Q3 2025 Veritone Inc Earnings Call
Speaker #3: Good day and welcome to the Veritone Inc third Quarter 2020 financial Results conference call . All participants will be in listen only mode .
Speaker #3: Should you need assistance , please signal a conference specialist by pressing the star key . Followed by zero . After today's presentation , there will be an opportunity to ask questions , to ask a question , you may press star , then one on your telephone keypad .
Speaker #3: To withdraw your question , please press star . Then two . Please note this event is being recorded . I would now like to turn the conference over to Kate Goldsmith , Investor Relations .
Speaker #3: Please go ahead .
Speaker #4: Thank you and good afternoon . After the market closed today , baritone issued a press release announcing results for the third quarter of 2025 ended September 30th , 2025 .
Speaker #4: The press release and other supplemental information are available on the Investor Relations section of Veritone, Inc. website. Joining us for today's call are Veritone's President and Chief Executive Officer, Ryan Steelberg, and Chief Financial Officer, Michael Zemetra, who will provide prepared remarks and then open the call up for a live question and answer session.
Speaker #4: Please note that certain information discussed on the call today , including certain answers to your questions , will include forward looking statements . This includes , without limitation , statements about our business strategy and future financial and operating performance .
Speaker #4: These forward looking statements are subject to risks , uncertainties and assumptions that may cause the actual results to differ materially from those stated .
Speaker #4: Certain of these risks and assumptions are discussed in Veritone Inc SEC filings , including its annual Report on Form 10-K . These forward looking statements are based on assumptions as of today , November 6th , 2025 , and Veritone undertakes no obligation to revise or update them .
Speaker #4: 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 #4: 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 Veritone website at .
Speaker #4: Now , I would like to turn the call over to our President and Chief Executive Officer , Ryan Steelberg .
Speaker #5: Thank you , Kate , and thank you , everyone for joining us today . As the iconic line from one of my favorite childhood shows , the A-Team , goes , I love it when a plan comes together .
Speaker #5: Simple yet profound and never more fitting than it is for baritone today . I look forward to sharing the details of our exceptional quarter and the strategic momentum now propelling Veritone Inc forward .
Speaker #5: But before we dive in , I want to take a moment to highlight the substantial progress we've made over the past 24 months .
Speaker #5: Progress that has fundamentally strengthened our company and positioned us for sustained growth and success . In early 2023 . We set a bold and deliberate course to realign Veritone Inc with its AI , where first mission fortify our financial position and ignite durable strategic growth .
Speaker #5: We've executed with precision and purpose every step of the way , transforming vision into measurable achievement . Today , I'm proud to declare success across these core initiatives .
Speaker #5: Veritone has not only regained its footing , but stands stronger , more focused , and more strategically positioned than ever before . First , let's start with the balance sheet , where we have completely flipped the script .
Speaker #5: A few years ago . At their peak . We carried nearly $80 million in high cost term debt , and roughly $200 million in convertible debt .
Speaker #5: Today , I'm proud to announce that we've completed an agreement to retire the entirety of our term debt and repurchase approximately 50% of our outstanding convertible debt .
Speaker #5: While maintaining material net cash on the balance sheet, we aim to fully fund operations through 2026 and achieve our profitability goal in the later half of next year.
Speaker #5: As a result , our annual debt service burden has now dropped from over $14 million a year to approximately $800,000 a year . A transformative shift that fundamentally strengthens our financial foundation and future trajectory .
Speaker #5: Our balance sheet historically , an anchor laden with debt , now provides renewed flexibility and stability , enabling us to fully capitalize on this hypergrowth market opportunity .
Speaker #5: Second , after years of disciplined financial execution and strategic reorganization efforts that have generated tens of millions of dollars in savings , our operating model today is now tightly aligned with both our scale and our strategic focus on our high growth AI software products and services .
Speaker #5: With this foundation in place, our confidence in achieving operating profitability in late 2026 has never been stronger. Third, we have refocused Veritone squarely on our AI roots.
Speaker #5: Our unmatched expertise and unstructured data and our market leading intelligent AI applications . Today , Veritone stands on a trajectory of strong strategic and profitable growth , powered by our proprietary AI operating system eyewear , which fuels the global data economy by generating trillions of tokens every quarter .
Speaker #5: As the AI economy accelerates , the data economy is expanding right alongside it and Veritone strategic positioning and market timing could not be more perfect .
