SoundHound AI dividend 3.5% on better-than-expected revenue growth and guidance | composed fool

Shares of SoundHound AI (Voice 3.47%) It rose 3.5% on Friday, following the AI-powered voice solutions provider’s release of its third-quarter 2023 report on Thursday afternoon.

The stock’s growth came from quarterly earnings that beat Wall Street consensus estimates, and management’s fourth-quarter earnings guidance (at the midpoint) was better than analysts had expected.

SoundHound AI key numbers

metric Q3 2022 Q3 2023 change
Income 11.2 million dollars 13.3 million dollars 19%
GAAP operating income ($27.1 million) ($14.5 million) 46% loss reduction
GAAP net income ($30.1 million) ($20.2 million) 33% loss reduction
GAAP earnings per share (EPS) ($0.15) ($0.09) 40% loss reduction

Data source: SoundHound. GAAP = generally accepted accounting principles.

Wall Street was looking for a loss of $0.09 per share on revenue of $12.8 million, so SoundHound met lower expectations and exceeded its high end.

In the third quarter, SoundHound used $20.7 million in cash to run its operations, an improvement over $26.8 million in cash used in the year-ago period. It ended the quarter with cash and equivalents of $109.9 million (including $13.8 million of non-current restricted cash) and long-term debt of $85 million.

What happened with SoundHound AI in the quarter and recently?

  • Backlog collections at the end of the quarter were $341.7 million, up 13% from last year. That’s a big setback for a company with $13.3 million in revenue in the most recent quarter.
  • This company is gaining attention with corporate restaurants. The company has partnered with Jersey Mike’s (a submarine sandwich chain based in — yes — New Jersey) and Krispy Kreme To integrate your artificial intelligence (AI) voice ordering solutions into your in-store operations.
  • Its SoundHound Chat AI is on trial with DS Automobiles, a Stellantis Brand. This makes it the first voice assistant in a European car brand to feature generative AI capabilities. (Generative AI exploded onto the scene last fall with the release of OpenAI’s wildly popular chatbot, ChatGPT.)
  • This company has its technology with firsta leading restaurant Software as a Service (SaaS) platform that makes SoundHound technology available to any location using Olo solutions.
  • The company announced the availability of Smart Answering, which allows businesses to quickly set up a fully automated, AI-powered call answering service.
  • After the end of the third quarter, the company announced that it would cooperate with it Samsung Electronics To provide audio driven AI driven menu boards for White Castle restaurant locations.

What managers should have said

Here’s what CFO Nitesh Sharan had to say in the earnings release:

With continued strong revenue momentum and steady progress towards profitability, we are performing against the key milestones we set earlier this year. Underpinning these financial results is a strong foundation for expanding vehicle partnerships and institutional restaurant customers that will help us into the future.

guidance

For the fourth quarter, management guided for revenue between $16 million and $20 million. At the midpoint, the outlook slightly beat Wall Street’s $17.6 million forecast. And it represents a growth of 68% to 111% year to year.

Additionally, the company again expected fourth quarter adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) to be positive. As a point of reference, adjusted EBITDA was negative $18.6 million in the fourth quarter of 2022 and negative $7.3 million in the quarter.

worth watching

SoundHound AI’s revenue increased strongly, though not dramatically, while its operating loss, net loss and negative cash flow from operations all improved year-over-year. Another notable positive is that the company still projects positive adjusted EBITDA in the fourth quarter.

The company operates in the artificial intelligence space, which has strong long-term growth potential. Along with its progress towards profitability, this is worth watching. That said, it has tough competition that includes several major tech companies.

Investors and potential investors of SoundHound AI stock should keep an eye on the company’s liquidity position. In the third quarter, it used more than $20 million in cash, ending the period with cash and equivalents of $109.9 million, which included $13.8 million in non-current restricted cash.

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