Participants

Cate Goldsmith; Investor Relations; Prosek Partners

Ryan Steelberg; President, Chief Executive Officer, Co-Founder, Director; Veritone Inc

Michael Zemetra; Chief Financial Officer, Executive Vice President, Treasurer; Veritone Inc

Scott Buck; Analyst; H.C. Wainwright & Co., LLC

Jesse Sobelson; Analyst; D. Boral Capital LLC

Glenn Mattson, Jr.; Analyst; Ladenburg Thalmann Financial Services Inc.

Presentation

Operator

Good day and welcome to the Veritone Inc., fourth-quarter 2024 financial results conference call.
(Operator Instructions) Please note this event is being recorded.
I would, now, like to turn the conference over to Cate Goldsmith, Investor Relations. Please go ahead.

Cate Goldsmith

Thank you and good evening.
After the market closed today, Veritone issued a press release, announcing results for the fourth-quarter 2024 and full-year fiscal 2024, ending December 31, 2024. The press release and other supplemental information are available on the Investor Relations section of Veritone's website.
Joining us for today's call are Veritone's Chairman and Chief Executive Officer, Ryan Steelberg; and Chief Financial Officer, Mike Zemetra, who will provide prepared remarks and, then, open the call up for a live question-and-answer session.
Please note that certain information discussed on the call, today, including certain answers to your questions, will include forward-looking statements. This includes, without limitation, statements about our business strategy and future financial and operating performance.
These forward-looking statements are subject to risks, uncertainties, and assumptions that may cause the actual results to differ, materially, from those stated. Certain of these risks and assumptions are discussed in Veritone's SEC filings, including its annual report on Form 10-K.
These forward-looking statements are based on assumptions as of today, March 13, 2025. Veritone undertakes no obligation to revise or update them.
During this call, the actual and forecasted financial measures we will be discussing, include non-GAAP measures. Reconciliations of these measures to the corresponding GAAP measures are included in the press release we issued, today.
Finally, I would like to remind everyone that the call, today, is being recorded and will be made available for replay via a link on the Investor Relations section of Veritone's website, at www.veritone.com.
Now, I would like to turn the call over to our Chairman and Chief Executive Officer, Ryan Steelberg.

Ryan Steelberg

Thank you, Cate. 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 Q4 2024 and full-year fiscal 2024 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 2025. Building on the strong foundation and fueled by megatrends, 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 Veritone 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 10 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 provides support to organizations by bringing clarity to the chaos of this data and, ultimately, derive increasing yields and revenue from their data sets.
Just in 2024, alone, we've cognitively processed over 10 petabytes of data, which includes over 58 million hours of video and audio. Against this incredible data scale, we utilized over 862 unique AI models through aiWARE, which include both proprietary Veritone 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 am 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 Artists 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 transactions 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.
Veritone 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 90th percentile.
During the fourth quarter of 2024, we announced several transformative wins and major product advancements, not the least of which included the expansion of iDEMS' data integration to enhance public safety and law enforcement efficiency, product enlisting 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 on aiWARE, 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 3 times faster than structured data. The global unstructured data solution market size is over $30 billion, estimated in 2024, and is expected to expand to over $90 billion by 2033.
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 the 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 purposefully repositioning Veritone to harness and unlock the power of our unique capabilities, supported by aiWARE.
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 are 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-year renewal is a testament to the value we deliver to the commercial marketplace.
In addition to the CBS News extension and expansion, in media and 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&E Networks, MediaWorks New Zealand, Sony Pictures, Alpha Media, and Charlie Rose, showcasing our continued fast 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. VDR will be a major contributor to delivering against our revenue growth in 2025 and beyond.
I'll, now, shift to discuss our products and 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 PandoLogic and Broadbean into a common Veritone higher 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 Q4 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 this 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 Gov clouds, in FedRAMP; and, also, currently being installed by DOD customers in their private tenant on AWS and Azure.
iDEMS is unique and differentiating 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's public sector customers to do more in less time, with better outcomes.
In local law enforcement, we, now, service hundreds of customers, using iDEMS, for investigation workflows and/or public records requests, PRA, Freedom of Information requests, 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 FedCiv 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's 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 Tradewinds Solutions augments our previously disclosed FedRAMP authorization, sole-source BPA with the DOJ, the T&E BPA with the CDAO, and our aiWARE applications and professional service listings on GSA. We are contract -ready to service the federal government.
Internationally, we continue to add new iDEMS 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 million. In the fourth quarter, we added 18 new public sector customers to our portfolio.
Our market-leading AI-based iDEMS 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, FedCiv, Fed DoD Intel, and international markets.
Before I close, I want to 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 want to thank Chad for his immeasurable contributions to the company, since its founding and inception.
Mr. Morales has been appointed to fill this vacancy and will serve as a strong strategic voice on Veritone's Board. Francisco is the Co-Founder and Executive Chairman of 5.11 Tactical; and its former CEO.
Founded in 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 Zemetra, who will provide more details on our quarterly performance and future guidance. Mike?

