Q2 2025 Veritone Inc Earnings Call

Speaker #2: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star within one on your telephone keypad.

Speaker #2: To withdraw your question, please press star within two. Please note this event is being recorded. I would now like to turn the conference over to Kate Goldsmith.

Speaker #2: Please go ahead.

Speaker #3: Thank you and good noon. After the market closed today, Veritone issued a press release announcing results for the second quarter 2025, which ended June 30th, 2025.

Speaker #3: The press release and other supplemental information are available on the investor relations section of Veritone's website. Joining us for today's call are Veritone's president and chief executive officer, Ryan Steelberg, and chief financial officer, Mike Zemetra.

Speaker #3: We will provide prepared remarks and then open the call up 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.

Speaker #3: This includes, without limitation, statements about our business strategy and future financial and operating performance. These forward-looking statements are subject to risks and certainties and assumptions that may cause the actual results to differ materially from those stated.

Speaker #3: Certain of these risks and Veritone's SEC assumptions are discussed in filings, including its annual report on Form 10K. These forward-looking statements are based on assumptions as of today, August 7th, 2025, and Veritone undertakes no obligation to revise or update them.

Speaker #3: During this call, the actual and forecasted financial measures we will be discussing include non-GAAP measures. Reconciliations of these measures to the corresponding GAAP measures are included in the press release we issued today.

Speaker #3: Finally, I would like 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 Veritone's website at www.veritone.com.

Speaker #3: Now, I would like to turn the call over to our president and chief executive officer, Ryan Steelberg.

Speaker #4: Thank you, Kate, and thank ou everyone for joining us this afternoon. I'm excited to speak with you about our recent quarter and our overall progress we've made against our strategic business priorities.

Speaker #4: I will start with an update on our exciting results and progress against our growth plans and then Mike will cover our financials in more detail.

Speaker #4: We are thrilled to report that our revenue of over $24 million for the quarter came in at the high end of our updated guidance in June, and it is a testament to the demand for our AIware platform and our market-leading AI applications and solutions.

Speaker #4: Our results demonstrate strong organic non-Veritone higher software revenue growth of over 45% in the quarter and we expect this growth rate to continue through the balance of the year.

Speaker #4: Veritone is definitively growing again, and this growth is being led by our core AI software solutions spanning both commercial and public sector business lines.

Speaker #4: Since co-founding Veritone in 2014, I can confidently say that there has never been a more exciting moment for our company than right now. We are translating demand into tangible and sustainable growth, and what makes this even more compelling is that our fastest growth areas including Veritone data refinery, or VDR, and public sector not only delivered strong results but also represent our largest pipelines and most expansive addressable markets in our history.

Speaker #4: We are building momentum in all the right areas, and the opportunity ahead of us has never been greater. In the quarter, we secured 104 new software customers and grew our VDR pipeline by over 100% from Q1, and over 33% just since our late June business update.

Speaker #4: The near-term VDR pipeline now surpasses $20 million as the demand for high-quality training data across both our commercial and public sector verticals remains very strong.

Speaker #4: We have also broken through with yet other major DOD agency, with the signing of our sole source contract with the US Air Force in June.

Speaker #4: This deal is already contributing revenue in 2025 and we expect it to ramp significantly in 2026 and beyond. Our public sector pipeline is now up to $189 million, up from $110 million at the end of the first quarter.

Speaker #4: Overall, it has been a fantastic momentum-building quarter as we transition into the second half of the year. Our recently announced cost-saving initiatives, which are expected to generate $10 million in annualized savings, together with our $10 million equity offering we completed in June, have strengthened our financial position and enhanced our ability to execute our strategy and focus on driving growth.

Speaker #4: Mike will provide more detail on these efforts and their impact across our core commercial and public sector verticals shortly. Now, want to provide an updated perspective on the AI landscape and our market opportunity.

Speaker #4: The AI landscape is indeed evolving rapidly. While enterprise-wide generative tools like Copilots and chatbots have scaled quickly, function-specific applications remain mostly in pilot mode.

Speaker #4: This GenAI paradox, as McKinsey describes it, underscores a gap between broad adoption and truly transformative use cases. Agentic AI aims to close this gap, shifting from reactive, LLM-centric tools to proactive, goal-driven agents capable of autonomous workflow execution.

Speaker #4: These agents combine planning, memory, and reasoning capabilities, but also pose new challenges around governance, data fragmentation, and effective monitoring and control. Scaling them effectively requires an infrastructure designed for trust, interoperability, and flexibility across different vendors.

Speaker #4: This has been and remains Veritone's clear opportunity. Our AIware platform provides a scalable, secure, and model-agnostic foundation for ingesting and operationalizing both structured and unstructured data across disparate enterprise systems securely and at scale.

