SOUNDHOUND AI, INC.

Previous wording

The following discussion and analysis of the financial condition and results of operations of SoundHound should be read together with our unaudited interim condensed consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q ("Form 10-Q") and the audited consolidated financial statements and notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operation as of and for the year ended December 31, 2024 included in our Annual Report on Form 10‑K for 2024 filed with the SEC on March 11, 2025 ("Form 10-K" or the "Annual Report). Some of the information contained in this discussion and analysis or set forth elsewhere in this report and in our Form 10-K, including information with respect to SoundHound’s plans and strategy for its business and related financing, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the “Risk Factors” and “Cautionary Statement Regarding Forward Looking Statements” section of this report, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. Unless otherwise indicated or the context otherwise requires, references in this section to “SoundHound,” “we,” “us,” “our” and other similar terms refer to SoundHound AI, Inc.

Current wording

The following discussion and analysis of the financial condition and results of operations of SoundHound should be read together with our unaudited interim condensed consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q ("Form 10-Q") and the audited consolidated financial statements and notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operation as of and for the year ended December 31, 2025 included in our Annual Report on Form 10‑K for 2025 filed with the SEC on March 2, 2026 ("Form 10-K" or the "Annual Report). Some of the information contained in this discussion and analysis or set forth elsewhere in this report and in our Form 10-K, including information with respect to SoundHound’s plans and strategy for its business and related financing, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the “Risk Factors” and “Cautionary Statement Regarding Forward Looking Statements” section of this report, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. Unless otherwise indicated or the context otherwise requires, references in this section to “SoundHound,” “we,” “us,” “our” and other similar terms refer to SoundHound AI, Inc and our subsidiaries.

Previous wording

Our market position is strengthened by the technical barriers to entry in the Voice AI space, which tend to discourage new market participants. Furthermore, our technology is backed by significant investments in intellectual property, with over 223 patents granted and over 108 patents pending, spanning multiple fields including speech recognition, natural language understanding, machine learning, monetization and more. We have achieved this critical momentum in part thanks to a long-tenured leadership team with deep expertise and proven ability to attract and retain talent. We believe that SoundHound has extensive technical expertise and a proven track record of innovation and value creation for us to continue to attract customers in the growing market for Voice AI transactions.

Current wording

Our market position is strengthened by the technical barriers to entry in the Voice AI space, which tend to discourage new market participants. Furthermore, our technology is backed by significant investments in intellectual property, with over 240 patents granted and 99 patents pending, spanning multiple fields including speech recognition, natural language understanding, machine learning, monetization and more. We have achieved this critical momentum in part thanks to a long-tenured leadership team with deep expertise and proven ability to attract and retain talent. We believe that SoundHound has extensive technical expertise and a proven track record of innovation and value creation for us to continue to attract customers in the growing market for Voice AI transactions.

Previous wording

During the periods presented in the condensed consolidated financial statements, we have not generated revenue from leads and transactions on voice-enabled products from voice-enabled services other than from the SoundHound music identification app. Going forward, SoundHound expects monetization revenue to be generated through a combination of advertising revenue from the music identification app and, over time, from leads and transactions on voice-enabled products from voice-enabled services, which we expect will provide much more seamless opportunities for consumers to access goods and services that they covet as we further build out and scale the voice-enabled ecosystem.

Current wording

During the periods presented in the unaudited condensed consolidated financial statements, we have not generated revenue from leads and transactions on voice-enabled products from voice-enabled services other than from the SoundHound music identification app. Going forward, SoundHound expects monetization revenue to be generated through a combination of advertising revenue from the music identification app and, over time, from leads and transactions on voice-enabled products from voice-enabled services, which we expect will provide much more seamless opportunities for consumers to access goods and services that they covet as we further build out and scale the voice-enabled ecosystem.

Previous wording

On September 3, 2025 (the “Interactions Acquisition Date”), we 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 combination also introduces major new powerhouse brands to the SoundHound customer portfolio, including global consumer icons, large technology device brands, insurers, automakers, and other preeminent Fortune 100 companies across industries.

Current wording

On September 3, 2025 (the “Interactions Acquisition Date”), we 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 combination also introduces certain major new powerhouse brands to the SoundHound customer portfolio, including global consumer icons, large technology device brands, insurers, automakers, and other preeminent Fortune 100 companies across industries.

