Massive News for SoundHound AI Stock Investors! | SOUN Stock Analysis | SoundHound Stock Update

Parkev Tatevosian, CFA
22 Mar 202407:55

TLDRSoundHound AI has made significant moves to boost its financial position and long-term growth strategy. The company acquired Sync 3, a leading voice AI provider for the restaurant industry, and integrated it from January 3rd, 2024, aiming to create an ecosystem linking cars and restaurants. Additionally, SoundHound AI raised $116 million by selling 34.6 million shares of common stock at an average price of $3.39, despite the stock trading at higher prices later. The company also reported increased revenue and reduced costs following a restructuring plan, and has $500 million in net operating loss carry forwards to offset future taxes.

Takeaways

  • 🚀 SoundHound AI provided significant updates on its financing capabilities and cash generation.
  • 📈 In December 2023, SoundHound AI acquired Sync 3, a leading voice AI provider for the restaurant industry, with the integration starting January 3rd, 2024.
  • 💰 The acquisition of Sync 3 is expected to incur substantial costs for SoundHound AI, including legal, accounting, and advisory fees.
  • 📊 SoundHound AI's revenue growth guidance for 2024 was met with investor underwhelm due to the expected inclusion of Sync 3's business from January 3rd.
  • 🍽️ The Sync 3 acquisition aligns with SoundHound AI's long-term goal of creating an ecosystem connecting cars and restaurants through voice AI technology.
  • 💵 On July 28th, 2023, SoundHound AI entered into a Controlled Equity Offering Sales Agreement to sell up to $150 million worth of Class A common stock.
  • 📈 Between January and February 2024, SoundHound AI raised $116 million by selling 34.6 million shares at a weighted average price of $3.39.
  • 🔄 SoundHound AI's stock price has increased by 32% on the year, making it a good time to raise capital by selling shares.
  • 💼 As of December 31st, 2023, SoundHound AI had remaining performance obligations of $12.7 million, with $6.4 million expected to be recognized as revenue within one year.
  • 💡 The company's restructuring in January 2023 led to cost savings and an 80% increase in revenue in its latest quarter, with sales and marketing costs decreasing by over 30%.
  • 💸 SoundHound AI has $395 million in US Federal and $109 million in State net operating loss carry forwards to reduce future taxes.

Q & A

  • What significant update did SoundHound AI provide to its investors?

    -SoundHound AI provided updates on its internal financing capabilities and cash generating ability, highlighting its acquisition of Sync 3 and its impact on the company's financials.

  • When did SoundHound AI acquire Sync 3?

    -SoundHound AI acquired Sync 3 in January 2024, with the closing date being January 3rd, 2024.

  • What does Sync 3 specialize in?

    -Sync 3 is a leading provider of voice AI and other technology solutions to the restaurant industry.

  • How will the acquisition of Sync 3 affect SoundHound AI's financial statements?

    -Starting January 3rd, all of Sync 3's business will be accounted for in SoundHound AI's business, which could impact revenue figures but was not immediately reflected in the financial statements at the time of the announcement.

  • What is SoundHound AI's long-term goal regarding the integration of cars and restaurants?

    -SoundHound AI aims to create an ecosystem where cars, equipped with voice AI technology, can connect to restaurants also enabled with voice AI, allowing consumers to order food directly from their cars without using a restaurant app or phone system.

  • How much capital did SoundHound AI raise by selling its common stock between January and February 2024?

    -SoundHound AI raised $116 million by selling 34.6 million shares of its common stock at a weighted average price of $3.39.

  • What was the stock price of SoundHound AI at the time of the script?

    -At the time of the script, SoundHound AI's stock was trading at $8.37 per share.

  • What was the outcome of SoundHound AI's restructuring in January 2023?

    -The restructuring in January 2023 resulted in expenses related to employee severance and benefits, but it ultimately improved the company's bottom line, with an 80% increase in revenue and a decrease in sales and marketing costs.

  • How much revenue is SoundHound AI expected to recognize from its remaining performance obligations as of December 31st, 2023?

    -SoundHound AI is expected to recognize $6.4 million of its remaining performance obligations as revenue within 1 year, $3.3 million between 2 and 5 years, and the rest after 5 years.

  • What is the potential tax benefit for SoundHound AI from its net operating loss carry forwards?

    -The net operating loss carry forwards could provide SoundHound AI with a tax benefit of around $100 million to $200 million when it starts generating profits, as it can use the losses to offset taxes on its first roughly 500 million in profits.

  • How has SoundHound AI's strategy of selling shares at a higher stock price impacted its capital raising efforts?

    -SoundHound AI's strategy of selling shares when its stock price was up has allowed the company to secure capital and extend its runway to execute on its business plan, especially important as it continues to lose money and needs to raise funds.

Outlines

00:00

📈 SoundHound AI's Strategic Acquisition and Financial Updates

This paragraph discusses SoundHound AI's significant business moves and financial health. It highlights the company's acquisition of Sync 3, a leading voice AI technology provider for the restaurant industry, which was integrated into SoundHound AI's operations starting January 3rd, 2024. The acquisition is expected to enhance SoundHound AI's long-term goal of creating an ecosystem between cars and restaurants, allowing consumers to order food via their car's voice AI technology. Additionally, the paragraph covers SoundHound AI's controlled equity offering sales agreement, through which the company aimed to raise $150 million by selling its class A common stock. The company's stock sale between January and February 2024 raised $116 million from the sale of 34.6 million shares at an average price of $3.39. The paragraph also notes that SoundHound AI continues to operate at a loss and is projected to do so for at least two more years, necessitating the capital raise. Lastly, it mentions the company's remaining performance obligations and the potential impact of its net operating loss carry forwards on future tax liabilities.

