Veritone, Inc. Q1 FY2025 earnings call

Management Statement and Operational Highlights

• Strategic Updates: Secured over 100 new business and renewal software agreements in Q1 2025, including with marquee commercial clients and public sector agencies. VDR is gaining material traction with a pipeline of over $10 million, leveraging Veritone's aiWARE platform.
• Veritone Hire: Pursuing growth through expanding reseller network, enhancing ATS integrations, and growing media services. Partnership with Workday is generating opportunities and leads.
• Public Sector: IDEMS is transforming operations for law enforcement, with progress in federal agencies like the Department of Defense and Department of Justice. Expanding technical partnerships and integrations, with several large county procurements in final stages and growth in Canada.

Segment Performance

• Veritone Data Refinery (VDR): In Q1 2025, VDR generated approximately $0.9 million in revenue. It has a near-term pipeline of over $10 million, up from $5 million a few weeks prior, and is expected to contribute significantly to revenue in the remainder of 2025. The global training data market is projected to grow, and VDR is uniquely positioned to capitalize on this, having already ingested and delivered the equivalent of over 200 billion tokens derived from premium audio and video for model training.
• Veritone Hire: Despite labor market challenges, it focuses on mid- and long-term growth through a three-pronged approach: expanding the reseller network, enhancing ATS integrations, and growing media services. Media services penetration within existing customers is less than 5% of their annual spend budgets, but there is significant growth potential. Partnership with Workday as a Certified Platinum Partner has generated opportunities and leads.
• Public Sector: Veritone Intelligent Digital Evidence Management System (IDEMS) is gaining traction domestically and internationally. Added 8 new SLED customers and 40 expansion sales transactions in Q1. Pipeline exceeds $110 million, with progress in federal and local law enforcement, including partnerships with Getac and work on Project Defender.

Guidance

• Q2 2025: Revenue expected to be between $23 million and $25 million. Public sector revenue expected to be up year-over-year, commercial enterprise revenue relatively flat with $1 million decline in consumption-based revenue offset by $1 million growth in commercial SaaS (largely from VDR), and managed services expected to be down year-over-year. Non-GAAP gross margins expected around 68%-70%, non-GAAP net loss projected between $8 million to $9 million.
• Fiscal 2025: Revenue expected $104 million to $115 million (18% y-o-y growth). Non-GAAP net loss between $30 million to $20 million. Public sector expected to grow 100%-150% y-o-y, VDR with significant growth opportunities, and commercial enterprise driven by renewed partnerships and VDR product offering. Non-GAAP gross margins expected 65%-70% throughout fiscal 2025, potentially expanding closer to 73% if revenue approaches higher end of guide.

Risks

• Forward-looking statements are subject to risks, uncertainties, and assumptions that may cause actual results to differ materially from those stated. These include risks related to market conditions, timing of contract executions, and the impact of macroeconomic factors on business segments like managed services.

Question and Answer

• Q: Scott Buck asks about public pipeline being new customers vs. customer expansions: A: Ryan Steelberg states the majority is customer expansion, with bullishness due to executed revenue-based contracts with larger pipeline customers, including within existing agencies under DoD.
• Q: Seth Gilbert asks about public safety deals generating revenue and Veritone Hire steps: A: Ryan Steelberg says some public safety deals are ready to deploy, with software modules ready to be delivered; Veritone Hire has a three-pronged approach: expanding reseller network, enhancing media services, and optimizing algorithms.
• Q: Glenn Mattson asks about margin flow and VDR pipeline nature: A: Mike Zemetra mentions margins expected to improve in Q2, Q3, Q4; Ryan Steelberg says VDR pipeline growth is from a few players with expanded visibility on data assets, including net new customers and selling same assets to multiple buyers.
• Q: Jesse Sobelson asks about balancing R&D investments in VDR and VDR milestones: A: Ryan Steelberg explains VDR uses existing infrastructure, with milestones including representing both sides of data asset transactions and procuring new data asset classes like security and public service data