Previous wording

Refer to the "Liquidity and Capital Resources" section for discussion on the purchase price and the Acquisition's impact on SoundHound's liquidity.

Current wording

We have incurred certain significant costs relating to the SYNQ3, Amelia and Interactions acquisitions, such as legal, accounting, financial advisory and other professional services fees, as well as other customary payments. Refer to the "Liquidity and Capital Resources" section for discussion on the purchase price and the Acquisition's impact on SoundHound's liquidity.

Previous wording

•Revenue Growth. Our commercial success, including acceptance and use of our applications, will depend on a number of factors, some of which are beyond our control, such as size of the market opportunity, successful integration with original equipment manufacturers (“OEM”), competition and demand from the public and members of the conversational AI community. Our product offerings, including those offerings that we have acquired, have disruptive effects in the ways human interact with computers and we are developing new, innovative economic models and acquiring companies such as SYNQ3, Amelia and Interactions which have synergistic businesses to ours that we believe will enhance value to customers, partners and shareholders. For our revenue growth to continue, we will need to invest in sales and marketing to ensure our messaging, capabilities and offerings are well understood and valued by customers. With our primary focus on enterprise customers, we also need to align with enterprise sales cycles, which can be longer than consumer cycles. As we build new customer relationships, we continually focus on maintaining and growing our existing relationships through long-term partnerships through significant upfront investment in customer specific engineering projects. Additionally, in addition to our acquisitions of SYNQ3, Amelia and Interactions, we may look to acquire other companies in the industry to develop synergies with our existing business.

Current wording

•Revenue Growth. Our commercial success, including acceptance and use of our applications, will depend on a number of factors, some of which are beyond our control, such as size of the market opportunity, successful integration with original equipment manufacturers (“OEM”), competition and demand from the public and members of the conversational AI community. Our product offerings, including those offerings that we have acquired, have disruptive effects in the ways human interact with computers and we are developing new, innovative economic models and acquiring companies such as SYNQ3, Amelia and Interactions which have synergistic businesses to ours that we believe will enhance value to customers, partners and stockholders. For our revenue growth to continue, we will need to invest in sales and marketing to ensure our messaging, capabilities and offerings are well understood and valued by customers. With our primary focus on enterprise customers, we also need to align with enterprise sales cycles, which can be longer than consumer cycles. As we build new customer relationships, we continually focus on maintaining and growing our existing relationships through long-term partnerships through significant upfront investment in customer specific engineering projects. Additionally, in addition to our acquisitions of SYNQ3, Amelia and Interactions, we may look to acquire other companies in the industry to develop synergies with our existing business.

Previous wording

•Seasonality. Our ability to accurately forecast demand for our technology could be negatively affected by many factors, including seasonal demand. We anticipate that we will experience fluctuations in customer and user demand based on seasonality. For example, in the past, we have seen approximately one third of our revenue in the first half of the year with the remaining two thirds in the second half. Additionally, given that we address markets across several different industry verticals, the associated overall seasonality impact to us may not be consistent year-to-year.

Current wording

•Seasonality. Our ability to accurately forecast demand for our technology could be negatively affected by many factors, including seasonal demand. We anticipate that we will experience fluctuations in customer and user demand based on seasonality. For example, in the past, we have seen approximately 40% of our revenue in the first half of the year with the remaining 60% in the second half. Additionally, given that we address markets across several different industry verticals, the associated overall seasonality impact to us may not be consistent year-to-year.

Previous wording

“Amelia Software Platform” meaning our AI-based digital resource solution that enables AI in our customers’ services, ranging across multiple industries. This generally includes revenue from hosted services if the customer elects our SaaS offering, or from licensing revenue if the customer requires an on-premise solution. Professional services are also offered and included within professional services revenue. The revenues from Amelia Software Platform are included within Service Subscriptions, and are recognized point in time or over time depending on the arrangement.

Current wording

“Amelia Software Platform” and “Virtual Assistance” meaning our AI-based digital resource solution that enables AI in our customers’ services, ranging across multiple industries. This generally includes revenue from hosted services if the customer elects our SaaS offering, or from licensing revenue if the customer requires an on-premise solution. Professional services are also offered and included within professional services revenue. The revenues from Amelia Software Platform and Virtual Assistance are included within Service Subscriptions, and are recognized point in time or over time depending on the arrangement.

