Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of SoundHound AI, Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of SoundHound AI, Inc. and its subsidiaries (the "Company") as of December 31, 2025 and 2024, and the related consolidated statements of operations and comprehensive loss, of redeemable convertible preferred stock and stockholders' equity (deficit) and of cash flows for each of the three years in the period ended December 31, 2025, including the related notes (collectively referred to as the "consolidated financial statements"). We also have audited the Company's internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company did not maintain, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO because material weaknesses in internal control over financial reporting existed as of that date as the Company did not (i) maintain an effective control environment as it lacked sufficient oversight of activities related to internal control over financial reporting due to a lack of an appropriate level of experience and training commensurate with the Company’s financial reporting requirements, (ii) design and maintain effective controls to respond to changes to the risks of material misstatement to financial reporting, which resulted in the Company not designing and maintaining effective controls related to substantially all accounts and disclosures, (iii) design and maintain effective controls related to the identification of and accounting for certain non-routine, unusual or complex transactions, including accounting for complex financing transactions, and (iv) design and maintain effective controls to verify appropriate segregation of duties, identification of instances where incompatible duties were assigned to an individual, and addressing conflicts on a timely basis.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. The material weaknesses referred to above are described in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A. We considered these material weaknesses in determining the nature, timing, and extent of audit tests applied in our audit of the 2025 consolidated financial statements, and our opinion regarding the effectiveness of the Company’s internal control over financial reporting does not affect our opinion on those consolidated financial statements.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in management's report referred to above. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
As described in Management’s Report on Internal Control over Financial Reporting, management has excluded Interactions Corporation from its assessment of internal control over financial reporting as of December 31, 2025 because it was acquired by the Company in a purchase business combination during 2025. We have also excluded Interactions Corporation from our audit of internal control over financial reporting. Interactions Corporation is a wholly-owned subsidiary whose total assets and total revenues excluded from management’s assessment and our audit of internal control over financial reporting represent approximately 5% and 14%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2025.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Revenue recognition
As described in Notes 2 and 4 to the consolidated financial statements, the Company derives its revenue primarily from the following performance obligations: (1) hosted services, (2) professional services, (3) monetization and (4) licensing. Contracts are accounted for by management when the parties have approved and committed to the contract, the rights of the parties and payment terms are identifiable, the contract has commercial substance and collectability of consideration is probable. Revenues are generally recognized upon the transfer of control of promised products or services provided to customers, reflecting the amount of consideration the Company expects to receive for those products or services. Management applies significant
judgment in identifying and evaluating terms and conditions in contracts which impact revenue recognition. The Company’s consolidated revenues for the year ended December 31, 2025 were $168.9 million.
The principal considerations for our determination that performing procedures relating to revenue recognition is a critical audit matter are (i) the significant judgment by management in identifying and evaluating terms and conditions in contracts with customers which impact revenue recognition and (ii) a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence relating to revenue recognition. As described in the “Opinions on the Financial Statements and Internal Control over Financial Reporting” section, material weaknesses were identified related to this matter.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included, among others, (i) evaluating and determining the nature and extent of audit procedures performed and evidence obtained that are responsive to the material weaknesses identified; (ii) obtaining an understanding of management’s process for identifying and evaluating terms and conditions in contracts, including evaluating management’s determination of the impact of those terms and conditions on revenue recognition; (iii) testing, on a sample basis, (a) the completeness and accuracy of management’s identification and evaluation of terms and conditions by examining contracts and (b) revenue transactions by obtaining and inspecting source documents, such as contracts, purchase orders, invoices, proof of delivery, and subsequent cash receipts; (iv) testing, on a sample basis, the timing of recognition of revenue transactions; and (v) testing, on a sample basis, the determination of the standalone selling price of performance obligations and testing the completeness and accuracy of the underlying data used by management in determining standalone selling price of performance obligations.
/s/ PricewaterhouseCoopers LLP
San Francisco, California
March 2, 2026
We have served as the Company’s auditor since 2023.
SOUNDHOUND AI, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
| | | | | | | | | | | |
| December 31,
2025 | | December 31,
2024 |
| ASSETS | | | |
| Current assets: | | | |
| Cash and cash equivalents | $ | 248,490 | | | $ | 198,240 | |
Accounts receivable, net of allowances of $2,254 and $726 as of December 31, 2025 and 2024, respectively | 32,336 | | | 23,159 | |
| Contract assets and unbilled revenue, net | 38,189 | | | 26,645 | |
| Other current assets | 10,114 | | | 7,476 | |
| Total current assets | 329,129 | | | 255,520 | |
| Restricted cash equivalents, non-current | 676 | | | 676 | |
| Right-of-use assets | 3,791 | | | 4,692 | |
| Property and equipment, net | 2,928 | | | 1,239 | |
| Goodwill | 122,277 | | | 101,704 | |
| Intangible assets, net | 181,395 | | | 174,943 | |
| Deferred tax asset | 29 | | | 4 | |
| Contract assets and unbilled revenue, non-current, net | 29,906 | | | 12,879 | |
| Other non-current assets | 18,042 | | | 2,296 | |
| Total assets | $ | 688,173 | | | $ | 553,953 | |
| | | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | | | |
| Current liabilities: | | | |
| Accounts payable | $ | 10,562 | | | $ | 5,559 | |
| Accrued liabilities | 26,325 | | | 26,291 | |
| Operating lease liabilities | 1,812 | | | 1,898 | |
| Finance lease liabilities | 332 | | | 49 | |
| Income tax liability | 2,662 | | | 2,750 | |
| Deferred revenue | 24,042 | | | 23,876 | |
| Contingent acquisition liabilities (Note 12) | 4,400 | | | — | |
| Other current liabilities | 1,604 | | | 7,319 | |
| Total current liabilities | 71,739 | | | 67,742 | |
| | | |
| Operating lease liabilities, net of current portion | 2,069 | | | 2,403 | |
| Deferred revenue, net of current portion | 8,195 | | | 6,862 | |
| Contingent acquisition liabilities, net of current portion (Note 12) | 129,227 | | | 286,898 | |
| Income tax liability, net of current portion | 2,254 | | | 3,075 | |
| Deferred tax liability | 1,363 | | | — | |
| Other non-current liabilities | 9,540 | | | 4,320 | |
| Total liabilities | $ | 224,387 | | | $ | 371,300 | |
| Commitments and contingencies (Note 8) | | | |
| | | |
| Stockholders’ equity (deficit): | | | |
Series A Preferred Stock, $0.0001 par value; 1,000,000 shares authorized; 0 and 0 shares issued and outstanding, aggregate liquidation preference of $— and $— as of December 31, 2025 and 2024, respectively | — | | | — | |
Class A Common Stock, $0.0001 par value; 755,000,000 and 455,000,000 shares authorized; 390,070,691 and 361,096,457 shares issued and outstanding as of December 31, 2025 and 2024, respectively | 37 | | | 35 | |
Class B Common Stock, $0.0001 par value; 44,000,000 shares authorized as of December 31, 2025 and 2024; 32,535,408 and 32,535,408 shares issued and outstanding as of December 31, 2025 and 2024, respectively | 3 | | | 3 | |
| Additional paid-in capital | 1,420,672 | | | 1,125,470 | |
| Accumulated deficit | (957,066) | | | (943,060) | |
| Accumulated other comprehensive income | 140 | | | 205 | |
| Total stockholders’ equity | $ | 463,786 | | | $ | 182,653 | |
| Total liabilities and stockholders’ equity | $ | 688,173 | | | $ | 553,953 | |
The accompanying notes are an integral part of these consolidated financial statements.
SOUNDHOUND AI, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS
(In thousands, except share and per share data)
| | | | | | | | | | | | | | | | | |
| Year Ended
December 31, |
| 2025 | | 2024 | | 2023 |
| Revenues | $ | 168,920 | | | $ | 84,693 | | | $ | 45,873 | |
| Operating expenses: | | | | | |
| Cost of revenues | 97,369 | | | 43,309 | | | 11,307 | |
| Sales and marketing | 61,640 | | | 29,126 | | | 18,893 | |
| Research and development | 98,250 | | | 70,555 | | | 51,439 | |
| General and administrative | 82,188 | | | 53,270 | | | 28,285 | |
| Change in fair value of contingent acquisition liabilities | (163,127) | | | 222,670 | | | — | |
| Amortization of intangible assets | 15,872 | | | 7,116 | | | — | |
| Restructuring | — | | | — | | | 4,557 | |
| Total operating expenses | 192,192 | | | 426,046 | | | 114,481 | |
| Loss from operations | (23,272) | | | (341,353) | | | (68,608) | |
| | | | | |
| Other income (expense), net: | | | | | |
| Loss on early extinguishment of debt | — | | | (15,629) | | | (837) | |
| Interest expense | (670) | | | (12,168) | | | (16,733) | |
| Other income, net | 14,668 | | | 9,222 | | | 1,155 | |
| Total other income (expense), net | 13,998 | | | (18,575) | | | (16,415) | |
| Loss before provision (benefit) for income taxes | (9,274) | | | (359,928) | | | (85,023) | |
| Provision (benefit) for income taxes | 4,732 | | | (9,247) | | | 3,914 | |
| Net loss | (14,006) | | | (350,681) | | | (88,937) | |
| Cumulative dividends attributable to Series A Preferred Stock | — | | | (416) | | | (2,774) | |
| Net loss attributable to SoundHound common stockholders | $ | (14,006) | | | $ | (351,097) | | | $ | (91,711) | |
| | | | | |
| Other comprehensive loss: | | | | | |
| Unrealized gains on investments | (65) | | | 6 | | | 199 | |
| Comprehensive loss | $ | (14,071) | | | $ | (350,675) | | | $ | (88,738) | |
| | | | | |
| Net loss per share: | | | | | |
| Basic | $ | (0.03) | | | $ | (1.04) | | | $ | (0.40) | |
| Diluted | $ | (0.28) | | | $ | (1.04) | | | $ | (0.40) | |
| | | | | |
| Weighted-average common shares outstanding: | | | | | |
| Basic | 405,421,412 | | 338,462,574 | | 229,264,904 |
| Diluted | 409,456,342 | | 338,462,574 | | 229,264,904 |
The accompanying notes are an integral part of these consolidated financial statements.
SOUNDHOUND AI, INC.
CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND
STOCKHOLDERS’ EQUITY (DEFICIT)
(In thousands, except share and per share data)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Series A Preferred Stock | Class A Common Stock | | Class B Common Stock | | Additional
Paid-in
Capital | | Accumulated
Other
Comprehensive
Loss | | Accumulated
Deficit | | Total |
| | Shares | | Amount | Shares | | Amount | | Shares | | Amount | | | | |
| Balances as of December 31, 2022 | | — | | — | 160,297,664 | | 16 | | 39,735,408 | | 4 | | 466,857 | | — | | (503,442) | | (36,565) |
| Issuance of common stock under the ELOC program | | — | | — | 25,000,000 | | 4 | | — | | — | | 73,762 | | — | | — | | 73,766 |
| ELOC program fee settled in common stock | | — | | — | 250,000 | | — | | — | | | | 915 | | — | | — | | 915 |
| Issuance of common stock under the Sales Agreement, net of issuance costs | | — | | — | 5,805,995 | | 1 | | — | | — | | 12,411 | | — | | — | | 12,412 |
| Issuance of Series A Preferred Stock | | 835,011 | | 24,942 | — | | — | | — | | — | | — | | — | | — | | 24,942 |
| Issuance of Class A common shares upon conversion of Class B common shares | | — | | — | 2,250,000 | | — | | (2,250,000) | | — | | — | | — | | — | | — |
| Issuance of Class A common shares upon conversion of Series A Preferred Stock | | (360,006) | | (10,755) | 11,597,654 | | 1 | | — | | — | | 10,754 | | — | | — | | — |
| Issuance of Class A common shares upon exercise of stock options | | — | | — | 3,585,829 | | — | | — | | — | | 8,506 | | — | | — | | 8,506 |
| Issuance of Class A common shares upon vesting of restricted stock units | | — | | — | 7,678,184 | | — | | — | | — | | — | | — | | — | | — |
| Issuance of common stock warrants | | — | | — | — | | — | | — | | — | | 4,136 | | — | | — | | 4,136 |
| Issuances of ESPP | | — | | — | 478,023 | | — | | — | | — | | 863 | | — | | — | | 863 |
| Stock-based compensation | | — | | — | — | | — | | — | | — | | 27,931 | | — | | — | | 27,931 |
| Net loss | | — | | — | — | | — | | — | | — | | — | | — | | (88,937) | | (88,937) |
| Other comprehensive income | | — | | — | — | | — | | — | | — | | — | | 199 | | | | 199 |
| Balances as of December 31, 2023 | | 475,005 | | $ | 14,187 | | 216,943,349 | | $ | 22 | | | 37,485,408 | | $ | 4 | | | $ | 606,135 | | | $ | 199 | | | $ | (592,379) | | | $ | 28,168 | |
| Issuance of Class A common stock under the Sales Agreement, Equity Distribution Agreement and Execute Equity Distribution Agreement, net of issuance costs | | — | | — | 85,826,406 | | 9 | | — | | — | | 396,685 | | — | | — | | 396,694 |
| Issuance of Class A common stock upon acquisition of SYNQ3 | | — | | — | 5,794,187 | | 1 | | — | | | | 9,875 | | — | | — | | 9,876 |
| Issuance of restricted shares of Class A common stock, subject to repurchase in connection with acquisition of SYNQ3 | | — | | — | 2,033,156 | | — | | — | | — | | — | | — | | — | | — |
| Issuance of Class A common stock for equity incentive awards | | | | | 17,750,154 | | — | | — | | — | | 29,685 | | — | | — | | 29,685 |
| Issuance of Class A common stock upon conversion of Class B common shares | | — | | — | 4,950,000 | | 1 | | (4,950,000) | | (1) | | — | | — | | — | | — |
| Issuance of Class A common stock upon conversion of Series A Preferred Stock | | (475,005) | | (14,187) | 16,624,215 | | 1 | | — | | — | | 14,186 | | — | | — | | — |
| Issuance of Class A common stock in connection with the exercise of warrants | | — | | — | 2,272,023 | | — | | — | | — | | 23 | | — | | — | | 23 |
| Issuance of Class A common stock upon acquisition of Amelia | | — | | — | 5,959,050 | | 1 | | — | | — | | 23,919 | | — | | — | | 23,920 |
| Issuance of Class A common stock to settle obligations under Amelia Debt | | — | | — | 2,943,917 | | — | | — | | — | | 11,817 | | — | | — | | 11,817 |
| Stock-based compensation | | — | | — | — | | — | | — | | — | | 33,145 | | — | | — | | 33,145 |
| Net loss | | — | | — | — | | — | | — | | — | | — | | — | | (350,681) | | (350,681) |
| Other comprehensive income | | — | | — | — | | — | | — | | — | | — | | 6 | | | | 6 |
| Balances as of December 31, 2024 | | — | | | $ | — | | 361,096,457 | | $ | 35 | | | 32,535,408 | | $ | 3 | | | $ | 1,125,470 | | | $ | 205 | | | $ | (943,060) | | | $ | 182,653 | |
| Issuance of Class A common stock under the Second Equity Distribution Agreement, net of issuance costs | | — | | — | 13,913,014 | | $ | 2 | | | — | | — | | 197,280 | | — | | — | | 197,282 |
SOUNDHOUND AI, INC.
CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND
STOCKHOLDERS’ EQUITY (DEFICIT)
(In thousands, except share and per share data)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Series A Preferred Stock | Class A Common Stock | | Class B Common Stock | | Additional
Paid-in
Capital | | Accumulated
Other
Comprehensive
Loss | | Accumulated
Deficit | | Total |
| | Shares | | Amount | Shares | | Amount | | Shares | | Amount | | Additional
Paid-in
Capital | | Accumulated
Other
Comprehensive
Loss | | Accumulated
Deficit | | Total |
| Issuance of Class A common stock for equity incentive awards | | — | | — | 14,578,879 | | $ | — | | | — | | — | | 10,835 | | — | | — | | 10,835 |
| Issuance of Class A common stock in connection with the exercise of warrants | | — | | — | 9,840 | | $ | — | | | — | | — | | 114 | | — | | — | | 114 |
| Issuance of Class A common stock due to settlement of contingent holdback consideration in connection with SYNQ3 Acquisition | | — | | — | 472,501 | | $ | — | | | — | | — | | 3,922 | | — | | — | | 3,922 |
| Stock-based compensation | | — | | — | — | | $ | — | | | — | | — | | 83,051 | | — | | — | | 83,051 |
| Net loss | | — | | — | — | | $ | — | | | — | | — | | — | | — | | (14,006) | | (14,006) |
| Other comprehensive income | | — | | — | — | | $ | — | | | — | | — | | — | | (65) | | — | | (65) |
| Balances as of December 31, 2025 | | — | | $ | — | | 390,070,691 | | $ | 37 | | | 32,535,408 | | $ | 3 | | | $ | 1,420,672 | | | $ | 140 | | | $ | (957,066) | | | $ | 463,786 | |
The accompanying notes are an integral part of these consolidated financial statements.
