Q1 2022 Veritone Inc Earnings Call
Welcome to the Barrington first quarter 2022 financial results Conference call all participants will be in a listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.
After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on your telephone keypad to withdraw your question. Please press Star then two please.
Please note this event is being recorded.
I'd now like to turn the conference over to Brian Alger Senior Vice President of capital markets and Investor Relations. Please go ahead. Thank.
Thank you and good afternoon.
After the market close today virtual issued a press release announcing the results for the first quarter ended March 31 2022.
Yes release and other supplemental information is available in the investors section of <unk> website joining.
Joining us for today's call are both alive and digital twin versions of Baritones, Chairman and CEO , Chad Silbert, President Ryan Gilbert and CFO , Mike <unk>, who will provide prepared remarks, and then open up the call for a live Q&A session. Shortly.
Shortly after completing today's call the remarks will be made available in six languages on baritones synthetic voices. Please.
Please note that certain information discussed on the call. Today will include forward looking statements about future events, and <unk> business strategy and future financial and operating performance, including its expected net revenues and non-GAAP net income and loss for the second quarter and full year of 2022, respectively.
These forward looking statements are subject to risks uncertainties and assumptions that may cause the actual results to differ materially from those stated or implied by those statements certain of these risks and assumptions are discussed in <unk> SEC filings, including its annual report on Form 10-K. These forward looking statements are based on the assumptions as of today may three 2022 and <unk>.
<unk> undertakes no obligation to revise or update them.
During this call the actual and forecasted financial measures, we will be discussing other than revenue will be presented on a non-GAAP basis unless noted otherwise reconciliations of these measures to the corresponding GAAP measures are included in the press release, we issued today. These non-GAAP measures include a breakout of <unk> results between core operations and corporate.
Core operations consists of <unk> consolidated software products and services and managed services and their supporting operations, including direct cost of sales as well as the operating expenses for sales marketing product development and certain general and administrative costs dedicated to these operations.
Corporate consists of general and administrative functions, such as executive finance legal people operations fixed overhead expenses, including facilities and information technology expenses.
Other income or expenses and taxes and other expenses that support the entire company, including public company driven costs.
Aratana has aligned its organization to focus on two distinct customer groups commercial enterprise and government and regulated industries commercial enterprise today consists of customers in the commercial sector, including our media and entertainment customers advertising customers content licensing customers and corporate intelligence customers that are not from the government or regulated industries.
Government and regulated industries also known as Jarrod I today consists of customers in the government and regulated industry sectors, including our state local and federal governments legal compliance and energy customers.
Across the commercial enterprise and government and regulated industries.
We separate revenue into two categories software products and services and managed services.
Sulfur products and services consists of revenues generated from our AI wear platform and through Penalising software products solutions any related support and maintenance services and any related professional services associated with the deployment <unk> implementation of such solutions.
Managed services consists of revenues generated from our advertising agency and related services and content licensing services.
Finally, I would like to remind everyone that not only this is called being produced with baritone voice our proprietary synthetic voice solution, but it is also being recorded and will be made available for replay via a link in the investors section of the company's website at www Dot baritone dot com now I would like to turn the call over to the digital twin of our chairman and CEO Chad.
Gilbert.
Chad.
Thank you Brian Good afternoon, one theater.
We'll swap.
Sure.
As Brian noted I am digital twin Chad I'm excited to speak with you today and to reiterate that AI is alive and growing stronger every day for the first quarter of 2022 baritone reported revenue of $34.4 million.
Renting year over year growth of 88% on a GAAP basis, and 45% on a pro forma basis, our new bookings increased 292% versus Q1 'twenty 'twenty. One we continue to see strong demand for a eyewear and we remain committed to investing to capture future growth.
Artificial intelligence and good times and bad will continue to thrive in good times AI is the leverage for companies to innovate differentiate and expand their products and offerings in tough times, Hey, I provided the tools to better optimize automate and reduce costs and inefficiencies.
The pandemic allowed us to prove the value of AI to Amazon and Fedex two of the world's most advanced and efficient logistics companies through our strong partnership with these companies we pioneered a new AI standard and recruiting that is being rapidly adopted by a diverse set of businesses case in point during Q1, we experienced.
Greater than 200% revenue growth and our hiring platform within our non Amazon customer base.
Similarly in the early days of Covid demand for our performance based advertising business surged, while overall media spend cratered law enforcement agencies, all across the U S selected our solutions, while facing the pressure of increased operational expectations combined with reduced funding in fact every day, we see further evidence that our.
<unk> of developing and delivering AI solutions based on common ingestion temporarily based cognition and standard API is fundamentally superior to custom or single point applications.
We remain very confident in our projected growth over the course of 2022 and beyond and we continue to execute at the highest levels across our platform as is evident with our key customer performance indicators for Q1, which included year over year software customer growth of 45% net retention over 120% in <unk>.
