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What changed in SOUNDHOUND AI, INC.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of SOUNDHOUND AI, INC.'s 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+328 added−342 removedSource: 10-K (2026-03-02) vs 10-K (2025-03-11)

Top changes in SOUNDHOUND AI, INC.'s 2025 10-K

328 paragraphs added · 342 removed · 261 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeOur demand generation efforts span the full customer funnel to target prospects across a variety of channels including: advertising, email, social media, search engines and many other digital channels. Sales and marketing will play a critical role in the next phase of our evolution as a company, with key ongoing investments in our team and leadership.
Biggest changeIn parallel, marketing and communications drive our brand equity and narrative through ongoing announcements, campaigns, events, speaking opportunities, and public relations efforts. Our demand generation efforts span the full customer funnel to target prospects across a variety of channels including: advertising, email, social media, search engines and many other digital channels.
With the recent popularization of Generative AI and Large Language Models in early 2023, we view this as an inflection point for Conversational AI, with a clear intersection between technology readiness and subsequent demand and adoption. Such intersections are rare, and SoundHound is in a unique position to create tremendous value.
With the popularization of Generative AI and Large Language Models in early 2023, we view this as an inflection point for Conversational AI, with a clear intersection between technology readiness and subsequent demand and adoption. Such intersections are rare, and SoundHound is in a unique position to create tremendous value.
With SoundHound’s technology, users can ask even more complicated questions, such as: “show me Asian restaurants in San Francisco, excluding Chinese and Japanese, and only show the ones that have more than three stars and are open after 9:00 PM on Wednesdays.” In addition, users can follow up and ask it to refine the criteria such as “remove Korean and Vietnamese, sort by rating then by price, and only show the ones that are good for kids and have a patio.” Additionally, through SoundHound's AI-driven restaurant voice ordering solution, Smart Ordering, automated voice technology can be deployed by any restaurant to take food and drink orders over the phone, via menu kiosks or at the drive- 2 Table of Contents thru.
With SoundHound’s technology, users can ask even more complicated questions, such as: “show me Asian restaurants in San Francisco, excluding Chinese and Japanese, and only show the ones that have more than three stars and are open after 9:00 PM on Wednesdays.” In addition, users can follow up and ask it to refine the criteria such as “remove Korean and Vietnamese, sort by rating then by price, and only show the ones that are good for kids and have a patio.” Additionally, through SoundHound's AI-driven restaurant voice ordering solution, Smart Ordering, automated voice technology can be deployed by any restaurant to take food and drink orders over the phone, via menu kiosks or at the drive-thru.
To provide another example, if a user is looking for a restaurant, but anything other than Chinese (because they had Chinese food yesterday) they can ask the concierge of a hotel: “Show me restaurants, excluding Chinese”, and the concierge can point the customer in the right direction.
To provide another example, if a user is looking for a restaurant, but anything other than Chinese (because they had Chinese food yesterday) they can ask the concierge of a hotel: “Show me restaurants, excluding Chinese,” and the concierge can point the customer in the right direction.
The contents of our websites are not incorporated by reference into this Annual Report on Form 10-K or in any other report or document we file with the SEC, and any references to our websites are intended to be inactive textual references only.
The contents of our websites are not incorporated by reference into this Annual Report on Form 10-K or in any 9 Table of Contents other report or document we file with the SEC, and any references to our websites are intended to be inactive textual references only.
Where existing voice technology requires wake words and relies on turn-taking with awkward pauses to process requests, 4 Table of Contents Dynamic Interaction uses the twin technologies of fragment parsing – which breaks speech down to partial-utterances and processes them in real-time – and full-duplex audio-visual integration to create an instantaneous, next-generation experience in human-computer interaction.
Where existing voice technology requires wake words and relies on turn-taking with awkward pauses to process requests, Dynamic Interaction uses the twin technologies of fragment parsing – which breaks speech down to partial-utterances and processes them in real-time – and full-duplex audio-visual integration to create an instantaneous, next-generation experience in human-computer interaction.
Highly accurate transcriptions result from advanced acoustic models trained to perform in a variety of scenarios — including in severely noisy environments and when accented language is spoken. Natural Language Understanding (“NLU”) Our proprietary Speech-to-Meaning technology tracks speech in real-time and understands the context, even before the user has finished speaking.
Highly accurate transcriptions result from advanced acoustic models trained to perform in a variety of scenarios — including in severely noisy environments and when accented language is spoken. 3 Table of Contents Natural Language Understanding (“NLU”) Our proprietary Speech-to-Meaning technology tracks speech in real-time and understands the context, even before the user has finished speaking.
Revenue Model Market Momentum Our entry into the Voice AI space began with 10 years of constant innovation in “stealth” building disruptive technologies in Voice AI using innovative approaches. Our goal was to build a differentiated Voice AI technology that we 6 Table of Contents fully own and which is significantly better than other solutions in the market.
Revenue Model Market Momentum Our entry into the Voice AI space began with 10 years of constant innovation in “stealth” building disruptive technologies in Voice AI using innovative approaches. Our goal was to build a differentiated Voice AI technology that we fully own and which is significantly better than other solutions in the market.
Instead of the typical two-step process of transcribing speech into text and then passing the text into an NLU model, Houndify can accomplish both of these tasks in one step, delivering faster and more accurate results. 3 Table of Contents Houndify’s ability to process and understand speech the instant a user stops speaking gives voice assistants the ability to respond faster.
Instead of the typical two-step process of transcribing speech into text and then passing the text into an NLU model, Houndify can accomplish both of these tasks in one step, delivering faster and more accurate results. Houndify’s ability to process and understand speech the instant a user stops speaking gives voice assistants the ability to respond faster.
Our market position is strengthened by the technical barriers to entry in the Voice AI space, which tend to discourage new market participants. Furthermore, our technology is backed by significant investments in intellectual property, with over 192 patents granted and over 109 patents pending, spanning multiple fields including speech recognition, natural language understanding, machine learning, monetization and more.
Our market position is strengthened by the technical barriers to entry in the Voice AI space, which tend to discourage new market participants. Furthermore, our technology is backed by significant investments in intellectual property, with over 359 patents granted and over 102 patents pending, spanning multiple fields including speech recognition, natural language understanding, machine learning, monetization and more.
In our case, we aim to offer our customers the best of both, enabling them to offer disruptive technologies to their users while maintaining control of their brand and user experience. With our disruptive monetization strategy, we also provide a path to monetization.
In our case, we aim to 7 Table of Contents offer our customers the best of both, enabling them to offer disruptive technologies to their users while maintaining control of their brand and user experience. With our disruptive monetization strategy, we also provide a path to monetization.
For enterprises, we also offer a flexible Gateway to integrate with custom POSs. Dynamic Interaction Dynamic Interaction is a category-level breakthrough in conversational AI that we believe raises the bar for human-computer interaction by not only recognizing and understanding speech, but also responding and acting in real-time.
For enterprises, we also offer a flexible Gateway to integrate with custom POSs. 4 Table of Contents Dynamic Interaction Dynamic Interaction is a category-level breakthrough in conversational AI that we believe raises the bar for human-computer interaction by not only recognizing and understanding speech, but also responding and acting in real-time.
Access to copies of our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and our Proxy Statements, and any amendments to these reports, is available via a link through our investor relations website, free of charge, after we file or furnish them with the SEC and they are available on the SEC's website.
Access to copies of our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and our Proxy Statements, and any amendments to these reports, is available via a link through our investor relations website, free of charge, after we file or furnish them with the Securities and Exchange Commission (“SEC”) and they are available on the SEC's website.
But when talking to a typical voice assistant, users often don’t ask the question: “show me restaurants, excluding Chinese”, because they don’t expect that it will work. And in fact, most other voice assistants will offer Chinese restaurants when asked to show restaurants excluding Chinese.
But when talking to a typical voice assistant, users often don’t ask the question: “show me restaurants, excluding Chinese,” because they don’t expect that it will work. And in fact, most 2 Table of Contents other voice assistants will offer Chinese restaurants when asked to show restaurants excluding Chinese.
Houndify Edge Hybrid solutions are designed to ensure that devices are always-on and responsive to commands. Allows for over-the-air product updates and a broader voice experience with the level of cloud-connectivity that best matches the product and its users.
To harness the capabilities of full cloud connectivity with the reliability of embedded edge voice technology. Houndify Edge Hybrid solutions are designed to ensure that devices are always-on and responsive to commands. Allows for over-the-air product updates and a broader voice experience with the level of cloud-connectivity that best matches the product and its users.
After we went public in 2022, SoundHound rapidly introduced innovation to the market with Smart Ordering, Dynamic Interaction TM , SoundHound Chat AI, and Smart Answering, among other products (see "Products and Technology" hereafter). SoundHound’s Vision A typical reaction to SoundHound’s technology is “Wow!
After we went public in 2022, SoundHound rapidly introduced innovation to the market with Smart Ordering, Dynamic Interaction TM , SoundHound Chat AI, and Smart Answering, among other products (see "Products and Technology" hereafter).
For example, we used to easily beat computers in the game of chess, but now computers can even top grandmasters. When it comes to language understanding, the general perception is computers are not yet as good as humans.
Computers are better than humans at computing, but they’re not always better than humans at performing certain tasks. For example, we used to easily beat computers in the game of chess, but now computers can even top grandmasters. When it comes to language understanding, the general perception is computers are not yet as good as humans.
We view the current environment as an opportunity to provide disruptive technologies with capabilities we believe are superior to existing alternatives, allowing customers to maintain their brand, control the user experience, get access to the data, and define their own privacy policies, while being able to customize, differentiate, innovate, and monetize.
Fast movers like us will create tremendous value. 6 Table of Contents We view the current environment as an opportunity to provide disruptive technologies with capabilities we believe are superior to existing alternatives, allowing customers to maintain their brand, control the user experience, get access to the data, and define their own privacy policies, while being able to customize, differentiate, innovate, and monetize.
We strive to create an environment that supports employee success and a culture where everyone has a voice in driving innovation. 8 Table of Contents Employees As of December 31, 2024, we had approximately 842 full-time employees, of which approximately 54% were in the United States and 46% were in our international locations.
We strive to create an environment that supports employee success and a culture where everyone has a voice in driving innovation. Employees As of December 31, 2025, we had approximately 954 full-time employees, of which approximately 56% were in the United States and 44% were in our international locations.
Brands can fully express their personality by choosing the gender, tone, and personality that will become their vocal identity. Our machine learning algorithms transform recorded voices into large databases of spoken sounds to form entire vocabularies of natural language — adapted to the user’s environment. We can transform any voice to generate a high-quality TTS with a small CPU footprint.
Brands can fully express their personality by choosing the gender, tone, and personality that will become their vocal identity. Our machine learning algorithms transform recorded voices into large databases of spoken sounds to form entire vocabularies of natural language — adapted to the user’s environment.
Intellectual Property SoundHound’s intellectual property portfolio includes over 192 patents granted and over 109 patents pending worldwide. These patents cover areas such as speech recognition, natural language understanding, machine learning, human interfaces, and others, including monetization and advertising. Out of our 301 patents granted and pending, more than 40 of these patents are in conversational monetization.
These patents cover areas such as speech recognition, natural language understanding, machine learning, human interfaces, and others, including monetization and advertising. 8 Table of Contents Out of our 461 patents granted and pending, more than 40 of these patents are in conversational monetization.
Additionally, there is no conflict of interest between us and our partners and customers as we do not compete with them (as some other Voice AI vendors do). 7 Table of Contents We believe that product creators know their product and users best.
Additionally, there is no conflict of interest between us and our partners and customers as we do not compete with them (as some other Voice AI vendors do). We believe that product creators know their product and users best. The idea of a single third-party assistant taking over their product is not reflective of our anticipated future.
And we view the market impact of this to be transformative, similar to the mobile ecosystem disruption of the last decade. Fast movers like us will create tremendous value.
And we view the market impact of this to be transformative, similar to the mobile ecosystem disruption of the last decade.
With Cloud we equip your voice assistant with real-time data from the cloud, deliver the most relevant responses with no CPU or memory restrictions, and retain ownership of customer relationships with access to data and analytics. To harness the capabilities of full cloud connectivity with the reliability of embedded edge voice technology.
Includes full access to custom commands and the ability to instantly update commands during development. With Cloud we equip your voice assistant with real-time data from the cloud, deliver the most relevant responses with no CPU or memory restrictions, and retain ownership of customer relationships with access to data and analytics.
Even humans cannot do this.” This is the crux of our vision: Create a Voice AI platform that exceeds human capabilities and brings value and delight via an ecosystem of billions of products enhanced by innovation and monetization opportunities. Computers are better than humans at computing, but they’re not always better than humans at performing certain tasks.
SoundHound’s Vision A typical reaction to SoundHound’s technology is “Wow! Even humans cannot do this.” This is the crux of our vision: Create a Voice AI platform that exceeds human capabilities and brings value and delight via an ecosystem of billions of products enhanced by innovation and monetization opportunities.
They can each tap into a single platform to access the ever-growing set of domains, but the product creators can innovate on top of platform and create value for the end users in their own way. Research and Development Research and development have been the foundation of our company since its origin.
We envision that every product will have its own identity, and they will have Voice AI customized in different ways. They can each tap into a single platform to access the ever-growing set of domains, but the product creators can innovate on top of platform and create value for the end users in their own way.
Edge and Cloud Connectivity 5 Table of Contents With edge (embedded) we offer a fully-embedded voice solution for brands seeking the convenience of a voice user interface without the privacy or connectivity concerns of the internet. Includes full access to custom commands and the ability to instantly update commands during development.
We can transform any voice to generate a high-quality TTS with a small CPU footprint. 5 Table of Contents Edge and Cloud Connectivity With edge (embedded) we offer a fully-embedded voice solution for brands seeking the convenience of a voice user interface without the privacy or connectivity concerns of the internet.
We have invested significantly over the years in making conversational Voice AI technology by leveraging advanced technologies across signal processing, speech recognition, machine learning and more. The complexities of our design and the associated technological breakthroughs have required more than ten years of research and development activities to fine tune our technology for commercial use.
Research and Development Research and development have been the foundation of our company since its origin. We have invested significantly over the years in making conversational Voice AI technology by leveraging advanced technologies across signal processing, speech recognition, machine learning and more.
We have protected our innovations throughout with patents and trade secrets, and we have continued to strengthen our competitive positioning by staying on top of the latest advancements in the Voice AI industry. We expect to continue to keep research and development and, more broadly, innovation and product quality at the forefront of our strategy and core focus.
In particular, we are continually working to improve the speed and accuracy of our Voice AI solutions and make customer adoption easier and faster. We have protected our innovations throughout with patents and trade secrets, and we have continued to strengthen our competitive positioning by staying on top of the latest advancements in the Voice AI industry.
While our products are already scaling with existing customers, markets and verticals, we see significant opportunities to grow into new ones. Increased sales and marketing efforts will enable us to capitalize on the tremendous momentum we are building and we expect to continue expanding resources to grow our personnel and leadership team focused on sales and marketing.
Increased sales and marketing efforts will enable us to capitalize on the tremendous momentum we are building and we expect to continue expanding resources to grow our personnel and leadership team focused on sales and marketing. Intellectual Property SoundHound’s intellectual property portfolio includes over 359 patents granted and over 102 patents pending worldwide.
We also work with analysts and higher education institutions to conduct studies, test and validate technology performance, providing key proof points for those considering our products. In parallel, marketing and communications drive our brand equity and narrative through ongoing announcements, campaigns, events, speaking opportunities, and public relations efforts.
We collect feedback directly from them to garner insights that help drive the business and product. We also work with analysts and higher education institutions to conduct studies, test and validate technology performance, providing key proof points for those considering our products.
Sales and Marketing We take an insight-driven, account-based marketing approach to build and expand our relationships with customers and partners. We collect feedback directly from them to garner insights that help drive the business and product.
We expect to continue to keep research and development and, more broadly, innovation and product quality at the forefront of our strategy and core focus. Sales and Marketing We take an insight-driven, account-based marketing approach to build and expand our relationships with customers and partners.
Available Information Our website is located at www.soundhound.com , and our investor relations website is located at investors.soundhound.com .