Previous wording

We have and may continue to experience volatility for our remaining performance obligations and deferred revenue as a result of the timing for completing our performance obligations. We had remaining performance obligations in the amount of $70.6 million as of September 30, 2025. Given the applicable contract terms, $41.3 million is expected to be recognized as revenue within one year, $27.6 million is expected to be recognized between 2 to 5 years and the remainder of $1.7 million is expected to be recognized after 5 years. Deferred revenue consists of billings or payments received in advance of revenue being recognized and can fluctuate with changes in billing frequency and other factors. As a result of these factors, as well as our mix of revenue streams and billing frequencies, we do not believe that changes in our remaining performance obligations and deferred revenue in a given period are directly correlated with our revenue growth in that period.

Current wording

We have and may continue to experience volatility for our remaining performance obligations and deferred revenue as a result of the timing for completing our performance obligations. We had remaining performance obligations in the amount of $64.7 million as of March 31, 2026. Given the applicable contract terms, $40.1 million is expected to be recognized as revenue within one year, $22.9 million is expected to be recognized between 2 to 5 years and the remainder of $1.7 million is expected to be recognized after 5 years. Deferred revenue consists of billings or payments received in advance of revenue being recognized and can fluctuate with changes in billing frequency and other factors. As a result of these factors, as well as our mix of revenue streams and billing frequencies, we do not believe that changes in our remaining performance obligations and deferred revenue in a given period are directly correlated with our revenue growth in that period.

Previous wording

SoundHound’s cost of revenues are comprised of direct costs associated directly with SoundHound’s revenue streams as described above. This primarily includes costs and depreciation related to hosting for cloud-based services, such as data centers, electricity charges, content fees and certain personnel-related expenses including personnel costs under call centers that are directly related to these revenue streams. Additionally, our cost of revenues also includes the amortization of developed technology acquired from SYNQ3, Amelia and other acquisition as intangible assets.

Current wording

SoundHound’s cost of revenues are comprised of direct costs associated directly with SoundHound’s revenue streams as described above. This primarily includes costs and depreciation related to hosting for cloud-based services, such as data centers, electricity charges, content fees and certain personnel-related expenses including personnel costs under call centers that are directly related to these revenue streams. Additionally, our cost of revenues also includes the amortization of developed technology acquired from SYNQ3, Amelia, Interactions and other acquisition as intangible assets.

Previous wording

The issuance of debt instruments with direct transaction costs, embedded derivatives and warrant instruments has resulted in debt discounts. Direct transaction costs consist of various transaction fees and third-party costs, such as bank and legal fees, that are incurred upon issuance. No interest expense was incurred during the three and nine months ended September 30, 2025 due to the repayment of Amelia Debt in December 2024 and the repayment of Term Loan in June 2024.

Current wording

The issuance of debt instruments with direct transaction costs, embedded derivatives and warrant instruments has resulted in debt discounts. Direct transaction costs consist of various transaction fees and third-party costs, such as bank and legal fees, that are incurred upon issuance. No interest expense was incurred during the three months ended March 31, 2026 due to the repayment of Amelia Debt in December 2024 and the repayment of Term Loan in June 2024.

Previous wording

Other income, net consists of the change in fair value related to our derivative liability, interest income and other income (expense).

Current wording

Other income (expense), net consists of the change in fair value related to our derivative liability, interest income and other expense.

Previous wording

Income tax expense includes federal, state and foreign taxes and is based on reported income before income taxes. We are in a cumulative loss position for tax purposes based on historical earnings. As of December 31, 2024, we had $548.4 million of U.S. federal and $208.1 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 2025 and 2028, respectively, with the exception of $403.3 million federal net operating loss carryforwards and $11.0 million state net operating loss carryforwards, which can be carried forward indefinitely.

Current wording

Income tax expense includes federal, state and foreign taxes and is based on reported income before income taxes. We are in a cumulative loss position for tax purposes based on historical earnings. As of December 31, 2025, we had $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.

