Q4 2024 Veritone Inc Earnings Call
Thank-you for watching!
Speaker Change: Good day and welcome to the Veritone, Inc. Fourth Quarter 2024 Financial Results Conference Call.
Speaker Change: Please note that certain information discussed on the call today, including certain answers to your questions will include forward looking statements.
Speaker Change: This includes without limitation statements about our business strategy and future financial and operating performance piece.
Speaker Change: These forward looking statements are subject to risks uncertainties and assumptions that may cause the actual results to differ materially from those statements.
Speaker Change: Certain of these risks and assumptions are discussed in <unk> SEC filings, including its annual report on Form 10-K.
Speaker Change: These forward looking statements are based on assumptions as of today March 13th 2025, and Barrington undertakes no obligation to revise or update them.
Speaker Change: During this call the actual and forecasted financial measures, we will be discussing non-GAAP measures reconciliations of these measures to the corresponding GAAP measures are included in the press release, we issued today.
Speaker Change: Finally, I would like to remind everyone that the call today is being recorded and will be made available for replay via a link on the Investor Relations section of Ericsson's website, Www dot bearish on Dot com.
Joe: Now I would like to turn the call over to our chairman and Chief Executive Officer, Joe <unk>.
Speaker Change: Thank you Kate and thank you everyone for joining us we're excited to speak with you today and provide an update on our fourth quarter and full year 2024 operations financial performance and strategic progress.
Speaker Change: We are pleased to report our Q4 2024 and full year fiscal 'twenty 'twenty four financial results, which reflect solid revenue performance and significant strides in our strategic initiatives.
Speaker Change: Throughout 2024, we've made decisive moves to optimize our operating structure and strengthened our balance sheet, allowing us to focus and prioritize investments to drive growth and differentiation in our core AI software and services offerings.
This disciplined approach has laid a strong foundation and we're already seeing the benefits in the early part of 2025.
Speaker Change: Building on the strong foundation and fueled by Megatrends, such as the momentum in enterprise wide AI adoption, the exponential growth rate of unstructured data as well as our growing robust sales pipeline, we're very confident in our ability to accelerate the baritone strategy.
Speaker Change: Today baritone is positioned to become the leading enterprise AI software applications and services provider across the commercial and public sectors and create long term value for our shareholders.
Mike's a metro will cover our quarterly and full year performance and financials in more detail later, but I wanted to start by providing a broader company updates and perspective on our current market environment and the opportunity that lies ahead.
Speaker Change: Over the last 10 years, we've grown burtone into a full service enterprise AI company, we are a market leader in ingesting and managing unstructured data indexing that data and harnessing the power of our AI platform to transform data into near real time, actionable analytics, and intelligent workflows, which provide support to.
Speaker Change: <unk> I bring clarity to the chaos of this data and ultimately derive increasing yields and revenue from their datasets.
Just in 'twenty 'twenty four alone we cognitively processed over 10 Petabytes of data, which includes over 58 million hours of video and audio.
Speaker Change: Against this incredible data scale, we utilized over 862 unique AI models through a eyewear, which include both proprietary baritone models as well as models from leading third parties.
This is proven AI at scale and in full production.
This performance all starts with our technology platform AI, where the first AI operating system.
Speaker Change: Whereas the secure platform agnostic open system that leverages and orchestrates hundreds of cognitive and generative AI models, so that unstructured data, including audio and video can be injected indexed processed transformed correlated and analyzed.
On top of this dynamic platform. We have developed purpose built an award winning AI applications to meet the specific needs of the public and commercial sectors.
And in 2024, we launched our AI, we're based consulting proserv arm and I S. G assisting both new and existing customers to develop transformative AI solutions for organizations all backgrounds through our AI adoption framework phases of SaaS realize any ball.
Speaker Change: I'm proud to say that currently we deploy in license our end to end platform applications and solutions to over 3200 customers across the public and commercial sectors.
Speaker Change: On the commercial side, our customers include Creative Arts Agency CBS News E. S. P. N E N C double a the Australian open Pepsico Fedex and state bar.
Speaker Change: In the public sector, we actively serviced the department of Justice The Department of defense and hundreds of state and local law enforcement agencies nationwide, including Anaheim Police Department, Pittsburgh, PD Nassau County Sheriff's Department, The California Highway patrol and the Beverly Hills Police Department.
Speaker Change: In a rapidly changing AI landscape, we entered 2025 from a position of strength set to unlock shareholder value and reinforce our market leadership.
One of the most significant moves we made in 2024 was the sale or divestiture of baritone one our legacy advertising agency, which accomplished several critical objectives for the company the.
Speaker Change: The divestiture focused our operations and concentrated our resources on what we believe is our greatest business opportunity delivering the most advanced AI solutions to our customers and partners at scale.
Secondly, the transaction strengthen our financial foundation substantially bolstering our balance sheet enabled us to greatly reduce our debt servicing cash burden.
Speaker Change: As a result, we are now firmly position as a pure play AI enterprise software for building on top of our existing scale again, which boasts over 3000 customers after the divestiture.
Speaker Change: Baritone has emerge well positioned relative to customer concentration risk with no single customer accounting for more than 5% of our revenues, while still maintaining gross revenue retention well about the 19th percentile.
Speaker Change: During the fourth quarter of 2024, we announced several transformative wins and major product advancements not the least of which included the expansion of items data integration to enhance public safety and law enforcement efficiency product and listing expansion within the AWS marketplace and a major multi year renewal and expansion with CBS news.