As of the date hereof, we are party to certain material legal proceedings as described in Note 8 to our consolidated financial statements. Available Information Our website is located at www.soundhound.com , and our investor relations website is located at investors.soundhound.com .
Removed
The idea of a single third-party assistant taking over their product is not reflective of our anticipated future. We envision that every product will have its own identity, and they will have Voice AI customized in different ways.
Added
Following the integration of the Amelia platform into SoundHound's ecosystem in 2025, we enhanced our AI agent platform by enabling full-stack agentic AI for enterprises, moving beyond simple voice response to systems that can reason through IT support or customer service requests and execute backend actions autonomously.
Removed
We continue to explore different innovation strategies to strengthen our capabilities. In particular, we are continually working to improve the speed and accuracy of our Voice AI solutions and make customer adoption easier and faster.
Added
With the launch of the Amelia 7 platform in 2025, SoundHound’s AI agent orchestration platform brings new capabilities into the vehicle, enabling multiple agents to carry out tasks and transactions on behalf of the driver – from the company’s own voice commerce agents that allow food ordering and reservations with top restaurant brands, to external agents that will allow users to check email or adjust their schedules.
Removed
We are not currently a party to any actions, claims, suits or other legal proceedings the outcome of which, if determined adversely to us, would individually or in the aggregate have a material adverse effect on our business, financial condition and results of operations.
Added
With the launch of Amelia 7 platform in 2025, our AI agent orchestration platform brings new capabilities into the vehicle, enabling multiple agents to carry out tasks and transactions on behalf of the driver – from the company’s own voice commerce agents that allow food ordering and reservations with top restaurant brands, to external agents that will allow users to check email or adjust their schedules.
Added
The complexities of our design and the associated technological breakthroughs have required more than ten years of research and development activities to fine tune our technology for commercial use. We continue to explore different innovation strategies to strengthen our capabilities.
Added
Sales and marketing will play a critical role in the next phase of our evolution as a company, with key ongoing investments in our team and leadership. While our products are already scaling with existing customers, markets and verticals, we see significant opportunities to grow into new ones.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAdditionally, if any of our employees, contractors, vendors or service providers use any third-party AI-powered software in connection with our business or the services they provide to us, it may lead to the inadvertent disclosure of our confidential information, including inadvertent disclosure of our confidential information into publicly available third-party training sets, which may impact our ability to realize the benefit of, or adequately maintain, protect and enforce our intellectual property or confidential information, harming our competitive position and business.
Biggest changeAccordingly, while AI-powered applications may help provide more tailored or personalized user experiences, if the content, analyses or recommendations that AI-powered solutions assist in producing on our products and services are, or are perceived to be, deficient, inaccurate, biased, unethical or otherwise flawed, our reputation, competitive position and business may be materially and adversely affected. 11 Table of Contents Additionally, if any of our employees, contractors, vendors or service providers use any third-party AI-powered software in connection with our business or the services they provide to us, it may lead to the inadvertent disclosure of our confidential information, including inadvertent disclosure of our confidential information into publicly available third-party training sets, which may impact our ability to realize the benefit of, or adequately maintain, protect and enforce our intellectual property or confidential information, harming our competitive position and business.
Any acquisition involves numerous risks and operational, financial, and managerial challenges, including the following, any of which could adversely affect our business, financial condition, or results of operations: • difficulties in integrating new operations, technologies, products, and personnel; • problems maintaining uniform procedures, controls and policies with respect to our financial accounting systems; • lack of synergies or the inability to realize expected synergies and cost-savings; • difficulties in managing geographically dispersed operations, including risks associated with entering foreign markets in which we have no or limited prior experience; • underperformance of any acquired technology, product, or business relative to our expectations and the price we paid; • negative near-term impacts on financial results after an acquisition, including acquisition-related earnings charges and contingent acquisition liabilities related to earnout payments or otherwise; • the potential loss of key employees, customers, and strategic partners of acquired companies; • claims by terminated employees and shareholders of acquired companies or other third parties related to the transaction; • the assumption or incurrence of additional debt obligations or expenses, or use of substantial portions of our cash; • the issuance of equity securities to finance or as consideration for any acquisitions that dilute the ownership of our stockholders (which in the case of certain of our prior acquisitions were significant); • the issuance of equity securities to finance or as consideration for any acquisitions may not be an option if the price of our common stock is low or volatile which could preclude us from completing any such acquisitions; • diversion of management’s attention and company resources from existing operations of the business; • inconsistencies in standards, controls, procedures, and policies; • the impairment of intangible assets as a result of technological advancements, or worse-than-expected performance of acquired companies; 26 Table of Contents • assumption of, or exposure to, historical liabilities of the acquired business, including unknown contingent or similar liabilities, including product liability, that are difficult to identify or accurately quantify; and • risks associated with acquiring intellectual property, including potential disputes regarding acquired companies’ intellectual property.
Any acquisition involves numerous risks and operational, financial, and managerial challenges, including the following, any of which could adversely affect our business, financial condition, or results of operations: • difficulties in integrating new operations, technologies, products, and personnel; • problems maintaining uniform procedures, controls and policies with respect to our financial accounting systems; • lack of synergies or the inability to realize expected synergies and cost-savings; • difficulties in managing geographically dispersed operations, including risks associated with entering foreign markets in which we have no or limited prior experience; • underperformance of any acquired technology, product, or business relative to our expectations and the price we paid; 26 Table of Contents • negative near-term impacts on financial results after an acquisition, including acquisition-related earnings charges and contingent acquisition liabilities related to earnout payments or otherwise; • the potential loss of key employees, customers, and strategic partners of acquired companies; • claims by terminated employees and shareholders of acquired companies or other third parties related to the transaction; • the assumption or incurrence of additional debt obligations or expenses, or use of substantial portions of our cash; • the issuance of equity securities to finance or as consideration for any acquisitions that dilute the ownership of our stockholders (which in the case of certain of our prior acquisitions were significant); • the issuance of equity securities to finance or as consideration for any acquisitions may not be an option if the price of our common stock is low or volatile which could preclude us from completing any such acquisitions; • diversion of management’s attention and company resources from existing operations of the business; • inconsistencies in standards, controls, procedures, and policies; • the impairment of intangible assets as a result of technological advancements, or worse-than-expected performance of acquired companies; • assumption of, or exposure to, historical liabilities of the acquired business, including unknown contingent or similar liabilities, including product liability, that are difficult to identify or accurately quantify; and • risks associated with acquiring intellectual property, including potential disputes regarding acquired companies’ intellectual property.
The Company did not maintain an effective control environment as it lacked sufficient oversight of activities related to its internal control over financial reporting due to a lack of appropriate level of experience and training commensurate with its financial reporting requirements.
The Company did not maintain an effective control environment as it lacked sufficient oversight of activities related to its internal control over financial reporting due to a lack of an appropriate level of experience and training commensurate with its financial reporting requirements.
While we are in the process of addressing our material weaknesses as disclosed herein, elements of our remediation plan can only be accomplished over time and we can offer no assurance that these initiatives will ultimately have the intended effects.
While we are in the process of addressing the material weaknesses as disclosed herein, elements of our remediation plan can only be accomplished over time and we can offer no assurance that these initiatives will ultimately have the intended effects.
SoundHound is subject to the reporting requirements of the Exchange Act, and is required to comply with the applicable requirements of the Sarbanes-Oxley Act, and the Dodd-Frank Wall Street Reform and Consumer Protection Act, as well as the rules and regulations subsequently implemented by the SEC and the listing standards of the Nasdaq, including changes in corporate governance practices and the establishment and maintenance of effective disclosure and financial controls.
SoundHound is subject to the reporting requirements of the Exchange Act, and is required to comply with the applicable requirements of the Sarbanes-Oxley Act, and the Dodd-Frank Wall Street Reform and Consumer Protection Act, as well as the rules and regulations subsequently implemented by the SEC and the listing standards of Nasdaq, including changes in corporate governance practices and the establishment and maintenance of effective disclosure and financial controls.
Changing laws, regulations and standards relating to corporate governance and public disclosure, including regulations implemented by the SEC and the Nasdaq, are subject to varying interpretations, and as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies.
Changing laws, regulations and standards relating to corporate governance and public disclosure, including regulations implemented by the SEC and Nasdaq, are subject to varying interpretations, and as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies.
The Amended Charter, Amended & Restated Bylaws of the Company (the "Amended Bylaws"), and Delaware law contain provisions that could depress the trading price of our common stock by acting to discourage, delay, or prevent a change of control of SoundHound or changes in SoundHound that our management or stockholders may deem advantageous.
The Restated Charter, Amended & Restated Bylaws of the Company (the "Amended Bylaws"), and Delaware law contain provisions that could depress the trading price of our common stock by acting to discourage, delay, or prevent a change of control of SoundHound or changes in SoundHound that our management or stockholders may deem advantageous.
Risks Related to our Business and Financial Condition • We have generated substantial net losses and negative operating cash flows since inception and may never achieve or maintain profitability or generate positive cash flows; • We may require additional capital to continue planned business operations but may not be able to obtain such capital when desired on favorable terms, if at all, or without dilution to our stockholders; • Our operating results could be materially and adversely affected if it loses any of its largest customers due to concentration risk; • The market in which we operate is highly competitive and rapidly changing and we may be unable to compete successfully; • Adverse conditions in the Voice AI market or the global economy more generally could have adverse effects on our results of operations; • We depend on skilled employees and the loss of one or more key members of our management team or personnel, or our failure to attract, integrate and retain additional personnel in the future, could harm our business and negatively affect our ability to successfully grow our business; • Cybersecurity and data privacy incidents or breaches may damage client relations and adversely affect our operations; • Our business is subject to a variety of domestic and international laws, rules, policies and other obligations, including data protection and anticorruption; • Interruptions or delays in our services or services from data center hosting facilities or public clouds could impair the delivery of services and harm our business; • We rely on third-party telecommunications and internet service providers, including connectivity to our cloud software, and any failure by these service providers to provide reliable services could cause us to lose customers and subject us to claims for credits or damages, among other things; • Our customers rely on third-party telecommunications and internet service providers to provide them with access and connectivity to our cloud software, and changes in how telecommunication and internet service providers handle and charge for access to telecommunications and the internet could materially harm our customer relationships, business, financial condition and operations results; • If we are unable to maintain and enhance our brand or reputation as an industry leader, our operating results may be adversely affected; • Our acquisition of SYNQ3, Amelia and any potential future acquisitions or strategic transactions may not be accretive and may subject us to various risks that could adversely affect our business and for which we may not achieve the anticipated benefit of such a transaction; • We have identified material weaknesses in our internal control over financial reporting and may identify additional material weaknesses in the future, which may result in material misstatements of our consolidated 10 Table of Contents financial statements or cause us to fail to meet its periodic reporting obligations and the trading price of our stock could be negatively affected.
Risks Related to our Business and Financial Condition • We have generated substantial net losses and negative operating cash flows since inception and may never achieve or maintain profitability or generate positive cash flows; • We may require additional capital to continue planned business operations but may not be able to obtain such capital when desired on favorable terms, if at all, or without dilution to our stockholders; • Our operating results could be materially and adversely affected if it loses any of its largest customers due to concentration risk; • The market in which we operate is highly competitive and rapidly changing and we may be unable to compete successfully; • Adverse conditions in the Voice AI market or the global economy more generally could have adverse effects on our results of operations; • We depend on skilled employees and the loss of one or more key members of our management team or personnel, or our failure to attract, integrate and retain additional personnel in the future, could harm our business and negatively affect our ability to successfully grow our business; • Cybersecurity and data privacy incidents or breaches may damage client relations and adversely affect our operations; • Our business is subject to a variety of domestic and international laws, rules, policies and other obligations, including data protection and anticorruption; • Interruptions or delays in our services or services from data center hosting facilities or public clouds could impair the delivery of services and harm our business; • We rely on third-party telecommunications and internet service providers, including connectivity to our cloud software, and any failure by these service providers to provide reliable services could cause us to lose customers and subject us to claims for credits or damages, among other things; • Our customers rely on third-party telecommunications and internet service providers to provide them with access and connectivity to our cloud software, and changes in how telecommunication and internet service providers handle and charge for access to telecommunications and the internet could materially harm our customer relationships, business, financial condition and operations results; 10 Table of Contents • If we are unable to maintain and enhance our brand or reputation as an industry leader, our operating results may be adversely affected; • Our acquisition of SYNQ3, Amelia, Interactions and any potential future acquisitions or strategic transactions may not be accretive and may subject us to various risks that could adversely affect our business and for which we may not achieve the anticipated benefit of such a transaction; • We have identified material weaknesses in our internal control over financial reporting and may identify additional material weaknesses in the future, which may result in material misstatements of our consolidated financial statements or cause us to fail to meet our periodic reporting obligations and the trading price of our stock could be negatively affected.
Among other things, the Amended Charter and Amended Bylaws include the following provisions: • permit the board of directors to establish the number of directors and fill any vacancies and newly created directorships; • authorize the issuance of “blank check” preferred stock that our board of directors could use to implement a stockholder rights plan; • eliminates the ability of our stockholders to call special meetings of stockholders, except to the extent otherwise provided in the Amended Bylaws; • prohibit stockholder action by written consent, except to the extent otherwise provided in the Amended Bylaws, which requires all stockholder actions to be taken at a meeting of our stockholders; • provide that the board of directors is expressly authorized to make, alter, or repeal our Amended Bylaws; and • establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at annual stockholder meetings.
Among other things, the Restated Charter and Amended Bylaws include the following provisions: • permit the board of directors to establish the number of directors and fill any vacancies and newly created directorships; • authorize the issuance of “blank check” preferred stock that our board of directors could use to implement a stockholder rights plan; • eliminates the ability of our stockholders to call special meetings of stockholders, except to the extent otherwise provided in the Amended Bylaws; • prohibit stockholder action by written consent, except to the extent otherwise provided in the Amended Bylaws, which requires all stockholder actions to be taken at a meeting of our stockholders; • provide that the board of directors is expressly authorized to make, alter, or repeal our Amended Bylaws; and • establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at annual stockholder meetings.
As SoundHound increases its international sales efforts it will face risks in doing business internationally that could harm its business, including: • the need to establish and protect SoundHound’s brand in international markets; • the need to localize and adapt SoundHound’s products for specific countries, including translation into foreign languages and associated costs and expenses; • difficulties in staffing and managing foreign operations, particularly hiring and training qualified sales and service personnel; • the need to implement and offer customer care in various languages; • different pricing environments, longer sales and accounts receivable payment cycles and collections issues; • weaker protection for intellectual property and other legal rights than in the U.S. and practical difficulties in enforcing intellectual property and other rights outside of the U.S.; • privacy and data protection laws and regulations that are complex, expensive to comply with and may require that customer data be stored and processed in a designated territory; • increased risk of piracy, counterfeiting and other misappropriation of SoundHound’s intellectual property in its locations outside the U.S.; • new and different sources of competition; • general economic conditions in international markets; • fluctuations in the value of the U.S. dollar and foreign currencies, which may make SoundHound’s products more expensive in other countries or may increase its costs, impacting its operating results when translated into U.S. dollars; • compliance challenges related to the complexity of multiple, conflicting and changing governmental laws and regulations, including employment, tax, telecommunications and telemarketing laws and regulations; • increased risk of international telecom fraud; • laws and business practices favoring local competitors; • compliance with laws and regulations applicable to foreign operations and cross border transactions, including the Foreign Corrupt Practices Act, the U.K.
As SoundHound increases its international sales efforts it will face risks in doing business internationally that could harm its business, including: • the need to establish and protect SoundHound’s brand in international markets; • the need to localize and adapt SoundHound’s products for specific countries, including translation into foreign languages and associated costs and expenses; • difficulties in staffing and managing foreign operations, particularly hiring and training qualified sales and service personnel; • the need to implement and offer customer care in various languages; • different pricing environments, longer sales and accounts receivable payment cycles and collections issues; • weaker protection for intellectual property and other legal rights than in the U.S. and practical difficulties in enforcing intellectual property and other rights outside of the U.S.; • privacy and data protection laws and regulations that are complex, expensive to comply with and may require that customer data be stored and processed in a designated territory; • increased risk of piracy, counterfeiting and other misappropriation of SoundHound’s intellectual property in its locations outside the U.S.; • new and different sources of competition; • general economic conditions in international markets; • fluctuations in the value of the U.S. dollar and foreign currencies, which may make SoundHound’s products more expensive in other countries or may increase its costs, impacting its operating results when translated into U.S. dollars; • compliance challenges related to the complexity of multiple, conflicting and changing governmental laws and regulations, including employment, tax, telecommunications and telemarketing laws and regulations; • increased risk of international telecom fraud; 22 Table of Contents • laws and business practices favoring local competitors; • compliance with laws and regulations applicable to foreign operations and cross border transactions, including the Foreign Corrupt Practices Act, the U.K.
