SoundHound AI, Inc. (NASDAQ:), a company specializing in prepackaged software services, has announced on Thursday the initiation of an at-the-market (ATM) equity offering program. Through this program, the company may intermittently sell up to $120 million of its Class A common stock, par value $0.0001 per share.
The equity distribution agreement involves Barclays (LON:) Capital Inc., Piper Sandler & Co., D.A. Davidson & Co., H.C. Wainwright & Co., LLC, and Joseph Gunnar & Co., LLC, serving as sales managers and/or principals. They are entitled to a commission of 2.5% of the gross sales price for any shares sold.
The sales of shares under this agreement could be executed through various transactions, including directly on the Nasdaq Global Market, with the company retaining the flexibility to determine the timing and amount of stock sold. There is no obligation on either SoundHound AI or the managers to proceed with the sale of any shares, and the agreement may be suspended or terminated by either party.
This ATM offering is part of SoundHound AI’s broader financial strategy, as outlined in their Registration Statement on Form S-3 declared effective on August 4, 2023, and supplemented by a related Registration Statement filed on Thursday. This move allows the company to bolster its capital structure and invest further in its business operations as needed.
The agreement provides the managers with indemnification and contribution rights, which are standard for such transactions, safeguarding them against potential liabilities under the Securities Act and Securities Exchange Act of 1934.
Investors should note that this report does not constitute an offer to sell or a solicitation of an offer to buy any shares. The offering of shares will only be made in states where such transactions are permitted by law and in accordance with the registration or qualification under the securities laws of such states.
This equity distribution agreement and the potential sale of shares are based on information disclosed in a press release statement and the accompanying SEC filing by SoundHound AI.
In other recent news, SoundHound AI has reported significant growth in earnings and revenue, with a 54% increase in the second quarter of 2024, totaling $13.5 million. The company has also seen a substantial increase in its cumulative subscriptions and bookings backlog, reaching $723.0M, indicating strong demand for its services, particularly the Polaris (NYSE:) model.
SoundHound AI continues to expand its presence in the conversational AI space with strategic acquisitions like SYNQ3 and Amelia AI. These acquisitions are expected to enhance its customer service capabilities and contribute positively to earnings in the latter half of 2025.
H.C. Wainwright maintains a positive outlook on SoundHound AI, expressing confidence in the company’s revenue growth strategy and cost management. The firm anticipates a move towards profitability over time, despite acknowledging that recent acquisitions might delay full-year profitability until possibly 2026 or 2027.
Furthermore, SoundHound AI has integrated its voice assistant technology, SoundHound Chat AI, into the Lancia Ypsilon’s S.A.L.A. infotainment system, available in several European countries. This development is expected to offer Lancia customers an enhanced and more interactive driving experience.
Lastly, MUSC Health, in collaboration with SoundHound, has launched an AI-powered agent named Emily to streamline patient appointment management. This is expected to improve operational efficiency and patient satisfaction at MUSC Health, further highlighting SoundHound AI’s commitment to innovation in the voice AI market.
InvestingPro Insights
SoundHound AI’s decision to initiate an at-the-market equity offering program comes at a time when the company is experiencing significant growth and market attention. According to InvestingPro data, SoundHound AI has shown impressive revenue growth, with a 53.47% increase in the last twelve months as of Q2 2024. This growth trajectory aligns with the company’s move to raise additional capital, potentially to fuel further expansion and development of its AI technologies.
InvestingPro Tips highlight that SoundHound AI holds more cash than debt on its balance sheet, which suggests a strong financial position. This could be further bolstered by the new equity offering. Additionally, analysts anticipate sales growth in the current year, which may justify the company’s decision to seek additional funding for growth initiatives.
However, investors should note that SoundHound AI is not currently profitable, with a negative operating income of $72.75 million in the last twelve months. This context underscores the importance of the ATM program in potentially providing the company with the financial flexibility to continue its growth trajectory while working towards profitability.
For those interested in a deeper analysis, InvestingPro offers 14 additional tips for SoundHound AI, providing a more comprehensive view of the company’s financial health and market position.
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