Good day, everyone, and thank you for standing by. Welcome to the SoundHound Q4 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 11 on your telephone. You'll then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Scott Smith, Head of Investor Relations. Please go ahead.

Good afternoon, and thank you for joining our fourth quarter and full year 2025 conference With me today is our CEO, Kayvon Mahajar, and our CFO, Nitesh Charan. We will begin with some short remarks before moving to Q&A. We'd 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 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, Kayvon Mahajir. Please go ahead, Kayvon.

Thank you, Scott, and thank you to everyone for joining the call today. 2025 was a record year for SoundHound, nearly doubling our revenue year over year. We also had a record fourth quarter. Revenue was up 59% while all key profit metrics improved. We broke another record in Q4. We signed over 100 customer deals, making it our biggest quarter yet. We won across different industries in a variety of regions. Just to name a few, we signed a new prominent automotive logo in Japan to use our AI assistant with a seven-digit unit commitment. In the U.S., we signed a multi-year deal with one of the largest telecommunications companies in the world to use our technology. We signed a multi-year global deal with one of the largest athletic shoes and apparel companies to power their AI customer service. We closed deals with healthcare providers, universities, insurance companies, financial institutions, e-commerce merchants, retail, military, and many more. Our execution with channel partners was also exceptional with multiple seven-figure deals in 2025. I'll dive into other business highlights specific to Q4 shortly but first I wanted to touch on a few recent market dynamics. The power of AI is disrupting traditional software and services companies and this is creating further tailwinds for soundhound in this inevitable ai transformation companies need a partner like soundhound to help them rapidly reinvent themselves we partner with our customers to overcome their challenges and achieve their ambitions creating incredible end user experiences for their employees and customers with the exponential advances in ai we believe we are entering a new era where companies with deep tech and data modes will create the most value. This makes Sanhan very well positioned with decades of deep tech innovation and data accumulation. Sanhan AI was founded with a mission to deliver voice and conversational AI experiences that are deeply integrated into user environments and deliver value where it matters most. This early vision now positions us perfectly for the agentic AI revolution we are seeing today we believe our agentic platform is the only solution that is ready to be deployed across a multitude of vertical use cases and a huge and growing range of touch points and modalities from call centers to cars robots phones apps TVs and websites all with a unified AI agent framework this means that our customers can build an agent once and deploy it anywhere at Soundhound we offer the best models and innovation regardless of where they come from. We can give customers access to big tech models, emerging models, other third-party models, as well as Sam has own models that consistently outperform big tech players. With us, our customers will have access to the latest and greatest technologies as fast as they become available. And because of our deep expertise in conversational AI, we are able to optimize our own technologies to meet customer needs. This ranges from offering Polaris, our custom speech recognition foundation model to our unique method of arbitrating the conversation across on device cloud on premise and even human augmented services this combination of capabilities is the foundation of our unique and differentiated agentic plus framework which blends agentic deterministic and human assisted understanding representing the full mix of what our customers want in addition sanhan has a massive amount of data and has processed billions of interactions over the years across all major global languages supported by having a physical presence in multiple markets and geographies. This allows us to compete and win against big tech, while new players are faced with the traditional limitations of scale and reach we've long since overcome. With those considerations in mind, we believe Sanhan is the strongest bet in an ever-changing world of AI evolution. We recently previewed our agentic platform to public audiences and they were blown away. The Consumer Technology Association, the body that organizes CES, consistently called our tech as an example of one of the most exciting trends at the whole show. Our customers agree and we are proud to navigate this exciting and dynamic period by their side. Here are some proof points as I highlight some of the many wins in this quarter alone. In automotive, besides the Japanese OEM previously mentioned, other notable customer wins include a new Korean OEM with a global footprint, an iconic Italian manufacturer of high performance luxury sports cars, as well as a Chinese and Vietnamese manufacturer. We also signed our first two-wheeler and have seen strong interest from at least a half dozen other OEMs. Stellantis also expanded further with the adoption of live generative AI capabilities for real-time responses and we added an Italian commercial truck company which will offer SoundHunt voice assistant to its wide range of vehicles. We also signed a multi-year renewal with one of the