Roche retention greater than 90% not only are we growing our new customer base, we are keeping and growing our existing customers as well proof that our land and expand strategy is working these are incredible stats for any company and even more pronounced given current economic conditions.
Hey, eyewear is helping our corporate and government partners make great progress with environmental social and governance or ESG concerns.
On the environmental side and in less than two weeks, we will be presenting at the <unk> Triple E. Innovative smart grid technologies 2022 event very tone in our lead utility customer Tampa Electric company will be presenting realized results from the first implementation together, we will showcase how we are actively working to reduce <unk>.
Carbon emissions and produce more reliable and efficient energy tangible results include lower maintenance and operating costs minimal spinning reserve coverage smoother energy production and a two X improvement and inverter life. This same technology is being utilized by smaller power providers and large manufacturing customers while many come.
<unk> claimed to have operational commitments to reduce carbon emissions. We are actively enabling meaningful change we believe their tones AI solutions are one of the most effective and efficient means of driving real change in the near term.
On the social side and the business World, our AI is removing bias and increasing diversity in the recruitment and hiring process across all commercial segments of our economy.
With state and local law enforcement agencies, a eyewear is being utilized throughout the investigative and evidenced lifecycle. We know our solutions are fundamentally changing how agencies communicate and serve their communities with reduced bias and increased transparency binding agency management with their constituents.
From an overall business standpoint today industry Titans, such as Amazon Fedex, Microsoft and Disney are not only our customers. They are also our partners and in many cases evangelists as customers. They have literally hundreds of millions of dollars being exchanged across our AI, We're enabled solutions and trust us with.
Some of their most critical business operations from hiring to customer acquisition, two core technology as strategic partners together, we are developing new applications and capabilities into AI, where that extend and expand the use of AI nearly everyday as evangelists in many cases. These companies are distributing or helping us market AI where.
<unk> to their customers by delivering heartfelt case studies ultimately, we believe all companies will need to utilize AI to be competitive in the near future.
We expect increased adoption of AI, where in 2022 and further acceleration in 2023 as the trust and awareness of AI has advantages grow in March I referred to the tipping point, where our customers use AI where to develop applications for their customers and in turn drive the geometric progression of our business the point, where AI application.
Element in Virtu and diverge in the point, where AI, where creates enormous leverage to grow customers and users revenue and so on I can confidently say that we are there and it is happening.
Our focus on our strategy and our mission remains we have ample resources, a cash flow positive business and we are aggressively investing in our people and leaning into the strategic advantages of our technology to further accelerate our growth and outpace our peers.
Now I'll turn the call over to Ryan our president to provide further details on our operational progress over to you Ryan.
Thank you Chad and good afternoon, everyone.
Went up database.
Good not mute.
That's our Shanghai in the first quarter of 2022 strength in commercial software products and services as well as managed services drove our revenue growth. The first quarter also delivered our best software bookings quarter ever at just over $9 $5 million up nearly 300% year over year with both <unk> and commercial delivering strong bookings access.
<unk>.
Let's start the business review with commercial enterprise.
Q1, 2022 commercial enterprise revenues increased 96% over the prior year period.
Within commercial on a GAAP basis, our managed services grew 18% year over year, and our software and services revenue grew by nearly 420%.
On a pro forma basis, our software products and service revenues were up 79% year over year.
Panda logics contribution was obviously significant to the GAAP growth the business with Amazon, our largest customer accelerated with increased penetration and overall robust hiring demand across all our high volume customers in a highly competitive labor market customer growth in general was strong with panda logic, maintaining triple digit customer growth within its customer base.
While baritone grew its customer count, 15% year over year on top of Pan those growth in.
In total we exited Q1 2022 with 559 customers.
Our record bookings strong retention and new market offerings validate our strategy and the investments we are making we are successfully attracting top talent to the organization and we have hired more than 150 employees since the beginning of the year.
Our expanded team enables us to accelerate the pace of our product innovation, resulting in the launch of very versus enterprise AI for the meta versus which we showcased at last week's Nab show in Las Vegas. We are proud to report we want NAV product of the year 2022 for baritone avatar right on the heels of receiving the same award for baritone voice in 2021.
Verdon voice continues to see very strong demand and we have already announced deals with IHOP Odyssey and silver track digital with a significant pipeline in the queue.
More than just synthetic voice <unk> is a complete enterprise suite of offerings built on a eyewear for the meta versus along with voice offerings include baritone Avatar N F T verify in our med adverse migration services for those that haven't checked it out yet I highly encourage each of you to visit www dot very versus dotcom.
We will be detailing and demonstrating many of these innovations at our upcoming analyst day in tech demo on May 13th.
Our technology is deployed and utilized by many of the most watched live events like March Madness. The masters the French open the USDA, the FIA Gran Turismo World Championships and many others.
In addition, we are excited to have just sign a multi year extension and expansion to our contract with the U S. T. A.
As I said in March in 2022, we continue to expect strong growth from our commercial enterprise offerings, all of which are expanding our Tam as our strategy of further penetrating the enterprise yields more strategic engagements.
