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spk11: Welcome to the Veritone First Quarter 2022 Financial Results Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After 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. 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 Brian Alger, Senior Vice President of Capital Markets and Investor Relations. Please go ahead.
spk02: Thank you, and good afternoon. After the market closed today, Veritone issued a press release announcing the results for the first quarter ended March 31, 2022. The press release and other supplemental information is available in the Investor section at Veritone's website. Joining us for today's call are both the live and digital twin versions of Veritone's Chairman and CEO, Chad Stilberg, President Ryan Stilberg, and CFO Mike Zmetra, who will provide prepared remarks and then open up the call for a live Q&A session. Shortly after completing today's call, the remarks will be made available in six languages on Veritone's Synthetic Voices. Please note that certain information discussed in the call today will include forward-looking statements about future events and Veritone's business strategy and future financial and operating performance, including its expected net revenues and non-GAAP net income and loss for the second quarter and full year of 2022, respectively. These forward-looking statements are subject to risks, uncertainties, and assumptions that may cause the actual results to differ materially from those stated or implied by those statements. Certain of these risks and assumptions are discussed in Veritone's SEC filings, including its annual report on Form 10-K. These forward-looking statements are based on the assumptions as of today, May 3, 2022, and Veritone undertakes no obligation to revise or update them. During this call, the actual and forecasted financial measures we will be discussing other than revenue will be presented on a non-GAAP basis unless noted otherwise. Reconciliations of these measures to the corresponding GAAP measures are included in the press release we issued today. These non-GAAP measures include a breakout of Veritone's results between core operations and corporate. Core operations consists of Veritone's consolidated software products and services and managed services and their supporting operations, including direct cost of sales, as well as operating expenses for sales, marketing, product development, and certain general and administrative costs dedicated to these operations. Corporate consists of general administrative functions, such as executive, finance, legal, people operations, fixed overhead expenses, including facilities and information technology expenses, other income or expenses and taxes, and other expenses that support the entire company, including public company driven costs. Veritone has aligned its organization to focus on two distinct customer groups, commercial enterprise and government and regulated industries. Commercial enterprise today consists of customers in the commercial sector, including our media and entertainment customers, advertising customers, content licensing customers, and corporate intelligence customers that are not from the government or regulated industries. Government and regulated industries, also known as GRI, today consists of customers in the government and regulated industries sectors, including our state, local, and federal governments, legal, compliance, and energy customers. Across the commercial enterprise and government and regulated industries, We separate revenue into two categories, software products and services and managed services. Software products and services consists of revenues generated from our AIWare platform and through Panelogic software products solutions, any related support and maintenance services, and any related professional services associated with the deployment and or implementation of such solutions. Managed services consists of revenues generated from our advertising agency and related services and content licensing services. Finally, I would like to remind everyone that not only is this call being produced with Veritone Voice, our proprietary synthetic voice solution, but it's also being recorded and will be made available for replay via a link in the investor section at the company's website at www.veritone.com. Now, I would like to turn the call over to the digital twin of our chairman and CEO, Chad Stilberg. Chad?
spk05: Thank you, Brian. Good afternoon. Buon sera. Bonsoir. Zao zhao hao. As Brian noted, I am digital twin Chad. I am excited to speak with you today and to reiterate that AI is alive and growing stronger every day. For the first quarter of 2022, Veritone reported revenue of $34.4 million, representing year-over-year growth of 88% on a gap basis and 45% on a pro forma basis. Our new bookings increased 292% versus Q1 2021. We continue to see strong demand for AIWare, and we remain committed to investing to capture future growth. Artificial intelligence, in good times and bad, will continue to thrive. In good times, AI is the leverage for companies to innovate, differentiate and expand their products and offerings. In tough times, AI provides the tools to better optimize, automate and reduce costs and inefficiencies. The pandemic allowed us to prove the value of AI to Amazon and FedEx, two of the world's most advanced and efficient logistics companies. Through our strong partnership with these companies, we pioneered a new AI standard in recruiting that is being rapidly adopted by a diverse set of businesses. Case in point, during Q1, we experienced greater than 200% revenue growth in our hiring platform within our non-Amazon customer base. Similarly, in the early days of COVID, demand for our performance-based advertising business surged, while overall media spend cratered. Law enforcement agencies all across the U.S. selected our solutions while facing the pressure of increased operational expectations combined with reduced funding. In fact, every day, we see further evidence that our strategy of developing and delivering AI solutions based on common ingestion, temporally based cognition, and standard APIs is fundamentally superior to custom or single-point applications. We remain very confident in our projected growth over the course of 2022 and beyond, and we