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Full transcript - Veritone Inc (VERI) Q4 2024:
Conference Operator: welcome to the Veritone Inc. Fourth Quarter twenty twenty four Financial Results Conference Call. All participants will be in listen only mode. After today’s presentation, there will be an opportunity to ask questions. Please note this event is being recorded.
Ryan Steelberg, Chairman and Chief Executive Officer, Veritone: Thank you, Kate, and thank you everyone for joining us. We are excited to speak with you today and provide an update on our fourth quarter and full year 2024 operations, financial performance, and strategic progress. We are pleased to report our q four twenty twenty four and full year fiscal twenty twenty four financial results, which reflects solid revenue performance and significant strides in our strategic initiatives. Throughout 2024, we’ve made decisive moves to optimize our operating structure and strengthen our balance sheet, allowing us to focus and prioritize investments to drive growth and differentiation in our core AI software and services offerings. This disciplined approach has laid a strong foundation, and we’re already seeing the benefits in the early part of twenty twenty five.
Building on the strong foundation and fueled by mega trends such as the momentum and enterprise wide AI adoption, the exponential growth rate of unstructured data, as well as our growing robust sales pipeline, we’re very confident in our ability to accelerate the Baritone strategy. Today, Baritone is positioned to become the leading enterprise AI software, applications, and services provider across the commercial and public sectors, and create long term value for our shareholders. Mike Zemetra will cover our quarterly and full year 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. Over the last ten years, we’ve grown Veritone into a full service enterprise AI company. We are a market leader in ingesting and managing unstructured data, indexing that data, and harnessing the power of our AI platform to transform data into near real time actionable analytics and intelligent workflows, which provide support to organizations by bringing clarity to the chaos of this data, and ultimately derive increasing yields and revenue from their datasets.
Just in 2024 alone, we’ve cognitively processed over 10 petabytes of data, which includes over fifty eight million hours of video and audio. Against this incredible data scale, we utilized over eight sixty two unique AI models through Aiware, which include both proprietary baritone models, as well as models from leading third parties. This is proven AI at scale and in full production. This performance all starts with our technology platform, Aiware, the first AI operating system. Aiware is a secure, platform agnostic, open system that leverages and orchestrates hundreds of cognitive and generative AI models, so that unstructured data, including audio and video, can be ingested, indexed, processed, transformed, correlated, and analyzed.
On top of this dynamic platform, we have developed purpose built and award winning AI applications to meet the specific needs of the public and commercial sectors. And in 2024, we launched our AIware based consulting ProServe arm, AISG, assisting both new and existing customers to develop transformative AI solutions for organizations of all backgrounds through our AI adoption framework phases of assess, realize, and evolve. I’m proud to say that currently, we deploy and license our end to end platform, applications, and solutions to over 3,200 customers across the public and commercial sectors. On the commercial side, our customers include Creative Arts Agency, CBS News, ESPN, the NCAA, the Australian Open, PepsiCo, FedEx, and State Farm. In the public sector, we actively service the Department of Justice, the Department of Defense, and hundreds of state and local law enforcement agencies nationwide, including Anaheim Police Department, Pittsburgh PD, Nassau County Sheriff’s Department, the California Highway Patrol, and the Beverly Hills Police Department.
In a rapidly changing AI landscape, we enter 2025 from a position of strength set to unlock shareholder value and reinforce our market leadership. One of the most significant moves we made in 2024 was the sale or divestiture of Veritone One, our legacy advertising agency, which accomplished several critical objectives for the company. The divestiture focused our operations and concentrated our resources on what we believe is our greatest business opportunity, delivering the most advanced AI solutions to our customers and partners at scale. Secondly, the transaction strengthened our financial foundation, substantially bolstering our balance sheet, enabled us to greatly reduce our debt servicing cash burden. As a result, we are now firmly positioned as a pure play AI enterprise software firm, building on top of our existing scale, again, which boasts over 3,000 customers after the divestiture.
Baritone has emerged well positioned relative to customer concentration risk, with no single customer accounting for more than 5% of our revenues, while still maintaining gross revenue retention well above the ninetieth percentile. During the fourth quarter of twenty twenty four, we announced several transformative wins and major product advancements, not the least of which included the expansion of IDEM’s data integration to enhance public safety and law enforcement efficiency, product and listing expansion within the AWS marketplace, and a major multi year renewal and expansion with CBS News. On the product and solution front, we recently launched Veritone Data Refinery, or VDR, built in a hour, that is already in full production and working with many of the largest hyperscalers and generative AI model companies, helping them train and fine tune their respective models with our proprietary data aggregation, management, annotation, indexing, and distribution capabilities. The trends we are seeing in the market make our offerings more critical than ever, as AI promises a complete transformation of data workflows, from pipeline construction to unlocking the value of unstructured information. According to Gartner, unstructured data represents an estimated 80 to 90% of all new enterprise data created, and is growing three times faster than structured data.
The global unstructured data solution market size is over $30,000,000,000 estimated in 2024, and is expected to expand to over $90,000,000,000 by 02/1933. The largest obstacles to AI adoption are the high cost and complexities of harnessing AI ready data and deploying enterprise AI solutions. Storing and backing up unstructured data exceeds 30% of the IT budgets of more than 50% of organizations surveyed in an August 2024 DIS study. However, such enterprises, many of whom are already our customers, lack the proper tools to collect, organize, access, and analyze the rapidly growing variety, velocity, and volume of data in real time. Furthermore, legacy systems and manual processes cannot keep up with increasing demands for data driven decision making and compliance.
And integrating multiple cognitive engines is expensive and slow. Our open AI ecosystem intelligently utilizes multiple best of breed cognitive and generative AI models within a single cloud based solution to process, analyze and organize data in volumes that can far exceed human cognitive capabilities. Moreover, our platform is model agnostic, positioned to adapt to the evolving AI model arms race that is currently underway. As we close out fiscal year 2024, I am proud of our team’s unwavering commitment to advancing our strategic business initiatives. These efforts have been critical in purposely repositioning Veritone to harness and unlock the power of our unique capabilities supported by AI work.
