Hello everyone, and welcome to the Veritone Third Quarter 2021 Financial Results Call. My name is Daisy and I will be coordinating today’s call. [Operator instructions] I would now hand over to your host Brian Alger from Veritone to begin. Brian, please go ahead, sir.

Good afternoon, and welcome to Veritone’s third quarter of 2021 conference call. I am Brian Alger, Senior Vice President, Investor Relations and Capital Markets. After the market closed today, Veritone issued a press release announcing the results for the third quarter ended September 30, 2021. The press release and other supplemental information is available at the investors section of our website. Joining me for today’s call are Veritone’s Chairman and CEO, Chad Steelberg; President, Ryan Steelberg; and CFO, Mike Zemetra. Following their remarks, we’ll open up the call for questions. Please note that certain information discussed on the call today will include forward-looking statements about future events and Veritone’s business strategy and future financial and operating performance, including its expected net revenues and non-GAAP net income and loss for the fourth quarter and full year of 2021 respectively. These forward-looking statements are subject to risks, uncertainties and assumptions, that may cause the actual results to differ materially from those stated or implied by those statements. Certain of these risks and assumptions are discussed in Veritone’s SEC filings, included its annual report on Form 10K. These forward-looking statements are based on assumptions as of today November 9, 2021, and Veritone undertakes no obligation to revise or update them. During this call, the actual and forecasted financial measures we’ll be discussing other than revenue will be presented on a non-GAAP basis, unless noted otherwise. Reconciliations of these measures to the corresponding GAAP measures are included in the press release we issued today. These non-GAAP measures include a breakout of our results between core operations and corporate. Core operations consist of our consolidated Software Products & Services including our recently acquired PandoLogic and Managed Services that include our content licensing and advertising services and their supporting operations, including direct cost of sales, as…

Thank you, Brian, and thanks, everyone, for joining us on today’s call. Looks like we have many new investors that have joined us for the first time. Welcome. I’m delighted to report that Veritone’s trend of raising the bar continues. Our top-line revenue grew 44% year-on-year making Q3 our sixth consecutive record quarter. Moreover, we are raising the midpoint of our full year 2021 revenue guidance to $104.3 million, which represents over 80% growth versus 2020. We remain steadfast in our mission to create a better world through the power of artificial intelligence. One that is dynamic, transparent, innovative and safe, powered by our proven AI platform, aiWARE, the first AI operating system. With our ever expanding AI solutions and rich partner ecosystem, our customers are solving their current and future challenges with confidence, knowing that Veritone is there to help streamline processes through intelligent automation, enhanced decision support, and optimized outcomes. We are very excited to have closed the recent acquisition and integration with PandoLogic. The impact to the overall business is transformative. By entering this new market, corporate intelligence, we increased our customer penetration into the Fortune 100 and broadened our international footprint. Including PandoLogic, our combined head count is approaching 500, growing over 50% since the beginning of 2021, and more importantly, increasing our engineering and product capabilities. We also augmented our top-line with the addition of PandoLogic’s pro forma revenues of over $50 million in 2021 and operating margins greater than 50%. In addition to strengthening our financial position, PandoLogic perfectly fits our culture and aligns with our strategic objectives. We are aggressively integrating aiWARE into PandoLogic’s applications and are already seeing the fruits of our labor. As a company, Veritone’s go-to-market strategy continues to mature. With the addition of PandoLogic and the technological advances in aiWARE, we are now capturing more enterprise opportunities across an increasing number of businesses. With a mature technology platform and multiple proven applications. We are aligning our business to focus on the customer and more broadly delivered the full potential of AI. As Ryan and Mike will detail later in the call in Q3, we realigned our organization to focus on two distinct markets each with a unique customer base and go-to-market strategy, commercial enterprise and government and regulated industries. With that, I would like to now hand the call over to Ryan, our President, and Co-Founder to discuss our operational achievements in greater detail. Over to you, Ryan.

Thank you, Chad, and good afternoon, everyone. We again achieved record results in Q3. Our performance for the quarter and year-to-date reflects a maturing platform and business strategy. Accordingly, we have recast our revenue breakdown to more accurately reflect the business we are managing today. We sell a combination of products and Managed Services into multiple end markets in commercial enterprise and government and regulated industries. Our recasting of the revenue aligns our reporting with the customers we serve and the way we go to market. Veritone has and always will lead with our software and technology. However, as the aiWARE platform and our suite of products matures, the way that we engage with our customers has also matured. In the early days, we talked about our land and expand customer strategy. Our goal was to get a foothold and then use our technology to compel customers to expand how much of one product they use across their company. Today, we have a much more comprehensive suite of products in Managed Services, so we are having much more comprehensive and strategic conversations with our customers. Increasingly, we are engaging in whole enterprise conversations. So now what started with a single application or use case has evolved to conversations and contracts that leverage the full potential of aiWARE. Whether it is with legacy broadcast customers, or newly engaged public safety agency customers, Veritone is now leveraging the power of our platform, ecosystem of partners and broad suite of applications. Commercial enterprise currently accounts for the vast majority of Veritone’s revenues. Yet we believe that GRI will grow in scope and size, albeit with different deal sizes and sales cycles. Over the course of the quarter, we achieved a number of notable milestones with our commercial enterprise customers. We renewed all material…