Speaker Change: On the product and solution front, we recently launched baritone data refinery or BD are built any hour that is already in full production and working with many of the largest hyperscale ours and generative AI model companies, helping them train and fine tune their respective models with our proprietary data aggregation management annotation indexing and <unk>.
Distribution capabilities.
The trends, we are seeing in the market make our offerings more critical than ever as AI promises a complete transformation of data workflows from pipeline construction to unlocking the value of unstructured information.
Speaker Change: According to Gartner unstructured data represents an estimated 80% to 90% of all new enterprise data created and is growing three times faster than structured data.
Speaker Change: The global and structured data solution market size is over $30 billion estimated in 2024 and is expected to expand to over $90 billion by 2033.
Speaker Change: The largest obstacles to AI adoption are the high cost and complexities of harnessing AI ready data and deploying enterprise AI solutions.
Speaker Change: Storing and backing up unstructured data exceeds 30% of the I T budgets of more than 50% of organizations surveyed in in August 2024 D. I S study.
Speaker Change: However, such enterprises, many of whom are already our customers lack the proper tools to collect organize access and analyze a rapidly growing variety velocity and volume of data in real time.
Speaker Change: Furthermore, legacy system and manual processes cannot keep up with increasing demands for data driven decision, making and complaints and integrating multiple cognitive engines is expensive and slow.
Speaker Change: Our open AI ecosystem intelligently utilizes multiple best of breed cognitive and generative AI models within a single cloud based solution to process analyze and organize data and volumes that can far exceed human cognitive capabilities.
Speaker Change: Moreover, our platform as model ignostic position to adapt to the evolving AI model arms race that is currently underway.
Speaker Change: As we close out fiscal year 2024, I'm proud of our team's unwavering commitment to advancing our strategic business initiatives.
These efforts have been critical in purposely repositioning baritone to harness and unlock the power of our unique capabilities supported by a hour by.
Speaker Change: By strategically aligning our investments and resources towards delivering advanced AI solutions in our highest growth verticals. We are optimally positioned to leverage the core strengths of baritones, our platform applications and solutions to seize the expanding opportunities in the Io market.
Speaker Change: Now, let me walk you through our performance in our core market verticals commercial and public sectors.
Speaker Change: In the commercial sector, the explosive growth and creation of digital media, especially audio and video is increasing at an unprecedented rate driving up the audience demand for on demand localized diverse content anytime anywhere.
Speaker Change: We are witnessing these trends, resulting in fragmented consumption across platforms and devices with increased expense.
Media organizations are grappling with macroeconomic pressures industry mergers consolidation remote work and leaner teams, while trying to keep revenue streams intact.
Speaker Change: As the industry's leading audio and video data experts, we have broadcast media sports and entertainment professionals leverage AI to transform content workflows extend media assets and unlock value across functions for ongoing profit deeper insights and wider reach.
Speaker Change: In short we are not only helping organize our customers' data, but we're also helping them extend and monetize their data generating both significant efficiencies and new revenue opportunities.
Speaker Change: During the quarter, we were proud to announce the renewal of our exclusive global licensing arrangement with CBS News CBS news will continue to utilize baritones our platform to enhance access to its extensive licensed content across numerous distribution channels. Additionally, we have expanded this partnership to also include their local market properties and station.
Speaker Change: And those respective data assets.
Speaker Change: We believe the multiyear renewal is a testament to the value we deliver to the commercial marketplace.
In addition to the CBS news extension and expansion in media and entertainment, we executed over 42, new deals in the quarter.
Speaker Change: Other notable deals included agreements with ESPN that Cumulus vital voices the game show Network Amy Networks Media works, New Zealand, Sony Pictures Alpha media and Charlie Rose showcasing our continued SaaS growth and a critical nature and stickiness of our AI solutions.
Speaker Change: Another major announcement for baritone in the fourth quarter was the launch of our Burtone data refinery platform in service a groundbreaking offering designed to help enterprises transform vast amounts of unstructured data into high quality AI ready assets <unk>.
Speaker Change: Leveraging AI, where this new solution empowers organization to transform and manage their video audio and text data for training sophisticated models and even optimize revenue opportunities through data monetization.
Speaker Change: The AI sectors explosive growth has led to an insatiable appetite and need for high quality training data, but there is a significant shortage of accessible clean unstructured data, including audio and video <unk>.
Sarah Jones: Sarah Jones data refinery is solving this data gaps and we are in a leading position in terms of technical expertise experience and scale to quickly grow this new business line.
Speaker Change: I want to reiterate that BTR is in full production and we are already booking material contracts and revenue working with the largest hyperscale Earth model developers and data IP owners.
Speaker Change: BTR will be a major contributor to delivering against our revenue growth in 2025 and beyond.
I'll now shift to discuss our products and solutions for the HR and job recruiting industries or baritone higher which we are now selling into both the commercial and public sectors.
Speaker Change: We successfully completed a transformative year streamlining operations on a global scale and integrating both pandas logic and bromby into a common baritone higher structure at an accelerated pace.
Speaker Change: This integration marked a significant milestone leading to the launch of a unified brand and the expansion of our programmatic advertising business beyond North America.
Speaker Change: Despite broader macroeconomic challenges in the labor and hiring market, our software and advertising businesses remained stable from the third to the fourth quarter How's.
Speaker Change: However, we continue to see substantial growth potential, particularly in the staffing in our P O segment internationally.
Speaker Change: Many steam businesses have extended their initial programmatic advertising pilot campaigns into long term commitments demonstrating the strength on our performance advertising solutions.
Speaker Change: During the quarter, we successfully launched our programmatic advertising solution in both the U K and Australia with plans to enter the German market in the coming months.
