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Veritone at 53rd JPMorgan Conference: Refocusing on AI and Data Refinery
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Published 16/05/2025, 01:18 am
Veritone at 53rd JPMorgan Conference: Refocusing on AI and Data Refinery
Veritone at 53rd JPMorgan Conference: Refocusing on AI and Data Refinery
On Thursday, 15 May 2025, Veritone (NASDAQ:VERI) presented at the 53rd Annual JPMorgan Global Technology, Media and Communications Conference, unveiling strategic shifts back to its AI roots. The company highlighted its focus on unstructured data processing and the launch of Veritone Data Refinery (VDR). Despite past challenges with diversification, Veritone is optimistic about future growth, particularly in the public sector.
Key Takeaways
Veritone is refocusing on its core AI capabilities, emphasizing audio and video data processing.
The new Veritone Data Refinery is expected to be a major growth driver, with a $10 million pipeline.
Significant wins in the public sector, including contracts with the Department of Defense and Department of Justice, are anticipated to boost 2025 growth.
The company maintains a high customer retention rate in the high 90th percentile.
CEO Ryan Stielberg believes Veritone is undervalued and poised for substantial stock price appreciation.
Financial Results
Veritone’s AI stack applications generate the majority of its $60 million revenue.
The company processes over 100,000 hours of audio and video daily, indexing nearly 60 million hours last year, equivalent to 11 petabytes of data.
VDR has already driven a $10 million pipeline since its announcement in November 2024.
Operational Updates
Veritone has sold its non-software business, Veritone One, to concentrate on AI.
The company operates on a platform-agnostic basis, utilizing AWS and Azure.
FedRAMP authorization enables Veritone to expand its federal government operations.
Future Outlook
VDR is projected to become one of Veritone’s largest business lines, with the premium AI training data market estimated to reach $17 billion in the next five to seven years.
2025 is expected to be pivotal for public sector expansion, with ongoing work with the Air Force and Department of Defense Logistics Agency.
Veritone aims to demonstrate its value through measurable results rather than narratives.
Q&A Highlights
Veritone serves thousands of enterprise AI customers with a high retention rate.
The company retained all core assets during its strategic refocus.
CEO Ryan Stielberg asserts that Veritone is likely the most undervalued stock on NASDAQ.
For more insights, refer to the full transcript below.
Full transcript - 53rd Annual JPMorgan Global Technology, Media and Communications Conference:
John Hutchison, Executive Director, JPMorgan’s Investment Bank: Hi, everybody. I’m John Hutchison, executive director from JPMorgan’s Investment Bank, Here to introduce Ryan Stielberg, the co founder, CEO and Chairman of Veritone. Veritone was started in 2014, about eleven years ago. Ryan started it with his brother. And Ryan has since grown the business to $100,000,000 IPO ed the business and overseen the execution for the past eleven years.
Ryan has twenty five years of experience in executive management across media companies, tech companies, including divisional head divisional leadership at Google. And Ryan is based out of Orange County and a native of Orange County alumni of UCLA. So Ryan, first, why don’t you tell us a little bit about your story building Veritone and introduce the audience to yourself.
Ryan Stielberg, Co-founder, CEO and Chairman, Veritone: Well, thank you. For everybody online, nice to have an opportunity to talk to you today. My journey started and it’s kind of the journey of Veritone in the mid ninety’s. So one of the sort of first pioneers to build one of the big first ad tech companies called Adforce right out of school. Built that up to be, again, one of it was pretty much Adforce and DoubleClick that kind of led and pioneered the way for all ad delivery on the web.
Built that business up through its IPO in the late ’90s. And we’ve had a lot of successes building and running, I’ll say, tech enabled advertising technology businesses over the course of my career. I think the one thing that we learned, and I think it’s one of the reasons why in the disciplines of AI you really see, I think, two big split in threads of where you saw so much innovation come from. One was e commerce. We’ll call the Peter Thiel and Elon Musk path.
And then you’ll see the ad tech side, right, primarily Google and that side. And there’s a reason for that. Why that history is important is running AI at scale is very challenging. It’s a massive data problem. And ad technology and ad serving is a major technology data problem.
You need to be able to and I’ll do the parallel real quick. If you’re going back and you go through the history of going from serving tons of ads on legacy data centers to now migration to the cloud and then the mobile phone comes out and then you go from websites to search, What the common thread is tons and tons of data, ad requests, billions and billions per hour and you have to figure out to serve the right ad to the right person at the right time. So fundamentally, the leveraging and invoking neural networks, rudimentary AI based models was almost a prerequisite to continue to advance when the sheer volume of ad delivery exploded around the world. And then a whole another phenomena happened. And this was really the onset of the mobile device where video and audio exploded.
So for many, many years, almost everything we were doing originally was very structured. HTML is very structured, meaning think of it as structured data versus unstructured data. Common theme that we’re going be talking about a lot. I’m sure many, many people across this conference are going to be talking about it. But the fastest growing data set was unstructured data.
So think of it this way. I have somebody who’s watching, who’s online and they’re no longer just reading a written article and looking at a few pictures, but they’re spending 90% of the time full screen watching a video. Well, if you’re Google and others and us ad tech guys, that’s both an opportunity but very scary. Where am I going serve ads? Right?
So there became a strong interest leveraging, again, rudimentary cognitive based AI, and this goes back almost twenty years, is we need to start figuring out what’s inside this content and we need to do it at scale, number one. And number two is we need to start having a much better understanding of contextual based targeting. Right? So I’m not just serving an ad and trying to build an inference model about who you are when you’re logging on, but also I need to figure out and do the parallel between who you are and what you’re looking at and what your interests are. Was very challenging, legacy algorithm of the processes and models weren’t working.
And so that’s where you start to really see the emergence and investment heavy in AI. Obviously, Google, when I sold my last successful business to Google in 02/2008, was I was tasked primarily to go after the unstructured data market. How could they start to look at these huge corpuses of audio and video and how could we start to figure out how to monetize that at scale? So that was really the kernel of Veritone. So Veritone is an idea that frankly we were thinking about going back to right after we sold DMARC broadcasting to Google back in the day and we and thesis was this, and it holds true today and it’s been validated over and over, is wow, there’s a lot of unstructured data being created and this is the tip of the iceberg.
And just put it in perspective, 80% plus of all new data created every single day is unstructured, messy. Think of it as noise and harmonics off an energy grid. Think of it as audio and video, right, being produced. When I say unstructured is it’s hard for rudimentary machines to understand that data without actually adding doing a lot of work to the data first. So you have to actually it’s like mining ore.
But again, if you can figure out how to mine ore effectively, there’s going to be tremendous value there. So Veritone was the idea as a play on words, means truth in the signal, is we believe we could create something very meaningful and impactful that if we could build a system that could ingest huge amounts of unstructured data, primarily audio and video, that will be a common theme throughout this talk. And I could leverage both cognitive science and obviously today future, I’ll say more advanced AI models, large language models, etcetera. But back then when we started this, we were really having to deal with AI based models we were creating ourselves that were, I would say, more rudimentary cognitive models. These are transcription, translation, object detection, face detection.
In no way are we minimizing those, but when you are dealing with tens of thousands of hours a minute, and our volume today, we process well over one hundred thousand hours of audio and video every single day for our customers, the volume is astronomical. And fundamentally you have to be able to, a, be able to figure out how to ingest and store and index all these huge amounts of unstructured data before we can even do anything with it. Number two is do we have the right cost effective AI models that can extract enough of intelligent data from it so we can act upon it? So here’s the best way and I’ll speed up. We don’t need to go through the rest of the history.
But this is now 2012, we have this idea. The original idea of Veritone was purely for media and entertainment. Right? How can we help extend this technology base to the big media companies, the big advertising companies out there to extend? But right even before we sort of launched our first prototype, which our platform is called aiWARE, which is a key point in our technology stack, we knew that this was much bigger than just tracking advertising, right, and facilitating advertising.
So I think what I’ll do is I’ll give you two examples end to end of like a customer to sort of explain exactly what we do in the commercial sense. And then obviously over the years now we’ve expanded, which we’re very excited about, into the public sector and other areas where there also is a huge need for understanding leveraging unstructured data. So ESPN. Kind of a prototypical customer of ours on the media and entertainment side. We have mostly large enterprise customers as our accounts and they range again on the commercial from large dozens and hundreds of media entertainment customers from movie studios to broadcasters, audio groups and video based groups.
But let’s take ESPN and Disney. So for ESPN, who’s been a customer now for about seven years, they keep renewing and they keep expanding, we are their kind of primary AI back end system. And what we do for them is we, every day, ingest every piece of content that they produce, obviously starting with a lot of their historical archive and that includes everything you hear over audio, podcasting, their video, the actual linear broadcast programming and all the components that go into that. So think of this huge amount of tonnage that comes into it. ESPN’s job and they do create some of their own singular shows, but for the most part they are an aggregator.
They’re having to collect hundreds of thousands of different sports clips around the world, be able to ingest, understand those quickly, and ultimately you and I, we see the very end product which is SportsCenter, right, that comes out every four. That takes a lot of work. Now, obviously with many different platforms for distribution, mobile, social, etc, their job, their speed and the time that they have to ingest, index, organize, package and repush out is incredibly high and it’s very expensive. When we first started working with them, they had well over 500 interns literally manually labeling content, trying to collect sources. Obviously, I think we’ve completely automated that whole process for them over the years.
So now the new world is all that content is being ingested into an instance of aiWARE for ESPN, whereas their system of record, we’re ingesting all that content, we’re indexing it in near real time, and think of it as just layers and so tonnage, so just visually think of it as creating a huge data lake first and then applying the right AI models to extract that value has multiple layers. So you you don’t want to trivialize part the first result. You got a question?
John Hutchison, Executive Director, JPMorgan’s Investment Bank: Yeah, yeah. And so from a viewer experience standpoint, that’s when they call up a clip from ten years ago, that’s because it got tagged by Veritone and they’re able to pull it up quickly.
Ryan Stielberg, Co-founder, CEO and Chairman, Veritone: One of many. The use cases I’ll get to, but before you get to the plethora of different use cases, you have to go through the page of ingestion, index, organize. It’s like creating the Google search corpus before anybody even starts to search for it. But yes, so now once you’ve done this full indexing, the opportunities and I’ll really focus on three main personas, the end user, where is this value being derived from, really falls into research, programming, advertising and sponsorship. And then obviously you’re going all the way to B2B2C, the end consumer obviously is the final beneficiary of this.
But now you can start doing really amazing things in near real time is pull me up all footage where Tiger Woods is on screen, his face, there’s a Nike logo in the background and in an aperture of five minutes they’re talking about redemption from a car accident to winning the US Open. And by the way, what I just described, you know, up until the exciting inclusion of large language models into our stack is it was still efficient, but it was like boolean, your classic search. Now, obviously, you can do it organically. So what I just described seems like, wow, that’s amazing. It’s like a truly search engine for the unbelievable amount of corpus of audio video.
You’re right. But that’s just but what’s come and been derived from that is all now it’s been seamlessly integrated into their workflow. So they know why which programming is working and what’s not. They’ve now done the correlation to Nielsen ratings. They’ve now done all the integrations working with us to first party data for consumption.
So they know what’s working and what’s not working. They know that that host that they signed a $100,000,000 contract with five years ago, his ratings are declining. And now you can actually have that layer of understanding in that data to prove and support your decisions when you’re trying to figure out new programming ideas. The advertising side just is probably the thing that helps fund this whole project is because so much advertising is now, as we all experience, particularly in sports, is embedded inside the content, we now have complete visibility and resolution of the efficacy of those ads. Meaning, obviously we’re in Boston right now, right?
The Celtics somehow won last night. I’m from LA, so I can do a little pun there. But if you watch that game, you’re seeing advertising embedded all throughout the broadcast. It’s not a commercial break anymore, it’s literally organic. When there’s a time out, we all heard it, they’re saying this time out is sponsored by GEICO and there’s a GEICO logo in the background.
Because of AI now, that’s indexed, we can now understand how valuable and how effective embedded organic advertising is, native based ads, in contrast or in correlation with a classic commercial break. So that’s just another big example. What we’re finding so exciting is once you’ve created this huge corpus of intelligence from this unstructured data, every company is now taking it in some different direction. So, again, we work with CNBC, CNN, the Disney’s, almost every audio broadcaster out there has been clients for years. And so I think we’ve created a great sustainable and growing business in the media entertainment and commercial space.
