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VI

Veritone, Inc. (VERI)·Q3 2024 Earnings Summary

Executive Summary

  • Q3 2024 revenue was $22.0M, down 21% year over year; non-GAAP gross margin compressed to 71.2% from 74.9% YoY; non-GAAP net loss improved to $7.1M (vs $7.9M) as cost actions offset lower gross profit .
  • Veritone closed the divestiture of Veritone One in October for up to $104M, used $30.5M to pay down term debt; post-deal, no single customer exceeded 5% of revenue, reducing concentration risk .
  • FY 2024 guidance was reset lower (revenue $92.5–$93.5M; non‑GAAP net loss $(37.5)–$(36.5)M); FY 2025 outlook targets revenue $107–$122M and non‑GAAP net loss $(25)–$(15)M, driven by a >$100M pipeline and public sector growth expectations of 100–150% YoY .
  • Management shifted projected cash‑flow profitability to FY 2026, citing business refocus and debt service reductions; restructuring delivered >15% OpEx savings in FY 2024, with >$40M annualized cost saves since 2023 .
  • Near-term catalysts: closure of several large 7- to mid‑8‑figure public sector deals over 3–12 months; multi‑year renewals/expansions with NCAA, iHeartMedia, ESPN underscore commercial momentum .

What Went Well and What Went Wrong

What Went Well

  • “The divestiture of Veritone One marks a defining moment... positioning us as a pure‑play enterprise AI company,” enabling focus on higher‑growth, higher‑margin verticals (public sector, commercial enterprise) and reduced customer concentration .
  • Commercial momentum: multi‑year agreements and expansions with NCAA (> $40M contract value), iHeartMedia (extension to >850 stations), ESPN; 28 media deals executed in the quarter .
  • Bookings and mix improved: total new bookings rose to $16.5M (+17% qoq; +6% yoy); ARR mix shifted to 76% subscription vs. consumption, improving revenue stability .

What Went Wrong

  • Top-line pressure: revenue fell 21% YoY to $22.0M, driven by declines in consumption‑based customers (including Amazon) and lapping ~$2.7M one‑time software revenue in Q3 2023 .
  • Margin compression: non‑GAAP gross margin declined to 71.2% from 74.9% YoY due to revenue mix shifting away from >90% margin items .
  • Guidance reset: FY 2024 revenue and non‑GAAP net loss guidance were materially lowered versus Q2 outlook, reflecting divestiture and timing of public sector deals; cash‑flow profitability pushed to FY 2026 (previously as early as Q4 2024) .

Financial Results

Q3 2024 vs prior quarter and prior year vs estimates

MetricQ3 2023Q2 2024Q3 2024Consensus (Q3 2024)
Revenue ($USD Millions)$28.0 $31.0 $22.0 N/A – SPGI data unavailable
GAAP Net Loss per Share (Basic & Diluted)$(0.66) $(0.59) $(0.57) N/A – SPGI data unavailable
GAAP Net Loss per Share – Continuing Ops$(0.72) N/A$(0.59) N/A – SPGI data unavailable
Non‑GAAP Net Loss per Share$(0.21) $(0.18) $(0.19) N/A – SPGI data unavailable
Non‑GAAP Gross Margin %74.9% 78.8% 71.2% N/A – SPGI data unavailable
Loss from Operations ($USD Millions)$(25.2) $(17.7) $(22.5) N/A – SPGI data unavailable

Notes: SPGI consensus estimates attempted but unavailable due to daily request limit; no estimate comparisons provided.

Quarterly trajectory (Q1–Q3 2024)

MetricQ1 2024Q2 2024Q3 2024
Revenue ($USD Millions)$31.6 $31.0 $22.0
Non‑GAAP Gross Margin %77.7% 78.8% 71.2%
Non‑GAAP Gross Profit ($USD Millions)$24.6 $24.4 $15.7
Loss from Operations ($USD Millions)$(21.8) $(17.7) $(22.5)
GAAP Net Loss per Share (Basic & Diluted)$(0.67) $(0.59) $(0.57)
Non‑GAAP Net Loss per Share$(0.20) $(0.18) $(0.19)

Segment revenue breakdown

SegmentQ1 2024Q2 2024Q3 2024
Software Products & Services ($USD Millions)$15.22 $15.63 $14.69
Managed Services ($USD Millions)$16.42 $15.36 $7.30
Total Revenue ($USD Millions)$31.64 $30.99 $21.99

Sub‑components:

  • Managed Services – Advertising (Q1/Q2): $10.98 (Q1) , $10.48 (Q2) ; Representation Services (Q3): $2.73 .
  • Managed Services – Licensing: $5.44 (Q1) , $4.89 (Q2) , $4.57 (Q3) .
  • Software – Commercial vs Public: Commercial/Public software revenue: $13.70/$1.52 (Q1) ; $14.51/$1.12 (Q2) ; $13.10/$1.60 (Q3) .