Speaker #5: Baritone has emerged as a leading semantic token factory for video and audio , a service we call the Veritone data Refinery , or VTR , built entirely on our own proprietary AI , where platform , our tokenization engine not only powers our own AI workflows and customer applications , but now serves as the foundation for a powerful new monetization framework .
Speaker #5: Our product offering is leading the way as the first of several major monetization initiatives , which we plan to roll out beginning in the first quarter of next year .
Speaker #5: For more than a decade , baritone has been tokenizing video and audio . The fastest growing segment of unstructured data at massive scale .
Speaker #5: More importantly , we're doing so in a transactional , utility driven format that delivers immediate value and measurable ROI for our customers and ultimately for our investors through our expanding suite of innovative AI products , services and applications .
Speaker #5: Our tokenization and monetization strategy is designed to exist and operate both on chain in the context of blockchain , and independently , as it has done profitably and efficiently for more than a decade .
Speaker #5: The data as a currency era has arrived , and Veritone is uniquely positioned to capitalize , executing from a position of strength , expertise and leadership in a rapidly expanding multibillion dollar market .
Speaker #5: In fact , according to Mordor Intelligence , the global tokenized asset market is projected to reach $13.5 trillion by 2030 . It is going to be a very exciting next few years for baritone and our customers .
Speaker #5: Now turning to our strong quarterly results . Veritone delivered revenue of over $29 million . This performance underscores the accelerating demand for our market leading AI , where solutions , data , products , and intelligent applications .
Speaker #5: Representing a 32% year over year increase in revenue for the overall business . Looking specifically at software products and services , which includes revenue grew by an impressive 55% during the quarter , excluding Veritone , higher , our software , products and services revenue surged by more than 200% as global investment in AI infrastructure intensifies .
Speaker #5: Demand for high quality training data and for our AI applications continues to rise in parallel , this powerful combination is driving sustained high margin expansion across our software products and services business .
Speaker #5: And as Mike will outline shortly , our bottom line performance this quarter was equally strong , delivering more than a 50% year over year improvement .
Speaker #5: Now , turning to the partnerships , contract wins and products that underpinned our strong results this quarter . Our Veritone data refinery business continued to deliver exceptional performance .
Speaker #5: VTR transforms raw , unstructured audio , video , images and text in a high quality tokenized datasets that power and fine tune the world's most advanced AI models .
Speaker #5: We have established ourselves as a premier data and model training partner , and during the quarter , we secured several significant new customers , including contracts with multiple major hyperscalers .
Speaker #5: Further solidifying Vtr's position as a critical enabler in the unstructured AI ecosystem . VS accelerating momentum underscores not only the surging Buyside demand for training data , model ready training data , but also the expanding monetization potential of premium video and audio assets themselves .
Speaker #5: Our qualified VTR pipeline and bookings now exceed $40 million , reflecting 100% growth quarter over quarter . Importantly , that figure represents only current bookings and near-term opportunities .
Speaker #5: Our total VTR pipeline now spans multiple sectors , regions , and time horizons . Positioning Veritone for sustained growth as AI developers increasingly move beyond open web data in favor of proprietary Multi-modality data sets .
Speaker #5: Precisely , the domain was built to serve . Looking forward , we are confident that by the end of Veritone will hold active contracts or projects with every major hyperscaler in the market .
Speaker #5: Our solutions are indeed growing quickly and provide great strategic leverage for future growth , but we are equally excited about our AI applications business again .
Speaker #5: Built and deployed on the same AI wear platform for Veritone and our customers . Our AI applications are the delivery vehicles for data centric , high value use cases , driving efficiency gains and ROI .
Speaker #5: In the quarter , we achieved significant progress across our commercial enterprise applications business . We signed 27 commercial agreements , including partnerships with ESPN , the NCAA and Newsmax , and just last week , we announced an expansion of our long standing relationship with CBS .
Speaker #5: Now encompassing many of CBS media Ventures flagship programs , including Entertainment Tonight and Inside Edition , which are now available for licensing through Veritone .
Speaker #5: These partnerships exemplify how Veritone empowers the world's leading media organizations to unlock and monetize their vast content and data archives . Furthermore , through VTR , we are transforming these assets into clean , searchable , model ready datasets , creating high value training material for AI models and in turn , generating meaningful recurring revenue streams for both Veritone and our partners .