continue to execute at the highest levels across our platform as is evident with our key customer performance indicators for Q1, which included year-over-year software customer growth of 45%, net retention over 120%, and gross retention greater than 90%. Not only are we growing our new customer base, we are keeping and growing our existing customers as well, proof that our land and expand strategy is working. These are incredible stats for any company, and even more pronounced given current economic conditions. AIWare is helping our corporate and government partners make great progress with environmental, social, and governance, or ESG, concerns. On the environmental side, and in less than two weeks, we will be presenting at the IEEE Innovative Smart Grid Technologies 2022 event. Veritone and our lead utility customer, Tampa Electric Company, will be presenting realized results from the first implementation. Together, we will showcase how we are actively working to reduce carbon emissions and produce more reliable and efficient energy. Tangible results include lower maintenance and operating costs, minimal spinning reserve coverage, smoother energy production, and a 2x improvement in inverter life. This same technology is being utilized by smaller power providers and large manufacturing customers. While many companies claim to have operational commitments to reduce carbon emissions, we are actively enabling meaningful change. We believe Veritone's AI solutions are one of the most effective and efficient means of driving real change in the near term. On the social side, in the business world, our AI is removing bias and increasing diversity in the recruitment and hiring process across all commercial segments of our economy. With state and local law enforcement agencies, AIWare is being utilized throughout the investigative and evidence lifecycle. We know our solutions are fundamentally changing how agencies communicate and serve their communities with reduced bias and increased transparency binding agency management with their constituents. From an overall business standpoint today, industry titans such as Amazon, FedEx, Microsoft, and Disney are not only our customers, they are also our partners, and in many cases, evangelists. As customers, they have literally hundreds of millions of dollars being exchanged across our AIWare-enabled solutions and trust us with some of their most critical business operations from hiring to customer acquisition to core technology. As strategic partners, together, we are developing new applications and capabilities into AIWare that extend and expand the use of AI nearly every day. As evangelists, in many cases these companies are distributing or helping us market AIWare solutions to their customers by delivering heartfelt case studies. Ultimately, we believe all companies will need to utilize AI to be competitive in the near future. We expect increased adoption of AIWare in 2022 and further acceleration in 2023 as the trust and awareness of AI's advantages grow. In March, I referred to the tipping point where our customers use AIWare to develop applications for their customers and in turn drive the geometric progression of our business. the point where AI application development and Veritone diverge, and the point where AIWare creates enormous leverage to grow customers, end users, revenue, and so on, I can confidently say that we are there and it is happening. Our focus on our strategy and our mission remains. We have ample resources, a cash flow positive business, and we are aggressively investing in our people and leaning into the strategic advantages of our technology to further accelerate our growth and outpace our peers. Now, I'll turn the call over to Ryan, our president, to provide further details on our operational progress. Over to you, Ryan.
spk09: Thank you, Chad, and good afternoon, everyone. In the first quarter of 2022, strength in commercial software products and services, as well as managed services, drove our revenue growth. The first quarter also delivered our best software bookings quarter ever at just over $9.5 million, up nearly 300% year-over-year, with both GRI and Commercial delivering strong bookings acceleration. Let's start the business review with Commercial Enterprise. Q1 2022 Commercial Enterprise revenues increased 96% over the prior year period. Within commercial, on a gap basis, our managed services grew 18% year-over-year and our software and services revenue grew by nearly 420%. On a pro forma basis, our software products and service revenues were up 79% year-over-year. PandoLogic's contribution was obviously significant to the GAAP growth. The business with Amazon, our largest customer, accelerated with increased penetration and overall robust hiring demand across all our high-volume customers in a highly competitive labor market. Customer growth in general was strong, with PandoLogic maintaining triple-digit customer growth within its customer base while Veritone grew its customer count 15% year-over-year on top of Pando's growth. In total, we exited Q1 2022 with 559 customers. Our record bookings, strong retention, and new market offerings validate our strategy and the investments we are making. We are successfully attracting top talent to the organization, and we have hired more than 150 employees since the beginning of the year. Our expanded team enables us to accelerate the pace of our product innovation, resulting in the launch of Variverse, enterprise AI for the metaverse, which we showcased at last week's NAV show in Las Vegas. We are proud to report we won NAV product of the year 2022 for Veritone Avatar, right on the heels of receiving the same award for Veritone Voice in 2021. Veritone Voice continues to see very strong demand, and we have already announced deals with iHeart, Odyssey, and SilverTrack Digital with a significant pipeline in the queue. More than just synthetic voice, Veraverse is a complete enterprise suite of offerings built on AIWare for the metaverse. Along with voice, offerings include Veritone Avatar, NFT, Verify, and our metaverse migration services. For those that haven't checked it out yet, I highly encourage each of you to visit www.veriverse.com. We will be detailing and demonstrating many of these innovations at our upcoming Analyst Day in Tech Demo on May 13th. Our technology