Speaker Change: Our expertise in this space was further reinforced at HR Tech Europe, where we presented a compelling case study on our success in partnership with Ron start a global leader in HR services.
Additionally, our media buying services expanded its reach beyond North America to global markets, securing significant deals, including a strategic partnership with CBRE one of the largest real estate companies in the world.
Speaker Change: Meanwhile, our commercial partnership with Linkedin continues to gain momentum exceeding expectations and broadening the scope of our client offerings.
On the software side, we are seeing growing opportunities for expansion through key commercial partnerships, we've strengthen our collaboration with workday the global leader in human capital software, achieving the highest sheer level of partnership platinum within their partnership program.
<unk>, we launched a major integration with bullhorn for Salesforce enhancing our ability to work alongside the leading software provider in the staffing industry.
Looking ahead baritone higher is well positioned for continued growth. The progress we achieved in Q4 underscores our ability to execute strategically and adapt to evolving market dynamics.
Speaker Change: With a strong foundation in place we are confident in our trajectory for the coming year.
Speaker Change: Switching to our public sector vertical.
Unlike commercial public sector requires an elevated level of scrutiny as it relates to software security and data protection.
Our proven track record of success industry certifications and deep compliance expertise and standards makes us well positioned to serve regulated industries.
Speaker Change: This past week the U S Defense Secretary, Pete Hegseth issued a clear and direct EDI to streamline and accelerate procurement of mission critical commercial software for D. O D and federal use we expect baritone to be a direct beneficiary of the software focused approach. We believe 2025 will be a breakout year for our public sector business.
Speaker Change: And we remain very bullish on the sectors opportunities and growth prospects.
Speaker Change: The baritone intelligent digital evidence management system or items applications have been deployed in AWS and Azure Gov clouds in fed ramp and also currently being installed by D. O D customers in their private tenants on AWS and Azure.
Idem is unique and differentiated and provide significant value and immediate ROI to end users in state and local law enforcement agencies U S higher education institutions U S Federal sieve and defense agencies and international government agencies.
Speaker Change: Launched in 2024 items has exceeded our expectations in terms of its demand and the reception we have received from the market.
Speaker Change: Items strengthens baritones position in the digital evidence management market and the leading system for aggregating analyzing and sharing investigation materials with advanced AI powered video and audio analytics specifically.
Speaker Change: Specifically, the investigative workflow using baritone items allows detectives and investigators to significantly speed up the investigation process and dramatically increase case clearance rates. This allows burtone public sector customers to do more in less time with better outcomes.
Speaker Change: And local law enforcement, we now service hundreds of customers using items for investigation workflows and or public records request PRA freedom of information request Voya and reduction workflows.
Speaker Change: Our users include detectives investigators and crime analysts, we continue to add new technical partners integration and new sales opportunities and are adding opportunities and partnerships weekly.
Speaker Change: On the U S. Federal side, we are currently under contract with both bad sieve and Fed D. O D. Intel agencies and are very active with several material trials and software implementations currently underway.
Speaker Change: We also recently announced that Burtone has achieved award will status on the department of Defense trade wind solutions marketplace for three of our AI solutions. This accelerates access to investigation tools with baritones illuminate redact and track applications added to the trade winds marketplace.
Speaker Change: As a reminder, the trade wind solutions marketplace is the premier offering a trade wins the department of Defense's suite of tools and services designed to accelerate the procurement and adoption of AI and machine learning data and analytics capabilities from organizations such as baritone.
Speaker Change: The addition of trade wind solutions augments, our previously disclosed fed ramp authorization sole source BPA with a D O J T N E. B P. A with a C D E O and our AI, where applications and professional service listings on GSA, we are contract ready to service the federal government.
Speaker Change: Internationally, we continue to add new items opportunities and are working with large local and national law enforcement agencies, who are active in trials and application training or in the final stages of the procurement process.
Speaker Change: Our public sector solutions are gaining traction both domestically and globally with new customer acquisitions, and a growing pipeline that is now exceeding $110 million.
Speaker Change: In the fourth quarter, we added 18, new public sector customers to our portfolio our market, leading AI based items applications built on a eyewear and professional services are core to our growth opportunity and our future success across all four of the public sector segments. We serve sled fed says fed D O D Intel and international markets.
Speaker Change: Before I close I want to highlight an announcement we made earlier today. This afternoon, we announced the appointment of Francisco J morality to our board of directors and in conjunction with this the resignation of Chad Steel Berg from our board Chad will be pursuing other business and philanthropic endeavors, we want to thank Chad for his immeasurable contributions to the company.
Speaker Change: <unk> since its founding in inception.
Speaker Change: Mr. Morale ice has been appointed to fill this vacancy and will serve as a strong strategic voice on Baritones Board.
Speaker Change: Francisco was the co founder and executive Chairman of 511 tactical and its former CEO found.
Founded in 2003 511 tactical is widely recognized as the global market leader in tactical apparel footwear and gear for law enforcement military and first responders, serving thousands of agencies and institutions worldwide.
Speaker Change: We look forward to welcoming Francisco and leveraging his deep relationships and network.
Speaker Change: We enter 2025 with strong momentum and look forward to demonstrating our ability to capitalize on the opportunity at hand.
Speaker Change: I'd now like to turn it over to Mike Symmetra, who will provide more details on our quarterly performance and future guidance Mike.
Mike Symmetra: Thank you Brian.
Mike Symmetra: I am excited to report that we continued to make substantial financial progress ending the year with revenue in line with expectations and fallen customer metrics and contributions made across our software products and services and managed services.
