SoundHound AI, Inc.

Hello, and welcome to the SoundHound third quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising that your hand has been raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. It is now my pleasure to introduce Head of Investor Relations, Scott Smith.

Good afternoon, and thank you for joining our third quarter 2023 conference call. With me today is our CEO, Kevan Mahajer, and our CFO, Nitesh Charan. We'll begin with some short remarks before moving to Q&A. We'd also like to remind everyone that we'll be making forward-looking statements on this call. Actual results could differ materially from those suggested by our forward-looking statements. Please refer to our filings with the SEC for a detailed discussion of the risks and uncertainties that could affect our business and for discussion statements that qualify as forward-looking statements. In addition, we may discuss certain non-GAAP measures. Please refer to today's press release for more detailed financial results further details on the definitions, limitations, and uses of those measures and reconciliations from GAAP to non-GAAP. Also note that the forward-looking statements on this call are based on information available to us as of today's date. We undertake no obligation to update any forward-looking statements except as required by law. Finally, this call is being audio webcast in its entirety on our investor relations website. Audio replay will be available following today's call. With that, I'd like to turn the call over to our CEO, Kayvon Mahajer. Please go ahead, Kayvon.

Thank you, Scott, and thank you to everyone for joining the call today. In our third quarter, we saw incredible momentum, showcased by a strong revenue performance. We continued a fast pace in our creation of great products that delight customers and users. Businesses are seeing the value of Sanhan in real time, and this is translating to the value we are creating for our stakeholders. This quarter, our revenue grew to a record $13.3 million, a 52% increase sequentially. At the same time, our key profit metric, adjusted EBITDA, continues to improve significantly, driven by operational excellence of our organizations. We've consistently demonstrated our track record as a leading innovator in AI. This quarter, the products we are creating saw exceptional demand, from automotive assistant with generative AI features to customer service solutions for every business. Let me give you an update. In our Pillar 1 category, we power products such as autos, TVs, and IoT devices. Since launching our voice AI platform, our Pillar 1 strategy has been a crucial part of our business. Generative AI is fueling even more excitement and customer interest in sound enhanced products and solutions. Take automotive as an example. We recently published the results of a study that over half of regular drivers would like chat GPT-style capabilities from their in-vehicle voice assistant. We believe this will give rise to a steep and rapid increase in the number of drivers actively using voice recognition in their cars. As a result, our projection is that more drivers will use voice instead of touch interfaces and physical owner's manuals at an increasing pace. We continue to expand in our existing large customer base, which includes over 20 car brands such as Hyundai and Stellantis. The automotive brands that have chosen Sandman Solutions represent roughly 25% of all units produced in the world today. As they ramp up production of units enabled with our AI, we expect to see further growth in the corresponding revenue, and we have also been winning more logos. Thanks to its enhanced performance, SoundHound Chat AI for Automotive has created a number of upsell opportunities, and last month, it became the first in-car voice assistant with generative AI capabilities to go live in vehicles in Europe. Last month, we also launched SoundHound Vehicle Intelligence, which also generates interest among a number of automotive brands. And another brand, TOG, the prominent EV automaker in Turkey, continues to ramp, and we are actively engaged with a number of other EV companies. As car makers, both traditional giants and up-and-coming EV brands, prioritize being more agile software companies, their interest in SoundHound's sophisticated voice AI solutions increases. But pillar one is not just about autos. We are showing increased usage among all categories. We are seeing more queries within the devices we power, including TVs and apps, which has increased our annual query run rate to over 2.9 billion. As this frequency of usage increases, the performance of our machine learning and AI models gets more advanced as they learn from this massive amount of data that keeps growing. The result will be more intuitive technology, which we expect will create faster adoption, new use cases, and ultimately higher unit prices per device. For TVs, we continue to work with established players like Vizio, as well as new and disruptive manufacturers in the space to unlock the true potential of the most prominent connected device in most homes. In doing this, we've seen high double-digit growth in usage year over year. For IoT devices, the use cases are endless, and we are working with more companies every day to extend or go into production in multiple areas. This quarter, we showcased our technology with Chimbali Group, a professional coffee machine manufacturer with distribution network covering over 100 countries and involving 700 distributors. We are also working with some of the largest appliance manufacturers in the world and have either signed, extended, or gone into production with multiple brands in industries such as telcos, robotics, printers, vending machines, and kiosks. Moving on to Pillar 2. In our Pillar 2 category, we aspire to service hundreds of millions of businesses around the world with our AI customer service solutions. We've been discussing the great traction we are seeing in enterprise brands. We announced White Castle last quarter, and this quarter, I'm happy to add two more incredible names to the list, Jersey Mike's and Krispy Kreme. We've also agreed to a trial with one of the largest global quick-serve restaurants in the world for the use of our dynamic interaction drive-through solution. We continue to sign larger deals in mid-market and regional restaurant space as well. Some recent wins include Chicken Shack, Buy My Thai, Bobacoo's Burritos, Core Life Eatery, Dog House, Happy Endings Hospitality, Sam & Louie's, Tony's Burgers, and Zeke's Pizza, representing opportunity of several hundred locations. Our expansion in White Castle Drive-Thru is also ramping. We are live in approximately a dozen lanes in the Midwest and are expanding into new locations in the Southwest United States. We are excited to be working with White Castle's first-class team as they bring the first truly intelligent drive-through experience across the country. Soundham has a unique competitive advantage in this vertical. We own and fully understand the entire conversational AI technology stack, which we have developed over nearly two decades. This ownership is important and hugely valuable to prospective customers because it means that we are able to fully drive improvements in the technology and its performance, rather than hitting the limits of some black box APIs. Our customers understand not only is this more secure and cost effective, it allows for more innovation and customization, which in turn allows for differentiation in their own markets. With these restaurant solutions, which we first launched last year, we have coverage in about 35 