And I’ll just give you a metric and then I’ll open it up for a few questions before we go over to public sector. But scale wise, on behalf of our customers, we indexed and processed almost 60,000,000 of audio video last year. And that’s like almost 11 petabytes of data. It’s huge. Massive scale.
So much scale that we are platform agnostic. So we run all of aiWARE and our payloads on AWS, on Azure. We’re completely platform agnostic. That has multiple benefits, but also by the nature of how we’ve designed this platform, our customers, let’s say who are big Azure or AWS customers, they can actually knock off or use this platform against their commitments and their credits. So anyway, that’s kind of the back story how we got here.
It started with an ad tech vision, expanded. We are now I’d say, who is Veritone? We are the experts on large scale audio and video indexing and understanding with AI. Period. I don’t think there’s any company that’s better than audio and video understanding and leveraging the opportunities for that than Veritone is.
That’s really who we are to our DNA.
John Hutchison, Executive Director, JPMorgan’s Investment Bank: Great. Thanks, Ryan. Bringing things up to speed in terms of a business update. Over the past few years Veritone has gone through a transition culminating in the sale of the legacy non software business Veritone One. So can you tell us about that evolution just in the past couple of years?
Is Veritone through the transition to becoming the pure play AI company?
Ryan Stielberg, Co-founder, CEO and Chairman, Veritone: Well, went through I’d say we started out as pure AI, pure play, and then we went through a journey and we’re kind of coming back to our roots as the markets matured. You know, I’ve done this, this is my sixth company and timing is everything at times. When we first launched this, we took this company public for some various reasons very early when we were doing, frankly, like $10,000,000 of revenue because we could, right? We were able to raise a tremendous amount of money. And my vision when we first and our vision when we first launched Veritone was we really didn’t want to build end solutions or applications.
We wanted to build this large infrastructure called aiWARE, publish our APIs and just wait for the business to flow in and we would index all of Disney’s content and that was going be more like a Twilio, if you will, back in the day. But back in 2012 through February early days of the founding of the company, the industry wasn’t ready. They weren’t ready with their data sets. By the way, if the companies or my clients don’t really understand their data sets at all, or frankly a lot of their data sets are not even in proper digital form, What do I I need gas to run my engine. So we had to do a pivot for the first few years, I would say from 2018 through the early 20s, ’20 ’20, ’20 ’20 ’2, where we had to go build the actual end applications.
So meaning instead of ESPN giving them a bunch of unmined ore, we had to do a lot of work. And so meaning what people are buying from us, that’s running on aiWARE, but we had to build the end applications. So I’ll make a rough analogy. We were building Windows and instead of people building applications on Windows, we initially, because the industry was not quite there yet, we had to go build Office, Microsoft. And that’s what we’ve been selling.
So the majority of our revenue today, about 60,000,000 of it, is from the end applications built on our stack which everything I told you, all the ingredients, all the cool AI, what turns into value and discernible ROI for end customers is the application layer. Obviously, thankfully we had enough subject matter expertise to make that pivot. The other thing was in our history, just because of our background and other reasons, we were and we did raise a lot of money. Even with our experience and I’d say a few failures in the past and a lot of success, We kind of broke the cardinal sin of we started waiting for the market to mature with shareholders. We started spending money and we got distracted.
We kind of applied our technology stack into a lot of different other areas. We were in the energy grid optimization business for a while, literally trying to optimize solar and battery utilization with our stack. And because we could. We were kind of waiting and their budgets were really not flowing. Bottom line is that we spent a lot of stuff and got distracted.
And so, unfortunately, when the true bomb dropped in this industry, was the release of ChatGBT, and the whole world woke up and said, let’s go. Thankfully I enough of a stable business, which I’ve just been describing on the commercial side, and the emergence of our public safety side, but we were not unfortunately in a position to sprint and capitalize on. That was a mistake we made. We spent too much money. We then raised debt.
And so, unfortunately with, in my mind, the perfect stack that was ready to go and get us into hyper growth velocity, I was cleaning house. I was a private equity CEO trying to manage downsizing when I should be investing in going for hyperbolic growth. So that process of me, I’ll say, trying to clean up the business and get us back to, frankly, our roots has taken about two years. So I do believe we’re through the valley. One of those which you just described is we did at one time own a traditional media agency, like an ad agency.
It was a big one. It was called Veritone One and we finally offloaded it at the end of next year. It was powered, so what differentiated that advertising agency was our technology, but it was a service business. It wasn’t we weren’t selling the core product was not AI were our applications. It was this third party services group.
And that was, I would say, it was one of the few major strategic moves that I needed to make to get us back to where we are today where I’m pure play AI. This is what I do. I ingest unstructured data, I turn it into value, I sell applications and I think we’re there, which is exciting.
John Hutchison, Executive Director, JPMorgan’s Investment Bank: That’s great. Jumping into what I think is the most exciting question today, Veritone Data Refinery was announced in November of twenty twenty four and is an exciting new growth driver for the company, already driving about $10,000,000 in pipeline. With premium data becoming more valuable for training AI models, we think it’s going be a $17,000,000,000 market in the next five to seven years. VDR is positioned to deliver a huge amount of growth for the company to help monetize customers’ content in a whole new way. So, can you tell us a little bit about VDR?
Ryan Stielberg, Co-founder, CEO and Chairman, Veritone: Yeah. So, the workflow and ecosystem of AI, training data is lifeblood. Right? Before you can run these models against new data sets, like running transcription and so on, you have to actually build the models. Building these models takes training data and lots of it.
And it’s exponentially growing the demand for training data. It took a whole another level when you introduced large language models and now multimodal models, meaning models that can understand and discern audio and video and other things in a common model. There’s been a few companies over the years that have emerged to assist in the preparation of training data. And it’s something that we’ve been looking at for a few years now. One is a private entity called Scale AI, which you may have heard of.
Just to put in perspective how important preparing data is, the CEO of Scale was actually with the president in The Middle East. Just perspective. You’re seeing Coke and you’re seeing Jensen and Nvidia and Elon Musk, but then there’s somebody there who prepares the data, literally. And it’s not just pure technology, it’s Mechanical Turk human labeling company, which is a big portion of the revenue. That’s how important data is.
And it’s an insatiable amount. You mentioned $17,000,000,000 it couldn’t even surpass that. So what we looked at was how can Veritone, because we’ve been now for over a decade ingesting and amassing the largest corpus of clean audio and video, this might be a big opportunity for us. What made us made the decision to open up this organic new line of business was Shutterstock. Shutterstock, a public company recently being, I think, taking private and consolidating with Getty.
But Shutterstock, who is one of the largest stock photo businesses out there, they entered that space, meaning they started to mobilize and license and work with the These are the Google Geminis, these are the OpenAI’s. They started to license their imagery to these groups to help them train their models. We were watching this very closely since obviously we’re sitting on a tremendous amount of audio and video. And then when we saw their growth, that really went from like zero to over $130,000,000 in just a few years in their data services business, it was when we started to craft our idea really in the beginning, like second quarter of last year was when we said, hey, let’s really look at what the efficacy of this business line expansion for Veritone.
So obviously fast forward a little bit, we designed and took to market VDR, Veritone Data Refinery, and we kind of came to market in mid Q4, so it’s only been a few months. And the reception has been incredible. So we are we think that this is going to be one of the largest lines of business for Veritone for the next several years. We are actively booking business. We’re generating material revenue.
Contracts are 6 figures and higher that we’re working with. And specifically, again, is we are working on both sides of the equation. We’re on one side, if you will, representing and working with our customers who we’ve had customers for ten years in some instances, not just large media companies, but I’ll just say other entities that have large corpuses of unstructured audio and video, including surveillance video, which we’ll talk about public sector in a second. But we’re now ingesting, we’re preparing that data, ironically using AI to prepare the data to train other AI. Right?
It’s a really interesting virtuous cycle. But no, we’re engaged with all the main buyers and we do think that we thought that this was going to be a few million dollars of contribution. I think it’s going to be significantly more than that in calendar year 2025 and beyond. And I think we’re we’ve got some interesting moats around us. I mean scale is a big one.
And I’ll give you just a couple of examples. We’re not just limited to facilitating the data sets that we already have under representation. It gives us a huge competitive advantage that we do with the groups like the NCAA and others that have these huge libraries. However, we are also being tasked and working with the model development companies, the hyperscalers, who are giving us tasks on their side. They’re telling us under contract with them to go find new data sets, help us prepare it.
So, if you want to think about it is Veritone is the audio and video version of Scale AI. Right? And that’s a very, very exciting opportunity for us. I’ve seen lightning in a bottle a few times and this could be one of them. Even if it’s not lightning, it’s going to be producing a lot of revenue ore for us which is exciting.
John Hutchison, Executive Director, JPMorgan’s Investment Bank: That’s terrific. Jumping into public sector, you’ve alluded to several times now. Veritone has made great strides in the public sector with some large wins with the DOD, DOJ. What are some of the problems that you’re solving for the public sector and how are you competing with how are you taking on competitors who are also trying to dig into the space? So
Ryan Stielberg, Co-founder, CEO and Chairman, Veritone: reflecting on the commercial side with media and entertainment customers, it’s interesting. Their core business is leveraging the audio and video they produce and making money. The core asset that we act upon is their core product offering. So meaning media entertainment customers have triple PhDs, if you will, on the format of audio and video. Even before cloud and going back cold storage and tape and etcetera.
So meaning we’ve proven there was a huge problem, we’ve generated a nice business from helping them mobilize and advance for media entertainment customers. Meaning, now imagine you look at almost every other company whose core expertise is not managing their data. It’s not their core product offering. If you look at state and local law enforcement, I’ll look at two groups, the Department of Defense and certain agencies like the Air Force or state and local law enforcement. These are entities now that are being bombarded with having to, again, understand and leverage tons and tons of data to run their business.
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If you are Beverly Hills to Police Department, a client of ours, and you are involved in a case or investigation, this is no longer beat cops going out and talking to people and taking manual notes and stuff. This is now a massive data collection. We know the one we’ve all celebrated now and it took years to really understand is DNA. Imagine doing cases now without DNA. By the way, DNA was probably one of the most unstructured things that you could figure out or try to understand.
It took years to have any credibility before it even was acceptable in cases. Now, in fact, it’s considered as ground truth ironically, even more than eyewitnesses at times, as you know. So, if you are let’s go very practical. There is a homicide or there’s a domestic violence incident. Every investigation has to start collecting evidence.
The fastest new form of evidence is audio and video. Body cameras, dash cams, security cameras. And obviously we like to say crime travels. Something bad happens, the person flees. We call it Jason Bourne.
They’re running across it. You have to collect this information, you have to build a case. The Boston bombing, we’re here. It took literally thousands and thousands of people, they rented out warehouses and sifted through the stuff manually. But imagine and that’s unlimited budget with the FBI.
Imagine now you have to do that in a case where it’s citizen upload video. So we have applied Veritone and aiWARE technology very similar to what we do for audio and video for ESPN, but now we’re ingesting and integrating and harvesting all those disparate data sets to help accelerate investigations. And there’s many different layers of this and it’s so exciting. But again, ultimately we want to help them close cases faster, which is time savings because I don’t care where you are and what your position is, but all these budgets are being constrained for law enforcement. And then there’s all these residual applications or use cases that popped up like FOIA requests, Freedom of Information Act.
So when you see footage show up and it’s being redacted, so it’s not just using our technology to find the bad guy, it’s also protecting, say, the identity of citizens. They have to release that footage to the public. It’s called FOIA, Freedom of Information Act, where that information has to get released to the public. We need protect people. So we use our AI to obfuscate their faces and change their voices.
And that’s what you see when those video clips pop up on the news and stuff like that. So public sector is a very, very exciting business for us. We’re at I just described in kind of that micro use case for staying local is the same applications at a much bigger scale which we’re doing the DOJ and the Department of Defense. So we’re actively working with the Air Force. We’re actively working with the Department of Defense Logistics Agency.
It’s taken us a very long time to get in this space. Getting into the Fed I mean FedRAMP and having your authorization to operate takes years. But I think successfully we’re there and you’re going to see 2025 is going to be not just the year of VDR. Twenty twenty five is going to be the year where Veritone sort of breaks into a new electron level for public sector growth as well.
John Hutchison, Executive Director, JPMorgan’s Investment Bank: Any questions from the audience in our last few minutes here? All right. A couple more from me. You mentioned these great, really exciting growth vectors in public sector and the VDR product. What are a couple of things you wish the market better understood about Veritone in the story
Ryan Stielberg, Co-founder, CEO and Chairman, Veritone: You know, we’ve been around for a while. I think it’s probably here’s the core pillars. One is Veritone probably has the largest number of enterprise core AI customers outside of the hyperscalers. We have thousands of customers that use our core AI platform and applications every single day. We have tens of thousands of end users that use our applications.