is deployed and utilized by many of the most watched live events like March Madness, the Masters, the French Open, the USGA, the FIA Gran Turismo World Championships, and many others. In addition, we are excited to have just signed a multi-year extension and expansion to our contract with the USTA. As I said in March, in 2022, we continue to expect strong growth from our commercial enterprise offerings, all of which are expanding our TAM as our strategy of further penetrating the enterprise yields more strategic engagements. Shifting to Government and Regulated Industries, or GRI. GRI had a strong quarter, although the revenue might not reflect it yet. The diversity of revenues and the strong bookings gives us further confidence in our go-to-market strategy and product fit. Since we spoke in March, we have engaged with four new civil agencies outside the DOJ for FedRAMP authorizations and our engagements with the JAIC, and the defense agencies continue to expand. Without a doubt, Veritone and AIWare are seeing broader and deeper penetration. On the state and local side, our Contact product is now attracting significant demand outside of California. Redact is also increasing its penetration across the subscriber base. One good use case is a customer in Northern California that initially signed a 100-hour contract, which they expanded to a 400-hour contract, and just recently more than doubled to a 1,000-hour contract. In aggregate, our customer count of law enforcement agencies is up roughly 100% year-over-year. On the energy front, demand has been accelerating since we officially launched our iDerm suite. We have announced CPV in Marabini, and additional new customers vary from small private operators to industrial manufacturers to data center providers. At next week's IEEE event that Chad referred to, together with our customer Tico, we plan to illustrate the real-world performance and efficiency gains of our solutions as well as to accelerate discussions with other grid operators in the pipeline. Veritone has started out 2022 strong. We are expanding and deepening our pipeline even as we add new solutions. Based on our bookings and pipeline of engagements, we have consciously made the decision to invest in our growth early. We know we have essentially an unlimited TAM, and it is up to us to deliver the right solutions with the proper amount of support to maximize our opportunity. Artificial intelligence inherently delivers efficiency and performance that accelerates growth and improves outcomes that are necessary in both expansionary and contracting economic environments. AI is a singularly disruptive innovation that we believe is still in its early stages of adoption and impact, and Veritone is committed to leading that innovation. Now, I would like to hand the call off to Mike Zimetra, our CFO, to go through the financial results and guidance in more detail. Over to you, Mike.
spk10: Thank you, Ryan. We continue to execute at the highest levels with record first quarter revenues, year-over-year pro forma revenue growth of 45%, a rock-solid balance sheet, as well as recent business momentum and financial leverage to accelerate our growth story even further. On top of this, we closed a small but strategic acquisition at the end of the quarter that we believe will help accelerate our metaverse strategy. During my prepared remarks, I will discuss our Q1 year-over-year performance and KPIs on a pro forma basis as if we own PandaLogic since the beginning of 2021, our Q1 cash position and working capital, and Q2 and full-year 2022 guidance. Now turning to Q1 2022 financial performance. Q1 revenue of $34.4 million was a record first quarter up $16.1 million or 88% from Q1 2021. Software products and services revenue increased $13.5 million or 288% to a Q1 record of $18.2 million driven largely by the addition of PandaLogic. Managed services revenue grew $2.6 million, or 19%, driven largely by growth in content licensing, which rose an astonishing 61% year-over-year driven by the overall increase in digital content usage and in live events coverage, such as the NCAA March basketball tournament as we return back to pre-COVID conditions. On a pro forma basis, Q1 2022 revenue increased 45% from Q1 2021 in software products and services revenue increased 78%, driven by new software customers' growth of 45% to 559, coupled with net customer retention of over 120%. Q1 2022 revenue also benefited slightly from our high-volume customers shifting their hiring to early in the year as opposed to spreading it throughout the first half of the year in part to meet demands in a highly competitive labor market. As a result, we expect there will be a slight decline in Q2 2022 high-volume customer hiring overall, but on plan for the entire first half of 2022, this impact is reflected in our Q2 guidance. More importantly, in Q1, we diversified our software products and services customer base, expanding it 45% year-over-year, and deepened our relationships, including with Amazon. For our hiring platform specifically, overall customers increased over 100% year-over-year, and their respective revenue contribution grew over 200% in Q1. While Amazon represented approximately 30% of our Q1 revenue, approximately 25% of that was from new service line revenues, offering one more example of the success of our land and expand model. Overall, our revenue pipeline continues to be strong. In late Q1, we acquired an influencer-based services company for $11.0 million, of which $3.5 million was paid up front with $1.5 million in cash and $2 million in stock. The remaining $7.5 million is payable over the next two years in deferred cash purchase price of $3 million and cash-based earn out of $4.5 million. During Q1 2022, it contributed less than 1% of revenue. For 2022, we expected to generate less than 2% of our consolidated revenue and near-neutral impact on our forecasted 2022 non-GAAP net income guidance. In Q1, we reported solid KPI results. New bookings were $9.6 million, up over 292% from pro forma Q1 2022. Gross retention continued to exceed 90%, Proforma customers were up 45% year over year, and Proforma Software AAR was $207,000, up 4% year over year. In managed services, advertising gross billings per active customer increased to $684,000, up 18% over Q1 2021. Overall Q1 2022 advertising revenue