Q4 2022 Veritone Inc Earnings Call
Good afternoon, and welcome to the vertex Inc. Fourth quarter and full year 2022 financial results Conference call. All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions to ask a question.
May Press Star then one on your Touchtone phone to withdraw from the question queue. Please press Star then two please note. This event is being recorded I would now like to turn the conference over to Brian Alger SVP Investor Relations and capital markets. Please go ahead.
Thank you and good afternoon.
After the market close today baritone issued a press release announcing our results for the fourth quarter and fiscal year ended December 31, 2020 to the.
The press release and other supplemental information is available in the investors section of our tons website.
Joining us for today's call are both alive and digital twin versions of <unk>, CEO and President, Brian Stubborn and CFO Mike's measure will provide prepared remarks, and then open up the call for a live question and answer session. Please note that certain information discussed on the call today, including certain answers to your questions will include forward looking statements. This includes without limitation statements about our business strategy.
And future financial and operating performance. These forward looking statements are subject to risks uncertainties and assumptions that may cause the actual results to differ materially from those stated.
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 assumptions as of today March 2nd 2023, and baritone undertakes no obligation to revise or update them.
During this call the actual and forecasted financial measures will be discussed and include non-GAAP measures reconciliations of these measures to the corresponding GAAP measures are included in the press release, we issued today.
So when we referenced pro forma measures such measures are presented on a combined pro forma basis Treme panel object is owned by Barrick, Tom Since January one 2021.
Finally, I would like to remind everyone that not only has this called then produced with baritone generative AI, but is also being recorded and will be made available for replay via a link in the investors section of <unk> website at Www Dot Verisign Dot com.
Now I'd like to turn the call over to the digital twin of our CEO and President Brian Gilbert Brian .
Thank you Brian good afternoon, when I started this.
Nabil.
Sure.
As Brian noted I am Brian digital twin powered by Burtone generative AI we.
We are happy to speak with you today and to provide an update regarding our fourth quarter and full year 2022 results.
Given this is my first earnings call as CEO and President I want to take a moment to discuss the initiatives we will be prioritizing.
Although burtone will always be driven by our software and technology innovation, we are doubling down on our focus in the markets, where we have established clear differentiation and product market fit resulting in disruptive efficiency and productivity gains for our customers. According to various third party estimates these markets already represent tens of billions of dollars and opportunity for all.
Our applications solutions and services and through focus we expect to capture greater share and revenue growth.
Entering the third months in my new capacity, we have already implemented a number of operational and organizational changes designed to more tightly align our go to market and technology development with our customers' needs together with the executive leadership I am pushing for operational excellence in everything we do from hiring two employee engagement and of course product development and <unk>.
Sales the entire leadership team is aligned behind the heightened attention to productivity and operational excellence, we are committed to driving burtone to sustainable profitability through growth and innovation. While these changes are largely internal and not yet evident to those outside the company. We expect the end result will be improved customer engagement and consequently more profitable growth.
Yeah.
For the fourth quarter and full year 2022 burtone reported revenue of $44 million and $150 million, respectively, Q4, new bookings reached another record of $20 million up 141% year over year, our year over year customer count grew 21% to 642 and our gross revenue retention.
<unk> to be strong in the high 90, percentiles as we will detail our commercial businesses powered by baritone AI. We're continued to be our foundation and clear differentiation in the market, providing the bulk of the revenues and profits for the business that said our investments in government and regulated industry solutions outside of energy, which I will speak to in a moment.
Our showing signs of more material traction with Q4, 2022 G. R I bookings growing both sequentially and year over year.
Against the challenging global market in 2022 we have taken a number of actions to set our course and refocus the company for sustainable and profitable growth.
During the fourth quarter Burtone took the decisive action of buying back $60 million of our convertible debt for a total cost of just over $39 million substantially improving our balance sheet and signaling high confidence in our business and outlook towards profitability.
Post this debt repurchase we remain well capitalized with $184.4 million in total cash and cash equivalents as of December 31st 2022.
We ended the year with unencumbered cash of $91 million in our November 2026 total debt outstanding is now just $141 million.