Speaker #4: This architecture aligns directly with the emerging agentic AI mesh, where multiple AI agents interact, collaborate, and continuously learn while maintaining visibility and control. As organizations move towards more adaptive, workflow-driven AI, Veritone offers the infrastructure and purpose-built AIware platform to power that evolution, unlocking operational agility, smarter operations, and new revenue opportunities.

Speaker #4: AIware also uniquely positions Veritone to capture one of the most compelling opportunities in the evolving AI value chain, training data. As reported just last week by the Wall Street Journal, big tech will spend over $400 billion this year on AI CapEx and OpEx, in what has become a new tech arms race.

Speaker #4: As next-generation LLMs and multimodality models become more sophisticated, demand for high-quality, domain-specific training data sets has surged. Industry estimates suggest that approximately $3 billion will be spent this year alone by fewer than 50 companies including the major hyperscalers on acquiring and preparing training data, and it's expected to grow to over $17 billion by 2032.

Speaker #4: Veritone is uniquely equipped to serve this market through our VDR solution, which transforms massive volumes of unstructured video, audio, and text into centralized, license-ready data sets for internal use or external model training.

Speaker #4: In the first half of 2025, VDR greatly exceeded our ectations in both adoption and revenue contribution. Data customers across both our commercial and public sector verticals ranging from major media networks to public institutions are using VDR to extract new value from both current and legacy data archives.

Speaker #4: Which often are underutilized, some dating back over a decade. On the buy side, VDR is now directly supplying clean, structured training data to some of the world's largest hyperscalers in AI model developers.

Speaker #4: In many ways, VDR represents the next-generation solution for unstructured training data, building on what data labeling companies like Scale AI recently acquired by Meta for over $30 billion and Shutterstock have done for the training data economy.

Speaker #4: Veritone's differentiation lies in our ability to process complex and diverse media types and modalities like audio and video at tremendous scale. In the second quarter alone, Veritone AIware processed millions of hours of video and audio, or in data science speak, over $5 trillion tokens.

Speaker #4: Through multimodal tokenization, Veritone efficiently transforms these millions of hours of unstructured video and audio assets into the foundation training blocks of intelligent systems. Our AIware-powered pipeline enables transformative-based sequence modeling and other training methods using discrete audio and video tokens bringing enterprise-grade media into the era of AI.

Speaker #4: Whether it's leveraged for third-party model training, fine-tuning enterprise customers' models, or even for training Veritone's proprietary internal models, we are providing a modern-day agentic stack for customers around their audio, video, and text data.

Speaker #4: As I mentioned earlier, our qualified VDR pipeline now exceeds $20 million up from $15 million at the end of June and more than doubling since early May.

Speaker #4: This growth reflects both expansion with existing customers as well as new agreements with leading hyperscalers and foundational model developers. We expect to formalize partnerships with nearly all of the major hyperscalers by the end of 2025.

Speaker #4: The growth in our commercial business continues to accelerate, driven by our rowing demand for our differentiated AI-powered software and managed services. We enable IP owners to unlock the full value of all of their media libraries by making them searchable, discoverable, and monetizable across a range of channels.

Speaker #4: Including advertising, broadcasting, documentary production, TV and film projects, and internal initiatives. In the second quarter, Veritone Commercial successfully closed 11 software enterprise deals, with clients such as Intermalon, Lobber Cup, United States Soccer Federation, Alpha Media, St.

Speaker #4: Louis Zoo, ESPN, and the Big Ten Network. These agreements underscore the continued expansion of Veritone's software-as-a-service offerings and highlight the critical role of our AI solutions and AI-differentiated managed ices in supporting our customers.

Speaker #4: Turning to the public sector, the major highlight this quarter is our multi-year agreement with the US Air Force to deploy our AIware platform and intelligent digital evidence management system, or IDEMS.

Speaker #4: We will provide the Air Force with advanced investigative and information capabilities to enhance and accelerate data analysis for investigative activity across diverse mission areas.

Speaker #4: This contract represents a material portion our sales pipeline and represents a strong alignment between our capabilities and the mission-critical needs of our federal partners.

Speaker #4: We have already begun recognizing revenue from this contract in 2025, with revenue contributions expected to accelerate meaningfully in 2026. This latest sole source award, with the Air Force, represents our third contract with this agency, and greatly expands the scope of our nership.

Speaker #4: Our with the DoD's Defense Logistics Agency also continues to expand. Our task orders with the DLA, funded under the Jet 2.0 IDEIQ, specifically require contractors to be competent in the use of Veritone applications.

Speaker #4: Which has resulted in a number of contracted service providers entering into reseller agreements with Veritone IDEMS for new opportunities. In conjunction with our recently achieved awardable status, through the Department of Defense's P1 Solutions Marketplace, we are realizing accelerated opportunities to expand our work with the DoD and other areas of federal, state, and local government and agencies.