largest American automobile manufacturers to deploy our enterprise AI solutions. In voice commerce, coming off a successful CES, we are seeing lots of momentum. Thanks to our deep penetration in restaurants, this highly anticipated solution is quickly advancing to go live in the US with a prominent German automotive OEM. The list of engaged OEMs is growing rapidly and we are now starting to see early signs of the flywheel effect taking shape. In January, we also unveiled our fully agentic voice platform for in-vehicle and on-TV commerce and showcased a leading smart TV manufacturer and a national pizza restaurant working together seamlessly. The solution is expected to go live later this year. And we are quickly building out an ecosystem well beyond food ordering from the Colorado TV, with Parkopedia and OpenTable partnerships announced in Q4, and further plans to extend to events and travel booking very soon in restaurants our voice inside solution is seeing high demand with a number of top 25 restaurant chains signing up to collect data for drive-through efficiency panda express also expanded into dozens more locations while casey's general store agreed to a multi-year renewal and added smart answering to handle non-food ordering calls we had franchise wins with both ihop and jersey mics in retail and consumer goods we signed one of the fastest growing global health clubs in the us and a multi-hundred unit personal care company to adopt our outbound innovative automated solution for customer retention campaigns and for managing inbound calls we signed two non-profit organizations one that has a large network of thrift stores and another one with a large number of fitness and health locations In Enterprise AI, we signed a record number of deals across various solutions and verticals, including In Financial Services, a New York-based global financial services platforms company, a large American multinational payment card services corporation, and BNP Paribas. In Healthcare, an eyewear and optical retailer, which operates or manages over 700 stores in 40 U.S. states, an independent healthcare practice that supports more than 1300 locations in 45 states, and a Virginia-based healthcare and wellness services with over 80 healthcare facilities. In insurance, a Fortune 100 multinational insurance and asset management company headquartered in Germany, a global Japanese insurance company that has offices spread throughout the US, and one of the first motor clubs in the US with more than 16 million members across 21 states in government and education a u.s government sponsored enterprise helping to make housing more accessible and affordable a large florida-based university to support their health system and likewise we signed on with a local government to a city in florida in hospitality one of the world's leading providers of food and support services operating in over 25 countries and an american ticket sales and distribution company with operations in over 35 countries around the world in telecommunications in addition to the large telco i mentioned previously we signed a european telecommunications company that provides cable television broadband internet and fixed telephony and a large british broadcast and telecommunications company i mentioned some of the success you've had with large seven-figure deals in 2025 with our channel partners and in q4 we continue to build out our ecosystem with the following partners with one of the largest telecommunications companies in the world we are adding stanham energetic ai call center automation to smbs in their large business marketplace in addition we partner with bridgepoint which expands our enterprise ai adoption across their vast network and a large customer experience management company providing services to approximately 150 000 businesses we renewed our partnership with a global technology and professional services company that delivers technology solutions and mission services to every major agency across the u.s government and a large multinational professional services firm to provide our solutions to financial services firms across spain importantly our enterprise ai technology is making a difference and helping businesses tackle some of their biggest challenges one large healthcare network reported that their AI agent built on Sandhance platform now handles more than a third of all patient appointment scheduling, helping to unclog the system that gets patients what they need more quickly. This customer is already looking to expand our platform to tackle additional use cases, like prescription refills and pharmacy inquiries. In a completely different industry, telecommunications, another customer reported a 20% reduction in the labor costs associated with billing disputes thanks to ai agents that analyze invoices and execute adjustments and in auto insurance our platform was able to help a customer increase containment by 10 percentage points with respect to very complex use cases in under 60 days in short we are seeing great traction because our technology is delivering real world results in closing we had a record 2025. this is happening because we are an ai first company and customers from a broad range of verticals are coming to us to automate their complex processes and make them more human-like to better serve the customers. We are leading the charge in a market disruption that is in the very early stages. We have a massive time and you're poised to win. With that I'll now turn the call over to Nitesh to talk about our financial performance, key growth drivers and business outlook.

