SoundHound AI (SOUN) Reports Third-Quarter Growth with Rising Demand for AI Solutions

SoundHound AI, Inc. SOUN has reported their earnings for the third quarter of 2023, which show a significant improvement in both revenue and adjusted EBITDA. The outcome is attributed to a robust demand for the company's AI solutions, highlighting the company's success in innovating within the technology space.

Financial Overview

While SOUN experienced a loss of 9 cents per share, this was in line with market expectations and notably better than the loss reported in the same period the previous year, showing an improvement of 40%. The company’s revenues saw an impressive year-over-year increase of 18.6%, reaching $13.3 million and exceeding predictions by 7.9%.

The company’s growing portfolio, which blends software engineering prowess with generative AI, has drawn new clientele and propelled the increase in their cumulative bookings backlog, now standing at $341.7 million, which is up by 13% from the previous year.

Cost and Operational Efficiency

Significant gains were made in operational efficiency as well, with operating expenses decreasing 27.3% year over year to $27.8 million, mainly due to reductions in marketing & sales expenses and investment in research and development.

SOUN demonstrated financial discipline and strategic allocation of resources which resulted in an adjusted EBITDA loss of $7.3 million, a considerable improvement from the $16.9 million loss in the year-ago quarter. Operating loss also saw a reduction, coming in at $14.5 million compared to the previous year’s $27.1 million loss.

Balance Sheet Insights

As of September 30, 2023, SOUN reported having $96.1 million in cash and cash equivalents. This reflects a decrease from the same date in the previous year, which stood at $115.7 million. There was also an increase observed in long-term debt which rose to $85 million from the $66.4 million recorded at the end of the prior quarter. These figures suggest that while there may be some areas of increased financial leverage, there is also a solid base of liquid assets.

Future Outlook

Looking ahead, SOUN provided an optimistic forecast for the fourth quarter of 2023, with expected revenues reaching between $16 million to $20 million and anticipations for positive adjusted EBITDA. This forward-looking guidance implies continued growth trajectory and operational improvements.

Peer Comparison and Sector Performance

Despite its achievements, SOUN currently carries a Zacks Rank #4 (Sell). However, other stocks in the broader technology sector, such as Nvidia NVDA, Asure Software ASUR, and Dell Technologies DELL, show promising outlooks and carry a Zacks Rank #1 (Strong Buy). With such rankings, these companies represent solid investment opportunities within the sector.

Investors might note that NVDA, headquartered in Santa Clara, California, has seen a staggering 221.3% surge in shares year to date and is known for its leadership in GPUs and SoCs. On the other hand, Austin-based Asure Software ASUR specializes in cloud-based human capital management solutions but has seen a slight decline of 9.6% year to date. Meanwhile, Dell Technologies DELL, headquartered in Round Rock, Texas, has delivered a strong performance with a return of 79.6% year to date, indicating a robust market presence in IT solutions and services.

SoundHound, AI, Revenue