In January we announced a number of strategic initiatives that are already in motion, including the addition of key management talent organizational realignment various cost reductions and the divesting of the energy business.
The net result of these actions is that their tone is more capable focused and efficient in its operations. Our go to market and engagement with customers and partners is more tightly aligned as we drive value.
With the recent increase in AI awareness from the emergence of generative AI and chat G. P. T. Burtone is driven to continue to innovate and deploy market, leading and trusted AI applications and solutions.
In mid February we announced Burtone AI worse native support of generative AI models detailing several used cases, where generative AI is being utilized today in production with our customers.
While the advancements and significance of the new public large language models or L. O EMS cannot be overstated for Burtone conversational AI and these L O M and domain specific L. O EMS as a class are another set of powerful models for a eyewear to utilize in delivering game changing products and solutions to our customers. We believe generative AI improves the.
<unk> experience and as a result should accelerate adoption of AI solutions and services for both new and existing customers.
We have consistently maintained that artificial intelligence in good times and bad will continue to thrive.
Our 21% growth in customers and 141% bookings growth are concrete evidence that that belief continues to be valid.
Importantly, the customer and booking strength was balanced across all of our offerings further diversifying our business.
Now, let's get into more of the operational details of our fourth quarter results.
Kicking off the business review with commercial enterprise.
First quarter 2022 commercial enterprise revenues of $42.8 million increased 18% sequentially, but were down 21% year over year, excluding Amazon Q4, 2022 commercial enterprise software and services revenues were up more than 70% year over year, while managed services revenues were up 12% on the full.
Year commercial software and services revenues grew over 54% without Amazon and managed services revenues grew 17%.
Stated more plainly, our 21% year over year growth in customers and otherwise growth in commercial revenues was strong as we continue to minimize the concentration risk of one customer.
Our recent deals with the Masters candle media Fox stats perform and Odyssey are all examples of our ability to expand and diversify in this dynamic operating environment.
By growing our customer base and continuing to deliver superior products and services Burtone will grow stronger and less susceptible to the actions of a single customer or even a single end market.
Moving onto government and regulated industries or G. R. I G.
<unk> revenues were relatively flat at $1.2 million in Q4 and $3.8 million on the full year.
That said bookings strength broad customer engagement, and new product and market initiatives indicate that our investments in G. R. I end markets are gaining traction at an accelerating pace.
At the state and local level, we continue to sign law enforcement agencies near daily. Moreover, our suite of offerings is driving increased product penetration with virtually no churn last quarter. We closed a three year seven figure SaaS contract to provide services to a statewide agency the California Highway patrol and since signing the con.
<unk> has already been upsized.
In the fourth quarter, we introduced reduction as a service, which is not only improving our revenue opportunities, but it is also accelerating the sales cycle with numerous agencies that are understaffed and already overwhelmed with content.
In the fourth quarter, we also announced the general availability of Burtone tracker, a unique person of interest detection and tracking solution that does not require biometric face identification is already attracting interest across our entire government customer base, including federal state and local agencies as well as some of our commercial customers.
Coming into 2023 our primary focus is on growing the business with existing customers and diversifying with new customers in the markets that we have established clear product market fit and productivity gains for our customers.
Before handing the call over to Mike to go through the financials in more detail I want to address the difficult decision to divest our energy group, while the potential of the energy market continues to be attractive and growing our energy business has underperformed. Our decision demonstrates that we are focused on markets with stronger product market fit and traction.
Those of you who have followed burtone for awhile know that the company's name is derived from Latin, meaning truth in a signal.
As we have all witnessed over the past several months there is a lot of noise around AI.
Burtone provides applications solutions and services to our customers that eliminate the noise and simply improve their processes and outcomes at significant margins to bear tone.
Today, we are clearly an established leader in delivering AI enabled results to more than 600 commercial customers with strong customer growth and retention, we expect to extend that lead not only in our commercial markets, but also with our targeted government and regulated clients as well.
The people we have attracted in the technology. We continue to develop are the foundational elements for burtone to capture and dominate our targeted markets.
Now I would like to hand, the call off to Mike The Metra, our CFO to go through the financial results and guidance take it away Mike.
Thank you Ryan IMAX.