Previous wording

We had federal and state research and development credit carryforwards of $21.4 million and $13.3 million, respectively, as of December 31, 2024. The federal credits will expire starting in 2029 if not utilized. The state credits can be carried forward indefinitely. We also had Canadian SR&ED tax credits of $1.6 million, which expire starting in 2038 if not utilized.

Current wording

We had federal and state research and development credit carryforwards of $27.2 million and $15.4 million, respectively, as of December 31, 2025. The federal credits will expire starting in 2029 if not utilized. The state credits can be carried forward indefinitely. We also had Canadian SR&ED tax credits of $1.9 million, which expire starting in 2039 if not utilized.

Previous wording

The following tables set forth the significant components of our results of operations for the three and nine months ended September 30, 2025 and 2024 ($ in thousands):

Current wording

The following tables set forth the significant components of our results of operations for the three months ended March 31, 2026 and 2025 ($ in thousands):

Previous wording

The following tables summarize our revenues by type and geographic regions for the three and nine months ended September 30, 2025 and 2024 ($ in thousands):

Current wording

The following tables summarize our revenues by type and geographic regions for the three months ended March 31, 2026 and 2025 ($ in thousands):

Previous wording

Cost of revenues increased by $11.2 million and $46.1 million, or 87% and 204% in the three and nine months ended September 30, 2025, respectively, compared to the same period in 2024. Gross margin decreased to 43% and 40% during the three and nine months ended September 30, 2025, respectively, compared to 49% and 55%, respectively, during the same period in 2024 primarily due to the acquisition of Amelia in 2024, which included a amortization of acquired intangible assets in the amount of $3.6 million and $10.6 million for the three and nine months ended September 30, 2025, respectively, and the acquisition of Interactions in 2025, which included a amortization of acquired intangible assets in the amount of $0.2 million for the three and nine months ended September 30, 2025. In the past, our gross margin has fluctuated and may continue to fluctuate from quarter to quarter due to revenue contributions from varying product mixes. However, we expect to gradually improve gross margins in the mid-term, especially as it relates the integration of Amelia, Interactions and SYNQ3.

Current wording

Cost of revenues increased by $11.9 million, or 65% in the three months ended March 31, 2026 compared to the same period in 2025. Gross margin decreased to 31% during the three months ended March 31, 2026 compared to 36% during the same period in 2025 primarily due to the acquisition of Interactions in the third quarter of 2025, which included an amortization of acquired intangible assets in the amount of $0.6 million and resulted in an increase of stock-based compensation of $2.8 million for the three months ended March 31, 2026. In the past, our gross margin has fluctuated and may continue to fluctuate from quarter to quarter due to revenue contributions from varying product mixes. However, we expect to gradually improve gross margins in the mid-term, especially as it relates the integration of Amelia, Interactions and SYNQ3.

Previous wording

Sales and marketing expenses increased by $8.0 million, or 96%, in the three months ended September 30, 2025 compared to the same period in 2024, primarily due to increases in 2025 of $6.9 million in personnel-related costs caused by Amelia and Interactions acquisitions, $0.7 million in office expense, $0.3 million in advertising expenses, $0.3 million in consulting fees, $0.2 million in travel expenses, and $0.1 million in legal and professional fees, which were partially offset by a decrease of $0.4 million incurred for information technology and facility allocations.

Current wording

Sales and marketing expenses increased by $7.2 million, or 60%, in the three months ended March 31, 2026 compared to the same period in 2025, primarily due to increases in 2026 of $4.7 million in personnel-related costs of Interactions which was acquired in the third quarter of 2025, $1.6 million in office expense, $0.4 million in advertising expenses, $0.3 million in travel expenses and $0.1 million in legal and professional fees.

Previous wording

We expect our sales and marketing expenses to remain stable in the short term. However, in the long term, we expect sales and marketing expenses to grow at a rate below that of our revenue, aligning with our strategic emphasis on cost effectiveness and sustainable financial performance.

Current wording

We expect our sales and marketing expenses to remain stable in the short term. However, in the long term, we expect sales and marketing expenses to grow at a rate below our expected growth in revenue, aligning with our strategic emphasis on cost effectiveness and sustainable financial performance.