By strategically aligning our investments and resources towards delivering advanced AI solutions in our highest growth verticals, we are optimally positioned to leverage the core strengths of Veritone’s Aiware platform, applications and solutions to seize the expanding opportunities in the AI market. Now, let me walk you through our performance in our core market verticals, commercial and public sectors. In the commercial sector, the explosive growth and creation of digital media, especially audio and video, is increasing at an unprecedented rate, driving up the audience demand for on demand, localized diverse content anytime, anywhere. We are witnessing these trends resulting in fragmented consumption across platforms and devices with increased expense. Media organizations are grappling with macroeconomic pressures, industry mergers, consolidation, remote work, and leaner teams, while trying to keep revenue streams intact.
As the industry’s leading audio and video data experts, we help broadcast media, sports, and entertainment professionals leverage AI to transform content workflows, extend media assets, and unlock value across functions for ongoing profit, deeper insights, and wider reach. In short, we are not only helping organize our customers’ data, but we are also helping them extend and monetize their data, generating both significant efficiencies and new revenue opportunities. During the quarter, we were proud to announce the renewal of our exclusive global licensing arrangement with CBS News. CBS News will continue to utilize Veritone’s AIware platform to enhance access to its extensive licensed content across numerous distribution channels. Additionally, we have expanded this partnership to also include their local market properties and stations and those respective data assets.
We believe the multi renewal is a testament to the value we deliver to the commercial marketplace. In addition to the CBS News extension and expansion, in meeting entertainment, we executed over 42 new deals in the quarter. Other notable deals included agreements with ESPN Bet, Cumulus, Vital Voices, The Game Show Network, A and E Networks, MediaWorks New Zealand, Sony Pictures, Alpha Media, and Charlie Rose, showcasing our continued SaaS growth and the critical nature and stickiness of our AI solutions. Another major announcement for Veritone in the fourth quarter was the launch of our Veritone data refinery platform and service. A groundbreaking offering designed to help enterprises transform vast amounts of unstructured data into high quality AI ready assets.
Leveraging AIware, this new solution empowers organizations to transform and manage their video, audio and text data for training sophisticated AI models, and even optimize revenue opportunities through data monetization. The AI sector’s explosive growth has led to an insatiable appetite and need for high quality training data. But there is a significant shortage of accessible, clean, unstructured data, including audio and video. Veritone’s data refinery is solving this data gap, and we are in a leading position in terms of technical expertise, experience, and scale to quickly grow this new business line. I want to reiterate that VDR is in full production, and we are already booking material contracts and revenue, working with the largest hyperscalers, model developers, and data IP owners.
BDR will be a major contributor to delivering against our revenue growth in 2025 and beyond. I’ll now shift to discuss our solutions for the HR and job recruiting industries, or Veritone Hire, which we are now selling into both the commercial and public sectors. We successfully completed a transformative year, streamlining operations on a global scale, and integrating both Pando Logic and Broadbeam into a common Veritone hire structure at an accelerated pace. This integration marked a significant milestone, leading to the launch of a unified brand and the expansion of our programmatic advertising business beyond North America. Despite broader macroeconomic challenges in the labor and hiring market, our software and advertising businesses remain stable from the third to the fourth quarter.
However, we continue to see substantial growth potential, particularly in the staffing and RPO segment internationally. Many esteemed businesses have extended their initial programmatic advertising pilot campaigns into long term commitments, demonstrating the strength on our performance advertising solutions. During the quarter, we successfully launched our programmatic advertising solution in both The UK and Australia, with plans to enter the German market in the coming months. Our expertise in this space was further reinforced at HR Tech Europe, where we presented a compelling case study on our success in partnership with Randstad, a global leader in HR services. Additionally, our media buying services expanded its reach beyond North America to global markets, securing significant deals, including a strategic partnership with CBRE, one of the largest real estate companies in the world.
Meanwhile, our commercial partnership with LinkedIn continues to gain momentum, exceeding expectations and broadening the scope of our client offerings. On the software side, we are seeing growing opportunities for expansion through key commercial partnerships. We’ve strengthened our collaboration with Workday, the global leader in human capital software, achieving the highest tier level of partnership, Platinum, within their partnership program. Furthermore, we launched a major integration with Bullhorn for Salesforce, enhancing our ability to work alongside the leading software provider in the staffing industry. Looking ahead, Veritone Hire is well positioned for continued growth.
The progress we achieved in q four underscores our ability to execute strategically and adapt to evolving market dynamics. With a strong foundation in place, we are confident in our trajectory for the coming year. Switching to our public sector vertical. Unlike commercial, the public sector requires an elevated level of scrutiny as it relates to software security and data protection. Our proven track record of success, industry certifications, and deep compliance expertise and standards makes us well positioned to serve regulated industries.
This past week, The US Defense Secretary, Pete Hegseth, issued a clear and direct edict to streamline and accelerate procurement of mission critical commercial software for DOD and federal use. We expect Veritone to be a direct beneficiary of the software focused approach. We believe 2025 will be a breakout year for our public sector business, and we remain very bullish on the sector’s opportunities and growth prospects. The Veritone Intelligent Digital Evidence Management System, or IDEMS applications have been deployed in AWS and Azure GovClouds, in FedRAMP, and also currently being installed by DoD customers in their private tenant on AWS and Azure. IDEMs is unique and differentiated and provides significant value and immediate ROI to end users in state and local law enforcement agencies, US higher education institutions, US federal civ and defense agencies, and international government agencies.