So our solutions are mission critical to the missions for these commercial businesses as well as the public sector. So I would say when you dig in, the more interesting and exciting it is. So there’s real meat there. The testament and the proof point there is our retention rate is very high, high at the 90 percentile. And many of the companies I mentioned before The NCAA, I think, just signed five plus three year deal.
Right? I mean, these huge extensions. So we are here to stay and we’re experts at this. So, thankfully, we’ve done a good job of being, I’d say, strategic and fiscal stewards to get the business back in shape, right, back to our roots. But here’s the second thing I want people to know is through that journey of cleaning up the business, we did not get rid of any of our core assets, not one.
Our core lines of business, we kept all of them. So I think people are this is really an entry point. I think, frankly, we are probably the most undervalued stock on all NASDAQ, bar none, right, relative to it. And I think that will change very, very quickly. Hopefully it shouldn’t take one big announcement with a new big DoD customer.
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It shouldn’t. But again, we have to prove ourselves. At the end of the day, it’s a numbers game. We shouldn’t be a story stock. But again, I just think once we get back into the light, you know, for over a thousand days our stock was over $20 right, going back years.
So we should be at a different point. You know, I think some were strategic moves we made, right, poorly in the past. But we’re through that and now it’s just, hey, take a look at Veritone because if you’re looking for AI quote unquote exposure, this hasn’t been a diamond in the rough. It’s been a diamond that’s kind of been under a cloth here for a while. And it’s still there and people are going see some amazing things this year from us.
John Hutchison, Executive Director, JPMorgan’s Investment Bank: Wonderful. Thank you, Ryan, for joining us today here in Boston at the JPMorgan TMC Conference.
Ryan Stielberg, Co-founder, CEO and Chairman, Veritone: Thank you. Thank you.
GBR
1 month ago
Veritone, Inc. (VERI) Q1 2025 Earnings Call Transcript
May 08, 2025 7:58 PM ETVeritone, Inc. (VERI) StockVERI
Veritone, Inc. (NASDAQ:VERI) Q1 2025 Earnings Conference Call May 8, 2025 5:00 PM ET
Company Participants
Cate Goldsmith - Investor Relations
Ryan Steelberg - President and Chief Executive Officer
Mike Zemetra - Chief Financial Officer
Conference Call Participants
Scott Buck - H.C. Wainwright & Co.
Seth Gilbert - UBS
Glenn Mattson - Ladenburg Thalmann
Jesse Sobelson - D. Boral Capital
Ryan Steelberg
Thank you, Kate, and thank you, everyone, for joining us. We are excited to speak with you today and to provide an update on our first quarter 2025 results, financial performance and progress against our strategic growth plan. I will begin by providing a strategic update and sharing my perspective on our current market environment and the opportunity that lies ahead. Mike Zemetra will then cover our quarterly performance and financials in more detail.
We are pleased to report our Q1 2025 financial results, which reflect solid revenue performance and demonstrate strong progress against our growth strategy.
Veritone secured over 100 new business and renewal software agreements during the first quarter. Notable contracts with marquee commercial clients include Fremantle, Odyssey, World Athletics, Cox Media Group and Hubbard. On the public sector front, notable deals include Fresno Police Department, Riverside County Sheriff's Department, as well as several agency components under the Department of Justice. And within Veritone hire, notable new contracts include Rolls Royce and a nine plus year deal with the Bank of France.
These deals highlight the continued software as a service growth and the importance and reliability of Veritone's AI solutions for our clients.
The media and entertainment industry is experiencing significant growth, fueled by evolving consumer behaviors and technological advancements. This surge is driving demand for content across a fragmented ecosystem of platforms and devices. However, media organizations are struggling to meet this demand, while also dealing with economic pressure and limited capital budgets.
Veritone's cost effective AI solutions provide necessary efficiencies and automated workflows while also fueling growth. Our recent execution at this year's Masters Golf Tournament with our long-standing customer Augusta National is an excellent example of how Veritone provides mission critical solutions at scale.
Managing over 200 terabytes of footage, inclusive of over 90,000 video files and over 18,000 images, Veritone enabled unprecedented content access and distribution across the Masters Tournament, Augusta National Women's Amateur and Drive, Chip and Putt Championship, strengthening their brand presence and enhancing fan experiences across all digital platforms.
Our comprehensive media infrastructure powered by aiWARE empowered both global broadcasters and content creators with seamless access to high-quality assets, facilitating efficient content production and wider audience reach.
Artificial intelligence has emerged as the requisite solution for media companies to address these challenges by enabling them to extend the distribution and yield of their content assets with greater efficiency and automated workflows.
Simultaneously, the expanding AI foundational models and infrastructure sector has led to an insatiable appetite and need for high quality training data. However, there is a significant shortage of accessible, clean, unstructured data, including audio and video. This is our time and our opportunity.
Veritone's Data Refinery or VDR is solving this data gap by servicing the global training data market, which is expected to grow from $2.4 billion in 2023 to over $17 billion in 2032.
As AI models' data needs advance from text to images to audio and video, Veritone is uniquely and strategically positioned to capitalize on this audio and video market demand.
In 2024 alone, Veritone aiWEAR processed almost 11 petabytes and nearly 60 million hours of media for our customers, providing further evidence of our ability to meet VDR fulfillment requirements.
The big headline is this: VDR is gaining material traction and is now expected to generate significant revenue for the remainder of the year with a qualified and near-term pipeline of over $10 million up from $5 million just a few weeks ago.
As a reminder, our targeted CAGR from 2024 to 2027 to address the large and growing training data market is over 300%. VDR transforms unstructured data in the AI ready assets, enabling enterprises to prepare and leverage their data efficiently and effectively, both for internal use as well as for licensing such data for third party AI model training and tuning. VDR is powered by Veritone's aiWARE platform, supporting incredible scale and now has contracts with major hyperscalers, AI model providers and intellectual property owners.
To put the scale into perspective, we have already ingested, prepared and delivered the equivalent of over 200 billion tokens derived from premium audio and video to multiple hyperscalers and model developers for advanced model training and tuning. We are now targeting to achieve the higher end of our previously disclosed VDR pipeline of at least $10 million in 2025 alone.
As the media and entertainment sector continues to evolve, Veritone is poised to lead the charge in providing AI driven solutions that empower organizations to meet the increasing demands for content, audience engagement and data monetization. With the momentum we have built so far this year, we are confident that Veritone is well positioned to maintain its leadership in the AI space and deliver strong sustained growth in in 2025 and beyond.
I'll now shift to discussing Veritone Hire, our products and solutions for the HR and job recruiting industries. Despite the global challenges to the labor market, Veritone Hire remains focused on mid- and long-term growth. This is being pursued through a concerted three-pronged approach, expanding the reseller network, enhancing ATS integrations, and growing our media services solution.
Currently, our media services penetration within existing customers is less than 5% of their respective annual spend budgets, which we estimated to be close to $1 billion per year. Therefore, we see significant growth potential against both our installed client base as well as from net new accounts.
In Q1 2025, Veritone Hire increased its number of media services clients, grew client budgets under management compared to the previous year and extended media services to new international markets.
To close my update on Veritone Hire, I want to highlight our partnership with Workday, one of the largest global HCM ATS providers. As a Workday Certified Platinum Partner, Veritone is now co-selling with Workday and through this collaboration, we have already generated numerous opportunities and leads, which have resulted in the swift acquisition of new clients, especially considering that our Workday agreement only officially started just mid quarter. As our partnership with Workday develops, we anticipate meaningful growth in both opportunities and signed clients.
Veritone's Hire is set for further expansion. The results of the first quarter demonstrate our effective strategic implementation and adaptability to market changes. With a solid groundwork established, we are optimistic about our direction for the remainder of the year ahead.
Now turning to the public sector. I'm proud to report that our Veritone Intelligent Digital Evidence Management System, or IDEMS, continues to gain traction, both domestically and internationally. In local law enforcement, we are now servicing hundreds of customers using our IDEMS applications for investigation workflows, public record requests, freedom of information requests, and redaction workflows.
Our users include detectives, investigators, crime analysts, public affairs, and FOIA personnel, and they're all seeing the transformative impact of our AI powered solutions, helping them streamline their operations and achieve improved outcomes faster.
As we continue to grow, we are expanding our technical partnerships and integrations with new sales opportunities arriving on a weekly basis.
The addition of our IDEMS application suite has been a game changer for us, driving increases in deal size and opening up new opportunities. We are in the final stages of procurement with several large counties in California as well as law enforcement agencies and district attorney offices in major cities across North America.
We are also expanding our footprint in Canada with a strategic partnership focused on opportunities across both the U.S. and Canada.
Additionally, our partnership with technology and public safety leader, Getac, has now moved into the operational stage and we are beginning to work closely with joint customers.
As we continue to innovate, we are also working on new integrations with other major industry players, bringing our AI scale workflow and expertise in video and audio analytics to create combined solutions that deliver enhanced value for our customers.
On the U.S. Federal side, we've made strong progress as well. Veritone Investigate has achieved awardable status within the Tradewinds marketplace, broadening our footprint in Federal Agencies. We're also assisting with a proof of concept for procurement fraud with the Department of Defense Agency. Additionally, we are working closely with the Defense Logistics Agency or DLA on the JET 2.0 for FOIA and investigative services.
Our IDEMS applications are now the system of record for several service providers fulfilling key tasks for the DLA and we are also deploying IDEMS and aiWARE on the DLA's private tenant in their own secure environment. This is a significant milestone for us as it proves our ability to meet the highest security standards required by the Department of Defense.
We are also supporting multiple agencies across the DoD, DHS and DOJ as they scope requirements and implement proof of concept deployments under Project Defender, a key initiative that aligns with the President's strategy for securing the border and modernizing law enforcement. We expect significant budget approvals and revenue generation for fiscal year 2026, and we are confident that Veritone will play a key role in this critical initiative.
In the first quarter of 2025, we added eight new SLED customers and 40 expansion sales transactions in the public sector. Our public sector pipeline now exceeds $110 million dollars underscoring the increasing demand for our AI based applications and services across all four of our public sector segments: SLED, Fed SIV Fed DoD, Intel and international markets.
I am very excited about what lies ahead as we continue to leverage the momentum from the strategic milestones I've just detailed.
We are confident that Veritone is well positioned to capitalize on the increasing demand for AI powered solutions in both the commercial and public sectors.
I would now like to turn over to Mike Zemetra, who will provide more details on our quarterly performance and future guidance. Mike?
Mike Zemetra
Thank you, Ryan. We started the year strong in Q1. Revenue was in line with our preliminary results, but did fall slightly below our guidance, primarily driven by delays in some of our larger public sector deals, offset by outperformance from our VDR business, which resulted in slightly lower gross margins versus expectations. We ended Q1 with solid customer metrics and contributions made across our software products and services and managed services.
As we enter the second quarter of 2025, we remain very bullish on the future growth prospects across our public sector and VDR initiatives, which I will explain in more detail.
During my prepared remarks, I will discuss Q1 year-over-year performance and KPIs, which exclude the results of our media agency, which are presented as discontinued operations in the corresponding historical financial periods, balance sheet and liquidity position and Q2 and fiscal 2025 guidance.
Starting with our Q1 2025 performance. Q1 revenue was $22.5 million down $1.7 million from Q1 2024, principally due to a decline in managed services and to a lesser extent from software products and services. Q1 managed services of $8 million declined $9 million principally driven by declines in campaigns across our representation services, coupled with slightly lower licensing. We expect this negative trend in representation services to continue throughout 2025 or until the macro economy shows demonstrated improvements over 2024.
For software products and services, Q1 commercial enterprise revenue declined $6 million year-over-year, largely due to a decrease in consumption-based revenue over the same period. Coupled with a decline in foreign exchange rates in Europe in Q1 2025 as compared to the U.S. Dollar. Offsetting this was growth in Veritone Data Refinery, or VDR, in Q1 2025 of approximately $0.9 million in revenue.
VDR, which launched in Q4 2024, is one area where we anticipate substantial year-over-year growth throughout fiscal 2025, with a near-term sales pipeline of approximately $10 million or double that from early March of 2025.
Overall, our public sector saw a small decline in revenue year-over-year and was slightly better when you exclude the loss of $0.3 million of certain non-recurring project related revenue in Q1 2024 that is not recurring in Q1 2025.
As I will explain later in my prepared remarks, we remain incredibly excited about our public sector and the growth it will achieve in fiscal 2025, which we are forecasting to start in Q2 2025.
