Good day, and thank you for standing by. Welcome to the SoundHound Q4 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Scott Smith, Head of Investor Relations. Please go ahead.

Good afternoon, and thank you for joining our fourth quarter and full year 2023 conference call. With me today is our CEO, Keyvan Mohajer, and our CFO, Nitesh Sharan. We will begin with some short remarks before moving to Q&A. We would also like to remind everyone that we will 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 and further details on the definition, 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 the 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. An audio replay will be available following today's call. With that, I would like to turn the call over to our CEO, Keyvan Mohajer. Please go ahead, Keyvan.

Thank you, Scott, and thank you to everyone for joining the call today. Once again, we broke a new quarterly record for revenue this quarter, which surpassed $17 million and was up 80% year-over-year. We are winning new customers and expanding with existing ones. We continue to create value for our customers, their customers and their employees, while delighting users with our technology. At the same time, we're also driving efficiencies with an 80% year-over-year improvement in adjusted EBITDA. At SoundHound, we've made two important predictions for the future of AI. The first is that AI customer service will be as necessary for every business as WiFi and electricity. Second is that speaking will become the primary way we interact with the devices around us. We believe voice and conversation is the most natural way to interact with technology, and fortunately for product creators, they can bring their products to life by simply adding a tiny inexpensive microphone. These predictions are the foundation of our three-pillar business strategy. Let me start with our first pillar, where we power products such as cars, TVs and IoT devices. We had a mature history in Pillar 1. We went from zero to over 20 automotive brands in just a few years. These brands represent over 25% of the automotive industry and we've added several brands just in the last few months. We powered TVs from legacy giants such as VIZIO to exciting new innovators such as Telly. We are in millions of devices and process billions of queries from cars, TVs and other forms of IoT devices. Our customers choose us because they believe our technology is the best and we help them protect their brand, users, and data. Because we partner with them to differentiate and innovate. Then something incredible happened. The introduction of large language models and generative AI created a positive disruption in our field. While the big tech companies were disoriented and have been scrambling to make their own models, which could take years, we were able to swiftly integrate multiple generative AI models within a matter of weeks. Our integration was clever due to our years of experience and technology foundation and introduced our SoundHound Chat AI product with generative AI. SoundHound Chat AI can integrate with real-time domains and can go back and forth between multiple models seamlessly in a single conversation session, and is able to utilize even multiple models for a single query. For example, they drive out the car and can ask for real-time weather, request sightseeing recommendations that match the weather condition, ask follow-up questions, and then request to start navigation to one of the recommended destinations by simply referring to it such as, 'Can you navigate me to the second option you recommend?' SoundHound Chat AI has rapid adoption. Launched in early 2023, we are one of the first companies to show how generative AI could be integrated into a voice assistant. While others are still only making broad claims to generate headlines, we've been building applications for generative AI. Thanks to our proprietary technology, which helps mitigate hallucinations and other issues that are inherent with untrained AI models, our applications are already live in production and in the hands of consumers across the world. Let me highlight a few examples of our momentum and progress with SoundHound Chat AI. Immediately after it became generally available, other brands saw the potential to increase car voice AI usage and improve the user experience using our product. This is not just a simple API integration, but it's seamless back and forth between large language models, content domains, and the onboard features of the car such as the navigation system. Throughout last year, we piloted our technology across a range of high profile OEM brands. We found that by adding generative AI capabilities to individual voice assistants, the frequency with which drivers and passengers engage with this increased multiple, and user satisfaction increased significantly. The enhanced performance of SoundHound Chat AI for automotive has created numerous opportunities and we are proud to announce that it has become the first in-car voice assistant with generative AI capabilities in the world to go live in vehicles beyond just an experimental pilot. Last year, Stellantis started a pilot with DS Automobiles, and due to the incredible results, they announced going live in production in 18 countries. Recently, more brands such as Peugeot, Opel, and Vauxhall have announced their plans to utilize SoundHound Chat AI. Given our strong partnership with Stellantis, we expect many more brands to go live in production this year. SoundHound Chat AI is increasing the product quality and user delight, but we also expect it to lead to an increase in revenue with the higher royalty rate for customers that choose to adapt. SoundHound Chat AI is enabling automakers to add value to their drivers' experiences with new functionality. We believe we are at the very beginning of a refresh that will bring exciting new opportunities for car manufacturers and drivers of SoundHound as we upsell these new features. In addition to SoundHound Chat AI, we also launched a new incredible product called SoundHound Vehicle Intelligence in the fourth quarter. Drawing on SoundHound's voice AI, it allows automakers to simply and easily voice-enable their car manuals. This means that drivers can use voice and conversation to ask about settings, special features, troubleshoot and more without having to spend time and effort listening to a cumbersome printed document. SoundHound Vehicle Intelligence is another innovation that we expect will improve product quality and increase our revenue. We are working closely with well-known EV brands and gaining strong traction with luxury brands as well. For example, we won the business for a prominent U.S.