Launched in 2024, IDEMS has exceeded our expectations in terms of its demand and the reception we have received from the market. 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. Specifically, the investigative workflow using Veritone IDEMS allows detectives and investigators to significantly speed up the investigation process and dramatically increase case clearance rates. This allows Veritone public sector customers to do more in less time with better outcomes. In local law enforcement, we now service hundreds of customers using items for investigation workflows and or public records requests, PRA, freedom of information request, FOIA, and redaction workflows.
Our users include detectives, investigators, and crime analysts. We continue to add new technical partners, integration, and new sales opportunities, and are adding opportunities and partnerships weekly. On The US federal side, we are currently under contract with both FedSieve and Fed DOD intel agencies and are very active with several material trials and software implementations currently underway. We also recently announced that Veritone has achieved awardable status on the Department of Defense Tradewinds Solutions Marketplace for three of our AI solutions. This accelerates access to investigation tools with Veritone’s illuminate, redact, and track applications added to the Tradewinds marketplace.
As a reminder, the Tradewinds solutions marketplace is the premier offering of Tradewinds, the Department of Defense’s suite of tools and services designed to accelerate the procurement and adoption of AI and machine learning data and analytics capabilities from organizations such as Veritone. The addition of Tradewind solutions augments our previously disclosed FedRAMP authorization, sole source BPA with the DOJ, the T and E BPA with the CDEO, and our AIOR applications and professional service listings on GSA. We are contract ready to service the federal government. Internationally, we continue to add new items opportunities and are working with large local and national law enforcement agencies who are active in trials, in application training, or in the final stages of the procurement process. Our public sector solutions are gaining traction both domestically and globally with new customer acquisitions and a growing pipeline that is now exceeding $110,000,000.
In the fourth quarter, we added 18 new public sector customers to our portfolio. Our market leading AI based items applications built on AIware and professional services are core to our growth opportunity and our future success across all four of the public sector segments we serve, SLED, FedSieve, FedDoD intel, and international markets. Before I close, I wanna highlight an announcement we made earlier today. This afternoon, we announced the appointment of Francisco j Morales to our board of directors. And in conjunction with this, the resignation of Chad Steelberg from our board.
Chad will be pursuing other business and philanthropic endeavors. We wanna thank Chad for his immeasurable contributions to the company since its founding and inception. Mister Morales has been appointed to fill this vacancy and will serve as a strong strategic voice on Baritone’s board. Francisco is the cofounder and executive chairman of five eleven Tactical and its former CEO. Founded in 02/2003, ’5 ’11 Tactical is widely recognized as the global market leader in tactical apparel, footwear, and gear for law enforcement, military, and first responders, serving thousands of agencies and institutions worldwide.
We look forward to welcoming Francisco and leveraging his deep relationships and network. We enter 2025 with strong momentum and look forward to demonstrating our ability to capitalize on the opportunity at hand. I would now like to turn over to Mike Sametra, who will provide more details on our quarterly performance and future guidance. Mike?
Mike Symetra, Chief Financial Officer, Veritone: Thank you, Ryan. I am excited to report that we continue to make substantial financial progress, ending the year with revenue in line with expectations and solid customer metrics and contributions made across our software products and services and managed services. As we exit 2024, a year where we streamline our operations, including divesting our media agency in Q4 and exiting historical revenue concentration dependencies, we made improvements in progress in our operations to refocus back to our near and long term growth targets heading into fiscal twenty twenty five. During my prepared remarks, I will discuss fiscal twenty twenty four and Q4 year over year performance and KPIs, which exclude the results of our media agency, which are presented as discontinued operations in the corresponding historical financial periods. Balance sheet and liquidity position pre and post divestiture, including our November 2024 ATM and January 2025 capital raise.
And Q1 and fiscal twenty twenty five guidance, highlighting the scalability of our revenue and business, including risks heading into fiscal twenty twenty five, focus on improved profitability and projected full year results. Starting with full year 2024 performance. Revenue was $92,600,000 in line with our guidance and down 7% year over year from $100,000,000 in 2023. Driving this was software products and services, which decreased $7,400,000 or 10.8%, while managed service revenue of $31,600,000 was flat year over year. The software products and service revenue decline was largely attributed to commercial enterprise, which declined $7,000,000 year over year, largely due to the expected declines in consumption based customers over the same period, including Amazon and certain one time software revenue in 2023 of approximately 2,200,000.0, which did not recur in 2024, offset by the addition of BroadBeam in late Q2 twenty twenty three.
As I will discuss in more detail, we remain bullish on our future and we are on pace for fiscal twenty twenty five to be a breakout year across our commercial enterprise and public sector, with the public sector on track to grow year over year anywhere from 100% to 150% driven by our IDEMS applications. Full year GAAP gross profit reached $62,700,000 as compared to $70,300,000 in 2023, a decline of 7,600,000 largely driven by the decline in revenue with GAAP gross margin of 67.6% as compared to 70.4% in 2023, a decline of two eighty basis points that was principally driven by the increase in non cash depreciation and amortization expense, largely associated with the June 2023 Broadbeams acquisition. Excluding non cash depreciation and amortization expense, 2024 non GAAP gross margin was 71.6% as compared to 72.3% in 2023, a decline of 70 basis points largely due to the decline in higher margin revenue from consumption based customers. Loss from operations was $86,800,000 as compared to $99,600,000 an improvement of $12,800,000 or 12.9% from 2023 loss from operations. This was primarily driven by improvements made in our operating expense structure over the past twenty four months, coupled with declines in acquisition related expenses of 5,000,000 severance and executive transition costs of 1,800,000.0, purchase consideration of 1,800,000.0, and non cash stock based compensation of 2,600,000.0.