Turning to key performance metrics across our software products and services in Q1 2025. ARR was $58.7 million which was relatively flat sequentially and down year-over-year as we expected declines in consumption-based revenue from the customers across our commercial enterprise sector, including Amazon over the trailing 12 months. Overall, ARR from recurrent subscription-based SaaS customer remained relatively flat year-over-year. As of Q1 2025, 81% of our ARR was from subscription versus consumption-based customers, up from 68% at Q1 2024 and flat sequentially from Q4 2024.
Total new bookings of $15.8 million up $2.9 million or 22% year-over-year, primarily due to larger renewals across our software customer base. Gross revenue retention continued to be above the 98 percentile and total software products and services customers of 3,156 was down 7% year-over-year, predominantly from our commercial enterprise sector, which includes lower consumption-based customers across Veritone Hire and the rolling impact of Sunsetting Legacy CareerBuilder customers post the June 2023 acquisition of Broadbean and smaller customers as we focus on larger ARR opportunities, offset by an increase across public sector largely from growth in public safety customers.
Q1 GAAP gross profit was $13.9 million compared to $16.6 million in Q1 2024, down $2.7 million largely as a result of the decline in revenue. Coupled with a higher mix of lower margin revenue in Q1 2025, with GAAP gross margin of 61.9% as compared to 68.8% in Q1 2024. Excluding non-cash depreciation and amortization expense, 2025 non-GAAP gross margin was 65.1% as compared to 71.2% in Q1 2024, a decline of 610 basis points largely due to the reduction in higher margin consumption-based revenue, coupled with a higher mix of lower margin revenue.
Note that in Q1 2025, VDR gross margins were approximately 40%. We expect that as VDR product matures, margins will initially be similar to Q1, but should expand throughout 2025 as we grow and diversify our content offerings. In addition, certain larger content licensing renewals in Q1 2025 continue to drive lower margins in their early phases of tiered volume pricing, but are expected to improve throughout 2025 as the volume of revenue increases over time.
Q1 operating loss of $21.6 million improved by $2.7 million or 11% year-over-year, primarily driven by lower operating expenses and severance costs year-over-year as a result of our Q1 2024 restructuring, offset by lower non-GAAP gross profit from the decline in revenue over the same period.
Net loss from continuing operations was $19.9 million an improvement of $6.3 million or 24% compared to Q1 2024. The year-over-year improvement was principally driven by the previously discussed $2.7 million improvement in loss from operations and a $3.7 million benefit from the change in fair value of our earn out from the divestiture of Veritone One recorded in Q1 2025.
Non-GAAP net loss from continuing operations was $11.1 million as compared to $10.3 million in Q4 2024. The decline was principally due to lower non-GAAP gross profit offset by improved operating losses.
Turning to our balance sheet. As of March 31, 2025, we held cash and restricted cash of $16.4 million as compared to $17.3 million at December 31, 2024. The net change in cash reflects net cash outflow from operations of $17 million principally driven by our non-GAAP net loss of $11.1 million, deferred purchase consideration of $1.2 million and interest paid on debt of approximately $1.2 million coupled with the timing of working capital in the quarter, offset by net cash inflow from investing in financing activities of $16.5 million driven by net cash inflows of $19.9 million from our January registered direct offering, partially offset by $1.9 million in debt principal payments and $1.4 million in capital expenditures.
Turning to liquidity. In Q1 2025, we completed a registered direct offering, selling 4.4 million shares of common stock priced at $2.53 per share and 3.6 million of pre-funded warrants priced at $2.52 per share for gross proceeds of approximately $20.3 million. At March 31, 2025, our consolidated debt is down from a peak of $201 million in December 2021 to approximately $130 million today, comprised of term debt of $39 million maturing in December 2027 and convertible debt of $91.3 million due November 2026.
As of March 31, 2025, we have over $30 million available across our $35 million ATM, which was established in November 2024. That said, we are currently in various discussions to further improve our cash position and balance sheet in the near term, which we will discuss in more detail as these initiatives progress. At March 31, 2025, we had 44.9 million shares issued and outstanding and 2.5 million warrants outstanding to our debtholders.
Now turning to updated Q2 2025 and full year 2025 guidance. Our software products and services revenue pipeline and long-term outlook continue to be at all-time highs. More specifically, we continue to see strong demand across the approximate $10 billion global digital evidence management market. In the public sector alone, we are beginning to march towards our 100% to 150% revenue growth target for fiscal year 2025.
We also remain in near-term contract basis on several large products with various facets of the U.S. Federal Government and international public safety customers with a near term sales pipeline in excess of $100 million. These deals range in the high seven to mid eight figure levels and will last anywhere from one to five years in duration and our confidence on closing these remains high. While there has been a lot of scrutiny around government spending under the new presidential administration, these initiatives are not expected to be scrutinized by the current administration and will drastically improve the federal government's investigative and evidence gathering capabilities in forecasted centralization.
As previously noted, we are seeing strong demand for our VDR product offering. Our near-term sales pipeline on VDR is now over $10 million which is an increase of 100% or $5 million since March of 2025. We are in active discussions with most of the largest hyperscalers on various VDR initiatives and will provide more detailed updates as we continue to progress on these initiatives.
More specifically, in Q2 2025, revenue is expected to be between $23 million and $25 million as compared to $24.1 million in Q2 2024. In Q2, we expect public sector revenue to be up year-over-year, led by the launch of larger initiatives across the Department of Defense.
Commercial enterprise revenue is expected to be relatively flat, driven by $1 million decline in consumption-based revenue across our managed services and Veritone Hire services offset by $1 million growth in commercial SaaS driven in large part from expanded VDR revenue.
Managed services is expected to be down year-over-year, principally due to the representation side of our business, which is experiencing some deceleration as a result of the more challenging macro environment.
We expect Q2 non-GAAP gross margins to be around 68% to 70%. Q2 non-GAAP net loss is projected to be between $8 million to $9 million as compared to $9.7 million in Q1 2024.
Turning to fiscal 2025 outlook. We are updating our prior guidance for fiscal 2025, which we are expecting revenue to be between $104 million to $115 million which at the midpoint represents an 18% increase year-over-year. The change in our outlook is principally driven by the shift in some of our larger growth initiatives across our public sector and VDR to the second half of 2025, coupled with the forecasted deceleration in managed services reflecting the more challenging macro market today. Non-GAAP net loss to be between $30 million to $20 million representing a 39% improvement year-over-year at the midpoint.
The change is reflective of the timing shift in revenue, coupled with the compression in gross margins on half of 2025, which we expect to improve in the latter half of fiscal 2025.
Key drivers to our fiscal 2025 guidance remain intact and include in the public sector. As previously discussed, we are expecting the public sector to grow 100% to 150% year-over-year, led by near-term deals across the Department of Defense, public safety, including international expansion into Europe and through more recently announced and expanded partnerships with AWS, Getac and others.
We are currently in early phases of deployments on projects across the U.S. Government and later trials on other opportunities. All these projects, when aggregated, are projected to generate substantial revenue over today's baseline, more prominently in the back half of 2025.
Commercial enterprise. Since August 2024, we renewed partnerships with some of our largest customers, including multiyear and expanded services with the NCAA, CVS and iHeart. Moreover, we recently renewed ESPN for a multiyear deal that included expanded software products and services.
We are also in the early phases of our VDR product offering with meaningful growth opportunities in fiscal 2025 and beyond. Today, we are expecting anywhere between $5 million to $10 million of deals to execute in 2025 and exciting new partnerships with some of the largest AI LoMs and cloud providers expanding our offerings into generative AI. These existing and newer market opportunities will drive year-over-year growth across our commercial enterprise sector and more importantly drive longer term sustainable growth. We believe the opportunity for VDR could generate $60 million in revenue annually by 2027.
Veritone Hire. Given the current macro environment, we continue to expect modest to flat growth across our Veritone Hire applications and services in fiscal 2025. With the exit of consumption-based customer dependencies in fiscal 2025, we do expect a more stable year in fiscal 2025 and a return back to growth in late fiscal 2025 to fiscal 2026 with expected macroeconomic improvements.
Non-GAAP gross margins. We are expecting our non-GAAP gross margins to be between 65% to 70% throughout fiscal 2025. To the extent that we approach the higher end of our fiscal 2025 revenue guide, we can see non-GAAP gross margins expanding closer to 73% on a blended basis. As we begin to scale and look towards 2026 and profitability, our non-GAAP gross margins should return to 70% or better.
And finally, our cost structure. With the backdrop of significant cost savings enacted over the last two years, we exited 2024 with a much-improved cost structure relative to the past three years. We will continue to manage our cost structure throughout 2025 to ensure we time necessary investments with corresponding growth. Today, our largest cost driver remains headcount and to a lesser degree professional services that have recently been higher and driven by transactional volume and integration.
That concludes my prepared remarks. Operator, we would now like to open up the call for questions.
Question-and-Answer Session
Operator
Thank you. [Operator Instructions] Our first question comes from Scott Buck with H.C. Wainwright & Co. Scott, you may ask your question.
Scott Buck
Hi, good afternoon, guys. Thanks for taking my questions. I guess first, I'm curious on the public pipeline. What if that is new customers versus more customer expansions?
Ryan Steelberg
The majority of it is, I'll say, customer expansion. So definitively why we're bullish is we've already executed two revenue-based contracts for some of the larger pipeline customers, meaning we're expecting here over frankly in the next few days or the next few months, our ability to communicate and announce much larger and expanded contracts against, I'll say existing agencies under the DoD.
So it's really a combination of expansion or additional expanded task orders and contracts within existing agencies that we've already been working with and recognizing revenue as well as net new agencies under the DoD and the DOJ.
Scott Buck
All right. That's helpful, right. And I guess kind of piggybacking off of that, the second quarter guide and the annual revenue guide suggests kind of second half revenue being up mid-30s versus the first half. Can you just speak a little bit more to your visibility and confidence? And it sounds like it's going to be a combination of several factors, public sector, VDR, but any kind of additional granularity you could provide there would be helpful?
Ryan Steelberg
Yes, I think it will be dominated by that delta will be again be dominated by VDR and public sector. So I would say public sector, we have, I'd say, great visibility on magnitude of the size of the deals and the revenue contribution. Obviously, the timing of when those contracts get opened and we're able to execute against those contracts, most of which is software, not services. That is going to be one of the variables and hence why we took a slightly more conservative position on the guide.
On VDR, we do have great visibility, and we're hopeful that that could be a breakout win even to the upside. So really the combination of active deal flow proposals, and sort of where we are specifically with VDR in conjunction with, frankly all ready to go and just ready for these next phase of these contracts to open up in the public safety side does give us confidence that we will be able to meet or surpass those kind of growth targets and prospects for Q2 and I'm sorry, for Q3 and Q4.
Scott Buck
That's great. And it sounds like the difference between the low end and the high end of the range is just again simply timing, right?
Ryan Steelberg
I would say timing of one and velocity on growth of VDR as well. I'd say VDR is less of a timing function, public safety is more a timing function.
Scott Buck
Yes. And the increase in VDR today versus the end of the quarter, is that one contract, two contracts, several contracts, just trying to gauge how widespread the management.
Ryan Steelberg
Multiple contracts with new partners, new clients, respective clients.
Scott Buck
With new partners, perfect. I appreciate it. That's it for me guys. Thanks a lot.
Ryan Steelberg
Thank you.
Operator
Our next question comes from Seth Gilbert with UBS. Seth, you may ask your question.
Seth Gilbert
Yes. Thanks for the questions. I had two. Maybe to start off a follow-up from the previous question. The full year guide still implies a pretty healthy uplift in the second half.
I was wondering, maybe more generically speaking, when could some of these public safety deals start generating revenue? Is it once you get the deal signed in the go ahead, they'll immediately begin generating revenue and that's why you're so bullish about the $104 million to $115 million guide or will it sort of trickle you know, bit by bit because there's some integration work or, you know, other work you need to do with, with some of these deals? Thank you.
Ryan Steelberg
For some of the, high visibility contracts that we're discussing, we're ready to deploy. So to be clear, we've kind of and obviously, we've been talking a lot about our historical deployments with the DLA, Defense Logistics Agency, which mind you which, just to provide a little bit more insight, was the actual deployment, on Azure, so aiWARE based and application deployments on a secure environment on the on the on the Azure stack.
For some of the ones that we've been talking about that are immediately going to be accretive and potentially contribute as early as in Q2, is on AWS, which we've successfully done many times and we're kind of ready to go, which means the software modules, the applications that are being procured and contracted for are ready to be delivered and stood up.