-based EV major to voice-enable their full fleet of market-leading vehicles. In addition, we significantly extended and increased the volume of our existing committed contract with a large auto OEM until 2037. Creating value in our Pillar 1 category is not just limited to automotive. We also licensed our technology to smart TVs and many IoT devices. For example, we've integrated our AI voice assistant with Telly, a new disruptive smart TV provider. Another customer, VIZIO, has an integrated platform for cutting-edge smart TVs, and is a strong opportunity with our monetization model using voice commerce such as ordering food, groceries, and supplies on the TV; which is typically the largest screen in the most social setting of every home. 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, such as with large appliance manufacturers, telcos, airplanes, robotics, printers, wearables, coffee machines, and kiosks among many others. We are also thrilled that in Q4, we have a notable revenue contribution from a preeminent AI chip company. Although this company has been a close partner for us for a number of years, this was the first time we generated licensing revenue from the partnership, and we expect more value will be realized from this partnership in the future. Moving on to Pillar 2, where we offer AI customer services for businesses such as restaurants, home services, personal care, and professional services. As we predicted a year ago, AI customer service is now outperforming units. User adoption is on the rise, and consumers are increasingly choosing to interact with conversational AI due to its reliability and extended capabilities. We believe disruption in the customer service industry will be one of the first major commercial applications for generative AI and large language models. It is also becoming affordable and accessible to merchants of all types. Businesses are beginning to see AI as a necessity, just like WiFi and electricity. We now have a proven scale in Pillar 2 as well. Today, our technology lies in about 10,000 merchant locations. We are fully engaged with over 100,000 locations in our pipeline and have over 30 million businesses in our near-term addressable market. We are at the very beginning of what generative AI will bring to the world and we are emerging as a market leader by offering applications with real-world use cases. There are two very clear reasons that we believe we are leading here. First, our solutions are built on proprietary technology and we alone own the entire technology stack. Second, our solutions are fully automated and therefore, easily scalable and capable of serving brands of all sizes from the largest brands in the world to your local favorite shop on the corner. We are offering easy-to-use, easy-to-implement solutions that make a real and immediate impact. I'll share some examples across our various offerings. Our SoundHound Smart Ordering product uses voice AI to support businesses by answering all inbound phone calls, taking customers' food orders and addressing numerous questions, allowing restaurants to free up their staff to focus on making food and engaging the customers in the store. Jersey Mike's, a chain with over 2,000 locations, went live in Q4 with Smart Ordering and is rolling out at a rapid pace. Targeted for an initial 50 locations, we've already reached that goal today and we expect them to expand their partnership based on the solid results today. White Castle, our first drive-thru offering, continues to ramp up production. We are on pace to reach our goal of 100 lanes by the end of 2024. So far, we are also seeing our order processing time of under 60 seconds, which is significantly faster compared to humans. In Q4, more large restaurant chains chose to integrate our voice AI ordering solution to help automate in-store operations, including Church's Chicken and a large hamburger chain located in the South, which has approximately 2,700 locations we can integrate our solution into. With these larger deals for our voice AI solution, we're also seeing a number of customers look to bundle these solutions with our other offerings. For example, we deployed our new SoundHound product called Employee Assist, as restaurants look for multiple offerings to gain efficiencies in ordering and with employees. SoundHound Employee Assist is a game changer for businesses. It uses conversational voice AI to support restaurant employees like a co-pilot across a variety of apps via their headsets. For example, it can provide ingredients and allergen information to customers. It can also train employees with step-by-step instructions to ensure the product is prepared correctly without them ever having to remove their glove, consult the manual, or distract another staff member, significantly reducing the stress on the workforce. Another incredible SoundHound product, Dynamic Interaction, is our multimodal full-duplex voice interface for kiosks, drive-thrus, or any device with a screen. We are working with a number of partners and customers and our pipeline keeps