Offsetting these were a lower non GAAP gross profit from the decline in revenue over the same period and higher depreciation and amortization expense of $3,300,000 as a result of the June 2023 Broadbeam acquisition. Non GAAP net loss from continuing operations of 48,800,000.0 improved 5,400,000.0 as compared to 2024, driven by the year over year decline in non GAAP gross margin offset by cost reductions enacted in the first half of twenty twenty four. In 2024, I’m happy to report we did not have a single customer that represented 5% or more of our consolidated revenue during the year, demonstrating our successful efforts to diversify our revenue base. Next, I would like to discuss our q four, twenty twenty four performance. Q four revenue from continuing operations was 22,400,000.0, down 4,700,000.0 from q four, twenty twenty three, principally due to a decline in software products and services driven largely by commercial enterprise, which declined 4,200,000 year over year due to the expected decrease in consumption based customers over the same period, including Amazon.
Included in Q4 twenty twenty four was approximately $700,000 in revenue from the launch of Veritone Data Refinery or VDR, which today has a near term sales pipeline of over 5,000,000 Overall, managed services, which excludes the divestiture of our legacy media agency, was relatively flat year over year. Across our software products and services, our key performance metrics for Q4 twenty twenty four show ARR of $58,800,000 down year over year as we expected declines in consumption based revenue from customers across our commercial enterprise sector, including Amazon over the trailing twelve months. Overall, ARR from recurring subscription based SaaS customers remained relatively flat year over year. As of Q4 twenty twenty four, ’80 ’1 percent of our ARR was from subscription based customers versus consumption based customers, up from 61.3% at Q4 twenty twenty three and seventy six percent sequentially from Q3 twenty twenty four. Total new bookings of 13,200,000.0, dollars down $4,300,000 year over year, primarily due to the timing of a renewal with one of our larger commercial enterprise customers, who renewed on a multiyear deal in Q3 twenty twenty four versus a one year extension in Q4 twenty twenty three.
Gross revenue retention continued to be above the ninetieth percentile and total software products and service customers of 3,237, which was down 6% year over year predominantly from our commercial sector, which includes lower consumption based customers across baritone higher, and the rolling impact of 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 public sector, largely from growth in public safety customers. Q4 GAAP gross profit was 15,300,000.0 compared to 19,900,000.0 in Q4 twenty twenty three. A decline of 4,600,000, largely driven by the decline in revenue with GAAP gross margin of 68.1% as compared to 73.5% in Q4 twenty twenty three, a decline of five forty basis points, principally driven by the decline in consumption based revenue, which generated over 90% gross margins. Excluding non cash depreciation and amortization, 2024 non GAAP gross margin was 70.2% as compared to 76.5% in Q4 twenty twenty three, a decline of six thirty basis points, largely driven due to the decline in higher margin revenue from consumption based customers, coupled with a higher mix of lower margin revenue. Note that in q one twenty twenty four was the initial launch of VDR, where gross margins were approximately 50%.
We expect that as the VDR product matures, margins will initially be similar to q four, but should improve throughout 02/2025. In addition, certain larger content licensing renewals in Q4 twenty twenty four drove lower margins in the early phases of tiered volume pricing, but are expected to improve throughout 2025 as the volume of revenue increases over time. Q4 loss from operations of nineteen point seven million dollars was flat year over year, primarily driven by improvements made in our operating expense structure over the last twenty four months and lower purchase consideration expense as a result of a $1,400,000 gain recorded on the change in fair value of the Veritone One earn out, offset by lower non GAAP gross profit from the decline in revenue over the same period and higher non cash depreciation and amortization expense of $1,200,000 Non GAAP net loss from continuing operations was $9,700,000 which was relatively flat as compared to Q4 twenty twenty three. The year over year change was driven by the decline in non GAAP gross margin offset by cost reductions enacted in the first half of twenty twenty four. On the strategic front, as we transition our 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 02/2023, we have executed over 40,000,000 of annualized cost savings, which includes over $17,000,000 of annualized cost reductions in fiscal twenty twenty four. The 2024 restructuring included organizational realignments within sales, engineering, and corporate, the results of which was a reduction of our global workforce by 15%. This positions us very well from a cost perspective heading into fiscal twenty twenty five. 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 $10,000,000,000 market opportunity today.
In the public sector alone, we remain in near term contract phases on several large projects with various facets of the US federal government and international public safety customers with a sales pipeline of over 100,000,000. These near term growth opportunities coupled with a much improved cost structure heading into fiscal twenty twenty five provide us a pathway to profitability as early as fiscal twenty twenty six. As a reminder, we divested our media agency Veritone One in October 2024. Total consideration from the sale was up to 104,000,000 in cash, which consisted of 86,000,000 in cash at closing and 18,000,000 in cash subject to an earn out based upon Baritone One’s revenue for calendar year 2025. Of the total 86,000,000 in cash at closing, the net cash proceeds were 59,100,000.0 in cash after $6,700,000 in cash was held in escrow and $20,300,000 in purchase price adjustments.
Net cash proceeds from the sale were used to pay down $30,500,000 in principal amount of the company’s December 2023 term loan, plus an additional 3,300,000 in accrued interest and prepayment premiums associated with the debt and $3,900,000 of deal related expenses. Including amounts held in escrow and the earn out, potential future proceeds include up to 24,700,000.0 in cash, which will largely be payable toward the February through April 2026 as certain escrows expire and the 02/2025 earn out is known. Given the media agency’s growth throughout fiscal twenty twenty four and its forecasted exit of customers and expected bookings for fiscal twenty twenty five, we feel confident on achieving at least a large portion of the $18,000,000 earn out at this point in time. Upon closing in Q4, twenty twenty four, recorded a gain on the sale of the divestiture of 69,600,000.0, which is included in discontinued operations in Q4 and fiscal twenty twenty four results. Turning to our balance sheet.