Previous wording

Research and development expenses increased by $3.3 million, or 17%, in the three months ended September 30, 2025 compared to the same period in 2024. The increase in research and development expenses was primarily due to increases in 2025 of $3.6 million in personnel-related costs caused by Amelia and Interactions acquisitions, $1.0 million in legal and professional fees, $0.8 million in office expense, $0.5 million in consulting fees, $0.1 million in utilities, and $0.1 million in travel expense, which were partially offset by a decrease of $1.5 million in cloud computing services, $1.1 million incurred for information technology and facility allocations, and $0.2 million in rent expense.

Current wording

Research and development expenses increased by $1.4 million, or 6%, in the three months ended March 31, 2026 compared to the same period in 2025. The increase in research and development expenses was primarily due to increases in 2026 of $2.0 million in office expense, $1.0 million in legal and professional fees, $0.3 million in consulting fees, $0.1 million in utilities, which were partially offset by a decrease of $1.0 million in personnel-related costs caused by lower stock-based compensation of $3.0 million offset by the increased salary related expenses of $2.0 million due to Interactions acquisition, $0.9 million in cloud computing services and $0.1 million in rent expense.

Previous wording

We expect our research and development expenses to remain stable in the short term. However, in the long term, we expect research and development expenses to grow at a rate below that of our revenue, aligning with our strategic emphasis on cost effectiveness and sustainable financial performance.

Current wording

We expect our research and development expenses to remain stable in the short term. However, in the long term, we expect research and development expenses to grow at a rate below our expected growth in revenue, aligning with our strategic emphasis on cost effectiveness and sustainable financial performance.

Previous wording

General and administrative expenses increased by $7.3 million, or 43%, in the three months ended September 30, 2025 compared to the same period in 2024. The increase in general and administrative expenses was primarily due to increases in 2025 of $4.6 million in personnel-related costs caused by Amelia and Interactions acquisitions, $1.4 million in information technology and facility allocations, $1.0 million in bad debt expense, $0.3 million in legal and professional fees, $0.2 million in taxes and license fees, $0.2 million in payroll fees, and $0.1 million in insurance expense, which were partially offset by a decrease of $0.2 million in consulting fees, $0.2 million in cloud computing fees, and $0.1 million in office expense.

Current wording

General and administrative expenses increased by $7.3 million, or 39%, in the three months ended March 31, 2026 compared to the same period in 2025. The increase in general and administrative expenses was primarily due to increases in 2026 of $4.5 million in personnel-related costs of Interactions which was acquired in the third quarter of 2025, $2.2 million in legal and professional fees mainly caused by the potential acquisitions, $0.3 million in rent expense, $0.3 million in software expense, $0.2 million in consulting fees, $0.2 million in taxes and licenses, which were partially offset by a decrease of $0.2 million in office expense and $0.2 million in cloud computing services.

Previous wording

We expect our general and administrative expenses to increase in the short term as we invest in our control environment. However, in the long term, we expect general and administrative expenses to grow at a rate below that of our revenue, aligning with our strategic emphasis on cost effectiveness and sustainable financial performance.

Current wording

We expect our general and administrative expenses to increase in the short term as we invest in our control environment to remediate the existing material weaknesses. However, in the long term, we expect general and administrative expenses to grow at a rate below our expected growth in revenue, aligning with our strategic emphasis on cost effectiveness and sustainable financial performance.

Previous wording

The change in fair value of acquisition related liabilities, which is marked-to-market based on the movements in our stock price and changes in the assessed probability of achieving certain future revenue targets, was a loss of $66.2 million and a gain of $78.5 million for the three and nine months ended September 30, 2025. The increase of the Company's stock price as of September 30, 2025 compared to the stock price as of June 30, 2025, resulted in an increase in its fair value of contingent acquisition liabilities during the three months ended September 30, 2025. The fluctuation is non-operating and non-cash in nature. We will continue to review our estimates on the quarterly basis over the remaining earnout period until 2026. See Note 16 to our unaudited condensed consolidated financial statements included within this report for more information.

Current wording

The change in fair value of acquisition related liabilities, which is marked-to-market based on the movements in our stock price and changes in the assessed probability of achieving certain future revenue targets, was a gain of $39.4 million for the three months ended March 31, 2026. The decrease of the Company's stock price as of March 31, 2026 compared to the stock price as of December 31, 2025, resulted in a decrease in its fair value of contingent acquisition liabilities during the three months ended March 31, 2026. The fluctuation is non-operating and non-cash in nature. We will continue to review our estimates on the quarterly basis over the remaining earnout period. See Note 15 to our unaudited condensed consolidated financial statements included within this report for more information.