SOUNDHOUND AI, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
| | | | | | | | | | | | | | | | | |
| Year Ended
December 31, |
| 2025 | | 2024 | | 2023 |
| Cash flows from operating activities: | | | | | |
| Net loss | $ | (14,006) | | | $ | (350,681) | | | $ | (88,937) | |
| Adjustments to reconcile net loss to net cash used in operating activities: | | | | | |
| Depreciation and amortization | 34,130 | | | 16,054 | | | 2,313 | |
| Stock-based compensation | 80,620 | | | 33,145 | | | 27,931 | |
| Loss on change in fair value of ELOC program | — | | | — | | | 1,901 | |
| Amortization of debt issuance cost | — | | | 1,621 | | | 5,400 | |
| Non-cash lease amortization | 2,906 | | | 2,613 | | | 3,346 | |
| Loss on disposal of property and equipment | 42 | | | — | | | — | |
| Amortization of capitalized commissions | 1,627 | | | — | | | — | |
| Loss on early extinguishment of debt | — | | | 15,629 | | | 837 | |
| Foreign currency gain/loss from remeasurement | (947) | | | (24) | | | 143 | |
| Change in fair value of contingent acquisition liabilities | (163,127) | | | 222,670 | | | — | |
| Change in fair value of derivative | (4,676) | | | — | | | — | |
| Deferred income taxes | 1,338 | | | (12,183) | | | 30 | |
| Other, net | 1,951 | | | (580) | | | 93 | |
| Changes in operating assets and liabilities, net of effects of acquisitions: | | | | | |
| Accounts receivable, net | (1,304) | | | (10,264) | | | (627) | |
| Prepaid expenses | — | | | — | | | 1,590 | |
| Other current assets | (2,956) | | | (3,131) | | | (821) | |
| Contract assets | (22,420) | | | (7,304) | | | (19,578) | |
| Other non-current assets | (4,498) | | | (196) | | | 671 | |
| Accounts payable | 1,930 | | | (7,636) | | | (1,162) | |
| Accrued liabilities | (3,918) | | | 1,846 | | | 4,266 | |
| Other current liabilities | (2,334) | | | (642) | | | — | |
| Operating lease liabilities | (2,742) | | | (3,214) | | | (3,657) | |
| Deferred revenue | (4,956) | | | (6,186) | | | (4,135) | |
| Other non-current liabilities | 5,118 | | | (415) | | | 2,131 | |
| Net cash used in operating activities | (98,222) | | | (108,878) | | | (68,265) | |
| | | | | |
| Cash flows from investing activities: | | | | | |
| Purchases of property and equipment | (902) | | | (640) | | | (392) | |
| Capitalized software development costs | (4,000) | | | — | | | — | |
| Payment related to acquisitions, net of cash acquired | (54,602) | | | (11,732) | | | — | |
| Net cash used in investing activities | (59,504) | | | (12,372) | | | (392) | |
| | | | | |
| Cash flows from financing activities: | | | | | |
| Proceeds from the issuance of Series A Preferred Stock, net of issuance costs | — | | | — | | | 24,942 | |
| Proceeds from sales of Class A common stock under the ELOC program, net of issuance costs | — | | | — | | | 71,615 | |
| Proceeds from sales of Class A common stock under the Sales Agreement, Equity Distribution Agreement, Execute Equity Distribution Agreement and Second Equity Distribution Agreement | 201,522 | | | 407,270 | | | 12,412 | |
| Proceeds from exercise of stock options and employee stock purchase plan | 10,835 | | | 29,685 | | | — | |
| Proceeds from warrants exercised | 114 | | | 23 | | | — | |
| Payment of financing costs associated with the Sales Agreement, Equity Distribution Agreement, Execute Equity Distribution Agreement, and Second Equity Distribution Agreement | (4,030) | | | (10,357) | | | — | |
| Proceeds from the issuance of debt, net of issuance costs | — | | | — | | | 85,087 | |
| Proceeds from the issuance of common stock | — | | | — | | | 9,369 | |
| Payments on Term Loan and Amelia Debt | — | | | (215,373) | | | (35,029) | |
| Payment to settle contingent holdback liabilities from SYNQ3 acquisitions | (198) | | | (217) | | | — | |
| Payments on finance leases | (169) | | | (125) | | | (159) | |
| Net cash provided by financing activities | 208,074 | | | 210,906 | | | 168,237 | |
| Effects of exchange rate changes on cash | (98) | | | 225 | | | (20) | |
| Net change in cash, cash equivalents, and restricted cash equivalents | 50,250 | | | 89,881 | | | 99,560 | |
| Cash, cash equivalents, and restricted cash equivalents, beginning of year | 198,916 | | | 109,035 | | | 9,475 | |
SOUNDHOUND, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS — Continued
(In thousands)
| | | | | | | | | | | | | | | | | |
| Year Ended
December 31, |
| 2025 | | 2024 | | 2023 |
| Cash, cash equivalents, and restricted cash equivalents, end of year | $ | 249,166 | | | $ | 198,916 | | | $ | 109,035 | |
| | | | | |
| Reconciliation to amounts on the consolidated balance sheets: | | | | | |
| Cash and cash equivalents | $ | 248,490 | | | $ | 198,240 | | | $ | 95,260 | |
| Current portion of restricted cash equivalents | — | | | — | | | — | |
| Non-current portion of restricted cash equivalents | 676 | | | 676 | | | 13,775 | |
Total cash, cash equivalents, and restricted cash equivalents shown in the consolidated statements of cash flows | $ | 249,166 | | | $ | 198,916 | | | $ | 109,035 | |
| | | | | | | | | | | | | | | | | |
| Year Ended
December 31, |
| 2025 | | 2024 | | 2023 |
| Supplemental disclosures of cash flow information: | | | | | |
| Cash paid for interest | $ | 26 | | | $ | 6,337 | | | $ | 11,984 | |
| Cash paid for income taxes, net of refunds | $ | 4,370 | | | $ | 2,717 | | | $ | 2,356 | |
| | | | | |
| Noncash investing and financing activities: | | | | | |
| Conversion of Series A Preferred Stock to Class A common stock | $ | — | | | $ | 14,187 | | | $ | 10,755 | |
| Issuance of Class A Common Stock to settle obligations under Amelia Debt | $ | — | | | $ | 11,817 | | | $ | — | |
| Issuance of Class A Common Stock to settle contingent holdback consideration of SYNQ3 acquisition | $ | 3,922 | | | $ | 189 | | | $ | — | |
| Deferred offering costs reclassified to additional paid-in capital | $ | 210 | | | $ | 220 | | | $ | — | |
| Purchases of property and equipment under accrued liabilities | $ | 163 | | | $ | — | | | $ | — | |
| Operating lease liabilities arising from obtaining right-of-use assets | $ | 1,001 | | | $ | 1,559 | | | $ | — | |
| Debt discount through issuance of common stock warrants | $ | — | | | $ | — | | | $ | 4,136 | |
| Issuance of Class A Common Stock to settle commitment shares related to the ELOC program | $ | — | | | $ | — | | | $ | 915 | |
| Fair value of Class A common stock and deferred equity consideration issued to acquire SYNQ3 and Amelia | $ | — | | | $ | 33,606 | | | $ | — | |
| Fair value of contingent earnout consideration to acquire SYNQ3 and Amelia | $ | — | | | $ | 67,945 | | | $ | — | |
| Fair value of contingent holdback consideration to acquire SYNQ3 | $ | — | | | $ | 570 | | | $ | — | |
| Fair value of deferred cash consideration under other acquisition | $ | — | | | $ | 195 | | | $ | — | |
| Fair value of deferred cash consideration under Interactions acquisition | $ | 1,150 | | | $ | — | | | $ | — | |
| Fair value of contingent earnout consideration under Interactions acquisition | $ | 9,900 | | | $ | — | | | $ | — | |
| Stock-based compensation included in capitalized software development costs | $ | 2,431 | | | $ | — | | | $ | — | |
The accompanying notes are an integral part of these consolidated financial statements.
SOUNDHOUND AI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION
Nature of Operations
SoundHound AI, Inc. (“we,” “us,” “our,” “SoundHound” or the “Company”) turns sound into understanding and actionable meaning. SoundHound’s technology applications enable humans to interact with the things around them in the same way they interact with each other: by speaking naturally to mobile phones, cars, televisions, music speakers, coffee machines, and every other part of the emerging “connected” world. SoundHound's voice AI platform enables product creators to develop their own voice interfaces with their customers. The SoundHound Chat AI voice assistant allows businesses and brands to provide a next-generation voice experience for their users, seamlessly integrating Generative AI and a mix of real-time information domains. Houndify is an open-access platform that allows developers to leverage SoundHound's Voice AI technology. The Company has developed a range of proprietary technologies on our voice AI platform, including Speech-to-Meaning, Deep Meaning Understanding, Collective AI, Dynamic Interaction and SoundHound Chat AI. The SoundHound music app allows customers to identify and play songs by singing or humming into the smartphone’s microphone, or by identifying the sound playing in the background from external sources. SoundHound also provides edge, cloud and hybrid (Edge+Cloud) connectivity solutions that allow brands to optimize their voice-enabled products and devices with options ranging from fully-embedded to exclusively cloud-connected.
On April 26, 2022, a business combination was closed between SoundHound Inc (“Legacy SoundHound”), and Archimedes Tech SPAC Partners Co. (“ATSP”), a special purpose acquisition company. The combined company is called SoundHound AI, Inc. and its Class A Common Stock and certain of its warrants commenced trading on the Nasdaq Global Market under the symbols “SOUN” and “SOUNW,” respectively, on April 28, 2022.
On January 3, 2024, the Company completed the acquisition of Synq3, Inc. ("SYNQ3") in a cash and stock transaction. On June 14, 2024, the Company completed an immaterial acquisition in a cash transaction. On August 6, 2024, the Company completed the acquisition of Amelia Holdings, Inc. ("Amelia") in a cash and stock transaction. On September 3, 2025, the Company completed the acquisition of Interactions Corporation ("Interactions") in a cash transaction. Refer to Note 3 for additional information.
Going Concern
Since inception, the Company has generated recurring losses as well as negative operating cash flows in the annual financial statements. As of December 31, 2025, the Company had an accumulated deficit of $957.1 million. Management expects to continue to incur additional substantial losses in the foreseeable future. The Company has historically funded its operations primarily through equity or debt financings.
Total unrestricted cash and cash equivalents on hand as of December 31, 2025 was $248.5 million. Although the Company has incurred recurring losses each year since its inception, the Company expects it will be able to fund its operations for at least the next twelve months from the date these consolidated financial statements are issued. The Company may seek funding through additional debt or equity financing arrangements, implement incremental expense reduction measures or a combination thereof to continue financing its operations. The Company's consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the normal course of business.
NOTE 2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Significant Accounting Policies
The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding annual financial reporting. Any reference in these notes to applicable accounting guidance is meant to refer to the authoritative U.S. GAAP included in the Accounting Standards Codification (“ASC”), and Accounting Standards Update (“ASU”) issued by the Financial Accounting Standards Board (“FASB”).
SOUNDHOUND AI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Principles of Consolidation
The Company’s consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
We consolidate any variable interest entity (“VIE”) where we have determined we are the primary beneficiary. The primary beneficiary is the entity which has both: (i) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance; and (ii) the obligation to absorb losses or receive benefits of the entity that could potentially be significant to the VIE.
Foreign Currency
The functional currency of the Company and its subsidiaries is the U.S. dollar. Foreign currency denominated transactions are converted into U.S. dollars at the average rates of exchange prevailing during the period. Assets and liabilities denominated in foreign currency are remeasured into U.S. dollars at current exchange rates at the balance sheet date for monetary assets and liabilities and at historical exchange rates for non-monetary assets and liabilities. During the years ended December 31, 2025, 2024 and 2023, the Company recognized net losses related to foreign currency transactions and remeasurements of $0.8 million, $0.7 million and $0.5 million, respectively, in the consolidated statements of operations as other expense, net.
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and judgments that affect the amounts reported and disclosures in the consolidated financial statements and accompanying notes. Such estimates include revenue recognition, allowance for credit losses, software development costs, accrued liabilities, derivative and warrant liabilities, calculation of the incremental borrowing rate, financial instruments recorded at fair value on a recurring basis, the accounting for business combinations and allocating purchase price, valuation and estimating the useful life of identifiable intangible assets, probability of achievement of revenue estimates related to contingent earnout consideration and performance-based equity awards, valuation of deferred tax assets and uncertain tax positions and the fair value of common stock and other assumptions used to measure stock-based compensation expense. In connection with the measurement period for the acquisition of Amelia and Interactions, no significant estimates were changed during the years ended December 31, 2025 and 2024. The Company bases its estimates on historical experience, the current economic environment, and on assumptions it believes are reasonable under the circumstances. The Company adjusts such estimates and assumptions when facts and circumstances dictate. Changes in those estimates resulting from changes in the economic environment will be reflected in the financial statements in future periods. Actual results could differ materially from those estimates.
Accounts Receivable, Net
Accounts receivable consist of current trade receivables due from customers recorded at invoiced amounts, net of allowance for doubtful accounts. Accounts receivable do not bear interest and the Company generally does not require collateral or other security in support of accounts receivable.
When the Company records customer receivables and contract assets arising from revenue transactions, an allowance is recorded for credit losses for the current expected credit losses ("CECL") inherent in the asset over its expected life. The allowance for credit losses is a valuation account deducted from the amortized cost basis of the assets to present their net carrying value at the amount expected to be collected. Each period, the allowance for credit losses is adjusted through earnings to reflect expected credit losses over the remaining lives of the assets.
The Company estimates expected credit losses based on relevant information about past events, including historical experience, payment terms, environmental and industry factors, and reasonable and supportable forecasts that affect the collectability of the reported amount. When measuring expected credit losses, we pool assets with similar country risk and credit risk characteristics. Changes in the relevant information may materially affect the estimates of expected credit losses.
SOUNDHOUND AI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Property and Equipment, Net
Property and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation and amortization is provided using the straight-line method over the estimated useful lives of the respective assets.
The estimated useful lives of the Company’s property and equipment are as follows:
| | | | | |
| Computer equipment | 3 – 4 years |
| Software | 3 years |
| Furniture and fixtures | 5 years |
| Leasehold improvements | Lesser of useful life or the term of the lease |
Maintenance and repairs that do not extend the life or improve the asset are expensed as incurred.
Capitalized Software Development Costs
The Company capitalizes qualifying internal-use software development costs under Accounting Standards Codification Topic 350-40, Internal-use Software ("ASC 350-40"). The costs consist of personnel costs, including related benefits and stock-based compensation, and cloud costs that were incurred during the application development stage. Capitalization of costs begins when two criteria are met: (1) the preliminary project stage is completed, and (2) it is probable that the software will be completed and used for its intended function. Capitalization ceases when the software is substantially complete and ready for its intended use, including the completion of all significant testing. Costs related to preliminary project activities and post-implementation operating activities are expensed as incurred.
The Company also capitalizes qualifying software development costs under Accounting Standards Codification Topic 985-20, Costs of Software to be Sold, Leased or Marketed ("ASC 985-20"). All costs to establish technological feasibility are expensed as incurred. Costs incurred subsequent to establishing technological feasibility are capitalized until the software product is available for general release to customers.
Capitalized software development costs under ASC 350-40 and ASC 985-20 are included in other non-current assets, net of amortization, on the consolidated balance sheets. These costs are amortized over the estimated useful life of the software, which is estimated to be three years. The amortization of capitalized software development costs is included in cost of revenue in the consolidated statement of operations and comprehensive loss.
Impairment of Long-Lived Assets
The Company evaluates property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of a specific asset or asset group may not be recoverable. An impairment loss is recognized when the total of estimated undiscounted future cash flows expected to result from the use of the asset and its eventual disposition is less than its carrying amount. Impairment, if any, would be assessed using discounted cash flows or other appropriate measures of fair value. Through December 31, 2025, there have been no such impairments.
Leases
The Company evaluates if an arrangement is a lease at its inception. Operating lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. The Company generally determines our incremental borrowing rate based on the information available at the lease commencement date in determining the present value of future payments, because the implicit rate of the lease is generally not known. Right-of-use ("ROU") assets related to our operating lease liabilities are measured at lease inception based on the initial measurement of the lease liability, plus any prepaid lease payments and less any lease incentives, as applicable. The lease terms that are used in determining our operating lease liabilities at lease inception may include options to extend or terminate the leases when it is reasonably certain that we will exercise such options. The Company amortizes the ROU assets as operating lease expense generally on a straight-line basis over the lease term and classify both the lease
SOUNDHOUND AI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
amortization and imputed interest as operating expenses. The Company has lease agreements with lease and non-lease components. The Company elected to not separate lease and non-lease components for its asset class of equipment.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an original maturity of three months or less from the date of purchase to be cash equivalents. The Company’s cash equivalents consist of treasury bills and money market funds. The treasury bills are treated as available-for-sale securities. Cash equivalents are measured and reported at fair value using quoted prices in active markets for similar securities. The deposits exceed federally insured limits. Changes in fair value for cash equivalents classified as available for sale securities are recorded to other comprehensive loss.
As of December 31, 2025, and 2024, available-for-sale securities consisted of U.S. Treasury bills and investments in government money market funds. The Company’s U.S. Treasury bills and the underlying securities held by the government money market funds had weighted-average maturities of three months or less as of the reporting date.
Restricted Cash
The Company’s restricted cash was established according to the requirements under various office lease agreements, which is held by lessors in the form of a deposit under the lease agreements. Restricted cash is classified as current or non-current on the consolidated balance sheets based on the expected duration of the restriction.
Segment Information
The Company has determined that the Chief Executive Officer is its chief operating decision maker. The Company’s Chief Executive Officer reviews discrete financial information on a consolidated basis for purposes of allocating resources and evaluating financial performance. Accordingly, the Company has determined that it operates as a single reportable segment.
Concentrations of Credit Risk and Other Risks and Uncertainties
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and cash equivalents, the balances of which frequently exceed federally insured limits. The Company regularly monitors its credit risk exposure and takes steps to mitigate the likelihood of these exposures resulting in actual loss.
As of December 31, 2025, there was no customer that accounted for more than 10% of the Company’s consolidated accounts receivable balance. As of December 31, 2024, accounts receivable balances due from Customer A accounted for 23% of the Company’s consolidated accounts receivable balance, respectively.
As of December 31, 2025, unbilled receivables from Customer B, C, D, E and F accounted for 23%, 17%, 16%, 14%, and 13% of the Company’s consolidated unbilled receivables balance, respectively. As of December 31, 2024, unbilled receivables from Customer C and D accounted for 50% and 24% of the Company’s consolidated unbilled receivables balance, respectively.
For the year ended December 31, 2025, there was no customer that accounted for more than 10% of revenue. For the year ended December 31, 2024, Customer C accounted for 14% of revenue. For the year ended December 31, 2023, Customer C and G accounted for 49% and 13% of revenue, respectively.
Common Stock Offerings
The Company has entered into certain agreements to sell common stock with counterparties including through the Equity Line of Credit ("ELOC") program and “at-the-market” offering programs pursuant to the Sales Agreement, Equity Distribution Agreement, Execute Equity Distribution Agreements and Second Equity Distribution Agreement (each as described in Note 14) to further support its growth strategy through initiatives such as accretive acquisitions
SOUNDHOUND AI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
and internal investments, to bolster working capital, and/or for general corporate purposes. The Company evaluates its common stock purchase agreements to determine whether they should be accounted for as derivatives with changes in fair value as other income, net in the period in which they occur.
Equity Issuance Costs
The Company capitalizes certain legal, professional, accounting and other third-party fees that are directly associated with in-process equity-classified financings as deferred offering costs until such financings are consummated. After consummation of the financing, these costs are recorded as a reduction of the proceeds received from the equity financing. If a planned equity financing is abandoned, the deferred offering costs are expensed immediately as a charge to operating expenses in the consolidated statements of operations.
Revenue Recognition
The Company recognizes revenue under Accounting Standards Codification Topic 606 (“ASC 606”), Revenue from Contracts with Customers, when a customer obtains control of promised goods or services in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, the Company performs the following five steps:
(i)Identification of the contract(s) with a customer;
(ii)Identification of the performance obligations in the contract;
(iii)Determination of the transaction price, including the constraint on variable consideration;
(iv)Allocation of the transaction price to the performance obligations in the contract; and
(v)Recognition of revenue when, or as, performance obligations are satisfied.
Contracts are accounted for when both parties have approved and committed to the contract, the rights of the parties and payment terms are identifiable, the contract has commercial substance and collectability of consideration is probable.
Under ASC 606, assuming all other revenue recognition criteria have been met, the Company recognizes revenue for arrangements upon the transfer of control of the Company’s performance obligations to its customers. A performance obligation is a promise in a contract to transfer a distinct good or service to a customer and is the unit of account in ASC 606. Revenues are recognized when control of the promised goods or services are transferred to a customer in an amount that reflects the consideration that the Company expects to receive in exchange for those services.
The Company capitalizes material sales commission expenses and associated payroll taxes paid to sales personnel that are incremental in obtaining a contract. The Company elected the practical expedient to recognize the incremental costs of obtaining a contract including sales commissions as an expense when incurred if the amortization period of such incremental cost would otherwise have been one year or less. Capitalized sales commissions are amortized over the period of benefit based on contract term, expected contract renewals and application useful life. Costs to obtain a contract that will be amortized within the succeeding 12-month period are classified as current and included in other current assets on the consolidated balance sheets. The remaining balance is classified as non-current and included in other assets on the consolidated balance sheets. Amortization expense is included in sales and marketing expenses in the consolidated statements of operations and comprehensive loss. Deferred commissions are periodically analyzed for impairment. As of December 31, 2025 and December 31, 2024, the Company capitalized sales commissions expenses of $3.7 million and zero, respectively, which were classified as other current assets and other non-current assets on the consolidated balance sheet.
SOUNDHOUND AI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Research and Development
The Company’s research and development costs are expensed as incurred. These costs include salaries and other personnel related expenses, contractor fees, facility costs, supplies, and depreciation of equipment associated with the design and development of new products prior to the establishment of their technological feasibility.
Advertising Expenses
Advertising expenses of $3.6 million, $2.8 million and $1.9 million incurred during the years ended December 31, 2025, 2024 and 2023, respectively, were expensed as incurred as a component of sales and marketing expenses on the consolidated statement of operations and comprehensive loss.
Warrants
The Company determines whether to classify contracts, such as warrants, that may be settled in its own stock as equity of the entity or as a liability. An equity-linked financial instrument must be considered indexed to the Company’s own stock to qualify for equity classification. The Company classifies warrants as liabilities for any contracts that may require a transfer of assets. Warrants classified as liabilities are accounted for at fair value and remeasured at each reporting date until exercise, expiration or modification that results in equity classification. Any change in the fair value of the warrants is recognized as other income, net in the consolidated statements of operations.
Income Taxes
The Company accounts for income taxes under the asset and liability method, whereby deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to affect taxable income. A valuation allowance is established when, in management’s estimate, it is more-likely-than-not that the deferred tax asset will not be realized. The Company adopted a more-likely-than-not threshold for financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. The Company records a liability for the difference between the benefit recognized and measured and the tax position taken or expected to be taken on the Company’s tax return.
The Company classifies interest and penalties related to uncertain tax positions in income tax expense, if applicable. The Company has recorded $0.1 million interest expense and penalties related to unrecognized tax benefits through December 31, 2025.