Thank you, Ryan. I am excited to report our financial progress, including our recent addition of PandoLogic in late Q3, 2021. For the sixth consecutive quarter, we posted record results and our KPIs along with the top and bottom-line beat our Q3 2021 guidance. During my prepared remarks, I will discuss our Q3 2021 organizational realignment and resulting changes to our financial reporting and KPI drivers. Our year-over-year performance on a GAAP and pro forma basis, the PandoLogic impact and annual 2021 guidance, which we raised again, highlighting revenues, scaling and exceeding a $100 million for the first time and equally as important Q4 2021 being our first projected quarter with positive non-GAAP net income. First, I’ll discuss our organizational realignment and new reporting format and metrics. We are presenting revenue in two distinct customer groups, each with a unique focus and go-to-market strategy, one commercial enterprise and two government and regulated industries or GRI. Additionally, we show revenue in two categories, one, software product and services, and two, Managed Services. We are also now reporting new customer driven metrics around our consolidated Software Product & Services, and on a pro forma basis as if we own PandoLogic since January 1, 2020. This includes a quarterly breakdown of total ending customers, average annual revenue per customer or AAR and gross retention, which is our best proxy for customer churn. Now to Q3 2021 performance. On a GAAP basis, revenue was a record $22.7 million, up $6.9 million or 44% from Q3 of 2020 driven largely by Software Products & Services, which increased $5.7 million or 169% to a record $9 million in revenue and secondarily from Managed Services, which increased $1.3 million or 10%. The increase in Software Products & Services was driven largely from the acquisition of PandoLogic and…

Thank you very much. [Operator Instructions] Our first question comes from Darren Aftahi from ROTH Capital Partners. Darren, your line is open. Please go ahead.

Hi guys. Thanks for taking my questions and congrats on the nice quarter and the good outlook. Two, if I may, just with the labor market, what's going on, I'm just kind of curious since you bought and closed Pando. How have things kind of changed, and what kind of do you see as the prospects for kind of cross-selling Pando into your legacy Veritone base? And then second question is kind of big picture. As you look into 2022, you've got a lot of things that are fairly material catalysts. I'm just kind of curious if you can kind of speak to which ones you think will gain the most kind of traction or fruit amongst energy, federal government, PandoLogic and then MARVEL.ai. Thanks.

Hi, Darren. Ryan, why don't you take the first one and then part of the second and then I'll follow up.

Okay, great. I think the labor market, obviously – despite it being a very challenging time for many corporations, it obviously puts Veritone with Pando in a very strategic position to really grow that business. And while we're doing that, and obviously, to our benefit, we are going to be significantly in benefiting those respective clients of ours. So obviously, we're seeing increased demand and increased revenue, hence, from that increased demand through PandoIQ. And we do expect that to continue for the foreseeable future. Just – again, we think the labor market is going to be tight. And it's not just for, I'd say, short-term quick service type of restaurants and logistics type of employers – employees, but we do see the systemic problem going to persist well through 2022 and beyond. So bodes very well for what we're doing. In terms of cross-selling, I'm really excited to state that this has been very well thought out and kind of strategically on-boarded an opportunity. Yes, PandoLogic is still subject to a contracted earn-out as we've disclosed before, but we've already done some great work in terms of co-marketing, cross-selling and doing that mapping. So we are very optimistic that we will start to see penetration of PandoIQ technology enabled with aiWARE, sold and deployed across the breadth of our customer base. The good news is everybody is in need of hiring quality and talent. And I think we're not only looking forward to that in 2022, but we're acting upon that now. In terms of other catalysts, I'll let Chad have his own remarks, but I'll speak to just the demand that we're seeing really in M&E, which has been exciting. We're going to talk a lot about, as I did on the prepared remarks earlier today about government, legal and compliance, but media and entertainment and our sort of commitment to that industry as we sort of sprint here to now this new Metaverse ecosystem, we're ahead of the curve. We have lots of major customers. We've already sort of prepared their content through obviously indexing and hosting on aiWARE, and we obviously have some early proof points such as the fairly good sized deals for NFTs that we've already facilitated through aiWARE as well as MARVEL.ai, which we're extremely bullish about. And so yes, I think MARVEL.ai will be a material contributor to revenue in 2022. And I think we'll have a very wide distribution of service deployment of MARVEL that spans from audio books to commercial productions to theatrical productions and localization, both domestically and internationally. Chad, do you want to add anything on the energy or GLC front?