growing. For example, Krispy Kreme has selected Dynamic Interaction. As you can see, our portfolio of restaurant solutions is taking shape and major brands from convenience stores to multinational restaurant chains are taking notice. They come to us to improve their order process, experience, and accuracy of their orders, while at the same time improving their bottom line. Today, we have restaurant solutions live in all 50 U.S. states and are now expanding internationally. With 25 languages in our arsenal, we believe we have a massive opportunity to go beyond English-speaking countries. Next, Smart Answering is our phone answering solution that goes beyond restaurants and can be used by any company in any industry. With this product, we are empowering businesses of all types on how they respond to customers on the phone, allowing them to capture every business opportunity while also mitigating costs. Smart Answering can handle multiple calls at once 24/7, conveniently filters out spam calls, saving hours of wasted time for any business. It also provides SMS responses, captures leads with intelligent messaging that asks important follow-up questions in addition to variable answers around policies, terms, and conditions, products, services, pricing and more. We are already live with customers using Smart Answering and the feedback is incredibly positive. The Smart Answering experience is fully automated, allowing us to easily offer this product to smaller businesses that in the past couldn't have this solution. To massively increase our ability to scale and operate a solution with no such onboarding for any business, we've been piloting a self-service e-commerce approach in Q1 and seeing early adoption. Let me talk about SYNQ3. Following up on the announcement of our acquisition of SYNQ3, we've begun the integration of this exceptional team with SoundHound. SYNQ3 brings more than 20 national and multinational chains spanning drive-thru, fast casual, and casual dining segments as well as convenience stores to SoundHound's fast-growing customer base. Examples include Chipotle, Casey's, Applebee's, Panda Express, Papa John's, and Five Guys. Because our voice AI is fully autonomous and does not use humans in the loop to perform, we are also able to rapidly scale our deployment without any degradation in quality. For instance, with SYNQ3, we recently completed the rollout of voice AI ordering to 2,400 Casey's General Stores, which also is one of the largest pizza chains in the U.S. Jointly, we are combining nearly two decades of SoundHound AI innovation with decades of SYNQ3's industry expertise and established relationships. Together, we will accelerate the deployment of leading-edge generative AI capabilities to the industry while ensuring that our technology always works to preserve the best interest of our customers, their customers, and society more broadly. The combination makes SoundHound the preeminent global provider of voice AI for restaurants, significantly extending our market reach. Although we only closed the transaction in Q1 of this year, we are already seeing tremendous momentum with their customers and the ability to offer them additional solutions such as Dynamic Interaction, Smart Answering, and Employee Assist. The synergies are already taking hold, and we are moving at a rapid pace. As I mentioned earlier, we have three pillars: royalties from voice-enabled products, subscription from voice-enabled services, and the third pillar is monetization from connecting those services to those products. For example, drivers of the SoundHound-enabled cars will be able to use their voice to order food by just talking to their car and can do so before arriving at the restaurant, or they can make appointments to get a haircut, book a flight, or perform other types of transactions. We believe this will create the future of the voice commerce ecosystem, and SoundHound is in a unique position to realize this vision due to our strong footprint in both devices and services. With our expanded national restaurant reach, we're seeing an acceleration of our Pillar 3 monetization strategy via transactions in millions of cars, TVs, and IoT devices. We believe this is a powerful business model, which could add significant value to all participants. We would collect a fee for generating new leads for merchants and facilitating transactions, the store or restaurant benefits from a new customer being channeled in their direction, and the automakers and the device makers take a share of this economy. Most importantly, the end user will have the convenience of using their voice to get things done. We are excited to see our portfolio of customers using voice-enabled services continue to grow, which should allow us to begin to pilot this new commercial ecosystem. In closing, our revenue has grown on average by over 50% over the last four years. This incredible growth during challenging times and against global market headwinds is a testament to our strong foundation, demand for our technology, and the great partnerships we've built with some of the most well-known brands in the world. Going forward, we expect to maintain this strong growth and see massive opportunities to accelerate even further beyond this year. The timely AI revolution is creating tailwinds in our favor. We believe that SoundHound has a unique advantage with its own IP based on experience building trust with global customers, a trove of data, and a track record of innovation allowing us to move fast and invent our way forward. We remain at the forefront of conversational AI, and that's why we have been working on Polaris, our multimodal, multilingual, generative AI foundation model, which could be another important tool for us as we position ourselves as one of the leading and major forces in this new era of AI. With that, 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.

