Veritone, Inc.

Good day, and welcome to the Veritone, Inc. First Quarter 2024 Financial Results Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone phone. 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 Stefan Norbom, Investor Relations. Please go ahead.

Thank you and good afternoon. After market closed today, Veritone issued a press release announcing results for the first quarter ended March 31, 2024. The press release and other supplemental information are available on the Investor section of Veritone's website. Joining us for today's call are Baritone's Chairman and Chief Executive Officer, Ryan Steelberg, and Chief Financial Officer, Mike Simetra, who will provide prepared remarks and then open the call up for a live question and answer session. Please note that certain information discussed on the call today, including certain answers to your questions, will include forward-looking statements. This includes, without limitation, statements about our business strategy and future financial and operating performance. These forward-looking statements are subject to risks, uncertainties, and assumptions that may cause the actual results to differ materially from those stated. Certain of these risks and assumptions are discussed in Veritone's SEC filings, including its annual report on Form 10-K. These forward-looking statements are based on assumptions as of today, May 7, 2024, and Veritone undertakes no obligation to revise or update them. 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. Also, when we reference pro forma measures, such measures are presented on a combined pro forma basis treating broad bean as owned by Veritone during fiscal year 2022. Finally, I would like to remind everyone that the call today is being recorded and will be made available for replay via link on the investor section of Veritone's website at www.veritone.com. Now I would like to turn the call over to our Chairman and Chief Executive Officer, Ryan Steelberg.

Thank you, Stephan, and thank you everyone for joining us. We are excited to speak with you today and provide an update on our first quarter 2024 operations and financial performance. I will start by reviewing our first quarter results before sharing a broader company update and turning it over to Mike Zimetra for more details on our financial performance. Baritone had a strong start to 2024. We delivered a healthy quarter of new business wins and demonstrated strong momentum against our commitments announced last quarter. We continue to make progress bolstering our fundamentals, right-sizing our operating structure, and aligning our investments and technical resources to accelerate our AI software and services revenue growth and technological leadership within the AI industry. For the first quarter of 2024, Veritone delivered total revenue of $31.6 million and non-GAAP operating loss of $7.6 million, outperforming the high end of our guidance. Annual reoccurring revenue was $72.1 million, including $48.6 million from subscription versus consumption-based customers, representing an improvement of 7% from Q1 2023 for subscription-based ARR. First quarter operating results underscore the strength of our strategy and execution over the last year, both of which have shifted our focus back to long-term, sustainable, and profitable growth. We are seeing clear signs that the steps taken to align Veritone's go-to-market strategy are gaining traction. Our restructuring efforts continued throughout the first quarter of 2024, and we expect to realize the full benefits of these efforts beginning in the second quarter of 2024. We also expect future cost and revenue-related synergies to materialize in the later part of this year. As discussed on our last earnings call, we are now targeting to achieve profitability on a non-GAAP basis as early as Q4 2024 and for the entirety of 2025. Notably, Veritone achieved several technological milestones in the first quarter and saw increased momentum evidenced by a robust, qualified pipeline of commercial and public sector enterprises. Our AI-ware powered solutions, which provide a best-in-class ecosystem of AI models and intelligent data lake and workflow tools, remain the cornerstone of our operations, allowing us to adapt alongside the development of AI technology and models to meet the unique needs of our customers. Coupled with our progress in LLMs and retrieval augmented generation, our comprehensive AI product suite positions us as a complementary solution to hardware providers and hyperscalers in the AI ecosystem. Generative AI stands as the preeminent focus of technological innovation, with companies of all sectors in the early stages of incorporating next-generation AI capabilities into their existing solutions. Concurrently, cloud providers are launching new services in ramping capacity and semiconductor firms are experiencing the escalating demand for AI and data center chip applications. According to IDC forecast, total worldwide expenditure on generative AI is projected to grow from $19.4 billion in 2023 to a staggering $151 billion by 2027. The accessibility and ease of use of new AI models has raised the prospect for rapid and widespread adoption. However, barriers still remain. Census Bureau's business survey indicates that less than 5% of firms are formerly using generative AI to produce goods and services. although the share is two to three times as high among information professional services and financial firms. The most commonly cited barriers to early AI adoption are short-term factors such as lack of knowledge, privacy concerns, and technological maturity. Veritone was created to break down these barriers with the ultimate mission to democratize AI, advance the capabilities of AI, and empower our customers and partners to do even better than before. Earlier today, we announced a major expansion in our go-to-market and service offerings with the launch of our integrated AI consulting and services group. Through our expanded offering, we hope to address the growing demand for expertise in the deployment of enterprise AI technologies and bridge a gap in the market between AI providers and end customers, allowing us to serve as a trusted partner for customer organizations in their journey to realize the full value of AI. Veritone