KPIs

KPIQ1 2024Q2 2024Q3 2024
Total Software Products & Services Customers3,384 3,437 3,291
ARR – Total ($USD Millions)$72.1 $67.9 $63.3
ARR – SaaS ($USD Millions)$48.60 $49.22 $48.27
ARR – Consumption ($USD Millions)$23.51 $18.70 $15.01
Total New Bookings ($USD Millions)$12.96 $14.05 $16.47
Gross Revenue Retention>90% >90% >90%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Millions)FY 2024$136–$142 $92.5–$93.5 Lowered
Non‑GAAP Net Loss ($USD Millions)FY 2024$(11)–$(15) $(37.5)–$(36.5) Lowered
Revenue ($USD Millions)Q3 2024$34–$35 Actual $22.0 Miss vs prior guide
Revenue ($USD Millions)FY 2025N/A$107–$122 New outlook
Non‑GAAP Net Loss ($USD Millions)FY 2025N/A$(25)–$(15) New outlook
Non‑GAAP Gross Margin %Q4 2024N/A73–74% New detail
Non‑GAAP Gross Margin %FY 2025N/A72–74%, potential 75–77% at high end New detail
Public Sector Revenue GrowthFY 2025N/A+100% to +150% YoY New detail
Cash‑flow Profitability TimingCompanyAs early as Q4 2024 As early as FY 2026 Pushed out

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 2024)Previous Mentions (Q2 2024)Current Period (Q3 2024)Trend
Strategic focus / divestitureFormal process to divest non‑software asset initiated Progressing toward divestiture Veritone One sold; pure‑play enterprise AI positioning Executed; refocus complete
Public sector pipeline & iDEMS19 public sector customers; AI consulting launched Pipeline >$100M; 17 new customers; AWS SCA Pipeline >$100M; 13 new customers; DoJ, DoD engagements; integrations (Axon, Milestone) Strengthening
Commercial media partnershipsNew/renewed deals (NBCU, U.S. Soccer, Chewy) 23 media deals; NCAA multi‑year up to $40M iHeartMedia expansion to 850+ stations; ESPN renewal; NCAA reaffirmed Expanding
ARR mix & stabilitySubscription ARR +7% YoY; shift away from consumption Subscription share 72% of ARR Subscription 76% of ARR; customer concentration eliminated (>5%) Improving mix
Cost actions & marginsRestructuring saves ~$13M annualized Material OpEx improvements; non‑GAAP GM up to 78.8% >15% OpEx savings in FY24; non‑GAAP GM 71–74% near‑term Cost base down; margin volatile on mix
Balance sheet & debtNew term loan framework Elevated interest expense from term loan $30.5M term debt repaid; cash ~$27M post‑deal; considering further deleveraging Deleveraging
Profitability timingAs early as Q4 2024 Reinforced in Q2 outlook Shifted to FY 2026 Deferred

Management Commentary

  • CEO Ryan Steelberg: “The divestiture of Veritone One marks a defining moment... positioning us as a pure‑play enterprise AI company... We’re now poised to capitalize on the unprecedented growth in the AI solutions market” .
  • “Post divestiture, Veritone has eliminated our customer concentration risk with no single customer accounting for more than 5% of our revenues” .
  • CFO Michael Zemetra on the deal: “Total consideration... up to $104 million... net cash proceeds were $59.1 million... used to pay down $30.5 million in principal... improving our balance sheet... reducing annualized debt carry costs” .
  • Pipeline and guidance: “Public sector expected to grow year‑over‑year anywhere from 100% to 150%... Fiscal 2025 revenue $107–$122 million... non‑GAAP net loss $(25)–$(15) million” .
  • Margin outlook: “We expect our non‑GAAP gross margin to range from 73% to 74% in Q4 2024... FY 2025 conservatively 72% to 74%, with potential expansion closer to 75%–77%” .

Q&A Highlights

  • 2024 guidance reset attribution: Management clarified the change is “100% allocated to timing on public sector” push‑outs, with potential upside if deals accelerate .
  • 2025 growth bridge: Growth addition (~$30M at high end) largely from public sector; commercial sector contributes but public is the “large portion of growth” .

Estimates Context

  • S&P Global consensus for Q3 2024 revenue and EPS was requested but not retrievable due to SPGI daily request limit; therefore estimate comparisons are unavailable for this recap. We attempted to fetch “Revenue Consensus Mean” and “Primary EPS Consensus Mean” for Q3 2024 and FY periods, but data was not provided.

Key Takeaways for Investors

  • The business is now a pure‑play enterprise AI platform post divestiture, with reduced customer concentration and a higher‑quality ARR mix (76% subscription), improving durability into FY 2025 .
  • Near‑term revenue headwinds from consumption declines (including Amazon) and lapping one‑time software in Q3’23 pressured margins; cost structure improvements helped narrow non‑GAAP net loss despite lower gross profit .
  • FY 2024 was reset lower due to divestiture and deal timing; watch for closure of several large public sector contracts (7- to mid‑8‑figure) over the next 3–12 months as key stock catalysts .
  • FY 2025 outlook implies double‑digit growth (22% midpoint) and substantial non‑GAAP loss improvement; public sector expansion (DoD, federal, international) and AWS/partner integrations are the primary drivers .
  • Margin trajectory depends on mix; management guides 73–74% in Q4 and 72–74% in FY 2025, with upside to 75–77% at high end of revenue—track mix shifts and contract types in upcoming quarters .
  • Balance sheet improved via $30.5M term debt paydown; management considering additional deleveraging pathways—reduces risk and interest burden into 2025 .
  • Absent SPGI consensus, frame results vs prior guide: Q3 revenue missed prior $34–$35M guide; investors should recalibrate models to new FY 2024/2025 ranges and monitor public sector bookings conversion rates .