As of 12/31/2024, we held cash and restricted cash of $17,300,000 as compared to $47,500,000 at 12/31/2023. Including the 01/03/2025 registered direct offering, 12/31/2024 cash would have been over 37,000,000. The net change reflects net cash outflows from operations of $31,200,000 principally driven by our non GAAP net loss of $40,800,000 and interest paid on debt of $11,800,000 offset by $18,800,000 in net cash inflows, largely driven from working capital changes from our media agency divestiture in Q4 twenty twenty four. Net cash outflows from investing and financing activities of $32,200,000 driven largely by capital expenditures of $6,000,000 and debt and deferred purchase consideration payments of $38,100,000 offset by net cash proceeds of $7,900,000 from the cash sale of our energy group and media agency in 2024, and $4,500,000 from net proceeds raised through our November 2024 ATM. Turning to liquidity today.
In 2024, we executed on our largest strategic initiative set up at the beginning of the year, including material cost reductions, the divestiture of non core assets, which included the cash sales of our energy group and media agency, and establishing a $35,000,000 ATM facility, setting us up for optimal growth heading into fiscal two thousand twenty five. In addition to the ATM, we raised 20,300,000.0 in a registered direct offering in early January two thousand twenty five. On top of this, we’ve reduced our debt carry substantially. As of 12/31/2024, our consolidated term debt is down from a peak of $2.00 1,000,000 in December 2021 to approximately $132,600,000 today, comprised of term debt of $41,000,000 due by December 2027, and convertible debt of $91,500,000 due November 2026. That said, we are currently in advanced negotiations to further improve our cash position and balance sheet in the near term, which we will discuss in more detail as these initiatives progress.
At 12/31/2024, we had 40,200,000.0 shares issued and outstanding and 2,400,000.0 warrants outstanding to our debt holders. Total shares of 1,700,000.0 were issued in Q4, twenty twenty four under our $35,000,000 ATM, raising net proceeds of 4,500,000.0. On 01/02/2025, we completed a registered direct offering, selling 4,400,000.0 shares of common stock priced at $2.53 per share and 3,600,000.0 of pre funded warrants priced at $2.52 a share for gross proceeds of approximately 20,300,000.0. Including the January 2025 offering, we had approximately 44,600,000.0 shares outstanding, exclusive of the 3,300,000.0 pre funded warrants. Now turning to updated fiscal Q1 twenty twenty five and full year 2025 guidance.
First, I would like to remind everyone that we have some very large public sector deals that we are expecting to close as early as Q1 twenty twenty five, but could close in the coming quarters in 2025. Our confidence in these deals is high. While there has been a lot of scrutiny around government spending under the new presidential administration, these initiatives are not expected to be scrutinized by the current administration and will drastically improve the federal government’s investigative and evidence gathering capabilities in forecasted centralization. These deals range in the 7 to mid 8 figure level and last anywhere from one to five years in duration. As the exact timing and rollout of these larger deals are still being actively negotiated today, we have provided a larger range on revenue in our fiscal twenty twenty five outlook.
In addition, we are seeing high demand for our VDR initiative with a pipeline of over 5,000,000 and growing as of today, the most of which we expect to execute in fiscal twenty twenty five. These coupled with an improved outlook on licensing and stability across our Veritone hire services, we remain highly confident in our near term revenue growth prospects across both our commercial and public sectors. More specifically, in Q1 twenty twenty five, revenue is expected to be between $23,000,000 and $24,000,000 as compared to $24,200,000 for Q1 twenty twenty four. In Q1, we expect the public sector to be flat to slightly up year over year, which includes the loss of $300,000 of certain non recurring project related revenue in Q1 twenty twenty four that is not recurring in Q1 twenty twenty five. Commercial revenue is expected to be relatively flat, driven by $1,000,000 decline in consumption based revenue across our managed services and Veritone higher services offset by 1,000,000 in improvements in commercial SaaS, driven in large part from new VDR revenue in Q1 twenty twenty five.
We expect Q1 non GAAP gross margins to be around 71% consistent with Q1 twenty twenty four. Q1 non GAAP net loss is projected to be between $9,500,000 to $8,500,000 as compared to $10,400,000 in Q1 twenty twenty four, an improvement of 13.5% at the midpoint. Turning to fiscal twenty twenty five outlook. We are slightly updating our prior guidance for fiscal twenty twenty five, which we are expecting revenue to be the same at $107,000,000 to $122,000,000 which at the midpoint represents a 24% increase year over year, and non GAAP net loss to slightly change to be between $27,000,000 to $17,000,000 representing a 46% improvement year over year at the midpoint. The slight change is reflective of the earlier compressions in gross margins on VDR, though we expect this to improve throughout fiscal twenty twenty five.
Key assumptions in our fiscal twenty twenty five guidance include, for the public sector, as previously discussed, 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 AWS, GTAC and others. We are currently in trials in our early phases of deployments on all of these projects, which when aggregated are projected to generate substantial revenue over today’s baseline. For commercial enterprise, since August 2024, we renewed our partnerships with some of the largest customers, including multi year deals and expanded services with the NCAA, CBS, and iHeart. Moreover, we recently renewed ESPN for a multiyear deal that included expanded software products and services. We are also in the beginning phases of our VDR product offering with exciting new partnerships with some of the largest AI, LLMs and cloud providers, expanding our offerings into generative AI.
These existing and newer market opportunities will drive year over year growth across our commercial sector. Turning to our recently launched AI solutions group. During the second half of twenty twenty four, we began to focus efforts on more expanded enterprise opportunities. In Q4 twenty twenty four, we upsold a multiyear deal with an existing Fortune 500 company to provide AI application services across their hiring platform. In addition, we were recently selected by one of the largest homebuilders in The US to provide deeper AI analytics and tools to accelerate some of their existing manual processes and data collection efforts.
Lastly, we are at various stages with the US Senate to assist them in managing their existing data. While we are forecasting modest revenue in fiscal two thousand twenty five around our expanded AI solutions, we do believe this will be a larger area of growth beyond fiscal twenty twenty five. For Veritone Hire, given the recent macro environment, we continue to expect modest to flat growth across our Veritone higher applications and services in fiscal twenty twenty five. With the exit of consumption based customer dependencies in fiscal twenty twenty four, we do expect a more stable year in 2025, with a return back to growth in late twenty twenty five to fiscal twenty twenty six with expected macroeconomic improvements. On non GAAP gross margins, we are projecting our non GAAP gross margins to be between 71 to 73% throughout fiscal twenty twenty five.