services launch at the advanced tier services partner level within the AWS partner network complements our historical differentiated status on the AWS software partner path with numerous AWS validated offerings in key areas such as machine learning and public safety. Our elevation to the advanced tier services partner level recognizes the pivotal role Veritone's AI consulting and services group will play in the advancement of AI, empowering customers to effectively use and derive the most benefit from the technology. Specifically, our partnership with AWS will further empower Veritone to develop and deploy innovative AI software solutions similar to the media management platform and licensing services Veritone architected for U.S. soccer. By combining human expertise with AI-ware technology, our newly formed group will empower businesses on their digital transformation journey through custom AI strategy development, AI workflow solutions, and innovation workshops. Through partnering with Veritone's AI Consulting and Services Group, customers will benefit from an expedited path to AI activation, as well as enhanced scalability, reliability, and performance for their AI-driven initiatives. We expect net new bookings and a creative revenue growth at attractive margins starting in 2024 from this new and expanded services offering. Now let me turn to our vertical markets. First, Veritone's hire platform. Veritone hire continued to perform well, again capitalizing on its strong commercial strategy and focus on multi-year subscription engagements, helping contribute to a near 10% increase in subscription-based ARR for Veritone and Q1. Beginning in the second half of 2024, we expect to see material growth on a global basis from Bravyn, driven by our ability to expand into controlling not just the job distribution software budget, but the advertising budgets as well for EMEA clients. We expect to finalize the full integration in the first half of 2024 and begin to realize further synergies from the sales and marketing organizational integration and technological integrations in the later half of the year. One notable Synergy update, we launched programmatic offering in the UK in Q1 and we're expanding further to big continental European markets, Germany and France, and Australia by the end of the year. Veritone Hire recently landed a new RFP win in EMEA with a Fortune 10 client that will contribute over $2 million in gross media revenues and will facilitate 7,500 hires on an annual basis starting in mid-May 2024. Additional key wins in the quarter include Group, Uniting Care Queensland, Brentag, Rennes, American Water, and others. On the product front in Q1, Baritone Hire introduced market-leading predictive performance capabilities on an individual job basis, cookie-less ad tracking technology that led to 20% improvement of tracking accuracy in campaigns previously tracked by third-party cookies, and self-serve features to expand the customer base of core programmatic solutions. Shifting to media entertainment. Across software products and services within media and entertainment, we had a robust start to the year, headlined by momentum in customer renewals and uptick in new business and the achievement of significant technological milestones. Notably, our AskBerry solution, our new generative AI media intelligence and natural language tool, was honored with a prestigious NAB Product of the Year award, marking our fifth win at NAB, but this time in the AI and machine learning category. At a time in which one of Generative AI's most prominent use cases is content creation, Asperry enables the democratization of data exploration and activation to provide value from content investments. Asperry empowers Veritone Digital Media Hub, or DMH, users to quickly extract actionable insights and execute dynamic workflows from their media archive and is an integrated solution on Veritone's AIWare platform. We are thrilled to announce that Asperry will soon be available across the majority of Veritone's commercial and public sector applications. In Q1, we inked partnerships with both Dilette and Gravio, showcasing our partner-driven channel approach and that other companies servicing the media and entertainment industry both need and rely on Veritone. Within media and entertainment, we executed over 23 new deals in the first quarter with a total contract value of $1.97 million and bookings reaching $1.6 million. Among the highlights of new business wins in the quarter, we secured deals with prominent media organizations such as Summit Media, the US Soccer Federation, and NBC Universal. Our commitment to client satisfaction is reflected in the 14 renewal deals closed in Q1 with total contract value of over $1 million and bookings totaling almost $850,000. Notable renewals include partnerships with Beasley Media, Crawford Broadcasting, and Augusta National. Furthermore, we've executed several substantial and Sony Pictures Entertainment, underscoring our strong customer retention metrics and the tangible value we bring to our customers. We achieved several technology milestones in Q1, with notable achievements including the enhancement of Veritone's search capabilities, which now significantly outperforms in recall, empowering clients to effortlessly query their media and data lake archives using natural language. Within our advertising and intelligence product suite, we introduce updates, adding support for Google BigQuery, Adobe, customer website pixels, and other industry benchmarks, augmenting the depth of insights provided to our media and advertising partners. The launch of media analytics on our DMH platform empowers customers with comprehensive reporting around media monetization, ingestion analytics, cognitive analytics, and engine optimization, to name a few. In Q1, we announced feature enhancements to our advertising and content intelligence suite, designed to embrace data privacy. Our solutions support the safeguarding of ad revenues for our customers by providing data granularity, privacy, and security. Our AI-assisted content licensing business continues to thrive and demonstrate significant partner growth, supported by a diverse base of content customers and buyers. Notably, during Q1, we witnessed the meteoric rise in women's sports and