Mike Symmetra: As we exit 2024, a year, where we streamline our operations, including divesting our media agency in Q4 and exiting historical revenue concentration dependencies, He made improvements and progress in our operations to refocus back to our near and long term growth targets heading into fiscal 2025.
During my prepared remarks, I will discuss fiscal.
Mike Symmetra: Fiscal 2024 in Q4 year over year performance, and Kpis, which exclude the results of our media agency, which are presented as discontinued operations in the corresponding historical financial periods.
Mike Symmetra: Balance sheet and liquidity position pre and post divestiture, including our November 2020 for ATM in January 2025 capital raise.
Mike Symmetra: And Q1 in fiscal 2025 guidance, highlighting the scalability of our revenue in business, including risks heading into fiscal 2025 focus on improved profitability and projected full year results.
Mike Symmetra: Starting with full year 2020 for performance.
Mike Symmetra: Revenue was $92 6 million in line with our guidance and down 7% year over year from $100 million in 2023.
Mike Symmetra: Driving this with software products and services, which decreased $7 4 million or 10, 8% or managed service revenue of $31 6 million was flat year over year.
Mike Symmetra: The software products and service revenue decline was largely attributed to commercial enterprise, which declined $7 million year over year, largely due to the expected declines in consumption based customers over the same period, including Amazon and certain one time software revenue in 2023 of approximately $2 2 million, which did not recur in two <unk>.
Mike Symmetra: 24 <unk>.
Mike Symmetra: All set by the addition of broad theme in late Q2 2023.
Mike Symmetra: As I will discuss in more detail, we remain bullish on our future and we are on pace for fiscal 2025 to be a breakout year across our commercial enterprise and public sector with the public sector on track to grow year over year anywhere from 100% to 150% driven by items applications.
Mike Symmetra: Full year GAAP gross profit reached $62 7 million as compared to $70 3 million in 2023, a decline of $7 6 million largely driven by the decline in revenue with GAAP gross margin of 67, 6% as compared to 74% in 2023.
Mike Symmetra: Line of 280 basis points that was principally driven by the increase in noncash depreciation and amortization expense largely associated with the June 2023 broad beam acquisition.
Mike Symmetra: Excluding noncash depreciation and amortization expense 2024, non-GAAP gross margin was 71, 6% as compared to 72, 3% in 2023 are.
Mike Symmetra: A decline of 70 basis points largely due to the decline in higher margin revenue from consumption based customers.
Mike Symmetra: Loss from operations was $86 8 million as compared to $99 6 million, an improvement of $12 8 million or 12, 9% from 2023 loss from operations.
Mike Symmetra: This was primarily driven by improvements made in our operating expense structure over the past 24 months, coupled with declines in acquisition related expenses of $5 million severance and executive transition cost of 1.8 million pets.
Mike Symmetra: Purchase consideration of $1 8 million and noncash stock based compensation of $2 6 million.
Mike Symmetra: Offsetting these were a lower non-GAAP gross profit from the decline in revenue over the same period and higher depreciation and amortization expense of $3 3 million as a result of the June 2023 broad beam acquisition.
Mike Symmetra: non-GAAP net loss from continuing operations of $48 8 million improved $5 4 million as compared to 2024, driven by the year over year decline in non-GAAP gross margin offset by cost reductions enacted in the first half of 2024.
Mike Symmetra: In 2024, I'm happy to report, we did not have a single customer that represented 5% or more of our consolidated revenue during the year demonstrating our successful efforts to diversify our revenue base.
Mike Symmetra: Next I would like to discuss our Q4 2020 for performance.
Mike Symmetra: Q4 revenue from continuing operations was $22 4 million down $4 7 million from Q4 2023, principally due to a decline in software products and services driven largely by commercial enterprise, which declined $4 2 million year over year due to the expected decrease in consumption based customers over the same period.
Mike Symmetra: Including Amazon.
Included in Q4, 2024 was approximately zero point $7 million in revenue from the launch of baritone data refinery or PDR, which today has a near term sales pipeline of over $5 million.
Mike Symmetra: Overall managed services, which excludes the divestiture of our legacy media agency was relatively flat year over year.
Mike Symmetra: Across our software products and services, our key performance metrics for Q4 2024 show.
Mike Symmetra: A R R.
Mike Symmetra: The $8 8 million down year over year, as we expected declines in consumption based revenue from customers across our commercial enterprise sector, including Amazon over the trailing 12 months.
Mike Symmetra: Overall, our recurring subscription based SaaS customers remained relatively flat year over year.
As of Q4 2024, 81% of our RR was from subscription based customers versus consumption based customers.
Mike Symmetra: Up from 61, 3% at Q4, 2023, and 76% sequentially from Q3 2024.
Mike Symmetra: Total new bookings of $13 2 million.
Down $4 3 million year over year, primarily due to the timing of a renewal with one of our larger commercial enterprise customers, who renewed on a multiyear deal in Q3 2024 versus a one year extension in Q4 2023.
Mike Symmetra: Gross revenue retention continued to be above the 19th percentile and.
In total software products and service customers of 3237, which was down 6% year over year predominantly from our commercial sector, which includes a lower consumption based customers across baritone higher and the rolling impact of Sunsetting legacy Careerbuilder customers post the June 2023 acquisition of broad beam.
Mike Symmetra: And smaller customers as we focus on larger opportunities.
Offset by an increase across public sector largely from growth in public safety customers.
Q4, GAAP gross profit was $15 3 million compared to $19 9 million in Q4 2023.
