Veritone, Inc.

Good day and thank you for waiting. Welcome to the Veritone, Inc. Third Quarter 2024 Financial Results Conference Call. Today all participants will be in a listen-only mode. Should you need any assistance during today's call, please signal for a conference specialist by pressing the star key followed by zero on your telephone keypad. After today's presentation, there will be an opportunity to ask your questions. To ask a question, you may press star and then one on your telephone keypad. To withdraw your question, please press star then two. Please note that today's event is being recorded. I would now like to turn the conference over to Kate Goldsmith, Investor Relations. Please go ahead.

Thank you and good morning. Prior to Market Open, Veritone issued a press release announcing results for the third quarter and did September 30th, 2024. The press release and other supplemental information are available on the Investor Relations section of Veritone's website. Joining us for today's call are Veritone's Chief Executive Officer and President, Ryan Steeleberg, and Chief Financial Officer, Mike Cimetra, who will provide prepared remarks and then open up the call 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 10K. These forward-looking statements are based on assumptions as of today, November 12th, 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. Reconciliation 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 broadbeam as acquired by Veritone on January 1, 2022, periods commencing after June 13th, 2023, are not presented on a pro forma basis. 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's website at .veritone.com. Now, I would like to turn the call over to our Chief Executive Officer and President, Ryan Steeleberg.

