Summary
SoundHound AI reported revenue of $6.71 million for the three months ended March 31, 2023, up 56.3% from $4.29 million in the prior-year quarter. The MD&A attributes the increase primarily to royalty revenue from Houndified Products in automotive vehicles, with notable strength in Korea, Germany, and France. Operating loss widened to $25.04 million from $20.72 million, down 20.9%. Net loss widened to $26.37 million from $25.10 million, down 5.0%. Diluted loss per share narrowed to -$0.13 from -$0.36, up 63.9%. Operating margin was -373.3%, up 109.6 percentage points from -482.9% in the prior-year quarter. The margin remains deeply negative, and the company is still far from breakeven on a GAAP basis.
The company continued to invest while cutting costs. A restructuring plan announced in January 2023 reduced the workforce by approximately 40%, or 180 positions globally. Sales and marketing headcount increased by approximately 33% from the prior-year quarter, while research and development headcount fell by approximately 45% as part of the restructuring. The MD&A says the restructuring is intended to reduce operating costs, improve operating margins, and improve cash flows. Operating cash flow was -$14.47 million, up 3.5% from -$14.99 million in the prior-year quarter. Capital expenditures fell 97.5% to $0.02 million from $0.61 million. The lower capital spending reflects a reduction in purchases of property and equipment.
Deferred revenue was $5.32 million at March 31, 2023, and remaining performance obligations were $18.40 million. The MD&A notes that these metrics can fluctuate with the timing of completing performance obligations and billing frequency, and are not directly correlated with revenue growth in a given period. The company had a customer retention rate greater than 80% as of December 31, 2022. SoundHound says its platform surpassed 1 billion annual queries in 2021 and experienced over 85% growth during 2022. Its technology is live with partners including Hyundai, Mercedes-Benz, Pandora, Snap, VIZIO, Square, Toast, Oracle, KIA, and Stellantis. The company had over 120 patents granted and over 140 patents pending. It also says its Houndify developer platform includes a library of over 100 content domains.
Management expects interest expense to increase substantially beginning in the second quarter of 2023 because of a new senior secured term loan entered in April 2023. The company expects to incur the remaining restructuring costs through the end of 2023. The MD&A flags several risks: inflationary pressures, the military conflict between Russia and Ukraine, supply and demand for end user products such as automobiles, longer enterprise sales cycles, competition, and seasonality. SoundHound expects it will be able to fund operations for at least the next twelve months, but it may seek additional debt or equity financing or implement more expense reductions. The company also plans to keep investing in research and development and sales and marketing to support revenue growth. The MD&A says revenue growth depends on successful integration with original equipment manufacturers and demand from the conversational AI community, factors that are partly outside the company's control. The company believes it can benefit from a market for Voice AI transactions that is estimated to grow to $160 billion per year by 2026, though that outlook depends on adoption and execution.
Forecast
No forward guidance in this quarter's filings.
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2023 | Q4 FY2022 | QoQ | Q1 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $6.7M | $9.5M | -29.4% | — | — |
| Gross profit | $4.7M | $6.7M | -29.9% | — | — |
| Gross margin | 70.5% | 71.0% | -0.5 pp | — | — |
| Research & development | $14.2M | $21.5M | -34.1% | — | — |
| Sales & marketing | $4.9M | $6.7M | -27.7% | — | — |
| General & administrative | $7.1M | $7.2M | -1.4% | — | — |
| Total operating expenses | $31.7M | $38.3M | -17.0% | — | — |
| Operating income (loss) | -$25.0M | -$28.8M | +12.9% | -$490.1K | -5009.2% |
| Operating margin | -373.3% | -302.6% | -70.7 pp | — | — |
| Net income (loss) | -$26.4M | -$30.7M | +14.1% | -$385.4K | -6741.1% |
| Net margin | -393.2% | -322.9% | -70.3 pp | — | — |
| Diluted EPS | -$0.13 | -$0.20 | +$0.07 | -$0.02 | -$0.11 |
Risks
The company has incurred recurring losses since inception and expects it will be able to fund operations for at least the next twelve months, but it may need additional debt or equity financing or further expense reductions. The senior secured term loan entered in April 2023 is expected to increase interest expense substantially beginning in Q2 2023, and the company recorded an operating loss of $25.0 million in the quarter ended March 31, 2023.
Total revenue rose 56% in the quarter ended March 31, 2023, and MD&A attributes the increase primarily to automotive product royalty revenue. This leaves results dependent on automotive OEM demand and a small set of geographies, where MD&A reports large current-quarter increases in Korea, Germany and France.
Growth depends on aligning with enterprise sales cycles, which can be longer than consumer cycles, and on significant upfront investment in customer-specific engineering projects before long-term partnerships scale. The company must also invest in sales and marketing to ensure its Voice AI offerings are understood and valued.
The company competes with big tech Voice AI offerings that can disintermediate customer brands and with legacy vendors, and its success depends on OEM integration, competition and demand from the conversational AI community. It relies on technical barriers and a large patent portfolio to differentiate.
The January 2023 Restructuring Plan cut approximately 40% of the workforce, or 180 positions globally, including a roughly 45% reduction in R&D headcount, while sales and marketing headcount increased approximately 33%. Execution risk remains as the company expects remaining restructuring costs through the end of 2023.
The company cites the Russia-Ukraine military conflict and significantly rising inflation, plus government interest rate increases, as having adverse effects on global financial markets and general economic conditions. These factors could reduce demand and increase market volatility.
Remaining performance obligations were $18.4 million as of March 31, 2023, and deferred revenue was $5.32 million on the same date. Management says changes in RPO and deferred revenue in a given period are not directly correlated with revenue growth because of timing of performance obligations and billing frequency.
SaaS KPIs
All quarters →Remaining Performance Obligations (RPO)
Customer Retention Rate
Summary, forecast, risks and KPIs are extracted from SOUNDHOUND AI, INC.'s SEC filings for Q1 FY2023 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 6, 2026.