Mike Symmetra: A decline of $4 6 million largely driven by the decline in revenue with GAAP gross margin of 68, 1% as compared to 73, 5% in Q4 2023 and.
Mike Symmetra: A decline of 540 basis points, principally driven by the decline in consumption based revenue, which generated over 90% gross margins.
Mike Symmetra: Excluding noncash depreciation and amortization 2024, non-GAAP gross margin was 70.2% as compared to 76, 5% in Q4 2023.
Mike Symmetra: A decline of 630 basis points, largely driven due to the decline in higher margin revenue from consumption based customers, coupled with a higher mix of lower margin revenue.
Mike Symmetra: Note that in Q1 2024 with the initial launch of Edr, where gross margins were approximately 50%.
Mike Symmetra: We expect that as the BTR product matures margins will initially be similar to Q4, it should improve throughout 2025.
Mike Symmetra: In addition, certain larger content licensing renewables in Q4 2024 drove lower margins in the early phases of tiered volume pricing, but are expected to improve throughout 2025 as the volume of revenue increases overtime.
Mike Symmetra: Q4 loss from operations of $19 7 million was flat year over year.
Primarily driven by improvements made in our operating structure over the last 24 months and lower purchase consideration expense as a result of a $1.4 million gain recorded on the change in fair value of the baritone one earn out offset by lower non-GAAP gross profit from the decline in revenue over the same period.
Mike Symmetra: Higher noncash depreciation and amortization expense of $1 2 million.
Mike Symmetra: non-GAAP net loss from continuing operations was $9 7 million, which was relatively flat as compared to Q4 2023 a.
Mike Symmetra: The year over year change was driven by the decline in non-GAAP gross margin offset by cost reductions enacted in the first half of 2024.
Mike Symmetra: On the strategic front as we transition our focus away from the divestiture, we are poised to return to growth with a much more efficient operating structure and laser focus on our AI solutions.
Mike Symmetra: Since the beginning of 2023, we have executed over $40 million of annualized cost savings, which includes over $17 million of annualized cost reductions in fiscal 2024.
Mike Symmetra: The 2020 for restructuring included organizational realignments within sales engineering incorporate the results of which was a reduction of our global workforce by 15%.
Mike Symmetra: This positions us very well from a cost perspective heading into fiscal 2025.
Mike Symmetra: On revenue growth and our outlook, our software products and services revenue pipeline and long term outlook remain at all time highs.
Mike Symmetra: More specifically, we continue to see strong demand across the global digital evidence management market, which represents an approximate $10 billion market opportunity today.
Mike Symmetra: In the public sector alone we remain in near term contract phases on several large projects with various facets of the U S Federal government and international public safety customers the.
Mike Symmetra: The sales pipeline of over $100 million.
Mike Symmetra: These near term growth opportunities coupled with a much improved cost structure heading into fiscal 2025 provides us a pathway to profitability as early as fiscal 2026.
Mike Symmetra: As a reminder, we divested our media agency baritone one in October 2024.
Mike Symmetra: Total consideration from the sale was up to $104 million in cash which consisted of $86 million in cash at closing and $18 million in cash subject to an earn out based upon baritone one's revenue for calendar year 2025.
Of the total 86 million in cash at closing.
Mike Symmetra: Net cash proceeds were $59 1 million in cash after $6 7 million in cash was held in escrow and $23 million in purchase price adjustments.
Net cash proceeds from the sale were used to pay down $35 million and principal amount of the company's December 2023 term loan with an additional $3 3 million in accrued interest and prepayment premiums associated with the debt and $3 9 million of deal related expenses.
Mike Symmetra: Including amounts held in escrow and the earn out potential future proceeds include up to $24 $7 million in cash.
Mike Symmetra: Which will largely be payable towards the end of 2025 through April 2026 at certain escrow as expire in the 2025 earn out is known.
Mike Symmetra: Given the media agencies growth throughout fiscal 2024, and its forecasted exit of customers and expected bookings for fiscal 2025, we feel confident on achieving at least a large portion of the $18 million earn out at this point in time.
Mike Symmetra: Upon closing in Q4 2024 reported a gain on the sale of the divestiture of $69 6 billion, which is included in discontinued operations in Q4 and fiscal 2024 results.
Mike Symmetra: Turning to our balance sheet.
Mike Symmetra: As of December 31, 2024, we held cash and restricted cash of $17 3 million as compared to $47 5 million at December 31 2023.
Including the January three 2025 registered direct offering December 31, 2024 cash would've been over $37 million.
Mike Symmetra: The net change reflects.
Mike Symmetra: Net cash outflows from operations of $31 2 million, principally driven by our non-GAAP net loss of $40 8 million in interest paid on debt of $11 8 million offset by $18 8 million in net cash inflows largely driven from working capital changes from a media agency divestiture in Q4 two.
Mike Symmetra: <unk> thousand 24.
Mike Symmetra: Net cash outflows from investing and financing activities of $32 2 million driven largely by capital expenditures of $6 million and debt and deferred purchase consideration payments of $38 1 million offset by net cash proceeds of $7 9 million from the cash sale of our energy group and media agency.
Mike Symmetra: In 2024, and $4 5 million from net proceeds raised through our November 2020 for ATM.
Mike Symmetra: Turning to liquidity today.
Mike Symmetra: In 2024, we executed on our largest strategic initiatives set out at the beginning of the year, including material cost reductions the divestiture of noncore assets, which included the cash sales of our energy group and media agency and establishing a $35 million ATM facility setting us up for optimal growth heading into fiscal <unk>.
Mike Symmetra: 2025 and.
