Good day, and thank you for joining us for the SoundHound Q1 2024 Earnings Conference Call. I will now turn the call over to Scott Smith, Head of Investor Relations. Please proceed.

Good afternoon and thank you for joining our first-quarter 2024 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'd 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 definitions, 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 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'd 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 are reporting very strong growth. First-quarter revenue was up 73%. Just a few days ago, we reached the milestone of being a public company for two years. While the tough external conditions of the last two to three years have weakened or eliminated many organizations, we have become stronger. We have nearly tripled our first-quarter revenue in just two years, while better leveraging our expenses, and we have more than doubled our cash position to its record high of approximately $225 million on the balance sheet. Our three-pillar strategy is working. This quarter was a special quarter for pillar two, where we offer AI customer service solutions for businesses. About 30% of our revenue was from pillar two with over 10,000 locations laid in production and over 100,000 in our pipeline. Just a year ago, these numbers were negligible. For the first time, our next-generation drive-thru AI service dynamic interaction is now live with one of the top global quick-service restaurant brands, and the results are incredible beyond expectation. The main challenge our customers face on the first day of being live with dynamic interaction was that our AI was so fast at taking orders that their kitchen could not keep up with the pace. Of course, they're addressing that on their side and are pleased with the results and immediately decided to expand to more locations. As we've said before, our AI solutions save costs for our customers, improve the experience of their users, and also increase revenue by adding throughputs and proactively offering upsells. Dynamic interaction is a technological breakthrough like no other. We believe its impact on voice and conversational interfaces will be as meaningful as Apple's multi-touch technology on touch interfaces. If you have not seen it in action, check out the videos on our website. We have built a competitive edge with our proprietary technology that is creating a massive opportunity in customer service. We have agreements executed with several other large quick-service restaurant brands that will be deploying dynamic interaction in the next few months, for example, Church's Chicken. The earlier version of our drive-thru AI experience has been live for several years and continues to thrive. White Castle continues to expand its footprint with more locations opening, including one of their busiest locations next to Disney World. Another major quick-service restaurant with over 2,000 locations uses our AI for drive-thru and continues to expand our offering to more locations as they add more drive-through capabilities to their existing in-store and takeout services. Next, our Smart Ordering offering continues its strong adoption. Smart Ordering uses our voice AI for answering all inbound phone calls to take customer food orders and to answer numerous questions, allowing restaurants to free up their staff to focus on making food and engaging with customers in-store. We handle millions of calls per month, and we power national brands such as Chipotle, Casey's, Firehouse, Noodles, and Five Guys. Last quarter, we announced the pilot with Jersey Mike's. The pilot was successful, and they're adding more locations. We also expanded with Applebee's and now have our voice AI offering across multiple franchisees, resulting in an additional 500 locations this quarter alone. We introduced a product called SoundHound Employee Assist, which uses our conversational voice AI technology to support employees like a copilot across a variety of tasks via their headset. We already have several customers benefiting from this new service, and we will have more to share soon. Last year, we expanded our AI customer service offering beyond restaurants with Smart Answering, a product that handles multiple calls at once 24/7, conveniently filtering out spam calls, providing verbal and SMS responses, taking configurable actions, capturing leads with intelligent messaging, and answering questions about policies, hours, products, services, pricing and more. Smart Answering is showing rapid growth within pillar two and already has hundreds of locations signed up from single-location small businesses to brands such as Planet Fitness. We estimate our pillar two total addressable market to be over $100 billion with over 1 million restaurants and approximately 30 million businesses in North America alone that we can offer our solutions to. And with dozens of languages we already provide to our pillar one customers, we plan to also go international in pillar two. We believe with large language models and generative AI and most importantly, the data science and machine learning behind our proprietary software, the time is now. Very few companies can offer businesses of all sizes an affordable, fast, and easy-to-implement solution that addresses their growing needs. While other point solution providers and legacy call center vendors are trying to evolve their offerings to include AI, we