continued to outpace prior year, approximating industry growth versus the robust strength shown in the first half of 2021, largely driven by the timing of new and larger event-driven campaigns by key customers in the first half of 2021. Q1 2022 gross profit reached $27.5 million, improving $14.0 million, or 104% from Q1 of 2021. Gross margins expanded to 80% in Q1 2022, up compared with 74% in Q1 2021. Both benefited from the entire quarter inclusion of PandaLogic, which typically generates gross margins in excess of 90%. As previously discussed, and as we continue to scale over the next 12 to 24 months, including the full impact of Panda logic, we expect total gross margins to reflect Panda logic seasonality. Which is slowest in the first half of the year and greatest in Q4 improving sequentially throughout the year and for total gross margins to exceed 80% for 2022. On a pro forma basis, our Q1 gross profit of $27.5 million increased $9.0 million, or 48%, versus Q1 2021, driven by the higher contribution from software products and services, which totaled 53% of revenue in Q1 2022 versus 43% in Q1 2021. Q1 2022 pro forma gross margins improved year over year at 80% as compared to 78% in Q1 2021. Q1 non-GAAP net loss was $5.2 million, including one-time expenses totaling $800,000, largely associated with a major site upgrade at one of our larger third-party hiring sites. Excluding these one-time items, Q1 2022 non-GAAP net loss would have been $4.4 million. This compares to non-GAAP net loss of $3.9 million in Q1 2021. During Q1, Core Operations posted non-GAAP net income of $831,000, compared with $1.2 million in Q1 2021, reflecting the recent investment we've made in operations. namely in hiring of engineering, sales, and marketing resources to accelerate 2022 and long-term revenue growth. The corporate non-GAAP net loss was $6.0 million, compared to $5.1 million in Q1 2021, driven principally by higher GNA costs to support our growth year-over-year, coupled with first-year full Sarbanes-Oxley compliance costs. As a percentage of revenue, corporate costs dropped from 27.9% in Q1 2021 to 17.4% in Q1 2022. On a pro forma basis, Q1 non-GAAP net loss increased slightly by $760,000 versus Q1 2021, reflecting improved revenue and gross profit offset by increased investments in OPEX, namely hiring of engineering, sales, and marketing organically and at PandaLogic to fund growth. Given our projected near and long-term growth objectives, we aggressively hired in Q1. Our hiring plan for 2022 is front-loaded in the first half of 2022, which will also have a heavier impact on forecasted 2022 bottom line results. Excluding the previously discussed one-time costs, Q1 non-gap net loss would have been relatively flat versus pro forma Q1 2021. Turning to our balance sheet, at March 31, 2022, we held cash and restricted cash of $237.6 million, including $69.5 million from managed services customers for future payments to vendors. This compares to $254.7 million at December 31, 2021. The $17.1 million net decrease reflects net cash inflows of $27.3 million from acquisition-driven and financing activities, including approximately $14.4 million cash outflows for PandaLogic's 2021 earn-out and $9.4 million in restricted stock net settlements. offset by positive cash inflows from operations of $10.1 million driven in part by the net positive Q1 working impact from the seasonality of the PandaLogic services. Working capital will continue to fluctuate depending on the timing and due dates of payments in any given period. Our unencumbered cash at the end of Q1 2022 was approximately $169 million, which is sufficient to operate the existing business and support growth for the foreseeable future. We ended March 31st, 2022 with 36.1 million shares outstanding. Lastly, I want to note that in connection with PandaLogic achieving its 2021 financial target and in addition to the $14.4 million in cash paid out in Q1 2022, we issued $7.2 million in stock or approximately 350,000 shares valued at $20.53 per share. We also issued $2 million, or 116,000 shares valued at $17.16 per share, for the new acquisition in late Q1 2022. We also retired approximately 458,000 shares from net settlements on restricted stock awards. Turning to financial guidance for Q2 and full year 2022, to echo Chad's comments and to further elaborate on the current state of the U.S. economy, we remain very bullish on our projected growth. In fact, our platform has never been more important to our customers than right now. While we do see a near-term impact in Q2 from the hiring shift from our volume hiring customers like Amazon, we do not expect this to have a material impact in our overall revenue projections for the year. As a result, we will be maintaining our previous revenue guidance for the year. As a reminder, 2022 is also a significant growth year for Veritone. To support this growth and achieve our near and long-term objectives, we plan to continue making responsible investments, including increases in headcount, which today stands at approximately 650 employees or roughly 25% higher versus the beginning of 2022. Our growth is largely dependent on these hires, the majority of which will be engineers, operational support, and sales. In addition, we have an active pipeline of strategic acquisitions to accelerate our planned organic growth and scale. In order to manage future growth and scale, we also need to invest in our infrastructure, including planned deployments of global systems such as Oracle and Workday in the first half of 2022 As you may recall from our last call, employee retention is key to Veritone, and with higher inflation and wage increases globally, we reinvested back into our current employees with newer retention rewards, higher annual raises, and richer benefits versus historical. In total, we expect these one-time system and retention related investments to be approximately $5 million of incremental costs to Veritone in 2022 versus 2021, with the majority beginning in Q2 2022. With that backdrop and the reminder that PandaLogic has significant revenue seasonality with the lowest hiring in the first half of the year and accelerating throughout the second half of the year, we expect Q2 2022 revenue to be between $38 and $39 million, representing an approximate 100% increase year over year at the midpoint versus Q2 