Company Profile
Founding
SoundHound AI (ticker: SOUN) was co-founded in 2005 by Iranian-Canadian computer scientist and entrepreneur Keyvan Mohajer and specializes in voice artificial intelligence.
Known by song recognition
In 2009, the company’s automatic song recognition application Midomi was renamed SoundHound.
Services provided
SoundHound provides an artificial intelligence voice platform that enables businesses to provide consumers with customized conversational experiences.
Initial Public Offering
On November 16, 2021, SoundHound announced plans to become a public company through a SPAC merger with Archimedes Tech SPAC Partners Co. On April 28, 2022, the merged company, SoundHound AI, was listed on Nasdaq.
How big is the voice AI market?
The AI speech generator market is experiencing rapid expansion, with the market value expected to increase from approximately US$3 billion in 2024 to US$20.4 billion in 2030, at a compound annual growth rate of 38%. The global voice and speech recognition market size is estimated at USD 20.25 billion in 2023 and is expected to grow at a CAGR of 14.6% from 2024 to 2030.
The company estimates a total addressable market of at least $140 billion. This addressable market could grow even larger over the next few years. Juniper Research projects the market for voice AI will top $160 billion by 2026.
Products
Song recognition
SoundHound is a music recognition software. When users hear a favorite song but don’t know the song name, they can use SoundHound to find it. Just point the phone microphone as close to the sound source as possible or hum. For most songs, SoundHound can It can obtain the song title from Midomi within 10 seconds, and display the singer, album, album cover and other information. The functionality is the same as Shazam, a software company that Apple acquired for $400 million in December 2017.
Industry Customized Solutions
SoundHound’s technology is used in a wide range of voice-enabled products and services, primarily in automotive, television, IoT, restaurants, customer service, healthcare, finance and retail. SoundHound offers a range of AI-powered products, including Smart Responses, Smart Ordering, Dynamic Drive-Thru, and SoundHound Chat AI, a voice assistant powered by generative AI.
SoundHound’s applications are live in over 10,000 restaurant locations, where they automate drive-thru ordering, phone ordering, and in-store ordering. Plus, adoption is growing for the company’s Employee Assist software, which can provide workers with immediate information about menu items or store policies on command. It’s basically a virtual assistant they can speak to at any time during their shift.
Market positioning and strategy
SoundHound faces stiff competition from large tech giants’ AI voice platforms, such as Amazon’s Alexa, Google Assistant, and Apple’s Siri. Large tech giants focus on consumer ecosystems, while SoundHound has carved out a unique niche. Basic market: Focus on solutions tailored for enterprises.
Competitors
Major competitors include Amazon’s Alexa, Google Assistant, Apple, Microsoft’s Nuance, etc.
There are many smaller competitors, such as Cerence (ticker: CRNC), which is a more famous one.
Competitive Advantage
Core Technology
SoundHound is unique in its ability to deliver high-quality conversational experiences in industries such as automotive, IoT, and customer service. At its core is speech-to-meaning technology, which bypasses the traditional steps of converting speech to text. Instead, it derives meaning directly from audio input, enabling faster and more accurate responses.
Patent
SoundHound has been improving its products for more than a decade, which has given it an advantage in the international market. With more than 155 granted patents and 115 pending patents, the company has developed a number of innovative technologies around speech recognition, natural language processing and conversational speech recognition. Innovations in monetization have created a wall of protection.
Globalization
SoundHound’s AI models, including its underlying Polaris Engine, are trained on billions of conversations and over a million hours of audio. This massive amount of data, covering dozens of major languages around the world (currently supporting over 25), enables the system to handle everything from casual queries to highly domain-specific commands.
Business Model
While big tech companies build voice assistants to power their ecosystems, often limiting customization, SoundHound positions itself as a platform-agnostic company.
But SoundHound provides white-label (similar to ODM foundy) solutions, a market that tech giants cannot and are unwilling to enter. This approach gives businesses full control over their brand, user profile, and voice assistant functionality, a key differentiator for companies wary of sharing sensitive information.
Solutions that tech giants can’t offer
SoundHound allows businesses to have their own brand and customize the voice assistant to meet their specific needs. For example, once a customized voice assistant is embedded into a vehicle’s operating system, replacing it requires redesigning core components, a costly and time-consuming process for automakers. This deep integration strengthens the relationship between SoundHound and its customers. This makes it an indispensable partner for its customers and easily establishes long-term partnerships with its customers.
Another area of SoundHound’s competitive advantage is its ability to provide customizability and data privacy. Businesses are able to retain control over their brand and user profiles. This independence is a critical factor for businesses that need to maintain privacy while delivering a brand experience for their customers.
Business Milestones of the Company
Important acquisitions
In December 2023, SoundHound acquired SYNQ3 Restaurant Solutions, a provider of voice AI for restaurants, for $25 million.