05:01

💼 SoundHound AI's Restructuring and Financial Outlook

The second paragraph focuses on SoundHound AI's restructuring efforts and their financial implications. It describes the company's January 2023 restructuring, which involved employee severance and benefits, and share-based compensation related to reduced headcount. The restructuring plan is deemed successful as it led to cost savings and improved the company's bottom line, with an 80% increase in revenue and a 30% decrease in sales and marketing costs in the latest quarter. The paragraph also mentions the company's net operating loss carry forwards, totaling $504 million, which could translate into significant tax savings once the company becomes profitable, by offsetting taxes on its first $500 million in profits.

Mindmap

Keywords

💡SoundHound AI

SoundHound AI is the central subject of the video, an artificial intelligence company that specializes in voice AI technology. The video discusses the company's recent updates, financial status, and strategic acquisitions. It is the entity that executed the acquisition of Sync 3 and is working towards creating an ecosystem between cars and restaurants using voice AI technology.

💡Sync 3

Sync 3 is a leading provider of voice AI and other technology solutions to the restaurant industry. It was acquired by SoundHound AI, and its integration is expected to enhance SoundHound's long-term goal of creating a connected ecosystem between cars and restaurants, allowing customers to order food via their car's voice AI system.

💡Cash Balance and Generating Ability

This refers to SoundHound AI's financial health, specifically its current cash reserves and its capacity to generate more cash in the future. A strong cash balance and generating ability are crucial for a company's operations, growth, and ability to fund strategic initiatives like acquisitions.

💡Acquisition Costs

Acquisition costs are the various expenses incurred when a company acquires another, including legal, accounting, financial advisory, and other professional fees. These costs are significant and can impact a company's financial statements and cash flow.

💡Controlled Equity Offering Sales Agreement

This is a financial agreement that allows a company to sell a specified amount of its stock over time, typically to raise capital. In the context of SoundHound AI, the company entered into such an agreement to offer $150 million worth of its class A common stock to address its cash needs.

💡Stock Sales

Stock sales refer to the process of a company selling shares of its common stock to investors as a way to raise capital. This is often done to fund operations, acquisitions, or other strategic initiatives. The price at which the stock is sold can significantly impact the amount of capital raised.

💡Deferred Revenue

Deferred revenue consists of payments from customers that a company has received but has not yet earned. It represents obligations to provide goods or services in the future. An increase in deferred revenue typically indicates future revenue potential, as it represents products or services that have been sold but not yet delivered or recognized as income.

💡Restructuring

Restructuring refers to a company's efforts to reorganize its operations to improve efficiency and reduce costs. This can involve layoffs, changes in management, or the sale of underperforming assets. Restructuring is often done to return a company to profitability or to better position it for future growth.

💡Net Operating Loss Carryforwards

Net operating loss carryforwards allow a company to offset future taxable income with losses it has incurred in the past. This can significantly reduce the company's future tax liabilities. It's a valuable asset for companies that are currently not profitable, as it can save them millions in taxes once they become profitable.

💡Long-Term Goals

Long-term goals are the strategic objectives that a company aims to achieve over an extended period. These goals guide the company's decision-making and resource allocation to ensure it moves towards its vision. For SoundHound AI, one such goal is creating an ecosystem that connects cars and restaurants through voice AI technology.

💡Investor Updates

Investor updates are communications from a company to its shareholders and potential investors, providing information about the company's financial health, strategic moves, and future outlook. These updates are crucial for maintaining transparency and managing investor expectations.

Highlights

SoundHound AI provided major updates on its internal financing and cash generation capabilities.

In December 2023, SoundHound AI acquired Sync 3, a leading voice AI provider for the restaurant industry, with the closing date set for January 3rd, 2024.

The acquisition of Sync 3 is expected to incur significant costs, including legal, accounting, and financial advisory fees, as well as customary payments.

SoundHound AI's revenue growth guidance for 2024 was met with mixed reactions from investors, as the company is set to grow both organically and through the integration of Sync 3.

The Sync 3 acquisition aligns with SoundHound AI's long-term strategy to create an ecosystem connecting cars and restaurants via voice AI technology.

SoundHound AI aims to enable in-car voice orders at restaurants, streamlining the process and eliminating the need for restaurant apps or phone orders.

On July 28th, 2023, SoundHound AI entered into a controlled equity offering sales agreement to sell up to $150 million worth of class A common stock.

SoundHound AI has been operating at a loss and is projected to continue doing so for at least two more years, necessitating the raising of funds.

Between January and February 2024, the company raised $116 million by selling 34.6 million shares of common stock at a weighted average price of $3.39.

SoundHound AI's stock price has since increased to $8.37 per share, indicating the company could have raised more capital if they had sold shares at the current market price.

The company's decision to sell shares when its stock price was rising is seen as prudent financial management, especially for a money-losing company.

As of December 31st, 2023, SoundHound AI had remaining performance obligations of $12.7 million, with $6.4 million expected to be recognized as revenue within one year.

Deferred revenue at SoundHound AI consists of billings or payments received in advance, which can fluctuate with changes in billing and frequency.

SoundHound AI's restructuring in January 2023 generated expenses but also led to cost savings, improving the company's bottom line.

The restructuring plan resulted in an 80% increase in revenue and a 30% decrease in sales and marketing costs in the latest quarter.

As of December 31st, SoundHound AI had $395 million in US Federal and $109 million in State net operating loss carry forwards to reduce future taxes.

The net loss carry forwards could potentially be worth $100 to $200 million in tax savings for SoundHound AI when it starts generating profits.

SoundHound AI's 10K statement revealed several significant news items that could impact the company's stock investors.

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