To the extent that we approach the higher end of our fiscal twenty twenty five revenue guide, we can see non GAAP gross margins expanding closer to 75% on a blended basis. As we begin to scale and look towards 2026 and profitability, our non GAAP gross margin should return to 75% or better. And finally, our cost structure. With a backdrop of significant cost savings enacted over the last two years, we exited 2024 with a much improved cost structure relative to the past three years. Moreover, we will continue to manage our cost structure throughout fiscal twenty twenty five to ensure we time necessary investments in our cost structure with corresponding growth.
Today, our largest cost remains headcount, and to our lesser extent, professional services that has recently been higher and driven by transactional volume and integration. As we exit 2024, we are not expected to focus on M and A and tactical transactions, which will allow us to become much 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 Veritone will be attending the thirty seventh annual Roth Conference taking place from March in Dana Point, California. That concludes my prepared remarks. Operator, we would like to now open up the call for questions.
Scott Buck, Analyst, H.C. Wainwright and Co.: We will
Conference Operator: now begin the question and answer session. The first question comes from Scott Buck with H. C. Wainwright and Co. Please go ahead.
Scott Buck, Analyst, H.C. Wainwright and Co.: Hi, good afternoon guys. Thanks for taking my questions. First off, I’m curious when do you fully anniversary some of these consumption customer headwinds? Just trying to get a sense of when the year over year comps improve there?
Unidentified Speaker, Veritone: Yes, I can take that one. Q1 20 20 four. So year over year, we are going to be out of the consumption comparison.
Scott Buck, Analyst, H.C. Wainwright and Co.: Okay, perfect. And then I’m curious just in the public sector and specifically federal government, I’ve heard from some other folks during this earnings season that typically when you have an administration turnover, there’s just some disruption and delay, it’s kind of normal course
Glenn Mattson, Analyst, Ladenburg Thalmann: of business. Are you guys seeing any of that?
Ryan Steelberg, Chairman and Chief Executive Officer, Veritone: We are not seeing that for a lot of the contracts that have been awarded for us previously. A lot of what I alluded to of the recent deployments of aiWARE in our respective applications in DoD areas is primarily 2025 money to date. We obviously are all watching closely, which again, we don’t believe is going to be relatively impactful for our 2025 guide in the short term business. But like others, for longer term opportunities, we are taking close attention to obviously the upcoming budget cycle and the potential CR that’s currently being negotiated. But to be very clear, what we’re talking about now in terms of our current and active deployments and revenue opportunities, we’re primarily servicing against approved $20.25 dollars
Scott Buck, Analyst, H.C. Wainwright and Co.: Perfect, Ryan. That’s very helpful. And then last one for me. I think you signed what, 11 new commercial customers during the quarter. Typically, how big of a
Ryan Steelberg, Chairman and Chief Executive Officer, Veritone: bite of the apple
Scott Buck, Analyst, H.C. Wainwright and Co.: do you take with that first contract? I guess, I’m trying to what I’m trying to do is figure out what the potential upsell opportunities are from those new customers in the future?
Ryan Steelberg, Chairman and Chief Executive Officer, Veritone: Well, let’s break them down. So, if it’s DDR related customers, as Mike alluded to, we’re thrilled. I mean, some of the growth and contracting that we’ve been able to sign for this new service right out of the gates are vastly exceeding our expectations. That being said, some of them initially upfront, as Mike alluded to, is some of the margin is a little bit lower than our stated blended overreaching margin, but we do expect that to normalize over the course of the year. So again, that’s speaking to VDR.
Upsell opportunities right now, obviously, if you do some comparisons and some comps to other companies who have been in the AI ready or AI asset preparedness businesses like Shutterstock and others, this is a very big opportunity for us. We’re obviously in a very ideal situation considering our magnitude and scale with high quality IP based audio and video. As we kind of touched on just last year, we processed over fifty eight million hours of audio and video on behalf of our customers. So, we expect that to be again a major contributor for production this year. But again, we are right now I think in VDR in the first phases of, I’ll call, the first contracting, but we do expect over the course of the year consistent with these other companies that we expect multiple SOWs and potential upsell opportunities with these new customers over the course of the year and into 2026.
Scott Buck, Analyst, H.C. Wainwright and Co.: Great. I appreciate the added color guys. Thank you for the time. Thank you.
Conference Operator: The next question comes from Jesse Silverson with DeBouro Capital. Please go ahead.
Jesse Silverson, Analyst, DeBouro Capital: Hey, everyone. Thanks for taking my questions here. Kind of dovetailing off of the prior question on the timing of consumption headwinds here. You are driving to some time growth this year versus the reported declines. So beyond these consumption headwinds, can you point to any specific drivers that underscore your confidence in this inflection point in growth?
Is it just the timing of the large government contract awards or maybe an anticipated acceleration in this BDR segment? I’m just trying to point to some specific business related catalysts to underscore the confidence here.
Ryan Steelberg, Chairman and Chief Executive Officer, Veritone: As we stated previously on some recent calls and public disclosures, VDR and public sector are by far going to be leading the growth and trajectory. In terms of proof points and immediate catalyst, VDR, as we’ve stated, has kind of come out of the gates significantly farther ahead in terms of where we thought we’d be already. We’re under contract and working with and generating revenue from some of the largest hyperscaler and model development companies, while also working with some of the largest IP owners on the content side. So, that is a clear one with clear proof points that we’re very excited about. And to be very clear, it is exceeding our expectations, both in terms of contract velocity and revenue growth.