Yes. I mean going back to the first question, Darren. I think the COVID effect that we all, kind of, have witnessed in terms of accelerating the adoption of technology in the enterprise, in terms of global communication and collaboration over the Internet, which obviously has manifested itself in things like Zoom and other technologies, I think you're seeing in the hiring markets as well, right? You have this COVID effect that's driving mass challenges in the global supply chain and hiring fronts. And our AI solutions and services are directly tailoring and solving that problem in a very unique way. And I believe that will become a systemic part of our society and the enterprise businesses even well past this current crunch that we're seeing, which leaves us in a really nice position to transform the corporate intelligence market, starting with talent acquisition, but expanding with obviously our aiWARE platform. And then looking forward into 2022, beyond just the obvious that Ryan kind of mentioned in the two categories, GRI, we've been investing and continue to invest heavily in that sector and are seeing the spectacular progress and laying that foundation, both on the energy side as well as in the government sector. So stay tuned. One of these days, you're going to see that market really explode for us and become a massive part of our business. 2022, we're crossing our fingers that that will be the year.

Thank you.

Our next question comes from Pat Walravens from JMP Securities. Pat, your line is open. Please go ahead.

Oh, great. Thank you. And congratulations to you guys. Nice to see the business cranking on so many different fronts. I think what I would love to hear is just sort of the steps you've taken in terms of integrating Pando and the steps you still have to take? So that would be sort of part one. And then part two, you've definitely piqued my curiosity with the comment and the press release about the Metaverse and the opportunity that presents. So if one of you wants to expand a little bit on that, love to hear that.

Sorry. Ryan, why don't you take the Pando integration first, what we've done so far and then kind of what's left on the roadmap going forward? And then we can both tag team on the Metaverse.

And I'll address it with Mike as well. There's – I'll say, a technical side of integration. So I think like everything we wanted to first make sure that we had good institutional controls of data and systems. And so I think check the box there. Mike and our team have done a good job in our integration team about making sure we just have full access and visibility to financial metrics numbers, and I'll say, all system processes. So that's sort of been completed. I mean, that will be an ongoing effort as we look to consolidate on a common HR-based platform and other systems over time. But I would say, we're definitely well ahead of schedule. More importantly, they're part of our weekly management meetings already. So we do already just – some of this is important at anecdotal, but for example, they are part of our weekly all staff kind of worldwide calls. Now we're actively co-engaged, both on the marketing side and sales front, as I mentioned earlier. And that specifically means account mapping, right, really looking at how we can accelerate not just their existing pipeline, but how do we obviously accelerate taking PandoIQ and their valuable services to our customer base. Some ongoing things obviously are, as we talked a little bit, it's not in hindering any of our projected growth. But again, we do have to take into account the earnout. And obviously, there'll be actions and sort of processes that we put in place, need to obviously make sure they align with providing Pandos' ability to have – an ability to achieve those earnouts. The good news is we're almost perfectly aligned. So again, whether it's the fruits of our labors or their labors to hit collective new logo accounts and numbers, we both benefit. So I would give it very high marks, internal score on how we've been doing so far in terms of integration, and I expect that to follow suit here in the future. On the Meta, Mike, is there anything I also want to add regarding integration on a technical basis?

No, that was perfect.

Okay. Ryan, I think it would be worth touching on the Wade & Wendy integration into MARVEL.ai and how that plays into the Metaverse as well.

Yes. And I'd say, one of our kind of new novel integrations representations that we've done, even above just starting to do some, I'd say, low level cognitive work through aiWARE is the integration of MARVEL.ai with PandoLogic's Wade & Wendy conversational AI framework. And so we're really excited about that. And Wade & Wendy, which is a service offering of PandoIQ provides a very powerful very intelligent conversation AI chatbot type of environment and service for Pando when they're engaging through their customers' talent acquisition needs. We've added a very powerful, almost seamlessly hyperrealistic voice element to that. And we can – and that voice can be in different dialects, different languages. And so we can really add a human element and a continuity aspect to talent acquisitions and on-boarding through an integration of MARVEL.ai voices with Wade & Wendy. And I think that's a good tee up of just one of the many things that I think, again, we are in a very good position to be a great technical provider and a technical partner to all of our media and entertainment customers and other organizations as they're evaluating not just the digital transformation world, that we – I would say we're dealing with yesterday, but looking forward an almost seamless means of looking into the Metaverse. And just one simple example is imagine now just one of our big media partners like ESPN or CBS News, having all of their content in effect, ready for seamless integration with the Metaverse, right? That content is being off-line through, I'll say, more traditional means of distribution like OTT or linear television. But – and a concrete example is – I think I might have mentioned it to you actually a couple of quarters ago – I'm sorry, a quarter ago was, for example, the CBS News footage of the March on Washington with Martin Luther King and the Civil Rights movement and that whole experience being accessible with inside the game of Fortnite as one example. So I think we're in a great position. aiWARE makes this all possible because we've already indexed and sort of packaged all the content ready for activation, again, whether that's distribution, NFT production or whatnot. So yes, we're very excited about it. Chad?