Shifting to government and regulated industries or G. R. I.
G R I had a strong quarter, although the revenue might not reflect it yet.
The diversity of revenues and a strong bookings gives us further confidence in our go to market strategy and product fit.
Since we spoke in March we have engaged with four new civil agencies outside the Doj for fed ramp authorizations, and our engagements with the Jake and the defense agencies continue to expand.
Without a doubt burtone and AI, where are seeing broader and deeper penetration.
On the state and local side, our contact product is now attracting significant demand outside of California. Redact is also increasing its penetration across the subscriber base.
One good use case is a customer in northern California that initially sign a 100 hour contract, which they expanded to a 400 hour contract and just recently more than doubled to a 1000 hour contract.
In aggregate, our customer count of law enforcement agencies is up roughly 100% year over year.
On the energy front demand has been accelerating since we officially launched our <unk> suite, we have announced CP V <unk> and additional new customers vary from small private operators to industrial manufacturers to datacenter providers.
At next week's I Tripoli event that Chad referred to together with our customer Teco, we plan to illustrate the real world performance and efficiency gains of our solutions as well as to accelerate discussions with other grid operators in the pipeline.
Baritone has started out 2022 strong we are expanding and deepening our pipeline, even as we add new solutions.
Based on our bookings and pipeline of engagements we have consciously made the decision to invest in our growth early we know we have essentially an unlimited Tam and it is up to us to deliver the right solutions with the proper amount of support to maximize our opportunity.
Artificial intelligence inherently delivers efficiency and performance that accelerates growth and improves outcomes that are necessary in both expansionary and contracting economic environments.
AI is a singularly disruptive innovation that we believe is still in its early stages of adoption and impact and baritone is committed to leading that innovation.
Now I would like to hand, the call off to Mike <unk>, our CFO to go through the financial results and guidance in more detail.
Over to you Mike.
Thank you Ryan we continue to execute at the highest levels with record first quarter revenues year over year pro forma revenue growth of 45% a rock solid balance sheet as well as recent business momentum and financial leverage to accelerate our growth story, even further on top of this we closed a small but strategic.
Acquisition at the end of the quarter that we believe will help accelerate our met averse strategy.
During my prepared remarks, I will discuss our Q1 year over year performance in Kpis on a pro forma basis as if we owned Panda logic since the beginning of 2021, our Q1 cash position and working capital in Q2 and full year 2022 guidance.
Now turning to Q1 2022 financial performance.
Q1 revenue of $34.4 million was a record first quarter up $16 $1 million or 88% from Q1, 2021 software products and services revenue increased $13 $5 million or 288% to a Q1 record of $18 $2 million driven largely by the addition.
A panda logic managed services revenue grew $2 6 million or 19% driven largely by growth in content licensing, which rose an astonishing 61% year over year driven by the overall increase in digital content usage and in live events coverage such as the NCAA March basketball tournament as we return back to pre.
Covid conditions.
On a pro forma basis Q1, 2022 revenue increased 45% from Q1, 2021 and software products and services revenue increased 78% driven by new software customers growth of 45% to 559, coupled with net customer retention of over 120%.
Q1, 2022 revenue also benefited slightly from our high volume customers shifting their hiring early in the year as opposed to spreading it throughout the first half of the year in part to meet demands in a highly competitive labor market. As a result, we expect there will be a slight decline in Q2 2022 high volume customer hiring overall, but on plan for the entire.
First half of 2022 this impact is reflected in our Q2 guidance.
More importantly in Q1, we diversified our software products and services customer base, expanding at 45% year over year, and deepen our relationships, including with Amazon for our hiring platform, specifically overall customers increased over 100% year over year and their respective revenue contribution grew over 200 person.
Sent in Q1, while Amazon represented approximately 30% of our Q1 revenue approximately 25% of that was from new service line revenues offering one more example of the success of our land and expand model.
Overall, our revenue pipeline continues to be strong in late Q1, we acquired an Influencer based services company for $11.0 million of which $3 $5 million was paid upfront with $1.5 million in cash and $2 million in stock. The remaining seven $5 million is payable over the next two years.
Ours in deferred cash purchase price of $3 million in cash based earn out of $4 $5 million. During Q1 2022, it contributed less than 1% of revenue for 2022, we expect it to generate less than 2% of our consolidated revenue and near neutral impact on our forecasted 2022, non-GAAP net income guidance.
In Q1, we reported solid Kpis results.
New bookings were $9 $6 million up over 292% from pro forma Q1 2022.
Gross retention continued to exceed 90%.
Pro forma customers were up 45% year over year and pro forma software AAR was $207000 up 4% year over year.
And managed services advertising gross billings per active customer increased to $684000 up 18% over Q1, 2021. Overall Q1 2022 advertising revenue continued to outpace prior year approximating industry growth versus the robust strength shown in the first half of 2021 largely driven.
And by the timing of new and larger event driven campaigns by key customers in the first half of 2021.
