v3.26.1
Fair Value Measurements
 6 Months Ended
Jun. 30, 2026
Fair Value Disclosures [Abstract]  
Fair Value Measurements Fair Value Measurements
The Company measures its cash equivalents at fair value based on an expected exit price as defined by the authoritative guidance on fair value measurements, which represents the amount that would be received on the sale of an asset or paid to transfer a liability, as the case may be, in an orderly transaction between market participants. As such, fair value may be based on assumptions that market participants would use in pricing an asset or liability. The authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level. The following are the hierarchical levels of inputs to measure fair value:
•Level 1: Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
•Level 2: Inputs reflect: quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the assets or liabilities; or inputs that are derived principally from or corroborated by observable market data by correlation or other means.
•Level 3: Unobservable inputs reflecting the Company’s assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available.

Financial Assets and Liabilities

The carrying amount of cash, accounts receivable, and accounts payable approximate their fair value due to their short-term nature. The Company’s assets and liabilities that are measured at fair value on a recurring basis, by level, within the fair value hierarchy as of June 30, 2026 and December 31, 2025, are summarized as follows:

June 30, 2026
Level 1Level 2Level 3
Total
(In thousands)
Assets
Cash equivalents - money market funds$34,042 $— $— $34,042 
Total assets$34,042 $— $— $34,042 
December 31, 2025
Level 1Level 2Level 3
Total
(In thousands)
Assets:
Cash equivalents - money market funds$43,000 $— $— $43,000 
Total assets$43,000 $— $— $43,000 
Liabilities:
Warrants liability
$— $— $2,999 $2,999 
Total liabilities
$— $— $2,999 $2,999 

In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as considers counterparty credit risk in its assessment of fair value. Observable or market inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s assumptions based on the best information available.

The Company’s money market funds are measured at fair value on a recurring basis based on quoted market prices in active markets and are classified as Level 1 within the fair value hierarchy. The Company’s Warrants liability was measured at fair value on a recurring basis and was classified as Level 3 within the fair value hierarchy. Significant changes in unobservable inputs could result in significantly lower or higher fair value measurements.

On a nonrecurring basis, the Company uses fair value measures when analyzing asset impairment. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If it is determined such indicators are present and the review indicates that the assets will not be fully recoverable, based on undiscounted estimated cash flows over the remaining amortization periods, their carrying values are reduced to estimated fair value. Estimated fair values are Level 3 measures in the fair value hierarchy. 
The estimated fair value of outstanding balances of the Notes as of the dates presented are as follows:
Level of
Hierarchy
Fair ValuePrincipal
Balance
Unamortized Debt Discount
Unamortized Debt Issuance Costs
Net Carrying
Value
(In thousands)
June 30, 2026
2026 Notes2$11,978 $14,972 $— $(26)$14,946 
2029 Notes3$164,530 $229,641 $(22,630)$(5,344)$201,667 
Second Lien 2029 Notes3$76,908 $181,952 $— $— $181,952 
December 31, 2025
2026 Notes
2$8,175 $20,125 $— $(73)$20,052 
2029 Notes
3$200,601 $221,877 $(25,955)$(6,142)$189,780 
Second Lien 2029 Notes3$61,497 $181,952 $— $— $181,952 

Management determined the fair value of the 2026 Notes by using Level 2 inputs based on observable market prices for the instrument and similar instruments.

Management determined the fair value of the 2029 Notes and Second Lien Notes using the expected transaction proceeds as the proxy for fair value. Management divided the outstanding principal amount by the product of the $7.00 floor multiplied by the SoundHound stock price as of June 30, 2026 to arrive at the fair value per $1,000 of principal amount.

Management determined the fair value of the 2029 Notes as of December 31, 2025 by using Level 3 inputs, including the volatility of 15.00%, yield of 16.00%, risk-free rate of 3.59% and credit spread of 12.81%. Management determined the fair value of the Second Lien Notes as of December 31, 2025 by using Level 3 inputs, including volatility of 15.00%, yield of 30.00%, risk-free rate of 3.64% and credit spread of 24.60%. A change in those inputs to a different amount might result in a significantly higher or lower fair value measurement.

Warrants

Upon issuance, the Company recorded the fair value of the Warrants using the Black-Scholes valuation model and is required to revalue these Warrants at each reporting date with any changes in fair value recorded on the Company’s condensed consolidated statements of operations. The valuation of the Warrants was classified as Level 3 within the fair value hierarchy and is influenced by the fair value of the underlying, or notional amount of, common stock of the Company.

As of June 30, 2026, the Company assessed the fair value of the Warrants as $0 due to the implications of the pending Mergers, and the probability of the Warrants being in the money being low as a result of debt obligations being senior to equity holders. According to the agreed-upon terms, upon completion of the Mergers, the Warrants will be cancelled for no consideration, and are therefore deemed to have zero value.
A summary of the Black-Scholes pricing model assumptions used to record the fair value of the Warrants as of June 30, 2025 is as follows:

June 30,
2025
Stock price
$1.01
Risk free rate
4.15%
Expected life (in years)
8.93
Expected volatility79.00%

Refer to Note 8 – Senior Notes, Capped Call Transactions and Warrants for additional information.

The changes in fair value of the Level 3 Warrants as of the dates presented are as follows:

June 30,
2026		December 31,
2025
(In thousands)
Balance, beginning of year$2,999 $17,498 
Settlement of Warrants— (1,297)
Change in the fair value of Warrants(2,999)(13,202)
Balance, end of period$— $2,999