already have a fully automated and therefore, easily scalable solution. We own our tech. We have big data from real interactions and nearly 20 years of experience. This is why we are winning. Moving on to pillar one, where we power products such as cars, TVs, and IoT devices. Within this category, our customers choose us because they believe our technology is the best, and we help them protect their brand users' data and because we partner with them to differentiate and innovate. We power millions of devices in dozens of languages. And this quarter, we reached an annual run rate of over 4 billion queries, which represents a growth of more than 60% year over year. Last year, we announced SoundHound Chat AI, which combines the power of large language models with our AI assistant, making it more capable and powerful. This is an upsell feature that will increase royalties from existing customers, and its unmatched quality is helping us win new customers. Last quarter, we talked about DS Automobiles being the first to quickly run a trial run to live production, which was unprecedented with car manufacturers. We have signed up new brands for SoundHound Chat AI, including Opel, Peugeot, and Vauxhall due to the success of their launch. And now this quarter, we are pleased to add Alfa Romeo and Lancia. We also went live into production with Stellantis vehicles in Japan. With our customer, Stellantis, we have been the first company anywhere in the world to launch a voice assistant integrated with ChatGPT into vehicles. We are also pleased to have been awarded a design win for our first automobile customers in Latin America with Stellantis. This is a brand-new competitive win. We also continue to gain interest and make progress with electric vehicle manufacturers. For example, a deal we won last quarter with a prominent US-based electric vehicle maker will voice-enable their full fleet of market-leading vehicles later this summer. This means we have gone from signing to in production in a matter of months, thanks to SoundHound's industry-leading capabilities and market-ready products. Additionally, we won a deal with a leading Asian electric car manufacturer to embed our software that aims to bring affordable and luxury electric cars with powerful engines. This is a brand new automaker we have not announced before. This quarter, we announced the collaboration with NVIDIA during the GTC conference. The solution we are partnering on combines SoundHound Chat AI with large language models running in vehicle on NVIDIA DRIVE for seamless voice interaction. Together with NVIDIA, we can now deliver in-vehicle generative AI responses with no connectivity required. We are also now partnering with Arm and have been officially added to their partner program. More to come on that later this year. Just today, we announced a partnership with Perplexity, which will bring cutting-edge online LLMs to SoundHound Chat AI. This allows us to offer a truly multifaceted, next-generation voice assistant to phones, cars, and IoT devices. SoundHound Chat AI will leverage Perplexity to provide accurate up-to-date responses to web-based queries that static offline LLMs cannot currently answer, expanding the type and complexity of the questions the assistant is able to answer. The move makes SoundHound AI the most advanced voice assistant available on the market today. We believe we are the only voice AI platform to be able to quickly provide this unified integration, combining our own technology seamlessly with third-party providers. We have also reached an important milestone with Polaris, our multimodal, multilingual, generative AI foundation model. Polaris now surpasses our latest state-of-the-art speech recognition model in terms of accuracy, speed, model size, and run costs, which already beat the other vendors we benchmarked against by a large margin, including models provided by big tech. Polaris is now live in production with a growing percentage of our customers, and we will continue to provide updates on its progress. We believe voice AI is a bigger opportunity than just conversational AI. Our data and know-how, along with our continued investment in this level of R&D, will strengthen our position as a leader in our space. 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 products. As we increase the notable names that we sign every quarter, and this quarter is no different, we get one step closer to mobilizing this third pillar, significantly increasing our addressable market while creating new, more convenient and accessible consumer experiences. We believe pillar three will create the voice commerce ecosystem of the future, and many customers are signing up in pillar one and pillar two in eager anticipation of us rolling out this monetization strategy. We are excited to see our portfolio of customers using voice-enabled services continue to grow, which should allow us to begin to offer this new commercial ecosystem. In closing, we continue to build a strong business and fortify our financial position, all while gaining market share. We couldn't be more pleased with the demand we're seeing and the high praise we are receiving from the customers we are serving. With another quarter of strong growth and notable customer wins, our momentum continues to grow. We remain passionate about what we do, and that has not changed in the 20 years since we founded the company. We look forward to continued strong growth and creating value for our stakeholders. We are grateful to our amazing team that makes this all possible as well as our customers, partners, investors, and shareholders. 