states and continue to increase our footprint across the country. At the same time, we are also expanding internationally. Going beyond restaurants, with our smart answering, we are completely disrupting how businesses of all types directly respond more intelligently and usefully to their customers. We provide business owners with confidence that their customers' relationships are improving while driving increased revenue and helping mitigate costs. Smart ordering and smart answering are complemented by our visually enhanced hand-to-hand dynamic interaction, which is our multimodal full-duplex interface for kiosks, drive-thrus, and any device with a screen. We are working with a number of partners and customers, and our pipeline keeps growing. We also continue to build out our point of sales ecosystem by joining Ollo Connect. Now live with several merchants, Ollo is a significant addition to our ecosystem as a software platform, creating additional potential customer touchpoints to enterprise brands with more than 77,000 locations, adding to more than 150,000 restaurants that use our hardware merchant partners, Toast, Oracle, and Square. To further accelerate our reach, we recently launched our POS Gateway solution that streamlines custom merchant integrations with SoundHound's voice AI ordering products and accelerates time to market. We also joined forces with Chaona, the leading online ordering and marketing platform. This will help enable restaurants to answer and respond to every inbound customer call so that orders are never missed. And just last month, we were pleased to have Samsung partner with us to unlock the power of digital outdoor signage and turn menus into interactive restaurant portals with almost unlimited potential. In 2016, after about a decade of stealth R&D, Samsung launched its breakthrough voice AI technology, powered by innovations such as speech-to-meaning and deepening understanding. These capabilities allowed our voice assistant solution to process not just speech, but also meaning understanding in real time, just like the human brain. Our ability to quickly handle complex and compound queries accessing live data remains unmatched in the voice industry today. We've always believed the future of voice AI would be powered by a combination of software engineering and machine learning. In our own models, we have been using machine learning for a number of years to improve speech recognition and natural language understanding. The introduction of large language models has allowed our platform to reach new heights. With our strong foundation of balancing software engineering and machine learning, you are easily able to integrate generative AI into our technology stack. In fact, we believe we are one of the fastest disruptors to take this new technology into production. Our customers require a mix of real-time data and conversational intelligence. Furthermore, they need to make sure their brands are protected from the type of misinformation and hallucinations that occur from access to unmanaged generative AI. Thanks to a rapid adoption of these recent innovations, we are live in market with our generative AI enhanced voice products across our automotive and restaurant customers. Our Santa and Chat AI product is the first to have this unique blend of technologies and is fueling our momentum with new and existing customers. Building on our success in automotive market, we recently introduced SoundHound Vehicle Intelligence, which provides instant hands-free access to vehicle-specific information without drivers having to pull over or spend time leafing through a physical manual. SoundHound's voice-enabled vehicle intelligence domain uses internally developed artificial intelligence and large language models to provide answers to almost any question about a car's functionality, maintenance, or repair, completely hands-free. Of course, the opportunity of this kind of functionality for voice-enabled user manuals doesn't begin and end with automotive. It can be extended to any device or appliance, allowing a manufacturer to achieve cost savings by lowering the frequency of customer calls and saving customers the hassle of having to find and figure out the instructions. While voice AI ordering technology is now decreasing their reliance on in-house staff, SoundHound products can also be used to augment human capabilities. For example, our voice-enabled employee assist technology can instruct a restaurant employee about how to make a particular item, allowing them to ask as many questions as they like to ensure the product is perfect without ever having to remove their gloves and consult a manual or distract another staff member. We initially launched dynamic interaction as a breakthrough multimodal ordering experience for drive-thrus, and the product has been well-received and we are gaining more traction and new customers every quarter. Since then, we have evolved the technology to allow in-store employees the same ordering experience previously limited to end customers. The ability to process orders visually in real time works equally well in-store as it does in drive-thru, whether it's a customer or employee as the end user. With our advancements in the restaurant space, customers are seeing the benefits of taking orders and filling them simultaneously. In the automotive and IoT space, we are able to provide real-time conversational voice AI experience. We are excited about our continued delivery of key technologies that provide meaningful value to our customers. Last time, I mentioned our ambitious Polaris initiative. It's an effort to weave together our learnings of the last two decades, as well as billions of real-time conversations and over a million hours of audio to produce our own fully multimodal generative AI foundation model, which can work with both speech and text and respond with audiovisual output. I'm pleased to say we've completed the first phase of this project and successfully built a multilingual model that can handle queries in multiple languages interchangeably and respond with high accuracy with streaming audio in real time. We will be rolling out the first version of Polaris to our customers in the coming weeks. This is an important milestone, and we expect even more disruptive features in future phases of Polaris. We are excited about the potential applications of a model that can respond instantly and seamlessly and in different modalities to request in various languages across a huge range of potential queries. The commercial possibilities are clearly huge. We believe Sanhan is uniquely positioned to achieve significant long-term success in this new era of AI. We have believed from our founding moment that voice and conversational AI is the most natural way to interact with devices and services and eventually permeate through all businesses. We have an amazing and passionate team that believes in this vision and continues to push forward to create conversational AI technology that exceeds human capabilities and delivers value and delights end users alike. In closing, we are experiencing meaningful success, and with every quarter that goes by, our momentum builds and our foundation gets stronger. Our products significantly reduce cost, increase revenue, and add efficiency for our customers. Our fully automated technology is unmatched, and we remain at the forefront of conversational AI and are winning new businesses and expanding with our existing relationships. With now, I'll now turn the call over to Nitesh to talk about our financial performance, key growth drivers, and outlook for the remainder of the year.