Thank you Kayvon and good afternoon everyone. Q4 was our strongest quarter with $55.1 million in revenue, up 59%, and improvements across all profit measures. For the full year, we delivered $169 million in revenue, up 99% versus the prior year, and up more than five-fold in the few years that we have been a public company. We achieved this record performance through our disruptive technology, breakthrough innovation, hyper-responsiveness to customers, and by scaling across our broadening enterprise portfolio. And we operationalize this with cost discipline, driving a clear pathway to break-even profitability. The market momentum in our space continues to accelerate. Generative AI, Agentic AI, and Voice AI are now base-level customer requirements. Customer service is undergoing a once-in-a-generation disruption, and enterprises are clamoring for innovators like us to provide high customer engagement solutions to improve their top and bottom lines. From the beginning, we have built our business to deliver successful AI-driven outcomes, and our pricing architecture is purpose-built for that. In a world where seed-based pricing models are quickly becoming antiquated because of their deteriorating price-value equations, our agentic solutions seamlessly drive outcome-focused consumption and success rates that create economic incentives fully aligned with our customers. that's a sustainable model it's a differentiated moat with our entrenchment deepening let me share some examples across our business we have been growing the automotive install base for years and our monthly active users continue to expand rapidly with q4 growth in excess of 50% year on year more notably their query activity or usage continues to accelerate with q4 audio queries up roughly 75% from the prior year. And note that this is only cloud-based queries. We also offer edge-based solutions that don't require internet connectivity, so these volume metrics meaningfully understate the full auto-customer engagement. The volume of queries we deliver in IoT and smart devices is even larger than the automotive base and also growing strongly. Our new voice commerce engines fit so well here, and the idea of ordering a pizza or a salad naturally via voice ordering on your TV while watching the super bowl or olympics personally resonates with me on that point in restaurants we continue to grow locations but what's even more directly impacting our revenue and our customers business is order activity which in q4 we saw across 9 million calls for the first time up strong double digits from the prior year that's a lot of meals from chipotle casey's and many others in our enterprise business our ai platform is delivering measurably better customer outcomes quarter after quarter containment rates hit record highs now resolving the majority of inbound interactions without any human escalation and with certain containment levels even crossing 90 percent our automation intensity crossed a meaningful architectural threshold in q4 chaining multiple targeted actions per customer engagement into fully autonomous resolutions our omni-channel multi-modal systems are driving better resolution rates resulting in compounding returns per interaction all this comes together in our comprehensive query volume which now is in billions per month up 12x since we went public with that let me discuss the fourth quarter financial results in more detail q4 revenue was 55.1 million dollars up 59 year over year the growth was driven across multiple verticals. Our enterprise AI business performed particularly well in healthcare and financial services. We also saw strong year-over-year growth in our restaurant business as our automation rates continue to improve, integrations deepen, and customer adoption continues to expand at a healthy rate. In automotive, we continue to accelerate our Asia business and see traction in the world's fastest-growing markets. As Kayvon mentioned, we signed a new Japanese automotive of oem in q4 and we had several deals in asia in 2025 with commitments of millions of units this broad-based expansion once again enabled us to realize strong customer diversification with no customers contributing greater than 10 percent of our revenue for the quarter or full year in q4 our gap and non-gap gross margins were both up year over year our gap gross margin was 48% and adjusted for non-cash amortization of purchase intangibles and employee stock compensation, our non-GAAP gross margin was 61%. We continue to drive efficiencies by modernizing infrastructure, optimizing cloud spend, consolidating legacy systems, and improving the efficiency of our core platforms, such as shifting from third-party solutions to our own home-built ones. And our continued efforts to prune our portfolio of low-margin acquired contracts has been resulting in the sequential improvements in non-gap gross margin this year we expect to continue focusing on profitable contracts and either adjusting or moving away from those that don't meet our minimum thresholds that said there are deals that have a clear near-term path to automation using our ai and we will not hesitate to make the critical investments in them to build long-term sustainable profitable returns r d expenses were 24.8 million dollars in q4 up 22 percent year-over-year largely due to acquisitions and related headcount and development costs we continue to invest in innovation to maintain our technological leadership for example we continue building our agentic ai solutions leveraging our vast data to further improve our polaris foundation model and are expanding our in-house real-time audio-to-audio and embedded vertical api integrations into production environments we also continue to differentiate across the entire voice ai stack including via best-in-class text-to-speech built on modern architectures for differentiated speed accuracy prosody and with code switching multilingual capability for an increasingly diverse and integrated world sales and marketing expenses were 17.4 million dollars in q4 reflecting an 82 percent year-over-year increase primarily driven by acquisitions we continue to invest in go-to-market efforts via direct and indirect sales, as well as customer success to increase retention. In addition, we continue to elevate our brand and market presence to drive demand and lead generation. G&A expenses were $21.2 million in Q4, reflecting a 29% year-over-year increase, primarily driven by various legal, advisory, and other costs related to our acquisitions. We also continue to drive operational efficiencies throughout the organization and improve our global control environment. we had non-cash employee stock compensation of 20.8 million dollars and depreciation and amortization including the amortization of intangibles of 10 million dollars in q4 all of which are included in our gap results adjusted EBITDA was a loss of 7.4 million dollars an improvement of 56 percent year over year gap net income of 40.1 million dollars and gap net earnings per share of 10 cents were positively impacted by the change in fair value of contingent liabilities of approximately 85 million dollars this relates to the acquisitions we have completed and is a non-operating and non-cash expense and primarily reflects the quarter-on-quarter fluctuation in our stock price as such this item has been excluded in our non-GAAP results non-GAAP net loss was 7.3 million dollars and non-GAAP net loss per share was $0.02 in the quarter. This adjusts for items such as non-cash depreciation and amortization, M&A transaction costs, and stock-based compensation. Our balance sheet remains strong, with cash and equivalents at quarter end of $248 million with no debt. With that, let me discuss our financial outlook. We are starting 2026 with strong momentum. As Kayvon mentioned, we broke a record in Q4 with over 100 customer deals across every industry we operate in our pipeline continues to build across several verticals we have a strong foundational customer base to expand upon through full portfolio upsell and cross sell and we continue to aggressively release new agentic and voice ai capabilities to dramatically improve customer outcomes with the greater scale achieved in 2025 we have increased visibility in the near term and expect to continue to grow rapidly over the long term for 2026 we expect our revenue to be in a range of $225 million to $260 million. As in prior years, there will be a ramp in revenue through the year given the nature of our customer base, underlying seasonality, and expected large deal timing, both for renewals and new deals. That said, we expect this seasonality to improve as our recurring mix of business continues to grow. Overall, this outlook affirms our expectation of another year of very strong growth. We remain committed to delivering accelerated growth while being mindful of the journey to profitability. Our strong cash position and debt-free balance sheet gives us the capacity to remain prudent in appropriately balancing growth with profit maximization. We will continue to drive scale through targeted investments. Last quarter, I mentioned that we see additional acquisition cost synergies of $20 million on an annualized basis and in q1 we have already executed most of that the effect of which we expect to appear in future quarters i also noted last quarter that we are entering our break-even phase after many years in heavy investment mode this transition won't be linear or uniform we expect it should be progressive and ultimately compounding our long-term expectation is that we can operate this business at scale with 70 percent plus gross margins and 30 percent plus ebit margins For the near term, though, we expect to calibrate the investments based on the opportunities in front of us and their expected returns, and we will continue to balance the importance of delivering profitability in the near term with fueling sustainable, profitable growth over the long term. With that, we will now move to Q&A.