Thank you, Kate, and thank you everyone for joining us. We are excited to speak with you today and provide an update on our third quarter 2024 operations, financial performance, and strategic progress. Mike Zimetra will cover our quarterly performance and financials in more detail later, but I wanted to start by providing a broader company update and perspective on our current market environment and the opportunity that lies ahead. Before we dive into the results, I want to address the transformative announcement we made a few weeks ago that marked a pivotal moment in Veritone's journey. We have successfully executed an agreement and have closed on the divestiture of Veritone 1, our legacy media agency business, in a transaction valued at up to $104 million. Let me put this transaction into perspective and clearly articulate what it means for Veritone's future as it represents the culmination of the strategic plan laid out in early 2023 to transform and focus this business. This divestiture represents far more than the sale of a non-core asset. It's a fundamental repositioning of our company in the rapidly evolving AI landscape and a significant catalyst to unlock shareholder value and reinforce our market leadership position. When we initiated the strategic review of Veritone, when I first took on the role of CEO, our goal was to identify the optimal path to unlock shareholder value and position Veritone for sustainable long-term growth in the AI sector. The sale of Veritone 1 accomplishes several critical objectives. First, it streamlines our operational focus, eliminating the complexity of managing two distinct business models, a technology software business and our legacy media agency. This refinement of purpose allows us to concentrate our resources, both financial and human capital, on what we believe is the greatest opportunity, delivering the most advanced AI solutions to our customers and partners at scale through our enterprise AI software, applications and AIware platform. Second, this transaction significantly strengthens our financial foundation, substantially bolsters our balance sheet and enables us to reduce our debt servicing cash burden. Furthermore, this strategic sale focuses our operations on higher growth verticals with strong margin profiles, namely public sector and commercial enterprise AI. As a result, we are now well positioned as a pure play AI enterprise software firm building on top of our existing scale, which boasts over 3000 customers after the post-investiture. Furthermore, post-investiture, Veritone has eliminated our customer concentration risk with no single customer accounting for more than 5% of our revenues while still maintaining gross revenue retention well above the 90th percentile. I'm very proud of our staff and leadership team who have guided us through this lengthy and challenging transformation, all in the public market form. And our timing to complete this transformation could not be more perfect. We're at a pivotal moment in technology history. Just as the cloud revolution transformed software delivery into software as a service or SaaS, we're now witnessing an even more profound shift with AI. This new paradigm is what we call service as software, the automation and amplification of knowledge work itself. This isn't just an incremental change. We're looking at a market opportunity worth trillions, according to Forbes and several other sources. Let me put this in perspective. The foundation layer of AI, the chips, infrastructure and general large language models is consolidating around major players like Microsoft OpenAI and Google DeepMind. This mirrors what we saw with cognitive AI. Large language models are readily available today and becoming increasingly commoditized, portable and more affordable. The real opportunity where Veritone is well positioned lies in the application layer. Just a few years ago, skeptics dismissed application layer companies as just wrappers on GPT. Today, it's this technology, our technology, that has emerged as one of the most compelling ways to build lasting value in the AI economy. According to Sequoia Capital, the most important segment for future AI investment is the application layer. This has been and will continue to be our focus. For you, our investors, you need to know that Veritone goes far beyond simple API integration to call AI models. AIware, our core platform, is truly an operating system for AI, supporting dynamic and scalable cognitive architectures and workflows. This proven platform, which is today serving hundreds of enterprise customers around the world, combines dynamic data integration, hundreds of cognitive and generated AI models, intelligent model routing, vector databases, compliance frameworks, and application workflow logic that can mirror human reasoning. We've expressed this powerful technology through dozens of award-winning applications that are solving real business and service problems with clear and definable ROI. For several years now, our leading AIware platform and applications have been delivering critical value for public and commercial sectors, including media and entertainment, sports, state and local law enforcement, Fed Civ, and now Fed DoD. With our strength and balance sheet and renewed focus on our AIware software and applications, we're uniquely positioned to capitalize on this opportunity. Our strategy is in full focus. Our track record of execution is strong, and our serviceable, addressable market is in the tens of billions. We are not just participating in the AI revolution, we're leading it. When appointed as CEO, I state of my strategic imperatives, streamline operations, bolster our financials, and zero in on what we do best, AI software and services. Now, as we near the close of fiscal 2024, we've advanced each initiative meaningfully, and we're in the prime position to capitalize on the booming demand for AI and leverage the strength of Veritone's AIware platform, applications, and solutions. Now, let me walk you through our performance in our core market verticals, commercial and public sector. In the commercial sector, our AI applications and custom built AI solutions continue to unlock tremendous value for commercial enterprises across functions and industries in this quarter. Within media and entertainment in August, we officially announced our landmark partnership with