Previous wording

Amortization of intangibles increased by $3.2 million and $16.2 million, or 64% and 226% in the three and nine months ended September 30, 2025 compared to the same period in 2024. The increase in amortization of intangibles was primarily attributable to the Amelia Acquisition that was closed during the third quarter of 2024 and Interaction Acquisition that was closed during the third quarter of 2025.

Current wording

Amortization of intangibles increased by $1.9 million, or 25% in the three months ended March 31, 2026 compared to the same period in 2025. The increase was primarily attributable to the intangibles of $39.5 million acquired from

Previous wording

The following tables summarize our other income, net, by type ($ in thousands):

Current wording

The following tables summarize our other income (expense), net, by type ($ in thousands):

Previous wording

Change in fair value of derivative increased by $5.1 million and $7.3 million, or 100% in the three and nine months ended September 30, 2025 compared to the same period in 2024. The increase was primarily attributable to the remeasurement gain from the change in fair value of a derivative assumed from Amelia acquisition. See Note 16 to our unaudited condensed consolidated financial statements included within this report for more information.

Current wording

Change in fair value of derivative decreased by $3.8 million, or 293% in the three months ended March 31, 2026 compared to the same period in 2025. The decrease was primarily attributable to the remeasurement loss from the change in fair value of a derivative assumed from Amelia acquisition caused by the decrease in the Company's stock price in the three months ended March 31, 2026. See Note 15 to our unaudited condensed consolidated financial statements included within this report for more information.

Previous wording

Total unrestricted cash and cash equivalents on hand as of September 30, 2025 was $268.9 million. Although we have incurred recurring losses each year since our inception, except for a net income of $129.9 million reported for the three months ended March 31 2025 and $55.2 million reported for the six months ended June 30, 2025, primarily due to the change in fair value of acquisition related liabilities, we expect we will be able to fund our operations for at least the next twelve months. We believe we will meet longer-term expected future cash requirements and obligations through a combination of cash flows from operating activities and, available cash balances and expected cash proceeds from the on-going at-the-market equity program. Our condensed consolidated financial statements have been prepared assuming that we 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.

Current wording

Total unrestricted cash and cash equivalents on hand as of March 31, 2026 was $215.6 million. Although we have incurred recurring losses each year since our inception, we expect we will be able to fund our operations for at least the next twelve months. We believe we will meet longer-term expected future cash requirements and obligations through a combination of cash flows from operating activities, available cash balances and expected cash proceeds from future ATM programs. Our condensed consolidated financial statements have been prepared assuming that we 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.

Previous wording

Our principal sources of liquidity are our cash and cash equivalents, which are sourced primarily from the sale of marketable securities. The primary uses of cash include the funding of operating expenses. There were no material changes to our material cash requirements as disclosed in our audited consolidated financial statements for the fiscal year ended December 31, 2024 in our Form 10-K.

Current wording

Our principal sources of liquidity are our cash and cash equivalents, which are sourced primarily from the sale of marketable securities. The primary uses of cash include the funding of operating expenses, as well as acquisition related costs. There were no material changes to our material cash requirements as disclosed in our audited consolidated financial statements for the fiscal year ended December 31, 2025 in our Form 10-K.

Previous wording

On January 24, 2025, we entered into an Equity Distribution Agreement (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. with respect to an at-the-market equity program. Under this program, we 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 our Class A Common Stock. During the three and nine months ended September 30, 2025, we sold 9,018,114 shares and 13,913,014 shares, respectively, of our common stock under the Second Equity Distribution Agreement, at an average price of $13.97 and $14.48 per share, respectively, and raised $126.0 million and $201.5 million of gross proceeds, respectively. The commissions and offering costs borne by us were approximately $2.5 million and $4.0 million, respectively. As of September 30, 2025, the Company had a remaining capacity to sell up to an additional $48.5 million of our common stock under the Second Equity Distribution Agreement.