Thank you. At this time, we'll have the question and answer session. As a reminder, to ask a question, you'll need to press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please stand by while we compile our Q&A roster. Your first question comes from the line of Scott Buck with H.C. Wainwright and Company. Your line is now open.

Yeah, good afternoon, guys. Thanks for taking my questions. Yeah, as we went through the 4Q highlights, clearly a lot of balls in the air. I'm curious, how are you handling from a deployment and customer service capacity standpoint? Are you starting to feel a little constrained?

Thanks for the question. We are definitely doing a lot, and I've been saying for the past few quarters that this is the time for us to do more, partly because, yes, we are in many industries, but the ingredients we are using to power these experiences is the same. So the decades of work we've done to build, you know, the best in class speech recognition, conversational AI, agentic orchestration, all of that is the same, regardless of whether we are in automotive or we are providing customer service for a healthcare company or insurance company. and we are, because of the advances in AI, we are actually able to deploy faster, go live faster, develop faster, and we are able to keep up with the demands with, you know, fewer people and less resources. So, you know, demand is going up and what we need to do to deliver to these customers, the resources requirement is actually going down. So, we expect that to be a further tailwind for us.

Great. That's helpful. And then I wanted to ask, you know, you call out a number of renewals. Can you talk a little bit about any changes in pricing or upselling you're seeing as you go through the renewal process with customers?