the NCAA. Since then, we've continued to build upon that success with additional partnerships and agreements with many notable brands. Today, we're in the final stages with a material media customer to secure an expanded multi-year deal worth over $20 million in potential total contract value, which we expect to close this contract in the fourth quarter. Additionally, I'm pleased to announce that Veritone has extended its agreement with iHeart Media, the nation's leading audio company. This multi-year SaaS agreement enables iHeart Media to seamlessly and automatically process, transform, and review audio data in near real time. With enhanced ad and content tracking, comprehensive analytics, faster content extension, and smarter media management. When we initially launched iHeart Media as a customer in 2017, we deployed our AI solutions across 200 stations in 50 markets. This current multi-year agreement extends our solutions to over 850 stations across 150 markets, showcasing the increasing value our software provides to both iHeart and their customers. In addition to the iHeart extension, in media and entertainment, we execute over 28 deals in the quarter. One other recently executed deal was the resigning of ESPN, which will leverage our software to effectively track the impact on native advertising placements and promotions, both spoken and visual across multiple ESPN-owned channels. Other notable deals in the quarter include agreements with Amblin Partners, Carson Entertainment Group, Univision, Westwood One, and the United States Tennis Association. Showcasing our commitment to client satisfaction and the stickiness of our AI solutions. Staying in commercial, let me provide an update on our AI hiring solutions. Baritone Hire successfully weathered market pressures on global label markets for another quarter, remaining focused and consistent in its strategy to add SaaS clients at the higher end of the middle and enterprise market, to offer significant budget efficiencies to programmatic and media services clients, and to continue to expand the reach and cross-selling of programmatic advertising and media services globally. Also, I'd like to call out that our hiring solutions general manager, Alex Forliss, was selected for TA Tech's Fall 2024 Honor Class of Business and Thought Leaders. For awareness, TA Tech is the leading association for talent acquisition leaders. Additionally, we signed significant AI programmatic contracts in the UK with a time utilizing AI-based programmatic job placement. A few notable global deals include Magnet International, Shell Energy Australia, Marriott International, Teleperformance, and Mitsubishi Chemical. Switching to our public sector vertical, which will be a key focus for us post investiture, we remain very bullish on our public sector opportunities and growth prospects. Our market-leading AI products built on AIware are driving our success. Our clear -to-market strategy extends across law enforcement, judicial agencies, and government sectors globally, enabling fast customer onboarding. Launched this year, Veritone Intelligent Digital Evidence Management System, or IDEMS, powered by AIware, has exceeded our expectations. IDEMS strengthens Veritone's position in the digital evidence management market as a leading system for aggregating, analyzing, and sharing investigation materials with advanced AI-powered video and audio analytics. In local law enforcement, we now service hundreds of customers and are adding opportunities and partnerships weekly. On the federal side, we already are contracting with both Fed Civ and Fed DOD agencies and are very active with several material trials and software implementations. Internationally, we have also added customers who are active with trials and are in procurement on several important and large opportunities. Our solutions are gaining traction globally with new customer acquisitions and a growing pipeline that is now exceeding $110 million. This quarter, we added 13 new public sector customers to our portfolio. New state and local agency customers include Englewood, Colorado, Sandoval County in New Mexico, two of the largest counties in Southern California, and a statewide law enforcement agency. New federal business includes the Department of Justice, the Office of Public Affairs. During Q3, we expanded our distribution channels and market reach with new strategic technical partnerships, including NUIX and GTEC. We completed and announced our integrations with AxonEvidence.com and Milestones VMS Connector, where we have created automated workflows and efficiencies for our customers by automating the ingestion process from those applications into our item suite, which allows our customers to take advantage of our public sector applications and our suite of AI capabilities that are part of AIware. This is all part of our strategy to be an open technology solution that can aggregate data from all the disparate evidence solutions, particularly audio, video, and unstructured data, and allow investigators to take advantage of our AI applications and AIware technology. As I close, I want to share some additional third quarter operational highlights in the public sector to provide a comprehensive view of our progress to date in this vertical. In Q3, we initiated a second phase of a project with a major DOD agency for our IDEM solutions. We also delivered an IDEM solution and began assisting in its implementation with yet another DOD organization. During the quarter, we announced and released our latest version of TRAC with enhanced UI and search capabilities and the ability to track and re-ID vehicles as individual objects. We also enhanced our model for tracking and re-IDing humans based on no biometric information. TRAC 2.0 is now fully deployed on AIware and it is included as a fully operational application in our IDEM suite. Finally, the result of this month's presidential election, we believe, will be a net positive for our prospects in the US Fed and have little to no impact on our existing contracts. The size and quality of our pipeline continues to grow and improve as a result of the IDEM's product suite, expansion of our technical partnerships, and the addition of new channel partners. I would now like to turn it over to Mike Zimetra, who will provide more details on our quarterly performance and future guidance. Mike? Thank