Stock-Based Compensation
The Company measures and records the expense related to stock-based payment awards based on the fair value of those awards as determined on the date of grant. The Company recognizes stock-based compensation expense over the requisite service period of the individual grant, generally equal to the vesting period, and uses the straight-line method to recognize stock-based compensation, except for restricted stock unit awards (“RSUs”) with vesting conditions tied to certain performance criteria ("Performance-Based RSUs"). Stock-based compensation costs for Performance-Based RSUs are recognized on a graded-vesting basis over the vesting period based on the most probable outcome of the performance conditions. If the minimum performance targets are not met, no compensation cost is recognized and any recognized compensation cost is reversed, except for awards subject to a market condition. The Company accounts for forfeitures as they occur. The Company uses the Black-Scholes option-pricing model to determine the fair value of stock options and employee stock purchase plan ("ESPP") shares. The Black-Scholes option-pricing model requires the use of highly subjective and complex assumptions to determine the fair value of the awards, including the expected term of the award and the price volatility of the underlying stock. The Company calculates the fair value of the awards granted by using the Black-Scholes option-pricing model with the following assumptions:
Expected Volatility — The Company estimates volatility for the awards by evaluating the average historical volatility of a peer group of companies for the period immediately preceding the award grant for a term that is approximately equal to the awards’ expected term.
SOUNDHOUND AI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Expected Term — The expected term of the Company’s awards represents the period that the stock-based awards are expected to be outstanding. The Company has elected to use the midpoint between the stock options’ vesting term and contractual expiration period to compute the expected term, as the Company does not have sufficient historical information to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior. For the valuation of ESPP shares, the Company uses the period of time from the valuation date to the purchase date.
Risk-Free Interest Rate — The risk-free interest rate is based on the implied yield currently available on U.S. Treasury zero-coupon issues with a term that is equal to the awards’ expected term at the grant date.
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.
Restricted Stock Units
The Company issues RSUs to grantees as compensation for services. The fair value of the RSUs is determined at the grant date based on the fair value of the Company’s Class A Common Stock and for RSUs with service conditions only, is recognized straight-line over the service period.
Stock-based compensation related to Performance-Based RSUs is recognized to the extent it is determined that performance is probable of being achieved.
The Company issues RSUs with vesting conditions tied to certain market conditions (“Market-Based RSUs”). To derive the fair value of Market-Based RSUs, the Company applies a Monte Carlo simulation to determine the grant date fair value. Stock-based compensation related to Market-Based RSUs is recognized over the derived service period.
Fair Value Measurements
The Company defines fair value as the exchange price that would be received from an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. The Company follows a three-level valuation hierarchy for disclosure of fair value measurements as follows:
•Level 1 — Inputs are unadjusted quoted prices in active markets for identical assets or liabilities at the measurement date.
•Level 2 — Inputs (other than quoted market prices included in Level 1) are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life.
•Level 3 — Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.
Preferred Stock
The Company assesses its preferred stock instruments at issuance and each reporting period for classification and derivative features requiring bifurcation.
The Company presents as temporary equity any stock which (i) the Company undertakes to redeem at a fixed or determinable price on the fixed or determinable date or dates; (ii) is redeemable at the option of the holders, or (iii) has conditions for redemption which are not solely within the control of the Company. For stock presented as temporary equity that is not currently redeemable, the Company assesses the probability of the event that would lead to redemption. If it is probable that the equity instrument will become redeemable, the Company accretes changes in the redemption value over the period from the date of issuance, or from the date that it becomes probable that the
SOUNDHOUND AI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
instrument will become redeemable, if later, to the earliest redemption date of the instrument using an appropriate methodology. If an equity instrument classified as temporary equity is not probable of redemption, subsequent adjustment of the amounts presented in temporary equity is unnecessary.
Net Loss Per Share
Basic net loss per share attributable to common stockholders is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period, without consideration for potentially dilutive securities.
Diluted net loss per share attributable to common stockholders is computed by dividing the net loss attributable to common stockholders by the weighted-average number of common stock and potentially dilutive securities outstanding for the period. For purposes of the diluted net loss per share calculation, Series A Preferred Stock, stock options, ESPP shares, RSUs and warrants are considered to be potentially dilutive securities. See Note 15 for further information.
Accordingly, in periods in which the Company reports a net loss, diluted net loss per share is the same as basic net loss per share, since dilutive common stock is not assumed to have been issued if their effect is anti-dilutive.
The Company issued Series A Preferred Stock, which accrues cumulative dividends which are either paid in cash or compounding to the liquidation preference at the discretion of the board of directors. The Company accrues dividends as adjustments to net loss before net loss attributable to common stockholders.
The Company applies the two-class method to calculate its basic and diluted net loss per share as the Company has issued shares that meet the definition of participating securities. The two-class method is an earnings allocation formula that treats a participating security as having rights to earnings that otherwise would have been available to common stockholders. The Company's participating securities contractually entitle the holders of such shares to participate in dividends, but do not contractually require the holders of such shares to participate in losses of the Company. Accordingly, in periods in which the Company reports a net loss, such losses are not allocated to such participating securities.
Business Combinations and Contingent Consideration
Business combinations are accounted for using the acquisition method. The Company allocates the fair value of the purchase price of an acquisition to the assets acquired and liabilities assumed, based on their estimated fair values as of the date of acquisition. The excess of the fair value of the purchase price over the fair values of these net tangible and intangible assets acquired is recorded as goodwill. Fair value of the acquired intangible assets was determined using an income approach, specifically the multi-period excess earnings method, relief-from-royalty method, or the with-and-without method, depending on the nature of the respective assets. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but the estimates and assumptions are inherently uncertain and subject to refinement. The significant judgments and assumptions used in valuing the developed technology include revenue growth rates, prospective financial information for cost of sales, research and development expenses and, other operating expenses, the discount rate, the technological obsolescence rate, and contributory asset charges. For customer relationships, the significant judgments and assumptions include revenue growth rates, customer attrition rate, prospective financial information for cost of sales and fixed and variable operating expenses and the discount rate. These estimates are inherently uncertain and, therefore, actual results may differ from the estimates made. As a result, during the measurement period of up to one year from the acquisition date, the Company may make adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. 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.
Certain business combinations include contingent consideration arrangements, which are generally based on achievement of future financial performance or future events. If it is determined the contingent consideration arrangement is not compensatory, the Company estimates fair value of contingent consideration payments as part of
SOUNDHOUND AI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
the initial purchase price and records the estimated fair value of contingent consideration as a liability in the consolidated balance sheet. The Company reviews and assesses the estimated fair value of contingent consideration each reporting period, and the updated fair value could differ materially from the initial estimates. Adjustments to estimated fair value related to changes in fair value are reported as change in fair value of contingent acquisition liabilities in our consolidated statements of operations.
Goodwill
Goodwill represents the excess of the purchase price in a business combination over the fair value of net assets acquired. Goodwill is not amortized but tested annually for impairment or when indicators of impairment are present. The test for goodwill impairment involves a qualitative assessment of impairment indicators. If indicators are present, a quantitative test of impairment is performed. Goodwill impairment, if any, is determined by comparing the reporting unit’s fair value to its carrying value. An impairment loss is recognized in an amount equal to the excess of the reporting unit’s carrying value over its fair value, up to the amount of goodwill allocated to the reporting unit. The Company's policy is to review goodwill for impairment annually on October 1st unless a triggering event requires an analysis sooner. There was no goodwill impairment in any of the periods presented.
Intangible Assets with Definite Lives
The Company's intangible assets consist principally of developed technology, customer relationships, tradename, and conversation data. The Company assesses the appropriate method of amortization of the intangible assets that reflects the pattern in which the economic benefits of the intangible assets are consumed. The Company determined that a straight-line method of amortization was appropriate for its intangible assets. The remaining useful lives of long-lived assets are re-assessed periodically at the asset group level for any events and circumstances that may change the future cash flows expected to be generated from the long-lived asset or asset group.
Intangible assets with definite lives are tested for impairment whenever events or changes in circumstances indicate the carrying value of a specific asset or asset group may not be recoverable. We assess the recoverability of intangible assets with definite lives at the asset group level. Asset groups are determined based upon the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. For the purpose of the recoverability test, we compare the total undiscounted future cash flows from the use and disposition of the assets with its net carrying amount. When the carrying value of the asset group exceeds the undiscounted future cash flows, the asset group is deemed to be impaired. The amount of the impairment loss represents the excess of the asset or asset group’s carrying value over its estimated fair value, which is generally determined based upon the present value of estimated future pre-tax cash flows that a market participant would expect from use and disposition of the long-lived asset or asset group. There were no intangible asset impairments in any of the periods presented.
Recent Accounting Pronouncements — Adopted
The Company continually assesses any ASUs or other new accounting pronouncements issued by the FASB to determine their applicability and impact. Where it is determined that a new accounting pronouncement will result in a change to the Company's financial reporting, the Company takes the appropriate steps to ensure that such changes are properly reflected in the consolidated financial statements or notes thereto.
In December 2023, the FASB issued Accounting Standards Update No. 2023-09, "Income Taxes (Topic 740): Improvements to Income Taxes Disclosures" ("ASU 2023-09"), which requires more detailed income tax disclosures. The guidance requires entities to disclose disaggregated information about their effective tax rate reconciliation as well as expanded information on income taxes paid by jurisdiction. The disclosure requirements are applied on a prospective basis, with the option to apply them retrospectively. The standard is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company adopted the standard retrospectively for the year ended December 31, 2025. See Note 19 of our consolidated financial statements included within this report for additional details.
SOUNDHOUND AI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Recent Accounting Pronouncements — Not Yet Adopted
In November 2024, the FASB issued Accounting Standards Update No. 2024-03. The standard is intended to require more detailed disclosures about specified categories of expenses (including employee compensation, depreciation, and amortization) included in certain expense captions presented on the face of the income statement. This ASU is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The amendments may be applied either prospectively to financial statements issued for reporting periods after the effective date of this ASU or retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating the impact that the updated standard will have on the financial statement disclosures.
In July 2025, the FASB issued Accounting Standards Update No. 2025-05. The standard is intended to provide a practical expedient for all entities and an accounting policy election available to all entities other than public business entities related to the estimation of expected credit losses for current accounts receivable and current contract assets that arise from transactions accounted for under ASC 606. This ASU is effective for fiscal years beginning after December 15, 2025, and interim periods within those fiscal years. Early adoption is permitted. The amendments should be applied prospectively to financial statements issued for reporting periods after the effective date of this ASU. The Company is currently evaluating the impact that the updated standard will have on the financial statement disclosures.
In September 2025, the FASB issued Accounting Standards Update No. 2025-06. The standard amends certain aspects of the accounting for and disclosure of internal-use software costs by increasing the operability of the recognition guidance considering different methods of software development under ASC 350-40. This ASU is effective for fiscal years beginning after December 15, 2027, and interim periods within those fiscal years. Early adoption is permitted. The amendments can be applied prospectively, retrospectively, or with a modified transition approach to financial statements issued for reporting periods after the effective date of this ASU. The Company is currently evaluating the impact that the updated standard will have on the financial statement disclosures.
NOTE 3. BUSINESS COMBINATIONS
SYNQ3 Acquisition
On January 3, 2024 (the "SYNQ3 Acquisition Date"), the Company acquired all of the issued and outstanding equity of SYNQ3, a provider of voice AI and other technology solutions to the restaurant industry, for total purchase consideration of $15.8 million (the “SYNQ3 Acquisition”). The Company’s acquisition of SYNQ3 is expected to expand its AI customer service solutions and create a Voice AI provider for restaurants. The acquisition is expected to significantly extend the Company's market reach and accelerate the deployment of generative AI capabilities to the industry.
The total purchase consideration includes $3.9 million in cash paid and 5,755,910 in shares of the Company’s Class A Common Stock. The Company has also withheld purchase consideration of $0.5 million in cash and 1,179,514 shares of the Company’s Class A Common Stock, subject to customary net working capital adjustments, to partially secure the indemnification obligations of SYNQ3's former stockholders under the merger agreement and agreed to pay up to $0.8 million in cash and 1,434,936 in shares of the Company’s Class A Common Stock to certain former stockholders of SYNQ3 based upon the achievement of specified future milestones. On the SYNQ3 Acquisition Date, the Company also issued 2,033,156 restricted shares of the Company’s Class A Common Stock subject to time and performance-based vesting conditions. The fair value of the purchase consideration was $15.8 million.
SYNQ3 Holdback
The $0.5 million in cash and 1,179,514 shares of the Company's Class A Common Stock were withheld for a period of 15 months (the "SYNQ3 Holdback Amount"). The Company determined that there are two components to the SYNQ3 Holdback Amount related to deferred consideration and contingent consideration, each comprised of cash and shares.
The deferred cash holdback consideration of $0.1 million and the deferred share holdback consideration of 361,145 shares of the Company's Class A Common Stock (collectively the "Deferred Consideration") were not recognized as of
SOUNDHOUND AI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
the SYNQ3 Acquisition Date as such amounts were offset by the indemnification obligations of SYNQ3's former stockholders.
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. The Company 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 the Company’s Class A Common Stock. During the year ended December 31, 2024, the Company issued 38,277 shares of the Company’s 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. 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 the Company’s consolidated statement of operations and comprehensive loss.
In April 2025, the Contingent SYNQ3 Holdback Consideration was settled by issuing 472,501 shares of the Company’s Class A Common Stock and paying $0.2 million in cash. After the holdback settlement, any remaining indemnifications by the sellers to cover unsettled claims was offset against the Contingent SYNQ3 Earnout Consideration to the extent of its fair value as of December 31, 2025.
See Note 12 for more information on the fair value measurement of shares associated with the holdback.
Contingent SYNQ3 Earnout Consideration
The Company also agreed to pay in aggregate up to $0.8 million in cash and 1,434,936 in shares of Class A Common Stock to certain stockholders of SYNQ3 based on tiered annual revenue targets for each fiscal year 2024, 2025 and 2026 (the “Contingent SYNQ3 Earnout Consideration”). The Company accounted for the Contingent SYNQ3 Earnout Consideration as a liability within contingent acquisition liabilities on the Company's consolidated balance sheets and will subsequently remeasure the liability at each reporting date with changes in fair value recognized as a component of operating expense in the Company’s consolidated statement of operations and comprehensive loss. As of the SYNQ3 Acquisition Date, the Contingent SYNQ3 Earnout Consideration was estimated to be $1.7 million in aggregate and to be settled in $0.2 million cash and the remainder in shares of the Company’s Class A Common Stock. For the years ended December 31, 2025 and December 31, 2024, we recognized a gain of $6.9 million and a loss of $7.0 million, respectively, 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 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.
Restricted stock awards
The 2,033,156 restricted shares of the Company's Class A Common Stock issued at the SYNQ3 Acquisition Date to certain continuing employees of SYNQ3 subject to time and performance-based vesting conditions was determined to be a separate transaction from the SYNQ3 Acquisition and therefore is excluded from purchase consideration. See Note 15 to our consolidated financial statements included within this report for more information on stock-based awards issued in connection with the SYNQ3 Acquisition.
Purchase price allocation
The purchase price allocation was performed as of January 3, 2024 and allocated to the assets acquired and liabilities assumed based on their respective fair values, as follows (in thousands):
SOUNDHOUND AI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
| | | | | |
| January 3, 2024 |
| Cash paid | $ | 3,910 | |
| Equity consideration | 9,687 | |
| Contingent earnout consideration | 1,676 | |
| Contingent holdback consideration | 570 | |
| Purchase price | 15,843 | |
| |
| Assets acquired: | |
| Cash | 221 | |
| Accounts receivable | 1,500 | |
| Prepaid expenses | 72 | |
| Intangible assets | 12,705 | |
| Total identified assets acquired | 14,498 | |
| |
| Liabilities assumed: | |
| Accounts payable | 440 | |
| Accrued liabilities | 3,427 | |
| Other non-current liabilities | 750 | |
| Deferred tax liability | 38 | |
| Total liabilities assumed | 4,655 | |
| |
| Fair value of identifiable net assets acquired | $ | 9,843 | |
| Goodwill acquired on acquisition | $ | 6,000 | |
Goodwill recognized includes synergies expected to be achieved from the operations of the combined company and intangible assets that do not qualify for separate recognition. Expected synergies include both increased revenue opportunities and the cost savings from the planned integration of platform infrastructure, facilities, personnel, and systems. The transaction is considered a non-taxable business combination, and goodwill is not deductible for tax purposes.
The purchase price allocation was finalized as of December 31, 2024.
The following table summarizes the fair values of the identifiable intangible assets acquired (in thousands):
| | | | | | | | |
| Useful life | Fair value |
Intangible Assets: | (in years) | January 3, 2024 |
| Developed technology | 3.0 | $ | 5,210 | |
| Customer relationships | 4.0 | 4,800 | |
| Tradename | 2.0 | 1,410 | |
| Conversation data | 2.5 | 1,285 | |
| | $ | 12,705 | |
The Company 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.
SOUNDHOUND AI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Amelia Acquisition
On August 6, 2024 (the “Amelia Acquisition Date”), the Company acquired all of the issued and outstanding equity of Amelia Holdings, Inc. (the “Amelia Acquisition”), a privately-held conversational AI software company involved in the development and delivery of AI and automation solutions and related services to improve customer experience and optimize business outcomes. The Company’s acquisition of Amelia is expected to strengthen SoundHound’s position in voice and conversational AI and allow the Company to enter new industries such as healthcare, insurance, financial services, energy and retail, expanding its market reach.
The total purchase consideration includes 3,809,520 shares of the Company's Class A Common Stock issued to the selling shareholders. The Company also issued and deposited 2,149,530 shares of Class A Common Stock otherwise owed to the selling shareholders into an escrow account in order to partially secure the indemnification obligations of the selling shareholders to the Company under the purchase agreement (the “Escrow Consideration”). The fair value of equity issued as part of the consideration paid was determined on the basis of the closing market price of the Company’s shares on the Amelia Acquisition Date, which also incorporated a discount for lack of marketability rates caused by the trading restrictions due to the fact that the shares were not registered at issuance and consequently there is a six-month holding period. The Company also paid $8.4 million of cash for seller transaction expenses in connection with the closing of the Amelia Acquisition. The Company 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 "Amelia Contingent Earnout Consideration). The fair value of the purchase consideration was $98.6 million.
In connection with the Amelia Acquisition, the Company assumed the amended senior secured term loan facility from Amelia in an aggregate principal amount of $121.5 million (“Amelia Debt”). On December 3, 2024, the Company 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 repaid in full.
Escrow Consideration
The Company accounted for the Escrow Consideration as equity-classified shares issued as part of the consideration transferred. The Company recorded an indemnification asset of $1.4 million under other non-current assets related to assumed sales tax and litigation contingent liabilities that existed prior to the Amelia Acquisition Date and are covered by the Company’s indemnification rights provided by the sellers. Upon the settlement of any valid indemnification claims against the selling shareholders, the escrow agent will return a number of shares to the Company equal to the dollar value of the indemnified loss divided by the reference price of $5.35 as stipulated in the purchase agreement. The Company concluded that this variability in settlement value is a derivative that is required to be remeasured to fair value due to changes in stock price. See Note 12 to our consolidated financial statements included within this report for more information on the fair value measurement of the derivative related to indemnification rights. Upon the expiration of the escrow period, any remaining shares within the escrow account will be released to the selling shareholders.
Contingent Amelia Earnout Consideration
The Company also agreed to pay up to 16,822,429 in shares of Class A Common Stock to the selling shareholders based on achievement of certain annual revenue targets in fiscal years 2025 and 2026. The Company accounted for the Contingent Amelia Earnout Consideration as a liability within contingent acquisition liabilities on the Company's consolidated balance sheets and will subsequently remeasure the liability at each reporting date with changes in fair value recognized as a component of operating expense in the Company’s consolidated statement of operations and comprehensive loss. As of the Amelia Acquisition Date, the Contingent Amelia Earnout Consideration had an estimated fair value of $66.3 million. For the year ended December 31, 2025 and December 31, 2024, the Company recognized a gain of $157.6 million and a loss of $211.9 million, respectively, 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. 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
SOUNDHOUND AI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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 Company assessed the 2026 revenue target as probable of being met.