Speaker #4: In the second quarter, we signed 35 new public sector customers, including the Riverside County Sheriff's Department and a top five police agency in the United States.

Speaker #4: Additionally, we signed 95 renewal contracts in the quarter, further validating the mission-critical nature of our AIware software and strong customer retention. We are confident that Veritone is well positioned to take advantage of the surge in AI spend by our , as use cases and demand for our solutions and AI continue to grow.

Speaker #4: Our direct public sector pipeline has grown to nearly $200 million. With defense technology spending projected to approach $1 trillion and the administration's prioritization of AI innovation, highlighted by the White House's recent AI action plan, we see significant additional business opportunities in the public sector, both this year and beyond.

Speaker #4: Turning to our higher division, the second quarter delivered solid performance across multiple key areas. The strategies implemented to navigate the challenging hiring market yielded positive outcomes, resulting in year-over-year growth for our SaaS and media services, formerly known as Broadbean, and exceeding our Q2 revenue targets.

Speaker #4: We also surpassed annual sales targets and achieved record growth in media service revenue in our inaugural year as a LinkedIn Gold partner. With our programmatic business slated to conclude its LinkedIn pay-for-performance and apply-connect integrations in early Q3, we expect to benefit from these efforts across our entire portfolio.

Speaker #4: These investments with LinkedIn will enable us to continue delivering substantial value to clients and strengthen our collaboration with LinkedIn, the new global market leader.

Speaker #4: We signed 58 new software deals in the quarter, including some of our most significant deals to date, while also building a more robust pipeline that could lead to even more positive results in the second half of the year, particularly in Q4, which traditionally is our strongest quarter for media deals in the higher division.

Speaker #4: Another major higher initiative, focused on expanding our SaaS revenue through enhanced ATS partnerships and integrations, is also gaining momentum and shows considerable promise for the SaaS revenue growth.

Speaker #4: At the close of Q1, we executed our most critical partnership agreement to date with Workday. This elevated us to the highest platinum level of partners and created substantial opportunities for co-selling and lead generation with the global leader in the market.

Speaker #4: In our first active quarter, our lead pipeline with Workday clients exceeds $1 million in contract value, despite the nascent stage of lead and deal flow.

Speaker #4: We finalized 11 new Workday client deals this quarter. Furthermore, new integrations with major global ATSs and as well as our partnership with the integrations marketplace Combo will provide Veritone higher access to over 100 new ATS integrations, in Q3 and beyond.

Speaker #4: We successfully concluded several notable deals this quarter with global corporations such as KPMG, Dower, Faden, CBRE, and Sun Corp, among others. Before turning things over to Mike, I want to congratulate our team for their strong performance and perseverance.

Speaker #4: Veritone is growing again. And we remain very bullish on our future. Our pipeline is the largest it has ever been, led by public sector and VDR, and our AI software revenue growth is accelerating.

Speaker #4: Now, Mike, over to you. Thank you, Ryan. We continued our strong momentum in the first half of 2025 with solid financial results in Q2.

Speaker #4: Revenue came in at the top end of our recent guidance, with our software products and services excluding Veritone higher, growing over 45% year-over-year. Driven by strong performances across our public sector and commercial enterprise.

Speaker #4: We ended Q2 with solid customer metrics and contributions made across our software products and services and managed ices. As we enter the second half of 2025, we remain very confident on the future growth prospects across our core software products and services, which I will explain in more detail.

Speaker #4: During my prepared remarks, I will discuss Q2 year-over-year performance and KPIs, which exclude the results of our media agency which are presented as discontinued operations in corresponding historical financial periods.

Speaker #4: Balance sheet and liquidity position, and Q3 and fiscal 2025 guidance. Starting with Q2 2025 performance, Q2 revenue was slightly over $24 million. Which was flat from Q2 2024 principally due to a $1.0 million increase from our software products and services, offset by a $1.9 million decline in our managed ices.

Speaker #4: The $1.8 million revenue growth in our software products and services was driven by our public sector. Which grew over 90% year-over-year. Coupled with the commercial enterprise software products and services revenue, that improved 0.8 million year-over-year.

Speaker #4: The growth in public sector was driven execution of larger deals in Q2 2025 including the Department of Defense and larger public safety agencies including a top five law forcement agency in the US, and Riverside County.

Speaker #4: We expect these larger public sector deals coupled with our expanding public sector pipeline to generate substantial growth in the second half of 2025. Which I will explain in more detail.

Speaker #4: The growth in commercial enterprise was led by Veritone data refinery, or VDR. VDR, which launched in Q4 2024, is one area where we anticipate substantial year-over-year growth throughout the remainder of fiscal 2025.