you, Ryan. I am pleased to report our third quarter results, which are in line with our previously announced guidance and demonstrate continued execution of our strategic initiatives set out earlier this year. Post our October 2024 divestiture of our media agency, we are now shifting our projected cash flow profitability to fiscal 2026. During my prepared remarks, I will discuss the key financial terms of the October 2024 divestiture of our media agency. Our Q3 -over-year performance and KPIs from continuing operations, which exclude the results of our media agency, which are presented as discontinued operations as of September 30th, 2024, and in the corresponding historical financial periods, balance sheet and liquidity positions pre and post divestiture, and our updated guidance for fiscal years 2024 and 25. Starting with the key financial terms of our October 2024 divestiture of our media agency, Veritone One. Total consideration from the sale was up to $104 million in cash, which consisted of $86 million in cash at closing and $18 million in cash subject to earn out based upon Veritone One's revenue for calendar year 2025. The divestiture represented approximately 25% of our consolidated revenue during the trailing nine months and in September 30th, 2024. The total purchase price was 3.5 times multiple on revenue and an 8.9 times multiple on EBITDA for the trailing 12 months and in September 30th, 2024. To be clear, Veritone One was predominantly a service business and a traditional media agency. These multiples represent a significant discount in the current market value of Veritone today, which is predominantly software products and services. Of the total $86 million in cash at closing, the net cash proceeds were $59.1 million in cash after $6.7 million in cash was held in escrow and $20.3 million in purchase price adjustments. Net cash proceeds from the sale were used to pay down $30.5 million in principal amount of the company's December 2023 term loan, plus an additional $3.3 million in accrued interest and prepayment premiums associated with the debt and $3.9 million of deal related expenses. After giving effect to the sale and term loan payment, Veritone ended with approximately $27.3 million in cash and aggregate principal debt of approximately $134.4 million, down from $168.8 million in debt at December 31st, 2023. Including amounts held in escrow and the earn out, potential future proceeds include up to $24.7 million in cash, which will largely be payable toward the end of 2025 through April, 2026, as certain escrows expire and the 2025 earn out is known. Given the media agency's growth throughout fiscal 2024 and its forecasted exit of and expected bookings for fiscal 2025, we feel highly confident on achieving at least a large portion of the $18 million earn out at this point in time. The divisor of our media agency is an important and strategic shift in our operations. Namely, it positions Veritone as a pure play AI company, allowing us to be more focused across our core AI products and services. In addition, it improves our balance sheet by reducing our annualized debt carry costs on our December 2023 term debt to almost half of what it was at December 31st, 2023. This annualized cash savings represented almost all of the EBITDA contribution from the divestiture over the trailing 12 months and in September 30th, 2024. As a result of this strategic shift, the financial results of the divestiture have been recast and are now reported as discontinued operations on the face of our financial statements. All commentary exclude the results from the divestiture for the 2023 and 2024 periods. Next, I would like to discuss our Q3 2024 performance. Q3 revenue was $22 million in line with our guidance and down $6 million from Q3 2023, principally due to a decline in software products and services. The decline in software products and services was driven in part by commercial enterprise, which declined $5.8 million year over year, largely due to the expected decline in consumption-based customers over the same period, including Amazon, and certain one-time software revenue in Q3 2023 of approximately $2.7 million, which did not recur in Q3 2024. Offsetting this was a slight increase in the public sector. As I will discuss later in more detail, we remain extremely bullish on our future, and we expect fiscal 2025 to be a breakout year across our commercial enterprise and public sector, with the public sector expected to grow year over year anywhere from 100 to 150% driven by our IDEMS applications. Overall, managed services, which excludes the divestiture of our legacy media agency, was relatively flat year over year. As of Q3 2024, I am happy to say that we did not have a single customer that represented 5% or more of our consolidated revenue in Q3 2024, demonstrating our successful efforts to diversify our revenue base. Across our software products and services, our key performance metrics for Q3 2024 show ARR of $63.3 million down year over year as we begin to exit expected declines in consumption-based revenue from customers across our commercial enterprise sector, including Amazon, over the trailing 12 months, offset by a slight increase in recurring subscription-based SaaS customers. As of Q3 2024, 76% of our ARR was from subscription versus consumption-based customers, up from 53% at Q3 2023. Total new bookings of $16.5 million, up 17% sequentially from Q2 2024, then 6% year over year. Gross revenue retention continued to be above the 90th percentile, and total software products and services customers of $3,291 down slightly quarter over quarter and year over year, predominantly from our commercial sector, which began sunsetting legacy career builder customers post the June 2023 acquisition of Broadbeam and smaller customers as we focus on larger ARR opportunities, offset by an increase across the public sector, largely from the growth in public safety customers. Q3 loss from operations was $22.5 million as compared to $25.2 million, an improvement of $2.7 million or 11% from Q3 2023. This was primarily driven by improvements made in our operating expense structure over the past 24 months, offset by a lower non-GAAP gross profit from the decline in revenue over the same period. Excluding the divestiture, Q3 2004 non-GAAP profit reached $15.7 million, declining .9% from Q3 2023 of $20.9 million. Our non-GAAP gross margin in Q3 2004 was .2% as compared to .9% in Q3 2023. Driving this was the decline in the revenue mix over the corresponding period, which largely came from revenue that generated over 90% non-GAAP gross margin. We expect our non-GAAP gross margin to range from 73% to 74% depending on the mix of revenue in Q4 2024. Overall, Q3 non-GAAP net loss was $7.1 million as compared to $7.9 million in Q3 2023, an improvement of 10.1%. Excluding the divestiture, which generated Q3 non-GAAP net profit of $4 million versus $2.5 million in Q3 2023. Q3 non-GAAP net loss from continuing operations was $11.1 million as compared to $10.4 million in Q3 2023. This performance reflects the expected decline in non-GAAP gross profit offset by cost savings enacted in 2024. On the strategic fund, as we transition or focus away from the divestiture, we are poised to return to growth with a much more efficient operating structure and laser focus on our AI solutions. Since the beginning of 2023, we have executed over $40 million of annualized cost savings, which includes over $17 million of annualized cost reductions in fiscal 2024. The 2024 restructuring included organizational alignments within sales, engineering, and corporate, the results of which was a reduction of over 15% of our global workforce. This positions us very well from a cost perspective heading into fiscal 2025. On revenue growth and our outlook, our software products and services revenue pipeline and long-term outlook remain at all-time highs. More specifically, we continue to see strong demand across the global digital evidence management market, which represents an approximate $10 billion market opportunity today. In the public sector alone, we remain in near-term contract