Purchase price allocation
The purchase price allocation was performed as of August 6, 2024 and allocated to the assets acquired and liabilities assumed based on their respective fair values, as follows (in thousands):
| | | | | |
| August 6, 2024 |
| Cash paid | $ | 8,420 | |
| Equity consideration | 15,291 | |
| Equity consideration in escrow | 8,628 | |
| Contingent earnout consideration | 66,269 | |
| Purchase price | 98,608 | |
| |
Assets acquired: | |
| Cash and cash equivalents | 1,128 | |
| Accounts receivable | 8,075 | |
| Other current assets | 1,822 | |
| Contract asset - current | 4,090 | |
| Property and equipment | 348 | |
| Right-of-use assets | 227 |
| Other assets | 1,741 |
| Intangible assets | 174,500 | |
| Total identified assets acquired | 191,931 | |
| |
Liabilities assumed: | |
| Accounts payable | 11,112 | |
| Accrued liabilities | 10,965 | |
| Income tax liabilities | 582 | |
| Short-term debt | 70,000 | |
| Operating lease liability, current | 211 | |
| Financing lease liability, current | 37 | |
| Other current liabilities | 3,474 | |
| Deferred revenue | 23,408 | |
| Deferred revenue, non-current | 4,295 | |
| Long-term debt | 51,511 | |
| Deferred tax liabilities | 11,820 | |
| Operating lease liability, non-current | 16 | |
| Other liabilities, non-current | 34 | |
| Income tax liability, net of current portion | 1,068 | |
| Total liabilities assumed | 188,533 | |
| |
| Fair value of identifiable net assets acquired | $ | 3,398 | |
| Goodwill acquired on acquisition | $ | 95,210 | |
SOUNDHOUND AI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Goodwill recognized includes synergies expected to be achieved from the operations of the combined company and intangible assets that do not qualify for separate recognition. Expected synergies include both increased revenue opportunities and the cost savings from the planned integration of platform infrastructure, facilities, personnel, and systems. The transaction is considered a non-taxable business combination, and goodwill is not deductible for tax purposes.
During the year ended December 31, 2025, the Company recorded measurement period adjustments to decrease the accrued liabilities by $0.1 million and other current liabilities by $0.4 million due to true-up of the accrued payroll taxes and sales taxes subsequent to the acquisition. As a result of the adjusted acquisition-date fair value of liabilities assumed, the Company 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 purchase price allocation was finalized as of September 30, 2025.
The following table summarizes the fair values of the identifiable intangible assets acquired (in thousands):
| | | | | | | | |
| Useful life | Fair value |
| Intangible Assets: | (in years) | at acquisition |
| Developed technology | 7.0 | $ | 98,900 | |
| Customer relationships | 7.0 | 68,600 | |
| Trade names | 5.0 | 7,000 | |
| | $ | 174,500 | |
The Company incurred $6.7 million in acquisition related expenses, of which $0.9 million and $5.8 million were incurred during the years ended December 31, 2025 and December 31, 2024, respectively, and recorded as general and administration expenses in its consolidated statements of operations and comprehensive loss.
Interactions Acquisition
On September 3, 2025 (the “Interactions Acquisition Date”), the Company acquired all of the issued and outstanding equity of Interactions Corporation (the “Interactions Acquisition”), a pioneer in AI for customer service and workflow orchestration. This strategic deal is expected to strengthen and extend SoundHound’s growing leadership in Agentic AI and accelerate its market penetration in customer service across enterprise businesses. The transaction also expands SoundHound’s customer portfolio across various industries, including global consumer icons, large technology device brands, insurers, automakers, and other preeminent Fortune 100 companies across industries.
The fair value of the preliminary purchase consideration was $76.1 million. The preliminary purchase consideration includes $19.4 million of cash paid to the selling shareholders. The Company also paid $4.1 million of cash for seller transaction expenses in connection with the closing of the Interactions Acquisition.
In connection with the Interactions Acquisition, the Company paid the debt held by Interactions (the “Interactions Debt”) on the Interactions Acquisition Date in an aggregate principal amount of $41.5 million as part of the purchase consideration under the merger agreement.
The Company has also withheld purchase consideration of $1.2 million in cash, subject to customary net working capital adjustments, to partially secure the indemnification obligations of Interactions' former stockholders under the merger agreement and agreed to pay up to $25.0 million in cash to certain former stockholders of Interactions based
SOUNDHOUND AI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
upon the achievement of specified future milestones in fiscal years 2026 and 2027 (the "Contingent Interactions Earnout Consideration).
Interactions Holdback
As of the Interactions Acquisition Date, the $1.2 million in cash withheld (the "Deferred Interactions Holdback Consideration") consisted of two components, adjustment holdback consideration and indemnity holdback consideration.
The adjustment holdback consideration of $1.0 million was recorded within other current liabilities at fair value as of the Interactions Acquisition Date (the "Interactions Adjustment Holdback Consideration") and is estimated to be paid to Interactions' former stockholders for the settlement of net working capital adjustments after sellers finish the review of the closing statement submitted by the acquirer within 120 days subsequent to the Interactions Acquisition Date.
The indemnity holdback consideration of $0.2 million was recorded within other current liabilities, which was withheld for a period of 12 months subsequent to the Interactions Acquisition Date (the "Interactions Indemnity Holdback Consideration"). Payment will occur after the sellers complete their review of the closing statement which must be submitted by the acquirer within 120 days of the Interactions Acquisition Date.
Contingent Interactions Earnout Consideration
The Company also agreed to pay up to $25.0 million in cash to the selling shareholders based on achievement of certain annual revenue targets in fiscal years 2026 and 2027 and renewal or extension of an existing contract with a specific customer on or before March 31, 2026 (the "Contingent Interactions Earnout Consideration"). The Company accounted for the Contingent Interactions Earnout Consideration as a liability within contingent acquisition liabilities on the Company's consolidated balance sheets and will subsequently remeasure the liability at each reporting date with changes in fair value recognized as a component of operating expense in the Company’s 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 the year ended December 31, 2025, the Company 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. As of December 31, 2025, the Company assessed the 2026 and 2027 revenue targets were probable of being met, and an existing contract with a specific customer was probable of being renewed or extended on or before March 31, 2026. See Note 22 to our consolidated financial statements included within this report for more information on the cash paid
SOUNDHOUND AI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
to settle a portion of the Contingent Interactions Earnout Consideration due to the renewal of an existing contract subsequent to December 31, 2025.
See Note 12 to our consolidated financial statements for more information on the fair value measurement of Interactions Holdback Amount and Contingent Interactions Earnout Consideration.
Preliminary purchase price allocation
The preliminary purchase price allocation was performed as of September 3, 2025 and allocated to the assets acquired and liabilities assumed based on their respective fair values, as follows (in thousands):
| | | | | |
| Preliminary:
Sep 3, 2025 |
| Cash paid | $ | 65,033 | |
| Deferred holdback consideration | 1,150 | |
| Contingent earnout consideration | 9,900 | |
| Purchase price | 76,083 | |
| |
| Assets acquired: | |
| Cash and cash equivalents | 10,431 | |
| Accounts receivable | 8,626 | |
| Other current assets | 1,519 | |
| Contract assets and unbilled receivable, current, net | 3,586 | |
| Property and equipment | 1,722 | |
| Right-of-use assets | 659 | |
| Contract assets and unbilled receivable, non-current, net | 3,081 | |
| Other assets | 176 | |
| Intangible assets | 39,500 | |
| Total identified assets acquired | 69,300 | |
| |
| Liabilities assumed: | |
| Accounts payable | 3,048 | |
| Accrued liabilities | 3,508 | |
| Operating lease liability, current | 241 | |
| Financing lease liability, current | 298 | |
| Deferred revenue | 4,155 | |
| Deferred revenue, non-current | 2,300 | |
| Operating lease liability, non-current | 478 | |
| Other liabilities, non-current | 256 | |
| Total liabilities assumed | 14,284 | |
| |
| Fair value of identifiable net assets acquired | $ | 55,016 | |
| Goodwill acquired on acquisition | $ | 21,067 | |
Goodwill recognized includes synergies expected to be achieved from the operations of the combined company and intangible assets that do not qualify for separate recognition. Expected synergies include both increased revenue opportunities and the cost savings from the planned integration of platform infrastructure, facilities, personnel, and
SOUNDHOUND AI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
systems. The transaction is considered a non-taxable business combination, and goodwill is not deductible for tax purposes.
The purchase accounting is not yet complete as of December 31, 2025 and as such, the final allocation among purchase consideration, intangible assets, net assets acquired and goodwill may be subject to change. 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 acquisition date.
The following table summarizes the preliminary fair values of the identifiable intangible assets acquired (in thousands):
| | | | | | | | |
| Useful life | Preliminary fair value |
| Intangible Assets: | (in years) | at acquisition |
| Customer relationships | 5.0 | $ | 26,700 | |
| Developed Technology | 5.0 | 12,000 | |
| Trademark | 2.0 | 800 | |
| | $ | 39,500 | |
The fair values of all intangible assets were estimated using the income approach. Under the income approach, an intangible asset’s fair value is equal to the present value of future economic benefits to be derived from ownership of the asset. Customer relationships was valued under the multi-period excess earnings method, which assumes that the value of intangible assets is equal to the present value of the incremental after-tax cash flows attributable specifically to the customer relationships. Developed technology and trade names were valued under the relief from royalty method, which assumes value to the extent that the acquired company is relieved of the obligation to pay royalties for the benefits received from them. The present value of projected cash flows included significant judgment and assumptions regarding (a) the projected revenues, attrition rate, and the discount rate for the certain customer contracts and related relationships, (b) the projected revenues, projected expenses, migration curve, contributory asset charges, and the discount rate for the developed technology, (c) the projected revenues, royalty rate, and the discount rate for the trade name.
The Company incurred $5.0 million in acquisition related expenses during the year ended December 31, 2025 and recorded as general and administration expenses in its consolidated statements of operations and comprehensive loss.
Unaudited pro forma financial information
The financial results of SYNQ3, Amelia and Interactions are included in these consolidated financial statements from the date of the acquisition. SYNQ3 contributed revenue of $12.0 million and net loss of $7.5 million to the Company for the year ended December 31, 2024. Amelia contributed revenue of $42.0 million and net loss of $8.5 million to the Company for the year ended December 31, 2024. Interactions contributed revenue of $23.1 million, and net income of $2.7 million to the Company for the year ended December 31, 2025.
The following table includes unaudited pro forma financial information that presents combined results of the Company as if the SYNQ3 and Amelia acquisitions were completed on January 1, 2023, and the Interactions acquisition was completed on January 1, 2024, the beginning of the comparable prior annual reporting period.
| | | | | | | | | | | |
| Unaudited |
| Years Ended |
| December 31, 2025 | December 31, 2024 | December 31, 2023 |
| Revenue | $ | 211,701 | | $ | 225,556 | | $ | 153,586 | |
| Net loss attributable to SoundHound AI, Inc. | $ | (8,624) | | $ | (367,400) | | $ | (158,339) | |
SOUNDHOUND AI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The unaudited pro forma financial information includes the combined historical operating results of the Company, SYNQ3, Amelia and Interactions prior to the acquisition, with adjustments to give effect for the acquisitions and related events. Pro forma adjustments have been made to reflect the incremental intangible asset amortization to be incurred based on the fair values and useful lives of each identifiable intangible asset, incremental stock-based compensation related to inducement equity awards, incremental transaction costs related to the acquisitions, adjustments to interest expense related to previously outstanding debt held by Amelia and Interactions, elimination of profit or loss from stock warrants issued by Interactions, reduction of interest income to reflect reduced average cash and equivalents after funding the Acquisitions with cash, removal of earnings attributable to non-controlling interest due to changes in Interactions ownership structure, and the related tax effects of pro forma adjustments for the period. These unaudited pro forma results are presented for informational purposes only and are not necessarily indicative of what the actual results of operations of the combined company would have been if the acquisition had occurred at the beginning of the period presented, nor are they indicative of future results of operations. Given the paydown of Amelia Debt occurred in December 2024, which was shortly after the acquisition dates, and the paydown of Interaction Debt occurred at the Interaction Acquisition Date, the interest expenses from Amelia Debt and Interaction Debt were excluded from the unaudited pro forma financial information. The unaudited pro forma results are based on the preliminary purchase price allocation under Interactions Acquisition and will be updated to reflect the final amounts as the allocation is finalized during the measurement period.
The Company did not have any material nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings.
Other Acquisition
On June 14, 2024, the Company completed an immaterial acquisition for total purchase consideration of $1.0 million. As part of the acquisition, the Company 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 quarter of the acquisition, resulting from a favorable fair value of identifiable net assets acquired at the date of acquisition as compared with the Company’s purchase price. The Company was able to negotiate a bargain purchase price as a result of the recurring losses and pre-filing bankruptcy status of the selling entity.
The purchase price allocation was finalized as of March 31, 2025.
The following table summarizes the fair values of the identifiable intangible assets acquired (in thousands):
| | | | | | | | |
| Useful life | Fair value |
Intangible Assets: | (in years) | at acquisition |
| Developed technology | 3.0 | $ | 1,530 | |
| Customer relationships | 3.0 | 960 | |
| Tradename | 3.0 | 60 | |
| | $ | 2,550 | |
The Company 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.
The financial results of the acquired entity are included in these consolidated financial statements from the date of the acquisition, and are immaterial. The Company has not separately presented unaudited pro forma results of operations reflecting the acquisition as the impacts were not material to the consolidated financial statements.
SOUNDHOUND AI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 4. REVENUE RECOGNITION
Revenue Recognition
The Company recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Revenues are generally recognized upon the transfer of control of promised products or services provided to customers, reflecting the amount of consideration the Company expects to receive for those products or services.
The Company’s arrangements with customers may contain multiple obligations. Individual services are accounted for separately if they are distinct — that is, if a customer can benefit from it on its own or with other resources that are readily available to the customer and if the service is separately identifiable from other items in the contract.
The Company derives its revenue primarily 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. The Company applies significant judgment in identifying and evaluating any terms and conditions in contracts which impact revenue recognition.
The Company has the following performance obligations in contracts with customers:
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.
The Company has determined that the hosted services arrangements are a single performance obligation comprised of a series of distinct services, since each day of providing access to hosted services is substantially the same and the customer simultaneously receives and consumes the benefits as access is provided. These services are provided either on a usage basis (i.e., variable consideration) or on a fixed fee subscription basis. The Company recognizes 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. In making this determination, factors such as the degree of integration, the significance of enhancement to existing 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.
In instances where the Company 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.
All revenues derived as a result of the SYNQ3 Acquisition, and substantial revenues derived as a result of the Amelia Acquisition and Interactions Acquisition are categorized as hosted services revenue.
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. The Company considers three criteria in making their assessment including (1) the customer simultaneously receives and consumes the benefits; (2) the Company’s performance creates or enhances an asset that the customer controls as the asset is created or enhanced; or (3) the Company’s performance does not create an asset with an alternative use to the entity and the entity has an enforceable right to payment for
SOUNDHOUND AI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
performance completed to date. If none of the criteria are met, revenues are determined to be recognized at a point in time.
For distinct professional services determined to be recognized over-time, measuring the stage of completion of a project requires significant judgment and estimates and is based on either input or output measures. During the year ended December 31, 2025, $14.7 million of professional service revenue was recognized over time, with the remaining $0.4 million recognized at a point in time when the performance obligation was fulfilled and control of the service was transferred to the customer. During the year ended December 31, 2024, $9.4 million of professional service revenue was recognized over time, with the remaining $0.1 million recognized at a point in time when the performance obligation was fulfilled and control of the service was transferred to the customer. During the year ended December 31, 2023, $7.4 million of professional service revenue was recognized over time, with the remaining $0.9 million recognized at a point in time when the performance obligation was fulfilled and control of the service was transferred to the customer.
Monetization
Monetization revenues are primarily derived from advertising payments associated with ad impressions placed on the SoundHound music identification application. The amount of revenue is based on actual monetization generated or usage, which represent a variable consideration with constrained estimates. Therefore, the Company recognizes 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 the Company is acting as a principal or an agent in the transaction. The Company has determined that it does not act as the principal in monetization arrangements because it does not control the transfer of the service and it does not set the price. Based on these factors, the Company reports revenue on a net basis.
Licensing
The Company licenses Amelia’s software solutions, Virtual Assistance applications, and other voice solutions that are embedded in customers’ products or services. Licensing revenues are a distinct performance obligation that is recognized when control is transferred to the customer, which is at a point in time for non-customized solutions. 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. Licensing revenue on fixed considerations including fixed fee and a 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. Licenses may include post-contract support, which is a distinct performance obligation and revenue from post- contract support is recognized ratably over the licensing period.
When a contract has multiple performance obligations, the transaction price is allocated to each performance obligation based on its relative estimated standalone selling price (“SSP”). Judgments are required to determine the SSP for each distinct performance obligation. SSP is determined by maximizing observable inputs from pricing of standalone sales, when possible. 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, the Company estimates 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.
SOUNDHOUND AI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
These factors may vary over time, depending upon the unique facts and circumstances related to each deliverable. If the facts and circumstances underlying the factors considered change or should future facts and circumstances lead the Company to consider additional factors, the Company’s best estimate of SSP may also change. When such observable data is not available because there is a limited number of transactions or prices are highly variable, the Company will estimate the standalone selling price using the residual approach.
The Company’s long-term contracts generally do not have significant financing components, as there is normally payment and performance in each year of the contract. The Company has elected the practical expedient to not adjust promised amounts of consideration for the effects of a significant financing component if the Company expects, at contract inception, that the period between when the Company transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less. If there is a period of one year or longer between the transfer of promised services and payment, it is generally for reasons other than financing, thus, the Company does not adjust the transaction price for financing components. In the limited cases where a significant financing component is present, the Company adjusts the promised consideration for the effects of a significant financing component and to recognize revenue to approximate an amount that reflects the cash selling price that a customer would have paid for the promised goods or services.
For the years ended December 31, 2025, 2024 and 2023, revenue under each performance obligation was as follows (in thousands):
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| 2025 | | 2024 | | 2023 |
| Hosted services | $ | 108,255 | | | $ | 57,246 | | | $ | 18,364 | |
| Licensing | 45,146 | | | 17,577 | | | 18,600 | |
| Professional services | 15,059 | | | 9,488 | | | 8,275 | |
| Monetization | 460 | | | 382 | | | 634 | |
| Total | $ | 168,920 | | | $ | 84,693 | | | $ | 45,873 | |
SOUNDHOUND AI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2025, 2024 and 2023, the disaggregated revenue by geographic location* was as follows (in thousands):
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| 2025 | | 2024 | | 2023 |
| United States | $ | 108,387 | | | $ | 46,751 | | | $ | 6,769 | |
| Korea | 10,336 | | | 12,289 | | | 22,962 | |
| France | 7,307 | | | 8,756 | | | 4,090 | |
| Germany | 360 | | | 196 | | | 5,950 | |
| Other | 42,530 | | | 16,701 | | | 6,102 | |
| Total | $ | 168,920 | | | $ | 84,693 | | | $ | 45,873 | |
*Revenue by geographic region is allocated to individual countries based on the billing location of the customer. The end customer location may be different than the customer's billing location. The ‘Other’ category is composed of geographic regions with sales less than 10% of the consolidated revenue.
For the years ended December 31, 2025, 2024 and 2023, the disaggregated revenue by recognition pattern was as follows (in thousands):
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| 2025 | | 2024 | | 2023 |
| Over time revenue | $ | 125,887 | | | $ | 67,789 | | | $ | 25,757 | |
| Point-in-time | 43,033 | | | 16,904 | | | 20,116 | |
| Total | $ | 168,920 | | | $ | 84,693 | | | $ | 45,873 | |
The Company also disaggregates revenue by service type. This disaggregation consists of Product Royalties, Service Subscriptions and Monetization. Product Royalties revenues are derived from Houndified Products, which are voice-enabled tangible products across the automotive and consumer electronics industries. Revenues from Product Royalties are based on volume, usage, or life of the products, which are driven by number of devices, users, or unit of time. Service Subscription revenues are generated through Houndified Services, Amelia services, and Virtual Assistance applications, which include customer services, food ordering, content, appointments and voice commerce, autonomous business workflows, and IT systems analysis. Subscription revenues are derived from monthly fees based on fixed fees, usage-based revenue, revenue per query or revenue per user. Houndified Products, Houndified Services, Amelia services, and Virtual Assistance applications may include professional services that develop and customize the Houndify platform, Amelia Software Platform, and Virtual Assistance applications to fit customers’ specific needs,
SOUNDHOUND AI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
and any post-contract support for on-premise solutions. Revenues from Monetization are generated from the SoundHound music identification app and are primarily attributable to user ad impression revenue.