Mike Symmetra: In addition to the ATM, we raised $23 million and a registered direct offering in early January 2025.
On top of this we reduced our debt carries substantially as of December 31, 2020 for a consolidated term debt is down from a peak of $201 million in December 2021 to approximately $132 6 million today comprised of term debt of $41 million due by December 2027 and convertible.
Debt of $91 5 million due November 2026.
That said we are currently in advanced negotiations to further improve our cash position and balance sheet in the near term, which we will discuss in more detail as these initiatives progress.
Mike Symmetra: At December 31, 2024, we had 42 million shares issued and outstanding and $2 4 million warrants outstanding to our debt holders.
Mike Symmetra: Total shares of $1 7 million were issued in Q4 2024 under our $35 million ATM raising net proceeds of $4 5 million.
Mike Symmetra: On January 2nd 2025, we completed a registered direct offering selling $4 4 million shares of common stock priced at $2 53 per share and $3 6 million of pre funded warrants priced at $2.52 a share for gross proceeds of approximately $23 million.
Mike Symmetra: Including the January 2025, offering we had approximately $44 6 million shares outstanding exclusive of the $3 3 million pre funded warrants.
Now turning to updated fiscal Q1, 2025, and full year 2025 guidance.
Mike Symmetra: First I would like to remind everyone that we have some very large public sector deals that we are expecting to close as early as Q1 2025.
It could close in the coming quarters in 2025.
Our confidence in these deals is high.
Mike Symmetra: While there has been a lot of scrutiny around government spending under the new presidential administration. These initiatives are not expected to be scrutinized by the current administration and will drastically improve the federal government's investigative and evidence gathering capabilities and forecasted centralization.
These deals range in the seven to mid eight figure level and last anywhere from one to five years in duration.
Mike Symmetra: And the exact timing and rollout of these larger deals are still being actively negotiated today, we have provided a larger range on revenue in our fiscal 2025 outlook.
Mike Symmetra: In addition, we are seeing high demand for our <unk> initiative with a pipeline of over $5 million and growing as of today, the most of which we expect to execute in fiscal 2025.
Mike Symmetra: These coupled with an improved outlook on licensing and stability across our baritone higher services, we remain highly confident in our near term revenue growth prospects across both our commercial and public sectors.
Mike Symmetra: More specifically in Q1 2025 revenue is expected to be between 23 and $24 million as compared to $24 2 million for Q1 2024.
Mike Symmetra: In Q1, we expect the public sector to be flat to slightly up year over year, which includes the loss of zero point $3 million of certain nonrecurring project related revenue in Q1 2024 that is not recurring in Q1 2025.
Mike Symmetra: Commercial revenue is expected to be relatively flat.
Driven by $1 million decline in consumption based revenue across our managed services and baritone higher services.
Mike Symmetra: All set by $1 million and improvements in commercial SaaS driven in large part from new VDI revenue in Q1 2025.
Mike Symmetra: We expect Q1, non-GAAP gross margins to be around 71% consistent with Q1 2024.
Mike Symmetra: Q1, non-GAAP net loss is projected to be between nine and a half to $8 5 million as compared to $10 4 million in Q1 2024, an improvement of 13, 5% at the midpoint.
Mike Symmetra: Turning to fiscal 2025 outlook.
Mike Symmetra: We are slightly updating our prior guidance for fiscal 2025, which we are expecting revenue to be the same at $107 million to $122 million, which at the midpoint represents a 24% increase year over year.
Mike Symmetra: non-GAAP net loss to slightly change to be between $27 million to $17 million, representing a 46% improvement year over year at the midpoint a.
Mike Symmetra: A slight change is reflective of the earlier compressions in gross margins on DDR, though we expect this to improve throughout fiscal 2025.
Mike Symmetra: Key assumptions in our fiscal 2025 guidance include.
For the public sector.
Mike Symmetra: As previously discussed we are expecting the public sector to grow 100% to 150% year over year.
Mike Symmetra: Led by near term deals across the department of defense public safety, including international expansion into Europe, and through more recently announced an expanded partnerships with AWS <unk> and others.
We are currently in trials and our early phases of deployment on all of these projects, which when aggregated are projected to generate substantial revenue over todays baseline.
For commercial enterprise.
Mike Symmetra: Since August 2024, we renewed our partnerships with some of our largest customers, including multi year deals and expanded services with the empty double a CBS and I heart.
Mike Symmetra: Rover, we recently renewed ESPN for a multiyear deal that included expanded software products and services.
Mike Symmetra: We are also in the beginning phases of our PDR product offering with exciting new partnerships with some of the largest AI <unk> and cloud providers expanding our offerings into generative AI.
Mike Symmetra: These existing and newer market opportunities will drive year over year growth across our commercial sector.
Mike Symmetra: Turning to our recently launched AI solutions group.
Mike Symmetra: During the second half of 2024, we began to focus efforts on more expanded enterprise opportunities.
Mike Symmetra: In Q4, 2024, we up sold a multiyear deal with an existing fortune 500 company to provide AI application services across their hiring platform.
Mike Symmetra: In addition, we were recently selected by one of the largest homebuilders in the U S to provide deeper analytics and tools to accelerate some of their existing manual processes and data collection efforts.
Lastly, we are at various stages with the U S Senate to assist them in managing their existing data.
Mike Symmetra: While we are forecasting modest revenue in fiscal 2025 around our expanded AI solutions. We do believe this will be a larger area of growth beyond fiscal 2025.
Mike Symmetra: For baritone higher.