Speaker #4: And today has a near-term sales pipeline over 20 million. Up over 100% from our guidance in Q1 2025. The $1.9 million decline in Q2 managed services was principally driven by a $2 million decline in representation services driven by a decline in our very ad services and a one-time live event campaign of $1 million in Q2 2024.

Speaker #4: Which did not recur in Q2 2025. Offset by a $0.1 million improvement in licensing. As we previously discussed, we expect this negative trend in representation services to continue throughout 2025.

Speaker #4: Or until the macro economy shows demonstrated improvements over 2024. Overall, Veritone higher remained relatively flat year-over-year. Driven largely by the hiring softness in the macro economy.

Speaker #4: Excluding Veritone higher, our software products and services grew over 45% year-over-year. Turning to key performance metrics across our software products and services in Q2 2025.

Speaker #4: ARR of 62.6 million, up 7% from Q1 2025 of 58.7 million, and down year-over-year from the expected declines in consumption-based revenue from customers across our hiring software products and services over the trailing 12 months.

Speaker #4: Overall, ARR from recurring subscription-based SaaS customers was up slightly by 2% year-over-year. As of Q2 2025, 81% of our ARR was from subscription versus consumption-based customers up from 74% at Q2 2024 and flat sequentially from Q1 2025.

Speaker #4: Total new bookings of 15.8 million, up 1.8 million or 13% year-over-year, primarily due to larger renewals across our software customer base. Gross revenue retention continued to be above the 98th percentile.

Speaker #4: And total software product and service customers of 3,067 which was down 9% year-over-year predominantly from our commercial enterprise sector. Which includes the lower consumption-based customers from Veritone higher and the continuing impact of sunsetting legacy career builder customers post the June 2023 acquisition of Broadbean.

Speaker #4: And a smaller customers as we focus on larger ARR opportunities. Offset by an increase across public sector largely from growth in public safety customers.

Speaker #4: Q2 GAAP gross profit was 15.3 million compared to 16.4 million in Q2 2024. A decline of 1.1 million largely driven by the higher mix of lower-margin revenue in Q2 2025 with GAAP gross margins of 63.9% as compared to 68.2% in Q2 2024.

Speaker #4: Excluding non-cash depreciation and amortization expense, 2025 non-GAAP gross margins were 68.9% as compared to 73.6% in Q2 2024. A decline of 470 basis points largely due to the decline in higher-margin consumption-based revenue coupled with a higher mix of lower-margin revenue.

Speaker #4: Note that in Q2 2025, VDR gross margins were approximately 40%. We expect that as the VDR product matures, margins will initially be similar to Q2 but should expand into late 2025 and 2026 as we grow and diversify the mix of our content offerings.

Speaker #4: Q2 operating loss 19.3 million improved by 1 million or 5% year-over-year. Primarily driven by lower operating expenses, offset by a lower non-GAAP gross profit from the decline in revenue over the same period.

Speaker #4: Net loss from continuing operations was 26.8 million. An increase of 3.4 million or 14.5% as compared to Q2 2024. The year-over-year increase was principally driven by a 3.4 million change in the estimated fair value of earnout from the divestiture of Veritone One, recorded in Q2 2025.

Speaker #4: Non-GAAP net loss from continuing operations was 8.7 million, as compared to 9.7 million in Q2 2024. And 11.1 million in Q1 2025. The improvement was principally due to lower operating losses driven by increased discipline on cost management, offset by lower non-GAAP gross profit.

Speaker #4: Further, in June 2025, we initiated up to 8 million of a targeted $10 million annualized cost reduction through reductions in personnel and improvements in our operating structure, including our platform costs.

Speaker #4: These cost reductions were initiated in part due to the softness in our managed services, coupled with delays in certain public sector deals that were expected to close earlier in 2025.

Speaker #4: As I will explain further, these reductions should provide us a more efficient cost structure as we manage towards our planned growth in the second half of 2025 and profitability into 2026 and beyond.

Speaker #4: Turning to our balance sheet, as of June 30th, 2025, we held cash and restricted cash of 13.9 million, as compared 17.3 million at December 31st, 2024.

Speaker #4: The net change in cash reflects net cash outflow from operations of 25.2 million, principally driven by our non-GAAP net loss of 19.8 million, deferred purchase consideration of 1.2 million, and interest paid on debt of approximately 3 million.

Speaker #4: Coupled with the timing of working capital in the quarter, offset by net cash inflows from investing and financing activities of 23 million, driven by net cash inflows of 29.9 million, from our January and June 2025 registered direct offerings.