Yeah. So, we have customers that we've had for a while. For example, some of the automotive logos that we've had for a number of years. because these renewals are actually an upsell moment because we bring them the agentic solution. The Gen.ai solution that we developed three years ago, that was an upsell moment. Now we have the agentic solution. That's another upsell moment. So it's basically a renewal with a price increase and sometimes with a bigger volume commitment. And we are seeing the same in customer service, again, especially with the customers we've had for a number of years. the agentic platform that is an upgrade, partly it could come at a higher price, and for deals that are based on containment rates, we expect to generate more revenue because we contain more of the incoming calls. For example, I'm going to use some numbers, but in the industry, there's no one number for containment rate because it depends on the use case. We've seen, you know, for example, in the use case, a 30% containment go to, you know, 70%, 80%, sometimes over 90%. That means we handle more than 90% of the incoming calls without kicking to a human, and we get paid more as we contain more calls. So some of the increasing revenue is just going to come from upgrading our existing customers to the agentic solution, even without a renewal and even without increasing the price, it's going to generate more revenue for us.

Great. That's very helpful. That's all I had, guys. I appreciate it. And congrats on the quarter. Thank you.

Thank you. Your next question comes from the line of Brian Schwartz with Oppenheimer. Your line is now open.

Yeah, hi. Thanks for taking my questions this afternoon. Congratulations on a very good year. Kayvon, I wanted to start with you. And, you know, your enterprise AI business clearly has strong momentum, especially in the higher regulated industries that you pointed out. You're building deeper entrenchment, you know, but in the market, certainly over the last like three, four, five months, there's been a lot of fear about software companies' long-term growth, that these larger LLM providers are going to be able to just build workflows above software companies' platforms and bypass them, and it's going to be much more challenging for companies to grow. So I was hoping you could address that, how you see the durability of the enterprise AI business as we enter this agentic era. And then I have a follow-up for Nitesh.

Sure. That's a great question. So I think there are two flavors of that question. One is what's happening to software and services companies, so not necessarily Soundhound. And that has been a tailwind for us for the past three-plus years because of Gen AI. So the concept of that is automation is coming, and that is going to disrupt services companies and SaaS companies. Everything is going to get automated and more and more automated. And that's not a new thing. We've been benefiting from that for three years, And these companies that want to automate basically come to SoundHound to help them automate. There is maybe a second flavor of that question, which is what happens to companies like SoundHound with the latest advances in AI where software development is becoming easier? We think of that as another tailwind. And, you know, a really good analogy that has resonated with me is, you know, imagine the internet companies when we had connections with dial-up modems. So, you know, good internet companies were there, and they were delivering their websites to their visitors. And then dial-up modem became broadband internet, so bandwidth went up in orders of magnitude. That was a great thing for internet companies. Now, some didn't maybe reinvent themselves quickly, but the services that these internet companies could provide became a lot more richer and powerful. And we feel the same way, that we can move faster. Like the earlier question that was asked, like, can we, you know, we have so many customers, how quickly can we deliver? We use AI to build AI to deliver to the customers that want AI. and we think that pace is going to be better for us that quality is going to be higher because we are utilizing these advances in AI.

Thank you I just wanted to ask you that question Kayvon because you're such a pioneer in terms of technology in this industry I appreciate you sharing your perspective. The question I have for Natasha is just thinking about how you're thinking about planning the progression of the efficiency of the business so maybe asking it in terms of the operating profile here in 2026. Clearly, the business is accelerating. I think you're gaining efficiency in your development from your, as Kayvon talked about, with your own Agentech and AI. But how do you think about the rest of the investment profile? You know, are you looking to accelerate your investments? Are you looking to keep your margin stable where they are today? Are you looking to show improvement in terms of the efficiency and the EBITDA margin 2026? Thank you.