I am excited to report that we continued to make substantial financial progress ending the year with solid customer metrics and contributions made across our software products and services and managed services. This includes our second time reporting positive non-GAAP income in Q4, 2022 and ending the year with a much improved balance sheet and cash in excess of 100.
$80 million.
During my prepared remarks, I will discuss.
Our fiscal 2022 in Q4 year over year performance and Kpis are December 'twenty, 'twenty, two debt buyback and Q1 and fiscal 'twenty twenty-three guidance, highlighting the scalability of our revenue and business risks heading into fiscal 'twenty twenty-three focus on near term profitability and projected full year results.
Starting with full year 2022 performance revenue was a record $149.7 million up 30% year over year from $115.3 million in 'twenty 'twenty. One this growth was driven largely by software products and services, which increased $25.1 million or 42% to a.
A record $84.6 million in revenue and secondarily from managed services, which increased $9.4 million or 17% the.
The increase in software products and services was driven largely from the Q3 2021 acquisition of Panda logic, and 30% organic growth from legacy software product and services revenue led by growth in commercial media and entertainment.
On a pro forma basis fiscal year 2022 revenue increased slightly by 1% from 2021 pro forma revenue of $148.1 million.
Driving this pro forma variance was software products and services, which decreased $7.8 million or 8% offset by the 9.2 million dollar increase in managed services.
The pro forma decline in software products and services was driven by our hiring solutions, which decreased $13.8 million or 19% year over year offset by the increase in organic software products and services of $6.4 million or 30% are hiring solutions revenue declined on a pro forma basis due to a year over year.
Greece, a 38% from Amazon, our largest customer offset by revenue growth of over 78% from other hiring solutions customers apart from Amazon going through its well publicized post pandemic changes are hiring solutions customer growth has been a monumental 80% since we acquired panel object through December 2022 as I will.
<unk> later in our guidance, while we expect a strong jobs economy throughout 'twenty twenty-three, including continuing new and existing customer growth across our hiring solutions platform. We are projecting revenue from Amazon to be slightly down year over year as we settle into the post pandemic higher interest rate than inflationary economy throughout 'twenty twenty-three.
And 20 twenty-two Amazon represented approximately 25% of our consolidated revenue down from approximately 40% of our pro forma 2021 revenue.
We expect customer growth and strong net revenue retention to further reduce the revenue concentration in 2020 three.
As a percentage of total revenue software products and services represented approximately 56% of consolidated revenue in fiscal 2022 versus 62% in fiscal 2021 on a pro forma basis.
Full year non-GAAP gross profit reached $122.3 million as compared to $93.2 million in 'twenty, 'twenty, one improving $29.1 million or 31%.
This too was largely driven by the growth across our business, while overall non-GAAP gross margins improved to 81.7% in 2022 as compared with 80.8% in 2020, one driven in large part by the mix of revenue growth in 2020 two.
non-GAAP net loss was $15 $9 million as compared to non-GAAP net income of $6.8 million in 2021 a decline of $22.7 million driven by increased investments made in core operations, most notably additions of sales and engineering staff made in the first half of 2022 and to a lesser extent.
From corporate investments around new system launches and higher professional fees. This was to support our first year's Sarbanes Oxley compliance efforts as we exit emerging growth status in 2022.
Partially offsetting this was the year over year improvement in non-GAAP gross margin.
Overall non-GAAP net loss was also down when compared to pro forma 2021 non-GAAP net income of $18.5 million driven by the aforementioned declines in our hiring solutions revenue coupled with increased investments in our operations.
We opened 20 twenty-two with 560 full time employees ramped up in the first half of 2022 to over 700 in 'twenty and with cost cutting measures that began in the second half of 'twenty 'twenty. Two we are now at approximately 655 full time employees or approximately 9% lower versus our heightened mid 2022.
Now more specifically to Q4 2022 performance.
Revenue was $43.9 million down, 20% or $11.3 million from Q4 of 2021 driven largely by software products and services, which decreased 32% or $13 million driven by Amazon.
Setting this decline was other software products and services revenue, which collectively grew by $6.2 million or 60% year over year, driven by overall customer growth over 120% net retention, excluding Amazon and gross revenue retention in the high 90 percentiles.