Speaker #4: Partially offset by 3.9 million in debt principal payments and 2.3 million in capital expenditures. Turning to liquidity today, on June 30th, 2025, we completed a registered direct offering selling 6.5 million shares of Common Stock priced at $1.09 per share, and $1.8 million of pre-funded warrants priced at $1.08 per share, for gross proceeds of approximately 10 million.

Speaker #4: Of the total funding, approximately 3 million of the gross proceeds was received in July 2025. Included in the funding was $1 million from our CEO, Ryan Steelberg.

Speaker #4: Which will price at the greater of $1.41 per share, which was the closing price of Veritone stock on June 27th, 2025. Or the closing price of Veritone stock two trading days following the filing of our Q2 Form 10Q.

Speaker #4: At June 30th, 2025, our consolidated debt is down from a peak of $201 million in December 2021 to approximately $128 million today. Comprised of term debt of approximately $37 million maturing in December 2027, and convertible debt of $91.3 million due November 2026.

Speaker #4: As of today, we have over $25 million available across our $35 million ATM, which was established in November 2024. That said, we are currently exploring potential financing structures including discussions with our current debt holders, which we believe could improve our current liquidity position and balance sheet.

Speaker #4: At June 30th, 2025, we had $47.6 million shares issued in standing and $2.5 million warrants outstanding to our debt holders. Now turning to updated fiscal Q2 2025 and full year 2025 guidance.

Speaker #4: Our software products and services revenue pipeline and long-term outlook continue to be at all-time highs. More specifically, we continue to see strong demand across the approximate $10 billion global digital evidence management market.

Speaker #4: And the public sector alone we are beginning to march towards our $100 to $150 percent revenue growth target for fiscal year 2025. In Q2, we announced we were awarded a sole source contract with the Air Force Office of Special Investigations, or OSI.

Speaker #4: Under the contract, the company's AI-powered utions including IDEMS will provide OSI with advanced investigative intelligence and counterintelligence capabilities in support of the DoD and interagency mission requirements.

Speaker #4: During Q2 2025, we began to recognize revenue on the award. This is the initial deployment with plans to roll out our IDEM solution across the broader DoD investigative and counterintelligence branches, over the next several years.

Speaker #4: While we cannot discuss the magnitude or exact specifics of this deal, it will serve as a substantial growth driver of our public sector revenue, in 2025 and '26.

Speaker #4: We also remain in near-term contract phases on several large projects with various facets of the US federal government, and international public safety customers, with a near-term sales pipeline and access of $180 million.

Speaker #4: As previously noted, on the commercial side, we are seeing strong and increasing demand for our VDR product. More specifically, we are an active discussion with the largest hyperscalers on various VDR initiatives, some of which are near-term agreements that approach or exceed $10 million individually.

Speaker #4: And others are longer-term partnerships where we are being positioned to serve as their provider of choice across their VDR initiatives. Our near-term sales pipeline on VDR, which launched in the second half of 2024, is now over $20 million.

Speaker #4: Which is an increase of 100% or $10 million since March 2025, and $5 million since the end of June 2025. More specifically, in Q3 2025, revenue is expected to be between $28 million and $30 million.

Speaker #4: As compared to $22 million from Q3 2024. A 32% increase at midpoint, and 21% sequentially from Q2 2025. In Q3, we expect our software products and services to increase over 45% year-over-year.

Speaker #4: Led by growth in the public sector and commercial enterprise. Specifically, expect our public sector revenue to grow over 50% year-over-year, and our commercial revenue led by VDR to grow over 45%.

Speaker #4: Included in this growth is our hiring products and services, which we expect to be relatively flat year-over-year, given the current macroeconomic environment. Consistent Q2 2025, our managed ices is expected to be down year-over-year, principally due to the representation side of our .

Speaker #4: Which is experienced some slowness as a result of the more challenging macro environment. We expect Q3 non-GAAP gross margins to be around $61 to $63 percent, driven by the forecasted higher mix of VDR revenue in the period.

Speaker #4: Q3 non-GAAP net loss is projected to be between $6 to $6.5 million, as compared to $11.1 million in Q3 2024. Representing a 43% improvement at the midpoint, and a 28% improvement sequentially from Q2 2025.

Speaker #4: Turning to fiscal 2025 outlook. We are updating our prior guidance for fiscal 2025. Which we are expecting revenue to be between $108 to $115 million.

Speaker #4: Which at the midpoint represents a 20% increase year-over-year. The change in our outlook is principally driven by the confidence in some of our more larger growth initiatives across the public sector and commercial VDR, coupled with a forecasted decline in managed services reflecting the more challenging macro market today.

Speaker #4: And non-GAAP net loss to be between $30 to $25 million, representing a 33% improvement year-over-year at the midpoint, the change is reflected of the timing shifts in revenue, coupled with the compression in gross margins on VDR in 2025, which we expect to improve upon fiscal 2026.