If intangible assets and goodwill that we recorded in connection with our acquisitions, including our SYNQ3 and Amelia acquisitions, become impaired, we may have to take significant charges against earnings, which would have a negative impact on our financial condition and results of operations. We record goodwill and intangible assets at fair value upon the acquisition of a business.
If intangible assets and goodwill that we recorded in connection with our acquisitions, including our SYNQ3, Amelia, and Interactions acquisitions, become impaired, we may have to take significant charges against earnings, which would have a negative impact on our financial condition and results of operations. We record goodwill and intangible assets at fair value upon the acquisition of a business.
Our failure to successfully address the foregoing risks may prevent us from achieving the anticipated benefits from any acquisition in a reasonable time frame, or at all. The integration of our acquisitions, and in particular, our acquisition of SYNQ3 and Amelia, may result in significant accounting charges that adversely affect the financial results of our company.
Our failure to successfully address the foregoing risks may prevent us from achieving the anticipated benefits from any acquisition in a reasonable time frame, or at all. The integration of our acquisitions, and in particular, our acquisition of SYNQ3, Amelia, and Interactions, may result in significant accounting charges that adversely affect the financial results of our company.
Factors that may contribute to fluctuations in operating results include: • the volume, timing and fulfillment of large customer contracts; • renewals of existing customer contracts and wins of new customer programs; • increased expenditures incurred pursuing new product or market opportunities; • receipt of royalty reports; • fluctuating sales by SoundHound’s customers to their end-users; • contractual counterparties failing to meet their contractual commitments to SoundHound; • introduction of new products by SoundHound or its competitors; 15 Table of Contents • cybersecurity or data breaches; • reduction in the prices of SoundHound’s products in response to competition, market conditions or contractual obligations; • increased costs to raise cash in the market place, including increased borrowing costs as a result of inflation and tariffs; • accounts receivable that are not collectible; • higher than anticipated costs related to fixed-price contracts with SoundHound’s customers; • change in costs due to regulatory or trade restrictions; • expenses incurred in litigation matters, whether initiated by SoundHound or brought by third-parties against SoundHound, and settlements or judgments it is required to pay in connection with disputes; and • general economic trends as they affect the customer bases into which SoundHound and its customers sell and operate.
Factors that may contribute to fluctuations in operating results include: • the volume, timing and fulfillment of large customer contracts; • renewals of existing customer contracts and wins of new customer programs; • increased expenditures incurred pursuing new product or market opportunities; • receipt of royalty reports; • fluctuating sales by SoundHound’s customers to their end-users; • contractual counterparties failing to meet their contractual commitments to SoundHound; • introduction of new products by SoundHound or its competitors; • cybersecurity or data breaches; • reduction in the prices of SoundHound’s products in response to competition, market conditions or contractual obligations; • increased costs to raise cash in the market place, including increased borrowing costs as a result of inflation and tariffs; • accounts receivable that are not collectible; • higher than anticipated costs related to fixed-price contracts with SoundHound’s customers; • change in costs due to regulatory or trade restrictions; • expenses incurred in litigation matters, whether initiated by SoundHound or brought by third-parties against SoundHound, and settlements or judgments it is required to pay in connection with disputes; and • general economic trends as they affect the customer bases into which SoundHound and its customers sell and operate.
Risks Related to our Intellectual Property and Technology • Our use of open source technology could impose limitations on our ability to commercialize our software; • Third parties have claimed in the past and may claim in the future that we are infringing their intellectual property, and we could be exposed to significant litigation or licensing expenses or be prevented from selling our products or making our technologies available to our customers if such claims are successful; • Unauthorized use of our proprietary technology and intellectual property could adversely affect our business and results of operations; Risks Related to our Securities and our Dual Class Common Stock Structure • Our stock price and trading volume may fluctuate significantly; • The requirements of being a public company may strain our resources and divert management’s attention, and the increases in legal, accounting and compliance expenses may be greater than we anticipate; • We have a dual class common stock structure that has the effect of concentrating voting control with the holders of our Class B Common Stock.
Risks Related to our Intellectual Property and Technology • Our use of open source technology could impose limitations on our ability to commercialize our software; • Third parties have claimed presently and in the past and may claim in the future that we are infringing their intellectual property, and we could be exposed to significant litigation or licensing expenses or be prevented from selling our products or making our technologies available to our customers if such claims are successful; • Unauthorized use of our proprietary technology and intellectual property could adversely affect our business and results of operations; Risks Related to our Securities and our Dual Class Common Stock Structure • Our stock price and trading volume has fluctuated significantly; • The requirements of being a public company may strain our resources and divert management’s attention, and the increases in legal, accounting and compliance expenses may be greater than we anticipate; • We have a dual class common stock structure that has the effect of concentrating voting control with the holders of our Class B Common Stock.
Any cybersecurity or data privacy incident or breach may result in: • loss of revenue resulting from the operational disruption; • loss of revenue or increased bad debt expense due to the inability to invoice properly or to customer dissatisfaction resulting in collection issues; 16 Table of Contents • loss of revenue due to loss of customers; • material remediation costs to recreate or restore systems; • material investments in new or enhanced systems in order to enhance SoundHound’s information security posture; • cost of incentives offered to customers to restore confidence and maintain business relationships; • reputational damage resulting in the failure to retain or attract customers; • costs associated with potential litigation or governmental investigations; • costs associated with any required notices of a data breach; • costs associated with the potential loss of critical business data; • difficulties enhancing or creating new products due to loss of data or data integrity issues; and • other consequences of which SoundHound is not currently aware but would discover through the process of remediating any cybersecurity or data privacy incidents or breaches that may occur.
Any cybersecurity or data privacy incident or breach may result in: • loss of revenue resulting from the operational disruption; • loss of revenue or increased bad debt expense due to the inability to invoice properly or to customer dissatisfaction resulting in collection issues; • loss of revenue due to loss of customers; • material remediation costs to recreate or restore systems; • material investments in new or enhanced systems in order to enhance SoundHound’s information security posture; • cost of incentives offered to customers to restore confidence and maintain business relationships; • reputational damage resulting in the failure to retain or attract customers; • costs associated with potential litigation or governmental investigations; • costs associated with any required notices of a data breach; • costs associated with the potential loss of critical business data; • difficulties enhancing or creating new products due to loss of data or data integrity issues; and • other consequences of which SoundHound is not currently aware but would discover through the process of remediating any cybersecurity or data privacy incidents or breaches that may occur.
Foreign Corrupt Practices Act; • uncertainties related to geopolitical risks, including the relationship between the U.S. government and the government of other nations; • tariffs, trade barriers and other regulatory or contractual limitations on SoundHound’s ability to sell or develop its solutions in certain foreign markets; • operating in countries with a higher incidence of corruption and fraudulent business practices; • changes in regulatory requirements, including export controls, tariffs and embargoes, other trade restrictions, competition, corporate practices and data privacy concerns; • potential adverse tax consequences arising from global operations; • seasonal reductions in business activity in certain parts of the world, particularly during the summer months in Europe and at year-end globally; • rapid changes in government, economic and political policies and conditions; and • political or civil unrest or instability, terrorism or epidemics or pandemics and other similar outbreaks or events.
Foreign Corrupt Practices Act; • uncertainties related to geopolitical risks, including the relationship between the U.S. government and the government of other nations; • tariffs, trade barriers and other regulatory or contractual limitations on SoundHound’s ability to sell or develop its solutions in certain foreign markets; • operating in countries with a higher incidence of corruption and fraudulent business practices; • changes in regulatory requirements, including export controls, tariffs and embargoes, other trade restrictions, competition, corporate practices and data privacy concerns; • potential adverse tax consequences arising from global operations; 20 Table of Contents • seasonal reductions in business activity in certain parts of the world, particularly during the summer months in Europe and at year-end globally; • rapid changes in government, economic and political policies and conditions; and • political or civil unrest or instability, terrorism or epidemics or pandemics and other similar outbreaks or events.
In addition, because of the ten-to-one voting ratio between our Class B and Class A Common Stock, holders of our Class B Common Stock could continue to control a majority of the combined voting power of our Common Stock and therefore control all matters submitted to our stockholders for approval until such time, if any, as a sufficient number of shares of our Class B Common Stock are converted into shares of our Class A Common Stock in accordance with the terms of the Second Amended & Restated Certificate of Incorporation of the Company (the "Amended Charter").
In addition, because of the ten-to-one voting ratio between our Class B and Class A Common Stock, holders of our Class B Common Stock could continue to control a majority of the combined voting power of our common stock and therefore control all matters submitted to our stockholders for approval until such time, if any, as a sufficient number of shares of our Class B Common Stock are converted into shares of our Class A Common Stock in accordance with the terms of the Restated Certificate of Incorporation of the Company (the "Restated Charter").
If enacted in this form or a similar form, this regulatory framework is expected to have a material impact on the way AI is regulated in the European Union and beyond, and, together with developing regulatory guidance and judicial decisions in this area, may affect our use of AI and our ability to provide and to improve our services, require additional compliance measures and changes to our operations and processes, result in increased compliance costs and potential increases in civil claims against us and could adversely affect our business, financial condition and results of operations.
If enacted in this 12 Table of Contents form or a similar form, this regulatory framework is expected to have a material impact on the way AI is regulated in the European Union and beyond, and, together with developing regulatory guidance and judicial decisions in this area, may affect our use of AI and our ability to provide and to improve our services, require additional compliance measures and changes to our operations and processes, result in increased compliance costs and potential increases in civil claims against us and could adversely affect our business, financial condition and results of operations.
In general, an “ownership change” will occur if there is a cumulative change in SoundHound’s ownership by “5-percent shareholders” that exceeds 50 percentage points over a rolling three-year period. Similar rules may apply under state tax laws.
In general, an “ownership change” will occur if there is a cumulative change in SoundHound’s ownership by “5-percent stockholders” that exceeds 50 percentage points over a rolling three-year period. Similar rules may apply under state tax laws.
Intangible assets and goodwill will be assessed for impairment in the event of an impairment indicator. Any reduction or impairment of the value of intangible assets and goodwill will result in a charge against earnings, which could materially adversely affect our results of operations and shareholders’ equity in future periods.
Intangible assets and goodwill will be assessed for impairment in the event of an impairment indicator. Any reduction or impairment of the value of intangible assets and goodwill will result in a charge against earnings, which could materially adversely affect our results of operations and stockholders’ equity in future periods.
We cannot predict whether having an Amended Charter that permits the issuance of multiple voting shares in a dual-class structure will result in a lower or more volatile market price of our Class A Common Stock, adverse publicity or other adverse consequences.
We cannot predict whether having an Restated Charter that permits the issuance of multiple voting shares in a dual-class structure will result in a lower or more volatile market price of our Class A Common Stock, adverse publicity or other adverse consequences.
This market and share price volatility relating to these outside effects, as well as general economic, market or political conditions, has and could further reduce the market price of our Class A Common Stock in spite of our operating performance and could also increase our cost of capital, which could prevent us from accessing debt and equity capital on terms acceptable to us or at all.
This market and share price volatility relating to these outside effects, as well as general economic, market or political conditions, has and could further reduce the market price of our Class A Common Stock in spite of our operating performance and could also 33 Table of Contents increase our cost of capital, which could prevent us from accessing debt and equity capital on terms acceptable to us or at all.
Shares of Class B Common Stock are convertible into shares of Class A Common Stock and will automatically convert into shares of Class A Common Stock upon the occurrence of certain future events, generally including transfers, subject to limited excepts set forth in the Amended Charter.
Shares of Class B Common Stock are convertible into shares of Class A Common Stock and will automatically convert into shares of Class A Common Stock upon the occurrence of certain future events, generally including transfers, subject to limited excepts set forth in the Restated Charter.
Intellectual property disputes could subject us to significant liabilities, require us to enter into royalty and licensing arrangements on unfavorable terms, prevent us from licensing certain of its products, cause severe disruptions to its operations or the markets in which we compete, or require us to satisfy indemnification commitments with its customers including contractual provisions under various arrangements.
Intellectual property disputes could subject us to significant liabilities, require us to enter into royalty and licensing arrangements on unfavorable terms, prevent us from licensing certain of its products, cause severe disruptions to its operations or the markets in which we compete, or require us to satisfy indemnification 31 Table of Contents commitments with its customers including contractual provisions under various arrangements.
If a major customer becomes subject to bankruptcy or similar 14 Table of Contents proceedings whereby contractual commitments are subject to stay of execution and the possibility of legal or other modification, or if a major customer otherwise successfully procures protection against SoundHound legally enforcing its obligations, it is likely that SoundHound will be forced to record a substantial loss.
If a major customer becomes subject to bankruptcy or similar proceedings whereby contractual commitments are subject to stay of execution and the possibility of legal or other modification, or if a major customer otherwise successfully procures protection against SoundHound legally enforcing its obligations, it is likely that SoundHound will be forced to record a substantial loss.
This would place SoundHound at a competitive disadvantage in attracting qualified personnel or force it to offer more cash compensation. Cybersecurity and data privacy incidents or breaches may damage client relations and inhibit SoundHound’s growth. The confidentiality and security of SoundHound’s information, and that of third parties, is critical to SoundHound’s business.
This would place SoundHound at a competitive disadvantage in attracting qualified personnel or force it to offer more cash compensation. 16 Table of Contents Cybersecurity and data privacy incidents or breaches may damage client relations and inhibit SoundHound’s growth. The confidentiality and security of SoundHound’s information, and that of third parties, is critical to SoundHound’s business.
In addition, over the last few years, the stock market more broadly has experienced price and volume fluctuations, including due to factors relating to the outbreak of COVID-19, inflationary pressures, the wars in Ukraine and in Gaza and the imposition and/or threat of tariffs, and this volatility has sometimes been unrelated to the operating performance of particular companies.
In addition, over the last few years, the stock market more broadly has experienced price and volume fluctuations, including due to factors relating to the outbreak of COVID-19, inflationary pressures, the wars in Ukraine and in the Middle East and the imposition and/or threat of tariffs, and this volatility has sometimes been unrelated to the operating performance of particular companies.
Further, if we fail to remedy these deficiencies (or any other future deficiencies) or maintain effective internal control over financial reporting, we could be subject to regulatory scrutiny, civil or criminal penalties or shareholder litigation.
Further, if we fail to remedy these deficiencies (or any other future deficiencies) or maintain effective internal control over financial reporting, we could be subject to regulatory scrutiny, civil or criminal penalties or stockholder litigation.
The design and development of new cloud-connected and embedded products and technologies and the addition of new languages will involve significant expense. SoundHound’s research and development costs have greatly increased in 13 Table of Contents recent years and, together with certain expenses associated with delivering SoundHound’s connected services, are projected to continue to escalate in the near future.
The design and development of new cloud-connected and embedded products and technologies and the addition of new languages will involve significant expense. SoundHound’s research and development costs have greatly increased in recent years and, together with certain expenses associated with delivering SoundHound’s connected services, are projected to continue to escalate in the near future.
Weak global economic conditions, changes in consumer behavior or a reduction in technology spending even if economic conditions stabilize, could adversely impact our business and results of operations in a number of ways, including longer sales cycles, lower demand or prices for our platform, fewer subscriptions and lower or no growth.
Weak global economic conditions, changes in consumer behavior or a reduction in technology spending even if economic conditions stabilize, 15 Table of Contents could adversely impact our business and results of operations in a number of ways, including longer sales cycles, lower demand or prices for our platform, fewer subscriptions and lower or no growth.
SoundHound regularly evaluates the need for a valuation allowance on deferred tax assets, considering historical profitability, projected future taxable income, the expected timing of the reversals of existing temporary differences and tax planning strategies. This analysis is heavily dependent upon SoundHound’s current and projected operating results.