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. Q1 revenue increased by 73% year over year. The results indicate another positive mile marker on our growth journey in which we exceeded $11 million in revenue in our seasonally smallest quarter of the year. We like where we are today, and we are excited about what we are quickly becoming. Our AI solutions attractively reside at a critical intersection. Macro factors like persistent inflation and wage pressures drive many of our customers towards automation for productivity. Concurrently, consumer demand for increased speed and convenience drive our customers towards automation to accelerate throughput and increase revenue. AI connects this intersection seamlessly, and generative AI massively extends the value proposition further. The penultimate result is high consumer interest in SoundHound. With our recent acquisitions, SYNQ3, now fully in the mix, the benefits of integrating this pioneering restaurant tech organization with our years of voice AI innovations are clear. And the breadth of coverage we now have in the restaurant sector is so exciting and showing up in overflowing customer activity. One of the measures we use to gauge that traction is backlog. Last quarter, I introduced a combined pillar one and pillar two customer demand metric called cumulative subscriptions and bookings backlog. In Q1, we saw approximately 80% year-over-year growth to $682 million with an average duration of about seven years. As a reminder, this measure includes new subscription revenue streams and our traditional royalty contract. The methodology for our pillar one contracts has not changed. We include only committed customer contracts for exactly the duration of the contract period and capture various facets of the deal and total contract value like construct. These facets include minimum commitment, target volumes, professional services, and other arrangements. We do not include renewals until the renewal takes place even if contracts include auto-renewal provisions. For subscriptions, cumulative subscriptions and bookings backlog takes into account customers where we are the leading or exclusive provider and assumes a four-year ramp to fully scale with the total five-year duration. We have incorporated reasonable assumptions about adoption percentages with lower percentages applying to pilot and proof-of-concept customers. Furthermore, this metric does not include pipeline opportunities for which we have well over a 100,000-location opportunity for pillar two alone. This metric is intended to directionally convey our medium-term revenue growth prospects. Before I walk through the financial results for the first quarter, given the impact of the acquisition on various aspects of the GAAP financials, we are introducing two new non-GAAP financial measures for gross margins and EPS to help investors better track how we manage the business operationally. I'll share more context in the relevant sections below. Q1 revenue was $11.6 million, up 73% year over year. We saw growth in Q1 across all major industry categories. Pillar two represented approximately 30% of revenue in the quarter, combining organic growth with positive contributions of roughly $3 million from the acquisition of SYNQ3. We also had a strong quarter in pillar one as automotive royalties went up with volume increases year over year. Auto units and cloud users both expanded strong double digits in the quarter. Additionally, we continue to see growing demand for our generative AI solutions, and we are seeing meaningful opportunities starting to be realized for accelerated unit price expansion. We also signed a multi-year commitment in the TVs and devices category, and that led to strong double-digit growth from devices in the quarter. In Q1, our gross margins were 60%, down year over year, largely resulting from the acquisition, including the mix of lower-margin call center agent business. On a stand-alone basis, gross margins were up year over year. Adjusted for acquisition impacts, notably the non-cash amortization of purchased intangibles, gross margins would have been 65.5%. This is the non-GAAP gross margin metric I introduced above. While the call center business does pressure margins in the near term, we are excited about what this new capacity can do for broader business opportunities and equally so, for the valuable training data it provides our AI models. That said, our goal over time is to automate and modernize. So we expect gross margin improvements through the year and ultimately back to pre-merger levels. R&D expenses were $14.9 million in Q1, an increase of 5% year over year. We have streamlined our R&D costs, increased efficiencies, and are prioritizing investments in disruptive innovation to expand our suite of products to address a wider array of customer needs. We are accelerating the training and deployment of large language models to provide even more value to customers, enabling us to open many doors and a wide variety of new conversational AI use cases. That said, we will continue to be thoughtful and opportunistic with greater emphasis on bringing unique value through best-of-breed large language models, including multilingual ASR foundation models, generative AI solutions, and voice AI capabilities that intermediate and