Speech and music recognition company SoundHound has closed $25 million in preferred equity financing from a group of unnamed financial and strategic investors.
The announcment arrived on Tuesday (January 24), less than two weeks after the company was reported to have axed nearly half of its staff (200 people).
In an SEC filing on January 5, SoundHound confirmed that the company was reducing its workforce “by approximately 40%”.
SoundHound says that it closed the financing on Friday January 20.
The investors in the latest financing were a mix of current shareholders and new capital providers, SoundHound said on Tuesday, adding that the preferred equity that the investors subscribed into will be convertible into class A shares in the company.
SoundHound went public on the Nasdaq stock exchange in April 2022 after closing a $2.1 billion merger with special purpose acquisition company (SPAC) Archimedes Tech SPAC Partners.
The preferred equity will be automatically converted on or after the one-year anniversary of the issuance date if certain price conditions are met, the company added.
In addition the equity financing, SoundHound says it is also in the process of refinancing its current debt with a new minimally dilutive facility that it says will provide incremental capital and defer current amortization payments.
According to SoundHound, the refinancing, in addition to the company’s cost reduction measures, is expected to result in operating cost savings in excess of $60 million as the company expects to become GAAP operating cash flow positive by the end of 2023.
In the same release, the company issued its upbeat earnings outlook for 2022, expecting revenue of about $31 million, at the high-end of its previous guidance, and gross margin in excess of 70%.
“SoundHound believes that burgeoning market demand and significant advances in technology are creating the conditions for an explosion in conversational AI, and SoundHound’s next-generation products and services are at the center of this revolution.”
Revenue growth in 2023 is forecast to gain momentum to about 50% year over year, owing to the company’s strong customer base and well over $300 million bookings foundation, it says.
SoundHound also attributed its anticipated robust results this year to increasing demand for its voice AI-enabled customer service products.
In 2022, the company made a number of key partnerships and integrations, including an agreement with Qualcomm that saw SoundHound’s voice AI being integrated with Snapdragon platforms.
The company also expanded its partnership with Snap and made new deals with VIZIO, Square and Toast.
In May 2022, SoundHound signed a seven-year agreement with Hyundai to include SoundHound’s Edge+Cloud voice AI technology, music recognition software, voice commerce solution, and multiple-language conversational intelligence in a number of Hyundai’s vehicle models globally.
Two months later, SoundHound announced a similar partnership with Stellantis, formed from the merger of Italian-American carmaker Fiat Chrysler Automobiles and France’s Peugeot.
Other partnerships over the past year were with LG, HARMAN International, DPCA, and DMI.
“SoundHound believes that burgeoning market demand and significant advances in technology are creating the conditions for an explosion in conversational AI, and SoundHound’s next-generation products and services are at the center of this revolution,” the company says.
SoundHound’s equity financing and debt refinancing comes as SoundHound, like other tech companies, weather the current macroeconomic downturn.
“When we set course in early 2021 to become publicly listed, high-tech companies like SoundHound were the darlings of the investor community,” CEO Keyvan Mohajer was quoted by tech news outlet Gizmodo as saying in an internal email.
“Companies who could achieve high growth, despite high costs, were seen as engines of a future economy. However, as a result of changing economic conditions, including high interest rates, rising inflation, and fears of recession, companies with our profile became much less desirable,” Mohajer added.
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