The public sector side, as we’ve touched on already, is we are actively deploying our solutions into DoD facilities and environments and tenants. And hopefully, we’ll be able to continue to publicize those opportunities and expanded contracts here publicly through press releases and other mechanisms here over the next several weeks and few quarters. But again, remain very bullish on hard concrete proof points for both VDR and public sector growth.
Jesse Silverson, Analyst, DeBouro Capital: Awesome. That’s exciting. And then just one follow-up for me and then I’ll jump back in the queue or connect with you guys. Just curious, it’s looking like we’re hitting an inflection point of growth in the business with all the pieces pointing to positive trends. As we look out over the medium to longer term, can you give us an idea of where you expect to be breakeven on a cash operating standpoint and what like some longer term profitability targets might be?
Unidentified Speaker, Veritone: Yes, I’ll take that one. I think based on our projections, the earliest is going to be in the back half of twenty twenty six.
Jesse Silverson, Analyst, DeBouro Capital: Great. Well, thanks for the details and thanks for taking my questions.
Scott Buck, Analyst, H.C. Wainwright and Co.: Thank you. Thank you.
Conference Operator: The next question comes from Glenn Mattson with Ladenburg Thalmann. Please go ahead.
Glenn Mattson, Analyst, Ladenburg Thalmann: Yes. Hi. Thanks for taking the question. Just curious on the items opportunity. Could you help just better understand how the new offering differs from the previous public safety revenue that you produced?
Just the breadth of the product and why that maybe is creating an inflection point there?
Ryan Steelberg, Chairman and Chief Executive Officer, Veritone: I think first is the number of applications. So IDEMs collectively is a suite of different applications. So historically, we primarily have had one application in the suite of solutions. Those historical applications have been primarily Redact and Illuminate, both very valuable, both still selling at good applications. So, in effect, we can start moving much larger diverse data sets and workflows to expand on the investigation process.
These newer applications include TRACK, which is an application that we announced last year, which provides dynamic and, I’ll say, cross device, cross camera tracking of people of interest as well as the upcoming or in addition to Investigate, which we also announced, which is a much more broader it’s more analogous to DMH Digital Media Hub, which we offer and is one of the dominant products that we sell on the commercial side. This is somewhat analogous on the commercial side, but named Investigate. And so, because of these expanded application product lines, we do expect more additional revenue on a per licensing basis against the application, but also we expect larger contracts because of again the breadth of the opportunity and solutions that we’re providing because of the multivariate nature of the diversity of the applications.
Glenn Mattson, Analyst, Ladenburg Thalmann: That’s super helpful. And then I guess just as in terms of competitive landscape, is it can you just describe when you’re in the field, what you see versus some of the other offerings that are out there and how you’re able to differentiate and win in that scenario?
Ryan Steelberg, Chairman and Chief Executive Officer, Veritone: Yes. So this is really exciting. So unlike the commercial business where there’s been different forms of technology and storage and I’ll say more archaic, analytic tools for movie content and elements, in the public sector space, I mean, it’s pretty much greenfield. You’re seeing explosion of new data types being created. And typically, they’re really bound in more or less closed environments with certain hardware providers.
So, for example, if there is a security camera, right, that’s going to a proprietary VMS system, if there is a single body camera company, right, that’s really working with that type of dataset, is working on the back end with a single vendor. But the reality is when you’re talking about the diversity of these new data sets, you’re talking about multiple different IoT sensor and capture things. Meaning, data is being produced at an incredibly higher rate now and the diversity of those data sets is making it incredibly challenging for municipalities, sheriff departments and police agencies to ingest, index and organize the breadth of these diverse and disparate data sets. That’s what we do. So, IDEMs built on AIware is the leading open platform that’s going to be able to ingest all these different datasets in any format, which, by the way, is critical.
You can’t really follow and progress an investigation along unless you can ingest all these different datasets and create a common narrative and storyline. For example, I like to say crime unfortunately travels. If you’re bouncing from drone footage to a security camera to a citizen upload camera, all that has to be taken into a common platform and that’s what we’re bringing to the market through with items on aiWARE.
Glenn Mattson, Analyst, Ladenburg Thalmann: Thanks for all that clarification. Very helpful, Ryan, and congrats on the results.
Scott Buck, Analyst, H.C. Wainwright and Co.: Thank you.
Conference Operator: This concludes our question and answer session. I would like to turn the conference back over to Ryan Steelberg for any closing remarks.
Ryan Steelberg, Chairman and Chief Executive Officer, Veritone: The close of 2024 represented really two years of material change and transition for our business. But I have to say is Veritone is back into a very focused and a very strong position for both revenue growth and market expansion for 2025 and beyond. I’m very thankful to our passionate teams and talented Veritoneians who have led us through this transformation. I mean, we’re all excited about 2025 and beyond. But more specifically, it’s taken into account again our market leading AI solutions, the near term positive impact from VDR and our public sector growth.
And we coupled that with a very large diverse customer base already of over 3,000 global enterprises, this is our year to really flip the switch. I think we’ve articulated some very clear proof points why both shareholders and potential new investors should be very bullish about the future of Veritone. Thank you for your time today.
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Veritone, Inc. (VERI) Q3 2024 Earnings Call Transcript
Nov. 12, 2024
Veritone, Inc. (NASDAQ:VERI) Q3 2024 Earnings Conference Call November 12, 2024 8:30 AM ET
Company Participants
Cate Goldsmith - Investor Relations
Ryan Steelberg - Chief Executive Officer & President
Mike Zemetra - Chief Financial Officer
Conference Call Participants
Seth Gilbert - UBS
Operator
Good day, and thank you for waiting. Welcome to the Veritone Inc. Third Quarter 2024 Financial Results Conference Call. [Operator Instructions] Please note that today's event is being recorded.
Ryan Steelberg
Thank you, Cate 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 Zemetra 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 One, 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 noncore 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 One 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 boast over 3,000 customers after the divestiture. Furthermore, post divestiture, 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 transforms 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, affordable 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 generative AI models, intelligent model routing, vector databases, compliance frameworks and application workflow logic that can mirror human reasoning.