2022 gap and 15% versus Q2 2021 pro forma. As previously discussed, If we shift a portion of accelerated Q1 2022 hiring from our high-volume customers, Q2 pro forma growth would be closer to 30% year-over-year. Q2 guidance includes a full quarter of our recent Q1 acquisition, which is projected to represent approximately 2% of Q2 consolidated revenue. We expect Q1 2022 non-GAAP net loss to be between $3.5 and $2.5 million, depending on how quickly we hire, which is better versus Q2 2021 non-GAAP net loss of $3.9 million, but slightly down versus Q2 2021 pro forma non-GAAP net income of $2.0 million, reflecting the stepped-up investments in people and infrastructure costs to support our near and long-term growth. For full year 2022, we expect revenue to be between $180 and $190 million, representing a year-over-year increase of 60% at the midpoint on a GAAP basis and near 25% increase on a pro forma basis for 2022. We expect our combined software products and services revenue growth to approximate 100% year-over-year on a GAAP basis. Full year 2022 guidance includes our recent Q1 acquisition, which is projected to represent approximately 2% of full year 2022 consolidated revenue. We expect full year non-GAAP net income to be between $10 and $17 million, depending on the timing of hiring and the overall mix of our revenue. At the midpoint, this represents an over 100% improvement when compared to 2022 non-GAAP net income. should be noted that in 2022 we expect our fully diluted share count to be between 43.7 and 45.7 million shares largely due to the as if converted accounting associated with our convertible debt offering and to a lesser extent the outstanding options warrants and rsus held primarily by our employees before i close We will be holding our semi-annual analyst update and tech demo on May 13th, where we will be showcasing new product applications and adoptions, customer testimonials, and updated long-term financial guidance. Please ensure you register in advance at the Investors section of our website. In addition, we plan to be on-site and speaking at the Bank of America Technology Conference in San Francisco on June 7th. Stiefel's Technology Conference in Boston on June 9th, and the Roth Conference in London, England, June 21st through the 23rd. Operator, now we would like to open up the call for questions.
spk11: We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone. 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'd like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. And our first question will come from Koji Aikido with Bank of America. Please go ahead.
spk07: Hey, Chad, Ryan, and Mike. Thanks for taking my questions here. A couple from me. You know, first one on Amazon, you're just kind of really thinking about the Amazon comments, your prepared remarks. Thank you very much for that. But also their comments last week on their earnings call, thinking about their fulfillment segment over capacity. You know, really thinking about Amazon being your biggest customer, not only for Panda, but really for the total business. You know, help us understand, I guess, some of the visibility, maybe from a committed recruiting spend with them, that's giving you the confidence in the Panda logic piece of the business. the total revenue guide. I just want to be absolutely clear here. Is Amazon an example of a high-volume customer for you?
spk05: Hey, Koji. Why don't I take the beginning of this thing and just take a step back for a moment? I think the market massively overreacted to Amazon's comments with respect to its impact on our business. Amazon isn't just a customer. Amazon is a phenomenal company. strategic partner to Veritone. And we work with them and have been working with them for a number of years across a number of our business units and service offerings, from AWS to Wonderly to Audible, and obviously the talent recruiting side as well. So yes, they are our biggest strategic partner across our AI set of solutions. And it's just an example of, again, other companies. I mean, if you think about our business, in addition to Amazon, our leadership position with customers like Microsoft, Disney, iHeart, AbbVie, one of the largest pharma companies in the world. We have and are fortunate enough to be a company targeting close to $180 million, $190 million in revenue this year, and we have some of the Fortune 1 companies, Fortune 1 companies in each of their category sectors that trust Veritone and are scaling their business geometrically with us. should tell you something about the power of our technology and the capabilities of our AI in a hyper-competitive marketplace. And Amazon, going back to essentially their core part of their business, we're trading with that group of customers hundreds of millions of dollars. And what Amazon is doing for us is really, and all those customers, are allowing us to collaborate with them to perfect our AI solutions that are solving systemic challenges that are not unique to Amazon. I mean, think about Amazon's business in fulfillment It's not just customer growth, sorry, employment growth that they're trying to solve for. It's customer retention and employee retention. And it's an obviously known statement that you have huge turnover in fulfillment centers, in quick service restaurants, in healthcare services, which is primarily where we're providing services. But again, perfecting those solutions with the tier one customers gives us the ability then to move down markets and to start selling, say, to the smaller groups in the same verticals. In fact, we saw over 250% growth from a revenue standpoint in our tier two customer category in the fulfillment side. So this is, I think, just been massively blown out of perspective. Amazon gives us very good guidance and works with us on a weekly basis to give us a sense of where they're headed into the future. And we are continuing to build new solutions. What's really important to note, and we mentioned it briefly on the call, and Ryan can touch on it in more detail, our Amazon relationship, even in the recruitment side, is also expanding to new products. I think we saw about 20 plus percent increase in our revenue with Amazon coming from new products and services that we've brought to market over the last few quarters. So Ryan, do you want to double tap on this in any way?