Speaker #5: As content libraries expand and data volumes surge . Veritone is uniquely positioned to unlock maximum value for commercial enterprises and IP owners . Our technology enables partners to fully monetize their content archives , transforming dormant assets into active revenue generating resources while simultaneously producing high quality , model ready data that fuels the next generation of AI innovation .
Speaker #5: Turning to the public sector , in Q3 , we closed 82 contracts from new and existing customers across federal , state and local agencies .
Speaker #5: We also added 30 new agencies during the quarter , including an Idms win at a top five law enforcement agency and an annual renewal with the Department of War Agency deployed in their private cloud .
Speaker #5: Despite the federal government shutdown , we continue to be actively engaged with our customers and prospects in the Department of War and DHS as we expand the footprint of Veritone solutions , our public sector pipeline now approaches $218 million in qualified opportunities , up from $110 million earlier this year , a testament to both our accelerating demand for AI driven solutions and baritones reputation as a trusted technology partner to law enforcement , defense and fed agencies .
Speaker #5: We also saw encouraging momentum internationally , including closing a partner led transaction for a national police agency in the EU and advancing multiple opportunities in the UK for Veritone redact veritone , Idms and a new workflow solution on AI were our international pipeline now exceeds $28 million and continues to grow rapidly , reflecting rising product market fit and strong demand among agencies engaged in government initiatives in key global markets , all supported by our secure and GDPR compliant infrastructure .
Speaker #5: Our affordable status on the Department of Wars P1 marketplace positions Veritone to capitalize on the expanding wave of government AI investment . This designation enables us to engage directly with DoD and civilian agencies .
Speaker #5: Shortened procurement cycles and deliver mission critical AI solutions faster , helping government partners tackle their most pressing operational and analytical challenges . Subsequent to the end of the quarter , we introduced a suite of new advanced capabilities within Veritone redact our AI , powered SaaS application that automates the redaction of sensitive information in audio , video and text .
Speaker #5: The latest features include AI powered voice masking , inverse blur , and multi-language transcription . In 64 languages . All designed to enhance privacy , compliance and efficiency .
Speaker #5: These advancements are already driving expansion within existing customers and creating new opportunities for agency and enterprise partnerships before turning things over to Mike , I want to reflect again on how far we've come and where we're headed .
Speaker #5: I could not be more excited about Veritone Inc future , and I remain deeply grateful to our investors , partners and employees who have supported us through this remarkable transformation .
Speaker #5: I have never been more confident in the future of Veritone . Our business , our people and the market opportunity before us . We are leading the tokenization and modernization of valuable , unstructured data and have firmly established ourselves as a key enterprise leader in both the AI and data economies .
Speaker #5: With the strength and balance sheet supported by high quality equity raises completed in the past few months , and the material debt reductions announced today .
Speaker #5: Veritone is entering a new phase of execution , one defined by rapid profitable growth with our exceptional talent , dynamic AI platform market leading applications and a robust expanding pipeline , Veritone Inc future has never been brighter .
Speaker #5: Over to you , Mike .
Speaker #6: Thank you . Ryan . We started the second half of 2025 with one of our strongest quarters to date with Q3 revenue , surpassing our recent guidance led by our software products and services growth of over 55% year over year .
Speaker #6: And 48% year over year improvements in our bottom line non-GAAP net loss . In addition to this momentum in our results , we secured over 100 million in equity capital in September and October 2025 , substantially improving our longer term liquidity position .
Speaker #6: As I will explain in more detail . I am thrilled to announce today that we will be paying off 100% of our term loan and paying down 50% of our convertible debt , further improving our liquidity position .
Speaker #6: The results we achieved this quarter are the culmination of years of hard work and strategy coming to fruition . During my prepared remarks , I will discuss Q3 year over year performance and KPIs , which exclude the results of our media agency , which are presented as discontinued operations and the corresponding historical financial periods .
Speaker #6: Balance sheet and liquidity position , including the recent raises and pay down of our debt and Q4 and fiscal 2025 guidance starting with Q3 2025 .
Speaker #6: Performance . Q3 revenue was 29.1 million , up 7.1 million , or 32% , from Q3 2024 , driven by an 8.1 million increase from our software , products and services , offset by a $1 million decline in our managed services .