For the years ended December 31, 2025, 2024 and 2023, the disaggregated revenue by service type was as follows (in thousands):
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| 2025 | | 2024 | | 2023 |
| Service subscriptions | $ | 133,547 | | | $ | 56,347 | | | $ | 1,940 | |
| Product royalties | 34,913 | | | 27,964 | | | 43,299 | |
| Monetization | 460 | | | 382 | | | 634 | |
| Total | $ | 168,920 | | | $ | 84,693 | | | $ | 45,873 | |
Contract Balances
The Company performs its obligations under a contract with a customer by providing access to software, licensing right to use software, or providing services in exchange for consideration from the customer. The timing of the Company’s performance often differs from the timing of the customer’s payment, which results in the recognition of a receivable, a contract asset or deferred revenue.
As of January 1, 2024, accounts receivable, net of allowances, was $4.1 million, contract assets were $28.3 million and deferred revenue was $9.2 million.
The contract asset and unbilled accounts receivable, net as of December 31, 2025 and December 31, 2024 consists of the following (in thousands):
| | | | | | | | | | | | | | | | | |
| Balance Sheet Presentation | | December 31,
2025 | | December 31,
2024 |
| Unbilled account receivables - current | Contract assets and unbilled receivables, net | | $ | 17,728 | | | $ | 13,441 | |
| Contract assets - current | Contract assets and unbilled receivables, net | | 20,461 | | | 13,204 | |
| Unbilled account receivables - non-current | Contract assets and unbilled receivables, non-current, net | | 12,988 | | | 922 | |
| Contract assets - non-current | Contract assets and unbilled receivables, non-current, net | | 16,918 | | | 11,957 | |
The change in the Company's unbilled accounts receivable and contract assets during the current period was primarily the result of new contracts, customer invoicing, and the performance of the Company's contracts, respectively. The Company has not recorded any specific asset impairment charges related to contract assets during the periods presented in the consolidated financial statements.
Revenues recognized included in the balances of the deferred revenue at the beginning of the reporting period for the years ended December 31, 2025, 2024 and 2023 were $24.1 million, $5.1 million and $7.9 million, respectively.
As of December 31, 2025, the aggregate amount of the transaction price allocated to the remaining performance obligations related to customer contracts that were unsatisfied or partially unsatisfied was $79.5 million. 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. This amount does not include contracts to which the customer is not committed, contracts for which the Company recognizes revenue equal to the amount the Company has the right to invoice for services performed, or future sales-based or usage-based royalty payments in exchange for access to the Company’s hosted services. This amount is subject to change due to future revaluations of variable consideration, terminations, other contract modifications or currency adjustments. The estimated timing of the recognition of remaining unsatisfied performance
SOUNDHOUND AI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
obligations is subject to change and is affected by changes to scope, changes in timing of delivery of products and services, or contract modifications.
NOTE 5. GOODWILL AND INTANGIBLE ASSETS
Goodwill
The change in the carrying value of goodwill including the effect of measurement period adjustments for the year ended December 31, 2025, was as follows (in thousands):
| | | | | |
| Balance as of December 31, 2023 | $ | — | |
| Acquisition of SYNQ3 | $ | 6,000 | |
| Acquisition of Amelia | $ | 95,704 | |
| Balance as of December 31, 2024 | $ | 101,704 | |
| Acquisition of Interactions | 21,067 | |
| Measurement period adjustment | $ | (494) | |
| Balance as of December 31, 2025 | $ | 122,277 | |
The Company has applied the acquisition method of accounting in accordance with ASC 805 and recognized assets acquired and liabilities assumed of SYNQ3, Amelia, and Interactions at their fair value as of the date of acquisition, with the excess purchase consideration recorded to goodwill. As the Company finalizes the estimation of the fair value of the assets acquired and liabilities assumed, additional adjustments to the amount of goodwill may be necessary. Refer to Note 3 for further information on the measurement period adjustments of Amelia Acquisition.
Intangible Assets
The gross carrying value, accumulated amortization and net carrying value of intangible assets consisted of the following (in thousands):
| | | | | | | | | | | | | | |
| | December 31, 2025 |
| Useful life (in years) | Gross Carrying Value | Accumulated Amortization | Net Carrying Value |
| Developed technology | 3.0 - 7.0 | $ | 117,640 | | $ | 24,871 | | $ | 92,769 | |
| Customer relationships | 3.0 - 7.0 | 101,060 | | 18,422 | | 82,638 | |
| Tradename | 2.0 - 5.0 | 9,270 | | 3,538 | | 5,732 | |
| Conversation data | 2.5 | 1,285 | | 1,029 | | 256 | |
| Total | | $ | 229,255 | | $ | 47,860 | | $ | 181,395 | |
| | | | | | | | | | | | | | |
| | December 31, 2024 |
| Useful life (in years) | Gross Carrying Value | Accumulated Amortization | Net Carrying Value |
| Developed technology | 3.0 - 7.0 | $ | 105,640 | | $ | 7,696 | | $ | 97,944 | |
| Customer relationships | 3.0 - 7.0 | 74,360 | | 5,322 | | 69,038 | |
| Tradename | 2.0 - 5.0 | 8,470 | | 1,280 | | 7,190 | |
| Conversation data | 2.5 | 1,285 | | 514 | | 771 | |
| Total | | $ | 189,755 | | $ | 14,812 | | $ | 174,943 | |
Amortization expense of intangible assets was $33.0 million for the year ended December 31, 2025. This expense was recorded as $17.2 million within cost of revenues for the year ended December 31, 2025. Amortization expense of
SOUNDHOUND AI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
intangible assets was $14.8 million for the year ended December 31, 2024. This expense was recorded as $7.7 million within cost of revenues for the year ended December 31, 2024. There was no amortization expense during the year ended December 31, 2023.
Future amortization expense of intangible assets held as of December 31, 2025, is as follows (in thousands):
| | | | | |
| Year ending December 31, | |
| 2026 | $ | 37,512 | |
| 2027 | 34,930 | |
| 2028 | 33,138 | |
| 2029 | 32,501 | |
| Thereafter | 43,314 | |
| Total | $ | 181,395 | |
NOTE 6. PROPERTY AND EQUIPMENT, NET AND CAPITALIZED SOFTWARE DEVELOPMENT COST
Property and equipment, net consisted of the following (in thousands):
| | | | | | | | | | | |
| December 31,
2025 | | December 31,
2024 |
| Computer equipment | $ | 17,441 | | | $ | 19,480 | |
| Software and voice recordings | 10,453 | | | 10,033 | |
| Leasehold improvements | 4,618 | | | 3,871 | |
| Furniture and fixtures | 962 | | | 1,154 | |
| Construction in progress | 15 | | | — | |
| Total property and equipment, at cost | 33,489 | | | 34,537 | |
| Less: accumulated depreciation and amortization | (30,562) | | | (33,298) | |
| Total property and equipment, net | $ | 2,928 | | | $ | 1,239 | |
As of December 31, 2025 and 2024, property and equipment, net includes assets under finance lease obligations (see Note 16 for additional information) with an aggregate cost of approximately $0.6 million and $0.6 million, respectively, and accumulated depreciation of approximately $0.2 million and $0.4 million, respectively. Depreciation and amortization expense in respect of capitalized property and equipment totaled approximately $1.0 million, $1.2 million and $2.3 million for the years ended December 31, 2025, 2024 and 2023, respectively.
As of December 31, 2025 and 2024, capitalized software development costs were $6.4 million and zero, respectively, and are included in other non-current assets in the accompanying consolidated balance sheets. Amortization expense for the years ended December 31, 2025, 2024 and 2023, was less than $0.1 million, zero and zero, respectively.
SOUNDHOUND AI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 7. ACCRUED LIABILITIES
Accrued liabilities consisted of the following (in thousands):
| | | | | | | | | | | |
| December 31,
2025 | | December 31,
2024 |
| Accrued compensation expenses | $ | 13,949 | | | $ | 15,850 | |
| Accrued vendor payables | 8,682 | | | 8,141 | |
| Accrued litigation liabilities | 3,045 | | | 1,750 | |
| Other accrued liabilities | 649 | | | 551 | |
| $ | 26,325 | | | $ | 26,291 | |
NOTE 8. COMMITMENTS AND CONTINGENCIES
Contracts
In August 2021, the Company entered into an exclusive agreement with a cloud service provider to host its voice artificial intelligence platform pursuant to which the Company committed to pay a minimum of $98.0 million in cloud costs over a seven-year period subject to variable increases based on usage.
Aggregate non-cancelable future minimum payments were as follows as of December 31, 2025 (in thousands):
| | | | | |
| 2026 | 16,000 | |
| 2027 | 24,000 | |
| 2028 | 24,000 | |
| Total | $ | 64,000 | |
Legal Proceedings
From time to time, the Company may have certain contingent liabilities that arise in the ordinary course of its business activities. The Company accrues contingent liabilities when it is probable that future expenditures will be made, and such expenditures can be reasonably estimated. The Company's assessment may change over time as individual proceedings or claims progress.
VB Assets, LLC v. SoundHound
On November 21, 2024, VB Assets, LLC, a non-practicing entity, filed a complaint against the Company in the United States District Court for the District of Delaware alleging patent infringement under 35 U.S.C. § 271. The case is captioned as VB Assets, LLC v. SoundHound AI, Inc., Case No. 1:24-cv-1279-MN. In its complaint, VB Assets, LLC alleges the Company is infringing U.S. Patent Nos. 8,073,681, 11,222,626, 8,886,536, 9,269,097, 9,502,025, and 11,087,385. VB Assets, LLC subsequently amended its complaint adding allegations that the Company is also infringing U.S. Patent Nos. 10,755,699, 10,297,249, and 7,818,176. At the appropriate time, the Company will deny all infringement allegations and allege that VB Assets, LLC patents asserted against the Company are invalid and/or unenforceable. The Company intends to vigorously defend itself in all respects. As of December 31, 2025, no determination can be made as to the likelihood of a favorable or unfavorable outcome. In accordance with ASC 450, Contingencies, no reasonably possible loss or range of loss can be estimated and accrued as of December 31, 2025.
Securities Litigation
On March 28, 2025, a class action complaint was filed in the United States District Court for the Northern District of California, captioned Liles v. SoundHound AI, Inc., Case No. 3:25-cv-02915-RFL. The complaint names as defendants the Company, its CEO Keyvan Mohajer, and its CFO Nitesh Sharan. The complaint asserts, among other
SOUNDHOUND AI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
things, claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended. Plaintiff seeks to represent a putative class of stockholders who purchased or otherwise acquired SoundHound securities between March 1, 2024 and March 11, 2025, both dates inclusive. On July 14, 2025, Judge Rita Lin appointed the leading plaintiff in the litigation. On July 25, 2025, a new Scheduling Order was entered. On October 1, 2025, the Lead Plaintiff served their amended complaint. The Company filed a motion to dismiss on December 12, 2025. The Plaintiffs filed their opposition to the motion to dismiss on February 10, 2026. The Company plans to file its reply on or before March 19, 2026. The hearing is scheduled in April 2026. The Company intends to vigorously defend the claims and believes the complaint lacks merit. As of December 31, 2025, no determination can be made as to the likelihood of a favorable or unfavorable outcome. In accordance with ASC 450, Contingencies, no reasonably possible loss or range of loss can be estimated and accrued as of December 31, 2025.
Derivative Actions
On April 8, 2025, a purported shareholder derivative complaint was filed in the United States District Court for the Northern District of California, captioned Bishop v. Mohajer, Case No. 3:25-cv-03172-JD. The complaint purports to assert claims on behalf of the Company against its directors, CEO, and CFO for breach of fiduciary duty, aiding and abetting breach of fiduciary duty, unjust enrichment, waste of corporate assets, and for contribution against Mr. Mohajer and Mr. Sharan under Sections 10(b) and 21D of the Securities Exchange Act of 1934. On April 16, 2025, a similar purported shareholder derivative complaint was filed against the same defendants in the same forum, captioned Roy v. Mohajer, Case No. 5:25-cv-03363-NC. That complaint purports to assert claims on behalf of the Company against its directors, CEO, and CFO for breach of fiduciary duty, unjust enrichment, abuse of control, gross mismanagement, waste of corporate assets, and for contribution against Mr. Mohajer and Mr. Sharan under Sections 10(b) and 21D of the Securities Exchange Act of 1934. All derivative actions have been stayed pending resolution of the Liles v. SoundHound AI et al securities class action litigation. As of December 31, 2025, no determination can be made as to the likelihood of a favorable or unfavorable outcome. In accordance with ASC 450, Contingencies, no reasonably possible loss or range of loss can be estimated and accrued as of December 31, 2025.
Other Matters
The Company continues to analyze potential sales tax exposure using a state-by-state assessment. In accordance with ASC 450, Contingencies, the Company estimated and recorded a liability of $4.1 million and $3.1 million as of December 31, 2025 and 2024.
NOTE 9. WARRANTS
Term Loan Warrants
In connection with the Credit Agreement (as defined in Note 10), the Company issued warrants to purchase up to 3,301,536 shares of the Company's Class A Common Stock to the lenders (the “Term Loan Warrants”). The Term Loan Warrants have a per share exercise price of $2.59 and may be exercised, including on a cashless basis, by the holder at any time prior to the 10-year anniversary of the issue date. The Term Loan Warrants will be automatically cashless exercised immediately prior to a change in control of the Company. The Term Loan Warrants are indexed to the Company's stock and were classified as an equity instrument. On the Term Loan Closing Date, this resulted in the Company allocating the gross proceeds and issuance costs between the Term Loan and the Term Loan Warrants based on their relative fair values, resulting in the initial recognition of the Term Loan Warrant at $4.1 million as additional paid-in-capital on the consolidated balance sheets.
In March 2024, the Company issued 2,269,982 shares of the Company's Class A Common Stock resulting from the cashless exercise in full of the Term Loan Warrants that were outstanding. As of December 31, 2024, all of the Term Loan Warrants had been exercised and no Term Loan Warrants are outstanding.
SOUNDHOUND AI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Warrants Related to the Business Combination
Public Warrants
On April 26, 2022 (the “Closing”), pursuant to a merger agreement dated as of November 15, 2021 by and among ATSP, ATSPC Merger Sub, Inc. and Legacy SoundHound, the parties consummated the merger of ATSPC Merger Sub, Inc. with and into Legacy SoundHound, with Legacy SoundHound continuing as the surviving corporation, as well as the other transactions contemplated by the Merger Agreement (the merger and such other transactions collectively referred to the “ATSP Merger”).
Prior to the ATSP Merger, ATSP issued public warrants (“Public Warrants”). Each Public Warrant entitles the holder to the right to purchase one share of common stock at an exercise price of $11.50 per share. No fractional shares were issued upon exercise of the Public Warrants. The Company may redeem the outstanding warrants, for $0.01 per warrant, upon not less than 30 days’ prior written notice of redemption, if the reported last sale price of the common stock equals or exceeds $18.00 per share (as adjusted for stock dividends, sub-divisions, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period commencing after the warrants become exercisable and ending on the third trading day before the Company sends the notice of redemption to the warrant holders. Upon issuance of a redemption notice by the Company, the warrant holders may, at any time after the redemption notice, exercise the Public Warrants for cash, or on a cashless basis.
Subsequent to the closing of the ATSP Merger, the Company’s Public Warrants continue to be classified as equity instruments, as they are indexed to the Company’s stock.
Private Warrants
Prior to the ATSP Merger, ATSP issued private warrants (“Private Warrants”). The Private Warrants were initially issued in the same form as the Public Warrants with the exception that the Private Warrants: (i) would not be redeemable by the Company and (ii) may be exercised for cash or on a cashless basis, so long as they are held by the initial purchasers or any of their permitted transferees. If the Private Warrants are held by holders other than the initial purchasers or any of their permitted transferees, the Private Warrants will be redeemable by the Company and exercisable by the holders on the same basis as the Public Warrants.
The Private Warrants were initially classified as derivative liability instruments as they met the definition of a derivative and were not considered indexed in the Company's own stock as the settlement value could be dependent on who held the Private Warrants at the time of exercise. Upon the Closing of the ATSP Merger, the Company modified its Private Warrants to be identical to its Public Warrants. Therefore, the Private Warrants met requirements for classification as equity instruments, as they are indexed to the Company’s stock.
As of December 31, 2025 and December 31, 2024, there were 3,654,115 and 3,663,955 Public Warrants and Private Warrants issued and outstanding, respectively. During the years ended December 31, 2025 and December 31, 2024, the Company issued 9,840 and 2,041 shares, respectively, of the Company's Class A Common Stock resulting from the exercise of Public Warrants and Private Warrants that were outstanding and raised $0.1 million and less than $0.1 million, respectively, in cash proceeds. There was no exercise during the years ended December 31, 2023.
NOTE 10. NOTE PAYABLE
SVB March 2021 Note
In March 2021, the Company entered into a loan and security agreement with a commercial bank to borrow $30.0 million. The loan bore interest at an annual rate equal to the greater of 9.00% or 5.75% above the Prime Rate. During the year ended December 31, 2023, the interest rate was 13.75%. Payments were interest-only for the first
SOUNDHOUND AI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
twelve months and are now principal and interest through maturity. During the year ended December 31, 2023, the Company recorded less than $0.1 million related to the amortization of the debt discount in interest expense.
Concurrently with the Company's entry into the Credit Agreement (as defined below), the Company used a portion of the proceeds to prepay in full all outstanding obligations under, and terminated, the SVB March 2021 Note. In connection with the SVB March 2021 Note prepayment, the Company paid a total of $18.5 million on April 14, 2023, which consisted of (i) the remaining principal amount outstanding of $18.1 million, (ii) a prepayment premium of $0.3 million, (iii) accrued and unpaid interest of $0.1 million and (iv) a nominal amount for transaction expenses, resulting in a loss on debt extinguishment of $0.4 million.
SCI June 2021 Note
In June 2021, the Company entered into a loan and security agreement with a lender to obtain credit extensions to the Company. Extensions were available in $5.0 million increments up to a total commitment amount of $15.0 million. The Company drew an initial $5.0 million on June 14, 2021 and the remaining $10.0 million on December 1, 2021. The loan bore interest at an annual rate equal to the greater of 9.00% or 5.75% above the Prime Rate. During the year ended December 31, 2023, the interest rate was 13.75%. Payments were interest-only for the first twelve months and principal and interest through maturity. During the year ended December 31, 2023, the Company recorded less than $0.1 million related to the amortization of the debt discounts in interest expense.
Concurrently with the Company’s entry into the Credit Agreement (as defined below), the Company used a portion of the proceeds to prepay in full all outstanding obligations under, and terminated, the SCI June 2021 Note. In connection with the SCI June 2021 Note prepayment on April 14, 2023, the Company paid a total of approximately $11.7 million, which consisted of (i) the remaining principal amount outstanding of approximately $11.5 million, (ii) a prepayment premium of approximately $0.2 million and (iii) a nominal amount for transaction expenses resulting in a loss on debt extinguishment of $0.4 million.
Term Loan
On April 14, 2023 (the “Term Loan Closing Date”), the Company entered into a Senior Secured Term Loan Credit Agreement (the “Credit Agreement”). The Credit Agreement provides for a term loan facility in an aggregate principal amount of up to $100.0 million (the “Term Loan”). The Credit Agreement also permits the Company to request additional commitments of up to $25.0 million in the aggregate, with funding of such commitments in the sole discretion of the lenders, under certain circumstances, which will be subject to the same terms as the Term Loan if funded. On the Term Loan closing date, the Company also entered into Guarantee and Collateral Agreement. In addition, the Company is obligated to pay incremental lender fees (the "Lender Fees"), beginning on the Term Loan closing date, initially at the rate of 3.50% of the principal amount of the Term Loans for the first 18 months paid semi-annually to provide a collateral protection insurance policy on behalf of the lenders. Such rate for the Lender Fees will decrease to 2.50% after the 18-month anniversary of the Term Loan Closing Date. As the lenders are the sole beneficiary of the insurance policy, the Lender Fees are deemed to be additional fees payable to the Lenders and is therefore being recognized as interest expense over the term of the Term Loan based on effective interest method.