Thanks, Brian. I'll take that from a couple of different angles. First, with respect to continuing that AI efficiency play, I think there's a multitude of ways that that plays out here. Number one, our efficiency in product development is better. Certainly, we're seeing that. I think our efficiency in deployment and delivery is better. We're seeing that. And then even just operationally, we're all across the company utilizing tools that may not be core to what SoundHound develops, but certainly in my G&A function, there's definitely a number of areas that we're driving efficiencies, and I think that's a responsibility that all of us take to leverage the latest and greatest to be responsible with our costs. Number two to your question on just the profile, I'll go back to my prepared remarks a little bit. We are now shifting, you know, from an era, I'd say from the origins of SoundHound, of where we were heavily investing primarily in our innovation, but maybe more recently in building up the go-to-market capabilities, to now this area, to this era of break-even. And, you know, we're not trying to be super precise on one quarter delivering one specific number, but more importantly, we start with the premise that we are in the very early innings of massive transformational shift, whether that's the LLM-driven capabilities that we're seeing with these amazing engines to the voice AI era of how we're able to engage with consumers and customers in really unique, more efficient, seamless ways to get all sorts of transactions. actions done, or obviously now to Agentic and how we can deliver great platforms and capabilities to enhance customer capabilities and solutions predominantly, I think, for us in the customer service space, and rewrite how those traditional sort of ways that people get their billing inquiries resolved or they book travel or they order food or whatnot or get health care appointments, all that's getting rewritten, and we're just in the early innings of it. So we need to be focused because we know that the outsized returns are there for us to go after. So we're going to keep fueling in getting the hyper growth that we've been delivering over the last couple of years. And it's our view that that level of growth, strong, very strong growth, you know, should continue for the foreseeable future. So with that, you know, to every incremental dollar point, that should go into fueling growth, but we need to be mindful that we're going to do it efficiently. So to your point, as we continue to scale, we absolutely expect efficiencies on our operating leverage. And I think from an EBITDA basis, you know, we'll continue to see year-over-year improvements in EBITDA. We'll continue to see leverage on the P&L. And I think our R&D in particular, I think we'll be able to drive efficiencies. And then I think it's a matter of go-to-market, it kind of we're going to we are investing both in direct and indirect channel and I think you know the indirect channel has been great for us we highlighted it briefly in the prepared remarks of just the additional scale we can get through indirect channel partners so across R&D across sales and marketing and across G&A we think there's efficiency and ultimately that'll land towards what I characterize in the prepared remarks is us moving into this era of breakeven So, thank you for taking my questions. Thank you, Brian.

Thank you. Your next question comes to a line of Gil Loria with DA Davidson. Your line is now open.

Great. This is Lucky On for Gil Loria. Thanks for taking the questions. You know, you guys have pretty strong traction, it sounds like, with auto OEMs, especially on net new in the quarter, despite previous headwinds from tariffs impacting the industry. I guess, is there anything to call out as to why you had particularly prominent success in that vertical this quarter?

Yeah, it actually was a great year in automotive for us. Earlier in the year, we closed with a big Chinese OEM, also with multiple millions of units committed. Then we had a robot maker in China, and then we had more deals in India. And then we're very proud that we have won a prominent logo in Japan. And I think it's because of the great solutions we've created. We've been in automotive for a number of years. We are well known for having, you know, the best solution. And we partner with our customers to, you know, achieve their vision and ambition. Our Pillar 3 vision is paying off. It's the, you know, we predicted a flywheel effect from Pillar 3. And to summarize it quickly, we power cars and TVs and devices in pillar one, and then we power customer service for merchants in pillar two, and then we connect them in pillar three together. So while you're driving, you can order coffee, you can book appointments, you can reserve tables, and that's a monetizable moment. We call it the voice commerce, and just the concept of being able to deliver value to the drivers while generating revenue for us and share that revenue with the OEM is creating a flywheel for us, and a lot of OEMs are choosing to work with us. So it's a combination of, you know, being a great partner, having the best technology, and the concept of monetization with our agentic AI in the cars.

And hopefully, Lucky, you're also noticing that, you know, we're seeing this growth in the fastest growing markets, too. So oftentimes in the fastest growing markets, it's sort of where they want the best to breed technology. And I think that's what's playing out here as well.

I think that makes a lot of sense. Maybe the last question from me, you know, as you enter your next phase of growth here, you touched on it already, but can you kind of stack rank the top investment priorities to capture the opportunity in front of you? And any update on your M&A strategy in light of the broad decline in valuations across software here recently?

Maybe I'll take some of it, and Nitesh can add. Our agentic platform is an area we are heavily investing in. It delivers a much better user experience. It has a higher containment rate. And then the latest version of our platform, it uses AI to create AI. So a lot of the experiences that used to take us, maybe a large team of developers, you know, weeks and months to deliver, you just tell it what you need to do and it just does it for you. So that is going to allow us to move faster, deliver better quality, have a higher containment rate, win more customers. So that's one area of focus for us. And that is going to be everywhere. It's going to be in automotive. It's going to be in customer service, pillar one, pillar two, pillar three. The next area that I would highlight is voice commerce. It's a vision that we pioneered. We are ahead of others in the space. It's a great idea, but it will take time for people to catch up because we have the largest number of merchants that are using our voice AI. We are the largest number of restaurants, and we have a huge footprint in cars and TVs and devices. So we are in a very good position to bring this to market.