Thank you, Keyvan, and good afternoon, everyone. Q4 revenue increased by 80% year-over-year. We finished 2023 with accelerating momentum, and we are seeing exceptionally strong interest from enterprise businesses, most notably within the restaurant and auto sectors. In fact, demand for SoundHound solutions is so high that we now have a healthy waitlist of restaurant merchants, and we're calibrating our resources to ensure we deliver for the customers. While we continue to be mindful of our pathway to profitability, delivering against this demand is paramount. The exceptional growth we realized was coupled with cost containment. We focused on cost discipline this past year and will continue to do so. For the year, adjusted EBITDA improved by over 50%, and in Q4, our results were even better with an 80% improvement. Excluding certain costs that were necessary to fuel our growth and transformation brings us close to the positive Q4 adjusted EBITDA target we laid out last quarter. For example, the near-term impact of switching to Big Four audit firms from PwC mid-year, while becoming a large accelerated filer and upgrading some of our internal tools contributed to the majority of these costs. We expect these expense pressures to lessen as we go forward. The underlying drivers behind the remainder of the expenses are positive indicators of our future. First, we saw some tremendous growth opportunities in the second half of the year that we chose to invest in. We saw significant demand from enterprise restaurants in particular. Second, we saw a great opportunity to inorganically accelerate our go-to-market motion and capture a sizable and meaningful restaurant customer portfolio. The acquisition of SYNQ3 clearly positions us as the leader in the restaurant AI space. Lastly, we accelerated investments in our administrative functions, notably around internal processes and controls, to ensure we have an even stronger foundation for the sustained long-term growth we expect to deliver. We fundamentally re-architected this company in 2023. We are more efficient, more focused, even more nimble, and aggressively driving disruption and growth across voice-enabled products and services. Accordingly, we are updating a metric we have previously shared in what we call cumulative subscription and bookings backlog, which includes our previously reported cumulative bookings backlog to also now include new subscription revenue streams that we are focused on. Cumulative bookings backlog takes into account the prior quarter-end balance plus new bookings in the current quarter minus associated revenue recognized. Cumulative booking backlog is still derived from committed customer contracts, and this definition remains the same as the previous one. Subscription backlog takes into account customers where we are the leading or exclusive provider and assumes a four-year ramp to fully scale with a total five-year duration. We have incorporated reasonable assumptions about adoption percentages with lower percentages applying to pilot and proof of concept customers. We believe we can outperform these assumptions given the faster rollouts we are currently experiencing and the expectation to work with these partners for much longer than previously anticipated. Similar to the previous definition, we do not include expected auto renewals for our Pillar 1 customers. This allows us to combine our Pillar 1 and Pillar 2 businesses into a single unifying metric. As we have communicated before, our cumulative bookings backlog mainly represented our Pillar 1 businesses. In Pillar 2, we have previously noted that ARR standardizes the annual subscription-like potential of these contracts while also indicating the better stability and predictability building in our financial model. That said, two different metrics on two different timescales don’t synthesize our full potential in an easy-to-understand manner, so we believe this updated figure is more representative of our medium-term revenue potential. Ultimately, we are addressing a greater than $100 billion rapidly growing market. So, this new metric gives you a view of the tangible customer activity we have won within that larger opportunity set. In Q3, I mentioned our cumulative bookings backlog was $341 million with automotive being the largest constituent. I also mentioned that separately, in the restaurant vertical, that at full scale out, we would have 4,500 locations signed up and roughly $25 million in ARR. When we look at the combined potential of our signed customers at the end of 2023 across both Pillars 1 and 2, our cumulative subscriptions and bookings backlog was $661 million, up nearly 100% year-over-year on an apples-to-apples basis, thanks to growth in Pillar 1 and the incredible list of customers we have added in Pillar 2. Let me now get specific on our financial results for the fourth quarter and full year. In Q4, revenue was $17.1 million, up 80% and within our guidance for the quarter. Full year revenue of $45.9 million was also within the outlook set at the beginning of the year. Revenue growth in Q4 was predominantly driven by automotive royalties with a strong increase in units offset by slight decreases in average selling prices due to a higher volume of edge licenses that generally have a lower royalty than our cloud licenses. Note that particularly with some of our new generative AI solutions, and ultimately with monetization, we think there are meaningful opportunities for unit price expansion. We also benefited in the quarter from a strong multi-year commitment of minimum guarantee volumes of our edge solution with an automotive partner and a new IP licensing opportunity with one of the preeminent AI chip makers that Keyvan referenced earlier. Over the full year 2023, we increased auto units by 68% and active cloud users by 55% versus the prior year. And over the last four years, we have delivered an overall compounded annual growth rate of