The Company used the proceeds from the Term Loan to (i) repay outstanding amounts equal to approximately $30.0 million under the Company’s existing loan facilities, (ii) fund an escrow account on the Term Loan Closing Date in the name of the Agent for an amount equal to the first four interest payments, (iii) pay certain fees and expenses incurred in connection with entering into the Credit Agreement, and (iv) fund the Lender Fees, together with related taxes, with the remaining proceeds to be used to fund growth investments and for general corporate purposes as permitted under the Credit Agreement.
The outstanding principal balance of the Term Loan bears interest at the applicable margin plus, at the Company’s election, either (i) the Term SOFR published by CME Group Benchmark Administration Limited for a one-month interest period plus 0.15% or (ii) the alternate base rate (“ABR”), which is a per annum rate equal to the greatest of (a) the Prime Rate (as defined in the Credit Agreement), (b) the NYFRB Rate (as defined in the Credit Agreement) plus 0.50% and (c) the Term SOFR plus 1.00%. The applicable margin under the Credit Agreement is 8.50% per annum with respect to SOFR loans, and 7.50% per annum with respect to ABR loans. As of June 30, 2024, the contractual
SOUNDHOUND AI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
interest rate was approximately 14.0%. The Company was amortizing the discounts on an effective interest basis over the period from issuance through April 14, 2027 (the “Maturity Date”). The effective interest rate was 25.18% for the quarter ended June 30, 2024. The Company incurred $6.0 million in stated interest in the consolidated statements of operations and comprehensive loss for the year ended December 31, 2024, and paid $3.5 million for the period. During the year ended December 31, 2024, the Company recorded $1.5 million in interest expense related to the debt discount.
On June 7, 2024, the Company entered into a letter agreement (the “Payoff Letter”) to prepay in full all indebtedness and other amounts outstanding and owing under the Credit Agreement. In connection with the Term Loan prepayment, the Company paid a total of $105.6 million on June 7, 2024, which consisted of (i) the remaining principal amount outstanding of $100.0 million, (ii) a prepayment premium of $5.0 million, (iii) transaction expenses of $0.6 million, resulting in a loss on debt extinguishment of $15.6 million. Accordingly, the accrued and unpaid interest of $2.6 million was waived under the Payoff Letter.
Amelia Debt
In connection with the Amelia Acquisition, the Company assumed the amended senior secured term loan facility from Amelia in an aggregate principal amount of $121.5 million, which was issued pursuant to the existing Credit Agreement (the “Amelia Debt Credit Agreement”) of Amelia with Monroe Capital Management Advisors, LLC (“Monroe”), as administrative and collateral agent for certain affiliated funds of Monroe, as lenders. In accordance with the terms of the debt assumed, on August 7, 2024, the Company paid $70.0 million in cash to pay down a portion of the outstanding principal balance and issued 2,943,917 shares of Class A common stock to settle certain fees associated with the Amelia Debt. The remaining outstanding balance of $39.7 million has a maturity date of June 30, 2026 (the “Maturity Date”) and provides, at the Company’s election, for payment of a portion of interest in cash or in kind ("PIK"), in which case interest will be capitalized and added to the outstanding principal amount, with principal and accrued interest due at the Maturity Date. The Amelia Debt may be prepaid at any time and must be prepaid, along with the applicable prepayment premium and exit fee, upon the occurrence of certain future events. The Amelia Debt will accrue interest at an annual rate equal to the sum of (a) Adjusted Term SOFR and (b)(i) an applicable margin of 9.00% for the portion of interest paid in cash, and (ii) an additional 1.00% for the portion of interest paid in kind. Upon an event of default, the interest rate will automatically increase by an additional 2.00% per annum, and may result in the declaration that all outstanding principal and interest under the Amelia Debt be immediately due and payable in whole or in part. During the year ended December 31, 2024, the Company recorded and paid $2.0 million in interest expense, of which $0.1 million was paid to settle the PIK that was capitalized and added to the outstanding principal amount.
On December 3, 2024, the Company 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. In connection with the Amelia Debt prepayment, the Company paid a total of $39.8 million on December 4, 2024, which consisted of the remaining principal amount outstanding of $39.8 million and transaction expenses of an immaterial amount, resulting in a loss on debt extinguishment of an immaterial amount.
NOTE 11. RESTRUCTURING
In January 2023, the Company announced a restructuring plan (the “Restructuring Plan”) intended to reduce operating costs, improve operating margins, improve cash flows and accelerate the Company’s path to profitability. The Restructuring Plan included a reduction of the Company’s then-current workforce by approximately 40% or 180 positions globally.
Costs associated with the Restructuring Plan consist of employee severance payments, employee benefits and share-based compensation. The costs associated with the Restructuring Plan were recorded to the restructuring expense line item within our consolidated statements of operations as incurred. During the year ended December 31, 2023, we recorded $4.6 million of restructuring expenses in connection with the Restructuring Plan, of which $1.4 million were cash payments. The Restructuring Plan was substantially complete as of December 31, 2023.
SOUNDHOUND AI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 12. FAIR VALUE MEASUREMENT
The following table presents the fair value of the Company's financial instruments that are measured or disclosed at fair value on a recurring basis (in thousands):
| | | | | | | | | | | | | | | | | |
| December 31, 2025 |
| Level 1 | | Level 2 | | Level 3 |
| Assets: | | | | | |
| Cash equivalents: | | | | | |
| Treasury bills | $ | 39,920 | | | $ | — | | | $ | — | |
| Money market funds | 21,334 | | | $ | — | | | $ | — | |
| Other non-current assets | | | | | |
| Derivative | $ | — | | | $ | — | | | $ | 4,786 | |
| Total assets | $ | 61,254 | | | $ | — | | | $ | — | |
| | | | | |
| Liabilities: | | | | | |
| Contingent acquisition liabilities (Current) | | | | | |
| Contingent earnout consideration | $ | — | | | $ | — | | | $ | 4,400 | |
| Contingent acquisition liabilities (Non-current) | | | | | |
| Contingent earnout consideration | $ | — | | | $ | — | | | $ | 129,227 | |
| Total liabilities | $ | — | | | $ | — | | | $ | 133,627 | |
| | | | | | | | | | | | | | | | | |
| December 31, 2024 |
| Level 1 | | Level 2 | | Level 3 |
| Assets: | | | | | |
| Cash equivalents: | | | | | |
| Treasury bills | $ | 38,070 | | | $ | — | | | $ | — | |
| Money market funds | 131,767 | | | $ | — | | | $ | — | |
| Total assets | $ | 169,837 | | | $ | — | | | $ | — | |
| | | | | |
| Liabilities: | | | | | |
Other current liabilities | | | | | |
Contingent holdback consideration | $ | — | | | $ | — | | | $ | 4,076 | |
Contingent acquisition liabilities | | | | | |
Contingent earnout consideration | $ | — | | | $ | — | | | $ | 286,898 | |
| Total liabilities | $ | — | | | $ | — | | | $ | 290,974 | |
Equity Line of Credit
SOUNDHOUND AI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
| | | | | |
| Liabilities: | Equity Line of Credit |
| December 31, 2022 | 1,075 | |
| Change in fair value | 1,901 | |
| Settlements | (2,976) | |
| December 31, 2023 | $ | — | |
The Company estimated the Level 3 fair value of the liability related to the ELOC using contractual inputs of the commitment shares and reimbursement fees prior to the settlement. The Company determined that the ELOC was not indexed to the Company’s own common stock and, therefore, should be accounted for in accordance with ASC 815: Derivatives. Accordingly, the Company recorded a derivative liability with an initial fair value of $1.1 million based on the upfront commitment fee and the reimbursement amount to the investor as consideration for its irrevocable commitment to purchase up to 25,000,000 shares of the Company's common stock.
Subsequent changes in the fair value of the derivative liability are dependent upon, among other things, changes in the closing share price of the Company’s common stock, the quantity and purchase price of shares purchased during the reporting period, the unused capacity under the ELOC as of the balance sheet date and the cost of raising other forms of capital. The Company adjusts the previous fair value estimate of the committed equity facility at each reporting period based on changes in the weighted average purchase price of shares purchased during the period, the unused capacity available under the ELOC, expected stock price volatility and other macroeconomic factors which impact the cost of raising comparable forms of capital.
The changes in the fair value of the committed equity facility were an increase of $1.9 million for the year ended December 31, 2023, which is included in other (income) expense, net on the consolidated statements of operations and comprehensive income (loss). The fair value of the liability then is remeasured as of the settlement date equal to the difference between the volume weighted average price at a 3% discount compared to the fair value of the common stock.
Term Loan and Term Loan Warrant
The fair value of the Company's variable rate Term Loan approximates aggregate principal amount as the interest rate of the loan approximates market rates.
The Company issued a Class A Common Stock warrant in connection with the Term Loan (see Note 9 for additional information). The warrant was recorded based on the allocation of its relative fair value of the debt proceeds of $4.1 million. The warrants were classified as equity instruments at inception with a corresponding discount recorded at issuance against the outstanding note payable in connection with the Term Loan. The common stock warrant is not subject to remeasurement at each subsequent balance sheet date due to its classification as an equity instrument as it is considered indexed to the Company’s stock. The Term Loan warrant expires in April 2033.
The Company determined the fair value of the Term Loan common stock warrant at issuance using the Black-Scholes option-pricing model using the following assumptions:
| | | | | | | | |
| Expected dividend rate | | — | % |
| Risk-free interest rate | | 3.60 | % |
| Expected volatility | | 52 | % |
| Expected term (in years) | | 5 |
All of the Term Loan Warrants had been exercised during the year ended December 31, 2024. No Term Loan Warrants had been exercised during the year ended December 31, 2023.
SOUNDHOUND AI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Escrow Consideration
Derivative
The reconciliation of the Company's derivative measured at fair value on a recurring basis using unobservable inputs (Level 3) is as follows:
| | | | | |
| Balance as of December 31, 2024 | $ | 110 | |
| Change in the fair value of derivative | 4,676 | |
| Balance as of December 31, 2025 | $ | 4,786 | |
The Company accounted for the Escrow Consideration under Amelia acquisition as equity-classified shares issued as part of the consideration transferred. Upon the settlement of any valid indemnification claims against the selling shareholders, the escrow agent will return a number of shares to the Company equal to the dollar value of the indemnified loss divided by the reference price of $5.35 as stipulated in the purchase agreement. The Company concluded that this variability in settlement value is a derivative that is required to be remeasured to fair value due to changes in stock price. During the year ended December 31, 2025, the Company recognized a gain of $4.7 million related to the change in fair value of derivative under other income in the consolidated statement of operations and comprehensive loss.
Contingent Acquisition Liabilities
Contingent Holdback Consideration
The reconciliation of the Company's Contingent SYNQ3 Holdback Consideration measured at fair value, including the effect of measurement period adjustments, on a recurring basis using unobservable inputs (Level 3) is as follows:
| | | | | |
| Balance as of December 31, 2023 | $ | — | |
| Acquisition of SYNQ3 | 981 | |
| Change in the fair value of liability | 3,712 | |
| Measurement period adjustments | (411) | |
| Settlement | (206) | |
| Balance as of December 31, 2024 | 4,076 | |
| Change in the fair value of liability | 44 | |
| Settlement | (4,120) | |
| Balance as of December 31, 2025 | — | |
The fair value of the cash portion of the Contingent Holdback Consideration was estimated based upon the holdback period of 15 months, and discounted using the risk-free interest rate based on the U.S. Treasury zero-coupon yield curve on the valuation date for a maturity similar to the 15-month holdback period. The fair value of the equity portion of the Contingent SYNQ3 Holdback Consideration was estimated based upon the value of the Company’s Class A Common Stock price. The fair value of the Contingent SYNQ3 Holdback Consideration was initially measured on January 3, 2024, the date on which the Company completed the acquisition of SYNQ3. For the years ended December 31, 2025 and 2024, the Company recognized a loss of less than $0.1 million and a loss of $3.7 million related to the Contingent SYNQ3 Holdback Consideration, respectively.
The fair value of the Contingent Holdback Consideration has been estimated as of the Closing Date and December 31, 2024 under the following assumptions:
SOUNDHOUND AI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
| | | | | | | | |
| January 3, 2024 | December 31, 2024 |
| Risk-free interest rate | 4.6 | % | 4.0 | % |
| Holdback period | 1.25 years | 0.25 years |
Contingent Earnout Consideration
The reconciliation of the Company's contingent earnout consideration measured at fair value on a recurring basis using unobservable inputs (Level 3) is as follows:
| | | | | |
| Balance as of December 31, 2023 | $ | — | |
| Acquisition of SYNQ3 | 1,676 | |
| Acquisition of Amelia | 66,269 | |
| Change in the fair value of liability* | 218,953 | |
| Balance as of December 31, 2024 | 286,898 | |
| Acquisition of Interactions | 9,900 | |
| Change in the fair value of liability* | (163,171) | |
| Balance as of December 31, 2025 | 133,627 | |
*Changes in the Company's year-end stock price resulted in adjustments to the fair value of contingent acquisition liabilities where future Contingent Earnout Consideration is marked-to-market on a quarterly basis, significantly impacting net loss and net loss per share during the years ended December 31, 2025 and 2024. The fluctuation is non-operating and non-cash in nature.
For the years ended December 31, 2025 and 2024, the Company recognized a gain of $163.2 million and a loss of $219.0 million related to the contingent earnout consideration, respectively, reflected in the change in fair value of contingent acquisition liabilities in the consolidated statement of operations and comprehensive loss.
The Company utilizes a Monte Carlo simulation to value the contingent earnout consideration. The Company selected this model as it believes it is reflective of all significant assumptions that market participants would likely consider in negotiating the transfer of the contingent earnout consideration. Such assumptions include, among other inputs, expected stock price volatility, risk-free rates, and change in control assumptions. The Company estimates the expected volatility of its common stock based on historical volatility of a peer group, considering the remaining term of the contingent earnout consideration. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the valuation date for a maturity similar to the expected remaining life of the contingent earnout consideration. The expected life of the contingent earnout consideration is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company anticipates to remain at zero.
The fair value of the Contingent SYNQ3 Earnout Consideration acquired from the SYNQ3 Acquisition has been estimated as of the Closing Date, December 31, 2024, and December 31, 2025, with the following assumptions for the unobservable inputs:
| | | | | | | | | | | |
| January 3, 2024 | December 31, 2024 | December 31, 2025 |
| Discount rate | 12.6 | % | 12.9 | % | 13.1 | % |
| Expected stock price volatility | 115.3 | % | 130.0 | % | 115.0 | % |
| Risk-free interest rate | 4.2 | % | 4.2 | % | 3.5 | % |
| Expected dividend yield | 0.0 | % | 0.0 | % | 0.0 | % |
| Expected life | 0.5 - 2.5 years | 0.50 - 1.50 years | 1 year |
SOUNDHOUND AI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The fair value of the Contingent Amelia Earnout Consideration acquired from the Amelia Acquisition has been estimated as of the Closing Date, December 31, 2024, and December 31, 2025, with the following assumptions for the unobservable inputs:
| | | | | | | | | | | |
| August 6, 2024 | December 31, 2024 | December 31, 2025 |
| Metric specific discount rate | 8.0 | % | 9.5 | % | 8.5 | % |
| Earnout payment discount rate | 3.8 | % | 4.2 | % | 3.4 | % |
| Expected stock price volatility | 73.0 | % | 68.0 | % | 98.0 | % |
| Expected metric volatility | 11.0 | % | 12.0 | % | 15.0 | % |
| Risk-free interest rate for target revenue | 4.0 | % | 4.2 | % | 3.6 | % |
| Risk-free interest rate for stock price | 3.8 | % | 4.2 | % | 3.5 | % |
| Expected dividend yield | — | % | — | % | — | % |
| Expected life | 1.4 - 2.4 years | 1.0 - 2.0 years | 1.0 year |
The fair value of the Contingent Interactions Earnout Consideration acquired from the Interactions Acquisition has been estimated as of the Closing Date and December 31, 2025, with the following assumptions for the unobservable inputs:
| | | | | | | | |
| September 3, 2025 | December 31, 2025 |
| Metric specific discount rate | 8.0 | % | 8.0 | % |
| Risk-free interest rate for target revenue | 3.5 | % | 3.4 | % |
| Expected metric volatility | 15.0 | % | 20.0 | % |
| Earnout payment discount rate | 6.8 | % | 6.2 | % |
| Expected life | 1.3 - 2.3 years | 1.0 - 2.0 years |
There were no transfers of financial instruments between Level 1, Level 2 and Level 3 during the years ended December 31, 2025 and 2024.
NOTE 13. PREFERRED STOCK
Series A Preferred Stock
Between January 18, 2023 and January 20, 2023, the Company entered into Preferred Stock Purchase Agreements (the “Purchase Agreements”) with certain investors (the “Investors”), pursuant to which the Company issued and sold to the Investors an aggregate of 835,011 shares of its newly designated Series A Convertible Preferred Stock for issuance price of $30.00 per share, raising an aggregate of approximately $25.0 million in cash proceeds. As of December 31, 2025 and December 31, 2024, all the Series A Preferred Stock have been converted to Class A Common Stock.
Liquidation Preference
The Liquidation Preference per share of Preferred Stock was initially equal to $30.00, the original issue price per share. On January 1, 2024, the Company's Series A Preferred Stock holders received their latest dividends paid-in-kind as an increase in Liquidation Preference, thereby increasing the Liquidation Preference per share to approximately $34.13.
Redemption
The Series A Preferred Stock is not mandatorily redeemable.
Conversion
SOUNDHOUND AI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Each share of Series A Preferred Stock is convertible, at the option of the holder, into such number of shares of Class A Common Stock equal to the Liquidation Preference per share at the time of conversion divided by $1.00 (the “Conversion Price”). In addition, each share of Series A Preferred Stock will automatically convert into shares of Class A Common Stock at the Conversion Price on or after January 20, 2024 if and when the daily volume-weighted average closing price per share of Class A Common Stock is at least 2.5 times the Conversion Price for each of any 90 trading days during any 120 consecutive trading day period, which 120-trading day period may commence (but may not end) prior to January 20, 2024. As of December 31, 2024, the condition of automatic conversion was met and all the remaining Series A Preferred Stock were automatically converted.
During the year ended December 31, 2024, 475,005 shares of preferred stock were converted into 16,624,215 shares of Class A Common Stock. The conversion was pursuant to the original terms of the agreement and therefore the carrying value of Series A Preferred Stock was converted into Class A Common Stock with no gain or loss upon conversion. There were no conversions during the year ended December 31, 2025.
Voting Rights
The Investors do not have voting rights, except with respect to certain protective provisions and as required by the Delaware General Corporation Law. However, as long as the Series A Preferred Stock are outstanding, the Company may not take certain actions that may materially and adversely impact the powers, preferences, or rights of the Investors without the consent of at least a majority of the Investors.
NOTE 14. COMMON STOCK
At the 2025 Annual Meeting of Stockholders held on May 23, 2025, the Company’s stockholders approved to increase the number of authorized shares of Class A Common Stock from 455,000,000 to 755,000,000. As of December 31, 2025, the Company is authorized to issue 800,000,000 shares of capital stock, consisting of (a) 755,000,000 shares of Class A Common Stock with a par value of $0.0001 per share, (b) 44,000,000 shares of Class B Common Stock with a par value of $0.0001 per share, and (c) 1,000,000 shares of preferred stock with a par value of $0.0001 per share. The outstanding shares of the Company’s common stock are fully paid and non-assessable.
On all matters to be voted upon, subject to the rights of any holders of any series of preferred stock, holders of shares of Class A Common Stock and Class B Common Stock will vote together as a single class on all matters submitted to the stockholders for their vote or approval. Holders of Class A and B Common Stock are entitled to one vote and ten votes per share respectively on all matters submitted to the stockholders for their vote or approval.