In June 2024, SoundHound acquired Allset, a restaurant ordering marketplace founded in Ukraine.
In August 2024, SoundHound acquired Amelia AI for $85 million with the goal of expanding its presence in financial services, insurance, healthcare, retail, and hospitality.
Key Customers
In 2015, SoundHound partnered with Hyundai to become the first in-car music recognition service on the new Genesis model.
In 2018, SoundHound Inc. announced partnerships with Hyundai, Mercedes-Benz, and Honda to use its Houndify voice AI platform to provide voice interaction for their products.
In 2023-2024, SoundHound partnered with White Castle and Jersey Mike’s Subs to offer AI-enabled drive-thru and voice AI phone ordering services at hundreds of locations. The company’s customer base also includes Chipotle, Applebee’s, Habit Burger, Noodles & Company, Beef O’Brady’s and Casey’s General Stores.
In 2024, SoundHound introduced the voice AI assistant in Peugeot, Opel, Vauxhall, Alfa Romeo, Citroen and Lancia cars in Europe.
In November 2024, SoundHound integrated its voice AI into Kia vehicles in India, including support for Hindi.
Relationship with Nvidia
Nvidia holds an investment stake in SoundHound AI. SoundHound is also working with Nvidia to enhance in-car voice assistants. The collaboration brings together SoundHound’s Chat AI platform with Nvidia’s DRIVE platform, enabling advanced in-car voice assistants to operate without the need for a cloud connection. This advancement enhances the in-car experience by enabling drivers to access information directly from the vehicle manual and other sources using natural speech.
Industry-oriented business model
Industry customers dominate its revenue
SoundHound told investors that five different industries represented between 5% and 25% of its total revenue, whereas in the prior-year period, 90% of its revenue came from the automotive sector alone.
Importantly, Soundhound continues to diversify its customer base. In the third quarter of 2023, more than 90% of its revenue came from the automotive sector, with 72% coming from one customer. Today, six sectors each contribute between 5% and 25% of revenue, while the largest customer accounts for just 12% of total revenue.
Targeted industries
SoundHound is building AI agent solution partnerships with leading companies in industries such as healthcare, insurance, telecommunications and banking, while also securing U.S. government and military contracts.
One of the company’s most notable achievements is in the restaurant industry, where it significantly optimized the drive-thru restaurant telephone ordering system. In addition, there was a significant increase in agreements signed with global electric vehicle manufacturers to embed advanced conversational AI capabilities into modern vehicles.
Restaurent chainstore
Chipotle Mexican Grill, White Castle, Applebee’s, and Panda Express are just some of the top restaurant chains using SoundHound’s technology.
Automotive
SoundHound’s Chat AI software is also finding its way into several new cars from leading manufacturers like Stellantis (Chrysler, Jeep, and Dodge), Mercedes-Benz, and Hyundai. It’s a powerful voice assistant that can give the driver information on everything from the weather to sports scores.
Operating Performance
2024 Q3 Financial Report
In the third quarter of 2024, revenue reached $25 million, an increase of 89% year-over-year. Full-year revenue is expected to reach $83.5 million, up 82% year over year, and the updated 2025 outlook is expected to be $15.5-175 million, nearly doubling year over year.
Financial healthy
On the balance sheet, SoundHound holds $136 million in cash and cash equivalents and only $40 million in current debt. Due to net losses and operating expenses, free cash flow is currently negative.
2025 forecast
2025 could be SoundHound’s biggest year so far. Before it even started, the company told investors it could deliver up to $175 million in revenue, which would represent accelerated growth of 105% compared to 2024.
Prospect
SoundHound’s recent financial performance reflects a company in high-growth mode, with impressive scalability metrics but ongoing challenges with profitability. Revenue continues to grow, increasing by more than 50% over the past four quarters.
Capital market performance
Market Cap
As of December 30, 2024, SoundHound’s market value is US$8.39 billion, which is considered a small-cap level in the U.S. stock market.
Stock price performance
As of December 30, 2024, SoundHound:
- Since the beginning of 2024, it has risen by 990.38%.
- Since the company went public, it has risen by 248.92%.
Risks
In 2023, the largest customer contributed 72% of total revenue, while in 2024, the top five customers together accounted for less than a third.
Unreasonable valuation
Current valuations raise significant concerns. Following the release of its third-quarter 2024 earnings report, the stock surged more than 190% in just 35 days.
While this reflects the market’s enthusiasm for its scalability and diversified customer base, it also pushes its price-to-sales (P/S) ratio to a staggering 99 times and forward P/E to 53 times.
Given the expected revenue growth, it is difficult to justify such a valuation in my view for a company that still faces profitability challenges and reports negative free cash flow.
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