greater than 50%. In Q4, our gross margins were 77.2%, up over 600 basis points year-over-year, largely resulting from the greater scale in our business. This helped drive gross margins above 75% for the full year, also up over 600 basis points year-over-year, as we increased our revenue sequentially every quarter, and at the same time, improved our cloud and data center efficiency throughout the year. R&D expenses were $12.7 million in Q4, a decrease of 41% year-over-year, resulting largely from our corporate restructuring actions earlier in the year. Despite the expense reduction, we continue to invest in disruptive innovation and expand our existing suite of products with solutions like Dynamic Interaction, Smart Answering, Employee Assist, Vehicle Intelligence, and SoundHound Chat AI. Sales and marketing expenses were $4.5 million in Q4, a decrease of 34% year-over-year, also due to the aforementioned restructuring. We continue to invest in go-to-market and customer engagement. As mentioned earlier, we are seeing tremendous momentum and heightened customer demand, largely resulting from the investments we have been making in sales and marketing. We will continue to invest in high ROI demand generation and brand awareness to ensure we further build upon the current traction. G&A expenses were $7.6 million in Q4, an increase of 3% year-over-year. The increase in G&A reflects two elements, some of which was not contemplated when we guided last quarter. First, part of our spending was related to diligence, negotiation, and closing of the acquisition of SYNQ3. Second, we accelerated investment in financial and non-financial processes and internal controls to support requirements under SOX 404(b) as we became a large accelerated filer. In total, these additional expenses, as compared to prior Q4, amounted to over $3 million and were the primary factors not fully encompassed in our previously provided adjusted EBITDA outlook. Across all operating expenses, non-cash employee stock compensation was $6.5 million in Q4. As a result, our operating loss for Q4 was $12.4 million, which reflects an improvement of 57% year-over-year. Likewise, for the full year, we saw improvements in our operating loss of 35%, as we successfully grew the business while maintaining cost discipline. OI&E was $4 million of net expense for the quarter, and net loss was $18 million in Q4, an improvement of 42% year-over-year. This led to a net loss per share in Q4 of $0.07 compared to $0.15 in the previous year, an improvement of 53%. Adjusted EBITDA, which excludes non-cash charges of stock compensation, acquisition costs, restructuring, and depreciation and amortization was a loss of $3.7 million in Q4 2023, an 80% year-over-year improvement and a sizable dollar reduction down from an $18.8 million loss in Q4 2022. Net cash used in operating activities for the entire year ended 2023 was about $68 million, improving roughly 27% year-over-year. Our cash position at year-end was approximately $109 million, of which $95 million was in cash and equivalents. Given additional actions we have taken in early 2024, our current total cash balance exceeds $200 million. Our capital position is unequivocally a source of strength and gives us security and optionality we need to drive the business forward. With that, let me discuss our outlook for 2024. We are committed to continuing to fuel strong growth with cost discipline and returns focus. We expect to expand with our existing automotive partners and add Pillar 1 customers. We expect our Pillar 2 businesses to grow meaningfully and increase from less than 10% of our total revenue in 2023 to more than 20% in 2024. We see the overall top line growing to within a range of $63 million to $77 million with $70 million as the midpoint target. As we look further ahead to 2025, we believe we will cross $100 million in revenue and deliver adjusted EBITDA profitability. Our gross margins have been in the range of 70% to 80%, providing a strong indicator of our software business profile. Since we just completed the acquisition of SYNQ3, while we work on migrating their cloud and AI infrastructure to our own, we expect a temporary decrease in gross margins due to some of these duplicative expenses. In addition, while the majority of SYNQ3's revenue is AI-driven, they also have a legacy call center operation which their team has been gradually upgrading with AI. We expect to further accelerate this migration, which will ultimately calibrate their gross margins to ours over time. As a result, we expect a combined company to show a one-time gross margin decrease in the early part of 2024, with steady improvement towards our historical levels as we get to the latter half of 2024 and beyond. Overall, though, we see this acquisition as roughly EBITDA neutral over 2024 and accretive beyond. Lastly, let me comment on expected revenue seasonality for the year. Our mix of business will shift throughout the year, as I described, to a greater mix of Pillar 2. But we will start the year more automotive-heavy, just as we ended 2023. As such, we remain affected by the seasonality in the automotive sector, which tends to be higher in Q4 and lower in Q1. Again, in 2024, we see our quarterly revenue building through the year and being back-end weighted. We believe we can grow our business roughly 50% year-on-year each quarter. Let me close by re-articulating our excitement about what lies ahead. Generative AI and large language models have created a generational technological shift. The old way is out. Customers are increasingly realizing they need partners like SoundHound to help pave the way forward. We are balancing the massive long-term opportunity with near-term volatility, navigating towards our goals, and bringing conversational voice AI to consumers everywhere, so they can seamlessly access the information and services they covet through the products and devices they most interact with.