Michael Zemetra

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 & Services and Managed Services.
As we exit 2024, a year where we streamlined our operations, including divesting our media agency in Q4 and exiting historical revenue concentration dependencies, we made improvements and progress in our operations to refocus back to our near- and long-term growth targets, heading into fiscal 2025.
During my prepared remarks, I will discuss fiscal 2024 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 2025 guidance, highlighting the scalability of our revenue and business, including risks heading into fiscal 2025 -- focus on improved profitability and projected full-year results.
Starting with full-year 2024 performance.
Revenue was $92.6 million, in line with our guidance and down 7% year over year from $100 million in 2023. Driving this was Software Products & Services, which decreased $7.4 million or 10.8% while Managed Services revenue of $31.6 million was flat year over year.
The Software Products & Services revenue decline was largely attributed to commercial enterprise, which declined $7 million 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 $2.2 million, which did not recur in 2024, offset by the addition of Broadbean in late Q2 2023.
As I will discuss in more detail, we remain bullish on our future and we are on pace for fiscal 2025 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 $62.7 million as compared to $70.3 million in 2023, a decline of $7.6 million, largely driven by the decline in revenue; with GAAP gross margin of 67.6% as compared to 70.4% in 2023, a decline of 280 basis points that was principally driven by the increase in non-cash depreciation and amortization expense, largely associated with the June 2023 Broadbean 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 $86.8 million as compared to $99.6 million, an improvement of $12.8 million or 12.9% from 2023 loss from operations. This was primarily driven by improvements made in our operating expense structure over the past 24 months, coupled with declines in acquisition-related expenses of $5 million, severance and executive transition costs of $1.8 million, purchase consideration of $1.8 million, and non-cash stock-based compensation of $2.6 million.
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 $3.3 million as a result of the June 2023 Broadbean acquisition.
Non-GAAP net loss from continuing operations, of $48.8 million, improved $5.4 million 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 2024.
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 Q4 2024 performance.
Q4 revenue from continuing operations was $22.4 million, down $4.7 million from Q4 2023, principally due to a decline in Software Products & Services; driven largely by commercial enterprise, which declined $4.2 million year over year, due to the expected decrease in consumption-based customers over the same period, including Amazon.
Included in Q4 2024 was approximately $0.7 million in revenue from the launch of Veritone Data Refinery, or VDR, which, today, has a near-term sales pipeline of over $5 million.
Overall, Managed Services, which excludes the divestiture of our legacy media agency, was relatively flat year over year.
Across our Software Products & Services, our key performance metrics for Q4 2024 show ARR of $58.8 million, down year over year, as we expected declines in consumption-based revenue from customers across our commercial enterprise sector, including Amazon, over the trailing 12-months.
Overall, ARR from recurring subscription-based SaaS customers remained relatively flat year over year.
As of Q4 2024, 81% of our ARR is from subscription-based customers versus consumption-based customers, up from 61.3% at Q4 2023 and 76% sequentially from Q3 2024.
Total new bookings of $13.2 million, down $4.3 million year over year, primarily due to the timing of a renewal with one of our larger commercial enterprise customers, who renewed on a multi-year deal in Q3 2024 versus a one-year extension in Q4 2023.
Gross revenue retention continued to be above the 90th percentile.
In total, Software Products & Services' customers of 3,237, which was down 6% year over year, predominantly from our commercial sector, which includes lower consumption-based customers across Veritone Hire; and the rolling impact of sunsetting legacy career-builder customers, post the June 2023 acquisition of Broadbean; and smaller customers, as we focus on larger ARR opportunities -- offset by an increase across the public sector, largely from growth in public safety customers.
Q4 GAAP gross profit was $15.3 million compared to $19.9 million in Q4 2023, a decline of $4.6 million, largely driven by the decline in revenue; with GAAP gross margin of 68.1% as compared to 73.5% in Q4 2023, a decline of 540 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 2023, a decline of 630 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 Q1 2024 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 Q4, which should improve throughout 2025.
In addition, certain larger content licensing renewals in Q4 2024 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 $19.7 million was flat year over year, primarily driven by improvements made in our operating expense structure over the last 24 months and lower purchase consideration expense as a result of a $1.4 million-dollar gain recorded on the change in fair value of the Veritone One earnout, offset by lower non-GAAP gross profit from the decline in revenue over the same period and a higher non-cash depreciation and amortization expense of $1.2 million.
Non-GAAP net loss from continuing operations was $9.7 million, which was relatively flat as compared to Q4 2023. 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 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 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 our global workforce by 15%. 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-dollar 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 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.
As a reminder, we divested our media agency, Veritone One, in October 2024. 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 an earnout, based upon Veritone One's revenue for calendar year 2025.