SoundHound regularly evaluates the need for a valuation allowance on deferred tax assets, considering historical profitability, projected future taxable income, the expected timing of the reversals of existing temporary differences and tax 23 Table of Contents planning strategies. This analysis is heavily dependent upon SoundHound’s current and projected operating results.
For example, SoundHound’s largest customers are currently in the automotive industry, and automotive production and sales are highly cyclical and depend on general economic conditions and other factors, including consumer spending and preferences, changes in interest rate levels and credit availability, tariffs, consumer confidence, fuel costs, fuel availability, environmental impact, union strikes, governmental incentives and regulatory requirements, and political volatility, especially in energy-producing countries and growth markets.
For example, SoundHound’s largest customers are currently in the automotive industry, and automotive production and sales are highly cyclical and 13 Table of Contents depend on general economic conditions and other factors, including consumer spending and preferences, changes in interest rate levels and credit availability, tariffs, consumer confidence, fuel costs, fuel availability, environmental impact, union strikes, governmental incentives and regulatory requirements, and political volatility, especially in energy-producing countries and growth markets.
Under those sections of the Code, if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change attributes, such as research tax credits, to offset its post-change income or tax may be limited.
Under those sections of the Code, if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change net operating loss 37 Table of Contents carryforwards and other pre-change attributes, such as research tax credits, to offset its post-change income or tax may be limited.
As a result, the trading price of our securities could decline and you could lose all or part of your 9 Table of Contents investment. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations and the market price of our securities.
As a result, the trading price of our securities could decline and you could lose all or part of your investment. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations and the market price of our securities.
Accordingly, SoundHound’s future results could be harmed by a variety of factors associated with international sales and operations, including: • adverse political and economic conditions, or changes to such conditions, in a specific region or country; • trade protection measures, including tariffs and import/export controls, imposed by the United States and/or by other countries or regional authorities such as China, Canada or the European Union; • the impact on local and global economies of the United Kingdom leaving the European Union; • changes in foreign currency exchange rates or the lack of ability to hedge certain foreign currencies; • compliance with laws and regulations in many countries and any subsequent changes in such laws and regulations; • geopolitical turmoil, including terrorism and war; • changing data privacy regulations and customer requirements to locate data centers in certain jurisdictions; • evolving restrictions on cross-border investment, including recent enhancements to the oversight by the Committee on Foreign Investment in the United States pursuant to the Foreign Investment Risk Preview Modernization Act and substantial restrictions on investment from China; 18 Table of Contents • changes in applicable tax laws; • difficulties in staffing and managing operations in multiple locations in many countries; • longer payment cycles of foreign customers and timing of collections in foreign jurisdictions; and • less effective protection of intellectual property than in the United States.
Accordingly, SoundHound’s future results could be harmed by a variety of factors associated with international sales and operations, including: • adverse political and economic conditions, or changes to such conditions, in a specific region or country; • trade protection measures, including tariffs and import/export controls, imposed by the United States and/or by other countries or regional authorities such as China, Canada or the European Union; • changes in foreign currency exchange rates or the lack of ability to hedge certain foreign currencies; • compliance with laws and regulations in many countries and any subsequent changes in such laws and regulations; • geopolitical turmoil, including terrorism and war; • changing data privacy regulations and customer requirements to locate data centers in certain jurisdictions; • evolving restrictions on cross-border investment, including recent enhancements to the oversight by the Committee on Foreign Investment in the United States pursuant to the Foreign Investment Risk Preview Modernization Act and substantial restrictions on investment from China; • changes in applicable tax laws; • difficulties in staffing and managing operations in multiple locations in many countries; • longer payment cycles of foreign customers and timing of collections in foreign jurisdictions; and • less effective protection of intellectual property than in the United States.
Compliance with data security and personal information protection laws, may result in additional expenses to 17 Table of Contents SoundHound and subject it to negative publicity, which could harm SoundHound’s reputation among users and negatively affect the trading price of its shares in the future.
Compliance with data security and personal information protection laws, may result in additional expenses to SoundHound and subject it to negative publicity, which could harm SoundHound’s reputation among users and negatively affect the trading price of its shares in the future.
The market price and trading volume of SoundHound’s Class A Common Stock has fluctuated widely and may continue to fluctuate widely, depending on many factors, some of which may be beyond our control, including: • actual or anticipated fluctuations in our results of operations due to factors related to our business; • success or failure of our business strategies; • competition and industry capacity; • changes in interest rates and other factors that affect earnings and cash flow; • our level of indebtedness, our ability to make payments on or service our indebtedness and our ability to obtain financing as needed; • our ability to retain and recruit qualified personnel, particularly in light of our recent restructuring; • our quarterly or annual earnings or losses, or those of other companies in our industry; • announcements by us or our competitors of significant acquisitions or dispositions; • changes in accounting standards, policies, guidance, interpretations or principles; • purchases or sales of our Class A Common Stock by large or influential investors or stockholders; • the failure of securities analysts to cover, or positively cover, our Class A Common Stock; • changes in earnings estimates by securities analysts or our ability to meet those estimates; • the operating and stock price performance of other comparable companies; • investor perception of the Company and the AI industry; • overall market fluctuations unrelated to our operating performance; • results from any material litigation or government investigation; • changes in laws and regulations (including tax laws and regulations) affecting our business; • changes in capital gains taxes and taxes on dividends affecting stockholders; and 32 Table of Contents • general economic conditions and other external factors.
The market price and trading volume of SoundHound’s Class A common stock, $0.0001 par value per share (“Class A Common Stock”) has fluctuated widely and may continue to fluctuate widely, depending on many factors, some of which may be beyond our control, including: • actual or anticipated fluctuations in our results of operations due to factors related to our business; • success or failure of our business strategies; • competition and industry capacity; • changes in interest rates and other factors that affect earnings and cash flow; • our level of indebtedness, our ability to make payments on or service our indebtedness and our ability to obtain financing as needed; • our ability to retain and recruit qualified personnel, particularly in light of our recent restructuring; • our quarterly or annual earnings or losses, or those of other companies in our industry; • announcements by us or our competitors of significant acquisitions or dispositions; • changes in accounting standards, policies, guidance, interpretations or principles; • significant purchases or sales of our Class A Common Stock by large or influential investors or stockholders; • the failure of securities analysts to cover, or positively cover, our Class A Common Stock; • changes in earnings estimates by securities analysts or our ability to meet those estimates; • the operating and stock price performance of other comparable companies; • investor perception of the Company and the AI industry; • overall market fluctuations unrelated to our operating performance; • results from any material litigation or government investigation; • changes in laws and regulations (including tax laws and regulations) affecting our business; • changes in capital gains taxes and taxes on dividends affecting stockholders; and • general economic conditions and other external factors.
SoundHound currently generates most of its international revenue in Europe and Asia, and SoundHound anticipates that revenue from international operations could increase in the future. SoundHound conducts a significant portion of the development of its voice recognition and natural language understanding solutions in Canada, Germany, Japan and China.
SoundHound currently generates most of its international revenue in Europe and Asia, and SoundHound anticipates that revenue from international operations could increase in the future. SoundHound conducts a significant 18 Table of Contents portion of the development of its voice recognition and natural language understanding solutions in Canada, Germany, Japan and China.
SoundHound may continue to have net losses and negative operating cash flows as SoundHound continues to invest in its development activities, and in sales and marketing. SoundHound also expects to incur the incremental costs of operating as a public company, contributing to SoundHound’s losses and operating uses of cash.
SoundHound will likely continue to have net losses and negative operating cash flows as SoundHound continues to invest in its development activities, and in sales and marketing. SoundHound also expects to continue to incur the incremental costs of operating as a public company, contributing to SoundHound’s losses and operating uses of cash.
Effective internal control over financial reporting is necessary to provide reliable financial reports and to assist in the effective prevention or detection of material misstatements due to error or fraud. Any inability to provide reliable financial 29 Table of Contents reports or prevent or detect material misstatements due to error or fraud could harm our business.
Effective internal control over financial reporting is necessary to provide reliable financial reports and to assist in the effective prevention or detection of material misstatements due to error or fraud. Any inability to provide reliable financial reports or prevent or detect material misstatements due to error or fraud could harm our business.
During the years ended December 31, 2024, 2023 and 2022, SoundHound derived approximately 45%, 85% and 89%, respectively, of its revenues from customers located in countries outside the United States, and SoundHound plans to increase its international operations in the future. Accordingly, SoundHound expects to increasingly face significant operational risks and expenses from doing business internationally.
During the years ended December 31, 2025, 2024 and 2023, SoundHound derived approximately 36%, 45% and 85%, respectively, of its revenues from customers located in countries outside the United States, and SoundHound plans to increase its international operations in the future. Accordingly, SoundHound expects to increasingly face significant operational risks and expenses from doing business internationally.
SoundHound anticipates that current cash, cash equivalents, cash provided by operating activities and funds available through SoundHound’s at-the-market offering program (ATM program), will not be sufficient to meet its future capital needs.
SoundHound anticipates that current cash, cash equivalents, cash provided by operating activities and funds available through SoundHound’s at-the-market offering program ("ATM"), will not be sufficient to meet its long-term expected future capital needs.
Although we maintain crisis management and disaster response plans, such events could make it difficult or impossible for us to deliver our services to our customers, could decrease demand for our services, and could cause us to incur substantial expense. Our insurance may not be sufficient to cover losses or additional expenses that we may sustain.
Although we maintain crisis management and disaster response plans, such events could make it difficult or impossible for us to deliver our services to our 30 Table of Contents customers, could decrease demand for our services, and could cause us to incur substantial expense. Our insurance may not be sufficient to cover losses or additional expenses that we may sustain.
The period of time from winning a contract to implementation is long and SoundHound is subject to the risks of cancellation or postponement of the contract or unsuccessful implementation. SoundHound’s products are technologically complex and incorporate many technological innovations.
The period of time 14 Table of Contents from winning a contract to implementation is long and SoundHound is subject to the risks of cancellation or postponement of the contract or unsuccessful implementation. SoundHound’s products are technologically complex and incorporate many technological innovations.
SoundHound’s public cloud-based platform offering is critical to developing and providing its products to its customers, scaling its business for future growth, accurately maintaining data and otherwise operating its business. Infrastructure buildouts on the public cloud are complex, time-consuming and may involve substantial expenditures.
SoundHound’s public cloud-based platform offering is critical to developing and providing its products to its customers, scaling its business for future growth, accurately maintaining data and otherwise operating its business. Infrastructure 21 Table of Contents buildouts on the public cloud are complex, time-consuming and may involve substantial expenditures.
SoundHound may be unable to keep current with changes in foreign 22 Table of Contents government requirements and laws as they change from time to time, which often occurs with minimal or no advance notice. Failure to comply with these regulations could harm its business.
SoundHound may be unable to keep current with changes in foreign government requirements and laws as they change from time to time, which often occurs with minimal or no advance notice. Failure to comply with these regulations could harm its business.
The material weaknesses related to the control environment, risk assessment and the accounting for certain non-routine, unusual or complex transactions resulted in the revision of the consolidated financial statements as of and for the periods ended September 30, 2022, December 31, 2022, March 31, 2023, June 30, 2023, immaterial errors related to SYNQ3 and Amelia acquisitions during the year ended December 31, 2024 and immaterial errors in various accounts during the interim and annual periods during 2023 and 2024.
The material weaknesses related to the control environment, risk assessment and the accounting for certain non-routine, unusual or complex transactions resulted in the revision of the consolidated financial statements as of and for the periods ended September 30, 2022, December 31, 2022, March 31, 2023, June 30, 2023, and immaterial errors in various accounts during the interim and annual periods during 2023, 2024 and 2025.
The conversion of Class B Common Stock to Class A 34 Table of Contents Common Stock will have the effect, over time, of increasing the relative voting power of those holders of Class B Common Stock who retain their shares in the long term.
The conversion of Class B Common Stock to Class A Common Stock will have the effect, over time, of increasing the relative voting power of those holders of Class B Common Stock who retain their shares in the long term.
Other risks and uncertainties SoundHound faces from its global operations include, but are not limited to: • difficulties in staffing and managing foreign operations; • limited protection for the enforcement of contract and intellectual property rights in certain countries where SoundHound may sell SoundHound’s solutions or work with suppliers or other third parties; • potentially longer sales and payment cycles and potentially greater difficulties in collecting accounts receivable; 19 Table of Contents • costs and difficulties of customizing solutions for foreign countries; • challenges in providing solutions across a significant distance, in different languages and among different cultures; • laws and business practices favoring local competition; • being subject to a wide variety of complex foreign laws, treaties and regulations and adjusting to any unexpected changes in such laws, treaties and regulations; • specific and significant regulations, including, but not limited to, the European Union’s GDPR, which imposes compliance obligations on companies who possess and use data of EU residents; • differences in analysis of regulatory, legal and tax issues across various countries, such as different interpretations of antitrust and competition laws; • uncertainty and resultant political, financial and market instability arising from the United Kingdom’s exit from the European Union; • compliance with U.S. laws affecting activities of U.S. companies abroad, including the U.S.
Other risks and uncertainties SoundHound faces from its global operations include, but are not limited to: • difficulties in staffing and managing foreign operations; • limited protection for the enforcement of contract and intellectual property rights in certain countries where SoundHound may sell SoundHound’s solutions or work with suppliers or other third parties; • potentially longer sales and payment cycles and potentially greater difficulties in collecting accounts receivable; • costs and difficulties of customizing solutions for foreign countries; • challenges in providing solutions across a significant distance, in different languages and among different cultures; • laws and business practices favoring local competition; • being subject to a wide variety of complex foreign laws, treaties and regulations and adjusting to any unexpected changes in such laws, treaties and regulations; • specific and significant regulations, including, but not limited to, the European Union’s GDPR, which imposes compliance obligations on companies who possess and use data of EU residents; • differences in analysis of regulatory, legal and tax issues across various countries, such as different interpretations of antitrust and competition laws; • compliance with U.S. laws affecting activities of U.S. companies abroad, including the U.S.
The success of our recent acquisitions will depend, in part, on our ability to: • integrate SYNQ3’s and Amelia's customer bases and capitalize on our cross-selling opportunities; • realize cost savings from reduced back-office and infrastructure expenses, eliminate duplicative company and management structure costs; • operate our combined businesses efficiently, achieve the strategic operating objectives for our business and realize significant cost savings and synergies; • realize the attractive risk-adjusted equity returns from our acquisitions for our stockholders; and • capitalize on the embedded and/or underexploited expansion opportunities offered by our acquisitions that we can expand upon.
The success of our recent acquisitions will depend, in part, on our ability to: • integrate SYNQ3, Amelia, and Interactions' customer bases and capitalize on our cross-selling opportunities; 27 Table of Contents • realize cost savings from reduced back-office and infrastructure expenses, eliminate duplicative company and management structure costs; • operate our combined businesses efficiently, achieve the strategic operating objectives for our business and realize significant cost savings and synergies; • realize the attractive risk-adjusted equity returns from our acquisitions for our stockholders; and • capitalize on the embedded and/or underexploited expansion opportunities offered by our acquisitions that we can expand upon.
SoundHound has generated substantial net losses and negative operating cash flows since its inception and may continue to do so for the foreseeable future. 27 Table of Contents To date, SoundHound has generated substantial net losses and negative cash flows from operating activities.
SoundHound has generated substantial net losses and negative operating cash flows since its inception and may continue to do so for the foreseeable future. To date, SoundHound has generated substantial net losses and negative cash flows from operating activities.
Additionally, the material weaknesses could result in misstatements to substantially all of our accounts and disclosures that would result in a material misstatement of the annual or interim consolidated financial statements that would not be prevented or detected.
The material weakness related to segregation of duties did not result in a misstatement to our annual or interim consolidated financial statements. Additionally, the material weaknesses could result in misstatements to substantially all of our accounts and disclosures that would result in a material misstatement of the annual or interim consolidated financial statements that would not be prevented or detected.
Customers who are not satisfied with any of SoundHound’s products may also bring claims against us for damages, which, even if unsuccessful, would likely be time-consuming to defend, and could result in costly litigation and payment of damages.
Customers who are not satisfied with any of SoundHound’s products may also bring claims against us for damages, which, even if unsuccessful, would likely be time-consuming to defend, and could result in costly litigation and payment of damages. Such claims could harm SoundHound’s reputation, financial results and competitive position.