Each share of Class B Common Stock shall convert into one fully paid and nonassessable share of Class A Common Stock upon mandatory or optional conversion. Shares of Class B Common Stock will be automatically converted into shares of Class A Common Stock upon the occurrence of certain future events, generally including transfers, subject to limited exceptions set forth in the amended charter. 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. As a result, it is possible that one or more of the persons or entities holding our Class B Common Stock could gain significant voting control as other holders of Class B Common Stock sell or otherwise convert their shares into Class A Common Stock.
During the year ended December 31, 2024, certain holders of Class B Common Stock optionally converted 4,950,000 shares of Class B Common Stock into the same number of shares of Class A Common Stock. There was no conversion of Class B Common Stock during the year ended December 31, 2025.
Equity Line of Credit ("ELOC")
On August 16, 2022, the Company entered into a common stock purchase agreement (“Common Stock Purchase Agreement”) and related registration rights agreement (the “CFPI Registration Rights Agreement”) with CF Principal Investments LLC (the “Counterparty”). Pursuant to the Common Stock Purchase Agreement, the Company had the right, but not the obligation, to direct the Counterparty to purchase up to 25,000,000 shares of Class A Common Stock, subject to certain limitations and conditions (the "ELOC Program") at a purchase price equal to 97% of the volume
SOUNDHOUND AI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
weighted average stock price for a given purchase date. In connection with the execution of the Common Stock Purchase Agreement and the side letter on February 14, 2023, the Company issued 250,000 shares of Common Stock (the “Initial Commitment Shares”) and additional cash commitment fee of $0.3 million.
The Company recorded Common Stock Purchase Agreement as a derivative liability with an initial fair value of $1.1 million based on the upfront commitment fee in the form of proceeds from future issuance of commitment shares to the Counterparty plus certain fees and expenses as specified in the Purchase Agreement.
The Company recorded losses on changes in the fair value of the derivative liability associated with the ELOC Program of $1.9 million for the year ended December 31, 2023 as other income, net on its consolidated statements of operations and comprehensive loss. The Company incurred third-party costs of $0.2 million related to the execution of the Common Stock Purchase Agreement which were recorded as general and administrative expenses in the consolidated statements of operations and comprehensive loss for the year ended December 31, 2023.
During the year ended December 31, 2023, the Company sold the entirety of the 25,000,000 shares for aggregate proceeds of approximately $71.7 million, with the volume weighted average stock price of shares purchased by the Counterparty ranging from $1.75 to $4.26 per share.
Sales Agreement
On July 28, 2023, the Company entered into a Controlled Equity Offering Sales Agreement (the “Sales Agreement”) with Cantor Fitzgerald & Co., H.C. Wainwright & Co., LLC, and D.A. Davidson & Co. (each a “Sales Agent” and collectively, the “Sales Agents”), pursuant to which the Company may offer and sell up to $150.0 million of shares of our Class A Common Stock from time to time through or to the Sales Agents acting as agent or principal. Sales of our Class A Common Stock under the Sales 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. The Sales Agents were entitled to aggregate compensation at a fixed commission rate of 2.5% of the gross sales price per share sold under the Sales Agreement. We also agreed to reimburse the Sales Agents for certain specified expenses, including the reasonable and documented fees and disbursements of its legal counsel in an amount of $0.1 million in the aggregate in connection with the execution of the Sales Agreement.
As of December 31, 2024, the Company sold 37,907,219 shares of our Class A common stock under the Sales Agreement, at a weighted-average price of $3.62 per share and raised $137.3 million of gross proceeds, which resulted in complete utilization of the Sales Agreement. After deducting approximately $3.4 million of commissions and offering costs incurred by the Company, the net proceeds from sales of Class A common stock was $133.8 million. As of December 31, 2024, the Company had no remaining capacity to sell the Company's Class A common stock under the Sales Agreement.
Equity Distribution Agreement
On April 9, 2024, the Company entered into an Equity Distribution Agreement (the “Equity Distribution Agreement”) with Citigroup Global Markets Inc., Barclays Capital Inc., Wedbush Securities Inc., Northland Securities, Inc. and Ladenburg Thalmann & Co. Inc. (the “Managers”) with respect to an at-the-market equity program. Under this program, the Company was able to offer and sell up to $150.0 million of shares of its Class A Common Stock from time to time through the Managers. Sales of Class A Common Stock under the 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. 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 agent in the sale of the Company's Class A Common Stock.
During the year ended December 31, 2024, the Company sold a total of 31,694,198 shares of our Class A common stock under the Equity Distribution Agreement, at a weighted-average price of $4.73 per share and raised $150.0 million of gross proceeds. After deducting approximately $3.7 million of commissions and offering costs incurred by the Company, the net proceeds from sales of Class A common stock was $146.2 million during the year ended December 31, 2024. As of December 31, 2024, the Company had no remaining capacity to sell the Company's Class A common stock under the Equity Distribution Agreement.
SOUNDHOUND AI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Execute Equity Distribution Agreement
On November 12, 2024, the Company entered into an Execute Equity Distribution Agreement (the “Execute Equity Distribution Agreement”) with Barclays Capital Inc., Piper Sandler & Co., D.A. Davidson & Co., H.C. Wainwright & Co., LLC, and Joseph Gunnar & Co., LLC, (each, an “Agent,” and, collectively, the “Agents”) with respect to an at-the-market equity program. Under this program, the Company was able to offer and sell up to $120.0 million of shares of its Class A Common Stock from time to time through the Agents. Sales of Class A Common Stock under the Execute 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. The Agents were entitled to commission at a fixed rate of 2.5% of the gross sales price per share for their services in acting as agent in the sale of the Company's Class A Common Stock.
During the year ended December 31, 2024, the Company sold a total of 16,224,989 shares of our Class A common stock under the Execute Equity Distribution Agreement, at a weighted-average price of $7.40 per share and raised $120.0 million of gross proceeds. After deducting approximately $3.0 million of commissions and offering costs incurred by the Company, the net proceeds from sales of Class A common stock was $117.0 million during the year ended December 31, 2024. As of December 31, 2024, the Company had no remaining capacity to sell the Company's Class A common stock under the Execute Equity Distribution Agreement.
Second Equity Distribution Agreement
On January 24, 2025, the Company entered into the Second Equity Distribution Agreement with Cantor Fitzgerald & Co., Guggenheim Securities, LLC, Oppenheimer & Co. Inc., Wedbush Securities Inc., Ladenburg Thalmann & Co. Inc. and Northland Securities, Inc. (each, an “Sales Manager,” and, collectively, the “Sales Managers”) with respect to an at-the-market equity program. Under this program, the Company may offer and sell up to $250.0 million of shares of its Class A Common Stock from time to time through the Sales Managers. 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. The Sales Managers will be 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 the Company's Class A Common Stock.
During the year ended December 31, 2025, the Company sold 13,913,014 shares of its common stock under the Second Equity Distribution Agreement, at an average price of $14.48 per share and raised $201.5 million of gross proceeds, respectively. The commissions and offering costs borne by us were approximately $4.0 million. As of December 31, 2025, the Company had a remaining capacity to sell up to an additional $48.5 million of its common stock under the Second Equity Distribution Agreement.
NOTE 15. STOCK INCENTIVE PLANS
2016 Equity Incentive Plan
In April 2016, we adopted the 2016 Equity Incentive Plan (the “2016 Plan”) as a successor and continuation of the 2006 Plan. Under the 2016 Plan, the Company was permitted to grant awards of stock options and Restricted Stock Units ("RSUs"), as well as stock appreciation rights and other stock awards. The Company no longer has shares available for issuance under the 2016 Plan.
2022 Incentive Award Plan
The Company adopted the 2022 Incentive Award Plan (the “2022 Incentive Plan,” collectively, with the 2006 Plan and the 2016 Plan, the “Plans”), effective April 26, 2022. The Company reserved 19,650,371 shares of Class A Common Stock for the issuance of awards under the 2022 Incentive Plan (“the Initial Limit”). The Initial Limit represents 10% of the aggregate number of shares of the Company’s common stock outstanding immediately after the Closing and is subject to increase each year over a ten-year period. As of December 31, 2025, the Company had 9,967,757 shares remaining for issuance under the 2022 Incentive Plan.
SOUNDHOUND AI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2022 Employee Stock Purchase Plan
The Company adopted the 2022 Employee Stock Purchase Plan (the “ESPP”) effective April 26, 2022, An aggregate of 3,930,074 shares of the Company’s Class A Common Stock has been reserved for issuance or transfer pursuant to rights granted under the ESPP (“Aggregate Number”). The Aggregate Number represents 2% of the aggregate number of shares of the Company’s common stock outstanding immediately after the Closing and is subject to increase each year over a ten-year period. The ESPP provides eligible employees with an opportunity to purchase common stock from the Company at a discount through accumulated payroll deductions. The ESPP is being implemented through a series of offerings of purchase rights to eligible employees. Under the ESPP, the Company’s Board of Directors may specify offerings but generally provides for a duration of 27 months. The purchase price will be specified pursuant to the offering, but cannot, under the terms of the ESPP, be less than 85% of the lower of the fair market value per share of the Company’s common stock on either the offering date or on the purchase date. The ESPP also includes a six-month look-back provision for the purchase price if the stock price on the purchase date is less than the stock price on the offering date. The first offering period under the ESPP began on November 1, 2022. As of December 31, 2025, 1,216,324 shares of Class A Common Stock were issued under the ESPP.
2024 Employment Inducement Incentive Award Plan
The Company adopted 2024 Employment Inducement Incentive Award Plan (the “2024 Inducement Plan,” collectively, with the 2016 Plan and the 2022 Incentive Plan, the “Plans”) effective August 6, 2024. The Company reserved 6,000,000 shares of Class A Common Stock for the issuance of awards under the 2024 Inducement Plan. As of December 31, 2025, 2,569,834 shares remaining for issuance under the 2024 Inducement Plan.
Stock Options Activity
Options granted generally have a maximum term of 10 years from grant date, are exercisable upon vesting unless otherwise designated for early exercise by the Board of Directors at the time of grant, and generally vest over a four-year period, with a 25% cliff vesting after one year and then ratably on a monthly basis for the remaining three years.
Stock option activity under the Plans was as follows for the years ended December 31, 2025, 2024 and 2023:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Number of Shares | | Weighted Average Exercise Price | | Weighted Average
Remaining Contractual Term (Years) | | Aggregate Intrinsic Value (in Thousands) |
| Outstanding, December 31, 2022 | | 25,420,425 | | $ | 3.74 | | | 6.32 | | $ | 1,448 | |
| Exercised | | (3,585,829) | | 2.37 | | | | | 5,207 | |
| Forfeited or cancelled | | (4,993,229) | | 5.24 | | | | | |
| Outstanding, December 31, 2023 | | 16,841,367 | | $ | 3.59 | | | 4.77 | | $ | 1,392 | |
| Exercised | | (9,806,309) | | 2.91 | | | | | 72,806 | |
| Forfeited or cancelled | | (1,109,147) | | 4.76 | | | | | |
| Outstanding, December 31, 2024 | | 5,925,911 | | $ | 4.44 | | | 5.08 | | $ | 91,268 | |
| Exercised | | (2,036,995) | | 4.22 | | | | | 22,034 | |
| Forfeited or cancelled | | (5,503) | | 7.51 | | | | | |
| Outstanding, December 31, 2025 | | 3,883,413 | | $ | 4.55 | | | 4.51 | | $ | 21,051 | |
| Exercisable, December 31, 2025 | | 3,877,860 | | 4.55 | | | 4.50 | | 21,026 | |
Options exercised early are subject to the vesting provisions mentioned above, and any unvested shares are subject to repurchase at the original price upon termination of employment, death, or disability. There were no option exercises during the years ended December 31, 2025, 2024 and 2023 that were subject to repurchase.
SOUNDHOUND AI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
There were no options granted during the years ended December 31, 2025, 2024, and 2023. The total fair value of options vested was approximately $1.5 million, $3.0 million and $4.5 million during the years ended December 31, 2025, 2024 and 2023, respectively. The Company recorded stock-based compensation expense related to options of $1.3 million, $3.0 million and $4.0 million for the years ended December 31, 2025, 2024 and 2023.
As of December 31, 2025, the total unrecognized stock-based compensation expense related to the unvested stock options was less than $0.1 million, which we expect to recognize over a weighted-average period of 0.53 years.
For the purpose of determining the estimated fair value of share-based payment awards issued in the form of stock options, the Company uses the Black-Scholes option-pricing model. The assumptions under the Black-Scholes option-pricing model during the year ended December 31, 2022 were as follows for option awards:
| | | | | |
| |
| 2022 |
| Dividend yield | 0 | % |
| Expected volatility | 51 | % |
| Expected term (years) | 5.88 |
| Risk free interest rate | 2.58 | % |
Restricted Stock Units Activity
RSUs granted generally vest over a four-year period, with 25% cliff vesting after one year and then ratably on a monthly basis for the remaining three years. Besides RSUs with vesting condition tied to requisite service period, the Company also issues RSUs with vesting conditions tied to certain market conditions (“Market-Based RSUs”) and RSUs with vesting conditions tied to certain performance criteria ("Performance-Based RSUs").
In connection with the SYNQ3 Acquisition, the Company granted 1,434,978 RSUs (the "Retention Pool"), 25% of which is subject to service conditions that vest at the end of each of the upcoming three fiscal years and 75% of which is subject to both service and performance-based vesting conditions at the end of each of the upcoming three fiscal years, respectively.
The performance level for each of the fiscal years 2024, 2025 and 2026 is based on tiered annual revenue targets, subject to a floor of $9.0 million, $21.0 million and $30.0 million, respectively, with vesting ranging from 50% to 100% of the RSUs granted depending on the level of achievement of the specified revenue target in each year.
The Company assesses the probability of vesting of the above performance-based awards from the Retention Pool every reporting period. As of December 31, 2025, the 2024 performance target was not met, but the 2025 performance target was met. The Company assessed the 2026 performance target as probable of being met.
The Company also granted 3,533,500 RSUs that vest over a four-year requisite service period to Amelia employees during the year ended December 31, 2025. Additionally, the Company granted 10,045,389 RSUs to other employees of the Company during the year ended December 31, 2025. As a result, the Company granted total of 13,578,889 RSUs during the year ended December 31, 2025.
SOUNDHOUND AI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The activity for unvested Restricted Stock Units under the Plans was as follows for the years ended December 31, 2025, 2024 and 2023:
| | | | | | | | | | | |
| Number of Shares | | Weighted Average Grant Date Fair Value |
| Unvested, December 31, 2023 | 16,343,591 | | 3.39 |
| Granted | 14,009,111 | | 4.14 |
| Vested | (7,322,556) | | 3.44 |
| Forfeited | (1,239,891) | | 3.15 |
| Unvested, December 31, 2024 | 21,790,255 | | 3.87 |
| Granted | 13,628,889 | | 12.34 |
| Vested | (12,093,741) | | 5.66 |
| Forfeited | (1,722,039) | | 5.41 |
| Unvested, December 31, 2025 | 21,603,364 | | 8.09 |
The Company recorded stock-based compensation expense of $4.0 million, $1.1 million and $1.3 million related to Performance-Based RSUs during the years ended December 31, 2025, 2024, and 2023, respectively. As of December 31, 2025, the total unrecognized stock-based compensation expense related to the unvested Performance-based RSUs was approximately $3.9 million. There were 50,000 Performance-Based RSUs granted during the year ended December 31, 2025.
The Company recorded less than $0.1 million, $0.6 million and $1.5 million in stock-based compensation expense related to Market-Based RSUs during the year ended December 31, 2025, 2024 and 2023, respectively. As of December 31, 2025, there was no unrecognized stock-based compensation expense related to the unvested Market-Based RSUs.
To derive the fair value of Market-Based RSUs, the Company applies a Monte Carlo simulation to determine the grant date fair value. The Company did not grant Market-Based RSUs during the years ended December 31, 2025, 2024, and 2023.
During the years ended December 31, 2025, 2024 and 2023, the fair value of RSUs that vested was $66.1 million, $24.1 million, and $25.5 million. During the years ended December 31, 2025, 2024, and 2023, the Company recorded $70.6 million, $27.2 million, and $20.4 million of stock-based compensation related to RSUs. As of December 31, 2025, the total unrecognized stock-based compensation expense related to the unvested RSUs with service conditions was approximately $157.7 million.
The total unrecognized stock-based compensation related to unvested RSUs is $161.6 million and this will vest over a weighted average period of 2.48 years.
Restricted Stock Awards Activity
In connection with the SYNQ3 Acquisition, a total of 2,033,156 unvested restricted Class A Common Stock shares ("RSAs") were issued, 25% of which are subject to service conditions that vest at the end of each of the upcoming three fiscal years in three tranches, and 75% of which is subject to both service and performance-based vesting conditions in three tranches. As of December 31, 2025, 465,349 RSAs were vested and 508,289 RSAs were forfeited as a result of the targets not met or not probable of being met.
The performance level for each of the fiscal years 2024, 2025 and 2026 is based on tiered annual revenue targets, subject to a floor of $9.0 million, $21.0 million and $30.0 million, respectively, with vesting ranging from 50% to 100% of the RSAs granted depending on the level of achievement of the specified revenue target in each year.
SOUNDHOUND AI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Company assesses the probability of vesting of the above performance-based awards every reporting period. As of December 31, 2025, the 2024 performance target was not met, but the 2025 performance target was met. The Company assessed the 2026 performance target as probable of being met.
The activity for unvested Restricted Stock Awards was as follows for the year ended December 31, 2025:
| | | | | | | | | | | |
| Number of Shares | | Weighted Average Grant Date Fair Value |
| Unvested, December 31, 2023 | — | | — |
| Granted | 2,033,156 | | 1.98 |
| Vested | (169,430) | | 1.98 |
| Forfeited | — | | |
| Unvested, December 31, 2024 | 1,863,726 | | 1.98 |
| Granted | — | | |
| Vested | (295,919) | | 1.98 |
| Forfeited | (508,289) | | 1.98 |
| Unvested, December 31, 2025 | 1,059,518 | | 1.98 |
The Company recorded stock-based compensation expense of $5.7 million and $0.8 million related to RSAs during the years ended December 31, 2025 and 2024, respectively.
As of December 31, 2025, the total unrecognized stock-based compensation expense related to the unvested RSAs subject to service-based vesting condition and unvested RSAs subject to performance-based vesting condition was approximately $0.1 million and $0.3 million, respectively, over a weighted average period of 1.00 years. Refer to Note 3 for further information on the SYNQ3 Acquisition.
ESPP Activity
For the purpose of determining the estimated fair value of ESPP shares, the Company uses the Black-Scholes option-pricing model. The assumptions under the Black-Scholes option-pricing model during the years ended December 31, 2025, 2024, and 2023 were as follows for ESPP awards:
| | | | | | | | | | | |
| Year Ended | Year Ended | Year Ended |
| December 31, 2025 | December 31, 2024 | December 31, 2023 |
| Dividend yield | 0 | % | 0 | % | 0 | % |
| Expected volatility | 96 | % | 84 | % | 56 | % |
| Expected term (years) | 0.50 | 0.50 | 0.49 |
| Risk free interest rate | 3.74 | % | 4.40 | % | 5.26 | % |
During the years ended December 31, 2025, 2024 and 2023, the Company recorded $1.4 million, $0.5 million and $0.4 million of stock-based compensation related to its ESPP. There was $0.6 million of unrecognized stock-based compensation expense for the year ended December 31, 2025, related to the ESPP that is expected to be recognized over an average vesting period of 0.36 years.
Equity Award Modifications
In connection with the Restructuring Plan (as defined in Note 11), the Company entered into severance arrangements with 166 affected employees. Pursuant to these arrangements, these employees received acceleration of vesting of RSUs and extensions of the post-termination exercise period of stock option awards. All award modifications related
SOUNDHOUND AI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
to restructuring activities were expensed in the year ended December 31, 2023. The total incremental compensation cost resulting from these modifications is $3.2 million. There were no significant modifications during the years ended December 31, 2025 and 2024.