Of the total $86 million 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 pre-payment premiums associated with the debt, and $3.9 million of deal-related expenses.
Including amounts held in escrow and the earnout, potential future proceeds include up to $24.7 million in cash, which will largely be payable toward the end of 2025 through April 2026, as certain escrows expire and the 2025 earnout 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 confident on achieving at least a large portion of the $18 million earnout, at this point in time.
Upon closing in Q4 2024, we recorded a gain on the sale of the divestiture of $69.6 million, which is included in discontinued operations in Q4 and fiscal 2024 results.
Turning to our balance sheet, as of December 31, 2024, we held cash and restricted cash of $17.3 million, as compared to $47.5 million at December 31, 2023. Including the January 3, 2025 registered direct offering, December 31, 2024, cash would have been over $37 million.
The net change reflects net cash outflows from operations of $31.2 million, principally driven by our non-GAAP net loss of $40.8 million and interest paid on debt of $11.8 million, offset by $18.8 million in net cash inflows, largely driven from working capital changes from our media agency divestiture in Q4 2024.
Net cash outflows from investing and financing activities of $32.2 million, driven largely by capital expenditures of $6 million and debt and deferred purchase consideration payments of $38.1 million, offset by net cash proceeds of $7.9 million from the cash sale of our energy group and media agency in 2024, and$ 4.5 million from net proceeds raised through our November 2024 ATM.
Turning to liquidity, today. In 2024, we executed on our largest strategic initiatives set out 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 million ATM facility, setting us up for optimal growth heading into fiscal 2025.
In addition to the ATM, we raised $20.3 million in a registered direct offering in early January 2025.
On top of this, we've reduced our debt carry, substantially. As of December 31, 2024, consolidated term debt is down from a peak of $201 million in December 2021 to approximately $132.6 million, today; comprised of term debt of $41 million due by December 2027 and convertible debt of $91.5 million 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 December 31, 2024, we had 40.2 million shares issued in outstanding and 2.4 million warrants outstanding to our debt holders. Total shares of $1.7 million were issued in Q4 2024, under our $35 million-dollar ATM, raising net proceeds of $4.5 million.
On January 2, 2025, we completed a registered direct offering, selling 4.4 million shares of common stock priced at $2.53 per share and 3.6 million of pre-funded warrants priced at $2.52 a share, for gross proceeds of approximately $20.3 million.
Including the January 2025 offering, we had approximately 44.6 million shares outstanding, exclusive of the 3.3 million pre-funded warrants.
Now, turning to updated fiscal Q1 2025 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 2025 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 and forecasted centralization.
These deals range in the seven to mid-eight-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 2025 outlook.
In addition, we are seeing high demand for our VDR initiative, with a pipeline of over $5 million and growing, as of today, the most of which we expect to execute in fiscal 2025.
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 2025, revenue is expected to be between $23 million and $24 million, as compared to $24.2 million for Q1 2024.
In Q1, we expect the public sector to be flat to slightly up year over year, which includes the loss of $0.3 million of certain non-recurring project-related revenue in Q1 2024 that is not recurring in Q1 2025.
Commercial revenue is expected to be relatively flat, driven by $1 million decline in consumption-based revenue across our Managed Services and Veritone Hire services, offset by $1 million in improvements in commercial SaaS, driven, in large part, from new VDR revenue in Q1 2025.
We expect Q1 non-GAAP gross margins to be around 71%, consistent with Q1 2024. Q1 non-GAAP net loss is projected to be between $9.5 million to $8.5 million, as compared to $10.4 million in Q1 2024, an improvement of 13.5% at the midpoint.
Turning to fiscal 2025 outlook. We are slightly updating our prior guidance for fiscal 2025, which we are expecting revenue to be the same, at $107 million to $122 million, which, at the midpoint, represents a 24% increase year over year; and non-GAAP net loss to slightly change, to be between $27 million to $17 million, 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 2025.
Key assumptions in our fiscal 2025 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, Getac, 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 multi-year deal that included expanded Software Products & 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 2024, we began to focus efforts on more expanded enterprise opportunities.
In Q4 2024, we upsold a multi-year 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 home builders 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 2025 around our expanded AI solutions, we do believe this will be a larger area of growth, beyond fiscal 2025.
For Veritone Hire. Given the recent macro environment, we continue to expect modest to flat 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 2025, with a return back to growth in late 2025 to fiscal 2026, 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 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%, 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 2025 to ensure we time necessary investments in our cost structure with corresponding growth.
Today, our largest cost remains headcount and to a 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&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 37th Annual Roth Conference taking place from March 16 to the 18, in Dana Point, California.
That concludes my prepared remarks. Operator, we would like to, now, open up the call for questions.

