Summary
SoundHound AI ended fiscal 2023 with revenue of $17.15 million in the fourth quarter, up 80.5% from the prior-year quarter. Full-year revenue reached $45.87 million, up 47.4%. The company still lost money. Fourth-quarter operating loss narrowed 57.2% to $12.39 million. Net loss narrowed 41.7% to $18.00 million. For the full year, operating loss narrowed 35.1% to $68.61 million and net loss narrowed 23.8% to $88.94 million. Diluted loss per share for the full year narrowed 45.9% to $0.40. Operating margin improved by 232.5 percentage points in the quarter to negative 72.3%, and improved by 189.9 percentage points for the full year to negative 149.6%.
Product royalties led the revenue increase, helped by higher unit-based royalties in Korea, a non-recurring voice data licensing agreement with a semiconductor customer, and a contract modification with a German automotive customer. Service subscriptions grew modestly, while monetization revenue declined. The company said it expects monetization revenue to come from its music identification app and, over time, from leads and transactions on voice-enabled products. Operating cash flow was negative $13.87 million in the fourth quarter, an improvement of 32.1% from the prior-year quarter. Full-year operating cash flow was negative $68.26 million, an improvement of 27.4%. Capital expenditures fell 58.9% in the quarter to $0.06 million and fell 70.5% for the full year to $0.39 million. Deferred revenue at Dec. 31, 2023 was $9.20 million, down 31.3% from a year earlier. Remaining performance obligations were $12.70 million, down 38.6%. Management said RPO and deferred revenue can swing with the timing of performance obligations and do not correlate directly with revenue growth in a given period.
The quarter included the December 2023 agreement to acquire Synq3, which closed on January 3, 2024. The deal calls for about $5.0 million in cash and 8,968,610 shares of Class A common stock, plus up to $4.0 million of additional consideration tied to 2024, 2025 and 2026 revenue targets. The stock consideration was based on a reference value of $2.23 per share upon the execution of the merger agreement dated December 6, 2023. About $0.5 million in cash and 1,179,524 shares are being withheld for 15 months to secure indemnification obligations. SoundHound expects the combination to create the largest Voice AI provider for restaurants and extend its reach to over 10,000 signed locations and more than 25 national and multinational chains. In January and February 2024, the company raised $116.4 million of gross proceeds under its Sales Agreement by selling 34,578,019 shares at a weighted-average price of $3.37. The Sales Agreement allows up to $150.0 million in Class A common stock sales. The company also has a $100.0 million term loan that matures on April 14, 2027.
The January 2023 restructuring plan reduced the workforce by approximately 40%, or 180 positions, and was complete as of December 31, 2023. Management expects gross margin to fluctuate in the near term and stabilize as the business scales. It also expects general and administrative expenses to rise in the short term as the company invests in its control environment, but to grow below revenue over the long term. The filing flags several risks: revenue growth depends on OEM integration, competition, enterprise sales cycles and seasonality, with roughly one third of revenue in the first half of the year and two thirds in the second half. The company also cites inflation, the Russia-Ukraine conflict and the Israel-Hamas war as sources of uncertainty. Liquidity remains a focus. Management believes it can fund operations for at least the next twelve months, but it says additional equity or debt may be needed and could dilute stockholders. The company also notes that its net operating loss carryforwards may be subject to annual limitations, and that research and development credit carryforwards may expire if not utilized.
Management's commentary focuses on long-term trends rather than formal next-quarter or full-year targets. It ties the outlook to product royalties, restaurant expansion and the Synq3 integration.
Forecast
No forward guidance in this quarter's filings.
Reported figures
GAAP, from SEC filings| Metric | Q4 FY2023 | Q3 FY2023 | QoQ | Q4 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $17.1M | $13.3M | +29.2% | $9.5M | +80.5% |
| Gross profit | $13.2M | $9.7M | +36.8% | $6.7M | +96.2% |
| Gross margin | 77.2% | 72.9% | +4.3 pp | 71.0% | +6.2 pp |
| Research & development | $12.7M | $12.8M | -0.7% | $21.5M | -40.9% |
| Sales & marketing | $4.5M | $4.5M | -0.0% | $6.7M | -33.7% |
| General & administrative | $7.6M | $6.9M | +10.2% | $7.2M | +5.7% |
| Total operating expenses | $29.5M | $27.8M | +6.3% | $38.3M | -22.8% |
| Operating income (loss) | -$12.4M | -$14.5M | +14.7% | -$28.8M | +56.9% |
| Operating margin | -72.3% | -109.5% | +37.2 pp | -302.6% | +230.3 pp |
| Net income (loss) | -$18.0M | -$20.2M | +10.9% | -$30.7M | +41.3% |
| Net margin | -105.0% | -152.2% | +47.2 pp | -322.9% | +217.9 pp |
| Diluted EPS | -$0.08 | -$0.09 | +$0.01 | -$0.20 | +$0.12 |
Risks
Two customers accounted for 62% of total revenues for the year ended December 31, 2023, and accounts receivable from three customers were 87% of the consolidated receivable balance at December 31, 2023. Loss of or payment failure by a major OEM customer could materially harm operating results.
The company has generated substantial net losses and negative operating cash flows since inception, with net cash used in operating activities of $68.3 million for FY2023 year to date and $94.0 million for FY2022 year to date. MD&A states it may require additional capital, and any equity or convertible debt sale would dilute stockholders.
The Voice AI market is highly competitive and rapidly changing, with large technology companies that have greater financial, technical and marketing resources and alternatives offered at lower cost or free. Competitors may bundle competing functionality into larger offerings, reducing penetration of SoundHound products.
Management identified material weaknesses in internal control over financial reporting and may identify additional material weaknesses, which could result in material misstatements or failure to meet periodic reporting obligations. The company also noted prior late filings and an extension for the Form 10-Q for the quarter ended September 30, 2023.
Interest expense increased 155% to $17.6 million in 2023 compared with 2022, primarily from the $100.0 million Term Loan executed in April 2023. Cash interest and lender fees create material future cash requirements and could strain liquidity.
Adverse conditions in the Voice AI market or the global economy, including automotive cyclicality, could reduce demand because the largest customers are OEMs. Automotive production and sales are highly cyclical and sensitive to interest rates, consumer spending, and credit availability.
OEM design wins require significant upfront investment, and development cycles are approximately six months to two years after a design win before revenue is realized. Contracts may be cancelled or postponed or implementation may fail, causing revenue volatility.
Customers, especially major OEM automotive customers, may demand fixed prices or annual price reductions, which could reduce sales and profit margins. If the company cannot offset price reductions with technology improvements, results of operations could be adversely affected.
The company depends on skilled employees, especially technical personnel, and competition for talent is intense; stock price volatility may diminish the value of equity awards. The January 2023 Restructuring Plan reduced the workforce by approximately 40% or 180 positions, which may increase execution risk.
The Synq3 acquisition closed January 3, 2024, and future acquisitions or strategic transactions may pose integration, cost, and execution risks. The company may not achieve the anticipated benefits, including expanding restaurant industry reach to over 10,000 signed locations.
The company derives a significant portion of revenue outside the U.S., with 85% of 2023 revenue from customers outside the United States, and faces risks from foreign currency, regulatory, and political conditions. Chinese regulations and variable interest entity structure could restrict operations or require penalties if deemed noncompliant.
SaaS KPIs
All quarters →Remaining Performance Obligations
Summary, forecast, risks and KPIs are extracted from SOUNDHOUND AI, INC.'s SEC filings for Q4 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.