We will now move to Q&A. Our first question comes from Dan Ives with Wedbush. Your line is now open.

Yes, thanks. Good quarter. Can you discuss whether you anticipate forming more strategic partnerships for distribution in the next six to nine months? Is that going to be a major focus for your go-to-market strategy?

Hi, Dan. Yes, that's definitely in our second pillar, which we view as a significant contributor. We have partnerships with companies like Olo, Toast, Oracle, and Square as channel partners, and they help us connect with a larger number of merchants. In our first pillar, our customers tend to be quite large. For instance, we just signed an extended deal until 2037 with one of the largest automakers, which reflects a significant commitment and a lot of trust.

Okay. And then, can you just talk about how the conversation with customers is changing? I mean, it seems like the vision has been there, but now you're starting to actually see the traction. How does it feel like it's more strategic in terms of the conversations you're having, whether it's on restaurants or autos? Maybe you could just compare conversations today to six months ago?

It's completely different, Dan. The demand is skyrocketing. We're actually handling more demand than ever. For instance, we have major customers like multinational chains with thousands of locations. We're even putting some of them on hold to manage larger requests. It's a temporary challenge we're addressing, but it's a favorable situation to be in. Customers are now approaching us, whereas about 12 months ago, or even nine months ago, we were actively pursuing them; now they are seeking us out.

Great. Thanks.

Thank you. One moment for our next question. Our next question comes from Gil Luria with D.A. Davidson. Your line is now open.

Thank you. Good afternoon. I have one product question and one financial question. Regarding the product question: can you clarify the nature of the revenue from the chip company? Are they using your technology in their chips, and do you receive licensing revenue when they sell those chips in devices? Or is it a different kind of arrangement? Additionally, how does the revenue scale once chip makers incorporate the technology?

Yeah, this actually was not a channel partnership with direct revenues. So, the company paid us for our IP. And we've known this company for a number of years. They're a close partner. This was the first time we generated revenue from that relationship, so we're incredibly excited about it, and we expect more positive things to come out of it in the future, but that's as much as we can share today.

Got it. So, maybe I have another question about the product. You mentioned a prominent EV maker in the U.S. Does this mean you can now provide technology over-the-air updates? Previously, a limitation has been releasing it only in new cars as they are shipped. However, I believe that at least three U.S.-based EV makers allow for over-the-air updates and have built-in microphones. So, does this type of deal enable you to roll out your software more rapidly and to a wider range of vehicles rather than just those that are shipped?

Yeah, absolutely. Especially for our cloud, we could replace an existing solution or sometimes they don't have a solution. So, we could actually go to legacy cars and power them too. In this particular case, it would be for new cars and older cars that have already been sold.

And then maybe one thing to add, Gil, I think part of your question is about the pace of scale. The other thing we're super excited about, as Keyvan mentioned in the prepared remarks, is around generative AI opportunities that we're already adding with existing customers. So, it's sort of a build on top, and it really unlocks so many different use cases for us and there's tremendous demand. So, I think the opportunity of scaling faster and doing more per unit, revenue per unit is a big opportunity for us.

Got it. So then on the new backlog metric, I want to make sure I understand the duration. It sounds like on the subscription side, you define the duration as a five-year duration. What's the duration on the booking side on the other side for Pillar 1? That used to be, I believe, six years. Is it still the six years or are we now harmonizing it as also a five-year duration?

No, great question. The current situation is due to committed contracts over the duration, so we are not harmonizing; we are actually adhering to the terms in the contract. In Q4, we had some deals that extended it. I would say the average duration across the full portfolio is still about 6.5 years. However, the duration on the device product has been extended due to some deals that increased the length for the Pillar 1 product. As you mentioned, we standardized the subscription side to five years, but similar to how we treated cumulative bookings backlog, we align it with the contract length. I hope that makes sense.

It does. Thank you.

Thanks, Gil.

Thank you. One moment for our next question. Our next question comes from Scott Buck with H.C. Wainwright & Co. Your line is now open.

Hi, good afternoon, guys. Thanks for taking my questions. First, I was hoping I could get a little more color on your visibility into '25 and maybe why you're comfortable putting out a target today.

Yes, I think it's a couple of different things. One is we're building and we're making choices to sort of build a multi-year roadmap, and that we're not playing short-term quarter-to-quarter or even two quarters. So, with the pipeline we're building, with the customers we're working with, and with the investment we're making to try to scale, we're getting increasing confidence beyond just this year. We thought it made sense frankly. We, through last year into this year, were sort of giving mile markers only up to the one-year mark. I think with the bookings backlog-type metric that we were talking about, there's a lot of good visibility. And frankly, it's sort of like where we're sitting today in February, early in the year, and we know there's just a lot more pipeline and traction that we're gaining. So, we felt confident enough to sort of give an early read to 2025, which we'll obviously calibrate as we go forward. But I think it's really a sentiment of confidence and commitment we're seeing from our customers.

That's helpful. Now does that include any additional M&A or any potential deal you would do in the future would be on top of those figures?

Yes. It doesn't require it. I mean, I would say we're super excited about the SYNQ3 acquisition and what it can bring. So, from that vantage point, it is the one plus one equals a lot more than two opportunity we have with them. In terms of future opportunities, we'll continue to look. We think it's a very dynamic market with a lot of potential opportunities organically and then even possibly inorganically. So, we certainly have nothing on the horizon to talk about there. But the numbers we laid out do not require it. If something structurally changed there, obviously, as you know very well, it depends on the flavor and the size and the type of M&A that possibly could be out there. So, if something we do changes that architecture, that ramp, we'll let you know.

Sure. That's great. And then on SYNQ3, I'm curious if you could give us something in terms of dollar terms, maybe what the upselling, cross-selling revenue synergy opportunity is there, or even as maybe a percentage of their legacy revenue?