spk09: Yeah, and I just also touch on, you know, the recent report came out yesterday from, you know, the Department of Labor Statistics represents, obviously, that open job recs has increased now to 11.5%. And, obviously, that impacts everybody. You know, we don't want to, you know, focus just on high-volume hirers, quick service restaurants, hospitality, and the like. But, obviously, we expect probably the normal pressures on those type of organizations to fill. And as Chad has made it very clear, we are a very trusted partner. Actually, we're developing new products and services as it relates to proprietary data lakes and other forms of deeper integrations to make even that much more of an efficient relationship in that stick here. So I think in addition to what we're doing in co-selling with AWS, as Chad alluded to on the media and entertainment side of our business with commercial, to, again, our ever-expanding and deepening relationship on the recruitment side and what we're doing on the advertising services side. We're thrilled to call Amazon a partner, and we do expect great growth from that relationship and others over the course of the year and beyond.
spk07: Thanks, Chad and Ryan. Just one follow-up from me. Wanted to touch on the Veraverse. I saw it in the press release. I saw you guys talking about it on your website, too. So, It sounds exciting. Congrats on that launch. I guess from a high level, you know, how do we think about monetization of the reverse? You know, maybe help us understand the pricing model and where it could show up in revenue. Is it a software? Is it managed services? Maybe, maybe even a little bit of both.
spk09: Yeah, I think the majority of it is going to be software related. There'll be some upfront fees based upon the cost to produce some of the initial avatars and voices. But then it'll transition to, I'd say, more erratably and easy to forecast SaaS-based revenues. We do expect the majority of the revenues initially to come, which I'm thrilled about, from our actually existing customers. So one of the reasons we were able to efficiently launch a large and comprehensive set of solutions for the very first is because of all of our customers already running and having all their content, a.k.a. training data, already indexed. So our ability to quickly provision and deploy these new synthetic solutions for media and entertainment partners has been great. So I do expect this to provide a level of materiality to the revenue base by the end of the year. But the primary goal here is to quickly sign as many media and entertainment broadcaster and digital influencer customers as quickly as possible to sort of reinforce our leadership position here.
spk07: Got it. Thanks, Ryan. Thanks for the color, guys. Appreciate it.
spk11: Thank you.
spk05: Thanks, Cody.
spk11: Our next question will come from Pat Rawavens with JMP Securities LLC. Please go ahead.
spk12: Oh, great. Thank you, guys. I mean, my big picture takeaway here is that pro forma growth accelerated to 45% from 30%, right? So that's great. Mike, if I could just drill down on two areas where I just – you had a lot in your section, and I just wanted to be really clear for people. So the Q1 net income and EPS missed the consensus, 15 cents versus 10. Can you just summarize quickly what are the key factors there? There was an 800K one-time expense, right?
spk10: Yeah, there was about $800,000 in one-time non-recurring expenses, really associated with customer credits. One of our major hiring platforms did an upgrade, and it took our software a little bit to catch up with it.
spk12: Okay. All right, so that's for that one. And then secondly, for the full year, your guidance is intact, but Q2 revenue comes in about $2 million to $3 million below the consensus. And just to help summarize again, is that PandaLogic?
spk01: Yeah. Or is it Morgan?
spk10: Yeah, so a big part of that is just the shift in revenue. So some of our high-volume hiring customers like Amazon accelerated hiring into Q1, and they'll see some of that benefit in through Q2. So if you look at the entire first half, we're on plan, but there's just a little bit of mix in Q1 versus Q2, if that makes sense.
spk12: Okay, great.
spk10: Thank you.
spk12: Yep.
spk11: Our next question will come from Darren Atahi with Roth Capital Partners. Please go ahead.
spk04: Hey, guys. Thanks for taking my questions. Congrats on the quarter. So, Ryan, can I follow up with a commentary about some of your content partners and rights owners in terms of the very first offerings? Like who do you think will adopt this and some of the kind of major sporting events that you guys kind of work with? Are those going to be kind of the, early adopters, low-hanging fruit, and then just maybe one for Mike, just looking at the annual sales number and appreciating kind of Pando seasonality. So your guidance kind of implies about 73 million in the first half of the year and 112 in the second half. What else beyond Pando kind of gives you confidence in that second half ramp versus the first half? Thanks.