If SoundHound raises additional funds through the issuance of equity, including its ATM Program, or convertible debt securities, the percentage ownership of its stockholders could be significantly diluted, and these newly-issued securities may have rights, preferences or privileges senior to those of existing stockholders, including those acquiring shares in this offering.
If SoundHound raises additional funds through the issuance of equity, including its ATM program, or convertible debt securities, or grants competitive equity awards to attract and retain qualified employees, the percentage ownership of its stockholders could be significantly diluted, and these newly-issued securities may have rights, preferences or privileges 28 Table of Contents senior to those of existing stockholders, including those acquiring shares in this offering.
If SoundHound does not prevail in any such disagreements, its profitability may be affected. SoundHound’s ability to use its net operating loss carryforwards and certain other tax attributes may be limited. As of December 31, 2024, SoundHound had $548.4 million of U.S. federal and $208.1 million of state net operating loss carryforwards available to reduce future taxable income.
If SoundHound does not prevail in any such disagreements, its profitability may be affected. SoundHound’s ability to use its net operating loss carryforwards and certain other tax attributes may be limited. As of December 31, 2025, SoundHound had $892.9 million of U.S. federal and $379.7 million of state net operating loss carryforwards available to reduce future taxable income.
In such an event, we may be required to seek licenses from third parties to continue commercially offering its software, to make its proprietary code generally available in source code form, to re-engineer its software or to discontinue the sale of its software if re-engineering could not be accomplished on a timely basis, any of which could adversely affect SoundHound’s business and revenue. 30 Table of Contents The use of open source technology could subject SoundHound to a number of other risks and challenges.
In such an event, we may be required to seek licenses from third parties to continue commercially offering its software, to make its proprietary code generally available in source code form, to re-engineer its software or to discontinue the sale of its software if re-engineering could not be accomplished on a timely basis, any of which could adversely affect SoundHound’s business and revenue.
SoundHound has been and in the future may be subject to claims and legal actions alleging that we or its customers may be infringing or contributing to the infringement of the intellectual property rights of others (though no material legal actions against SoundHound are currently pending).
SoundHound has been, is currently and in the future may be subject to claims and legal actions alleging that we or its customers may be infringing or contributing to the infringement of the intellectual property rights of others.
This could result in significant expenses to remediate any internal control deficiencies and lead to a decline in our stock price. We identified material weaknesses in internal control over financial reporting as of December 31, 2024.
This could result in significant expenses to remediate any internal control deficiencies and lead to a decline in our stock price. We identified material weaknesses in internal control over financial reporting as of December 31, 2025. These material weaknesses were previously disclosed and continue to exist.
Further, due to rapid business growth, changes to existing controls or the implementation of new controls have not been sufficient to respond to changes to the risks of material misstatement to financial reporting, which resulted in the Company, including the SYNQ3 and Amelia entities which were acquired during 2024, not designing and maintaining effective controls related to substantially all accounts and disclosures.
Further, due to rapid business growth, changes to existing controls or the implementation of new controls have not been sufficient to respond to changes to the risks of material misstatement to 29 Table of Contents financial reporting, which resulted in the Company not designing and maintaining effective controls related to substantially all accounts and disclosures.
We may engage in future acquisitions or strategic transactions which may require us to seek additional financing or financial commitments, increase our expenses and/or present significant distractions to our management.
We may engage in future acquisitions or strategic transactions which may require us to seek additional financing or financial commitments, increase our expenses and/or present significant distractions to our management. We completed our acquisitions of Synq3, Inc. ("SYNQ3") in January 2024, Amelia Holdings, Inc.
The legislation has had no effect on SoundHound’s provision for income taxes because SoundHound has incurred annual losses in the U.S. to date and management set up a full valuation allowance against its U.S. federal and states deferred tax assets.
The legislation has had no effect on SoundHound’s provision for income taxes because SoundHound has incurred annual losses in the U.S. to date and management set up a full valuation allowance against its U.S. federal and states deferred tax assets. On July 4, 2025, the United States enacted tax reform legislation through the One Big Beautiful Bill Act.
These material weaknesses contributed to the following additional material weaknesses as of December 31, 2024: • The Company did not design and maintain effective controls related to the identification of and accounting for certain non-routine, unusual or complex transactions, including the accounting for complex financing transactions and acquisitions. • The Company did not design and maintain effective controls to verify appropriate segregation of duties, including assessment of incompatible duties, identification of instances where incompatible duties were assigned to an individual, and addressing conflicts on a timely basis. • The Company did not design and maintain effective controls over certain information technology (IT) general controls over information systems that are relevant to the preparation of the Company’s financial statements.
These material weaknesses contributed to the following additional material weaknesses that continue to exist as of December 31, 2025: • The Company did not design and maintain effective controls related to the identification of and accounting for certain non-routine, unusual or complex transactions, including the accounting for complex financing transactions. • The Company did not design and maintain effective controls to verify appropriate segregation of duties, including assessment of incompatible duties, identification of instances where incompatible duties were assigned to an individual, and addressing conflicts on a timely basis.
The unbilled receivables balances from two customers collectively totaled 74% of the Company’s consolidated unbilled receivables balance at December 31, 2024. The unbilled receivables balances from three customers collectively totaled 86% of the Company’s consolidated unbilled receivables balance at December 31, 2023.
The unbilled receivables balances from five customers collectively totaled 83% of the Company’s consolidated unbilled receivables balance at December 31, 2025. The unbilled receivables balances from two customers collectively totaled 74% of the Company’s consolidated unbilled receivables balance at December 31, 2024.
For example, an acquisition or strategic transaction, may entail numerous operational and financial risks, including the risks outlined above and additionally: • exposure to unknown financial or product liabilities; • disruption of our business and diversion of our management's time and attention in order to develop acquired products or technologies; • higher than expected acquisition and integration costs; • write-downs of assets or goodwill or impairment charges; • increased amortization expenses; • difficulty and cost in combining the operations and personnel of any acquired businesses with our operations and personnel which may result in reorganizations and reductions in force; • impairment of relationships with key suppliers or customers of any acquired businesses due to changes in management and ownership; and • inability to retain key employees of any acquired businesses. 25 Table of Contents Accordingly, although there can be no assurance that we will undertake or successfully complete any transactions of the nature described above, any transactions that we do complete could have a material adverse effect on our business, results of operations, financial condition and prospects.
For example, an acquisition 25 Table of Contents or strategic transaction, may entail numerous operational and financial risks, including the risks outlined above and additionally: • exposure to unknown financial or product liabilities; • disruption of our business and diversion of our management's time and attention in order to develop acquired products or technologies; • higher than expected acquisition and integration costs; • write-downs of assets or goodwill or impairment charges; • increased amortization expenses; • difficulty and cost in combining the operations and personnel of any acquired businesses with our operations and personnel which may result in reorganizations and reductions in force; • impairment of relationships with key suppliers or customers of any acquired businesses due to changes in management and ownership; and • inability to retain key employees of any acquired businesses.
Risks Applicable to a Dual Class Common Stock Structure SoundHound has a dual class common stock structure that has the effect of concentrating voting control with the holders of our Class B Common Stock.
Risks Applicable to a Dual Class Common Stock Structure SoundHound has a dual class common stock structure that has the effect of concentrating voting control with the holders of our Class B common stock, $0.0001 par value per share (“Class B Common Stock”).
SoundHound has a dual class common stock structure and the holders of SoundHound Class B Common Stock have ten votes per share. SoundHound Founders own shares of Class B Common Stock representing approximately 48% of the voting power of the outstanding capital stock of SoundHound as of December 31, 2024.
SoundHound has a dual class common stock structure and the holders of SoundHound Class B Common Stock have ten votes per share. SoundHound's founders (Keyvan Mohajer, Majid Emami and James Hom) own shares of Class B Common Stock representing approximately 47% of the voting power of the outstanding capital stock of SoundHound as of December 31, 2025.
Violations of Trade Laws can result in substantial criminal fines and civil penalties, imprisonment, the loss of trade privileges, debarment, tax reassessments, breach of contract and fraud litigation, reputational harm, and other consequences. SoundHound also expects its non-U.S. activities to increase in time.
Violations of Trade Laws can result in substantial criminal fines and civil penalties, imprisonment, the loss of trade privileges, debarment, tax reassessments, breach of contract and fraud litigation, reputational harm, and other consequences.
The federal and state net operating loss carryforwards will start to expire in 2025 and 2028, respectively, with the exception of $403.3 million federal net operating loss carryforwards and $11.0 million state net operating loss carryforwards, which can be carried forward indefinitely.
The federal and state net operating loss carryforwards will start to expire in 2026 with the exception of $691.0 million federal net operating loss carryforwards and $18.5 million state net operating loss carryforwards, which can be carried forward indefinitely.
If SoundHound’s current and future customers purchase a lower volume of subscriptions for SoundHound’s proprietary products or do not continue entering into service contracts with us, SoundHound’s recurring revenue stream relative to its total revenues would be reduced and its operating results would be adversely affected. 24 Table of Contents SoundHound’s brand, reputation and ability to attract, retain and serve its customers are dependent in part upon the reliable performance of its products and technologies.
If SoundHound’s current and future customers purchase a lower volume of subscriptions for SoundHound’s proprietary products or do not continue entering into service contracts with us, SoundHound’s recurring revenue stream relative to its total revenues would be reduced and its operating results would be adversely affected.
Further, the cost to comply with such laws or regulations could be significant and would increase our operating expenses, which could adversely affect our business, financial condition and results of operations. For example, in Europe, the European Parliament formally enacted the European Union’s Artificial Intelligence Act (the “AI Act”).
Further, the cost to comply with such laws or regulations could be significant and would increase our operating expenses, which could adversely affect our business, financial condition and results of operations.
SoundHound’s business is subject to risks, expenses and uncertainties associated with selling its solutions in locations outside the United States that could adversely affect its operating results.
SoundHound also expects its non-U.S. activities to increase in time. 19 Table of Contents SoundHound’s business is subject to risks, expenses and uncertainties associated with selling its solutions in locations outside the United States that could adversely affect its operating results.
Any provision of our Amended Charter, our Amended Bylaws, or Delaware law that has the effect of delaying, preventing, or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock and could also affect the price that some investors are willing to pay for our common stock.
Any provision of our Restated Charter, our Amended Bylaws, or Delaware law that has the effect of delaying, preventing, or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock and could also affect the price that some investors are willing to pay for our common stock. 36 Table of Contents Risks Related to U.S. and International Taxation Generally Changes in tax laws or exposure to additional income tax liabilities could affect SoundHound’s future profitability.
Any failure to attract, integrate, motivate and retain such employees could harm SoundHound’s business or impair our ability to timely meet business goals and objectives. 28 Table of Contents The Company has identified material weaknesses in its internal control over financial reporting and may identify additional material weaknesses in the future, which may result in material misstatements of the Company’s consolidated financial statements or cause the Company to fail to meet its periodic reporting obligations and the trading price of our stock could be negatively affected.
The Company has identified material weaknesses in its internal control over financial reporting and may identify additional material weaknesses in the future, which may result in material misstatements of the Company’s consolidated financial statements or cause the Company to fail to meet its periodic reporting obligations and the trading price of the Company's stock could be negatively affected.
In addition, the impacts of climate change on the global economy and our industry are rapidly evolving. We may be subject to increased regulations, reporting requirements, standards or expectations regarding the environmental impacts of our business. Risks Relating to SoundHound’s Intellectual Property and Technology SoundHound’s use of open source technology could impose limitations on its ability to commercialize its software.
In addition, the impacts of climate change on the global economy and our industry are rapidly evolving. We may be subject to increased regulations, reporting requirements, standards or expectations regarding the environmental impacts of our business.
New products, as well as enhancements to its existing products, could fail to attain sufficient market acceptance for many reasons, including: • delays in releasing new products, or product enhancements; • failure to accurately predict market demand and to supply products that meet this demand in a timely fashion; • defects in its products, errors or failures of its products; • negative publicity or perceptions about the performance or effectiveness of products; • introduction or anticipated introduction of competing products or technologies by its competitors; and • installation, configuration or usage errors by its customers.
New products, as well as enhancements to its existing products, could fail to attain sufficient market acceptance for many reasons, including: • delays in releasing new products, or product enhancements; • failure to accurately predict market demand and to supply products that meet this demand in a timely fashion; • defects in its products, errors or failures of its products; • negative publicity or perceptions about the performance or effectiveness of products; • introduction or anticipated introduction of competing products or technologies by its competitors; and • installation, configuration or usage errors by its customers. 24 Table of Contents If SoundHound fails to anticipate market requirements or fail to develop and introduce product enhancements or new products to meet those needs in a timely manner, it could cause us to lose existing customers and prevent us from gaining new customers, which would significantly harm its business, financial condition and results of operations.
SoundHound is also subject to the risks generally associated with new product introductions and applications, including lack of market acceptance, delays in product development and failure of products to operate properly. These risks could have a material adverse effect on SoundHound’s business, results of operations and financial condition.
SoundHound is also subject to the risks generally associated with new product introductions and applications, including lack of market acceptance, delays in product development and failure of products to operate properly.
As a result, it may be difficult for us to add new customers to SoundHound’s existing customer base. Competition in the marketplace may also lead us to win fewer new customers or result in us providing discounts and other commercial incentives.
Competition in the marketplace may also lead us to win fewer new customers or result in us providing discounts and other commercial incentives.
Accordingly, the forecasts of market growth included in this Annual Report should not be taken as indicative of its future growth. 23 Table of Contents If SoundHound is unable to acquire new customers, its operating results will be harmed.
Accordingly, the forecasts of market growth included in this Annual Report should not be taken as indicative of its future growth. If SoundHound is unable to acquire new customers, its operating results will be harmed. Likewise, potential customer turnover in the future, or costs it incurs to retain its existing customers, could materially and adversely affect its operating results.
Changes in legislative, regulatory or industry requirements or in competitive technologies may render certain of SoundHound’s products obsolete or less attractive to its customers, which could adversely affect its results of operations.
We may be unable to respond quickly enough to changes in technology and technological risks and to develop its intellectual property into commercially viable products. Changes in legislative, regulatory or industry requirements or in competitive technologies may render certain of SoundHound’s products obsolete or less attractive to its customers, which could adversely affect its results of operations.
Service disruption or outages, whether caused by SoundHound’s service, the products or services of SoundHound’s third-party service providers, or SoundHound’s customers’ or their customers’ equipment and systems, may result in loss of market acceptance of its products and technologies and any necessary remedial actions may force it to incur significant costs and expenses. 20 Table of Contents If any of these service providers fail to provide reliable services, suffer outages, degrade, disrupt, increase the cost of or terminate the services that SoundHound and its customers depend on, SoundHound may be required to switch to another service provider.
Service disruption or outages, whether caused by SoundHound’s service, the products or services of SoundHound’s third-party service providers, or SoundHound’s customers’ or their customers’ equipment and systems, may result in loss of market acceptance of its products and technologies and any necessary remedial actions may force it to incur significant costs and expenses.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur Vendor Management Team conducts an annual review of third-party hosted applications with a specific focus on any sensitive data shared with third parties. The internal business owners of the hosted applications are required to document user access reviews at least annually and provide from the vendor a System and Organization Controls (SOC) 1 or SOC 2 report.
Biggest changeWe conduct an annual review of third-party hosted applications with a specific focus on any sensitive data. We perform user access reviews on all third-party applications. We obtain compliance reports, such as SOC 1 and SOC 2, from all critical third-party vendors annually.
The board of directors is informed of cybersecurity risks, at least annually, through established processes, including periodic briefings, reports, and updates on the evolving landscape of cybersecurity threats. Management 38 Table of Contents SoundHound designates the Information Security Management Committee as responsible for assessing and managing cybersecurity risks.
The board of directors is informed of cybersecurity risks, at least annually, through established processes, including periodic briefings, reports, and updates on the evolving landscape of cybersecurity threats. Management 39 Table of Contents SoundHound designates the Information Security Management Committee as responsible for assessing and managing cybersecurity risks.