Yes. Let me try to explain it clearly. They have an impressive portfolio of customers, including Chipotle, Papa John's, Applebee's, Firehouse Subs, and Five Guys. We had a vision when we acquired them about the potential of our collaboration, and I can tell you that the early results are even more promising than expected. We see opportunities for cross-selling our solutions, combining different voice solutions, and upselling Employee Assist capabilities, such as Smart Answering. Many discussions are happening now, and I'll share more specific details later. We believe SYNQ3 will play a significant role in our plans. The impact on margins is evolving, especially as we transition the call center business to AI. There is a lot of work that comes with integrating two companies, and we are in the midst of that process. However, I want to emphasize that the restaurant sector presents a huge revenue opportunity for us, worth billions annually, and we are just beginning to explore it. Working together, I believe we can accelerate our growth. Additionally, when we assess the competitive landscape, we find that it is mostly untapped, as our technology, particularly in fully automated solutions, is unique. The demand in the restaurant industry is strong due to labor shortages, cost pressures, and the need for consistent service, making this a fitting solution. The organic growth opportunity is immense. With SYNQ3, we are enthusiastic about the synergies and potential for growth. Regarding the revenue outlook related to your earlier question, our merger gives us the confidence to project what we anticipate for early 2025. We wouldn't make such a commitment unless we believed we could achieve that and more.

Yes, well, I appreciate the added color, guys. Congrats again on the quarter.

Thank you.

Thank you.

Thank you. One moment for our next question. Our next question comes from Glenn Mattson with Ladenburg Thalmann. Your line is now open.

Hi, guys. Thanks for taking the question. So, I just wanted to talk a little more about the comment that was made that perhaps some customers on the restaurant side have put on hold for a little time due to demand overflowing your ability to fill it right now. So, curious if that means that there is going to be more hiring involved, or maybe it's more of a learning process as you kind of scale up from smaller mom-and-pop to national chains, and maybe there's a learning curve for both sides of the equation whereby the process of implementing the software will get faster over time or that kind of thing. Maybe you could just give some color on your thoughts there?

I'll begin and then Keyvan can provide additional insights. We are continuously learning in this new market as we disrupt, grow, and improve each day. Our acquisition has taught us a lot, especially since SYNQ3 excels at rapid scaling. I believe we can unite and drive enhancements. One advantage of our software solutions is their ability to scale quickly once we integrate with point of sale systems and manage menu ingestion effectively. Each new customer we onboard expands our potential market and can significantly speed up our growth. We see many positive effects that we can build upon. Regarding investments, we aim to pursue growth. When demand is high, we don't want to decline any customer, but we must be mindful of our roadmap. We will carefully evaluate our hiring to ensure it aligns with our growth trajectory. Before Keyvan speaks, I want to emphasize that we will maintain a focus on cost discipline while also recognizing the opportunities before us. We will not compromise on this; we are committed to investing in order to effectively meet demand.

Yeah, that's all that. And I would just add that the hold that I mentioned, we are talking about days and weeks, not really months or anything beyond that.

Great. Thanks for that color. And then last for me, just on the model side, I think in the press you said that historically been 70%, 80% gross margin. I guess theoretically, if you get to that kind of north of $100 million 2025 revenue target that you put out today, a lot of the growth will be on the restaurant side or the staff side, which theoretically would be, I think, higher margin than the auto. So, would you have us model toward the higher end of that range for 2025?

I won't provide guidance on gross margin for 2025. I will stick to the guidance I've shared, but I can offer some additional insights. Long-term, we are a software business, and the margin profile should certainly exceed 70%. We expect EBIT margins to be over 30%, but that’s at scale and fully penetrated, which I would say is several years down the line. In the near term, we are focused on investments. Regarding your specific question about gross margin, it's not as straightforward as comparing Pillar 2 to Pillar 1 because it varies. Within Pillar 1, some of our edge solutions have very high margins. It depends on the overall mix. However, I do believe we will return to the 70% range. This will also relate to our call center business, which we see as a significant opportunity for transformation in customer service. As I mentioned earlier, generative AI is a key factor in this disruption, enabling consumers to easily access the information and services they want. We believe we can quickly scale this and utilize call center capabilities to gather data and facilitate real customer interactions that will enhance our model. There will be challenges as we expand beyond restaurants into various sectors, balancing the demand for customer support with our capabilities. As we progress into Pillar 2, we'll be refining our approach. That’s why I can’t provide a specific answer right now. However, I can assure you that, long-term, we should be aiming to return to the 70% range, but we need to continue our work to provide specifics for 2025.

Right. Thanks. I know a lot of the moving parts; I understand. Thanks, and congrats on the quarter.

Thank you.

Thank you.

Thank you. One moment for our next question. Our next question comes from Mike Latimore with Northland Capital Markets. Your line is now open.