Yeah, and I can add on the M&A part of your question. I think a couple of years in, I'll just say I think the M&A approach we're taking seems right to us. I think we'll keep being mindful about what's in the marketplace and potential partnerships, being aware of opportunities to combine. And, you know, so far they've been companies that have had really amazing customer relationships. We've been able to harness together and bring our innovation jointly to expand those relationships, use some of those landing points to expand broader in the relevant industries. And I think we'll continue to seek some of those opportunities. Because we've done a few, I'd say there's a lot more inbound also interest. And so we have a pretty strict and disciplined formula or methodology we go through in assessing if one may make sense, and we'll just keep that discipline. You know, there's plenty that we look at that don't make sense for us, and I think we put a lot of scrutiny into when it might. Again, since things are moving really fast, we've said before, and I'll just repeat that, you know, we know we can do a lot of good things with what we've built here, but we don't want to be insular. And so we want to be aware of all the great things and partnerships that we can build. So I think M&A, certainly thinking out the next few years, will continue to be a really important part of our muscle.

Makes a lot of sense. Appreciate the color there. Thanks for taking my questions. Thanks, Lucky.

Thank you. Your next question comes from the line of Mike Latimer with Northland Capital Markets. Your line is now open.

Hey, hi, this is Vijay Devar for Mike Latimore. A couple of questions. One, how many Amelia customers are live on your Agentic AI version 7.3 and are likely to go live this year?

Yeah, hey, Vijay. We said last time, and I think we're just continuing to make progress, that we had early last year, this early adopter program where we piloted with, I think at the time we said 15 or so customers in that ramp through the summer. And we've been on this pathway of migration where we assumed we kind of are on pathway to get the majority, vast majority, I think over 75 percent, migrated over by the middle of this year. So we're continuing to be on that pathway, making incremental progress every quarter that we go by, and we continue to see that in Q4, and we're already continuing to see acceleration in Q1. One of the good things with our new Agentec platform that we highlighted at the Consumer Electronics Show that we talked about in the prepared remarks is, you know, that's something that we're getting a lot of early traction from customers on. I channel our head of sales there and saying that the customer feedback has been superb. And so one of the great things we've been trying to deploy is sort of automated migration paths to allow people to migrate from prior version to Amelia 7.3 onto the new version that we're rolling out. So we are excited that our migration paths in, especially going back to one of the earlier questions about the efficiency now with delivery and AI and what it's allowing us. It is allowing for more rapid migration patterns.

Got it. So when the customer moves to 7.3, is there incremental revenue to found home?

Yeah. So as I mentioned, just a pure higher containment rate is expected to increase our revenue. In many of our deals, we get paid when we successfully avoid a caller to go to a human. And by going to Agentec, we've seen, you know, just as an example, numbers going from like a 30% containment to over 90% containment. In some cases, we also get paid more for the upgrading to Agentec. So it's a mix of both, but either way, it's directionally positive for revenue.

The other thing we've seen with the recent versions is sort of interactions that previously fell outside or would have to get escalated or things we can capture now at much greater rate so all of that is incremental revenue for us.

Perfect thank you.

Thank you.

Thank you. As a reminder to ask a question please press star one one on your telephone and wait for your name to be announced. Your next question comes from the line of James Fish with Piper Sandler.

Your line appreciate the time here um just on the on the cx side of things how is amelia effectively winning new customers versus you know the the contact center pure play the crm offerings and even some of the other standalone ai solutions out there really what's what's making them different that's resonating with customers and then i've got a follow-up yeah so we um uh so first of all sound hound you know with the acquisitions we've made we are a combination of teams and companies with several decades of collective experience in customer service, so we've been at it for a long time, and we have deep technology and we have data, and we are also very deep in a lot of these