So again, I would say, you will start to see, and again, it's not mostly service based revenues, but you will start to be see full satisfaction of obligations starting almost immediately once that contract gets released.
Seth Gilbert
Got it. Very helpful. Maybe in the second one, Veritone Hire, I know the market is tough right now and Mike just walked through some comments at the end of his prepared remarks.
Maybe could you talk about some of the steps you're undertaking on that side of the business? Or has there been a change in the competitive landscape like anything else that you've mentioned just on Veritone Hire? Thank you.
Ryan Steelberg
Yes. I think number one, we've reached a point of stability. So again, on a relative basis to how it's been over the past previous years, primarily as an impact from Amazon as a major customer, we've absolutely achieved an element of stability.
In terms of growth, as I touched on briefly in the prepared remarks, it's really a three-pronged approach. Number one is the expansion of the reseller and partner network. A pretty big chunk of our new leads and new deal flow is now actually coming more consistently through partners such as Bullhorn, such as Workday. Again, so we're leaning into those and another benefit of those deals with those larger HCR, HR companies is some of the average contract value is actually higher. So again, partner engagement and partner activation is one of the three-pronged approach for acceleration of the growth on the hiring side.
Number two is the media services. So in effect, where we're helping using our software to manage, let's just say, X percent of a customer's job acquisition budget. There's been a concerted effort starting frankly a couple of years ago, but really picking up velocity, at the second half of last year is to procure and secure a larger portion of the overall spend budget. And we're seeing good success there and we actually have some pretty good, a pretty strong pipeline. It's one of the key areas where we probably have the most visibility of growth for the hire business is the expansion of that share of wallet or taking more of that spend allocation.
And then the third prong approach again is just continued optimization, right, of our algorithms and it's been leaning in more to our competitive advantage in terms of ROI yield. So in effect, when we do get a dollar from a customer, what is the yield that we can get from in terms of proving whether that's cost of applicant or cost per hire is continuing to maintain our competitive lead in the performance there.
So it's a pretty defined, I think well organized three-pronged approach, but I guess it's going to be dominated with confidence mostly by the expansion of the partner one, again with the big players like Workday and others as well as the expansion of our media services opportunity.
Seth Gilbert
Got it. Thank you for that, Ryan.
Operator
And our next question comes from Glenn Mattson with Ladenburg Thalmann. Glenn, you may ask your question.
Glenn Mattson
Thanks for taking the question. Sorry, if you covered this, I'm bounced amongst a couple of calls here. So just one quick one for me. Mike, can you help us understand the margin kind of flow throughout the year as VDR kind of maybe drags earlier and then gets better over time, but then also the public sector, it sounds like it's going to be a big second half for public sector. So the impact that has in the recovery just kind of as we want to think about it quarter to quarter, that would be helpful? Thanks.
Mike Zemetra
Yes. I think I mentioned it in my prepared remarks that we had some slippage and some planned delay on some of the public sector stuff that's going to come in at a higher margin. And then we had some VDR stuff that kind of drove that down a little bit further. As we get into Q2, Q3, Q4, those margins are expected to improve.
Glenn Mattson
Okay. So just kind of think about it stepping up each quarter a little bit, I guess. And you may have covered this as well, but just kind of the stair step of growth from $5 million a little less than a month ago in pipeline to $10 million.
Can you just talk about the nature of that difference? Was it broad based or is it a couple of large -- I guess the deal size here is so large that one or two deals can move that or is that
Ryan Steelberg
It's a few. It's not dozens, but let's just say a few players who we've been speaking with for now several months have progressed to, I'd say, a level of visibility in terms of data sampling, even at that stage already, that we're pretty bullish and it's against a lot of the same data assets that we've been servicing and mobilizing already.
So specifically, it's not a net new of having to find new data assets per se, It's actually just expansion of in effect selling those data assets to net new customers, who are some of the biggest names out there. And again, we're not going to go into the details of those. So specifically, it's expansion for net new customers is why we're bullish.
Glenn Mattson
That's great. And just quick, is it are you starting to see any of the feedback loop yet to bring in new content customers in terms of their.
Ryan Steelberg
Yes. I think the halo effect of us so once again just to clarify what you're asking is, if we're talking about customer like the NCAA where they are technology customer, they are footage licensing customer and now a VDR customer, right, where that three-pronged opportunity has created a halo effect. And so now we're in discussions with dozens of net new IP owners to become net new customers. So not only will that we do expect this to be continue to accelerate and drive the VDR line item, but we do expect acceleration in, I'll say, core AI or DMH software SaaS licensing as well. Thank you for asking the question.
Glenn Mattson
Great. Thanks guys.
Operator
Thank you. Our next question comes from Jesse Sobelson with D. Boral Capital. Jesse, you may begin.
Jesse Sobelson
Hey, guys. I can take my question here. Just a bigger picture one since it's related in the call. With AI adoption accelerating, how are you guys balancing these R&D investments in VDR against the profitability targets?
And then when you look at this product for the rest of the year, what milestones are you really looking to define success? Is it converting this doubled backlog by the end of the year? Or are there other milestones we could point to? Thanks.
Ryan Steelberg
Sure. I'll hit the first one on the CapEx. So the good news is, I think we have a pretty good runway where at least as it relates to VDR, we're not going to expect or we foresee a lot of capital investment to continue to advance, I'll say, that revenue line at least for the next maybe couple of quarters.
Specifically, it's because it's relying on everything we've already built and it's using the exact same aiWARE based platform and software systems, specifically DMH, to manage that product offering. So in effect, we already have made the investments and we're actually generating revenue and profits from those software services with media companies already.
So this is almost like a net new, very organic new extension built on the same infrastructure and AI infrastructure that we've already been that has already been subsidized, right, because of other lines of business.
Now over time, as we get more sophisticated and the scale and velocity of VDR grows, by all means, we're going to want to make sure that we double down, I'll say, and cement our moat and moats around the opportunity, so we can continue to be more efficient. And that's one of the areas that I think over time where we're going to start to see an improving margin, right? As we can continue to streamline the operations of VDR, we do expect again over time the margins to increase.
So that hopefully answers the question on VDR. And do you mind, can you ask the second part of your question again, please?
Jesse Sobelson
Yes, sure. I appreciate the detail there on the extension of an existing platform. I am very excited about the business model here, which is one of the things I wanted to highlight.
The second piece of this is just with VDR, what other milestones for success can we point to with this? Is it converting that backlog or is there an additional piece of it that we could look to?
Ryan Steelberg
Yes. Great question. So I think we've achieved some of them already, which means we're not just limited to facilitating VDR revenues against data assets that are already under contract, right? Meaning, with the our historical DMH and aiWARE based media companies. We've already now facilitated deals against new data sets.
So Veritone has established a level of credibility and trust on both sides of the equation, both the sell side, meaning our representation of the content IP owners, such as the news outlets and the broadcasters, etc. But now we're also facilitating deals, I'll call on the buy side, so representing as both the service and technology partner for the hyperscalers and the model developers. And that second part was something that we did not foresee to happen as quickly as it has, but it puts us in a very strategic leverage position that we're really excited about.
In terms of the asset classes, I think one of the big milestones was, hey, when can we show the efficacy of our ability to sell frankly the same data asset to multiple buyers. And I would just say we're very, very close to achieving that and hopefully over the next few weeks here a couple of months that we'll be able to sort of communicate that in more detail.
But those are the two big KPIs that I wanted to see is could we represent and participate on both sides of the equation in terms of representation and buy side? And could we start to see a viability of selling the same data sets to multiple buyers, which we've done?
In terms of like trying to sell every piece of asset that we have under management, I don't think that's necessarily a goal. I think most importantly is, do we feel that we have either direct control and oversight over the right audio and video assets today, right, which proves the supply to go realize those revenues? And if we don't, do we have the intimacy of the relationship with the buyers that if there are data sets that we need to go get, right, and fold or expand our current corpuses of data or get net new types of data sets out there? Do we have the trust and do we have the ability to go procure those?
And I will state that we have done that already. So for example, we are already procuring, I'll say, some elements of security and public service data that is becoming an interesting asset class where we're seeing high demand for.
So this is no longer just limited to a media and entertainment, news and sports related content, but we're also seeing, again, managed through Veritone VDR, surveillance and other forms of unstructured datasets that's in high demand as well, which is a great crossover to our public safety business as well.
Jesse Sobelson
Thank you very much.
Ryan Steelberg
Thank you. Okay.
Operator
It seems there are no further questions at this time. This concludes our question-and-answer session. I would like to now turn the call back over to your host, Ryan Steelberg, for any closing remarks.
Ryan Steelberg
Well, thank you everybody for joining today. I would say, I'm somewhat disappointed that we had some slippage in timing of some of these deals. But I think what you're hearing through our voices in the Q&A, we're very, very bullish on VDR and we're very bullish on public sector. These are going to deliver in a big way for us and we're very, very excited about that.
We are going to be participating in a few upcoming in the very near-term financial conferences. Hopefully, many of you can listen in if they're virtual or participate in person. Those conferences are going to be the Needham Conference, the Technology, Media and Consumer Conference, which is actually virtual conference starting tomorrow. And so you can get more information on our investor site or on Needham's website about that conference. Next week, we're going to be participating in person at the JPMorgan, their annual Global Technology Media and Communications Conference in Boston on May 14 and the 15. Again, encourage everybody to participate if they're in the respective area.
And then finally, the Ladenburg Thalmann Innovation Expo, 2025, which is on May 21 in New York City, and I'll be there in person presenting.
So look forward to speaking to everybody in person and going deeper into different areas. Thank you for your time everybody today.
Operator
GBR
3 months ago
Full transcript - Veritone Inc (VERI) Q4 2024:
Conference Operator: welcome to the Veritone Inc. Fourth Quarter twenty twenty four Financial Results Conference Call. All participants will be in listen only mode. After today’s presentation, there will be an opportunity to ask questions. Please note this event is being recorded.
Ryan Steelberg, Chairman and Chief Executive Officer, Veritone: Thank you, Kate, and thank you everyone for joining us. We are excited to speak with you today and provide an update on our fourth quarter and full year 2024 operations, financial performance, and strategic progress. We are pleased to report our q four twenty twenty four and full year fiscal twenty twenty four financial results, which reflects solid revenue performance and significant strides in our strategic initiatives. Throughout 2024, we’ve made decisive moves to optimize our operating structure and strengthen our balance sheet, allowing us to focus and prioritize investments to drive growth and differentiation in our core AI software and services offerings. This disciplined approach has laid a strong foundation, and we’re already seeing the benefits in the early part of twenty twenty five.
Building on the strong foundation and fueled by mega trends such as the momentum and enterprise wide AI adoption, the exponential growth rate of unstructured data, as well as our growing robust sales pipeline, we’re very confident in our ability to accelerate the Baritone strategy. Today, Baritone is positioned to become the leading enterprise AI software, applications, and services provider across the commercial and public sectors, and create long term value for our shareholders. Mike Zemetra will cover our quarterly and full year performance and financials in more detail later, but I wanted to start by providing a broader company update and perspective on our current market environment and the opportunity that lies ahead. Over the last ten years, we’ve grown Veritone into a full service enterprise AI company. We are a market leader in ingesting and managing unstructured data, indexing that data, and harnessing the power of our AI platform to transform data into near real time actionable analytics and intelligent workflows, which provide support to organizations by bringing clarity to the chaos of this data, and ultimately derive increasing yields and revenue from their datasets.
Just in 2024 alone, we’ve cognitively processed over 10 petabytes of data, which includes over fifty eight million hours of video and audio. Against this incredible data scale, we utilized over eight sixty two unique AI models through Aiware, which include both proprietary baritone models, as well as models from leading third parties. This is proven AI at scale and in full production. This performance all starts with our technology platform, Aiware, the first AI operating system. Aiware is a secure, platform agnostic, open system that leverages and orchestrates hundreds of cognitive and generative AI models, so that unstructured data, including audio and video, can be ingested, indexed, processed, transformed, correlated, and analyzed.
On top of this dynamic platform, we have developed purpose built and award winning AI applications to meet the specific needs of the public and commercial sectors. And in 2024, we launched our AIware based consulting ProServe arm, AISG, assisting both new and existing customers to develop transformative AI solutions for organizations of all backgrounds through our AI adoption framework phases of assess, realize, and evolve. I’m proud to say that currently, we deploy and license our end to end platform, applications, and solutions to over 3,200 customers across the public and commercial sectors. On the commercial side, our customers include Creative Arts Agency, CBS News, ESPN, the NCAA, the Australian Open, PepsiCo, FedEx, and State Farm. In the public sector, we actively service the Department of Justice, the Department of Defense, and hundreds of state and local law enforcement agencies nationwide, including Anaheim Police Department, Pittsburgh PD, Nassau County Sheriff’s Department, the California Highway Patrol, and the Beverly Hills Police Department.