Great, yes, thanks. Congrats on an excellent year here.

Hey, Mike, thanks.

Yeah, hello. The last quarter you highlighted a lot of restaurant wins like White Castle, Jersey Mike's, Krispy Kreme. What percent of those opportunities do you think you might get deployed by year-end? And sort of what are the keys to getting there, whether it's internal work or leveraging third parties?

It really depends on the customer. Drive-thru operations differ from phone ordering. Last year, we announced our partnership with White Castle, aiming to scale to 100 locations this year, and we are on track. There are specific hardware requirements for the drive-thru setup, which can impact the pace of deployment. White Castle has full corporate ownership, making it easier for us to deploy fully. However, working with customers that have franchisees can present more challenges. For instance, Jersey Mike's represents a phone ordering opportunity. They have more than 2,000 locations and have started with 50 locations that we're currently pushing through. This process can accelerate quickly. To directly address your question, the speed of deployment varies depending on the customer’s setup. We're improving week by week and are optimistic about it. This ties into the assumptions we made for our subscription estimates over five years, which we believe will ramp up conservatively over four years. If you prefer to consider four years, that seems reasonable, as we are progressing faster than that, but it’s a safe estimate to use.

Yeah. No, that makes sense. And on SYNQ3, I think they had something like 10,000 locations, I believe. Do you feel like you could apply your tech to all those locations, or is there a percent that's already kind of happy with what they have?

I mean, the solution is already great, but there's an upgrade opportunity by combining what they have with what we have, and then there's upsell opportunities by offering things like Smart Answering and Employee Assist to existing customers, and we're pursuing both of those.

And I'll also add, Mike, there's also an efficiency opportunity for us as we sort of migrate their back-end systems, the cloud systems, and migrate to our technology. So it's also about back-end, not only just our front-end, and that’s a cost opportunity for us.

And I guess just a basic financial question. What do you think SYNQ3 contributes in '24 and what is current share count?

So, in '24, it kind of depends on the synergies and so forth, but they have a good book of business that we're growing. The reason we're hedging a bit is some of it is the AI and call center that we're going to migrate the call center to AI, we're going to upgrade. There are a few choices through the integration. Again, we're still pretty early in the integration process. But we're excited about the fleet of partners that they have and really mostly about the synergies that we think we could build. But it's all contemplated in our guidance, and we think together we can accelerate even faster than we could have alone. Share count, I think, is around 270 million; I don’t have the number right in front of me on the Class A side, is probably where we are. We have, I think I mentioned in the prepared remarks, some capital raising we’ve done this year to get the balance sheet over $200 million in cash. So that’s about where we are.

Okay. Great. Thanks a lot.

Thanks, Mike.

Thank you. One moment for our next question. Our next question comes from Brett Knoblauch with Cantor Fitzgerald. Your line is now open.

Hi, thanks for taking my question. It was helpful to hear about the year-over-year growth in auto units. I was wondering if you could provide some indication of how many units or devices currently have your technology embedded, and if you might be able to share this information on a more regular basis in the future?

We are in the millions. We considered disclosing the exact number. One challenge is that some of our customers don't give us unique device IDs. So then it makes it more difficult to accurately measure. It might all look like one device, but it might be a million. There are ways to interpolate that, but definitely you are in the millions of cars, TVs, and IoT devices.

The other measure we do give, and we put it in the press release, but it's the queries, which is another sort of an indicator of usage and activity, and that has been growing. It's been growing. We've been giving that number for a couple of years now and crossing 3.5 billion sort of run rate is an indication of the breadth and also just the usage curve increases that we're excited about.

Got it. And then on maybe the restaurant business. I guess any update on how many units you guys are currently deployed in and what you're targeting for the end of this year? I think White Castle, you're expecting to be in over 100 by the end of the year. But maybe more broadly speaking, given you kind of expect Pillar 2 to be north of 20% of the business this year?

I will break it down. With SYNQ3, we now have a significant number of restaurants onboard, as highlighted by the customer names I mentioned earlier. We're consistently expanding and have major deals in progress, which represent tens of thousands of potential opportunities. The pricing varies; for phone ordering, it might be in the hundreds of dollars per location, while in the drive-thru market, it could exceed thousands. In our more advanced stage, it could go beyond just the technology. The number of units and locations will depend on how quickly we can integrate. We believe we are addressing a market with hundreds of thousands of locations, and what we have implemented today is just a small fraction. In the U.S. alone, there are a million food establishments, with global numbers being even higher. We expect to grow significantly from our current 10,000 locations by the end of the year, and soon we will discuss hundreds of thousands we are involved with, followed by corresponding revenue growth.

Thank you. Most appreciate it.

Thanks, Brett.

Thank you. We're showing no further questions at this time. This concludes today's conference call. Thank you for participating. You may now disconnect.