spk09: Mike, maybe I'll cover one and three, and then I'll let you hit the middle. So on the very first side, the two primary constituent groups that we're being very laser-focused on are digital influencers and content providers and IP owners on the content side. And so we expect, based upon the announcements you've already made with iHeart and others, is that we obviously have very strong engagement with all groups, audio based podcasters, radio networks, radio, um, broadcasters and the like. Um, and we're going to be going very hard and we do envision, you know, in, in very, in the near future, a world where every single person of notoriety and fame, including obviously these prominent digital influencers will have a digital twin, um, that can be used for a multitude of different, both utility and future revenue and, and extensibility growth opportunities. So that's what we've been focusing on. It's a, most of these are customers already. The second major category is going to be the content groups directly, not necessarily sports, but as you know, we have kind of a broad array of different types of general entertainment, children's programming, sports programming, and news and talk. So we're going after each one of these customers, again, prioritizing against our existing customers first. But I'll leave you with this one is, you know, we do envision a time in the very near future where almost every single actor or voiceover talent or character will have built into their writer when they're doing a production contract to specifically address the concept of a digital twin. And hopefully Veritone is the leading force behind that. The last point, I touched on point three, the second half of the year, and then I'll let Mike close it, was another key element. We've talked a lot about our ever-increasing activity as it relates to government legal and compliance and our ability to service the DOJ and the DOD. I'm excited to announce that against every one of the publicly voiced or announced BPAs and the IDIQs, the government contracting vehicles, we are actively generating revenue against all those. We obviously are excited and always looking to accelerate the growth, but the fact that we've transitioned from the RFI to the RFP to being named in awards and successfully now prosecuting against task orders is something that we're very excited about. and considering both the breadth of the opportunity and the diversity between the two different branches of the government. Mike, did you want to add on?
spk10: Yeah, I'll add on to it. Yeah, as far as first half versus the second half, I mean, listen, we've got a good side of visibility into our pipeline, which obviously gives us tremendous comfort. In terms of variability, I mean, things that are more output-driven like PandaLogic, we do have what we mentioned before. We've got, you know, over 100% growth year over year in the non-volume hiring, which is sort of the non-Amazon, non-FedEx. And that's going to continue to accelerate. I mean, they're continuing just to crush it every week. So we have high confidence in those numbers and the outwards as well. So I don't know if that answers your question, Gary.
spk09: Yeah, and one thing we've noted in our prepared remarks in our releases, the strong bookings, and those represent still continued growth from really all facets of the business, including GLC of that $9.6 million in bookings for the quarter, and we expect similar trends going forward.
spk05: Yeah, Darren, just to triple tap on a couple things there, because there's a lot of info on that, but on the script, Right. New bookings increased pursuant to our prepared remarks 292% versus Q1 of 2021. So this is just massive acceleration. We're not seeing it stop. And artificial intelligence is used during good times and bad. So while a lot of companies are fretful that we're heading into a recessionary period or that we could be ended up with a significant slowdown as rates continue to increase the Fed level, all that's going to do is shift the use of artificial intelligence with all of our customers from being expansion in the go-go times to now looking at cost cutting to looking at more efficient ways to drive their operations and it's literally all going to be powered by aiware and we're working with literally every one of our major customers to start thinking about that expansion and that shift and that adoption and lastly on the fed side again i can't stress this enough you know every single contract that we have announced with the fed we now have active task orders revenue generating active task orders and are working with them on those functions. That's helpful. Thanks, all. Sure.
spk11: Our next question will come from Carl Kirsteed with UBS. Please go ahead.
spk08: Thanks, and glad to be part of this call. Mike, I wanted to press a little bit on the first half, second half net loss profile. Given your 2Q guide, it's about an 8 million first half loss. Given your full year guide midpoint, it means second half needs to be 21-22. Can you talk through that ramp? Maybe part of your answer is that you guys have front-end loaded hiring, so it's less of a drag in the second half, but perhaps you could bridge that first half, second half to give me and everybody on the call comfort in your second half implied net loss guide. Thank you.
spk10: Yeah, sure. The first half, as I mentioned in my prepared remarks, We are spending an incremental $5 million on existing staff and infrastructure, and the bulk of those costs start really in the second quarter. So you'll have a full second half of those costs as opposed to a quarter of those coming into the second quarter. On top of that, we did front end load our hiring, right? That's going to have a full impact in the back half as opposed to a partial impact in the first half. And then really from a margin perspective, our margin, what I mentioned in my call is our margin is sequentially going to improve. And most of that's going to be driven off the seasonality of our revenues with PandaLogic. So the lion's share come in Q3, Q4. If you look into Amazon's call, they actually shifted their prime day from June to July. that's actually going to positively impact Q3 from a hiring perspective. And then if Amazon and some of our higher volume customers sequentially go throughout the end of the year, Q4 ends up being the largest in terms of volume with them. So when you take all those mix with the margin sequentially improving and obviously revenues improving quarter over quarter, that's what's impacting the bottom line.
spk08: Got it. Okay. And then maybe just a follow-up for you on the full year revenue guide of 180, 190. That obviously now includes this acquisition. Could you just clarify what the dollar revenue contribution is in that full year rev guide? Thanks a lot.
spk10: Yeah. Yeah. At the high end, it's less than 2%. Okay.
spk08: Good stuff. Thanks a lot.
spk10: Yep.
spk05: Thank you.
spk11: Our next question will come from Chad Bennett with Craig Hallam. Please go ahead.