industries like healthcare, insurance, banking, and so on, and, you know, the reputation, the experience, the relationships all help us. But if you zoom out, and this might answer an earlier question that maybe I didn't quite answer from Scott, but if a customer chooses to work with a big tech, that's a very high risk decision because when you choose a company like Google or OpenAI as your vendor. And by the way, these companies are not really deep into customer service. They provide tools for others like SoundHound. But if they just go deep with one big tech, they are going to miss out on innovations that might come out of other big tech. So if, for example, you're betting on Google models, and then if OpenAI creates an ecosystem that benefits the world, you might miss out on it or vice versa. But SoundHound provides our philosophy is we provide the best technology, the best model to our customers, no matter where it comes from. Most of the time it comes from us, because we have our own models that we've created over a long period of time with a lot of data, and we compare it with the big tech models, and we beat them in accuracy, speed, and cost. But if for some edge cases or use cases or scenarios, a big tech model is better, we bring it to our platform and we use it for our customers. So by choosing SoundHound, they are more guaranteed to get the best as soon as it becomes available no matter where it comes from versus when they bid on a big tech then they it's a very expensive risk and beyond the big tech there are some new players most of those are are maybe two years old some are doing better than others but the way we think about them they are lego players they because of the nature of how how old they are you know one or two years um they don't have their own tech so they are uh scrambling and building you know getting one api from um for speech recognition from one source and then for text to speech from another source from for llms from another source and they are basically putting it together like legos and they're only added for a couple of years and And that puts SoundHound at a much bigger advantage because we've been at this for, again, decades. We have our own models, and we have proven success in enterprise. You know, we are in seven of the top ten banks. We process billions of queries. And, you know, in terms of quality of service and the reputation, we are in a very good position.

And maybe I can add one thing, Jim. And I said this in the prepared remarks, but it's salient to your question. I think fundamentally legacy, this goes back to the earlier question on, I think, for Brian on disruption in software. You know, models that were built, seat-based pricing, that value was on let's get more users using our tool, and it wasn't as directly tied to customer outcomes, that is at risk because the tools are getting so good, and we're building those and our solutions are directly our economic model our pricing model is directly tied to customers to you know achieving or or um seeing real value did did a prescription get refilled did appointment get booked did you know food get ordered um so so i think just architecturally we're better to Kayvon's point and and i'd say also the economic incentive alignment is also an advantage for us got a very very detailed answer guys appreciate that

uh maybe the test for you um just a i'm getting an asked here after hours um just a hammer home a fine point is there much further mna included in the annual guide obviously you guys have a ton of opportunity you guys have a strategic sense of of doing acquisitions and folding them in just trying to understand if there's further a contemplating guide and given the environment there's a lot of sensitivity to stock-based comp um you guys are a bit of an outlier here i guess how are you handling your stock comp going forward and the dilution we've seen historically thanks guys sure um thanks jim so for the first part of that to be very direct no our guidance does not

contemplate you know m a that we haven't done or you know so that is not baked into the outlook Our outlook reflects the base of business, the pipeline of deals we have in motion, the existing customer activity that's recurring and we're upselling and expanding, and that's what's reflected in the outlook range. Now, as I mentioned in an earlier call, certainly there are M&A ideas out there and conversations we have from time to time and inbounds we receive that if they happen, you know, we will, if they're meaningful and material and we need to update an outlook, we will certainly do that like we have in the past. Your second question on stock-based comp. Yeah, so I'll start with this general point at SoundHound, which I think a lot of us internally have a lot of pride around, and I give all credit to Kayvon and the culture he's built. Like, this is a company where we want all employees to participate in the full contribution, and so we do distribute equity to our entire company, and I don't think that's the same as every other company. So we feel pride because everybody here is an owner. And we've also seen historically a lot of volatility that makes in some of the math on our P&L, especially with the acquisitions, you get mark-to-market activity that when you have a stock that's so volatile, you'll distribute a grant. By the time it gets valued for P&L purposes, it's at $20, and then that amortizes over four years. So that is something that's a little different because we're such a high-vol stock. But I take the general element of your question. We do think of the economic impact, certainly of dilution and certainly of where stock comp fits in our overall compensation profile. And we want to be competitive. We want to attract all the right talent and make sure we have the right people. To an earlier question, though, we are always vigilantly looking at our cost structure and can we do things more efficiently? And we have historically, you know, taken cost actions, including to our people when we needed to. But so I'm mindful of the element of your question. I think we do try to be equitable in our distribution of SOC comp. We are mindful of the dilution impact. We are mindful, to your point, on, you know, it is probably a higher percent of revenue than you might see elsewhere. I think as we scale, you will see that normalized, certainly, as you will with some of the other operating lines. But, again, I'll close with what I started with, which is I think we generally do feel a sense of pride that we do distribute equity to everybody at this company, and that makes us all combined owners in the outcome and success of what we build. Thanks, guys. Thanks, Jim.

Thank you. I'm showing no further questions at this time. Thank you for your participation in today's conference. This does conclude the program, and you may now disconnect.