phases on several large projects with various facets of the U.S. federal government and international public safety customers, with a sales pipeline of over $100 million. These near-term growth opportunities, coupled with a much improved cost structure heading into fiscal 2025, provide us a pathway to profitability as early as fiscal 2026. Turning to our balance sheet, as of September 30, 2024, and including the divestiture, we held cash and restricted cash of $46.9 million as compared to $72.9 million at December 31, 2023. The net change reflects net cash from outflows from operations of $24.2 million, principally driven by our non-GAAP net loss of $21.6 million. Net cash outflows from investing and financing activities of $9.2 million, driven largely by capital expenditures of $5.1 million and debt and deferred purchase consideration of $5.9 million, offset by cash proceeds of $1.8 million from the cash sale of our energy group in Q2 2024. Turning to liquidity today, to date, we have executed on our strategic initiatives set out at the beginning of 2024, including material cost reductions, the divestiture of non-core assets, which included the cash sales of our energy group in Veritone I, and setting us up for optimal growth heading into fiscal 2025. On top of this, we've reduced our debt carry substantially. Post the 2024 divestiture of Veritone I, our consolidated debt is down from a peak of $201 million in December 2021 to approximately $134 million today, comprised of term debt of $43.1 million due by December 2027 and convertible debt of $91.3 million due November 2026. We reported cash on hand of approximately $27 million immediately following the divestiture, with the potential opportunity bring in an additional $24 million of cash through deferred purchase consideration from the divestiture over the next 12 to 24 months. That said, we are currently exploring additional strategic pathways to further improve our balance sheet and reduce our consolidated debt in the near term, which we will discuss in more detail as these initiatives progress. Now turning to updated fiscal 2024 and 2025 guidance. First, I would like to remind everyone that we have some very large public sector deals that we are expecting to close in the near term. These deals range in the seven to mid eight figure level and can close at any time over the next three to 12 months. As exact timing and rollout of these larger deals are still actively being negotiated today, we have provided a larger range on revenue and fiscal 2025 outlook. Conversely, we have conservatively narrowed our revenue and non-cap net loss ranges for fiscal 2024, including Q4 2024, to discount the potential of any of these large deals closing by the end of fiscal 2024. As a result, in excluding the divestiture of Veritone I and based on our -to-day performance, we are updating our fiscal 2024 guidance and are reaffirming our fiscal 2025 business outlook. More specifically, we expect fiscal 2024 full year revenue is expected to be between 92.5 million and 93.5 million as compared to 100 million for the full year 2023. Full year non-cap loss is projected to be between 37.5 million and 36.5 million as compared to 45.5 million full year 2023. Key assumptions in our guidance include the divestiture of Veritone I. We expect the divestiture to provide less than 0.5 million of non-cap gross profit in Q4 2024 guide. Continued growth in public sector revenue. In the event one of these large deals accelerates into Q4 2024, it will only represent upside to our current guidance. Consistent with prior periods, we do expect reduction in consumption-based revenue from customers such as Amazon, which is embedded in our guidance year over year. And the full realization of our cost reduction initiatives will not happen until Q1 2024 as we did enact certain cost reduction initiatives up through Q3 2024, which we will not see the full benefit of until Q1 2025. Turning to fiscal 2025 outlook. We are holding our prior guidance for fiscal 2025, which we are expecting revenue to be between 107 to 122 million, which at the midpoint represents a 22% increase year over year and non-gap net loss to be between 25 to 15 million, representing a 46% improvement year over year at the midpoint. Key assumptions in our fiscal 2025 guidance include public sector. We are expecting the public sector to grow 100 to 150% year over year, led by near-term deals across the Department of Defense, public safety, including international expansion into Europe, and through more recently announced and expanded partnerships with the AWS, GTAC, and others. We are currently in trials and early phase deployments on all of these projects, which when aggregated are projected to generate substantial revenue over today's baseline. Commercial enterprise. Since August 2024, we renewed our partnerships with some of our largest customers, including multi-year deals and expanded services with the NCAA and IHART. Moreover, we recently renewed ESPN for a multi-year deal that included expanded software products and services. Atop this, one of our largest customers is set to renew in Q4 2024 with annual contract value in excess of 20 million. We are also in the beginning phases of announcing exciting new partnerships with some of the largest AI LLMs and cloud providers to expand our offerings into generative AI. These existing and new market opportunities will drive year over year growth across our commercial sector. Enterprise. During the second half of 2024, we begin to focus efforts on more enterprise opportunities. During Q4 2024, we upsold a multi-year deal with a big four firm to provide AI application services across their hiring platform. We are also in early trials with one of the largest home builders in the U.S. to provide deeper AI analytics and tools to accelerate some of their existing manual process data collections today. Lastly, we are in middle stages with the U.S. Senate to assist them in managing their existing data. While we are forecasting modest revenue in fiscal 2025 around enterprise, we do believe this will be a larger area of growth beyond fiscal 2025. Veritone Hire. Given the current macro, we continue to expect modest to small growth across our applications and services in fiscal 2025. With the exit of consumption-based customer dependencies in fiscal 2024, we do expect a more stable year in fiscal 2025 with a return back to growth in late fiscal 2025 to fiscal 2026. Non-GAAP gross margins. We are projecting our non-GAAP gross margins conservatively to be between 72 to 74 percent throughout fiscal 2025. To the extent that we approach the higher end of our fiscal 2025 revenue guide, we can see non-GAAP gross margins expanding closer to 75 to 77 percent on a blended basis. As we begin to scale and look towards 2026 and profitability, our non-GAAP gross margins should return back to 78 to 80 percent. And finally, our cost structure. With a backdrop of significant cost savings enacted over the last two years, we will exit 2024 with a much improved cost structure relative to the past three years. Moreover, we will continue to manage our cost structure throughout fiscal 2025 to ensure we time necessary investments in our cost structure with corresponding growth. Today, our largest cost remains headcount and to a lesser degree, professional services that has recently been higher and driven by transactional volume and integrations. As we exit 2024, we are not expected to focus on M&A and tactical transactions, which will allow us to get more efficient with our back end of support services and exit dependencies of higher professional fees over the past several years. Before closing the call, I'd like to remind everyone listening that we will be presenting at Needham's sixth annual Needham virtual infrastructure, data analytics software, and cloud communications conference on November 20th at 1.30 p.m. Eastern Time. The webcast link is available on our investor relations website. On-demand replay will be available shortly after the presentation for 90 days. That concludes my prepared remarks. Operator, we would now like to call the questions.