Q1, 2022, gross profit reached $27 $5 million, improving $14.0 million or 104% from Q1 of 2021 gross margins expanded to 80% in Q1 2022 up compared with 74% in Q1 2021, both benefited from the entire quarter.
Inclusion of Panda logic, which typically generates gross margins in excess of 90% as previously discussed and as we continue to scale over the next 12 to 24 months, including the full impact of Panda logic. We expect total gross margins to reflect panda logic seasonality, which is slowest in the first half of the year and greatest in Q4.
<unk> improving sequentially throughout the year and for total gross margins to exceed 80% for 2022.
On a pro forma basis, our Q1 gross profit of $27 $5 million increased $9.0 million or 48% versus Q1 2021, driven by the higher contribution from software products and services, which totaled 53% of revenue in Q1 2022 versus 43% in Q1 'twenty.
21, Q1, 2022 pro forma gross margins improved year over year at 80% as compared to 78% in Q1 2021.
Q1, non-GAAP net loss was $5 $2 million, including onetime expenses totaling $800000 largely associated with the major site upgrade at one of our larger third party hiring sites. Excluding these onetime items Q1, 2022, non-GAAP net loss would have been $4.4 million. This compares to non-GAAP .
Net loss of $3 $9 million in Q1 2021 during Q1 core operations posted non-GAAP net income of $831000 compared with $1 $2 million in Q1 2021, reflecting the recent investment we've made in operations, namely in hiring of engineering sales and marketing resources to ask.
<unk> 2022, and long term revenue growth the corporate non-GAAP net loss was $6.0 million compared to $5 $1 million in Q1, 2021, driven principally by higher G&A costs to support our growth year over year, coupled with first year full sarbanes Oxley compliance costs as a percentage of revenue.
<unk> costs dropped from 27, 9% in Q1, 2021% to 17, 4% in Q1 2022.
On a pro forma basis Q1, non-GAAP net loss increased slightly by $760000 versus Q1, 2021, reflecting improved revenue and gross profit offset by increased investments in opex, namely hiring of engineering sales and marketing organically and at Panda logic to fund growth given our projected <unk>.
Near and long term growth objectives, we aggressively hired in Q1, our hiring plan for 2022 is front loaded in the first half of 2022, which will also have a heavier impact on forecasted 2020 to bottomline results. Excluding the previously discussed onetime costs Q1, non-GAAP net loss would have been relatively flat versus pro forma.
Q1 2021.
Turning to our balance sheet at March 31, 2022, we held cash and restricted cash of $237 $6 million, including $69 $5 million from managed services customers for future payments to vendors. This compares to $254 $7 million at December 31, 2021.
The $17 1 million dollar net decrease reflects net cash inflows of $27 $3 million from acquisition, driven and financing activities, including approximately $14 $4 million cash outflows for <unk> 2021 earn out of $9 $4 million in restricted stock net settlements offset by positive cash inflow.
Flows from operations of $10 $1 million driven in part by the net positive Q1 working impact from the seasonality of the Panda logic services.
Working capital will continue to fluctuate depending on the timing and due dates of payments in any given period, our unencumbered cash at the end of Q1 2022 was approximately $169 million, which is sufficient to operate the existing business and support growth for the foreseeable future.
We ended March 31, 2022, with $36 1 million shares outstanding.
Lastly, I want to note that in connection with Panda logic, achieving its 2021 financial targets and in addition to the $14 $4 million in cash paid out in Q1, 2022, we issued $7 $2 million in stock or approximately 350000 shares valued at $20 53 per share. We also issued.
$2 million or 116000 shares valued at $17 16 per share for the new acquisition in late Q1 2022. We also retired approximately 458000 shares for net settlements on restricted stock Awards.
Turning to financial guidance for Q2 and full year 2022.
To Echo Chad's comments and to further elaborate on the current state of the U S economy, we remain very bullish on our projected growth in fact, our platform has never been more important to our customers and right now while we do see a near term impact in Q2 from the hiring shifts from our volume hiring customers like Amazon, We do not expect this to have a material impact in our <unk>.
Overall revenue projections for the year as a result, we will be maintaining our previous revenue guidance for the year.
As a reminder, 2022 is also a significant growth year for Verifone to support this growth and achieve our near and long term objectives. We plan to continue making responsible investments including increases in head count, which today stands at approximately 650 employees or roughly 25% higher versus the beginning of 2012.
Two our growth is largely dependent on these hires the majority of which will be engineers operational support and sales. In addition, we have an active pipeline of strategic acquisitions to accelerate our planned organic growth and scale in order to manage future growth and scale. We also need to invest in our infrastructure, including planned deployments of glu.
<unk> systems, such as Oracle and workday in the first half of 2022.
As you may recall from our last call employee retention is key to bear tone and with higher inflation and wage increases globally, we reinvested back into our current employees with newer retention rewards higher annual raises and Richard benefits versus historical in total we expect these one time system and retention related investments to be approximate.