The designated persons or committees actively monitor cybersecurity incidents through processes that monitor the prevention, detection, mitigation and remediation of cybersecurity incidents, including continuous assessment and adaptation to emerging threats. 39 Table of Contents
The designated persons or committees actively monitor cybersecurity incidents through processes that monitor the prevention, detection, mitigation and remediation of cybersecurity incidents, including continuous assessment and adaptation to emerging threats. 40 Table of Contents
We review our operational policies and procedures with third party experts on an annual basis as part of our annual audit process. We also maintain cyber insurance coverage. In addition to assessing our own cybersecurity preparedness, we also consider and evaluate cybersecurity risks associated with use of third-party service providers.
We review our operational policies and procedures with third-party experts as part of our annual audit process. We also maintain cyber insurance coverage. In addition to assessing our own cybersecurity preparedness, we also consider and evaluate cybersecurity risks associated with use of third-party service providers.
The Company assesses, identifies and manages cybersecurity related risks. Cybersecurity related risks are evaluated to assess top risks to the enterprise on a bi-annual basis. SoundHound has implemented a comprehensive cybersecurity program designed to identify, assess, and manage cyber risks.
The Company assesses, identifies and manages cybersecurity related risks. Cybersecurity related risks are continuously evaluated to assess top risks to the enterprise. SoundHound has implemented a comprehensive cybersecurity program designed to identify, assess, and manage cyber risks.
If a third-party vendor is not able to provide a SOC 1 or SOC 2 report, we take additional steps to assess their cybersecurity preparedness and assess our relationship on that basis. Our assessment of risks associated with use of third-party providers is part of our overall cybersecurity risk management framework.
If a third-party vendor is not able to provide compliance reports, we take additional steps to assess their cybersecurity preparedness and assess our relationship on that basis. Our assessment of risks associated with use of third-party providers is part of our overall cybersecurity risk management framework. SoundHound will report any cybersecurity incidents determined to be material.
Governance The audit committee oversees risks from cybersecurity threats as part of its broader risk oversight responsibilities. The board recognizes the importance of cybersecurity in safeguarding the company’s assets and operations. SoundHound has a dedicated Information Security Management committee responsible for overseeing risks from cybersecurity threats.
The board recognizes the importance of cybersecurity in safeguarding the company’s assets and operations. SoundHound has a dedicated Information Security Management Committee responsible for overseeing risks from cybersecurity threats.
We have continued to expand investments in IT security, including additional end-user training, using layered defenses, identifying and protecting critical assets, strengthening monitoring and alerting, and engaging experts. We regularly test defenses by performing simulations and drills at both a technical level and by reviewing our operational policies and procedures.
We have continued to expand investments in our overall security posture, including additional end-user training, using defense in depth, identifying and protecting critical assets, strengthening monitoring and alerting, and engaging experts. We regularly test our defenses through simulations, both at the technical level and through reviews of our operational policies and procedures.
SoundHound will report any cybersecurity incidents determined to be material. Material aspects of the nature, scope and timing of the incident, and the impact or reasonably likely impact of the incident on the Company, including on SoundHound’s financial condition and results of operations will be disclosed.
Material aspects of the nature, scope and timing of the incident, and the impact or reasonably likely impact of the incident on the Company, including on SoundHound’s financial condition and results of operations will be disclosed. Governance The Audit Committee oversees risks from cybersecurity threats as part of its broader risk oversight responsibilities.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeLegal Proceedings The material set forth in the section titled “Legal Proceedings” in Note 7 of our Notes to Consolidated Financial Statements is incorporated herein by reference. Item 4. Mine Safety Disclosures Not applicable. 40 Table of Contents Part II
Biggest changeLegal Proceedings The material set forth in the section titled “Legal Proceedings” in Note 8 of our Notes to Consolidated Financial Statements is incorporated herein by reference. Item 4. Mine Safety Disclosures Not applicable. 41 Table of Contents Part II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeSecurities Authorized for Issuance Under Equity Compensation Plans The following table sets forth information as of December 31, 2024 relating to all our equity compensation plans: Plan Category Number of Securities to be Issued Upon Exercise of Outstanding Options (in thousands) Weighted Average Exercise Price of Outstanding Options Number of Granted Restricted Stock Awards Outstanding (in thousands) Number of Securities Remaining Available for Future Issuance (in thousands) Equity compensation plans approved by security holders 5,926 $ 4.44 23,654 11,216 Equity compensation plans not approved by security holders — — — — Total 5,926 4.44 23,654 11,216 Performance Graph In accordance with Exchange Act Rule 14a-3(b), the disclosure for this item will be included in our annual report to be provided to the Company's stockholders in connection with the Annual Meeting of Shareholders to be held in 2025, which annual report shall be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year.
Biggest changeCompensation Plans The following table sets forth information as of December 31, 2025 relating to all our equity compensation plans: Plan Category Number of Securities to be Issued Upon Exercise of Outstanding Options (in thousands) Weighted Average Exercise Price of Outstanding Options Number of Granted Restricted Stock Awards Outstanding (in thousands) Number of Securities Remaining Available for Future Issuance (in thousands) Equity compensation plans approved by security holders 3,883 $ 4.55 22,663 7,559 Equity compensation plans not approved by security holders — — — — Total 3,883 4.55 22,663 7,559 Performance Graph In accordance with Exchange Act Rule 14a-3(b), the disclosure for this item will be included in our Annual Report to be provided to the Company's stockholders in connection with the Annual Meeting of Stockholders to be held on May 22, 2026, which Annual Report shall be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year.
Recent Sales of Unregistered Securities None that have not already been disclosed in a prior Quarterly Report on Form 10-Q or Current Report on Form 8-K. Purchases of Equity Securities by the Issuer and Affiliated Purchasers None. Item 6. [Reserved] 41 Table of Contents
Recent Sales of Unregistered Securities None that have not already been disclosed in a prior Quarterly Report on Form 10-Q or Current Report on Form 8-K. Purchases of Equity Securities by the Issuer and Affiliated Purchasers None. Item 6. [Reserved] 42 Table of Contents
Our listed redeemable warrants are listed on the Nasdaq Global Market under the symbol “SOUNW.” Stockholders According to the records of our transfer agent, there were 74 holders of record of our Class A common stock, 3 holders of record of our Class B common stock and 7 holders of record of our listed redeemable warrants on December 31, 2024 .
Our listed redeemable warrants are listed on the Nasdaq Global Market under the symbol “SOUNW.” Stockholders According to the records of our transfer agent, there were 73 holders of record of our Class A Common Stock, 3 holders of record of our Class B Common Stock and 5 holders of record of our listed redeemable warrants on December 31, 2025.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeSee Note 8, Note 10 and Note 16 to our consolidated financial statements included within this Annual Report on Form 10-K for more information. 57 Table of Contents Cash Flows The following table summarizes our cash flows (in thousands): Year Ended December 31, 2024 2023 Net cash used in operating activities $ (108,878) $ (68,265) Net cash used in investing activities (12,372) (392) Net cash provided by financing activities 210,906 168,237 Effects of exchange rate changes on cash 225 (20) Net change in cash, cash equivalents, and restricted cash equivalents $ 89,881 $ 99,560 Cash Flows Used in Operating Activities Net cash used in operating activities was $108.9 million during 2024 compared to $68.3 million during 2023.The $40.6 million decrease in cash used in operating activities was primarily due to our increased net loss of $261.7 million, a net decrease in changes in operating assets and liabilities of $15.8 million, an increase in deferred income taxes of $12.2 million resulting from the tax benefit from acquisitions, a decrease in amortization of debt issuance cost of $3.8 million, a decrease in loss on change in fair value of ELOC program of $1.9 million, and a decrease in non-cash lease amortization of $0.7 million, a net increase in other non-cash loss of $0.7 million, and an increase in foreign currency gain from remeasurement of $0.2 million.
Biggest changeCash Flows The following table summarizes our cash flows (in thousands): Year Ended December 31, 2025 2024 Net cash used in operating activities $ (98,222) $ (108,878) Net cash used in investing activities (59,504) (12,372) Net cash provided by financing activities 208,074 210,906 Effects of exchange rate changes on cash (98) 225 Net change in cash, cash equivalents, and restricted cash equivalents $ 50,250 $ 89,881 Cash Flows Used in Operating Activities Net cash used in operating activities was $98.2 million during 2025 compared to $108.9 million during 2024.The $10.7 million decrease in cash used in operating activities was primarily due to decreases of $336.7 million in net loss, and increases of $47.5 million in stock-based compensation, $18.1 million in depreciation and amortization, $13.5 million in deferred income taxes, $2.5 million in other non-cash loss, $1.6 million in amortization of capitalized commissions and non-cash lease amortization of $0.3 million, which were partially offset by the movement of $385.8 million in change in fair value of contingent acquisition liabilities, decrease of $15.6 million in loss on early extinguishment of debt, $4.7 million from change in the fair value of derivatives, $1.6 million in amortization of debt issuance cost, $0.9 million in changes in operating assets and liabilities, and $0.9 million in foreign currency gain from remeasurement.
The contingent cash and share holdback consideration to be issued is variable (“Contingent Holdback Consideration”). Final amounts to be issued will be reduced based upon future actions and settlements with third parties to resolve assumed contingent sales tax liabilities and certain other assumed contingent liabilities of SYNQ3 in connection with the SYNQ3 Acquisition.
The contingent cash and share holdback consideration to be issued is variable (“Contingent SYNQ3 Holdback Consideration”). Final amounts to be issued will be reduced based upon future actions and settlements with third parties to resolve assumed contingent sales tax liabilities and certain other assumed contingent liabilities of SYNQ3 in connection with the SYNQ3 Acquisition.
We accounted for the Contingent Holdback Consideration as a liability on the consolidated balance sheet. As of the SYNQ3 Acquisition Date, the Contingent Holdback Consideration was estimated to be $0.6 million in aggregate and to be settled in $0.1 million cash and the remainder in shares of our Class A Common Stock.
We accounted for the Contingent SYNQ3 Holdback Consideration as a liability on the consolidated balance sheet. As of the SYNQ3 Acquisition Date, the Contingent SYNQ3 Holdback Consideration was estimated to be $0.6 million in aggregate and to be settled in $0.1 million cash and the remainder in shares of our Class A Common Stock.
We also paid $8.4 million of cash for seller transaction expenses in connection with the closing of the Amelia Acquisition. We agreed to issue up to 16,822,429 shares to the selling shareholders based on achievement of certain revenue targets in fiscal years 2025 and 2026. The fair value of the preliminary purchase consideration was $98.6 million.
We also paid $8.4 million of cash for seller transaction expenses in connection with the closing of the Amelia Acquisition. We agreed to issue up to 16,822,429 shares to the selling shareholders based on achievement of certain revenue targets in fiscal years 2025 and 2026. The fair value of the purchase consideration was $98.6 million.
As we build new customer relationships, we continually focus on maintaining and growing our existing relationships through long-term partnerships through significant upfront investment in customer specific engineering projects. Additionally, in addition to our acquisitions of SYNQ3 and Amelia, we may look to acquire other companies in the industry to develop synergies with our existing business. • Cost of Revenues.
As we build new customer relationships, we continually focus on maintaining and growing our existing relationships through long-term partnerships through significant upfront investment in customer specific engineering projects. Additionally, in addition to our acquisitions of SYNQ3, Amelia, and Interactions, we may look to acquire other companies in the industry to develop synergies with our existing business. • Cost of Revenues.
Gain on Bargain Purchase The gain on bargain purchase of $1.2 million was recorded within other income (expense), net in the consolidated statements of operations and comprehensive loss in the year ended December 31, 2024 as a result of a favorable fair value of identifiable net assets acquired from an immaterial acquisition at the date of acquisition as compared with the purchase price.
Gain on Bargain Purchase The gain on bargain purchase of $1.2 million was recorded within other income, net in the consolidated statements of operations and comprehensive loss in the year ended December 31, 2024 as a result of a favorable fair value of identifiable net assets acquired from an immaterial acquisition at the date of acquisition as compared with the purchase price.
We have incurred certain significant costs relating to the SYNQ3 and Amelia Acquisitions, such as legal, accounting, financial advisory and other professional services fees, as well as other customary payments. Refer to "Item 1A. Risk Factors" in our Form 10-K for a discussion regarding the risks associated with the acquisitions.
We have incurred certain significant costs relating to the SYNQ3, Amelia and Interactions acquisitions, such as legal, accounting, financial advisory and other professional services fees, as well as other customary payments. Refer to "Item 1A. Risk Factors" in our Form 10-K for a discussion regarding the risks associated with the acquisitions.
Escrow Consideration On the Amelia Acquisition Date, we issued and deposited 2,149,530 shares of our Class A Common Stock into and escrow account in order to partially secure the indemnification obligations of the selling shareholders under the purchase agreement. We accounted for the escrow consideration as equity issued as part of consideration transferred.
Escrow Consideration On the Amelia Acquisition Date, we issued and deposited 2,149,530 shares of our Class A Common Stock into an escrow account in order to partially secure the indemnification obligations of the selling shareholders under the purchase agreement. We accounted for the escrow consideration as equity issued as part of consideration transferred.
During the year ended December 31, 2024, we issued 38,277 shares of our Class A Common Stock and paid an immaterial amount in cash from the Contingent Holdback Consideration to SYNQ3's former stockholders as a result of the net working capital adjustments settled during the year.
During the year ended December 31, 2024, we issued 38,277 shares of our Class A Common Stock and paid an immaterial amount in cash from the Contingent SYNQ3 Holdback Consideration to SYNQ3's former stockholders as a result of the net working capital adjustments settled during the year.
In the past, our gross margin has fluctuated and may continue to fluctuate from quarter to quarter due to revenue contributions from varying product mixes. However, we expect to gradually improve gross margins in the mid-term, especially as it relates the integration of Amelia and SYNQ3.
In the past, our gross margin has fluctuated and may continue to fluctuate from quarter to quarter due to revenue contributions from varying product mixes. However, we expect to gradually improve gross margins in the mid-term, especially as it relates the integration of Amelia, Interactions and SYNQ3.
We believe that SoundHound is well-positioned to fill the growing void and demand for an independent Voice AI platform. The Voice AI offerings from big tech companies are primarily an extension of their more core services and offerings. Rather than strengthening a customer’s product, it can take over the entire experience, thus disintermediating the company’s brand, users and data.
We believe that SoundHound is well-positioned to fill the growing void and demand for an independent Voice AI platform. The Voice AI offerings from big tech companies are primarily an extension of their more core services and offerings. Rather than strengthening a customer’s product, it can take over the entire experience, thus disintermediating our brand, users and data.
Unless otherwise indicated or the context otherwise requires, references in this section to “SoundHound,” “we,” “us,” “our” and other similar terms refer to SoundHound AI, Inc. Company Overview We are a global leader in conversational intelligence, offering independent Voice AI solutions that enable businesses to deliver high-quality conversational experiences to their customers.
Unless otherwise indicated or the context otherwise requires, references in this section to “SoundHound,” “we,” “us,” “our” and other similar terms refer to SoundHound AI, Inc. and our subsidiaries. Company Overview We are a global leader in conversational intelligence, offering independent Voice AI solutions that enable businesses to deliver high-quality conversational experiences to their customers.
In some cases, these providers even compete with the products they support, making them increasingly less attractive as a choice for a voice interface. 42 Table of Contents The alternative options are generally legacy vendors tending to use what we consider to be dated technologies at a high price.
In some cases, these providers even compete with the products they support, making them increasingly less attractive as a choice for a voice interface. 43 Table of Contents The alternative options are generally legacy vendors tending to use what we consider to be dated technologies at a high price.
Our policy is to review goodwill for impairment annually on October 1st unless a triggering event requires an analysis sooner. There was no goodwill impairment for the year ended December 31, 2024. Intangible Assets with Definite Lives Our intangible assets consist principally of developed technology, customer relationships, tradename, and conversation data.
Our policy is to review goodwill for impairment annually on October 1st unless a triggering event requires an analysis sooner. There was no goodwill impairment for the year ended December 31, 2025. Intangible Assets with Definite Lives Our intangible assets consist principally of developed technology, customer relationships, tradename, and conversation data.
Since prices vary from customer to customer based on customer relationship, volume discount and contract type, in instances where the SSP is not directly observable, we estimate SSP by considering the following factors: • Costs of developing and supplying each performance obligation; • Industry standards; • Major product groupings; and • Gross margin objectives and pricing practices, such as contractually stated prices, discounts offered and applicable price lists.