Yes. And I think the Metaverse, by definition, is a lot bigger than the new Meta company AKA Facebook. By definition, it's a multi-verse that's going to be moving content and information, both into the digital realm and then obviously, the digital realm interfacing back with us in our physical selves. I think aiWARE is perfectly positioned with our Automate Studio and our ability to set up those pipelines for that digital transformation integration with the Metaverse. So our APIs and heavy lifting that we've been doing over the years is really going to pay spades for us and our partners to capitalize on the Metaverse and all way.

All right. Great. Thank you both to that perspective.

Thank you very much, Pat. Our next question comes from Brad Reback from Stifel. Brad, your line is open. Please go ahead.

Great. Thanks very much. Guys, just high level, I know you haven't spoken to 2022 yet, but trying to get us all on the same page. Any thoughts on how we should think about revenue growth and the starting point there?

Yes, I'll take this one. So what I can tell you, Brad, is I think you have to look at us on a pro forma basis. And pro forma year-over-year, if you take the midpoint of our guidance. We'll be growing just north of 30%. But what we've always said is we're going to be a plus 40% grower as sort of our baseline target. So I think if you use that as a proxy for 2022, you're going to be in the ballpark, at least to start off the gate.

That's great. That's great. And then just one real sort of tactical question. What should we be using for the share account for 4Q given that you flipped over to profitability?

Yes, that's a great question. So we've got 34.9 million shares outstanding, and there's roughly about 10 million shares of common stock equivalents that are outstanding. So that's what I would use on a fully diluted basis.

That's great. Thanks very much guys.

Yes, thanks, Brad.

Our next question is from Nick Mattiacci from Craig-Hallum. Nick, your line is open. Please go ahead.

This is Nick on for Chad Bennett. Thanks for taking our questions. So I'm curious if you could speak about where aiWARE is gaining traction in commercial enterprises outside of the media and entertainment vertical. And then also, if you could just give any color on how much the media entertainment vertical is of that aiWARE commercial business today? And where do you see opportunity outside of media and entertainment?

Ryan, why don't you take this one?

Yes. So I mean, we – since kind of really announcing our new alignment and sort of define it as commercial and government, legal and compliance regulated industry. Today, media and entertainment still dominates and makes up the lion's share of commercial. And so – but we do expect that to expand into really all different types of industries here quickly. You can kind of say that PandoLogic is kind of an interesting foyer where we're already doing the integration of AI with and through PandoIQ. So by default, we're kind of already in kind of a wide array of hospitality, quick service restaurants and others. And that's going to be a major focus of ours just because of, obviously, the scale and market leverage we have already with PandoIQ through PandoIQ, their service offering. But I expect us to be in really all industries, fintech from healthcare, auto and other areas. So I don't think we're limited today, candidly, post close of Pando, and we kind of see ourselves in really almost every vertical. But on a legacy basis, as you guys are aware, media and entertainment historically had dominated commercial, but I think that will kind of be broaden itself out and be more diversified through 2022.

Got it. And I believe I saw that the founder of the company, you guys acquired that, I think, eventually became the energy product left the company. I was just curious if this has any impact on the product road map for you guys' energy products. Thank you.

I don't think – yes, I mean – are you talking about our own internal energy solution?

Correct.

Yes. No. Chad was the Founder and Chief Architect of that product. I think you're referring to Dr. Wolf Kahn, who was a data scientist as part of that. So no, we don't expect – and by the way, he's still actively engaged with the company on a consulting basis. So we don't expect any disruption, but to be clear, I think Chad and our own engineering team sort of have led and will continue to lead that effort.

Got it. Thank you.

Thanks, Nick.

[Operator Instructions] At this time, we have no further questions. So I'll hand back over to Chad for any closing remarks.

Thank you, operator, and thanks, everyone, for joining us on today's call. I'm very pleased with Veritone's performance this past quarter. We appreciate your time today and the opportunity to share the exciting progress we are making towards our mission of making the world better through artificial intelligence. Until next time, goodbye.

Thank you, everyone, for joining today's call. You may now disconnect your line, and have a lovely day.