$5 million of incremental costs to their tone in 2022 versus 2021 with the majority beginning in Q2 2022.
With that backdrop, and the reminder, that Panda logic has significant revenue seasonality with the lowest hiring in the first half of the year and accelerating throughout the second half of the year.
We expect Q2 2022 revenue to be between 38 and $39 million, representing an approximate 100% increase year over year at the midpoint versus Q2, 2022, GAAP and 15% versus Q2 2021 pro forma as previously discussed if we shift a portion of accelerated Q1 2022 hiring from our high.
Volume customers Q2 pro forma growth would be closer to 30% year over year Q2 guidance includes a full quarter of our recent Q1 acquisition, which is projected to represent approximately 2% of Q2 consolidated revenue.
We expect Q1 2022, non-GAAP net loss to be between three five and $2 $5 million, depending on how quickly we hire which is better versus Q2, 2021, non-GAAP net loss of $3 $9 million, but slightly down versus Q2, 2021 pro forma non-GAAP net income of $2.0 million, reflecting the stepped up.
Investments in people and infrastructure costs to support our near and long term growth.
For full year 2022, we expect revenue to be between 180 and $190 million, representing a year over year increase of 60% at the midpoint on a GAAP basis, and near 25% increase on a pro forma basis for 2022, we expect our combined software products and services revenue growth to approximate <unk>.
100% year over year on a GAAP basis full year 2022 guidance includes our recent Q1 acquisition, which is projected to represent approximately 2% of full year 2022 consolidated revenue.
We expect full year non-GAAP net income to be between 10% and $17 million, depending on the timing of hiring in the overall mix of our revenue at the midpoint. This represents an over 100% improvement when compared to 2022 non-GAAP net income.
It should be noted that in 2022, we expect our fully diluted share count to be between 43, 7% and $45 7 million shares largely due to the as if converted accounting associated with our convertible debt offering and to a lesser extent the outstanding options warrants and Rfu's held primarily by our employees.
Before I close we will be holding our semiannual analyst update and tech demo on May 13th where we will be showcasing new product applications and adoptions customer testimonials and updated long term financial guidance. Please ensure you register in advance at the investors section of our website.
In addition, we plan to be onsite and speaking at the Bank of America Technology Conference in San Francisco on June 7th.
<unk> Technology conference in Boston on June nine and the Roth Conference in London, England June twenty-first through the 23rd.
Operator, now we would like to open up the call for questions.
We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.
If you are using a speakerphone please pick up your handset before pressing the keys.
Anytime you question Thats been addressed and you would like to withdraw your question. Please press Star then two at this time, we will pause momentarily to assemble our roster.
And our first question will come from Koji Aikido with Bank of America. Please go ahead.
Hey, Chad, Brian and Mike Thanks for taking my questions here.
Couple from me.
First one on Amazon and you just kind of really thinking about the Amazon comments. Your prepared remarks. Thank you very much for that but also their comments last week on their earnings call thinking about their fulfillment segment overcapacity.
Really thinking about Amazon being your biggest customer not only for <unk>, but really for the total business.
Help us understand I guess some of the visibility maybe from a committed recruiting spent with them that's giving you the confidence in the <unk> piece of the.
The total revenue guide I just want to be absolutely clear here is Amazon. An example of a high volume customer for you.
Hey, Koji.
Yes ill take that.
And any of this thing and just take a step back for a moment I think the market massively overreacted to Amazon's comments with respect to its impact on our business Amazon isn't just a customer Amazon is a phenomenal strategic partner to <unk> and we will work with them and have been working with them for a number of years.
Across a number of our business units and service offerings from AWS to wonderly audible and obviously the talent recruiting side as well. So yes. They are they're our biggest strategic partner across our set of solution and it is just an example of again other companies I mean, if you think about our business in addition to Amazon.
Now our leadership position with customers like Microsoft Disney I Heart Abbvie, one of the largest pharma companies in the world.
<unk> are fortunate enough to be a company TARP.
Targeting growth 180 $190 million in revenue this year and we have some of the fortune one companies fortune one companies in each of their category sectors that trust baritone entered scaling their business.
Metrically with us.
Tell you something about the power of our technology and the capabilities of our AI in a hyper competitive marketplace and.
Amazon going back to essentially their core part of their business.
Yes, we're trading with that group of customers one hundreds of billions of dollars and what Amazon is doing for US is really in all of those customers are allowing us to collaborate with them to perfect. Our AI solutions that are solving systemic challenges that are not unique to Amazon I mean think about amazon's business and fulfillment.
It's not just customer growth sorry.
Sorry, employment growth that they're trying to solve for its customer retention and employee retention.
And it's it's an obviously known statement that you have huge turnover and fulfillment centers and quick service restaurants.
In health care services, which is primarily where were providing services, but again perfecting those solutions with a tier one customers that gives us the ability then to move down market and just start selling now I'd say to the smaller groups and the same in the same verticals. In fact, we saw over 250% growth in our <unk> from a revenue standpoint in our.
Tier two customer category and the procurement side. So this is this is I think thats been massively bought a perspective Amazon gives us.
Good guidance and works with us on a weekly basis.
Give us.
A sense of where they're headed into the future and we are continuing to go new solutions, what's really important to note and we mentioned it briefly on the call and Ryan can touch on in more detail.
Our Amazon relationship even in the recruitment side is also expanding into new products. I think we saw about 20 plus percent increase in our revenue with Amazon coming from our new products and services that we brought to market over the last few quarters.
So Brian do you want I wanted double cap on this in any way.
Yes.
Touch on the recent report came out yesterday from the department of Labor.
Business mix represents obviously that open job Brexit has increased now to 11, 5% and obviously that impacted everybody. We want we don't want US focused just on high volume hires quick service restaurants, hospitality and alike, but obviously, we expect probably the normal pressures on those types of organizations.
<unk> to fill.
And as Chad has made it very clear.
Very trusted partner actually we're building new products and services.
As it relates to your proprietary data lake and other forms of deeper integrations to make it even that much more of an efficient relationship.
And in that stickier. So I think in addition to what we're doing in co selling with AWS.
Chad alluded to on the median entertainment side of our business with commercial to again, our ever expanding and deepening relationship on the recruitment side and what we're doing on the advertising services side, where we.
We're thrilled to call Amazon a partner and we do expect.
Great growth from that relationship and others over the course of the year and beyond.
Thanks, Chad and Ryan just just one follow up for me.
Wanted to touch on the very versus I saw it in the press release, you guys talking about it on your website. So now it sounds exciting congrats on that launch I guess from a high level. How do we think about monetization of their versus maybe help us understand pricing model and where it can show up in revenue is it a software managed services maybe.
Maybe even a little bit of both.
I think the majority of it is going to be software related.
There'll be some upfront fees based upon the cost to produce some of the initial avatars and voices.
But then I'll transition to I'd say more ratably and easy to forecast SaaS based revenues.
We do expect the majority of the revenues initially to come which I'm thrilled about from are actually existing customers. So one of the reasons, we were able to efficiently launch, it's a large and comprehensive.
Set of solutions for the very versus.
Is because of all of our customers already running and having all of their content.
Training data already indexed so our ability to quickly provision and deploy these new.
Synthetic solutions for media and Entertainment partners.
Has been has been great.
Expect that provide a level of materiality to the to the revenue base by the end of the year.
But the primary goal here is to quickly sign as many meeting entertainment broadcaster and digital influencer customers as quickly as possible to sort of reinforce our leadership position here.
Got it thanks, Brian Thanks for the color guys I appreciate it.
Thanks Kurt.
Our next question will come from Pat <unk> with JMP Securities LLC. Please go ahead.
Oh, great. Thank you guys.
Big picture takeaway here is that pro forma growth accelerated to 45% from 30 right. So.
That's great.
Mike if I could just drill down on two areas, where I guess you.
You had a lot in your section and I just wanted to be really clear for people. So the Q1 net income and EPS missed the consensus.
<unk> versus 10 can you just summarize quickly what are the key factors. There there was an 800 K onetime expense right.
Yes, there was about $800000 in one time nonrecurring expenses really associated with customer credits.
From one of our major hiring platforms did an upgrade.
It took our software a little bit to catch up with it.
Okay Alright.
Alright, so that's where that one and then secondly, you or for the full year. Your guidance is intact, but Q2 revenue comes in about $2 million to $3 million below the consensus and just just help helps summarize again, but what is that handle logic.
Yes.
Big part of that is just the shift in revenue.
So some of our non our high volume of hiring customers like Amazon accelerated hiring into Q1.
And they'll see some of that benefit into Q2.
So if you look at the entire first half were on plan.
But theres just a little bit of mix in Q1 versus Q2, if that makes sense. Okay.
Okay, great. Thank you.
Yes.
Our next question will come from Darren <unk> with Roth Capital Partners. Please go ahead.
Hey, guys. Thanks for taking my question.
That's on a quarter. So one quick follow up on the commentary about some of your content partners and rights owners in terms of the various offerings like.
Who do you think will adopt some of the kind of major sporting events that you guys kind of work with are those going to be kind of the.
Early adopters low hanging fruit and then just maybe one for Mike just looking at the annual sales number and appreciate it and kind of panned out seasonality.
So your guidance kind of implies about $73 million in the first half of the year and 112 in the second half.
What else beyond <unk> kind of gives you confidence in that second half ramp versus the first half.
No.
Michael maybe I'll cover one and three and I'll, let you hit the middle.
So on the variable side. The two primary constituent groups that were being very laser focused on our digital influencers.
And content providers and IP owners on the content side.
So we expect if you based upon the announcements you've already made with <unk> and others is that we obviously are very strong engagement with all groups audio based podcast hours radio networks radio.
<unk> and alike.
And we're going to be going very hard and we do envision.
In the near future a world, where every single person of notoriety and fame, including obviously these prominent digital Influencers will have a digital twin.
That can be used for a multitude of different both utility and future revenue and extensibility growth opportunities. So that's what we've been focusing on most of these are customers already the second major category is going to be the content groups directly not necessarily sports.
But as you know we have kind of a broad array of different types of general Entertainment children's programming sports programming and news and talk.
So we're going after each one of these customers again priority prioritizing against our existing customers first.
But I'll leave you with this one is we do envision a time in the very near future, where almost every single actor or voice over talent.
Your character will have built into their writer when theyre doing a production contract contract to specifically address the.
The concept of a digital twin and hopefully baritone as the leading force behind that.
Last point I.
Touching on three of the second half of the year, and then I'll, let I'll, let might close it.
It was another key element.
We've talked a lot about our ever increasing activity as it relates to government legal and compliance and our ability to service the Doj in the Dod.
I am excited to announce that again every one of the publicly.
Void or announced BPA and the IDI cues the government contracting vehicles, we are actively generating revenue against all of those we obviously are excited and always looking to accelerate the growth, but the fact that we've transitioned from the <unk> to the RFP to be named and awards and successfully now.
<unk> <unk> task orders is something that we're very excited about.
Considering the bulk.
<unk> of the opportunity and the diversity between the two different branches of the government.
Mike did you want to add.
Yeah, I'll add onto it.
As far as first half versus the second half I mean listen we.
<unk> got a good side of visibility.
Into our pipeline, which obviously gives us tremendous comfort.
In terms of variability I mean things that are more output driven like <unk> logic.
Do you have what we mentioned before we've got over 100% growth year over year.
The non volume hiring where sort of the non Amazon non Fedex.
That's going to continue to accelerate I mean, theyre just theyre continuing just to crush it every week so.
We have high confidence in those numbers in the outward as well so.
I don't know if that answers your question Gary.
No.
One thing we've noted in our prepared remarks in our releases the strong bookings and those represent.
Still continued growth from from really all facets of the business include including GLC of that $9 6 million in bookings for the quarter.
And we expect similar trends going forward.
Yes, Darrin just to just a triple tap on a couple of things there. So there's a lot of info on that but on the script.
New bookings increased pursuant to our prepared remarks, 292% versus Q1 of 2021. So this is just massive acceleration, we're not seeing it stop and artificial intelligence is used during good times and bad so while a lot of companies are fretful that we're heading into a recessionary period or that we could be ended up with.
Difficult slowdown as rates continue to increase the fed level all of that is going to do is shift the use of artificial intelligence with all of our customers from being expansion and the Gogo times to now looking at cost cutting to looking at more efficient ways to drive their operations and it's literally all going to be powered by AI and we're working with literally every one of our.
Major customers to start thinking about that expansion in that shift and that adoption.
And then lastly on the fed side again I can't stress. This enough every single contract that we have announced with the fed we now have active task orders revenue generating active task orders and are working with them on those functions.
That's helpful. Thanks all.
Sure.
Alright.
Our next question will come from Carl Kirst feed with UBS. Please go ahead.
Thanks.
Glad to be part of this call Mike I wanted to press a little bit on the first half second half.
Net loss profile given your <unk> guide.
Got an 8 million first half loss given your full year guide midpoint.
Second half needs to be 'twenty, one 'twenty two can you talk through that ramp maybe part of your answer is that you guys are front end loaded hiring so it's less of a drag in the second half, but perhaps you could bridge that first half second half to give.
And everybody on the call comfort in your second half implied net loss guide. Thank you.
Yes sure.
The the first half as I mentioned in my prepared remarks.
We are spending an incremental $5 million on existing staff.
And infrastructure.
The bulk of those costs start really in the second quarter.
So you'll have a full second half of those costs as opposed to a quarter of those.
Going into the second quarter.
On top of that.
Did front end load our hiring.
Right. So that's going to have a full impact in the back half as opposed to a partial impact in the first half.
And then really from a margin perspective, our margin what I mentioned in my call is our margin is sequentially going to improve.
And most of that is going to be driven off the seasonality of our revenues with handle logic.
So the lion's share coming Q3, Q4, if you looked at the Amazons call they actually shifted their prime day for.
June to July that's actually going to positively impact Q3 from a hiring perspective, and then as Amazon and some of our higher volume customers.
Sequentially throughout the end of the year Q4 ends up being the largest in terms of volume with them.
So when you take all those mix with the margin sequentially improving.
Obviously revenues improving.
Quarter over quarter.
That's what's impacting the bottom line.
Got it Okay, and then maybe just a follow up for you on the full year revenue guide of 180 190 that obviously now includes this acquisition could you just clarify what the.
Dollar revenue contribution is in that full year Rev Guide. Thanks, a lot yeah, yeah at the high end, it's less than 2%.
Okay.
Good stuff thanks, a lot.
Thank you.
Our next question will come from Chad Bennett with Craig Hallum. Please go ahead.
Great. Thanks for taking my question. So Mike just a quick question I was hopping between calls just on the Pan dough.
Contribution both in the quarter and if you're if you care to share kind of how youre thinking about it for the year did you provide.
Provide any of that infill in the call.
Yes, we said that it was about 30% of consolidated revenue.
In the quarter.
In the quarter, yet got it and I think you said down seasonally right.
Yes, so Q. So the first half of the year is seasonally down and they ramp in the back half of the year.
Okay, and then just you know.
I think theres a lot of a lot of.
Bullish commentary around <unk> and kind of bookings and activity there.
So so I guess.
Is there a target or a level of expectation we should have for that business. I mean, it was from a revenue standpoint down 40% sequentially down 40% year over year.
I don't know if that shows up in some type of RP O number or whatnot or these are more kind of longer standing ratable deals, but when do we actually see <unk> revenue show up.
Yeah, I'll take the part of that maybe chat and Ryan worth adding.
So <unk> the investments we've made in GI we are winning.
And really you're going to see that manifest itself starting as early as Q2.
And then and then we will be able to provide more color.
As that starts to progress throughout the year as far as RPM Rps doubled year over year. So we're close to $9 million in terms of RPM and a lot of that is the bookings and the winnings were having on the <unk>.
Okay.
And then Mike with the kind of initial or kind of accelerated investments.
In the first half of the year.
Looking at the full year, considering the net income guide for the year a range for the year.
Is the company is going to be cash flow positive for the year.
Just on what you see today.
Yeah from a non-GAAP net income perspective.
$10 million to $17 million, obviously, we've got variability in our working cap.
Of that we do control and we don't because of our managed services business, but if you assume working cap to be net neutral.
Yes, you get you'd be positive cash flow.
From operations.
Alright, thanks for taking my questions.
Yep.
Thanks.
Our next question will come from Mike Latimore with Northland Capital markets. Please go ahead.
Okay. Thanks.
Yes, I mean, the software bookings were for excellent I guess.
Can you give a little more detail on that or was there a couple of big wins in there or is it pretty broad based and then are there a couple of use cases that really set up.
Yes, Brian you want to take that.
Yeah.
It really kind of across the board I don't think there was any unique use cases per se, but in the.
Regulated industry.
As it relates to government legal and compliance.
It's mostly AI, where proper obviously more at the enterprise level versus specific applications, which is really exciting.
As I mentioned earlier some of the active task orders that we are currently prosecuting today.
Our AI, where direct meaning they are not necessarily tied to appropriations against a specific application, but really looking at our operating system as the product.
Which we're thrilled about so I think that the major one that we're active in.
Hopefully there'll be more information that we can provide when appropriate on them, but those are some of the big bigger active one.
In addition to I'd say normal increase and acceleration of other sides of the business, including commercial.
Okay, and then Scott.
Okay.
Yes, I just wanted to just sort of echo that we talked about Amazon and 25% of the revenue from Amazon was from new services.
Yeah.
Yes, yes, okay.
And then the.
Sequential growth implied in the guidance is pretty solid there I guess.
Is the what would be kind of a couple of key drivers it kind of sounds like the hiring volume hiring maybe doesn't pick up in the second quarter, but maybe that's wrong, but what are some of the biggest sequential growth drivers.
Okay.
Youre talking from the topline or from a bottom line perspective.
Top line.
Hi, good morning.
Yes, I mean listen our the content licensing business.
Some kind of combination of exiting COVID-19.
And having more content as we start to deploy more customers and expand with existing customers.
It's really starting to manifest itself.
While sequentially it will probably be flat year over year, it's going to be a nice nice growth.
And then a lot of.
We talk about the very birth, it's really starting to open up starting in Q2.
So sequentially that should improve quarter over quarter.
And throughout the back half of the year.
Okay.
Thanks.
Again, if you have a question. Please press Star then one our next question will come from Robert Galvin with Stifel. Please go ahead.
This is Rob Calvin on for Brad for you back since you are taking the question.
I'm just wondering what the nonrecurring costs in the credits is there the potential for other vendors to do a similar upgrade.
They could I just given the size of this particular platform.
It will it will not have anywhere near an impact.
But this one did.
Awesome. Thank you.
Okay. Thanks.
This concludes our question and answer session I would like to turn the conference back over to Chad scaled Burke CEO , Eric Cohen for any closing remarks.
Thank you operator, we at <unk> are experts in artificial intelligence and our unique and differentiated business model paves the way for significant potential upside for our investors our employees and our loyal customers.
The geopolitical and macroeconomic volatility that surround the today without question the future of enterprise is going to be powered by artificial intelligence and we believe <unk> will play a vital role in unlocking that potential 2021 was strong we expect 2022 to be even stronger. Additionally, our pipeline of new business continues to imply.
Accelerating growth beyond this year. Thank you for joining us on today's call.
Okay.
The conference.
<unk> has now concluded. Thank you for attending today's presentation you may now disconnect.