arbitrate between our own models and partner LLMs. Sales and marketing expenses were $5.5 million in Q1, an increase of 14% year over year. We continue to invest in go-to-market and customer engagement to capture the strong momentum and heightened demand, and we are expanding reach through brand and industry marketing, demand generation, and high ROI lead-gen strategy. Our sales reach continues to expand with both direct sales and through an amazing ecosystem of strategic channel partners. We know the best go-to-market ROI comes from customers loving us. And this quarter, with one of the largest QSRs, we were introduced to their executive management team as the best partners their team has ever worked with. G&A expenses were $10.3 million in Q1, an increase of 41% year over year. The increases in G&A reflect two main elements that we talked about last quarter. Our year-over-year comparison continues to be impacted by investments in financial and non-financial processes and internal controls to support requirements under stocks 404(b) as we became a large accelerated filer last year, and this quarter also factors in acquisition-related costs. All operating expense line items were impacted by the SYNQ3 acquisition, as well as higher employer-related tax costs and increased compensation. Non-cash employee stock compensation was $7 million in Q1. As a result, our operating loss for Q1 was $28.5 million. This included non-cash acquisition impacts related to the fair value accounting that will likely introduce volatility into this line for the foreseeable future. OI&E was $4.2 million of net expense for the quarter, and net loss was $33 million in Q1 compared to $27.4 million in the prior-year period. This led to a net loss per share in Q1 of $0.12 compared to $0.14 in the previous year. Adjusting for non-cash acquisition-related amortization of purchased intangibles, fair value adjustments, M&A transaction costs, stock-based comp, and other non-cash items, our non-GAAP EPS loss was $0.07 in the quarter. This is a measure we will continue to report upon in future quarters given it better normalizes the ongoing operating results of the business. Adjusted EBITDA was a loss of $15.4 million in Q1. The year-over-year decrease was a result of the previously mentioned higher operating costs as well as the SYNQ3 acquisition impact. Net cash used in operating activities for the three months ended March 31, 2024, was about $21 million. Our cash position at quarter end was $226 million, of which $212 million was in cash. With this strong cash position, we have given ourselves some great optionality to drive the business forward and further improve our financial profile. We entered a new ATM program in the quarter to provide us with capital-raising flexibility, although our balance sheet and forward projections indicate we don't have any time-sensitive capital-raising needs. It would only be necessitated strategically either for capital structure optimization purposes or if another attractive acquisition opportunity presented itself, where the economic value merited it. All that said, we don't take this strength for granted and are committed to being prudent stewards of capital, focusing on creating long-term sustainable growth and profitability. With that, let me discuss our outlook for the remainder of 2024. We are excited about the opportunities ahead and pleased with our top-line performance, coupled with the demand we are seeing in pillars one and two, and we are driving new opportunities in pillar three. We are ahead of pace in having pillar two exceed 20% of total revenue mix this year, and we see that mix increasing as we go into 2025. Given the Q1 performance, we are raising the lower end of our guidance and narrowing our initial range, which steps up our mid-point to $71 million. Therefore, our revenue guidance for the full year is now $65 million to $77 million. We continue to believe the right expectation for subsequent quarters is roughly 50% year-on-year growth. We hope to outperform, but at this stage, we believe this is the appropriate expectation. Furthermore, we still expect to cross $100 million in revenue and deliver adjusted EBITDA profitability in 2025. As I noted last quarter, the increased cost impact on gross margins and adjusted EBITDA is temporary, and we expect both to improve as we move forward. With the SYNQ3 acquisition, we are working on migrating their cloud and AI infrastructure to SoundHound, so in the immediate term, we have some duplicative costs. In addition, while a portion 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. Overall, though, based on initial conversations with customers and partners, we are making great progress, and there is strong interest to even further increase the value we create for customers. I'll close with another note of conviction in the business we are building. As I've said before, the path forward isn't always linear. In particular, creating disruptive transformational innovation is not for everyone, but it's a strong part of SoundHound's DNA. When the pieces start falling together, though there's a gravitational force at play. With our proven track record of progress, as each quarter passes, we get closer to our escape velocity. Despite our achievements so far, we don't take our success for granted, and we fight for it every day to aim higher and push the boundaries further measurably and persistently. Thank you. We will now move to Q&A.

