Shares of SoundHound AI (SOUN 5.77%) gained 3.5% on Friday, following the artificial intelligence-powered voice solutions provider's release on Thursday afternoon of its third-quarter 2023 report.
The stock's rise is attributable to the quarter's revenue exceeding Wall Street's consensus estimate and management's fourth-quarter revenue guidance (at the midpoint) also coming in better than analysts had expected.
SoundHound AI's key numbers
| Metric | Q3 2022 | Q3 2023 | Change |
|---|---|---|---|
| Revenue | $11.2 million | $13.3 million | 19% |
| GAAP operating income | ($27.1 million) | ($14.5 million) | Loss narrowed 46% |
| GAAP net income | ($30.1 million) | ($20.2 million) | Loss narrowed 33% |
| GAAP earnings per share (EPS) | ($0.15) | ($0.09) | Loss narrowed 40% |
Data source: SoundHound. GAAP = generally accepted accounting principles.
Wall Street was looking for a loss per share of $0.09 on revenue of $12.8 million, so SoundHound met the bottom-line expectation and exceeded the top-line one.
In Q3, SoundHound used cash of $20.7 million running its operations, an improvement from using cash of $26.8 million in the year-ago period. It ended the quarter with cash and equivalents of $109.9 million (includes $13.8 million of non-current restricted cash) and long-term debt of $85 million.
What happened with SoundHound AI in the quarter and more recently?
- Cumulative bookings backlog was $341.7 million at the end of the quarter, up 13% year over year. This is a huge backlog for a company with revenue of $13.3 million in the just-reported quarter.
- The company is gaining traction with enterprise restaurants. It partnered with Jersey Mike's (a submarine sandwich chain headquartered in -- yup -- New Jersey) and Krispy Kreme to integrate its voice artificial intelligence (AI) ordering solutions in their in-store operations.
- Its SoundHound Chat AI deployed in a pilot with DS Automobiles, a Stellantis brand. This makes it the first voice assistant within a European auto brand to have generative AI capabilities. (Generative AI exploded onto the scene in the fall of last year with the release of the incredibly popular chatbot from OpenAI, ChatGPT.)
- The company integrated its technology with Olo, a leading restaurant software-as-a service (SaaS) platform, making SoundHound's tech available to any of the locations using Olo's solutions.
- It announced the availability of Smart Answering, which enables businesses to quickly setup a fully automated, AI-powered call answering service.
- After the third quarter ended, the company announced a collaboration with Samsung Electronics to provide voice AI-enabled drive-thru menu boards to White Castle restaurant locations.
What managements had to say
Here's what CFO Nitesh Sharan had to say in the earnings release:
With continued strong revenue momentum and sustained progress on the path to profitability, we are delivering against the key milestones we laid out earlier this year. Underpinning those financial results is a strengthening foundation of expanding automotive partnerships and enterprise restaurant customers that will help fuel our future.
Guidance
For the fourth quarter, management guided for revenue in the range of $16 million to $20 million. At the midpoint, this outlook slightly surpassed the $17.6 million Wall Street had expected. And it represents growth of 68% to 111% year over year.
In addition, the company reaffirmed its expectation that Q4 adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) will be positive. As points of reference, adjusted EBITDA was negative $18.6 in the fourth quarter of 2022 and negative $7.3 million in the just-reported quarter.
Worth watching
SoundHound AI's revenue increased solidly, though not strongly, while its operating loss, net loss, and negative cash flow from operations all improved year over year. Another notable positive is that the company still forecast positive adjusted EBITDA in the fourth quarter.
The company operates in an artificial intelligence space that has powerful long-term growth potential. Along with its progress toward achieving profitability, this makes it worth watching. That said, it has tough competition, which includes several Big Tech companies.
Investors and potential investors in SoundHound AI stock should keep an eye on the company's liquidity situation. In Q3, it burned through more than $20 million in cash and ended the period with cash and equivalents of $109.9 million, which included $13.8 million of non-current restricted cash.