Speaker #6: The 8.1 million revenue growth in software products and services was driven by commercial enterprise , which improved 7.8 million year over year , and Public sector , which grew over 25% year over year .
Speaker #6: The growth in commercial enterprise was led capital by Veritone Inc Data Refinery , or VTR . Veeder , which launched in Q4 2024 , is one area where we continue to see very strong growth and today has a near-term sales pipeline in bookings of over 40 million , up over 100% from our guidance in Q2 2025 .
Speaker #6: Overall , Veritone remained relatively flat year over year , driven largely by the hiring softness in the macro economy . Excluding Veritone Inc hire , our software products and services grew more than 200% year over year .
Speaker #6: The growth in the public sector was driven by the rollout of larger deals executed in the first half of 2025, including the Department of Defense and larger public safety agencies.
Speaker #6: We expect these larger public sector deals , coupled with our expanding public sector pipeline to generate substantial growth beyond 2025 , which I will explain in more detail later .
Speaker #6: The $1 million decrease in Q3 managed services revenue was principally due to a decline in representation services by a decrease in our very services , offset by a slight improvement in content licensing as we previously discussed , we expect this negative trend in representation services to continue through 2025 or until the macro economy shows demonstrated improvements over 2024 .
Speaker #6: Turning to key performance metrics across our software products and services in Q3 2025 , RR of 68.8 million , up 9% from Q2 2024 of 63.4 million and 12% sequentially from Q2 2025 from increased consumption based revenue , largely driven by VR and stable recurring SaaS based revenue .
Speaker #6: Overall , RR from consumption based customers increased 26% year over year and 74% sequentially from Q2 2025 . Recurring subscription based SaaS customers were up slightly by 3% year over year .
Speaker #6: As of Q3 2025 , 73% of our RR was from subscription versus consumption based customers . As compared to 76% at Q3 2024 .
Speaker #6: Total new bookings reached 21.5 million, an increase of 5 million, or 30% year over year, primarily due to larger VTR bookings across our software.
Speaker #6: Customer base . Gross revenue retention continued to be above the 98th percentile . Total software products and services . Customers of 3021 , which was down 9% year over year , predominantly from our commercial enterprise sector , which includes lower consumption based customers across Veritone Inc , hire and the continuing impact of Sunsetting .
Speaker #6: Legacy , CareerBuilder customers post the June 2023 acquisition of Broadbeam and smaller customers . As we focus on larger AR opportunities , offset by an increase across public sector , largely from the growth in public safety , customers , Q3 GAAP gross profit was 18.7 million , compared to 14.7 million in Q3 2024 , an improvement of 4 million , largely driven by growth in software products and services , including VTR , with GAAP gross margins of 63.3% as compared to 66.6% in Q3 2024 .
Speaker #6: Excluding non-cash depreciation and amortization expense , Q3 2025 non-GAAP gross margin was 70.6% as compared to 71.2% in Q3 2024 , a decline of 60 basis points .
Speaker #6: Note that included in Q3 2025 is certain one time software revenue that has very high gross margins , while our gross margins remained close to approximately 40% .
Speaker #6: As I will discuss later , we do not expect the same level of one time software revenue to recur in Q4 2025 , and as a result , our forecasting Q4 2025 non-GAAP gross margins to be closer to 60% .
Speaker #6: Q3 operating loss of $15.8 million improved by 6.7 million , or 29% , year over year , primarily driven by the increase in gross profit , offset by lower operating expenses .
Speaker #6: Net loss from continuing operations was 26.9 million , an increase of 4.4 million , or 20% , compared to Q3 2020 . For the year over year increase was principally driven by an $8 million non-cash charge in the estimated fair value of the Earnout expected from the divestiture of Veritone one recorded in Q3 2025 and a $2.2 million change in our Q3 tax provision , offset by the 6.7 million improvement in operating loss .
Speaker #6: Non-GAAP net loss from continuing operations was $5.8 million, as compared to $11.1 million in Q3 2024, representing a $5.3 million, or 48%, improvement.
Speaker #6: The improvement was principally due to the year over year growth in non-GAAP gross profit , coupled with lower operating losses driven by increased discipline on cost management .
Speaker #6: As I will explain further , these reductions will provide us with a more efficient cost structure as we manage towards our planned growth throughout the remainder of 2025 and targeted profitability in the latter part of 2026 and beyond .