Speaker #4: Before closing the call, I'd like to remind everyone listening that Veritone will be attending HC Wainwright's 27th Annual Global Conference September 8th through the 10th in New York City.

Speaker #4: That concludes my prepared remarks. Operator, we would now like to open up the call for questions.

Speaker #1: We will now begin the question and answer session. To ask a question, you may press star within one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys.

Speaker #1: If at any time your question has been addressed and you would like to withdraw your question, please press star within two. At this time, we'll pause momentarily to assemble our roster.

Speaker #1: And your first question comes from Scott Buck with HC Wainwright. Please go head. Scott your line may be on mute. And your next question comes from Jesse Silverson with Dboro Capital.

Speaker #1: Please go head.

Speaker #5: Hi, everyone. thanks for taking my questions here. I ink the big thing, you know, this is a great quarter doing exactly what you guys said you were going to .

Speaker #5: You've got this guidance for, for the rest of the year that points to some, some pretty significant, acceleration in the growth rate. I mean, I'm calculating like midpoint near, you know, 30% year-over-year here.

Speaker #5: while you've provided a lot of details on, you know, growing the business, deciding on the contracts, with, within the public sector, the growth in the pipeline.

Speaker #5: Can you guys elaborate on what specifically needs to convert? Whether it's, you know, revenue recognition from this Air Force contract or any VDR pipeline signings that need to happen to support this step up in, in the acceleration that 're seeing guided for top line?

Speaker #5: And I'm just ind of curious what gives you the, the level confidence into, you know, the visibility you have, for that acceleration. Thank ou.

Speaker #1: Thank you, Jesse. I think as we sit here right , we probably have our smallest gap of go-get revenue to realize, that guide for Q3.

Speaker #1: and, and I say a bunch that already in terms , of bookings and visibility, for the balance of the year. So again, our, as we sit here today, you know, in the end of the first week in August, our delta of go-get to hit that guide midpoint and hopefully the high end, you ow, is the smallest it's ever been.

Speaker #1: the other way of saying that is, you ow, sort of the contracted opportunities and the businesses, and, and opportunities that we're currently servicing will support the, the balance of, of that, that opportunity for revenue.

Speaker #1: So again, we're, we have the customers, we are transacting as we've, as, Mike and I both mentioned, we're, already generating revenue, from these new DoD contracts.

Speaker #1: We're already generating revenue from these new customers, with VDR. so we're very, very excited, we've been sort of waiting for this to happen and, and they're all kind hitting on all cylinders right .

Speaker #6: Awesome! That's really great detail. It's really exciting to see. We're excited here. I guess I'll just back up and ask a broader level question here.

Speaker #6: As well, and then take a step back. But just with the, you know, VA, within AI, everything's moving very fast. There's very rapid advancements, and do you view Veritone's differentiation, particularly in these regulated industries like defense and law enforcement, versus the broader AI platforms out there?

Speaker #6: How

Speaker #6: such as like Palantir, Microsoft, or other open source options.

Speaker #1: Mm-hmm. I think first and foremost, and this goes back all the way to our founding, you know, we kind of, and

Speaker #1: thankfully, had a even generative AI.

Speaker #1: vision that AI-based models were going to become commoditized over time. There would be thousands of vision models, there'd be thousands of speech models, and even today that, you know, there's, there's hundreds of next generation LLMs and multimodal models.

Speaker #1: The key is having a platform, AIware that in effect can manage the full end-to-end stack. but be agnostic to these models. Or independent of these different models.

Speaker #1: Meaning, customers like iHeartMedia and others, they've been customers for many years. we owned, I'll say the software platform application layer, with these entities. And so as models advanced, they don't have to go anywhere.

Hi. Yeah. Thanks for taking the question and congrats on the quarter, um, first on items. Um, uh, you know, in the past, you've spoken about multiple kind of, uh, I think, I think you said 7 or 8 figure kind of multi-year,

uh,

Size deals of the um, the the wind and the Air Force is a significant 1 clearly um, you know, I guess partly I'm curious. Do you need to close more of those style deals to to meet your guidance for the year you reiterated? So I'm guessing you feel pretty comfortable there. But also just can you speak to like, what winning that contract and what it means for for these next contracts, does it get easier to close them as you get more reference, customers of that size, uh, uh, any color, that'd be great.