Given the recent macro environment, we continue to expect modest to flat growth across our baritone higher applications and services in fiscal 2025.
Mike Symmetra: With the exit of consumption based customer dependencies in fiscal 2024, we do expect a more stable year in 2025 with a return back to growth in late 2025 to fiscal 2026 with expected macroeconomic improvements.
Mike Symmetra: On non-GAAP gross margins, we are projecting our non-GAAP gross margins to be between 71% to 73% throughout fiscal 2025 to.
Mike Symmetra: To the extent that we approach the higher end of our fiscal 2025 revenue guide, we can see non-GAAP gross margins expanding closer to 75% on a blended basis.
Mike Symmetra: As we begin to scale and look towards 2026 and profitability, our non-GAAP gross margins should return to 75% or better.
And finally, our cost structure.
Mike Symmetra: With a backdrop of significant cost savings enacted over the last two years, we exited 2024 with a much improved cost structure relative to the past three years.
Mike Symmetra: Moreover, we will continue to manage our cost structure throughout fiscal 2025 to ensure we time necessary investments in our cost structure with corresponding growth.
Mike Symmetra: Today, our largest costs remains head count and to a lesser extent professional services that has recently been higher and driven by transactional volume and integration.
Mike Symmetra: As we exit 2024, we are not expected to focus on M&A and tactical transactions, which will allow us to become much more efficient with our back end of support services and exit dependencies of higher professional fees over the past several years.
Before closing the call I'd like to remind everyone listening that burtone will be attending the 37th annual Roth Conference taking place from March 16 to the 18th in Dana point, California.
Mike Symmetra: That concludes my prepared remarks, operator, we would like to now open up the call for questions.
Speaker Change: We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad, if youre using a speakerphone. Please pick up your handset before pressing the keys. If a anytime you question has 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.
Speaker Change: The first question comes from Scott Buck with H C. Wainwright until please go ahead.
Hi, Good afternoon, guys. Thanks for taking my questions first off I'm curious when do you fully anniversaried. Some of these consumption customer headwinds just trying to get a sense of when the year over year comps improve there.
Speaker Change: Yeah, I can take that one.
Speaker Change: Q1 2024.
Speaker Change: So your year over year.
Speaker Change: We are going to be out of the ink consumption comparisons.
Speaker Change: Okay.
Perfect.
Speaker Change: And then I was curious just are in the public sector and specifically federal governments.
Speaker Change: I've heard from some other folks during this earning season that you know.
Speaker Change: Typically when you have an administration turnover there just some disruption and delay.
Speaker Change: It's kind of normal course of business are you guys seeing any of that.
Speaker Change: We are we are not seeing that for a lot of the contracts that had been awarded for US previously a lot of what I alluded to of the recent deployment.
Speaker Change: <unk> of it.
Speaker Change: I wear in our respective application in D. O D areas, if primarily 2025 money to date.
Speaker Change: We obviously are all watching closely which again, we don't believe is going to be relatively impactful for our 2025 guide and in the short term business, but like others for longer term opportunities we are taking playing.
Close attention to obviously, the upcoming budget cycle and the potential CR. That's currently being negotiated but to be very clear what we're talking about now in terms of our current and active deployment and revenue opportunities were primarily servicing against approved $2025.
Speaker Change: Perfect. That's very helpful. And then last one for me is I think he signed what 11, new commercial customers during the quarter.
Speaker Change: Typically.
Big of a bite of the Apple do you take with that first contract I guess I'm trying to what I'm trying to do is figure out what the potential upsell opportunities are from those new customers in the future.
Speaker Change: Well, let's break them down so.
Speaker Change: DDR related customers as Mike alluded to.
Speaker Change: We're thrilled I mean, some of the growth in contracting that we have been able to sign for that new service right out of the gate.
Speaker Change: Our are vastly exceeding our expectations that being said some of them initially upfront as Mike alluded to is some of the margin.
Speaker Change: There's a little bit lower than our stated blended overreaching margin, but we do expect that to normalize over the course of the year. So again, that's speaking the BTR.
Speaker Change: Upsell opportunities right now obviously, if you do some comparison and some comps to other companies who have been in I'm thinking you know AI ready.
Speaker Change: Asset AI asset from preparedness businesses like Shutterstock and others.
Speaker Change: This is a very big opportunity for US you know, we're obviously in a very ideal situation, considering our magnitude and scale with high quality IP based audio and video ads.
Speaker Change: As we kind of touched on you know just last year, we processed over 58 million hours of audio and video on behalf of our customers. So we expect that to be again, a major contributor for production. This year, but again, we are right now I think in the PDR and the first phases of of I'll call them. The first contracting, but we do expect over the course of the year consistent with these other companies.
That we expect multiple SFW and potential upsell opportunities with these new customers over the course of the year and into 2026.
Speaker Change: Great I appreciate the added color guys. Thank you for the time.
Thank you.
Speaker Change: The next question comes from Jesse So Wilson with <unk> capital. Please go ahead.
Speaker Change: Everyone. Thanks for taking my questions here kind of Dovetailing off of the prior question on the timing of the consumption headwinds here. You know you are guiding to some some growth this year versus the reported declines. So beyond these consumption headwinds can you point to any specific drivers that underscore your confidence in this inflection point in growth is.
Is it just the timing of the large government contract awards or maybe anticipated acceleration in this V. Dr segment, I'm, just trying to point to some specific business related catalysts to underscore the confidence here.
Speaker Change: As we stated previously on some recent calls and public disclosures V. D. R and public sector are by far going to be leading the growth and trajectory in terms of proof points and immediate catalyst DDR. As we've stated has kind of come out of the gate significantly farther in head and.