Overall, our revenue pipeline and long term outlook remains strong.
Our partner driven channel strategy continues to deliver results with record new bookings of $20 million in Q4, 2022 an increase of 141% from Q4 2021 with.
With increased opportunities around our offerings within commercial enterprise and G. R. I knew regenerative the eye product applications around an L. P and hiring solutions expanded managed services to now include reduction as a service and accelerated cross selling opportunities across our platform. Our future pipeline is at an all time high particularly in G. R I, where we.
To immediately begin realizing significant growth in the near and long term.
In Q4, we reported solid Kpis results, new bookings were $20 million up 141% from Q4 of 'twenty 'twenty. One gross revenue retention continued to be in the high 90 percentile and any software customers were up 21% year over year.
And managed services advertising gross billings per active client increased to a record $823000 up 32% over Q4 of 'twenty 'twenty. One overall Q4, 2022 advertising revenue continued to outpace the prior year and exceeded industry growth in large part due to the performance nature of our advertising platform.
Q4, 2022 non-GAAP gross profit reached $37.2 million declining $11.7 million or 24% from Q4 of 2021 largely due to the decrease in our hiring solutions revenue.
Overall Q4, non-GAAP gross margins were 84.7% as compared with 88.6% in Q4 of 2021.
Software products and services non-GAAP gross margins benefited from the inclusion of our hiring solutions, which generate non-GAAP gross margins in excess of 90%.
As a result, the overall non-GAAP gross margin came down in Q4, 2022 as compared to Q4 2021.
We expect consolidated non-GAAP gross margins to continue to exceed 80% throughout fiscal 'twenty twenty-three with sequential improvement each quarter consistent with the seasonality of our business.
Q4, non-GAAP net income was $2.2 million as compared to $17.0 million in Q4 of 2021 driven largely by the decline in revenue from our hiring solutions, coupled with increased investments in sales and engineering personnel across our core operations in order to grow and scale, our AI where platform and business Q4.
<unk> 2022 corporate operations remained relatively flat year over year.
Turning to our balance sheet at December 31st 2022, we held cash and restricted cash of $185.3 million compared to $255.6 million at December 31st 2021.
The 70.3 million dollar decrease reflects net cash outflows from financing and investing activities of $74.0 million offset slightly by net cash inflow from operations of $3.7 million.
During Q4, 2022 we used $39 million to repurchase $60 million or 30% of our outstanding convertible debt generating a net gain of $21.0 million.
In addition, net cash outflows from financing and investing activities included $21.7 million towards acquisitions, including $14.4 million of cash towards panel on <unk> 2021 earn out $9.8 million and net share settlements of equity awards and $4.8 million in capital expenditures.
Net cash inflows from operating activities of $3.7 million consists of net positive changes in our working capital of $24.9 million, principally associated with the growth and timing of payments and our managed services largely offset by our $15.9 million non-GAAP net loss and cash interest and taxes paid in 2022.
Of the total $184.4 million in cash approximately $93.1 million of our reported cash is essentially held for payments to third parties from our managed services we.
We ended December 31, 2022, with 36.3 million shares outstanding and convertible debt of $141 million principle, 1.75% interest due November 2026.
Looking ahead to Q1, 'twenty twenty-three I want to point out one time cash in stock items.
As a reminder, in the second half of 2022 we negotiated a settlement on panels <unk> 2022 earn out of approximately $8 million in cash and 135000, a baritone stock payable in Q1 2023.
When aggregated the final consideration paid for the Panda logic acquisition was approximately $115 million in total or $35 million less than the target price of $150 million if.
If we average the last two years of revenue this comes to a price around 1.8 times revenue.
Turning to financial guidance for Q1, and fiscal 'twenty twenty-three fiscal 'twenty twenty-three is shaping to be a challenging year with the backdrop of a possible recession, given inflationary and interest rate pressures take.
Taking these macro factors into consideration, we approached our 'twenty twenty-three planning with a very conservative approach on revenue with heightened discipline around costs as we march towards profitability.