Stock-Based Compensation
Stock-based compensation is classified in the following expense accounts on the consolidated statements of operations and comprehensive loss for the years ended December 31, 2025, 2024 and 2023 (in thousands):
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| 2025 | | 2024 | | 2023 |
| Cost of revenues | $ | 8,899 | | | $ | 458 | | | $ | 412 | |
| Sales and marketing | 15,990 | | | 4,818 | | | 3,601 | |
| Research and development | 35,270 | | | 16,203 | | | 11,992 | |
| General and administrative | 22,892 | | | 11,666 | | | 8,784 | |
| Restructuring costs | — | | | — | | | 3,142 | |
| Less: Capitalized software development costs | (2,431) | | | — | | | — | |
| Total | $ | 80,620 | | | $ | 33,145 | | | $ | 27,931 | |
| | | | | |
NOTE 16. LEASES
The Company leases certain facilities under non-cancelable operating leases that expire at various dates through 2030. Some leases include renewal options, which would permit extensions of the expiration dates at rates approximating fair market rental values. The Company also enters into certain finance leases for computer equipment. The finance leases are collateralized by the financed assets.
Aggregate non-cancelable future minimum lease payments under operating and finance leases were as follows as of December 31, 2025 (in thousands):
| | | | | | | | | | | |
| Operating
Lease | | Finance
Lease |
| Year Ending December 31: | | | |
| 2026 | $ | 2,037 | | | $ | 377 | |
| 2027 | 797 | | | 119 | |
| 2028 | 580 | | | 40 | |
| 2029 | 501 | | | — | |
| 2030 | 334 | | | — | |
| Thereafter | — | | | — | |
| Total | 4,249 | | | 536 | |
| Less: imputed interest | (386) | | | (58) | |
| Present value of lease liabilities | 3,863 | | | 478 | |
| Less: current portion | (1,812) | | | (332) | |
| Add: immaterial difference | $ | 18 | | | $ | — | |
| Lease liabilities, net of current portion | $ | 2,069 | | | $ | 146 | |
| | | |
| | | |
SOUNDHOUND AI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The components of lease cost were as follows during the years ended December 31, 2025, 2024 and 2023 (in thousands):
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| 2025 | | 2024 | | 2023 |
| Operating lease cost | $ | 2,703 | | | $ | 2,628 | | | $ | 3,177 | |
| Short-term lease cost | $ | 957 | | | $ | 972 | | | $ | 1,298 | |
| | | | | |
| Finance lease cost: | | | | | |
| Amortization of finance leased assets | $ | 149 | | | $ | 134 | | | $ | 161 | |
| Interest on lease liabilities | $ | 29 | | | $ | 11 | | | $ | 23 | |
The table below presents additional information related to our leases as of December 31, 2025:
| | | | | | | | | | | |
| Operating
Lease | | Finance
Lease |
| Weighted average remaining lease term (years) | 2.53 | | 0.92 |
| Weighted average discount rate | 10.67 | % | | 14.00 | % |
The Company’s rent expense totaled approximately $4.0 million, $4.5 million and $5.3 million during the years ended December 31, 2025, 2024 and 2023, respectively.
NOTE 17. OTHER INCOME, NET
Other income, net on the consolidated statements of operations and comprehensive loss is comprised of the following for the years ended December 31, 2025, 2024 and 2023 (in thousands):
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| 2025 | | 2024 | | 2023 |
| Other income, net: | | | | | |
| Interest income | $ | 9,799 | | | $ | 8,370 | | | $ | 2,866 | |
| Change in fair value of derivative | 4,676 | | | — | | | — | |
| Loss on change in fair value of ELOC program | — | | | — | | | (1,901) | |
| Gain on bargain purchase | — | | | 1,223 | | | — | |
| Other income (expense), net | 193 | | | (371) | | | 190 | |
| Total other income, net | $ | 14,668 | | | $ | 9,222 | | | $ | 1,155 | |
SOUNDHOUND AI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 18. NET LOSS PER SHARE
The following table presents the calculation of basic and diluted net loss per share attributable to common stockholders for the years ended December 31, 2025, 2024 and 2023:
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| 2025 | | 2024 | | 2023 |
| Numerator: | | | | | |
| Net loss | $ | (14,006) | | | $ | (350,681) | | | $ | (88,937) | |
| | | | | |
| Cumulative dividends attributable to Series A Preferred Stock | — | | | (416) | | | (2,774) | |
| Net loss attributable to common stockholders - basic | $ | (14,006) | | | $ | (351,097) | | | $ | (91,711) | |
| | | | | |
| Net loss | $ | (14,006) | | | $ | (350,681) | | | $ | (88,937) | |
| Effect of potentially dilutive equivalent shares to net loss | (99,512) | | | — | | | — | |
| Cumulative dividends attributable to Series A Preferred Stock | — | | | (416) | | | (2,774) | |
| Net loss attributable to common stockholders - diluted | $ | (113,518) | | | $ | (351,097) | | | $ | (91,711) | |
| | | | | |
| Denominator: | | | | | |
| Weighted average shares outstanding – basic | 405,421,412 | | 338,462,574 | | 229,264,904 |
| Effect of potentially dilutive equivalent shares | 4,034,930 | | | — | | | — | |
| Weighted average shares outstanding – diluted | 409,456,342 | | 338,462,574 | | 229,264,904 |
| | | | | |
| Basic net loss per share | $ | (0.03) | | | $ | (1.04) | | | $ | (0.40) | |
| Diluted net loss per share | $ | (0.28) | | | $ | (1.04) | | | $ | (0.40) | |
For the years ended December 31, 2024 and 2023, the diluted net loss per share is equal to the basic earnings per share as the effect of potentially dilutive securities would have been antidilutive.
The following table summarizes the outstanding shares of potentially dilutive securities that were excluded from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive for the years ended December 31, 2025, 2024 and 2023:
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| 2025 | | 2024 | | 2023 |
| Stock-based awards | 20,336,025 | | 24,918,197 | | 33,484,074 |
| Unvested restricted share awards | 551,229 | | 338,859 | | — |
| Common stock warrants | 3,654,115 | | 3,663,955 | | 6,967,532 |
| Contingently issuable shares | 119,096 | | — | | — |
| Series A Preferred Stock | — | | — | | 16,226,645 |
| Total | 24,660,465 | | 28,921,011 | | 56,678,251 |
The table above does not include: (i) 1,755,078, 4,342,570, and zero shares of unvested stock-based awards and restricted stock awards, respectively, and (ii) 6,085,802, 18,257,365 and zero shares of contingently issuable earnout shares, respectively; outstanding as of December 31, 2025, 2024 and 2023, as these awards are subject to performance conditions that were not met as of those dates. The table also excludes 274,191 and zero shares associated with the Contingent SYNQ3 Holdback Consideration in connection with the SYNQ3 Acquisition, respectively, as these shares are subject to contingencies that were not met as of December 31, 2024 and 2023.
SOUNDHOUND AI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The shares issued and held in escrow for the Amelia Acquisition are participating securities that contractually entitle the holders of such shares to participate in the combined entity’s earnings but do not contractually require the holders of such shares to participate in the combined entity’s losses. The weighted average shares outstanding used to calculate basic net loss per share attributable to common stockholders for the years ended December 31, 2025 and 2024 excludes the 1,918,969 and 2,149,530 shares, respectively, of the Company's Class A Common Stock held in escrow as they are considered contingently returnable shares until the indemnifications subject to escrow have been resolved.
NOTE 19. INCOME TAXES
The following is a geographical breakdown of income (loss) before income taxes (in thousands):
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| 2025 | | 2024 | | 2023 |
| Domestic | $ | (15,244) | | | $ | (363,347) | | | $ | (86,724) | |
| Foreign | 5,970 | | | 3,419 | | | 1,701 | |
| $ | (9,274) | | | $ | (359,928) | | | $ | (85,023) | |
The provision (benefit) for income taxes consisted of the following (in thousands):
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| 2025 | | 2024 | | 2023 |
| Current provision: | | | | | |
| Federal | $ | — | | | $ | — | | | $ | — | |
| State | — | | | 2 | | | 3 | |
| Foreign | 3,394 | | | 2,934 | | | 3,881 | |
| Total current provision | $ | 3,394 | | | $ | 2,936 | | | $ | 3,884 | |
| Deferred provision: | | | | | |
| Federal | $ | — | | | $ | (10,492) | | | $ | — | |
| State | — | | | (1,701) | | | — | |
| Foreign | 1,338 | | | 10 | | | 30 | |
| Total deferred provision | $ | 1,338 | | | $ | (12,183) | | | $ | 30 | |
| Total provision (benefit) for income taxes | $ | 4,732 | | | $ | (9,247) | | | $ | 3,914 | |
| Effective tax rate | (51.0) | % | | 2.6 | % | | (4.6) | % |
The Company has incurred net pre-tax losses in the United States only for all periods presented. The Company recorded an income tax expense (benefit) of $4.7 million, $(9.2) million, and $3.9 million for the years ended December 31, 2025, 2024, and 2023, respectively. The 2024 tax benefit relates to tax benefits from acquisitions, partially offset by withholding tax paid for sales to customers in foreign jurisdictions and income tax related to foreign subsidiaries. The 2023 and 2025 tax expense relates to withholding tax paid for sales to customers in foreign jurisdictions and income tax related to foreign subsidiaries.
The following table is a reconciliation of the U.S. federal statutory tax rate of 21% to the Company’s effective tax rate and the provision for (benefit from) income taxes for the years ended December 31, 2025, 2024, and 2023 after adoption of ASU 2023-09 (in thousands):
SOUNDHOUND AI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| 2025 | | 2024 | | 2023 |
| Total | % | | Total | % | | Total | % |
| | | | | | | | |
| Tax at the U.S. federal statutory rate | (1,948) | | 21.0 | % | | (75,585) | | 21.0 | % | | (17,855) | | 21.0 | % |
| State and local income taxes, net of federal income tax effects | — | | — | % | | 2 | | — | % | | 3 | | — | % |
| Foreign tax effects: | | | | | | | | |
| South Korea | | | | | | | | |
| Withholding tax | 1,600 | | (17.3) | % | | 1,851 | | (0.5) | % | | 3,689 | | (4.3) | % |
| Other | (4) | | — | % | | (4) | | — | % | | (7) | | — | % |
| China | | | | | | | | |
| Other | 485 | | (5.2) | % | | (84) | | — | % | | (21) | | — | % |
| Peru | | | | | | | | |
| Withholding tax | 1,121 | | (12.1) | % | | 501 | | (0.1) | % | | — | | — | % |
| Other | (62) | | 0.7 | % | | (1) | | — | % | | — | | — | % |
| Netherlands | | | | | | | | |
| Unrealized FX gain/loss | 565 | | (6.1) | % | | — | | — | % | | — | | — | % |
| Other | (308) | | 3.3 | % | | (24) | | — | % | | — | | — | % |
| Other foreign jurisdictions | 81 | | (0.9) | % | | (16) | | — | % | | (108) | | 0.1 | % |
| Tax credits: | | | | | | | | |
| Research & development tax credits | (4,061) | | 43.8 | % | | (4,881) | | 1.4 | % | | (2,302) | | 2.7 | % |
| Changes in valuation allowance | 43,550 | | (469.6) | % | | 39,083 | | (10.9) | % | | 18,604 | | (21.9) | % |
| Nontaxable or nondeductible items: | | | | | | | | |
| Stock based compensation | (12,233) | | 131.9 | % | | (15,224) | | 4.2 | % | | 2,289 | | (2.7) | % |
| Sec. 162(m) disallowance | 8,461 | | (91.2) | % | | 9,457 | | (2.6) | % | | 270 | | (0.3) | % |
| Change in fair value of contingent acquisition liabilities | (34,257) | | 369.4 | % | | 46,761 | | (13.0) | % | | — | | — | % |
| Withholding tax deduction | (348) | | 3.8 | % | | (441) | | 0.1 | % | | (775) | | 0.9 | % |
| Transaction costs | 590 | | (6.4) | % | | 1,451 | | (0.4) | % | | (733) | | 0.9 | % |
| Remeasurement gain/loss | (968) | | 10.4 | % | | 11 | | — | % | | — | | — | % |
| Other | 80 | | (0.9) | % | | 159 | | — | % | | 799 | | (0.9) | % |
| Changes in unrecognized tax benefits | 8 | | (0.1) | % | | (7) | | — | % | | 197 | | (0.2) | % |
| Other adjustments: | | | | | | | | |
| Acquisition | 2,158 | | (23.3) | % | | (12,189) | | 3.4 | % | | — | | — | % |
| Other deferred adjustments | 222 | | (2.4) | % | | (67) | | — | % | | (136) | | 0.2 | % |
| Effective tax rate | $ | 4,732 | | (51.0) | % | | $ | (9,247) | | 2.6 | % | | $ | 3,914 | | (4.6) | % |
SOUNDHOUND AI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The components of our deferred tax assets and liabilities were as follows (in thousands):
| | | | | | | | | | | |
| Year Ended December 31, |
| 2025 | | 2024 |
| Deferred tax assets: | | | |
| Net operating loss carryforwards | $ | 210,500 | | | $ | 127,680 | |
| Research and development credits | 29,476 | | | 23,934 | |
| Property and equipment | 1,955 | | | 1,936 | |
| Deferred revenue | 4,873 | | | 5,260 | |
| Interest expense | 3,485 | | | 5,484 | |
| Stock-based compensation | 3,497 | | | 2,704 | |
| Operating lease liabilities | 958 | | | 1,014 | |
| Section 174 research and development capitalization | 41,922 | | | 40,648 | |
| Accruals and reserves | 2,530 | | | 2,780 | |
| Other | — | | | 2 | |
| Total deferred tax assets | 299,196 | | | 211,442 | |
| Valuation allowance | (260,164) | | | (170,219) | |
| Total deferred tax assets, net | 39,032 | | | 41,223 | |
| Deferred tax liabilities: | | | |
| | | |
| Right-of-use assets | (936) | | | (1,017) | |
| Intangible assets | (39,430) | | | (40,202) | |
| Total deferred tax liabilities | (40,366) | | | (41,219) | |
| Net deferred tax assets | $ | (1,334) | | | $ | 4 | |
Based on available objective evidence, management believes it is more-likely-than-not that the domestic federal and state deferred tax assets; and excess Canadian SR&ED tax credits will not be fully realized due to the Company’s cumulative losses arising in the United States, and its inability to utilize excess tax credits in Canada. Accordingly, the Company has recorded a valuation allowance on deferred tax assets in excess of deferred tax liabilities against its federal and state deferred tax assets and excess Canadian SR&ED tax credits as of December 31, 2025 and 2024. The valuation allowance increased by $90.0 million from the year ended December 31, 2024 to December 31, 2025.
The Company has not provided U.S. income or foreign withholding taxes on the undistributed earnings of its foreign subsidiaries as of December 31, 2025 because it intends to indefinitely reinvest such earnings outside of the U.S. If these foreign earnings were to be repatriated in the future, the related U.S. tax liability will not be material.
As of December 31, 2025, the Company had net operating loss carryforwards of $892.9 million of U.S. federal and $379.7 million of state net operating loss carryforwards available to reduce future taxable income. 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.
The Company 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. The Company also had Canadian SR&ED tax credits of $1.9 million, which will expire starting in 2039 if not utilized.
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. The Company’s net operating loss carryforwards and tax credits could expire before utilization if subject to annual limitations.
SOUNDHOUND AI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Company files U.S. federal income tax returns as well as income tax returns in many U.S. states and foreign jurisdictions. As of December 31, 2025, the tax years 2005 through the current period remain open to examination by the major jurisdictions in which the Company is subject to tax. Fiscal years outside the normal statute of limitation remain open to audit by tax authorities due to tax attributes generated in those early years, which have been carried forward and may be audited in subsequent years when utilized.
Changes in gross unrecognized tax benefits during the periods presented were as follows (in thousands):
| | | | | |
| Balance as of December 31, 2022 | $ | 6,130 | |
| Increase for tax positions of prior years | 370 | |
| Increase for tax positions of current year | 1,095 | |
| Balance as of December 31, 2023 | $ | 7,595 | |
Increase for tax positions of prior years
| 877 | |
| Decrease for tax positions of prior years | (4) | |
| Increase for tax positions of current year | 2,784 | |
| Balance as of December 31, 2024 | $ | 11,252 | |
| Increase for tax positions of prior years | 408 | |
| Decrease for tax positions of prior years | (708) | |
| Increase for tax positions of current year | 2,402 | |
| Balance as of December 31, 2025 | $ | 13,354 | |
$0.6 million of the unrecognized tax benefits, if recognized, would affect the effective tax rate. $12.8 million of the unrecognized tax benefits, if recognized, would not affect the effective tax rate and would be offset by the reversal of related deferred tax assets which are subject to a full valuation allowance. As of December 31, 2025, the Company has accrued $0.1 million interest and penalties related to unrecognized tax benefits.
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the United States. Included in this legislation are provisions that allow for the immediate expensing of domestic United States research and development expenses and acceleration of tax deductions for qualified capital expenditures acquired and placed into service after January 19, 2025, and other changes to the U.S. taxation of profits derived from foreign operations. The legislation has multiple effective dates, with various effective dates between 2025 and 2027. The Company evaluated the OBBBA and included its impact within our consolidated financial statements. The Company will continue to assess the full impact of these legislative changes as additional guidance becomes available.
The amount of cash paid for income taxes, net of refunds, is as follows (in thousands):
SOUNDHOUND AI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| 2025 | | 2024 | | 2023 |
| U.S. federal | $ | — | | | $ | — | | | $ | — | |
| State and local | — | | | 15 | | | 3 | |
| Total U.S. | $ | — | | | $ | 15 | | | $ | 3 | |
| | | | | |
| Foreign | | | | | |
| South Korea | $ | 2,262 | | | $ | 1,628 | | | $ | 1,694 | |
| Peru | 712 | | | 523 | | | — | |
| Netherlands | 687 | | | — | | | — | |
| Germany | * | | * | | 404 | |
| India | * | | 332 | | | — | |
| France | * | | * | | 226 | |
| Japan | — | | | 140 | | | * |
| Other | 709 | | | 79 | | | 29 | |
| Total foreign | $ | 4,370 | | | $ | 2,702 | | | $ | 2,353 | |
| | | | | |
| Total income taxes paid, net of refunds | $ | 4,370 | | | $ | 2,717 | | | $ | 2,356 | |
*Income taxes paid, net of refunds do not meet the disaggregation threshold in years 2025, 2024 and 2023. Such amounts are not presented as comparative disclosures because such disclosures are not required.
NOTE 20. RELATED PARTY TRANSACTIONS
On January 24, 2025, the Company entered into an Equity Distribution Agreement with Guggenheim Securities, LLC and other Sales Managers with respect to an at-the-market equity program. Under this program, the Company may offer and sell up to $250.0 million of shares of its Class A Common Stock from time to time through the Sales Managers. Refer to Note 14 to the consolidated financial statements for more information.
The brother of one of our Board of Directors is a Senior Advisor to Guggenheim Securities, LLC and a member of the Guggenheim Securities investment banking team. Our board member did not participate in the Company’s decision to engage Guggenheim Securities, LLC to sell the Company's Class A Common Stock under at-the-market equity program and disclosed the fact that his brother would be involved in the services to be provided by Guggenheim Securities, LLC to the Company in advance of the determination by the Company to engage Guggenheim Securities, LLC. During the year ended December 31, 2025, the Company paid commissions of $0.4 million to Guggenheim Securities, LLC for the Class A Common Stock sold through it as a Sales Manager.
NOTE 21. SEGMENT INFORMATION
The Company organized its operations into a single reportable segment, managed on a consolidated basis. The Company has determined that the Chief Executive Officer is its chief operating decision maker ("CODM"). The CODM assesses performance for the segment and decides how to allocate resources based on net loss that also is reported on the income statement as consolidated net loss. The CODM compares net loss from budget to actual result to assess segment performance and adjust resource allocations as necessary.
The personnel-related costs are the significant segment expenses included in the net loss that are regularly provided to the CODM. Personnel-related costs were $204.4 million, $114.1 million and $73.1 million, respectively, and represented 63.4%, 60.5% and 66.5%, respectively, of total operating expenses during the years ended December 31, 2025, 2024, and 2023.
SOUNDHOUND AI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 22. SUBSEQUENT EVENTS
On January 23, 2026, the Company paid $4.7 million to the selling shareholders under Interaction Acquisition to settle a portion of the Contingent Interactions Earnout Consideration due to the achievement of the target through the renewal of an existing contract with a specific customer.