Our first question comes from Gil Luria from D.A. Davidson.

Yes, good afternoon. A lot of product announcement and advances. Let me focus on a couple of the ones that seem most intriguing. The first one around the NVIDIA in vehicle. It would be a big step forward for the whole technology around AI to do the inference without connectivity. What's the timeline do you think that you can deliver this to one of your automotive customers? So that's one. I'll bundle the second one on product, which is on the Perplexity, it sounds like you're going to be leveraging Perplexity AI in the SoundHound Chat AI app. Is there a potential down the road for SoundHound technology to be the front-end for the Perplexity app.

Thanks for the great questions. The NVIDIA announcement is a significant milestone because these generative AI large language models are quite large. Typically, they do not fit on edge devices, but through this partnership, we can operate them at the edge, reducing the reliance on cloud services. While cloud connectivity is still necessary for real-time data, like weather updates or sports scores, many functions—such as general knowledge retrieval or tasks within a vehicle or device—do not require cloud access. We believe the applications extend beyond the automotive sector. In automotive, hardware changes take time, but for software, we have seen rapid transitions, with some deals going from signing to production in just a few months. That said, hardware changes are slower. However, we envision opportunities beyond automotive, such as in quick-service restaurants (QSR) for dynamic interactions and drive-thru automation, which could also be managed at the edge. We are excited about the potential for faster developments through this partnership. Regarding Perplexity, it is not limited to our Chat AI application; we also provide it as a platform for our customers, including those in the automotive sector. Many have already upgraded from our previous versions to incorporate the Chat AI feature, which we see as an upsell and anticipate that our royalties will increase. The access to the online LLM will represent another upgrade opportunity for us, extending beyond just the Chat AI application on smartphones. As for powering Perplexity properties, we haven't made any announcements yet, but we're excited about this partnership’s beginnings. Being both part of the NVIDIA portfolio, which has invested in us, we find that our capabilities complement each other, and we see many future possibilities together.

Thank you, Nitesh, one for you. A little big picture. Last year, you were very effective at changing your overall cost structure to fit, frankly, what the capital markets needed you to do, which is to show a clear path to profitability. You did that very effectively. You reached that point. But as you sit here today, with significant cash on your balance sheet, much lower burn rate, and the long series of opportunities, a couple of which we just discussed, is there a potential or an opportunity for you to move the lever a little bit the other way and say, hey, we have so many opportunities on the technology front that maybe we need to fund more of those and relax a little bit of that shift to profitability?

Thank you, Gil. I want to emphasize that our primary goal is to create long-term value for our customers. We're experiencing strong demand and observing how technology opportunities align with this consumer demand in real-time, which is expanding with every interaction we have. The potential in front of us is significant. However, that doesn't give us the freedom to overspend. We must be strategic about our path forward and have indicated our intention to reach a breakeven point next year. That said, we are continually seeing new opportunities to accelerate our investments based on conversations with customers. Your question regarding opportunities in the automotive sector is valid, and we are indeed observing progress, particularly with the speed at which we can collaborate with some electric vehicle companies. Furthermore, in the restaurant sector, especially in customer service, there's a considerable demand. We mentioned in our prepared remarks the progress we are making with larger quick-service restaurants, which could potentially generate hundreds of millions in annual recurring revenue for us. We recognize the size of this opportunity in the near term. Given the fast-paced innovations and the dynamic ecosystem with numerous new players and technologies, it's essential for us to remain agile. This is why maintaining a strong balance sheet is crucial; it provides us with the means to be thoughtful and strategic about our investments. We will approach this carefully and with capital mindfulness to ensure strong returns. There is a balance to maintain. Ultimately, our investment decisions are guided by whether we are genuinely creating value for our customers, and as we hear that demand growing louder, we will act to meet those consumer interests. I hope that clarifies our perspective.

Our next question comes from the line of Mike Latimore from Northland Capital Markets.

Thanks, yeah. Congrats on all the developments here. Maybe can you just talk a little bit about the synergies you're seeing with SYNQ3 so far. What kind of cross-sell opportunities are you seeing and have had? Are you able to leverage some of their data to train your models? And then are you able to use some of their resources to help with deployments?

I’ll begin, and Nitesh can provide additional insights. We definitely see the synergy; the acquisition was fantastic, and we take great pride in it. Each day we experience its benefits. They possess a wealth of data that we are already utilizing to enhance our models. They have extensive integration capabilities, and it’s not solely about delivering a comprehensive AI model. We need to integrate with POS systems, as many enterprise clients have their own proprietary systems that must be connected. They offer analytics, menu management, and more, which we are leveraging to accelerate our growth with our organic clients. On the technology and data front, the synergy between our companies is also due to our shared experience. We began as an AI company and recognized the restaurant industry as a promising sector. They came from a background in restaurant operations and identified automation as a valuable opportunity. Both companies have nearly 20 years of history, with them evolving towards AI as we entered the restaurant space. Their deep understanding of the industry is crucial for us as we aim to scale further.