In February this year, we announced $12 million to $15 million of annualized cost savings initiatives, which included cutting back on certain operating expenses head count reductions and finally, the divestiture of our energy group, which we are tracking to finalize in the first half of 2020 three.
I'm happy to report that we've executed on approximately $7.5 million of annualized savings through today or approximately 50% of the high end of our stated range and expect to continue to update you on further progress when we announce Q1 earnings in May 'twenty twenty-three.
With that backdrop, we are guiding Q1 revenue to be between 29.5 and $30.5 million, representing an 11% decrease year over year at the midpoint.
Driving this decline as our high volume hiring solutions, including Amazon, who have returned back to non pandemic hiring trends in Q1, 'twenty twenty-three versus Q1 2022.
As a result, we expect our Q1 'twenty twenty-three hiring solutions revenue to be down as much as 50% year over year in Q1, 'twenty twenty-three returning back to more seasonal trends in Q2 and in the second half of 'twenty twenty-three offsetting this will be G. R I, which we expect to improve at or above, 100% and Q1 'twenty twenty-three versus Q.
120, twenty-two driven by new and existing customer growth.
Our managed services is expected to be fairly flat in Q1, 'twenty twenty-three versus 2022 with expected advertising revenue to remain comparable in the first half of 'twenty twenty-three versus 2022 given the current economic environment.
Risks to our Q1 revenue guidance include execution on new enterprise deliverables, namely across G. R I, which can be unpredictable and our concentration of Amazon, which usage of our hiring platform can vary.
And Q1 quarterly non-GAAP net loss to be between $8 5 million and $9.5 million, which is down by $3.8 million versus Q1, 2022 driven by the previously discussed year over year decline in our hiring solutions revenue.
As a reminder, Q1 is our seasonally lowest performing quarter as the majority of our costs are fixed and payroll driven.
For full year 2023 we expect revenue to be between $158.0 million and $168.0 million, representing a year over year increase of 9% at the midpoint.
As a reminder, and given current economic outlook, we are forecasting our revenue conservatively in 'twenty twenty-three, including a year over year decline of approximately 10% from Amazon certain onetime software sales revenues in 2022 that are not recurring in 2023, and the disposition of our energy revenue and group in the first half of 'twenty twenty-three.
If we exclude the impact of these are revenue guidance would be over 20% improvement in 'twenty twenty-three versus 2022 rich.
Risks to our annual revenue guidance include the macro economy, and the result of continued inflation and higher interest rates on our customers' execution on new enterprise deliverables, namely across G. R. I and continued customer growth and retention metrics from our software products and services.
We expect full year non-GAAP net loss to improve substantially in 2023 and be between $7.0 million and $1.0 million as we continue to progress towards profitability.
At the midpoint this represents a 75% improvement when compared to fiscal 2022 non-GAAP net loss.
Before I close we will be speaking at the following investor conferences. The JMP Securities Technology Conference in San Francisco on March 7th and the 35th annual Roth Conference in Dana point on March 13th and 14th that concludes my prepared remarks.
Operator, we would like to now open up the call for questions.
We will now begin the question and answer session.
Jim You May Press Star then one on your Touchtone.
If you are using a speakerphone. Please pick up your handset before passing to keep you awake child from the question queue. Please press Star then.
Our first question from Darren <unk>.
Ross please.
Please go ahead.
Hey, guys. Thanks for taking my questions.
Two if I may 1st you guys sound pretty enthused.
Enthused about kind of your outlook for G. R. I I'm, just kind of curious could you speak to that.
Enthusiasm and maybe touch on I know you guys launched the.
The tracker product for forensics.
In the fourth quarter, and just how that kind of plays into that and my second question is.
Just given these HR product you guys have.
It kind of being a defensive.
The mechanism and then more of a lower growth environment, there's hiring going on these kind of speak to.
Trends in that business.
Outside of Amazon and some of your core customers. Thanks.
Great. Thank you.
G. R. I you know we've put out a few releases and we updated you in the past that.
Our strength in growth in local law enforcement.
At the city level, and the county level and even at the state level has continued to accelerate in pace. So you know today. We are we've had you know we have hundreds of customers were signing new customers almost daily.
But however, historically the product that we've been taking to market.