Current wording

On January 24, 2025, we entered into an Equity Distribution Agreement (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. with respect to an ATM program. Under this program, we may offer and sell up to $250.0 million of shares of our Class A Common Stock from time to time through the Sales Managers. Sales 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 are entitled to commission at a fixed rate of 2.0% of the gross sales price per share for their services in acting as agent in the sale of our Class A Common Stock. During the three months ended March 31, 2025, we sold 4,248,900 shares of our common stock under the Second Equity Distribution Agreement, at an average price of $15.94 per share and raised $67.7 million of gross proceeds. The commissions and offering costs borne by us were approximately $1.4 million. During the three months ended March 31, 2026, there were no issuances of our common stock under the Second Equity Distribution Agreement. As of March 31, 2026, the Company had a remaining capacity to sell up to an additional $48.5 million of our common stock under the Second Equity Distribution Agreement.

Previous wording

The total purchase consideration includes $3.9 million in cash paid and 5,755,910 in shares of our Class A Common Stock issued as of the SYNQ3 Acquisition Date. We also withheld purchase consideration of $0.5 million in cash and 1,179,514 shares of our 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 our Class A Common Stock to certain former stockholders of SYNQ3 based upon the achievement of specified future milestones. On the SYNQ3 Acquisition Date, we also issued 2,033,156 restricted shares of our Class A Common Stock subject to time and performance-based vesting conditions. The fair value of the purchase consideration was $15.8 million.

Current wording

The total purchase consideration included $3.9 million in cash paid and 5,755,910 in shares of our Class A Common Stock issued as of the SYNQ3 Acquisition Date. We also withheld purchase consideration of $0.5 million in cash and 1,179,514 shares of our 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 our Class A Common Stock to certain former stockholders of SYNQ3 based upon the achievement of specified future milestones. On the SYNQ3 Acquisition Date, we also issued 2,033,156 restricted shares of our Class A Common Stock subject to time and performance-based vesting conditions. The fair value of the purchase consideration was $15.8 million.

Previous wording

The $0.5 million in cash and 1,179,514 shares of our Class A Common Stock were withheld for a period of 15 months (the “SYNQ3 Holdback Amount”). We determined that there are two components to the SYNQ3 Holdback Amount related to deferred consideration and contingent consideration, each comprised of cash and shares.

Current wording

The $0.5 million in cash and 1,179,514 shares of our Class A Common Stock were withheld for a period of 15 months (the “SYNQ3 Holdback Amount”).

Previous wording

We 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”). We accounted for the Contingent SYNQ3 Earnout Consideration as a liability within contingent acquisition liabilities on our condensed 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 our condensed 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 our Class A Common Stock. See Note 16 to our unaudited condensed consolidated financial statements included within this report for more information on the fair value measurement of Contingent SYNQ3 Earnout Consideration. As of September 30, 2025, the 2024 revenue target was not met. The Company assessed the 2025 revenue target was not probable of being met but the 2026 revenue target was probable of being met. No earnout consideration was issued as of September 30, 2025.

Current wording

We 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”). We accounted for the Contingent SYNQ3 Earnout Consideration as a liability within contingent acquisition liabilities on our condensed 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 our condensed consolidated statement of operations and comprehensive income (loss).

Previous wording

The 2,033,156 restricted shares of our 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.

Current wording

The 2,033,156 restricted shares of our 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 11 to our unaudited condensed consolidated financial statements included within this report for more information on stock-based awards issued in connection with the SYNQ3 Acquisition.

Previous wording

On the Amelia Acquisition Date, we issued a total of 3,809,520 shares of the SoundHound Class A common stock to the sellers. Pursuant to the terms of the purchase agreement, we also issued and deposited 2,149,530 shares of the SoundHound Class A common stock into an escrow account in order to partially secure the indemnification obligations of the selling shareholders under the purchase agreement. We also paid $8.4 million of cash for seller transaction expenses in connection with the closing of the Amelia Acquisition. We agreed to issue up to 16,822,429 shares to the selling shareholders based on achievement of certain revenue targets in fiscal years 2025 and 2026. The fair value of the purchase consideration was $98.6 million.