We have 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 SIV and now Fed DoD.
With our strengthened 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 AI revolution, we're leading it.
When appointed as CEO, I stated 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 multiyear 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 iHeartMedia, the nation's leading audio company. This multiyear SaaS agreement enables iHeartMedia 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 iHeartMedia as a customer in 2017, we deployed our AI solutions across 200 stations in 50 markets. As current multiyear 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 executed over 28 deals in the quarter. One other recently executed deal was the re-signing 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. Veritone 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 Fourlis was selected for TAtech's Fall 2024 Honor Class of Business and Thought Leaders. For awareness, TAtech is the leading association for talent acquisition leaders. Additionally, we signed significant AI programmatic contracts in the UK with a global staffing client and broke into Australia for the first time utilizing AI-based programmatic job placement.
A few notable global deals include Magna 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-divestiture, 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 go-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 SIV 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 in our 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 Getac. We completed and announced our integrations with Axon's Evidence.com and Milestone's VMS connector where we have created automated workflows and efficiencies for our customers by automating the ingestion process from those applications into our iDEMS 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 iDEMS solutions. We also delivered an iDEMS solution and began assisting in its implementation with yet another DoD organization.
During the quarter, we announced and released our latest version of Track 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. Track 2.0 is now fully deployed on aiWARE and it is included as a fully operational application in our iDEMS suite.
Finally, the results 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 iDEMS product suite the expansion of our technical partnerships and the addition of new channel partners.
I would now like to turn it over to Mike Zemetra who will provide more details on our quarterly performance and future guidance. Mike?
Mike Zemetra
Thank you, Ryan. I am pleased to report our third quarter results, which were in line with our previously announced guidance and demonstrates 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 year-over-year performance in KPIs from continuing operations which exclude the results of our media agency, which are presented as discontinued operations as of September 30 2024 and in the corresponding historical financial periods balance sheet and liquidity positions pre- and post-divestiture and our updated guidance for fiscal year 2024 and 2025.
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 ended September 30, 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 ended September 30, 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 & 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 it back to the sale and term loan payment Veritone ended with approximately $27.3 million in cash an aggregate principal debt of approximately $134.4 million, down from $168.8 million in debt at December 31, 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 towards 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 customers 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 divestiture of our media agency is an important and strategic shift in our operations namely it positions Veritone is 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 the way it was at December 31, 2023. This annualized cash savings represented almost all of the EBITDA contribution from the divestiture over the trailing 12 months ended September 30, 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 & Services. The decline in Software Products & 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 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'm happy to report, 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 & 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 consortia-based revenue from customers across our traditional 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 and 6% year-over-year. Gross revenue retention continued to be above the 90th percentile and total Software Products & Services customers of 3,291 down slightly quarter-over-quarter and year-over-year predominantly from our commercial sector which began sunsetting legacy CareerBuilder customers post the June 2023 acquisition of Broadbean and smaller customers, as we focus on larger ARR opportunities, offset by an increase across 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, 2024 non-GAAP gross profit reached $15.7 million, declining 24.9% from Q3, 2023 of $20.9 million. Our non-GAAP gross margin in Q3 2024 was 71.2% as compared to 74.9% 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 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 front, as we transition our 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 realignments 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 & 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 US federal government and international public safety customers. With the 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 and Veritone One 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 One, 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 to 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-8-figure level and will 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 in fiscal 2025 outlook.
Conversely, we have conservatively narrowed our revenue and non-GAAP 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 and excluding the divestiture of Veritone One and based on our year-to-date 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-GAAP 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 One, we expect the divestiture to provide less than $0.5 million of non-GAAP 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 million to $122 million, which at the midpoint represents a 22% increase year-over-year and non-GAAP net loss to be between $25 million 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 AWS, Getac, and others. We are currently in trials and our early phase deployments on all 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 multiyear deals and expanded services with the NCAA and iHeart.
Moreover, we recently renewed ESPN for a multiyear deal that included expanded Software Products & 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 LOMs and cloud providers to expand our offerings in degenerative 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 began to focus efforts on more Enterprise opportunities. During Q4 2024, we have sold a multiyear deal with a Big Four firm to provide AI application services across the hiring platform. We are also in early trials with one of the largest homebuilders in the U.S. to provide deeper AI analytics and tools to accelerate some of their existing manual process and 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 Veritone Hire 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% 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% 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%.
And finally our cost structure. With the 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 tie 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 the Needham's Sixth Annual Needham Virtual Infrastructure, Data Analytics Software and Cloud Communications Conference on November 20 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 open up the call for questions.
Question-and-Answer Session
Operator
Thank you. We will now begin the question-and-answer session. [Operator Instructions] And today's first question comes from Seth Gilbert with UBS. Please proceed.
Seth Gilbert
Hey, guys. Thanks for the question. Can you talk about the updated 2024 revenue guide? Is the $4 million to $5 million change 100% allocated to public deal push out? Or were there maybe updates on the hiring side of the business as well?
Mike Zemetra
Yeah. I can take that. Yeah, you're right. It's 100% allocated to timing on Public Sector. And as I mentioned in my prepared remarks, there's potential upside assuming some of these larger deals get pulled into the quarter.
Seth Gilbert
Got it. And then 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. And you're guiding 2025 to above 30% at the high end an addition of almost $30 million. So is that all allocated to public deal sector as well? Or maybe there's other spots of improvement that you would call out that we should be cognizant of in our model? Thank you.
Mike Zemetra
Yeah. I think we mentioned the Public Sector growing between 100% to 150% year-over-year. So if you take the residual of that we are expecting growth across commercial sector. But that -- the large portion of growth on a dollar basis will come from the Public Sector.
Seth Gilbert
Got it. Thanks guys.
Operator
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