Since prices vary from customer to customer based on customer relationship, volume discount and contract type, in instances where the SSP is not directly observable, we estimate SSP by considering the following factors: • Costs of developing and supplying each performance obligation; • Industry standards; • Major product groupings; and 60 Table of Contents • Gross margin objectives and pricing practices, such as contractually stated prices, discounts offered and applicable price lists.
Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgement about the carrying value of assets and liabilities that are not readily apparent from other sources.
Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgment about the carrying value of assets and liabilities that are not readily apparent from other sources.
Upon the expiration of the escrow period, any remaining shares in the escrow account will be released to the selling shareholders. 54 Table of Contents Contingent Amelia Earnout Consideration We agreed to pay up to 16,822,429 in shares of Class A Common Stock to the selling shareholders based on achievement of certain revenue targets in fiscal years 2025 and 2026 (the “Contingent Amelia Earnout Consideration”).
Upon the expiration of the escrow period, any remaining shares within the escrow account will be released to the selling shareholders. 55 Table of Contents Contingent Amelia Earnout Consideration We agreed to pay up to 16,822,429 in shares of Class A Common Stock to the selling shareholders based on achievement of certain revenue targets in fiscal years 2025 and 2026 (the “Contingent Amelia Earnout Consideration”).
Upon the measurement period's conclusion or final determination of the fair value of the purchase price of an 61 Table of Contents acquisition, whichever comes first, any subsequent adjustments are recorded to our consolidated statements of operations in the period they are identified. Acquisition-related expenses are recognized separately from the business combination and expensed as incurred.
Upon the measurement period's conclusion or final determination of the fair value of the purchase price of an acquisition, whichever comes first, any subsequent adjustments are recorded to our consolidated statements of operations in the period they are identified. Acquisition-related expenses are recognized separately from the business combination and expensed as incurred.
Our product offerings, including those offerings that we have acquired, have disruptive effects in the ways human interact with computers and we are developing new, innovative economic models and acquiring companies such as SYNQ3 and Amelia which have synergistic businesses to ours that we believe will enhance value to customers, partners and shareholders.
Our product offerings, including those offerings that we have acquired, have disruptive effects in the ways human interact with computers and we are developing new, innovative economic models and acquiring companies such as SYNQ3, Amelia, and Interactions which have synergistic businesses to ours that we believe will enhance value to customers, partners and stockholders.
Additionally, we have, and may in the future, indemnify third parties in connection with our issuance of securities (including pursuant to our at-the-market offering program) and in connection with acquisitions of other companies. Our liability is generally limited to the aggregate amount of consideration actually received in these instances.
Additionally, we have, and may in the future, indemnify third parties in connection with our issuance of securities (including pursuant to our ATM offering program) and in connection with acquisitions of other companies. Our liability is generally limited to the aggregate amount of consideration actually received in these instances.
As part of the acquisition, we acquired net assets of $2.2 million , including intangible assets of $2.6 million , and recognized a preliminary gain on bargain purchase of $1.2 million within other income (expense), net in the consolidated statements of operations and comprehensive loss during the year ended December 31, 2024, resulting from a favorable fair value of identifiable net assets acquired at the date of acquisition as compared with the purchase price.
As part of the acquisition, we acquired net assets of $2.2 million , including intangible assets of $2.6 million , and recognized a gain on bargain purchase of $1.2 million within other income, net in the consolidated statements of operations and comprehensive loss during the year ended December 31, 2025, resulting from a favorable fair value of identifiable net assets acquired at the date of acquisition as compared with the purchase price.
Our market position is strengthened by the technical barriers to entry in the Voice AI space, which tend to discourage new market participants. Furthermore, our technology is backed by significant investments in intellectual property, with over 192 patents granted and over 109 patents pending, spanning multiple fields including speech recognition, natural language understanding, machine learning, monetization and more.
Our market position is strengthened by the technical barriers to entry in the Voice AI space, which tend to discourage new market participants. Furthermore, our technology is backed by significant investments in intellectual property, with over 359 patents granted and over 102 patents pending, spanning multiple fields including speech recognition, natural language understanding, machine learning, monetization and more.
This generally includes revenues derived from up-front services (“professional services”) that develop and customize the Houndify platform to fit customers’ specific needs. These professional services are included in both our Product Royalties and Service Subscriptions revenues.
This generally includes revenues derived from implementation services (“professional services”) that develop and customize the Houndify platform to fit customers’ specific needs. These professional services are included in both our Product Royalties and Service Subscriptions revenues.
The first pillar is Product Royalties, where we voice enable a product and the product creator pays us a royalty based on volume, usage or duration. SoundHound collects royalty revenue when your technology is placed in a car, smart speaker or an appliance, for example. 43 Table of Contents The second pillar is Service Subscription.
The first pillar is Product Royalties, where we voice enable a product and the product creator pays us a royalty based on volume, usage or duration. SoundHound collects royalty revenue when our technology is placed in a car, smart speaker or an appliance, for example. 44 Table of Contents The second pillar is Service Subscription.
Our business model since inception has been to invest in our technology in the form of dedicated research and development. We will continue to invest in the development of our software platform to 44 Table of Contents deliver consumers with continually improving value and delight.
Our business model since inception has been to invest in our technology in the form of dedicated research and development. We will continue to invest in the development of our software platform to deliver consumers with continually improving value and delight.
We evaluate our common stock purchase agreements to determine whether they are indexed to our own 60 Table of Contents common stock, and therefore whether they should be accounted for as derivatives with changes in fair value as other income (expense), net in the consolidated statement of operations and comprehensive loss in the period in which they occur.
We evaluate our common stock purchase agreements to determine whether they are indexed to our own common stock, and therefore whether they should be accounted for as derivatives with changes in fair value as other income, net in the consolidated statement of operations and comprehensive loss in the period in which they occur.
We believe that the assumptions, judgments and estimates involved in the accounting for revenue recognition, derivative liabilities, warrant liabilities, stock-based compensation, business combinations, contingent consideration, goodwill, and intangible assets with definite lives, have the greatest potential impact on our consolidated financial statements.
We believe that the assumptions, judgments and estimates involved in the accounting for revenue recognition, derivative liabilities, warrant liabilities, stock-based compensation, business combinations, contingent consideration, goodwill, intangible assets with definite lives, and capitalized software development costs, have the greatest potential impact on our consolidated financial statements.
On December 3, 2024 , we entered into a letter agreement (the “Amelia Debt Payoff Letter”) to prepay in full all indebtedness and other amounts outstanding and owing under the Amelia Debt Credit Agreement.
On December 3, 2024, we entered into a letter agreement (the “Amelia Debt Payoff Letter”) to prepay in full all indebtedness and other amounts outstanding and owing under the Amelia Debt Credit Agreement and the Amelia Debt was subsequently paid in full.
The term of these indemnification agreements is generally perpetual any time after the execution of the agreement. The maximum potential amount of future payments we could be required to make under these arrangements is not determinable.
The term of these indemnification agreements is generally perpetual any time after the execution of the agreement. The maximum potential amount of future payments we could be required to 58 Table of Contents make under these arrangements is not determinable.
Pursuant to these arrangements, we indemnify, hold harmless and agree to reimburse the indemnified parties for losses suffered or incurred 58 Table of Contents by the indemnified party, in connection with any trade secret, copyright, patent or other intellectual property infringement claim by any third party with respect to its technology.
Pursuant to these arrangements, we indemnify, hold harmless and agree to reimburse the indemnified parties for losses suffered or incurred by the indemnified party, in connection with any trade secret, copyright, patent or other intellectual property infringement claim by any third party with respect to its technology.
Hosted Services Hosted services, along with non-distinct customization, integration, maintenance and support professional services, allow customers to access the Houndify and Amelia software platform over the contract period without taking possession of the software.
Hosted Services Hosted services, along with non-distinct customization, integration, maintenance and support professional services, allow customers to access the Houndify, Amelia Software Platform, and Virtual Assistance applications over the contract period without taking possession of the software.
Licensing revenue on fixed considerations including fixed fee and minimum guarantee from usage-based arrangements are recognized when the Company grants the customer the right to use and benefit from the license at the start of the licensing period.
Licensing revenue on fixed considerations including fixed fee and minimum guarantee from royalty arrangements are recognized when the Company grants the customer the right to use and benefit from the license at the start of the licensing period.
Our investments include continuous enhancements to our technology we've developed over the last two decades or acquired from acquisitions, investments in data to help refine and improve our underlying algorithms and other costs to attract and retain a world-class technical workforce. • Revenue Growth.
Our investments include continuous enhancements to our technology we've developed over the last two decades or acquired from acquisitions, investments in data to help refine and improve our underlying algorithms and other costs to attract and retain a world-class technical workforce. 45 Table of Contents • Revenue Growth.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of the financial condition and results of operations of SoundHound should be read together with our consolidated financial statements and the related notes thereto. The fiscal years presented are the periods ended December 31, 2024 (“2024”) and December 31, 2023 (“2023”).
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of the financial condition and results of operations of SoundHound should be read together with our consolidated financial statements and the related notes thereto. The fiscal years presented are the periods ended December 31, 2025 (“2025”) and December 31, 2024 (“2024”).
Expected Dividend Yield — The Company has not declared or paid dividends to date and does not anticipate declaring dividends. As such, expected dividend yield is zero. Business Combinations and Contingent Consideration Business combinations are accounted for using the acquisition method.
Expected Dividend Yield — The Company has not declared or paid dividends to date and does not anticipate declaring dividends. As such, expected dividend yield is zero. Business Combinations and Contingent Consideration 61 Table of Contents Business combinations are accounted for using the acquisition method.
Our commercial success, including acceptance and use of our applications, will depend on a number of factors, some of which are beyond our control, such as size of the market opportunity, successful integration with original equipment manufacturers (“OEM”), competition and demand from the public and members of the conversational AI community.
Our commercial success, including acceptance and use of our applications, will depend on a number of factors, some of which are beyond our control, such as size of the market opportunity, successful integration with OEM, competition and demand from the public and members of the conversational AI community.
Non-distinct professional services are recognized over the contractual life of the contract, whereas 45 Table of Contents revenues from distinct professional services are recognized as the services are performed or when the services are complete depending on the arrangement. “Amelia Software Platform” meaning our AI-based digital resource solution that enables AI in our customers’ services, ranging across multiple industries.
Non-distinct professional services are recognized over the contractual life of the contract, whereas revenues from distinct professional services are recognized as the services are performed or when the services are complete depending on the arrangement. “Amelia Software Platform” and “Virtual Assistance” meaning our AI-based digital resource solution that enables AI in our customers’ services, ranging across multiple industries.
Information concerning the fiscal year ended December 31, 2022 (“2022”) and a comparison of 2023 and 2022 may be found under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10‑K for 2023, filed with the SEC on March 1, 2024.
Information concerning the fiscal year ended December 31, 2023 (“2023”) and a comparison of 2024 and 2023 may be found under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10‑K for the fiscal year ended December 31, 2024, filed with the SEC on March 11, 2025.
For example, in the past, we have seen approximately one third of our revenue in the first half of the year with the remaining two thirds in the second half. Additionally, given that we address markets across several different industry verticals, the associated overall seasonality impact to us may not be consistent year-to-year. • Development of International Markets.
For example, in the past, we have seen approximately 40% of our revenue in the first half of the year with the remaining 60% in the second half. Additionally, given that we address markets across several different industry verticals, the associated overall seasonality impact to us may not be consistent year-to-year. • Development of International Markets.
Sales of Class A Common Stock under the Equity Distribution Agreement were made at market prices by any method that is deemed to be an “at the market offering” as defined in Rule 415 under the Securities Act.
Sales of our Class A Common Stock, if any, under the Second Equity Distribution Agreement will be made at market prices by any method that is deemed to be an “at the market offering” as defined in Rule 415 under the Securities Act.
Holdback The $0.5 million in cash and 1,179,514 shares of our Class A Common Stock is being withheld for a period of 15 months (the “Holdback Amount”). We determined that there are two components to the Holdback Amount related to deferred consideration and contingent consideration, each comprised of cash and shares.
SYNQ3 Holdback The $0.5 million in cash and 1,179,514 shares of our Class A Common Stock were withheld for a period of 15 months (the “SYNQ3 Holdback Amount”). We determined that there are two components to the SYNQ3 Holdback Amount related to deferred consideration and contingent consideration, each comprised of cash and shares.
We believe we will meet longer-term expected future cash requirements and obligations through a combination of cash flows from operating activities, available cash balances and expected cash proceeds from the future at-the-market equity program.
We believe we will meet longer-term expected future cash requirements and obligations through a combination of cash flows from operating activities, available cash balances and expected cash proceeds from the future ATM program.
Under Sections 382 and 383 of the Internal Revenue Code of 1986 and similar state tax laws, utilization of net operating loss carryforwards and tax credits may be subject to annual limitations due to certain ownership changes. Our net operating loss carryforwards and tax credits could expire before utilization if subject to annual limitations.
Under Sections 382 and 383 of the Internal Revenue Code of 1986 and similar state tax laws, utilization of net operating loss carryforwards and tax credits may be subject to annual limitations due to certain ownership changes.
Restricted stock units As a condition of the SYNQ3 Acquisition, we additionally granted certain employees awards with future vesting conditions. As a result, we determined that these awards should be accounted for separately from the SYNQ3 Acquisition and therefore are excluded from purchase consideration.
Restricted stock units As a condition of the SYNQ3 Acquisition, we additionally granted certain employees awards with future vesting conditions. As a result, we determined that these awards should be accounted for separately from the SYNQ3 Acquisition and therefore are excluded from purchase consideration. The purchase price allocation was finalized as of December 31, 2024.
For the year ended December 31, 2024, we recognized a $211.9 million loss related to the Contingent Amelia Earnout Consideration, reflected in the change in fair value of contingent acquisition liabilities in the consolidated statement of operations and comprehensive loss.
For the years ended December 31, 2025 and 2024, we recognized a $157.6 million gain and a $211.9 million loss related to the Contingent Amelia Earnout Consideration, respectively, reflected in the change in fair value of contingent acquisition liabilities in the consolidated statement of operations and comprehensive loss.
The Contingent Holdback Consideration will be subsequently remeasured at each reporting date with changes in fair value recognized as a component of operating expense on our consolidated statement of operations and comprehensive loss. For the year ended December 31, 2024, we recognized a loss of $3.7 million related to the Contingent Holdback Consideration.
The Contingent SYNQ3 Holdback Consideration will be subsequently remeasured at each reporting date with changes in fair value recognized as a component of operating expense on our consolidated statement of operations and comprehensive loss. For the year ended December 31, 2025, we recognized a loss of less than $0.1 million related to the Contingent SYNQ3 Holdback Consideration.
These services are provided either on a usage basis (i.e., variable consideration) or on a fixed fee subscription basis. We recognize revenue as each distinct service period is performed. Hosted services generally include up-front services to develop and/or customize the application to each customer’s specification. Judgement is required to determine whether these professional services are distinct from the hosted services.
These services are provided either on a usage basis (i.e., variable consideration) or on a fixed fee subscription basis. We recognize revenue as each distinct service period is performed. Hosted services may include implementation services to develop and/or customize the applications to each customer’s specification. Judgment is required to determine whether these professional services are distinct from the hosted services.
The managers were entitled to commission at a fixed rate of 2.5% of the gross sales price per share for their services in acting as agents in the sale of our Class A Common Stock.
The sales managers are entitled to commission at a fixed rate of 2.0% of the gross sales price per share for their services in acting as agent in the sale of our Class A Common Stock.
Any adjustments to the estimates of purchase price allocation will be made in the periods in which the adjustments are determined, and the cumulative effect of such adjustments will be calculated as if the adjustments had been completed as of the acquisition date. We expect to finalize the purchase price allocation within 12 months from the Amelia Acquisition Date.
Any adjustments to the preliminary purchase price allocation will be made in the periods in which the adjustments are determined, and the cumulative effect of such adjustments will be calculated as if the adjustments had been completed as of the acquisition date. The Company expects to finalize the purchase price allocation within 12 months from the Interactions Acquisition Date.