Yep. Well I'll I'll pick those off. You know. First, of course our ability um to point to a very large, multifaceted contract with the Air Force um spreads quickly. Um and we can we can attest and we'll be kind of spoke to is that, you know, we we are seeing a multitude of different opportunities and inbound demand um spread quickly across the dod. And I and even outside the dod because of of the Air Force contract and announcement. Um, and that's and that's I'd say commencement with any other type of business. So referral,

Of the government's law enforcement and counterterrorism, um, opportunities into other agencies as well. So, yes, um, you know, and this opportunity, um, for us really is the tip of the iceberg for expansion. Um, just in the, in the areas of use, cases, for investigations. Um, and counterterrorism, um, we, we expect this to expand into other, um, agencies as well. So, um, we do have a healthy pipeline that, that, that crosses over into many other areas of DOD. Um, um, and and, but again, to sort of be specific to your question is we have enough meat if we can just execute on. Frankly, the, the kind of customers that we already have. I think we're pretty confident to hit many of our goals. That being said, um, we as we attempted to a material increase in the size of our pipeline, um, we are bringing on more and more new customers. As we mentioned in 35, new customers in public sector in the previous quarter and we expect that to continue accelerate here over the next few quarters.

Uh, you also mentioned the top five Public Safety customers. I'm not— I can't recall if you've mentioned that in the past or not, but can you give any more color around it?

You know what the, what kind of agency and who, what the use cases are that kind of thing.

It's a item's customer.

Um, it's 1 of the biggest law enforcement agencies in the world. Um, we're not at Liberty to give specific names. Um, but let's just say, hopefully, we're closing, um, some homicide and murder investigations, um, leveraging, our next, you know, generation AI based software here, um, but we're, we're thrilled and, you know, and we are, you know, we're all excited about our DOD efforts. Um, but ours, um, State local law, enforcement business continues to grow and Thrive as well. And and uh the the the sheriff department, which we talked about and also this police agency um is kind of a good representation of the demand for our Solutions in sled, as well.

1 more. If I could squeeze in on vdr, you, uh, you talk. I think the pipeline you think is 20 million now, can you quantify? Just get get some more color on that, how you come up with that number? And what that means is it translates to revenue. I know in that pie chart on your slide deck, you you off the range, the higher end of the range, kind of uh yep. Uh do you just kind of help us understand like the the bridge between that and and revenue and sure the timing yeah.

Yeah. So, I think as Mike, um, articulated in his remarks, uh, that near-term pop pipeline is kind of qualified as $20 million, with high visibility between the next 3 to 12 months. Um, you know, the VDR could just continue to grow and grow and grow. Um, I think we've really hit a perfect use case, sweet spot, as I articulated in my remarks. Um, you know, I.

Really do, believe veritone has created a more technology version for unstructured data that scale. AI did and others, um, in primarily Legacy data labeling efforts to help train data. Um, we are working with many of the largest hyperscalers and model developer companies today. Um, so we are representing them in providing and helping them train. Their next Generation, AI models and the budgets are massive. Um, so again, we are being successful. Um, I I, I've um, you know, it's probably I'm very excited about public sector. I'm very excited about DOD. Um, but you know, I, you know, vdr could be lightning in a bottle, still a lot more work to do, but I think we got great product Market fit right now. And, uh, you know, it's it's, uh, you know, pedals down on on sort of our bullishness for vdr.

Uh, thanks for all that color and congrats.

Thank you.

And your next question comes from. Seth Gilbert with UBS. Please go ahead.

Give the full year guide by 4 million dollars and reduce the high end of the non-gaap net loss by 5 million. So just curious, if you could talk about where you're making Investments, or is there anything you didn't anticipate in in 2? Hm, cross head.

Yeah, I can take this the first. Oh, did you hear the first part of that? M, Mike. I didn't hear the first part of the question, but if you got it, I didn't hear the first part, but I, yeah, I think I can articulate it. Oh, I can if you need.

Uh yeah, just in terms of the non-gaap, net loss. What I explained is just kind of the velocity of bdr.

And the compression on margins.

And so while we raise the top end of the revenue guide, we tightened on the lower end or I guess the higher end on the non-gaap net loss. Um as a result of that, margin compression,

100 to 150% year-over-year guide for the year. You need to grow the public sector by about million dollars quarter of a quarter or, you know, maybe almost 300%. So, I I'm just wondering if that's fair to assume a big uptick in in 4q and is it all from the dod Revenue kind of uh, maybe hitting in in 4k? Thank you.

Yeah, on 4K. I mean we're not giving specific guidance, but I think your math is probably directionally accurate.

Um, and it's not dependent on a single contract. Um, but that contract obviously is a vehicle for a good portion of that growth.

Got it. Thank you.

And your next question comes from Scott buck with HC Wayne Wright. Please go ahead.

Hey, good afternoon guys. Uh, appreciate the the time um,

The 3Q guides are just a nice sequential step up uh in in Revenue.

I'm curious. What do you think? You, you kind of have in hand versus what you have to go out and earn here over the next couple of months, to to meet the midpoint of that guide?