In a rapidly changing AI landscape, we enter 2025 from a position of strength set to unlock shareholder value and reinforce our market leadership. One of the most significant moves we made in 2024 was the sale or divestiture of Veritone One, our legacy advertising agency, which accomplished several critical objectives for the company. The divestiture focused our operations and concentrated our resources on what we believe is our greatest business opportunity, delivering the most advanced AI solutions to our customers and partners at scale. Secondly, the transaction strengthened our financial foundation, substantially bolstering our balance sheet, enabled us to greatly reduce our debt servicing cash burden. As a result, we are now firmly positioned as a pure play AI enterprise software firm, building on top of our existing scale, again, which boasts over 3,000 customers after the divestiture.
Baritone has emerged well positioned relative to customer concentration risk, with no single customer accounting for more than 5% of our revenues, while still maintaining gross revenue retention well above the ninetieth percentile. During the fourth quarter of twenty twenty four, we announced several transformative wins and major product advancements, not the least of which included the expansion of IDEM’s data integration to enhance public safety and law enforcement efficiency, product and listing expansion within the AWS marketplace, and a major multi year renewal and expansion with CBS News. On the product and solution front, we recently launched Veritone Data Refinery, or VDR, built in a hour, that is already in full production and working with many of the largest hyperscalers and generative AI model companies, helping them train and fine tune their respective models with our proprietary data aggregation, management, annotation, indexing, and distribution capabilities. The trends we are seeing in the market make our offerings more critical than ever, as AI promises a complete transformation of data workflows, from pipeline construction to unlocking the value of unstructured information. According to Gartner, unstructured data represents an estimated 80 to 90% of all new enterprise data created, and is growing three times faster than structured data.
The global unstructured data solution market size is over $30,000,000,000 estimated in 2024, and is expected to expand to over $90,000,000,000 by 02/1933. The largest obstacles to AI adoption are the high cost and complexities of harnessing AI ready data and deploying enterprise AI solutions. Storing and backing up unstructured data exceeds 30% of the IT budgets of more than 50% of organizations surveyed in an August 2024 DIS study. However, such enterprises, many of whom are already our customers, lack the proper tools to collect, organize, access, and analyze the rapidly growing variety, velocity, and volume of data in real time. Furthermore, legacy systems and manual processes cannot keep up with increasing demands for data driven decision making and compliance.
And integrating multiple cognitive engines is expensive and slow. Our open AI ecosystem intelligently utilizes multiple best of breed cognitive and generative AI models within a single cloud based solution to process, analyze and organize data in volumes that can far exceed human cognitive capabilities. Moreover, our platform is model agnostic, positioned to adapt to the evolving AI model arms race that is currently underway. As we close out fiscal year 2024, I am proud of our team’s unwavering commitment to advancing our strategic business initiatives. These efforts have been critical in purposely repositioning Veritone to harness and unlock the power of our unique capabilities supported by AI work.
By strategically aligning our investments and resources towards delivering advanced AI solutions in our highest growth verticals, we are optimally positioned to leverage the core strengths of Veritone’s Aiware platform, applications and solutions to seize the expanding opportunities in the AI market. Now, let me walk you through our performance in our core market verticals, commercial and public sectors. In the commercial sector, the explosive growth and creation of digital media, especially audio and video, is increasing at an unprecedented rate, driving up the audience demand for on demand, localized diverse content anytime, anywhere. We are witnessing these trends resulting in fragmented consumption across platforms and devices with increased expense. Media organizations are grappling with macroeconomic pressures, industry mergers, consolidation, remote work, and leaner teams, while trying to keep revenue streams intact.
As the industry’s leading audio and video data experts, we help broadcast media, sports, and entertainment professionals leverage AI to transform content workflows, extend media assets, and unlock value across functions for ongoing profit, deeper insights, and wider reach. In short, we are not only helping organize our customers’ data, but we are also helping them extend and monetize their data, generating both significant efficiencies and new revenue opportunities. During the quarter, we were proud to announce the renewal of our exclusive global licensing arrangement with CBS News. CBS News will continue to utilize Veritone’s AIware platform to enhance access to its extensive licensed content across numerous distribution channels. Additionally, we have expanded this partnership to also include their local market properties and stations and those respective data assets.
We believe the multi renewal is a testament to the value we deliver to the commercial marketplace. In addition to the CBS News extension and expansion, in meeting entertainment, we executed over 42 new deals in the quarter. Other notable deals included agreements with ESPN Bet, Cumulus, Vital Voices, The Game Show Network, A and E Networks, MediaWorks New Zealand, Sony Pictures, Alpha Media, and Charlie Rose, showcasing our continued SaaS growth and the critical nature and stickiness of our AI solutions. Another major announcement for Veritone in the fourth quarter was the launch of our Veritone data refinery platform and service. A groundbreaking offering designed to help enterprises transform vast amounts of unstructured data into high quality AI ready assets.
Leveraging AIware, this new solution empowers organizations to transform and manage their video, audio and text data for training sophisticated AI models, and even optimize revenue opportunities through data monetization. The AI sector’s explosive growth has led to an insatiable appetite and need for high quality training data. But there is a significant shortage of accessible, clean, unstructured data, including audio and video. Veritone’s data refinery is solving this data gap, and we are in a leading position in terms of technical expertise, experience, and scale to quickly grow this new business line. I want to reiterate that VDR is in full production, and we are already booking material contracts and revenue, working with the largest hyperscalers, model developers, and data IP owners.
BDR will be a major contributor to delivering against our revenue growth in 2025 and beyond. I’ll now shift to discuss our solutions for the HR and job recruiting industries, or Veritone Hire, which we are now selling into both the commercial and public sectors. We successfully completed a transformative year, streamlining operations on a global scale, and integrating both Pando Logic and Broadbeam into a common Veritone hire structure at an accelerated pace. This integration marked a significant milestone, leading to the launch of a unified brand and the expansion of our programmatic advertising business beyond North America. Despite broader macroeconomic challenges in the labor and hiring market, our software and advertising businesses remain stable from the third to the fourth quarter.
However, we continue to see substantial growth potential, particularly in the staffing and RPO segment internationally. Many esteemed businesses have extended their initial programmatic advertising pilot campaigns into long term commitments, demonstrating the strength on our performance advertising solutions. During the quarter, we successfully launched our programmatic advertising solution in both The UK and Australia, with plans to enter the German market in the coming months. Our expertise in this space was further reinforced at HR Tech Europe, where we presented a compelling case study on our success in partnership with Randstad, a global leader in HR services. Additionally, our media buying services expanded its reach beyond North America to global markets, securing significant deals, including a strategic partnership with CBRE, one of the largest real estate companies in the world.
Meanwhile, our commercial partnership with LinkedIn continues to gain momentum, exceeding expectations and broadening the scope of our client offerings. On the software side, we are seeing growing opportunities for expansion through key commercial partnerships. We’ve strengthened our collaboration with Workday, the global leader in human capital software, achieving the highest tier level of partnership, Platinum, within their partnership program. Furthermore, we launched a major integration with Bullhorn for Salesforce, enhancing our ability to work alongside the leading software provider in the staffing industry. Looking ahead, Veritone Hire is well positioned for continued growth.
The progress we achieved in q four underscores our ability to execute strategically and adapt to evolving market dynamics. With a strong foundation in place, we are confident in our trajectory for the coming year. Switching to our public sector vertical. Unlike commercial, the public sector requires an elevated level of scrutiny as it relates to software security and data protection. Our proven track record of success, industry certifications, and deep compliance expertise and standards makes us well positioned to serve regulated industries.
This past week, The US Defense Secretary, Pete Hegseth, issued a clear and direct edict to streamline and accelerate procurement of mission critical commercial software for DOD and federal use. We expect Veritone to be a direct beneficiary of the software focused approach. We believe 2025 will be a breakout year for our public sector business, and we remain very bullish on the sector’s opportunities and growth prospects. The Veritone Intelligent Digital Evidence Management System, or IDEMS applications have been deployed in AWS and Azure GovClouds, in FedRAMP, and also currently being installed by DoD customers in their private tenant on AWS and Azure. IDEMs is unique and differentiated and provides significant value and immediate ROI to end users in state and local law enforcement agencies, US higher education institutions, US federal civ and defense agencies, and international government agencies.
Launched in 2024, IDEMS has exceeded our expectations in terms of its demand and the reception we have received from the market. IDEMS strengthens Veritone’s position in the digital evidence management market as a leading system for aggregating, analyzing, and sharing investigation materials with advanced AI powered video and audio analytics. Specifically, the investigative workflow using Veritone IDEMS allows detectives and investigators to significantly speed up the investigation process and dramatically increase case clearance rates. This allows Veritone public sector customers to do more in less time with better outcomes. In local law enforcement, we now service hundreds of customers using items for investigation workflows and or public records requests, PRA, freedom of information request, FOIA, and redaction workflows.
Our users include detectives, investigators, and crime analysts. We continue to add new technical partners, integration, and new sales opportunities, and are adding opportunities and partnerships weekly. On The US federal side, we are currently under contract with both FedSieve and Fed DOD intel agencies and are very active with several material trials and software implementations currently underway. We also recently announced that Veritone has achieved awardable status on the Department of Defense Tradewinds Solutions Marketplace for three of our AI solutions. This accelerates access to investigation tools with Veritone’s illuminate, redact, and track applications added to the Tradewinds marketplace.
As a reminder, the Tradewinds solutions marketplace is the premier offering of Tradewinds, the Department of Defense’s suite of tools and services designed to accelerate the procurement and adoption of AI and machine learning data and analytics capabilities from organizations such as Veritone. The addition of Tradewind solutions augments our previously disclosed FedRAMP authorization, sole source BPA with the DOJ, the T and E BPA with the CDEO, and our AIOR applications and professional service listings on GSA. We are contract ready to service the federal government. Internationally, we continue to add new items opportunities and are working with large local and national law enforcement agencies who are active in trials, in application training, or in the final stages of the procurement process. Our public sector solutions are gaining traction both domestically and globally with new customer acquisitions and a growing pipeline that is now exceeding $110,000,000.
In the fourth quarter, we added 18 new public sector customers to our portfolio. Our market leading AI based items applications built on AIware and professional services are core to our growth opportunity and our future success across all four of the public sector segments we serve, SLED, FedSieve, FedDoD intel, and international markets. Before I close, I wanna highlight an announcement we made earlier today. This afternoon, we announced the appointment of Francisco j Morales to our board of directors. And in conjunction with this, the resignation of Chad Steelberg from our board.
Chad will be pursuing other business and philanthropic endeavors. We wanna thank Chad for his immeasurable contributions to the company since its founding and inception. Mister Morales has been appointed to fill this vacancy and will serve as a strong strategic voice on Baritone’s board. Francisco is the cofounder and executive chairman of five eleven Tactical and its former CEO. Founded in 02/2003, ’5 ’11 Tactical is widely recognized as the global market leader in tactical apparel, footwear, and gear for law enforcement, military, and first responders, serving thousands of agencies and institutions worldwide.
We look forward to welcoming Francisco and leveraging his deep relationships and network. We enter 2025 with strong momentum and look forward to demonstrating our ability to capitalize on the opportunity at hand. I would now like to turn over to Mike Sametra, who will provide more details on our quarterly performance and future guidance. Mike?
Mike Symetra, Chief Financial Officer, Veritone: Thank you, Ryan. I am excited to report that we continue to make substantial financial progress, ending the year with revenue in line with expectations and solid customer metrics and contributions made across our software products and services and managed services. As we exit 2024, a year where we streamline our operations, including divesting our media agency in Q4 and exiting historical revenue concentration dependencies, we made improvements in progress in our operations to refocus back to our near and long term growth targets heading into fiscal twenty twenty five. During my prepared remarks, I will discuss fiscal twenty twenty four and Q4 year over year performance and KPIs, which exclude the results of our media agency, which are presented as discontinued operations in the corresponding historical financial periods. Balance sheet and liquidity position pre and post divestiture, including our November 2024 ATM and January 2025 capital raise.