Current wording

On the Amelia Acquisition Date, we issued a total of 3,809,520 shares of the SoundHound Class A Common Stock to the sellers. Pursuant to the terms of the purchase agreement, we also issued and deposited 2,149,530 shares of the SoundHound Class A Common Stock into an escrow account in order to partially secure the indemnification obligations of the selling shareholders under the purchase agreement. We agreed to issue up to 16,822,429 shares to the selling shareholders based on achievement of certain revenue targets in fiscal years 2025 and 2026. The fair value of the purchase consideration was $98.6 million.

Previous wording

On the Amelia Acquisition Date, we issued and deposited 2,149,530 shares of our Class A Common Stock into an escrow account in order to partially secure the indemnification obligations of the selling shareholders under the purchase agreement. We accounted for the escrow consideration as equity issued as part of consideration transferred. Upon the settlement of any valid indemnification claims against the sellers, the escrow agent will return a number of shares to us equal to the dollar value of the indemnified loss divided by the reference price of $5.35 as stipulated in the purchase agreement. We concluded that this variability in settlement value is a derivative that is requirement to be remeasured to fair value due to changes in stock price. For the three and nine months ended September 30, 2025, we recognized a gain of $5.1 million and $7.3 million, respectively, related to remeasurement of the derivative, reflected in the other income, net in the condensed consolidated statement of operations and comprehensive loss. Upon the expiration of the escrow period, any remaining shares in the escrow account will be released to the selling shareholders. See Note 16 to our unaudited condensed 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.

Current wording

On the Amelia Acquisition Date, we issued and deposited 2,149,530 shares of our Class A Common Stock into an escrow account in order to partially secure the indemnification obligations of the selling shareholders under the purchase agreement. We accounted for the escrow consideration as equity issued as part of consideration transferred. Upon the settlement of any valid indemnification claims against the sellers, the escrow agent will return a number of shares to us equal to the dollar value of the indemnified loss divided by the reference price of $5.35 as stipulated in the purchase agreement. We 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.

Previous wording

We agreed to pay up to 16,822,429 in shares of Class A Common Stock to the selling shareholders based on achievement of certain revenue targets in fiscal years 2025 and 2026 (the “Contingent Amelia Earnout Consideration”). We accounted for the Contingent Amelia Earnout Consideration as a liability within contingent acquisition liabilities on the our condensed consolidated balance sheet and will subsequently remeasure the liability at each reporting date with changes in fair value recognized as a component of operating expense in our condensed 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 and will be settled in shares of our Class A Common Stock. For the three and nine months ended September 30, 2025, we recognized a loss of $65,945,000 and a gain of $70.1 million, respectively, related to the Contingent Amelia Earnout Consideration, reflected in the change in fair value of contingent acquisition liabilities in the condensed consolidated statement of operations and comprehensive loss. As of September 30, 2025, the Company assessed the 2025 and 2026 revenue targets were probable of being met.

Current wording

We agreed to pay up to 16,822,429 in shares of Class A Common Stock to the selling shareholders based on achievement of certain revenue targets in fiscal years 2025 and 2026 (the “Contingent Amelia Earnout Consideration”). We accounted for the Contingent Amelia Earnout Consideration as a liability within contingent acquisition liabilities on our condensed consolidated balance sheet and will subsequently remeasure the liability at each reporting date with changes in fair value recognized as a component of operating expense in our condensed consolidated statement of operations and comprehensive income (loss). For the three months ended March 31, 2026 and 2025, we recognized a gain of $37.4 million and $168.7 million, respectively, related to the Contingent Amelia Earnout Consideration, reflected in the change in fair value of contingent acquisition liabilities in the condensed consolidated statement of operations and comprehensive income (loss). As of March 31, 2026, the 2025 revenue target was met. We assessed the 2026 revenue targets was probable of being met.

Previous wording

We 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 upon the achievement of specified future milestones in fiscal years 2026 and 2027 (the "Contingent Interactions Earnout Consideration).

Current wording

We have 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 upon the achievement of specified future milestones in fiscal years 2026 and 2027 (the "Contingent Interactions Earnout Consideration).

Previous wording

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 within 120 days subsequent to the Interactions Acquisition Date to Interactions' former stockholders for the settlement of net working capital adjustments.

Current wording

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 in the second quarter of 2026 to Interactions' former stockholders for the settlement of net working capital adjustments.

Previous wording

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

Current wording

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.