record-breaking professional sports ratings, driven largely by the global phenomenon of Kaitlyn Clark during the Women's March Madness Basketball Championship. This created a unique opportunity for both content owners and creators to leverage near real-time events to drive special and unique content moments, rather than advertisements, news briefings, or documentaries. In Q1, Baritone had various new client wins, such as the Professional Fighters League, and played a pivotal role in facilitating near real-time moments for companies such as State Farm, Nike, Invesco, Apple Studios, and many more. As the advertising market rebounds from a challenging 2023, our agency group seized opportunities to expand customer advertising campaigns for our clients. Annual bookings remain strong for the year and are on track to surpass our previous records. While the overall digital streaming and podcasting sector saw significant internet growth rates of around 7% in 2023, our agency group's endeavors surpassed these numbers by a considerable margin. In Q1 2024, we signed four new advertising customers, Bolin Branch, Gab, National Debt, and Nordis, with three additional exciting launches subsequent to the quarter's end. Our advertising customers pipeline remains strong with numerous new advertisers in various stages of contracting and discussions, positioning us for continued success throughout the year. One of the most notable new advertising customers recently signed is Chewy, the largest direct-to-consumer pet supplies company. Across media and entertainment, we continue to see a strong, validated pipeline of $11 million with significant opportunities across both new and existing customers. Our newly launched AI consulting and services group stands well positioned to help these media and entertainment titans accelerate their business goals and drive immediate value for their organizations by leveraging AI. Finally, I would like to comment on Veritone's public sector business. Building on the progress made in the previous quarters, we've achieved significant milestones and made substantial strides in delivering AI-powered solutions that address the unique needs of the public sector in Q1 2024. In the first quarter, we welcomed 19 new public sector customers to the portfolio. Notably, we updated and released our contact application to meet the new requirements set forth by the California Department of Justice for RIPA data collection. With over 14,000 police officers and supervisors now utilizing Veritone Contact, we continue to expand our reach in providing cutting-edge solutions to support law enforcement agencies. Our collaboration with Apexis, a technical integration partner, has already produced encouraging results. During Q1, we closed three deals with federal clients and our pipeline is steadily expanding with a promising funnel in North America, particularly in Canada, as well as with the U.S. federal government and U.S. SLED. Furthermore, we onboarded three new public sector resellers in Q1, and each has already established customer meetings and created new opportunities for growth. At a time in which law enforcement agencies are facing mounting pressure to modernize their operations, coupled with the pressures of fluctuating budgetary constraints, Veritone Redact gained traction with seven new revenue-generating customers, highlighting the value and efficiency of our managed services offering to the public sector organizations. Our partnership with WSI Technologies to automate public record requests for our primary statewide law enforcement agency marks a significant milestone for the public sector. The state law enforcement agency will use our AI-powered REDACT tool to automate its audio and video redaction workflows, reducing lengthy manual processes, conserve internal resources, and address the ever-increasing Freedom of Information Act request backlog. With a solution like Baritone REDACT, these agencies can significantly alleviate the manual and laborious process of audio and video redaction and get back to what matters most, protecting and serving their communities. The newly launched Veritone IDEMS applications gained traction in international markets, including Canada, the UK, and Ireland. In Q1, we enhanced our IDEMS suite by adding a secure, large language model deployed on a customer-by-customer basis. This addition ensures that the usage of our Veritone LLM technology remains secure and is not shared outside of their organization. With multiple wins and new funnel growth during the quarter, our IDEMS applications continue to resonate with global public sector entities. Our achievements already realized in 2024 demonstrate our dedication to serving as a trusted partner in the public sector and the immense opportunity ahead to broaden our footprint across countries, cities, agencies, and municipalities globally. Reflecting on the first quarter of 2024, I am proud of the substantial progress made possible by our talented and dedicated Baritone team. We will continue to take disciplined measures to enact cost savings and operational enhancements throughout the year, aligning with our plans to position Veritone's operating model for long-term agility, serve true customer demand, and secure our lead in delivering advanced, efficient AI solutions to our customers and partners. While generative AI has experienced an explosion in the market and is maturing rapidly, it is important to recognize that we are still in the early innings. Many enterprises remain largely in the experimental and pilot phases, and the adoption of AI has only seen modest growth thus far, with fewer than 5% of companies reporting using generative AI in regular production, according to Goldman Sachs. As evidenced by our strong financial performance, new business wins, and technological milestones in Q1, Veritone has emerged from this transition stronger and better positioned to harness the immense opportunities of more mainstream enterprise-wide AI adoption that lie in the quarters and years to come. I am confident in our ability to maintain continued momentum throughout 2024 and look forward to providing an update on our progress in August. Now I'd like to hand the call off to Mike Zimetra, our CFO, to go through our financial results and guidance in more detail. Mike?