And Q1 and fiscal twenty twenty five guidance, highlighting the scalability of our revenue and business, including risks heading into fiscal twenty twenty five, focus on improved profitability and projected full year results. Starting with full year 2024 performance. Revenue was $92,600,000 in line with our guidance and down 7% year over year from $100,000,000 in 2023. Driving this was software products and services, which decreased $7,400,000 or 10.8%, while managed service revenue of $31,600,000 was flat year over year. The software products and service revenue decline was largely attributed to commercial enterprise, which declined $7,000,000 year over year, largely due to the expected declines in consumption based customers over the same period, including Amazon and certain one time software revenue in 2023 of approximately 2,200,000.0, which did not recur in 2024, offset by the addition of BroadBeam in late Q2 twenty twenty three.
As I will discuss in more detail, we remain bullish on our future and we are on pace for fiscal twenty twenty five to be a breakout year across our commercial enterprise and public sector, with the public sector on track to grow year over year anywhere from 100% to 150% driven by our IDEMS applications. Full year GAAP gross profit reached $62,700,000 as compared to $70,300,000 in 2023, a decline of 7,600,000 largely driven by the decline in revenue with GAAP gross margin of 67.6% as compared to 70.4% in 2023, a decline of two eighty basis points that was principally driven by the increase in non cash depreciation and amortization expense, largely associated with the June 2023 Broadbeams acquisition. Excluding non cash depreciation and amortization expense, 2024 non GAAP gross margin was 71.6% as compared to 72.3% in 2023, a decline of 70 basis points largely due to the decline in higher margin revenue from consumption based customers. Loss from operations was $86,800,000 as compared to $99,600,000 an improvement of $12,800,000 or 12.9% from 2023 loss from operations. This was primarily driven by improvements made in our operating expense structure over the past twenty four months, coupled with declines in acquisition related expenses of 5,000,000 severance and executive transition costs of 1,800,000.0, purchase consideration of 1,800,000.0, and non cash stock based compensation of 2,600,000.0.
Offsetting these were a lower non GAAP gross profit from the decline in revenue over the same period and higher depreciation and amortization expense of $3,300,000 as a result of the June 2023 Broadbeam acquisition. Non GAAP net loss from continuing operations of 48,800,000.0 improved 5,400,000.0 as compared to 2024, driven by the year over year decline in non GAAP gross margin offset by cost reductions enacted in the first half of twenty twenty four. In 2024, I’m happy to report we did not have a single customer that represented 5% or more of our consolidated revenue during the year, demonstrating our successful efforts to diversify our revenue base. Next, I would like to discuss our q four, twenty twenty four performance. Q four revenue from continuing operations was 22,400,000.0, down 4,700,000.0 from q four, twenty twenty three, principally due to a decline in software products and services driven largely by commercial enterprise, which declined 4,200,000 year over year due to the expected decrease in consumption based customers over the same period, including Amazon.
Included in Q4 twenty twenty four was approximately $700,000 in revenue from the launch of Veritone Data Refinery or VDR, which today has a near term sales pipeline of over 5,000,000 Overall, managed services, which excludes the divestiture of our legacy media agency, was relatively flat year over year. Across our software products and services, our key performance metrics for Q4 twenty twenty four show ARR of $58,800,000 down year over year as we expected declines in consumption based revenue from customers across our commercial enterprise sector, including Amazon over the trailing twelve months. Overall, ARR from recurring subscription based SaaS customers remained relatively flat year over year. As of Q4 twenty twenty four, ’80 ’1 percent of our ARR was from subscription based customers versus consumption based customers, up from 61.3% at Q4 twenty twenty three and seventy six percent sequentially from Q3 twenty twenty four. Total new bookings of 13,200,000.0, dollars down $4,300,000 year over year, primarily due to the timing of a renewal with one of our larger commercial enterprise customers, who renewed on a multiyear deal in Q3 twenty twenty four versus a one year extension in Q4 twenty twenty three.
Gross revenue retention continued to be above the ninetieth percentile and total software products and service customers of 3,237, which was down 6% year over year predominantly from our commercial sector, which includes lower consumption based customers across baritone higher, and the rolling impact of sunsetting legacy career builder customers post the June 2023 acquisition of Broadbeam, and smaller customers as we focus on larger ARR opportunities, offset by an increase across public sector, largely from growth in public safety customers. Q4 GAAP gross profit was 15,300,000.0 compared to 19,900,000.0 in Q4 twenty twenty three. A decline of 4,600,000, largely driven by the decline in revenue with GAAP gross margin of 68.1% as compared to 73.5% in Q4 twenty twenty three, a decline of five forty basis points, principally driven by the decline in consumption based revenue, which generated over 90% gross margins. Excluding non cash depreciation and amortization, 2024 non GAAP gross margin was 70.2% as compared to 76.5% in Q4 twenty twenty three, a decline of six thirty basis points, largely driven due to the decline in higher margin revenue from consumption based customers, coupled with a higher mix of lower margin revenue. Note that in q one twenty twenty four was the initial launch of VDR, where gross margins were approximately 50%.
We expect that as the VDR product matures, margins will initially be similar to q four, but should improve throughout 02/2025. In addition, certain larger content licensing renewals in Q4 twenty twenty four drove lower margins in the early phases of tiered volume pricing, but are expected to improve throughout 2025 as the volume of revenue increases over time. Q4 loss from operations of nineteen point seven million dollars was flat year over year, primarily driven by improvements made in our operating expense structure over the last twenty four months and lower purchase consideration expense as a result of a $1,400,000 gain recorded on the change in fair value of the Veritone One earn out, offset by lower non GAAP gross profit from the decline in revenue over the same period and higher non cash depreciation and amortization expense of $1,200,000 Non GAAP net loss from continuing operations was $9,700,000 which was relatively flat as compared to Q4 twenty twenty three. The year over year change was driven by the decline in non GAAP gross margin offset by cost reductions enacted in the first half of twenty twenty four. On the strategic front, as we transition our focus away from the divestiture, we are poised to return to growth with a much more efficient operating structure and laser focus on our AI solutions.
Since the beginning of 02/2023, we have executed over 40,000,000 of annualized cost savings, which includes over $17,000,000 of annualized cost reductions in fiscal twenty twenty four. The 2024 restructuring included organizational realignments within sales, engineering, and corporate, the results of which was a reduction of our global workforce by 15%. This positions us very well from a cost perspective heading into fiscal twenty twenty five. On revenue growth and our outlook, our software products and services revenue pipeline and long term outlook remain at all time highs. More specifically, we continue to see strong demand across the global digital evidence management market, which represents an approximate $10,000,000,000 market opportunity today.
In the public sector alone, we remain in near term contract phases on several large projects with various facets of the US federal government and international public safety customers with a sales pipeline of over 100,000,000. These near term growth opportunities coupled with a much improved cost structure heading into fiscal twenty twenty five provide us a pathway to profitability as early as fiscal twenty twenty six. As a reminder, we divested our media agency Veritone One in October 2024. Total consideration from the sale was up to 104,000,000 in cash, which consisted of 86,000,000 in cash at closing and 18,000,000 in cash subject to an earn out based upon Baritone One’s revenue for calendar year 2025. Of the total 86,000,000 in cash at closing, the net cash proceeds were 59,100,000.0 in cash after $6,700,000 in cash was held in escrow and $20,300,000 in purchase price adjustments.
Net cash proceeds from the sale were used to pay down $30,500,000 in principal amount of the company’s December 2023 term loan, plus an additional 3,300,000 in accrued interest and prepayment premiums associated with the debt and $3,900,000 of deal related expenses. Including amounts held in escrow and the earn out, potential future proceeds include up to 24,700,000.0 in cash, which will largely be payable toward the February through April 2026 as certain escrows expire and the 02/2025 earn out is known. Given the media agency’s growth throughout fiscal twenty twenty four and its forecasted exit of customers and expected bookings for fiscal twenty twenty five, we feel confident on achieving at least a large portion of the $18,000,000 earn out at this point in time. Upon closing in Q4, twenty twenty four, recorded a gain on the sale of the divestiture of 69,600,000.0, which is included in discontinued operations in Q4 and fiscal twenty twenty four results. Turning to our balance sheet.
As of 12/31/2024, we held cash and restricted cash of $17,300,000 as compared to $47,500,000 at 12/31/2023. Including the 01/03/2025 registered direct offering, 12/31/2024 cash would have been over 37,000,000. The net change reflects net cash outflows from operations of $31,200,000 principally driven by our non GAAP net loss of $40,800,000 and interest paid on debt of $11,800,000 offset by $18,800,000 in net cash inflows, largely driven from working capital changes from our media agency divestiture in Q4 twenty twenty four. Net cash outflows from investing and financing activities of $32,200,000 driven largely by capital expenditures of $6,000,000 and debt and deferred purchase consideration payments of $38,100,000 offset by net cash proceeds of $7,900,000 from the cash sale of our energy group and media agency in 2024, and $4,500,000 from net proceeds raised through our November 2024 ATM. Turning to liquidity today.
In 2024, we executed on our largest strategic initiative set up at the beginning of the year, including material cost reductions, the divestiture of non core assets, which included the cash sales of our energy group and media agency, and establishing a $35,000,000 ATM facility, setting us up for optimal growth heading into fiscal two thousand twenty five. In addition to the ATM, we raised 20,300,000.0 in a registered direct offering in early January two thousand twenty five. On top of this, we’ve reduced our debt carry substantially. As of 12/31/2024, our consolidated term debt is down from a peak of $2.00 1,000,000 in December 2021 to approximately $132,600,000 today, comprised of term debt of $41,000,000 due by December 2027, and convertible debt of $91,500,000 due November 2026. That said, we are currently in advanced negotiations to further improve our cash position and balance sheet in the near term, which we will discuss in more detail as these initiatives progress.
At 12/31/2024, we had 40,200,000.0 shares issued and outstanding and 2,400,000.0 warrants outstanding to our debt holders. Total shares of 1,700,000.0 were issued in Q4, twenty twenty four under our $35,000,000 ATM, raising net proceeds of 4,500,000.0. On 01/02/2025, we completed a registered direct offering, selling 4,400,000.0 shares of common stock priced at $2.53 per share and 3,600,000.0 of pre funded warrants priced at $2.52 a share for gross proceeds of approximately 20,300,000.0. Including the January 2025 offering, we had approximately 44,600,000.0 shares outstanding, exclusive of the 3,300,000.0 pre funded warrants. Now turning to updated fiscal Q1 twenty twenty five and full year 2025 guidance.
First, I would like to remind everyone that we have some very large public sector deals that we are expecting to close as early as Q1 twenty twenty five, but could close in the coming quarters in 2025. Our confidence in these deals is high. While there has been a lot of scrutiny around government spending under the new presidential administration, these initiatives are not expected to be scrutinized by the current administration and will drastically improve the federal government’s investigative and evidence gathering capabilities in forecasted centralization. These deals range in the 7 to mid 8 figure level and last anywhere from one to five years in duration. As the exact timing and rollout of these larger deals are still being actively negotiated today, we have provided a larger range on revenue in our fiscal twenty twenty five outlook.
In addition, we are seeing high demand for our VDR initiative with a pipeline of over 5,000,000 and growing as of today, the most of which we expect to execute in fiscal twenty twenty five. These coupled with an improved outlook on licensing and stability across our Veritone hire services, we remain highly confident in our near term revenue growth prospects across both our commercial and public sectors. More specifically, in Q1 twenty twenty five, revenue is expected to be between $23,000,000 and $24,000,000 as compared to $24,200,000 for Q1 twenty twenty four. In Q1, we expect the public sector to be flat to slightly up year over year, which includes the loss of $300,000 of certain non recurring project related revenue in Q1 twenty twenty four that is not recurring in Q1 twenty twenty five. Commercial revenue is expected to be relatively flat, driven by $1,000,000 decline in consumption based revenue across our managed services and Veritone higher services offset by 1,000,000 in improvements in commercial SaaS, driven in large part from new VDR revenue in Q1 twenty twenty five.
We expect Q1 non GAAP gross margins to be around 71% consistent with Q1 twenty twenty four. Q1 non GAAP net loss is projected to be between $9,500,000 to $8,500,000 as compared to $10,400,000 in Q1 twenty twenty four, an improvement of 13.5% at the midpoint. Turning to fiscal twenty twenty five outlook. We are slightly updating our prior guidance for fiscal twenty twenty five, which we are expecting revenue to be the same at $107,000,000 to $122,000,000 which at the midpoint represents a 24% increase year over year, and non GAAP net loss to slightly change to be between $27,000,000 to $17,000,000 representing a 46% improvement year over year at the midpoint. The slight change is reflective of the earlier compressions in gross margins on VDR, though we expect this to improve throughout fiscal twenty twenty five.
