Summary
SoundHound AI reported second-quarter fiscal 2023 revenue of $8.75 million, up 42.2% from the prior-year quarter. Year-to-date revenue reached $15.46 million, up 48.0% from the first half of fiscal 2022. The top line benefited from a contract modification with a customer in Germany and higher product royalty revenue from customers in Korea. A distinct customization service sold to a large automotive company in France in the prior-year periods partly offset the gain. The Germany modification added new professional services in place of a tail support obligation beyond the contract period ending December 31, 2023, and the company said the related transaction price will be recognized as revenue in 2023.
The quarter still produced large losses, but the loss profile improved. Operating loss was $16.44 million, narrowed from $28.93 million in the prior-year quarter. Net loss was $21.93 million, narrowed from $30.67 million. Diluted loss per share was $0.10, narrowed from $0.19. Operating margin was negative 187.8%, up from negative 470.3% a year earlier. On a year-to-date basis, operating loss was $41.47 million, narrowed from $49.65 million; net loss was $48.30 million, narrowed from $55.77 million; and diluted loss per share was $0.23, narrowed from $0.48. Year-to-date operating margin was negative 268.3%, up from negative 475.5%.
Management tied much of the cost improvement to a restructuring plan announced in January 2023. The plan cut the then-current workforce by about 40%, or 180 positions globally. Research and development headcount fell by about 40% in the first quarter of 2023, and general and administrative headcount fell by about 35%. The company said it expects a nominal amount of additional restructuring expense through the end of 2023. It continued to invest in sales and marketing to support subscriptions and monetization. SoundHound's model has three revenue pillars: product royalties, service subscriptions, and monetization. Product royalties remain the largest contributor. The company expects subscriptions and monetization to take a larger share over time. Its Houndify platform includes more than 100 content domains, and the company has globalized its solution from 1 to 25 languages. It also cites over 120 patents granted and over 140 patents pending.
Cash generation remained negative but less so. Operating cash flow was negative $19.18 million in the quarter, up 39.6% from negative $31.78 million in the prior-year quarter. Year-to-date operating cash flow was negative $33.65 million, up 28.0% from negative $46.77 million. Capital expenditures were $0.28 million in the quarter, down 25.1% from $0.37 million, and $0.29 million year to date, down 70.2% from $0.98 million. Deferred revenue was $4.61 million as of June 30, 2023. Remaining performance obligations were $15.80 million as of the same date. The company said changes in deferred revenue and remaining performance obligations may not correlate with revenue growth because of timing and billing mix.
Liquidity and risk remain central. SoundHound closed a $100.0 million term loan in April 2023, used part of the proceeds to repay about $30.0 million under existing loan facilities, and entered a controlled equity offering sales agreement in July 2023 for up to $150,000,000 of Class A common stock. No shares had been sold under that at-the-market program as of the filing date. The term loan matures on April 14, 2027, and the interest rate was approximately 13.6% as of June 30, 2023. Management said the term loan would increase interest costs substantially going forward. The company still expects to fund operations for at least the next twelve months, though it has incurred recurring losses since inception and may seek more debt or equity financing or additional expense cuts. Other named risks include longer enterprise sales cycles, seasonality, supply and demand for end-user products such as automobiles, inflation, and the military conflict between Russia and Ukraine. The filing does not provide formal revenue or earnings guidance for the next quarter or the full fiscal year.
Forecast
No forward guidance in this quarter's filings.
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2023 | Q1 FY2023 | QoQ | Q2 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $8.8M | $6.7M | +30.5% | $6.2M | +42.2% |
| Gross profit | $6.9M | $4.7M | +46.3% | $3.7M | +88.9% |
| Gross margin | 79.1% | 70.5% | +8.5 pp | 59.6% | +19.5 pp |
| Research & development | $11.7M | $14.2M | -17.3% | $18.9M | -37.8% |
| Sales & marketing | $5.1M | $4.9M | +4.2% | $4.4M | +16.2% |
| General & administrative | $6.4M | $7.1M | -10.5% | $9.4M | -31.9% |
| Total operating expenses | $25.2M | $31.7M | -20.7% | $35.1M | -28.2% |
| Operating income (loss) | -$16.4M | -$25.0M | +34.4% | -$28.9M | +43.2% |
| Operating margin | -187.8% | -373.3% | +185.5 pp | -470.3% | +282.4 pp |
| Net income (loss) | -$21.9M | -$26.4M | +16.8% | -$30.7M | +28.5% |
| Net margin | -250.6% | -393.2% | +142.5 pp | -498.5% | +247.9 pp |
| Diluted EPS | -$0.10 | -$0.13 | +$0.03 | -$0.19 | +$0.09 |
Risks
The company has incurred recurring losses since inception and used $33.7 million of cash in operating activities in the six months ended June 30, 2023, though that was an improvement from $46.8 million used in the prior-year period. It may need additional debt or equity financing, including its $150.0 million at-the-market sales agreement, to fund operations beyond the next twelve months.
The $100.0 million Term Loan entered in April 2023 carried an interest rate of approximately 13.6% as of June 30, 2023, and interest expense increased 254% in the quarter and 47% year to date compared with the prior-year periods. High debt service costs could pressure results and cash flow.
Revenue growth was primarily driven by a contract modification with a customer in Germany and royalty increases from customers in Korea. Germany revenue increased 234% in the quarter to $3.8 million while France revenue decreased 54%, indicating meaningful customer and geographic concentration that could cause revenue volatility.
The company focuses on enterprise customers and must align with enterprise sales cycles, which can be longer than consumer cycles, while investing in sales and marketing to support revenue growth. Long sales cycles and needed upfront customer-specific engineering investment could delay revenue recognition.
The January 2023 Restructuring Plan reduced the workforce by approximately 40%, including research and development headcount by approximately 40% and general and administrative headcount by approximately 35% in the first quarter of 2023. This could impair product innovation, execution, and the ability to retain key technical talent.
Gross margin increased to 79% in the quarter and 75% year to date from 60% and 59% in the prior-year periods, helped by data center and hosting migrations. The company may not sustain these margins if revenue mix shifts or data center and hosting costs scale faster than revenue.
The MD&A highlights inflation, increases in benchmark interest rates, and the Russia-Ukraine military conflict as factors that have adversely affected global financial markets and could disrupt operations or customer demand. These conditions may increase market volatility and affect enterprise spending on Voice AI.
SaaS KPIs
All quarters →Remaining Performance Obligations
Summary, forecast, risks and KPIs are extracted from SOUNDHOUND AI, INC.'s SEC filings for Q2 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.