Speaker #6: Turning to our balance sheet , as of September 30th , 2025 , we held cash and restricted cash of 36.5 million as compared to 16.9 million at December 31st , 2024 .
Speaker #6: The net change in cash reflects net cash outflows from operations of 41.2 million , principally driven by our non-GAAP net loss of 25.6 million .
Speaker #6: Deferred purchase consideration of 1.2 million and interest paid on debt of approximately 5.8 million . Coupled with the timing of working capital in the quarter , driven largely by the increase in AR due to the growth in revenue in the period , offset by net cash inflows from investing and financing activities of 64.9 million , driven by net cash inflows of 70.9 million from equity offerings through Q3 2025 .
Speaker #6: Partially offset by 5.8 million in debt . Principal payments and 3.6 million in capital expenditures . Turning to liquidity today , in September 2025 , we completed an underwritten equity offering , selling 9.5 million shares of common stock priced at $2.63 per share and an Overallotment of 1.4 million shares granted to the underwriter , which was exercised in full for total gross proceeds of 28.8 million .
Speaker #6: In October 2025 . We completed a registered direct offering , selling 12.9 million shares of common stock priced at $5.83 per share for total gross proceeds of 75 million .
Speaker #6: Immediately following the October offering , we held cash and cash equivalents in excess of $100 million at September 30th , 2025 . Our consolidated debt is down from a peak of 201 million in December 2021 to approximately 126.7 million subsequent to September 30th .
Speaker #6: We paid down $3.6 million of our term debt through deferred purchase consideration received in October 2025, bringing our debt to $123.1 million.
Speaker #6: Comprised of 31.8 million of term debt and 91.3 million of convertible debt . Today , we announced that we have agreed in principle with certain debt holders to pay off 100% of our senior secured term debt and buyback 50% of our convertible notes , for a total of approximately 77.5 million of consolidated debt .
Speaker #6: Principal . In exchange for approximately 77.5 million of cash and 625,000 shares of our common stock , valued at today's closing price . Immediately following this debt payoff , our unencumbered consolidated cash is approximately 34 million , which is sufficient to fund our operations over the next 12 months .
Speaker #6: At a minimum , post this paydown , our remaining debt will be approximately 45 million , comprised solely of our 1.75% convertible notes due November 2026 .
Speaker #6: By completing this transaction , we free up an estimated 13 million of annualized debt , carry costs and substantially improve our liquidity position and future cash flow outlook .
Speaker #6: I want to underscore what an impressive and important step reducing our debt is . The improved flexibility and stability we now have as a result of our strength and balance sheet will allow us to focus on reaching our growth potential to meet the Hypergrowth market opportunity , we face .
Speaker #6: That said , we will continue to be opportunistic with continued focus on further improving our current liquidity position and balance sheet . At September 30th , 2025 , we had 70.9 million shares issued and outstanding and 2.5 million warrants outstanding to our debt holders .
Speaker #6: Now , turning to updated fiscal Q4 2025 and full year 2025 guidance . Our software , products and Services revenue , pipeline and long term outlook continue to be at all time highs .
Speaker #6: More specifically , we continue to see strong demand across the approximate $10 billion global digital evidence Management market . Our public sector and VTR pipelines continue to grow .
Speaker #6: Collectively , our backlog and sales pipeline across our core AR platform is in excess of 200 million today , and is Veritone remains uniquely positioned to capture even more opportunity in the data as a currency market .
Speaker #6: We expect that pipeline and our potential to monetize our trove of tokenized audio and video to further increase more specifically , in Q4 2020 .
Speaker #6: Five , revenues expected to be between 33.4 million and 39.4 million , as compared to 22.4 million in Q4 2020 , for a 63% increase at the midpoint .
Speaker #6: And 25% sequentially from Q3 2025 . In Q4 , we expect our software , products and services to increase more than 75% year over year , led by the growth in public sector and commercial enterprise .
Speaker #6: Specifically , we expect our public sector revenue to grow close to 50% year over year , and our commercial enterprise revenue , led by VR to grow more than 75% .
Speaker #6: Our Veritone Inc higher products and services are included in this growth , and we expect baritone hire to be slightly down year over year given the current macroeconomic environment consistent with Q3 2025 , our managed services is expected to be down year over year , principally due to the representation side of our business , which is experiencing some slowness as a result of the more challenging macroeconomic environment .