Scott as I kind of mentioned earlier, you may have been off the call but um I I said right now you know we probably have the smallest Delta of go get from that we've really had in any quarter. Um we have a lot of the deal flow, kind of in the works already. Either under contract and just delivering and executing against such as vdr, um, or areas that, you know, again, we had to get over the hump to get the, um, Air Force contract done, um, with initial phases deployed, but now that that contract and award is live, um, and our initial software has been deployed, um, again now it's just, you know, ramping and scaling. So again to be very clear, you know, I would say, our contracted ga, uh, contracted opportunity provides us probably the best resolution for us to, um, I say perform against the guide with the smallest, Delta of go get that we've had in a very long time.

That's great and and very helpful. Uh, did you disclose what? Uh, revenue from the Air Force was during the quarter.

No, we did not.

Can you?

No, we're not going to, we're not going to break down specific contracts or or specific line items.

fair, fair, fair enough, um, on the vdr pipeline are there, significant customer concentrations in there or is it fairly

Uh, evenly dispersed.

Um, I think the space in general, um, as I've said in my prepared remarks,

Um, you know, the space is dominated by really the top, you know, you know, 50, major players. Um, so it is a, it is a massive category, um, but but, but it is dominated by 50 players. Um, you know, around that area. Um, so again, you know, this is unlike other areas of our business, you know, where we have thousands of customers. You, you can sort of interpret that, you know, that again to be clear. We don't have a single customer who's dominating it, but in terms of the current ecosystem out there, this is both good and bad. Um, it is the super majority of the spend is concentrated to about 50 major big tech companies today and AI model development companies. Um, on the, on the flip side, the positive side is I probably as we stated we're engaged with almost all of them already, right? We haven't. It's not we're not we're not actively doing business with all of them yet. Um I think we did say as our goal is to be actively engaged and working with all of the major hyperscalers by the end of the year. So on 1 side they're they're you know, that I would say there is the potential of

Concentration. Um, within that 50, um, group. But on the opposite side, is its afford US the ability because of the killer offering that we have in the great assets that we have. We're already engaged with near majority of the 50 already.

Okay. And and as you guys have gone out and sold vdr to have spoken to customers on, on vdr, are you getting better in that sales process? I mean, you know, I imagine, um, each incremental opportunity, your sales team was able to learn a little, something new and and might be more efficient uh moving forward.

To to accelerate. So I'd say you know that that that's exciting on on on the flip side, you know, this, you know, audio and video and unstructured data as a training data class is relatively newer. Um, so again, part of it is just familiarity with a lot of different groups who are let's say, you know first time really trying to think about what what their next Generation multimodality. Um video-based models may look like um or groups who are trying to fine-tune, um, you know, Legacy multimodality models. So so not only I would say it's 2 sides. Not only are we learning more, um, about what these different groups.

Um, are trying to achieve, um, with their next Generation models, but um, but on the flip side, they are learning more about us. Um, and, and I could, and I can say confidently, is we're building great trust. Um, people know that we veritone can deliver, um, at scales. And I did touch on, you know, kind of the scale and size of of tokens that we are dealing with. And we're talking about hundreds of millions billions and obviously potentially trillions of tokens in the context of of just the scale of the audio and video video that we're dealing with. So we're we're we're bullish. Um and I'd say it's really 2 sides 1. We're getting more confident and 2 our customers who who were working with them, selling to are getting more confident in in higher with a higher level of trust in US.

All right, I appreciate the added color, Ryan.

Thank you.

This concludes our question and answer session, I would like to turn the conference back over to president and chief executive officer, Ryan, Spielberg for any closing remarks.

Well, at first, I'd like to thank everybody, you know, I'm obviously very excited about this quarter. Um, you know, it's taking us a long time, um, to to clean up a lot of things but, um, you know, as sort of we've been sort of indicating now for a few quarters. Um, there's a really, a lot of excitement on some killer core assets on in our in our AI software business and vdr. Um, that, that would we knew were coming, um, and if this quarter kind of culminated in a couple things, 1 got over the hump with the big, um, OSI Air Force contract, and really started to sort of jog in into a run with the growth of vdr, um, which is going to be a great accelerant for the balance of the year and into the future, you know, 45%, if you know year-over-year growth in the second quarter in our core, AI software is phenomenal. Um, and I think there's there's a lot, there's a high ceiling there. Um so again we're exiting this quarter and moving into the second half of the year with a purview into next year. Feeling great. Um we still got to execute but our pipeline's large.

Um, we're dealing with some of the largest tech companies out there who are selling with, and sort of, finally the sky's the limit for Veritone.

Um migrate covered it but please check our IR sites or please register. Um we are going to be attending a multitude of different Financial conferences here, over the balance of the year and into the first quarter of next year, hope to meet and talk to both our existing and new investors. So but appreciate everybody's time today. Thank you.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect