A Quick Look at SoundHound AI
SoundHound has developed automated technologies for voice assistance capabilities For customer service and other applications.
With the merger complete, I’m on hold for SOUN until we see significant revenue growth and operating results.
SoundHound was founded in Santa Clara, California to provide businesses with an AI voice platform to enable automated chatting services for their customers.
The management is led by co-founder and CEO Kevan Mohajer, who was founder and former chief technology officer of Zumo Software as well as chief technology officer of InsuranceHotline.com.
SoundHound’s primary offerings include:
Branded alert words
Automatic speech recognition
Understanding natural language
text to speech
SoundHound market and competition
According to market 2021 Research Report By Grand View Research, the global market for smart virtual assistants was estimated at $5.8 billion in 2020 and is expected to exceed $43 billion by 2028.
This represents a projected compound annual growth rate (CAGR) of 28.5% for a very strong CAGR (compound annual growth rate) from 2021 to 2028.
The main drivers of this projected growth are the need to sharply increase efficiency as well as improve customer experiences across the enterprise as well as in other contexts such as automotive, education, retail, travel and other industries.
Below is a chart showing the historical and future growth trajectory of the Smart Virtual Assistant Market in Asia Pacific:
Major competitors or other industry participants include:
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Comment on SoundHound
Archimedes completed his merger with SoundHound on April 27, 2022.
As a private company, SoundHound has been funded with a total of $215 million (which may contain some secondary stock purchases) from a large group of venture capital and strategic investors including Orange SA, Daimler, Global Catalyst Partners and other corporate investors.
Notably, prior to its release to the public via the SPAC track, SoundHound pursued strategic investors across several industries which is unusual for a private company.
According to a recent shareholder letter (PDF), SoundHound’s operational metrics showed significant growth, with the company doubling its query traffic from 50 million inquiries per month to 100 million inquiries per month in 2021, exceeding 1 billion inquiries for the year.
The company also indicated that it had a cumulative cumulative booking of $230 million by the end of the first quarter of 2022.
However, revenue remains very low, with only $4.3 million in the first quarter of 2022 resulting in a loss of just over $25 million under GAAP.
Free cash flow for the quarter was negative ($15.6 million).
With $118 million in total revenue from the SPAC deal, the company will have some runway to continue its growth efforts.
Looking ahead, management expects to achieve a midpoint of $30 million in total revenue in 2022, and has recently appointed a Director of Revenue to lead its growth initiatives.
The market opportunity for smart assistants is fairly large but is expected to grow at a very high growth rate as companies seek to automate customer and employee service functions and companies like SoundHound continue to develop more capable solutions.
The primary risk to the company’s prospects is that it will need to invest heavily in research and development in order to compete in the market.
For example, in the first quarter of 2022, research and development accounted for $16.7 million of a total of $23.2 million in operating expenses, or 72%.
At an EV/forward sales multiple of 63 times, the stock is priced to perfection.
SOUND will need to demonstrate a faster growth path while taking a meaningful step towards operating the break-even point before the current market environment rewards shareholders.
I’m waiting for SOUN to see significant revenue growth and positive operating results.