Speaker #6: We expect Q4 non-GAAP gross margins to be approximately 61 to 60% , driven by the forecasted higher mix of revenue in the period Q4 .
Speaker #6: non-GAAP net loss is projected to be between 1.5 to 5 million as compared to 9.7 million in Q4 2024 , representing a 66% improvement at the midpoint and a 44% improvement sequentially from Q3 2025 .
Speaker #6: Turning to fiscal 2025 , outlook , we are updating our prior guidance for fiscal 2025 , which we are expecting revenue to be between 109 to 115 million , which at the midpoint represents a 22% increase year over year .
Speaker #6: And non-GAAP net loss to be between 31.6 to 26 million , representing a 29% improvement year over year at the midpoint . The change is reflective of the timing shifts in revenue , coupled with the compression and gross margins on VTR in 2025 , which we expect to improve upon in fiscal 2026 .
Speaker #6: Before closing the call , I'd like to remind everyone listening that Veritone will be attending Needham's virtual sixth annual Tech Week November 20th through the 24th , and UBS Global Technology and AI conference December 1st through the fourth .
Speaker #6: In Scottsdale , Arizona . That concludes my prepared remarks . Operator . We would now like to open up the call for questions .
Speaker #3: We will now begin the question and answer session . To ask a question , you may press star , then one on your telephone keypad .
Speaker #3: If you are using a speakerphone , please pick up your handset before pressing the keys . If at any time your question has been addressed and you would like to withdraw your question , please press star then two .
Speaker #3: At this time , we'll pause momentarily to assemble our roster . In your first question comes from Joshua Riley with Needham . Please go ahead .
Speaker #7: All right . Great . Thanks for taking my questions . And nice job on the quarter here . Maybe just starting off on the Q4 revenue guidance .
Speaker #7: You know , there's a $6 million range . Obviously there between the high and the low end . Maybe we could just review what are the puts and takes that , you know , would get your expectations in the business to the high end of the revenue guidance for the quarter .
Speaker #7: And then maybe , you know , what would drive it to the lower end of the guidance for the quarter . Thank you .
Speaker #7: Yep . I think it's just timing and velocity .
Speaker #5: On some .
Speaker #7: Of the larger .
Speaker #5: Deals . Again , you know , as I sit here today , obviously I was very bullish in both , you know .
Speaker #7: The words that I .
Speaker #5: Chose and sort of my my tone and disposition .
Speaker #7: So obviously .
Speaker #5: We're going to push to get to the highest .
Speaker #7: But again , relative to the .
Speaker #5: Size and magnitude of some .
Speaker #7: Of these .
Speaker #5: Deals and some .
Speaker #7: Of the commercial .
Speaker #5: Deals and some of the .
Speaker #7: , I'd say to a lesser third degree .
Speaker #5: The timing on .
Speaker #7: Some of the public sector .
Speaker #5: Deals .
Speaker #7: That's really going to be .
Speaker #5: Sort of the .
Speaker #7: Inputs to the ranges . But as I sit here today , very , very optimistic , very excited .
Speaker #5: , and .
Speaker #7: Most importantly , we .
Speaker #5: Have .
Speaker #7: I'll say , a very mature pipeline to substantiate that that range and . give us the opportunity to hit the higher .
Speaker #5: End of the .
Speaker #7: Range . Got it . And then on the on the 100% quarter over quarter increase in the pipeline , can you just help us understand what what is what are you doing from a go to market perspective to kind of drive that pipeline growth .
Speaker #7: And then as we look forward into 2026 , are you expanding the go to market efforts there to further expand the pipeline , or do you kind of have the people in place to manage the upside opportunity there ?
Speaker #7: Maybe kind of help us understand the dynamics there . So this isn't really exciting one . And I want to be clear , I mean , a lot of our growth obviously .
Speaker #5: This this , this conversation .
Speaker #7: Today was dominated by VTR . But there's the other side of EDR , which is the the supply side . And that's the side that frankly , before we even introduced the concept of ADR , we've been servicing and selling AI based software to a lot of media and entertainment and content groups for years .
Speaker #7: So again , where we see the great opportunity and what makes us very , very unique as compared to really anybody who's in the AI training data ecosystem , is that we , to be clear , we represent and generate revenue from both sides , right .
Speaker #7: Again ,
Speaker #5: Both from the buy side . Those are the hyperscalers and the model developers . We're selling to , but also the representation side , those are the media and entertainment and other data suppliers that we represent .