In instances where we concluded that the up-front services are not distinct performance obligations, revenue for these activities is recognized over the period which the hosted services are provided and is included within hosted services revenue.
In instances where we concluded that the implementation services are not distinct performance obligations, revenues for these activities are recognized over the period which the hosted services are expected to be provided and is included within hosted services revenue.
There were no intangible asset impairments in any of the periods presented. Recent Accounting Pronouncements See Note 2 of our notes to the consolidated financial statements included within this Annual Report on Form 10-K for information regarding recent accounting pronouncements that are of significance, or potential significance to us.
Recent Accounting Pronouncements See Note 2 of our notes to the consolidated financial statements included within this Annual Report on Form 10-K for information regarding recent accounting pronouncements that are of significance, or potential significance to us.
We had federal and state research and development credit carryforwards of $21.4 million and $13.3 million, respectively, as of December 31, 2024. The federal credits will expire starting in 2029 if not utilized. The state credits can be carried forward indefinitely. We also had Canadian SR&ED tax credits of $1.6 million, which expire starting in 2038 if not utilized.
We had federal and state research and development credit carryforwards of $27.2 million and $15.4 million, respectively, as of December 31, 2025. The federal credits will expire starting in 2029 if not utilized. The state credits can be carried forward indefinitely. We also had Canadian SR&ED tax credits of $1.9 million, which expire starting in 2039 if not utilized.
Change in Fair Value of Contingent Acquisition Liabilities The change in fair value of acquisition related liabilities, which is driven by the movements in our stock price and changes in the assessed probability of achieving certain future revenue targets, was a loss of $222.7 million for the year ended December 31, 2024.
Change in Fair Value of Contingent Acquisition Liabilities The change in fair value of acquisition related liabilities, which is marked-to-market based on the movements in our stock price and changes in the assessed probability of achieving certain future revenue targets, was a gain of $163.1 million for the year ended December 31, 2025, compared to a loss of $222.7 million for the year ended December 31, 2024.
We have determined that we do not act as the principal in monetization arrangements because we do not control the transfer of the service and it does not set the price. Based on these factors, we report revenue on a net basis. Licensing We license voice and Amelia's software solutions that are embedded in customers' products or services.
We have determined that we do not act as the principal in monetization arrangements because we do not control the transfer of the service and it does not set the price. Based on these factors, we report revenue on a net basis.
If an evaluation of recoverability is required, the estimated undiscounted future cash flows directly associated with the asset are compared with the asset’s carrying amount. If the estimated future cash flows from the use of the asset are less than the carrying value, an impairment charge would be recorded to write down the asset to its estimated fair value.
If the estimated future cash flows from the use of the asset are less than the carrying value, an impairment charge would be recorded to write down the asset to its estimated fair value.
In making this determination, factors such as the degree of integration, the customers’ ability to start using the software prior to customization, and the availability of these services from other independent vendors are considered.
In making this determination, factors such as the degree of integration, the significance of enhancement to existing 59 Table of Contents functionality, the customers’ ability to start using the software prior to customization, the evaluation as to whether the services extend the economic life of the application, and the availability of these services from other independent vendors are considered.
The increase was primarily attributable to interest earned on greater money market and treasury bond balances during 2024 as we engaged in significant transactions that increased our liquidity. Refer to "Liquidity and Capital Resources" for a discussion of the changes in our business that led to an increase in cash for the year ended December 31, 2024.
The increase was primarily attributable to interest earned on greater money market and treasury bond balances during the year ended December 31, 2025, as we engaged in significant transactions that increased our liquidity.
The costs of these activities consist primarily of personnel-related expenses, third-party consultants and costs associated with technological supplies and materials, along with other direct and allocated expenses such as facility costs, depreciation and other shared expenses.
The costs of these activities consist primarily of personnel-related expenses, third-party consultants and costs associated with technological supplies and materials, along with other direct and allocated expenses such as facility costs, depreciation and other shared expenses. We expense research and development costs associated with the design and development of new products in the periods in which they are incurred.
Revenues generated from licensing are on usage-based arrangements with a per unit pricing or on fixed considerations. The Company records licensing revenue relating to usage-based royalty arrangements in the same period in which the underlying usage occurs.
For licenses with non-distinct customized solutions, revenues are recognized over time based on the progress towards completion of the customized solution. Revenues generated from licensing are on royalty arrangements with a per unit pricing or on fixed considerations. The Company records licensing revenue relating to usage-based royalty arrangements in the same period in which the underlying usage occurs.
For the year ended December 31, 2024, we recognized a loss of $7.0 million related to the Contingent SYNQ3 Earnout Consideration, reflected in the change in fair value of contingent acquisition liabilities in the consolidated statement of operations and comprehensive loss.
As of the Interactions Acquisition Date, the Contingent Interactions Earnout Consideration had an estimated fair value of $9.9 million. For year ended December 31, 2025, we recognized a loss of $1.3 million related to the Contingent Interactions Earnout Consideration, reflected in the change in fair value of contingent acquisition liabilities in the consolidated statement of operations and comprehensive loss.
We primarily derive revenue from the following performance obligations: (1) hosted services, (2) professional services, (3) monetization, and (4) licensing. We apply significant judgement in identifying and evaluating any terms and conditions in contracts which may impact revenue recognition.
We primarily derive revenue from the following performance obligations: (1) hosted services, (2) professional services, (3) monetization, and (4) licensing. Revenues are reported net of applicable sales and use taxes that are passed through to customers. We apply significant judgment in identifying and evaluating any terms and conditions in contracts which may impact revenue recognition.
See Note 12 to our consolidated financial statements included within this report for more information on the fair value measurement of Contingent Amalia Earnout Consideration. As of December 31, 2024, we assessed the 2025 and 2026 revenue target were probable of being met.
See Note 12 to our consolidated financial statements included within this report for more information on the fair value measurement of Contingent Amelia Earnout Consideration. As of December 31, 2025, the 2025 revenue target was met and the related earnout consideration is expected to be settled in the first quarter of 2026.
The federal and state net operating loss carryforwards will start to expire in 2025 and 2028, respectively, with the 47 Table of Contents exception of $403.3 million federal net operating loss carryforwards and $11.0 million state net operating loss carryforwards, which can be carried forward indefinitely.
The federal and state net operating loss carryforwards will start to expire in 2026 with the exception of $691.0 million federal net operating loss carryforwards and $18.5 million state net operating loss carryforwards, which can be carried forward indefinitely.
This primarily includes costs and depreciation related to hosting for cloud-based services, such as data centers, electricity charges, content fees and certain personnel-related expenses including personnel costs under call centers that are directly related to these revenue streams. Additionally, our cost of revenues also includes the amortization of developed technology acquired from SYNQ3, Amelia and other acquisition as intangible assets.
This primarily includes costs and depreciation related to hosting for cloud-based services, such as data centers, electricity charges, content fees and certain personnel-related expenses including personnel costs under call centers that are directly related to these revenue streams.
The measurement period adjustments were recorded in the consolidated financial statements as of and for the year ended December 31, 2024 and were made to reflect facts and circumstances that existed as of the Amelia Acquisition Date.
As a result of the adjusted acquisition-date fair value of liabilities assumed, we recorded a decrease of $0.5 million to the goodwill recognized. The measurement period adjustments were recorded in the consolidated financial statements as of and for the year ended December 31, 2025 and were made to reflect facts and circumstances that existed as of the Amelia Acquisition Date.
The determination of whether revenue should be reported on a gross or net basis is based on an assessment of whether we are acting as a principal or an agent in the transaction.
Therefore, we recognize the related revenues at a point in time when advertisements are placed, when commissions are paid, or when the SoundHound application is downloaded. The determination of whether revenue should be reported on a gross or net basis is based on an assessment of whether we are acting as a principal or an agent in the transaction.
SYNQ3 Acquisition On January 3, 2024 (the "SYNQ3 Acquisition Date"), we acquired all of the issued and outstanding equity of SYNQ3, a leading provider of voice AI and other technology solutions to the restaurant industry, for total purchase consideration of $15.8 million (the “SYNQ3 Acquisition”).
As of December 31, 2025, the Company had a remaining capacity to sell up to an additional $48.5 million of our common stock under the Second Equity Distribution Agreement. 53 Table of Contents SYNQ3 Acquisition On January 3, 2024 (the "SYNQ3 Acquisition Date"), we acquired all of the issued and outstanding equity of SYNQ3, a leading provider of voice AI and other technology solutions to the restaurant industry, for total purchase consideration of $15.8 million (the “SYNQ3 Acquisition”).
In connection with the Amelia Acquisition, we assumed the amended senior secured term loan facility from Amelia in an aggregate principal amount of $121.5 million (“Amelia Debt”). See Note 10 to our consolidated financial statements included within this report for more information on the Amelia Debt.
In connection with the Amelia Acquisition, we assumed the amended senior secured term loan facility from Amelia in an aggregate principal amount of $121.5 million (“Amelia Debt”).
This generally includes revenue from hosted services if the customer elects our SaaS offering, or from licensing revenue if the customer requires an on-premise solutions. Professional services are also offered and included within professional services revenue. The revenues from Amelia Software Platform are included within Service Subscriptions, and are recognized point in time or over time depending on the arrangement.
This generally includes revenue from hosted services if the customer elects our SaaS offering, or from licensing revenue if the customer requires an on-premise solution. Professional 46 Table of Contents services are also offered and included within professional services revenue.
We expect to finalize the purchase price allocation within 12 months from the acquisition date. We incurred $0.1 million in acquisition related expenses during the year ended December 31, 2024 and recorded as general and administration expenses in its consolidated statements of operations and comprehensive loss.
We incurred $2.2 million in acquisition related expenses, of which $0.1 million, $1.0 million, and $1.1 million were incurred during the years ended December 31, 2025, 2024 and 2023, respectively, and recorded as general and administration expenses in its consolidated statements of operations and comprehensive loss.
Refer to "Liquidity and Capital Resources" for additional information. Loss on Extinguishment of Debt The $15.6 million increase in loss on extinguishment of debt during the year ended December 31, 2024 was attributable to a loss on the repayment of Amelia Debt in December 2024 and the repayment of Term Loan in June 2024.
Loss on Extinguishment of Debt The $15.6 million decrease in loss on extinguishment of debt during the year ended December 31, 2025 was attributable to a loss on the repayment of Amelia Debt in December 2024 and the repayment of Term Loan in June 2024. See Note 10 to our consolidated financial statements included within this report for more information.
Change in Fair Value of Contingent Acquisition Liabilities The change in fair value of contingent acquisition liabilities is related to contingent consideration from the SYNQ3 and Amelia acquisitions. The contingent consideration was determined to be liability classified and is remeasured as of each reporting period with a corresponding change in fair value recorded.
The contingent consideration was determined to be liability classified and is remeasured as of each reporting period with a corresponding change in fair value recorded. Amortization of Intangible Assets Amortization of acquired customer relationships, tradename and conversation data is included within operating expenses and arises from the amortization of assets acquired through the acquisitions.
Given the applicable contract terms, $48.9 million is expected to be recognized as revenue within one year, $32.1 million is expected to be recognized between 2 to 5 years and the remainder of $2.3 million is expected to be recognized after 5 years.
We had remaining performance obligations in the amount of $79.5 million as of December 31, 2025. Given the applicable contract terms, $47.8 million is expected to be recognized as revenue within one year, $30.1 million is expected to be recognized between 2 to 5 years and the remainder of $1.6 million is expected to be recognized after 5 years.
Other Income (Expense), Net The following table summarizes our other income (expense), net by type ($ in thousands): Year Ended December 31, Change 2024 2023 $ % Interest income $ 8,370 $ 2,866 $ 5,504 192 % Loss on change in fair value of ELOC program — (1,901) 1,901 * Gain on bargain purchase 1,223 — 1,223 * Other income (expense), net (371) 190 (561) (296) % Total other income (expense), net $ 9,222 $ 1,155 $ 8,067 699 % * Not meaningful Interest Income Interest income increased by $5.5 million, or 192%, in 2024 compared to 2023.
Other Income, Net The following table summarizes our other income, net by type ($ in thousands): Year Ended December 31, Change 2025 2024 $ % Other income, net Interest income $ 9,799 $ 8,370 $ 1,429 17 % Change in fair value of derivative 4,676 — 4,676 100 % Gain on bargain purchase — 1,223 (1,223) (100) % Other income (expense), net 193 (371) 564 (152) % Total other income, net $ 14,668 $ 9,222 $ 5,446 59 % Interest Income Interest income increased by $1.4 million, or 17%, in 2025 compared to 2024.
The $42.7 million increase in cash provided by financing activities was primarily due to the $384.5 million increase in net proceeds from sales of Class A Common Stock under the Sales Agreement, Equity Distribution Agreement and Execute Equity Distribution Agreement, and an increase of $29.7 million in proceeds from exercise of stock options and employee stock purchase plan.
The $2.8 million decrease in cash provided by financing activities was primarily due to decreases of $199.4 million in net proceeds from sales of Class A Common Stock under the Sales Agreement and Second Equity Distribution Agreement and $18.9 million in proceeds from exercise of stock options and employee stock purchase plan, which is partially offset by decreases of $215.4 million in the payment of notes payable.
As of December 31, 2024, the 53 Table of Contents 2024 revenue target was not met but we assessed the 2025 and 2026 revenue target were probable of being met, and no earnout consideration was issued during the year ended December 31, 2024.
As of December 31, 2025, the 2024 revenue target was not met, but the 2025 revenue target was met and the related earnout consideration is expected to be settled in the first quarter of 2026. The Company assessed the 2026 revenue target as probable of being met. No earnout consideration was issued as of December 31, 2025.
The Company's year-end stock price increase resulted in an increase in its fair value of contingent acquisition liabilities where future Contingent Earnout Consideration and Contingent Holdback Consideration are marked-to-market on a quarterly basis, significantly impacting net loss and EPS during the year ended December 31, 2024. The fluctuation is non-operating and non-cash in nature.
The decrease of the Company's stock price as of December 31, 2025 compared to the stock price as of December 31, 2024, resulted in a decrease in its fair value of contingent acquisition liabilities during the year ended December 31, 2025. The fluctuation is non-operating and non-cash in nature.
All revenues derived as a result of the SYNQ3 Acquisition, and substantial revenues derived as a result of the Amelia Acquisition are categorized as hosted services revenue. 59 Table of Contents Professional Services Revenue from distinct professional services, such as non-integrated development services and other professional services, are either recognized over time based upon the progress towards completion of the project, or at a point in time at project completion, depending on the nature of the arrangement.
Professional Services Revenues from distinct professional services, such as non-integrated development services and other professional services, are either recognized over time based upon the progress towards completion of the project, or at a point in time at project completion. The Company assesses distinct professional services to determine whether the transfer of control is over-time or at a point in time.
Inc. on April 9, 2024 with regards to an at-the-market equity program. Under this program, we were able to offer and sell up to $150.0 million of shares of our Class A Common Stock from time to time through the managers.
Inc., Wedbush Securities Inc., Ladenburg Thalmann & Co. Inc. and Northland Securities, Inc. with respect to an ATM program. Under this program, we may offer and sell up to $250.0 million of shares of our Class A Common Stock from time to time through the sales managers.
Sales and Marketing Sales and marketing expenses consist of personnel-related costs of the sales and marketing team, promotional campaigns, advertising fees and other marketing related costs. Advertising costs are expensed to sales and marketing when incurred.
Additionally, our cost of revenues also includes the amortization of developed technology acquired from SYNQ3, Amelia, Interactions and other acquisition as intangible assets. Sales and Marketing Sales and marketing expenses consist of personnel-related costs of the sales and marketing team, promotional campaigns, advertising fees and other marketing related costs. Advertising costs are expensed to sales and marketing when incurred.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeWhere transactions may be denominated in foreign currencies, we are subject to market risk with respect to fluctuations in 62 Table of Contents the relative value of currencies. During the years ended December 31, 2024 and December 31, 2023, we recorded the exchange rate losses of approximately $0.7 million and $0.5 million, respectively.
Biggest changeWhere transactions may be denominated in foreign currencies, we are subject to market risk with respect to fluctuations in the relative value of currencies. During the years ended December 31, 2025 and December 31, 2024, we recorded the exchange rate losses of approximately $0.8 million and $0.7 million, respectively.

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