Question and Answer Session

Operator

We will now begin the question-and-answer session.
(Operator Instructions)
Scott Buck, H.C. Wainwright & Co..

Scott Buck

Hi. Good afternoon, guys. Thanks for taking my questions.
First, 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.

Michael Zemetra

Yeah. I can take that one.
Q1 2024. Year over year, we are going to be out of the consumption comparison.

Scott Buck

Okay. Perfect.
And, then, I'm curious -- just in the public sector and, specifically, federal government, I've heard from some other folks during the earnings season that, typically, when you have an administration turnover, there's just some disruption and delay, it's normal course of business. Are you, guys, seeing any of that?

Ryan Steelberg

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 AI, 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 paying 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 2025 dollars.

Scott Buck

Perfect, Ryan. That's very helpful.
And, then, last one for me. I think you signed 11 new commercial customers during the quarter. Typically, how big of a bite of the apple do you take with that first contract? What I'm trying to do is figure out what the potential upsell opportunities are from those new customers in the future.

Ryan Steelberg

Well, let's break them down.
If it's VDR-related customers, as Mike alluded to, we're thrilled. Some of the growth in 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, up-front, 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. 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 touched on, just last year, we processed over 58 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

Great. I appreciate the added color, guys. Thank you for the time.

Operator

Jesse Sobelson, D. Boral Capital.

Jesse Sobelson

Hey, everyone. Thanks for taking my questions, here.
Dovetailing off the prior question, on the timing of consumption headwinds, here, you are riding to some sign 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 and growth? Is it just the timing of the large government contract awards or, maybe, an anticipated acceleration in this VDR segment?
I'm just trying to point to some specific business-related catalysts to underscore the confidence, here.

Ryan Steelberg

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 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. 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 a few quarters.
But, again, remain very bullish on hard concrete proof points for both VDR and public sector growth.

Jesse Sobelson

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 breaking even on a cash operating standpoint? And what, like, some longer-term profitability targets might be?

Michael Zemetra

Yeah. I'll take that one.
I think, based on our projections, the earliest is going to be in the back-half of 2026.

Jesse Sobelson

Oh. Great. Well, thanks for the details. And thanks for taking my questions.

Operator

Glenn Mattson, Ladenburg Thalmann.

Glenn Mattson, Jr.

Yeah. Thanks for taking the question.
Just curious on the iDEMS opportunity, could you have -- just to better understand how the new offering differs from the previous public safety revenue that you produce, just the breadth of the product and why that maybe is creating an inflection point, there.

Ryan Steelberg

I think, first, is that the number of applications. iDEMS, collectively, is a suite of different applications.
Historically, we primarily have had one application in the suite of solutions; that those historical applications have been primarily Redact and Illuminate, both very valuable, both still selling at good clips.
But the expansion of iDEMS is really building up a portfolio of those 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.
In the 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, Jr.

Oh. That's super helpful.
And, then, just as in terms of competitive landscape, 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

This is really exciting. Unlike the commercial business, where there's been different forms of technology and storage and, I'll say, more archaic analytic tools for [moving] content and elements; in the public sector space, 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.
For example, if there's 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 data set, 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 IT 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 data sets 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 data sets 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, with iDEMS, on aiWARE.

Glenn Mattson, Jr.

Thanks for all that clarification. Very helpful, Ryan. And congrats on the results.

Ryan Steelberg

Thank you.

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

The close of 2024 represented, really, two years of material change and transition for our business.
But I have to say that 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 Veritonians, who have led us through this transformation. And we're all excited about 2025 and beyond.
But, more specifically, if taking into account, again, our market-leading AI solutions, the near-term positive impact from VDR, in our public sector growth, and couple 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 on why both shareholders and potential new investors should be very bullish about the future of Veritone.
Thank you for your time, today.

Operator

The conference is now concluded.
Thank you for attending today's presentation.
You may now disconnect.