I want to add a couple of points. I see this in three categories. In terms of revenue, there are significant opportunities for cross-selling and upselling, as Keyvan mentioned. Additionally, the relationships they bring and our conversations are advancing much quicker than we could have achieved on our own. This is happening rapidly. Furthermore, merging our core capabilities with what they have already established acts as a catalyst for both their existing customers and new client relationships. From a revenue perspective, these are medium to long-term opportunities, and we’re increasingly optimistic several months after the acquisition, consistent with our initial expectations. On the cost side, we've addressed some aspects, and we are currently navigating this journey. We are managing back-end costs related to cloud migration and considering architectural adjustments in the software stack, which will allow us to integrate our capabilities more efficiently. We expect to move faster and leverage insights from both organizations. The cost elements affecting Q1 numbers stem from various acquisition-related expenses and an unsynergized cost structure, which we are now addressing. Over the coming quarters, you'll witness more efficiency emerge from this. One specific aspect is the gross margin, which I mentioned in my prepared remarks. While gross margins were lower this quarter, this aligns with our plans. They operate a call center business that we'll gradually automate, utilizing real-time production data to enhance our models. Additionally, I want to share that SoundHound's gross margin increased by over 300 basis points year over year on a standalone basis. We are still driving a strong margin profile, although there will be this transition with SYNQ3. Finally, I want to emphasize the innovation opportunities related to synergies, particularly concerning data. Data is critical in enhancing our models and understanding customer needs better. It’s vital for us to connect with operators in 10,000 locations and identify what’s essential for the restaurant ecosystem. We are enthusiastic about making our products more aligned with their needs. There is much more to discuss, but given the brevity of the call, I'll conclude here, though we have a lot of excitement about the future.

Sounds like great progress out of the gate. And then just real quick on the restaurant vertical, is there a clear leader here between phone ordering versus drive-thrus in terms of just like what's in the pipeline? Is it skewed to one or to the other very much here? Or is it kind of balanced between phone ordering and drive-thrus?

It's balanced. The answer to your question involves both short-term and long-term aspects. We're enthusiastic about opportunities beyond just phone versus drive-thru, including discussions around our Employee Assist program, which supports in-store staff. In-app conversations are generating excitement among many restaurants. Our Smart Answering capability acts as a foundational element for these developments. There are various opportunities we are currently incubating, and we've previously mentioned a timeline for deployment. With drive-thru, we have specific hardware needs and cycles to navigate. We're cultivating strong partnerships with several hardware providers to standardize and expedite this process. We recognize this as a major breakthrough. While we respect the competition, right now we perceive a unique value proposition in an untapped market. We aim to move quickly. In the phone ordering space, we also have excellent partners and are experiencing growth. We've noticed that certain types of cuisine generate more phone orders, so we will focus on servicing those categories more. In summary, it's balanced, but we're excited about multiple opportunities.

Our next question comes from the line of Glenn Mattson from Ladenburg.

Hi. And I apologize if this is repetitive because I missed part of Keyvan's prepared remarks. But Nitesh, you just kind of talked about some of the gating factors in rolling out the offering in retail like some of the equipment that has to be placed in it. And I think last call you guys also kind of talked about the demand just been a little bit higher than you could handle at the given time and that some customers are kind of put on hold while you decide who best to serve and how quickly and everything. So I guess I'm just trying to figure out or understand if there's been some change there, if you caught up to some of that demand somewhat or if there's more investment needed to make to get to that spot and just an update on where you are from that point of view.