Speaker #5: But also have been selling software to . So again , to your question . Specifically , as I stated in my prepared remarks , we do believe that we will be engaged in doing active projects and business with the with the with nearly all , if not 100% of the major buyers today in the space .
Speaker #5: But the space is growing quickly . And so what we're very focused on is to make sure that not only are we continuing to take care of the of the larger transactions with the bigger model development shops , but also we do believe because of the cost basis for compute , storage , etc.
Speaker #5: , continues to come down . We do believe that there's going to be more entities , different companies to sell to , to sell these training data sets to .
Speaker #5: So we do believe that we want to continue to strategically expand our sales force , we are building a pretty reputable brand as it relates in the AI training data .
Speaker #5: Data market . But but to be clear , we want to make sure we don't simply focus on the buy side . We continue to want it and what we have seen , we really didn't touch on upon it that much .
Speaker #5: In my prepared remarks , but we are also seeing an increased velocity of the data providers coming to Veritone Inc . We signed a multitude of different .
Speaker #5: We obviously mentioned a couple of the bigger brands on my call , but we saw a multitude of different customers now coming to us , not only for the solutions , but for our AI software side of the equation .
Speaker #5: So again , I want to just to summarize that we are we are unique in the sense that we that we that we sit and represent and sell to both sides of the equation .
Speaker #5: The sell side and the buy side . And yes , we will be investing strategically more into the go to market , to increase velocity , to make sure , again , that that's not a limiting function going into next year .
Speaker #5: Got it .
Speaker #8: That's very helpful explanation there . And then maybe on the the Q4 guidance for the public sector , I believe you said it was going to be up 50% year over year .
Speaker #8: How much of the what are you factoring in on the federal side with the government shutdown ? Obviously still in place here to kind of hit that number ?
Speaker #8: And are you making any assumptions that some federal , US federal deals will close and kind of hit that number , which would require the government to reopen or just kind of how you kind of calibrating those assumptions ?
Speaker #5: I think we've taken that into the handicap for that guide . Obviously , as a percentage of the overall revenue base , it's not that large .
Speaker #5: You know , and so meaning to sway us to have to take a more pessimistic view of hitting that guide . To be clear , we still are generating growth .
Speaker #5: We still are closing new businesses and revenue in the federal space . But have we seen potentially some delays in some of the revenues that would have contributed in this quarter ?
Speaker #5: We have , thankfully , the other sides of the business have grown . You know , sort of outperformed . And so thus we're you know , we're extremely bullish overall .
Speaker #5: But but again , the short answer is , you know , like everybody we hope this government shut down ends sooner than later .
Speaker #5: And you know just what if you know , if all these things start hitting on all cylinders . So again overall we're very an excited .
Speaker #5: And I think that a lot of investors need to when they're thinking about some of our market peers in the market . We're not a one trick pony in a certain vertical , right ?
Speaker #5: We have the exact same powerful technology stack AI where that's being sold effectively into both commercial and commercial and public sector . And I think investors should take note of that .
Speaker #5: So again , this is another great example of having a focused yet diversified business can be very , very attractive .
Speaker #8: Okay , great . I'll pass the line along . Thanks guys .
Speaker #5: Thank you .
Speaker #3: And your next question comes from Glen Matson with Ladenburg Thalmann . Please go ahead .
Speaker #9: Hi . Yeah , thanks for taking the question . I just want I know VTR is a bigger story , of course , but I wanted to just drill down on that public sector stuff for a minute .
Speaker #9: What I'm curious is , you know , is it that the federal shutdown is causing a bit of a slowdown in , in particular , is it related to that ?
Speaker #9: Air Force contract only because , you know , I want to understand if it's , you know , as I think about my forecast for next year , if there's like a snapback as a temporary thing or if it's , you know , maybe that something else going on , just if you could elaborate .
Speaker #9: Thanks .
Speaker #5: No , I think this is a short term blip . Again , in terms of at least my perspective for your modeling . You know that this was weeks , if not a couple months delay .
Speaker #5: But again , it's not binary . To be very clear . So it will have a negligible overreaching effect on for your modeling for next year .
Speaker #5: And when you say snapback again , a lot of the projects are active , but again , you know , there are people that we were working with , not not the majority , but definitely individuals who were furloughed and put off , which I would say , you know , may have contributed to , to to some of the slowdown .