Key assumptions in our fiscal twenty twenty five guidance include, for the public sector, as previously discussed, we are expecting the public sector to grow 100% to 150% year over year, led by near term deals across the Department of Defense public safety, including international expansion into Europe and through more recently announced and expanded partnerships with AWS, GTAC and others. We are currently in trials in our early phases of deployments on all of these projects, which when aggregated are projected to generate substantial revenue over today’s baseline. For commercial enterprise, since August 2024, we renewed our partnerships with some of the largest customers, including multi year deals and expanded services with the NCAA, CBS, and iHeart. Moreover, we recently renewed ESPN for a multiyear deal that included expanded software products and services. We are also in the beginning phases of our VDR product offering with exciting new partnerships with some of the largest AI, LLMs and cloud providers, expanding our offerings into generative AI.
These existing and newer market opportunities will drive year over year growth across our commercial sector. Turning to our recently launched AI solutions group. During the second half of twenty twenty four, we began to focus efforts on more expanded enterprise opportunities. In Q4 twenty twenty four, we upsold a multiyear deal with an existing Fortune 500 company to provide AI application services across their hiring platform. In addition, we were recently selected by one of the largest homebuilders in The US to provide deeper AI analytics and tools to accelerate some of their existing manual processes and data collection efforts.
Lastly, we are at various stages with the US Senate to assist them in managing their existing data. While we are forecasting modest revenue in fiscal two thousand twenty five around our expanded AI solutions, we do believe this will be a larger area of growth beyond fiscal twenty twenty five. For Veritone Hire, given the recent macro environment, we continue to expect modest to flat growth across our Veritone higher applications and services in fiscal twenty twenty five. With the exit of consumption based customer dependencies in fiscal twenty twenty four, we do expect a more stable year in 2025, with a return back to growth in late twenty twenty five to fiscal twenty twenty six with expected macroeconomic improvements. On non GAAP gross margins, we are projecting our non GAAP gross margins to be between 71 to 73% throughout fiscal twenty twenty five.
To the extent that we approach the higher end of our fiscal twenty twenty five revenue guide, we can see non GAAP gross margins expanding closer to 75% on a blended basis. As we begin to scale and look towards 2026 and profitability, our non GAAP gross margin should return to 75% or better. And finally, our cost structure. With a backdrop of significant cost savings enacted over the last two years, we exited 2024 with a much improved cost structure relative to the past three years. Moreover, we will continue to manage our cost structure throughout fiscal twenty twenty five to ensure we time necessary investments in our cost structure with corresponding growth.
Today, our largest cost remains headcount, and to our lesser extent, professional services that has recently been higher and driven by transactional volume and integration. As we exit 2024, we are not expected to focus on M and A and tactical transactions, which will allow us to become much more efficient with our back end of support services and exit dependencies of higher professional fees over the past several years. Before closing the call, I’d like to remind everyone listening that Veritone will be attending the thirty seventh annual Roth Conference taking place from March in Dana Point, California. That concludes my prepared remarks. Operator, we would like to now open up the call for questions.
Scott Buck, Analyst, H.C. Wainwright and Co.: We will
Conference Operator: now begin the question and answer session. The first question comes from Scott Buck with H. C. Wainwright and Co. Please go ahead.
Scott Buck, Analyst, H.C. Wainwright and Co.: Hi, good afternoon guys. Thanks for taking my questions. First off, I’m curious when do you fully anniversary some of these consumption customer headwinds? Just trying to get a sense of when the year over year comps improve there?
Unidentified Speaker, Veritone: Yes, I can take that one. Q1 20 20 four. So year over year, we are going to be out of the consumption comparison.
Scott Buck, Analyst, H.C. Wainwright and Co.: Okay, perfect. And then I’m curious just in the public sector and specifically federal government, I’ve heard from some other folks during this earnings season that typically when you have an administration turnover, there’s just some disruption and delay, it’s kind of normal course
Glenn Mattson, Analyst, Ladenburg Thalmann: of business. Are you guys seeing any of that?
Ryan Steelberg, Chairman and Chief Executive Officer, Veritone: We are not seeing that for a lot of the contracts that have been awarded for us previously. A lot of what I alluded to of the recent deployments of aiWARE in our respective applications in DoD areas is primarily 2025 money to date. We obviously are all watching closely, which again, we don’t believe is going to be relatively impactful for our 2025 guide in the short term business. But like others, for longer term opportunities, we are taking close attention to obviously the upcoming budget cycle and the potential CR that’s currently being negotiated. But to be very clear, what we’re talking about now in terms of our current and active deployments and revenue opportunities, we’re primarily servicing against approved $20.25 dollars
Scott Buck, Analyst, H.C. Wainwright and Co.: Perfect, Ryan. That’s very helpful. And then last one for me. I think you signed what, 11 new commercial customers during the quarter. Typically, how big of a
Ryan Steelberg, Chairman and Chief Executive Officer, Veritone: bite of the apple
Scott Buck, Analyst, H.C. Wainwright and Co.: do you take with that first contract? I guess, I’m trying to what I’m trying to do is figure out what the potential upsell opportunities are from those new customers in the future?
Ryan Steelberg, Chairman and Chief Executive Officer, Veritone: Well, let’s break them down. So, if it’s DDR related customers, as Mike alluded to, we’re thrilled. I mean, some of the growth and contracting that we’ve been able to sign for this new service right out of the gates are vastly exceeding our expectations. That being said, some of them initially upfront, as Mike alluded to, is some of the margin is a little bit lower than our stated blended overreaching margin, but we do expect that to normalize over the course of the year. So again, that’s speaking to VDR.
Upsell opportunities right now, obviously, if you do some comparisons and some comps to other companies who have been in the AI ready or AI asset preparedness businesses like Shutterstock and others, this is a very big opportunity for us. We’re obviously in a very ideal situation considering our magnitude and scale with high quality IP based audio and video. As we kind of touched on just last year, we processed over fifty eight million hours of audio and video on behalf of our customers. So, we expect that to be again a major contributor for production this year. But again, we are right now I think in VDR in the first phases of, I’ll call, the first contracting, but we do expect over the course of the year consistent with these other companies that we expect multiple SOWs and potential upsell opportunities with these new customers over the course of the year and into 2026.
Scott Buck, Analyst, H.C. Wainwright and Co.: Great. I appreciate the added color guys. Thank you for the time. Thank you.
Conference Operator: The next question comes from Jesse Silverson with DeBouro Capital. Please go ahead.
Jesse Silverson, Analyst, DeBouro Capital: Hey, everyone. Thanks for taking my questions here. Kind of dovetailing off of the prior question on the timing of consumption headwinds here. You are driving to some time growth this year versus the reported declines. So beyond these consumption headwinds, can you point to any specific drivers that underscore your confidence in this inflection point in growth?
Is it just the timing of the large government contract awards or maybe an anticipated acceleration in this BDR segment? I’m just trying to point to some specific business related catalysts to underscore the confidence here.
Ryan Steelberg, Chairman and Chief Executive Officer, Veritone: As we stated previously on some recent calls and public disclosures, VDR and public sector are by far going to be leading the growth and trajectory. In terms of proof points and immediate catalyst, VDR, as we’ve stated, has kind of come out of the gates significantly farther ahead in terms of where we thought we’d be already. We’re under contract and working with and generating revenue from some of the largest hyperscaler and model development companies, while also working with some of the largest IP owners on the content side. So, that is a clear one with clear proof points that we’re very excited about. And to be very clear, it is exceeding our expectations, both in terms of contract velocity and revenue growth.
The public sector side, as we’ve touched on already, is we are actively deploying our solutions into DoD facilities and environments and tenants. And hopefully, we’ll be able to continue to publicize those opportunities and expanded contracts here publicly through press releases and other mechanisms here over the next several weeks and few quarters. But again, remain very bullish on hard concrete proof points for both VDR and public sector growth.
Jesse Silverson, Analyst, DeBouro Capital: Awesome. That’s exciting. And then just one follow-up for me and then I’ll jump back in the queue or connect with you guys. Just curious, it’s looking like we’re hitting an inflection point of growth in the business with all the pieces pointing to positive trends. As we look out over the medium to longer term, can you give us an idea of where you expect to be breakeven on a cash operating standpoint and what like some longer term profitability targets might be?
Unidentified Speaker, Veritone: Yes, I’ll take that one. I think based on our projections, the earliest is going to be in the back half of twenty twenty six.
Jesse Silverson, Analyst, DeBouro Capital: Great. Well, thanks for the details and thanks for taking my questions.
Scott Buck, Analyst, H.C. Wainwright and Co.: Thank you. Thank you.
Conference Operator: The next question comes from Glenn Mattson with Ladenburg Thalmann. Please go ahead.
Glenn Mattson, Analyst, Ladenburg Thalmann: Yes. Hi. Thanks for taking the question. Just curious on the items opportunity. Could you help just better understand how the new offering differs from the previous public safety revenue that you produced?
Just the breadth of the product and why that maybe is creating an inflection point there?
Ryan Steelberg, Chairman and Chief Executive Officer, Veritone: I think first is the number of applications. So IDEMs collectively is a suite of different applications. So historically, we primarily have had one application in the suite of solutions. Those historical applications have been primarily Redact and Illuminate, both very valuable, both still selling at good applications. So, in effect, we can start moving much larger diverse data sets and workflows to expand on the investigation process.
These newer applications include TRACK, which is an application that we announced last year, which provides dynamic and, I’ll say, cross device, cross camera tracking of people of interest as well as the upcoming or in addition to Investigate, which we also announced, which is a much more broader it’s more analogous to DMH Digital Media Hub, which we offer and is one of the dominant products that we sell on the commercial side. This is somewhat analogous on the commercial side, but named Investigate. And so, because of these expanded application product lines, we do expect more additional revenue on a per licensing basis against the application, but also we expect larger contracts because of again the breadth of the opportunity and solutions that we’re providing because of the multivariate nature of the diversity of the applications.
Glenn Mattson, Analyst, Ladenburg Thalmann: That’s super helpful. And then I guess just as in terms of competitive landscape, is it can you just describe when you’re in the field, what you see versus some of the other offerings that are out there and how you’re able to differentiate and win in that scenario?
Ryan Steelberg, Chairman and Chief Executive Officer, Veritone: Yes. So this is really exciting. So unlike the commercial business where there’s been different forms of technology and storage and I’ll say more archaic, analytic tools for movie content and elements, in the public sector space, I mean, it’s pretty much greenfield. You’re seeing explosion of new data types being created. And typically, they’re really bound in more or less closed environments with certain hardware providers.
So, for example, if there is a security camera, right, that’s going to a proprietary VMS system, if there is a single body camera company, right, that’s really working with that type of dataset, is working on the back end with a single vendor. But the reality is when you’re talking about the diversity of these new data sets, you’re talking about multiple different IoT sensor and capture things. Meaning, data is being produced at an incredibly higher rate now and the diversity of those data sets is making it incredibly challenging for municipalities, sheriff departments and police agencies to ingest, index and organize the breadth of these diverse and disparate data sets. That’s what we do. So, IDEMs built on AIware is the leading open platform that’s going to be able to ingest all these different datasets in any format, which, by the way, is critical.
You can’t really follow and progress an investigation along unless you can ingest all these different datasets and create a common narrative and storyline. For example, I like to say crime unfortunately travels. If you’re bouncing from drone footage to a security camera to a citizen upload camera, all that has to be taken into a common platform and that’s what we’re bringing to the market through with items on aiWARE.
Glenn Mattson, Analyst, Ladenburg Thalmann: Thanks for all that clarification. Very helpful, Ryan, and congrats on the results.
Scott Buck, Analyst, H.C. Wainwright and Co.: Thank you.
Conference Operator: This concludes our question and answer session. I would like to turn the conference back over to Ryan Steelberg for any closing remarks.
Ryan Steelberg, Chairman and Chief Executive Officer, Veritone: The close of 2024 represented really two years of material change and transition for our business. But I have to say is Veritone is back into a very focused and a very strong position for both revenue growth and market expansion for 2025 and beyond. I’m very thankful to our passionate teams and talented Veritoneians who have led us through this transformation. I mean, we’re all excited about 2025 and beyond. But more specifically, it’s taken into account again our market leading AI solutions, the near term positive impact from VDR and our public sector growth.
And we coupled that with a very large diverse customer base already of over 3,000 global enterprises, this is our year to really flip the switch. I think we’ve articulated some very clear proof points why both shareholders and potential new investors should be very bullish about the future of Veritone. Thank you for your time today.
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