Have been lower ticket item sales you know we love. The fact that AI will provide a very extensible platform Q help us onboard customers.
Who have limited budget to start investing in and improving their operations using AI.
But on the flip side, we've really we're looking for opportunities to increase we have this great relationship we have great product market fit and a good brand in the space and trackers one of the solutions that we're excited about to take to market, where we do expect larger and higher ticket item opportunities.
So in addition to that some of the longer term deals that would be we're working on right in state and local law enforcement.
Specifically have just started to come to close as you know the space.
It takes a long time.
We were we did disclosed earlier in the.
Repair prepared remarks about the California Highway patrol and statewide.
Deal with them as it relates to our sled based product.
So we are we're very optimistic.
We've been able to continue to grow the pipeline and now we're seeing the results of that while maintaining pretty good cost discipline in the area, but again I think tracker.
In discussions with most of our customers about this new solution, which is proprietary.
With groups like Bart up North and the department of Justice and a multitude of different local law enforcement agencies across the country.
On the as it relates to HR talent acquisition solutions Pandal logic.
As we stated earlier, they've had significant growth quarter over quarter.
Sorry year over year against the fourth quarter of over 60% now for non Amazon business. So that we have great product market fit there.
The revenues and the new customer growth for non Amazon business continues to accelerate.
And we're very bullish on that market, we think the tight labor market is going to keep to that side of the business strong and healthy.
And we're going to continue to invest in that area and we do feel that we have very clear product market fit.
And competitive differentiation against a few other smaller competitors and again, the saturation of programmatic or another way of saying it the adoption of programmatic into the HR talent acquisition space is still incredibly low. So we're very early in the curve and it's a big market as we touched on Jeff.
Just the programmatic AD advertising spend for job acquisition in the U S is over 85 billion per year. So it's a good market opportunity for us that we're going to continue to invest heavily in.
Thanks Ryan.
Thanks, Dan.
The next question is from <unk> of Bank of America. Please go ahead.
Yeah, Hey, guys. Thanks for taking the questions actually if I don't wanted to follow up on that.
And you're guiding to some pretty pretty good growth there, but also in the prepared remarks, you talked a little bit about deliverable risk I was wondering if you could just describe what that deliverable risk is for the <unk> segment.
You know there are some areas where we are.
Let's say some of the agencies.
Are looking or making decisions on whether we can deploy AI where in a commercial cloud instance.
As you May recall <unk> was built to be platform agnostic.
From either on prem or Azure, or Google cloud or AWS.
And despite the fact that we are fully deployed on azure Gov or fed.
Lot of different agencies are just frankly trying to figure out where against the certain or ever changing security and protocols that they're under you know it you know can they deploy and start running AI.
We're in the respective flood applications and in E.
A public cloud versus the government cloud environment.
So it's more of not a technical limitation, but at times, it's just a a positioning our security changes that that really every municipality is trying to to grapple with.
In terms of tracker tracker is a new product. So we have tried and true product as it relates to the sled market.
For the product with contact and redact and illuminate trackers new product. We're just now starting to sell it into the marketplace. You know we I think we have been conservative in our forecasting as it relates to the contribution of tracker for 2023, but again, they're in because it is a brand new product. We just wanted to be a little bit conservative and.
I'll take that.
Deployment risk greater than zero because of the nature of the product.
Got it no Ryan that's Super helpful and just a follow up here I'm going to ask you the.
The generative AI question with all the hype surrounding it.
As.
A press release around it just curious if you could talk a little about a little bit about if if this generative AI has this has affected your pipeline positive near negatively and maybe more importantly is has the maybe open the door to conversations into end markets, where you haven't had much penetration before thanks guys.
Thank you.
Well, let me start by saying that I mean, our team thankfully.
You know again, we are not just a very quick and nimble company to react to market changes and opportunities, but we have had pretty good foresight on certain areas and key technology trends, we started working with large.
Large language models, specifically earlier versions of G. P T I'm going back to 2019.
Our conversational AI framework and technology stack.
In our HR solutions business, formerly known as weight and Wendy.
Both the combination of of domain specific large language models I think of them as proprietary chat Gpt's. If you will in conjunction are orchestrated with public large language models like chat GBT. So first of all so first this is not new to us.
Something that we've been seeing and actually building and deploying now for four years.
The second thing that we're thrilled about it.
We are we are we don't want don't want to underestimate or understate. The importance of these large language models as they are coming to market, but for us as we've designed and as Chad and team of design AI, we're going back and rears. This really is just and again I don't want to minimize it but just another class of AI models that we can readily deploy and immediately activate.
Through a eyewear and that's what you've seen so so when when we announced just a couple of weeks ago.
The formally kind of consolidating all of the things we're doing in generative AI, including synthetic boy under what we're calling baryton generative AI those were real production use cases that we showed them. So that we are both active and generating revenue as it relates to our generative AI deployment on a eyewear and you're right. It has absolutely open up.
A lot more broader discussions not just potentially with new customers, which is absolutely the case, but with existing customers.
Today in our discussions with large media groups like CBS news and others is again add kind of their trusted them AI Wilderness guide, which all kind of conclude in talking about that at the end of the remarks today, but.
But you know we are already working with them on Ideating and figure out how we can immediately deploy and take advantage of these generated solution against the content that we already have.
One of the big benefits. We have is we're sitting on Petabytes and Petabytes of our client data as you know for audio video content and in other forms of structured data. So our ability to immediately activate and take advantage of the new or any new type of AI models, including these large language models is we're prepared to act efficiently.
<unk> cost effectively and deliver scalable production based use cases and solutions in weeks instead of frankly coming out with a press release and planning for the future.
The next question is from Patrick Wall Ravens of JMP Securities. Please go ahead.
Hi, This is Aaron Kimpton on for Pat first off can you guys elaborate on the rationale for divesting the energy business you know what were your learnings there and what does it show investors about the company's current priority.
Yes.
The energy market and and really the product market fit we had.
What was it.
It was appealing and.
We have some early indications that we had decent product market fit for us really trying to to build and deploy solutions to optimize the energy grid and to help orchestrate the the the input and distribution of clean energy Green Angelilli energy based solutions in renewables onto legacy grid.
That being said it was an expensive initiative that was not performing up to the growth in scale as other areas of the business and so as we were looking at areas starting really the middle of last year of areas, where we could.
Start to save money, but be able to repurpose that focus and those resources onto other areas specifically as we mentioned.
I mentioned, such as generative AI and synthetic voice and other areas of investment. We just felt it was a better appropriation of resources and focus not just at the coder line level, but at the management level, but if we had to make a tough decision energy with its Nathan positioning so far for us as the company was one one of the areas.
On the call on the chopping block that we felt was that just shouldn't be part of baritone proper we're not closing the door to be clear on the energy opportunity, but but those will most likely be through strategic partners.
Such as Deloitte and others.
As opportunities arise as compared to baritone direct I'm going after there and building proprietary applications and services for that industry.
Very helpful. And then maybe just a follow up for Mike what are the key points you would make to investors on the balance sheet. After the repurchase of the convertible debt at the end of November would you be open to doing a second repurchase kind of like bandwidth that earlier this week.
Yeah, I mean, I think we're always going to be opportunistic in terms of use of our cash.
And I think taking down a third of our debt was fiscally responsible and tied into.
Our confidence in our outlook in terms of the operations.
As far as going forward again, if opportunities arise and it makes sense, we're certainly open to doing more but at the moment, we're not looking into it.
Thank you.
Okay and if you have a question. Please press Star then one the next question is for Nick Maniaci, Craig Hallum. Please go ahead.
Hi, This is Nick on for Chad Bennett, Thanks for taking our questions. So if you can remind us on the non Amazon pathologic portion of the business just just how the pricing and your visibility into revenues might differ from the Amazon relationship and then maybe on that same subject what are some of the verticals that you're looking to this year to drive growth.
Ex Amazon.
Mike you want to take the.
Revenue allocation distribution of Amazon versus non Amazon.
Yeah, I mean, it's the the pricing in terms of the model isn't highly differentiated.
And it may be differentiated by.