Speaker #5: But again , I'm not , you know , I so I would say no , that should not impact in my mind what you are in terms of your modeling or our excitement for overreaching public sector .
Speaker #5: But again , like many others , we did see some hit over the last several weeks .
Speaker #9: Thanks for that color . And then , as I think , also kind of a model question , if you want to handle it or Mike .
Speaker #9: But when I think about next year , I mean historically the front half of the year for software and services was kind of a bit lighter .
Speaker #9: And then a stronger second half if I , if I have that right . And so that might be being overwhelmed by the growth .
Speaker #9: How should we just think about seasonality next year ? I know you're not necessarily guiding for next year , but just kind of the trend , the timing .
Speaker #10: I haven't given any guidance . Yeah , I'll take it . I'll take it . We haven't given any guide for next year .
Speaker #10: But to your point , a lot of the growth was in the back half of this year . And that should continue in the first half relative to year over year comparisons .
Speaker #10: If that's to kind of give you some direction .
Speaker #9: Yeah , very helpful . Great . That's it for me I think . Thanks , guys . Come back in the queue .
Speaker #5: Thank you .
Speaker #10: Thank you .
Speaker #3: Again if you have a question please press star . Then one . Your next question comes from Stephen Banta with Banta Asset Management .
Speaker #3: Please go ahead .
Speaker #11: Hey guys . Great quarter and looks like you guys are executing well against what you stated back in 23 . I'm just curious if you can provide maybe a little bit of color around your strategy with Veritone Inc .
Speaker #11: Seems like the business in general is is firing on all cylinders and and is looking to , to be optimistic in the future .
Speaker #11: But when it comes to higher , how are you guys looking at that ? Do you have a strategy with with regard to that business ?
Speaker #11: Thanks .
Speaker #5: You know , you know , it is a very stable business . Obviously , as we've stated in the market on the calls relative to the other , I'd say more hyper growth areas of the business .
Speaker #5: It's more or less flat or slightly down , but it is a very stable business . You know , it is , you know , a meaningful contributor to the business in terms of cash flow .
Speaker #5: So we'll keep all of our options on the table . Again , you know , I think most importantly , on a relative basis to its peers in the marketplace , in in an industry where a lot of players in the space have been down anywhere from 10 to 20% for a business that's been flat , slightly down , we're outperforming .
Speaker #5: So , you know , as of as of all things , you know , it is important part of the overall Veritone Inc portfolio and revenue base .
Speaker #5: But but like all things , you know , we're we're going to keep an open mind about about the future . But right now we're we're pleased with the overreaching .
Speaker #5: I think the most important thing we want investors to look at is overreaching the improvement across the board at an aggregate basis of what we've been able to do , both top and bottom line .
Speaker #5: And as of today , the Veritone Inc piece is an important part of that equation .
Speaker #11: Gotcha . Okay . Hey , thanks for taking the question .
Speaker #5: Thank you .
Speaker #3: This concludes our question and answer I would like to turn the conference back over to CEO and Chairman , Ryan Steelberg , for any closing remarks .
Speaker #3: session .
Speaker #5: Well , thank you , everybody for the call today . You know , obviously , we're you know , we're looking we're you know , we as a company , we sort of fit in .
Speaker #5: We are we are an AI company . But ironically , relative to what I think we've done is massive improvements on some of the legacy
Speaker #5: overhangs . You know , we have been kind of operating . I feel historically with , you know , one , almost two arms tied behind my back .
Speaker #5: And I think us, as a collective company with our product portfolio, being in this market, both I'll call the data and AI economy.
Speaker #5: We should all be very , very optimistic , excited and bullish about our prospects . You know , again , hopefully , you know , we can continue to prove improve our multiple as a company relative to our peer group .
Speaker #5: But there are a lot of things that we needed historically to clean up. As I stated clearly, I believe that we have cleared those up.
Speaker #5: And I think we're in a phenomenal situation . I also want to double tap . And before I sign off on that very unique situation , we are where we sit in in the middle of providing great utility value , both from data suppliers and for data acquirers .
Speaker #5: Very unique . And I want and we're going to continue to talk about that and continue to continue to press on that . It just provides tremendous growth and revenue growth and revenue diversity for the business .
Speaker #5: So, thanks everybody for their time. We'll speak to you soon.