Thank you. We will now begin the question and answer session. As a reminder, to ask a question, you may press star then one on your telephone keypad. If you are using a speaker phone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw it, please press star then two. At this time, we will pause momentarily to assemble our roster. Today's first question comes from Seth Gilbert with UBS. Please proceed.

Hey, guys. Thanks for the question. Can you talk about the updated 2024 revenue guide? Is the $4 to $5 million change 100% allocated to public deal pushout or maybe updates on the hiring side of the business as well?

Yes, I can take that. You are right. It is 100% allocated to timing on public sector. As I mentioned in my prepared remarks, there is potential upside assuming some of these larger deals get pulled into the quarter.

Got it. Maybe as a follow-up, can you give us a bit more of a bridge on acceleration to 2025? I think on our numbers, 2024 revenue growth is going to finish around maybe negative 7% on a pro forma basis. You are guiding 2025 to above 30% at the high end in addition to almost $30 million. Is that all allocated to public deal sector as well or maybe there are other spots of improvement that you would call out that we should be cognizant of in our model? Thank you.

I think we mentioned the public sector growing between 100% to 150% year over year. If you take the residual of that, we are expecting growth across the commercial sector. The large portion of growth on a dollar basis will come from the public sector.

Got it. Thanks,

Mike. As a reminder, if you do have a question, please press star then one on your touchtone phone. Again, if you do have a question, please press star then one. And at this time, it appears that we have no further questioners in the queue. And this does conclude our question and answer session as well as today's conference. Thank you for attending today's presentation and you may now disconnect.