Thanks, Glenn. We're working hard and making definite progress. I want to clarify that we are not talking about delays stretching out for months. We are actively addressing various aspects of our pipeline with customers. We’ve made significant strides, and while unpacking our costs may be complex due to the acquisition, I can break it down into three segments: transitional costs from the acquisition, the integration of acquisition-related expenses alongside other one-off dynamics and seasonal items, and ongoing investments that we plan to continue. This ties back to Gil's question regarding our goal of achieving profitability next year. We are accelerating investments where they are needed to satisfy consumer and customer demand. In response to Glenn, we are focusing on hiring the right talent and investing in the necessary capabilities to efficiently meet customer needs. I believe we're making excellent progress in that regard. One challenge, which can be seen as a silver lining, is that we are experiencing increased demand. Each time we introduce meaningful innovation, word spreads quickly, especially in the restaurant sector. We're looking forward to the upcoming major restaurant conference in Chicago, where we have an impressive showcase set to promote our offerings. While we're enhancing our existing relationships, we are also encountering growing demand, which is a positive challenge. Nonetheless, we need to keep investing to ensure we meet customer expectations. As I mentioned earlier, we've received positive feedback from one of the largest QSRs regarding our technology's success—though there was a challenge where the order-taking tech was too efficient for current preparation capabilities. We're committed to resolving that issue collaboratively, which reflects the positive progress we're making. Hearing positive comments from our customers is what we strive to nurture, as it creates a beneficial cycle that we can continually build upon. We are working diligently to keep up with the demand, and we are investing to ensure we meet consumer and customer needs, although we still face considerable demand that we are actively managing.

That's very helpful and certainly a good issue to have. I have a second question. I feel like you've mentioned this before, possibly in this call as well. I'm curious about your outlook for potential acquisitions beyond SYNQ3. I understand that you still need to integrate the SYNQ3 acquisition. However, I'm interested in your thought process regarding the attributes you seek in future acquisitions and your overall appetite for them. Thank you.

Sure. I'll start by saying our organic opportunity is immense. We're excited about what SYNQ3 brings and what we can accomplish with our current capabilities. The organization is fully committed to leveraging this potential, which could lead to significant long-term growth and the creation of an incredible business. The surrounding ecosystem and macro environment are evolving, with several factors at play. Firstly, the recent rise of generative AI is creating disruptions across industries. Secondly, it's attracting new participants into the ecosystem. We will remain proactive rather than solely focusing on our agenda. Our strategy emphasizes partnerships and learning from others, supported by a dedicated team that monitors these dynamics constantly. When considering any organic investment or acquisition opportunity, we rely on our three-pillar framework. We are aggressively developing voice-enabled products in areas like automotive, IoT, and other devices, and we are also advancing our customer service initiatives, particularly in the restaurant sector. Our Smart Answering service is expanding into various other industries such as fitness centers, beauty salons, and real estate, among many others. Our scale is creating significant opportunities for monetization by integrating voice-enabled services with products. We aim to pursue organic growth while engaging with companies excelling in specific niches. Instead of a cumbersome M&A process, partnerships often make more sense, and we are actively expanding those. We have mentioned a few examples in this call. We plan to remain open-minded, utilizing our strong balance sheet to make strategic decisions. Nevertheless, we will be careful stewards of our resources, ensuring everything aligns with our overarching strategy and market trends. Regarding our appetite for future acquisitions, we prioritize returns above our capital costs, adjusted for risk. As long as the calculations are favorable, we'll remain receptive. Being a small but disruptive company means our focus isn't solely on financial metrics; speed is equally important. We aim to move quickly and continue to disrupt the market. Any opportunity that could impede our momentum isn’t favorable, while those that enhance our speed are ideal. That’s the approach we take.

Our next question comes from the line of Brett Knoblauch from Cantor Fitzgerald.

Hi, everyone. I appreciate you taking my questions. It's great to see that demand on the restaurant side of the business is continuing to grow. Can you elaborate on the sources of that demand from a lead generation perspective? Is it coming from your outbound sales efforts, or are customers reaching out to you, similar to how quickly Applebee's was onboarded? Also, how do your POS partnerships with Square and Olo fit into this? I'm curious about your go-to-market strategy in the restaurant segment.

Yeah. Thanks for the question. So it's a combination. We have events that we participate in that increase awareness, like the one that's coming up, National Restaurant Association. We have now a good-sized sales team. The SYNQ3 acquisition augmented that. But we have seen a big shift that maybe 18 months ago, we had to knock on these doors and educate them about the value of voice AI automation. But now we see them knocking on our door. A lot of these brands that we used to dream about talking to, now they are coming to us knocking on our door, and they want to move fast. So there has been a very big change in the dynamic of the market.

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