You know the target in terms of the candidate and where that candidate best gets filled but as far as the overall model it isn't necessarily differentiate between Amazon and non Amazon as far as targeted markets. I mean, there is yeah, we're seeing a lot within health care for example, shortages in nursing and things.
Along those lines transportation.
Other markets that really are non technology, driven that are continue to expand them I think a lot of.
What youre reading in the news in terms of recession, and layoffs has been principally driven in the technology market.
Whereas if you look at retail health care transportation, and other markets and Theyre continuing to grow.
In addition, we're also going to be cross selling and we are actively cross selling the product and the government which as.
You know the largest hiring entity in the U S.
Yeah.
Into the phase of contracting.
But hiring solutions with and into state and local law enforcement, which we're very excited about.
In addition, the other area. So again, the the pullback of Amazon as we articulated.
We're confident in the offsetting that again with the growth of the non Amazon enterprise business for HR based solutions and then an additional of our refocus.
On the verticals that we do have strong product market fit and strong traction already have very good and solid Sam and Tam.
So we have already addressed HR.
And the talent and the talent acquisition budget over 85 billion in the U S alone is a great growth opportunity for our enterprise businesses in our HR talent acquisition solutions.
And then also just want you know one segment of the opportunity of meeting entertainment is the localization of content.
As we're going and can advancing in terms of the globalization of content of media both exporting U S based content media assets, but also importing foreign language content. The localization business is expected to increase this is already a 54 billion dollar a year industry just the localization of <unk>.
And obviously, we're right in the middle of it with with with them very very tightened specific product market fit solutions to help accelerate that.
And so those are two obviously median entertainment and we do continue to see as a growing opportunity for us, including our licensing business, which we touched on earlier today and we are we remain very bullish on our enterprise business for HR talent solutions, considering the tight labor market.
And the clear ROI benefits that our programmatic solution brings to bear on that opportunity.
Got it and then if you could just touch on your expanded relationship with Deloitte and I know, it's still pretty early but any indications of traction thus far with Deloitte and where we might see that show up in our results.
Deloitte, it's still the most active in our Gi side focused primarily on different areas of fed mostly fed.
Some.
On the fed D O D side.
We are in discussions on expanding utilization of AI, where another solutions as it relates to T.
TMT and areas for potential localization synthetic voice and other areas.
But again, we're you know we're I would say, we're not reliant we do have a very growing expanding channel opportunity working with dozens.
If not like over 50 different channel partners today, So it's definitely not limited to Deloitte, but we do expect Deloitte to continue to be a growing partner flowers for the foreseeable future.
Great. Thanks for taking it.
Maybe just to echo that more recently, we've actually expanded you know more partnerships with both Amazon and Azure.
So.
Definitely this partner driven model is highly successful for us.
Yes.
Again, if you have a question. Please press Star then one.
There are no additional questions at this time. This concludes our question and answer session I would like to turn the conference back to Ryan Gilbert for closing remarks.
Thank you operator.
As I enter my third month in this new capacity as CEO I'm excited about and very confident in <unk> future.
Over the past several years, we have built their count and a eyewear to really set the class or enterprise AI software and solutions, our strong and diverse customer base, our consistently high gross margins, our elite customer retention rate and most importantly, our dynamic and talented staff.
Should provide our stakeholders with strong optimism for our specific future.
As we all know a eyewear and it can be very cluttered and confusing for many and then obviously a lot has gone very noisy recently with the generative AI, but we truly believe that bear county is the trusted AI Wilderness guide for both new and existing enterprise customers and again.
We can we have confidence in that because again of our high retention rates.
And obviously against non Amazon business and actual over 100 for 'twenty 100 per ton of 120% in net retention growth revenues.
So again, we're going to finish the wrap up by reiterating our focus for 2023, which is all about operational excellence and that it means that it's getting continuing to get our house in order inclusive of becoming more efficient and cutting cost a renewed focus on the successful market that we're in.
With strong product market fit such as HR talent acquisitions, TMT and G. R. I.
And it and it continued and passionate in.
Technology innovation and technology driven company.
That we will always be at the forefront of bringing the latest and most reliable and most scalable AI based solutions to the market.
Thank you for your attention today, and I look forward to communicating with you in the future.
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