spk03: Great. Thanks for taking my question. So, Mike, just a quick question. I was hopping between calls. Just on the Pando contribution, both in the quarter and if you care to share kind of how you're thinking about it for the year, did you provide any of that info in the call?
spk10: Yeah, we said that it was about 30% consolidated revenue. In the quarter? In the quarter, yes. Got it.
spk03: And I think you said down seasonally, right?
spk10: Yeah. So the first half of the year is seasonally down, and they ramp in the back half of the year. Okay.
spk03: And then just, you know, I think there's a lot of bullish commentary around GRI and kind of bookings and activity there. So I guess, you know, is there a target or level expectation we should have for that business? I mean, it was, you know, from a revenue standpoint, down 40% sequentially, down 40% year over year. You know, I don't know if that shows up in some type of RPO number or whatnot, or these are more kind of longer standing, ratable deals. But when do we actually see GRI revenue show up?
spk10: Yeah, I'll take the part of that. Maybe Chad and Ryan want to add in. So GRI, the investments we've made in GRI, we are winning. And really, you're going to see that manifest itself starting as early as Q2. And then we'll be able to provide more color as that starts to progress throughout the year. As far as RPO, RPO has doubled year over year. So we're close to 9 million in terms of RPO. And a lot of that is the bookings and the winnings we're having on the GRI side.
spk03: And then, Mike, with the kind of initial or kind of accelerated investments in the first half of the year, looking at the full year, considering the net income guide for the year or range for the year, is the company going to be cash flow positive for the year based on what you see today?
spk10: Yeah, from a non-GAAP net income perspective, you know, $10 to $17 million. Obviously, we've got variability in our working cap. Some of that we do control, some we don't because of our managed services business. But if you assume working cap to be net neutral, yeah, you'd be positive cash flow from operations.
spk03: All right. Thanks for taking my questions.
spk11: Thanks. All right. Our next question will come from Mike Lattimore with Northland Capital Markets. Please go ahead.
spk01: That's good. Thanks. Yeah, I mean, the software bookings were excellent. I guess, can you give a little more detail on that? Was there a couple big wins in there, or is it pretty broad-based? And then are there a couple, I don't know, use cases that really stood out?
spk05: Yeah, Brian, do you want to take that?
spk09: Yeah. Really kind of across the board. I don't think there was any unique use cases per se, but in the regulated industries as it relates to government legal and compliance, it's mostly AI-ware proper, obviously more at the enterprise level versus specific applications, which is really exciting. So as I mentioned earlier, some of the active task orders that we're currently prosecuting today are are AIWare direct, meaning they're not necessarily tied to, you know, appropriations against a specific application, but really looking at the AIWare operating system as the product, which we're thrilled about. So I think that's a major one that we're active in. You know, hopefully there'll be more information that we can provide when appropriate on them. But those are some of the bigger active ones, just in addition to, I'd say, normal increase in acceleration of other sides of the business, including commercial.
spk01: Okay. And then you've got it.
spk10: Yeah. I just want to just sort of echo that we talked about Amazon and, you know, 25% of the revenue from Amazon was from new services.
spk01: Okay. And then the, um, sequential growth implied in the guidance is pretty solid there. I guess what, what, is the uh what would be kind of a couple key drivers it kind of sounds like the hiring volume hiring maybe doesn't pick up in the second quarter but maybe that's wrong but what are some of the big sequential growth drivers you take from a top line or from a bottom line perspective top line top line yeah i mean listen are the content licensing business you know some kind of combination of exiting focus
spk10: and having more content as we start to deploy more customers and expand with existing customers is really starting to manifest itself. While sequentially, it will probably be flat, but year over year, it's going to be a nice growth. And then, you know, a lot of, you know, we talk about the very verse. It's really starting to open up, starting in Q2. So sequentially, that should improve quarter over quarter. and throughout the back half of the year.
spk01: Okay, thanks.
spk11: Again, if you have a question, please press star then one. Our next question will come from Robert Galvin with Stiefel. Please go ahead.
spk06: Hi, this is Rob Galvin on for Bribe Reback. Thank you for taking the question. I'm just wondering with the non-repairing customer credits, is there the potential for other vendors to do a similar upgrade
spk10: They could, just given the size of this particular platform, it will not have anywhere near an impact that this one did.
spk01: Awesome. Thank you. Thanks.
spk11: This concludes our question and answer session. I would like to turn the conference back over to Chad Stielberg, CEO of Veritone, for any closing remarks.
spk05: Thank you, Operator. We at Veritone are experts in artificial intelligence, and our unique and differentiated business model paves the way for significant potential upside for our investors, our employees, and our loyal customers. Despite the geopolitical and macroeconomic volatility that surrounds us today, without question, the future of enterprise is going to be powered by artificial intelligence. And we believe Veritone will play a vital role in unlocking that potential. 2021 was strong. We expect 2022 to be even stronger. Additionally, our pipeline of new business continues to imply accelerating growth beyond this year. Thank you for joining us on today's call. Goodbye.
spk11: The conference is now concluded. Thank you for attending today's presentation.
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