Speaker Change: As of where we thought we'd be already.
Speaker Change: We're under contract and working with and generating revenue from some of the largest hyperscale are in model development companies. While also working with some of the largest IP owners on the content side and so that is a clear one with clear proof points that we're very excited about and.
And to be very clear is exceeding our expectations. Both in terms of contract velocity and <unk> and revenue growth the public sector side as we've touched on already is we are actively deploying our solutions into D O D facilities and environments and tenants.
Speaker Change: We will be able to continue to publicize those opportunities and expanded contracts here publicly through press releases and other mechanisms here over the next several weeks and few quarters, but again remain very bullish on hard concrete proof points for both the PDR and public sector public sector growth.
Speaker Change: Awesome Awesome, that's exciting and then just one follow up for me and then I'll I'll jump back to mature it collected the guys. Just curious you know.
Speaker Change: We're it's looking like we're hitting an inflection point of growth in the business with with all the pieces pointing to positive trends as we look out over the medium to longer term can you give us some idea of where you expect to be breakeven on a cash operating standpoint, and what like smarter and profitability targets might be.
Speaker Change: Yeah, I'll take that one I think based on our projections.
Speaker Change: The earliest is going to be in the back half of 2026.
Okay, great well, thanks for the details and Doug Thanks for taking my questions.
Speaker Change: Thank you.
Speaker Change: Thank you.
The next question comes from Glenn Mattson with Ladenburg Thalmann.
Speaker Change: Please go ahead.
Glenn Mattson: Yeah, Hi, thanks for taking the question.
Speaker Change: Just curious on your items.
Glenn Mattson: Opportunity.
Glenn Mattson: Could you help us just better understand how the new offering different from the previous public safety revenue that you produce just the just the breadth of the product and why that maybe.
Great at an inflection point there.
Glenn Mattson: Well I think first is that the number of applications. So I damage collectively.
Glenn Mattson: <unk> is a suite of different applications. So historically, we primarily have had one application and a suite of solutions that those historical applications have been primarily redact.
Glenn Mattson: And illuminate.
Glenn Mattson: Both very valuable both still selling them at good clip, but.
Glenn Mattson: But the expansion of item is really building out the portfolio of those applications. So in effect, we can start moving much larger diverse datasets and workflows to expand on the investigation process. These new Apple newer applications include track, which with an application that we announced last year.
Glenn Mattson: Which provide dynamic and I would say cross device cross camera tracking of people of interest as well as the upcoming or the.
Glenn Mattson: In addition to investigate which we also announced.
Glenn Mattson: Which is a much more broader it's more analogous to DMA digital media hub, which we offer and it's one of the dominant products that we sell on the commercial side. This is somewhat analogous on the commercial side, but named investigate and so because of these expanded.
Glenn Mattson: <unk> product line, we do expect more additional revenue on a per licensing basis against the application, but also we expect larger contracts because of again, the breadth of the opportunity and solutions that we're providing because of the multi variant nature of the diversity of the applications.
Speaker Change: That's super helpful. And then I guess just in terms of the competitive landscape is it could you just describe what when you're in the field. What did you see versus some of the other offerings that are out there.
Speaker Change: And how you're able to differentiate and win in that scenario.
Speaker Change: This is really exciting so unlike the commercial business, where there's been different forms of technology and storage and I'll say more archaic.
Speaker Change: Analytic tools for movie content and adding.
Speaker Change: And elements in the public sector space I mean, it's pretty much Greenfield youre seeing an explosion of new data types being created.
Speaker Change: And typically they're really bound and more or less closed environment with certain hardware providers. So for example, if there is a closed if there was a security camera right that's going to a proprietary Vms system.
Speaker Change: If there is a single body camera company right. That's really working with it you know that type of dataset is working is working on the backend with a single vendor, but the reality is when youre talking about the diversity of these new datasets you were talking about multiple different Iot sensor and capture things, meaning data is being prudent.
Higher right now and the diversity of those datasets.
Speaker Change: Making it incredibly challenging for municipalities Sheriff departments, and police agencies to ingest index and organize the breadth of these diverse and disparate datasets. That's what we do so I dams built on AI.
Where is the leading open platform, that's going to be able to ingest. All these different datasets in any format, which by the way is critical you cant really follow and progressing investigation, along unless you can ingest all of these different datasets and create a common narrative and story line. For example, I can say crime. Unfortunately traveled if you're bouncing.
Speaker Change: Drone footage to a close soon to a security camera to a citizen upload camera all that have to be taken into a common platform and that's what we're bringing to the market through with items on AI work.
Ryan: Thanks for all that clarification very helpful. Ryan.
Ryan: Congrats on the results.
Thank you.
Ryan: This concludes our question and answer session I would like to turn the conference back over to Ryan Steelwork for any closing remarks.
Ryan: The close of 2024 represented really two years of material change and transition for our business, but I can say is burtone is back into a very focused and a very strong position for both revenue growth and market expansion for 2025 and beyond I'm very thankful.
Ryan: Two our passionate team and talented bear Italians, who have let us through this transformation and now we're all exciting excited about 2025 and beyond.
Ryan: But more specifically is taken into account again, our market leading AI solutions.
Ryan: Near term positive impact from DDR, and our public sector growth and when we couple that with a very large diverse customer base already of over 3000 Global enterprises.
Ryan: This is argue are to really flipped the switch I think we've articulated some very clear proof points why.
<unk> shareholders and potential new investors should be very bullish about the future of airtel. Thank you for your time today.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.