Veritone, Inc. (VERI) Q4 2019 Earnings Report, Transcript and Summary

Thank you for standing by and welcome to the Veritone Fourth Quarter and Full Year 2019 Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Brian Alger. Thank you. Please go ahead.

Good afternoon, and welcome to Veritone's fourth quarter and yearend 2019 conference call. I'm Brian Alger, Senior Vice President of Corporate Development and Investor Relations. After the market closed today, Veritone issued a press release announcing the results for the fourth quarter and year ended December 31, 2019. The press release is available on 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; Pete Collins. 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 loss for the first quarter of 2020. 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, including its Annual Report on Form 10-K. These forward-looking statements are based on assumptions, as of today March 4, 2020 and Veritone undertakes no obligation to revise or update them. During this call, we will present and discuss actual and forecasted non-GAAP financial measures including non-GAAP operating expenses, non-GAAP net loss and adjusted EBITDAS. Reconciliations of these measures to the corresponding GAAP measures are included in the press release we issued today. Also, in 2019, we adopted ASC 606, the new revenue recognition accounting standard. We determine that the impact of the adoption of ASC 606 was immaterial. So we did not record an adjustment to our opening balance sheet at the beginning of 2019. Because, we're an emerging growth company, we recorded our quarterly results in 2019 using the prior revenue recognition standard ASC 605. Our 2019 annual financial statements are prepared using ASC 606. As the impact of adopting ASC 606 was immaterial, the combined net revenues from our fourth quarter and 2019 equal our annual net revenues. Finally, I would like to remind everyone that this call is being recorded and will be made available for replay via link available on our Investor section of the company's website at www.veritone.com. Now, I'd like to turn the call over to our Chairman and CEO; Chad Steelberg. Chad?

Thank you, Brian. Welcome, everyone, and thank you for joining us today. I'm pleased to report that in 2019 Veritone grew revenues 84% year-over-year to $49.6 million, reflecting both strong organic growth and the contributions from the three businesses we acquired, in Q3 of 2018. During 2019, we launched multiple new products, established critical new channel partnerships, and invested significantly in product development. In November, we discussed that with the development of our platform largely complete, we have shifted our focus to take advantage of our amazing opportunities to accelerate revenue growth, while improving our path to profitability. To capitalize on this, we’ve realigned our business and functional teams to maximize our speed, efficiency and customer focus, and implemented a number of enhancements to our aiWARE platform, that we expected to deliver orders of magnitude improvements and scalability and compute utilization, driving improved margins and enabling larger and more dynamic use cases. I'm pleased to report that we have made great progress in all of these areas. Our business realignment is already accelerating our product development cycle, and helping to drive increased engagement with our customers. Veritone finished 2019, with our best stats bookings quarter by far, up more than 82% sequentially. Our net revenues of $12.4 million in the fourth quarter were at the high end of our guidance range, with both our aiWARE SaaS and advertising business at record levels, and our SaaS pipeline continues to grow. Our focus on achieving profitability is already producing savings at the high end of the range we had initially projected. Notably, our recent aiWARE upgrades are yielding significant cost savings, even with a higher number of processing hours. From the peak in the third quarter, our average daily compute costs have been reduced by 35%. As a result, our Q4 non-GAAP net loss was down $1.6 million sequentially, to the lowest levels we have recorded since the third quarter of 2017. And our Q4 adjusted EBITDAS loss was significantly below our guidance range at $8.1 million. Our initiatives continue to deliver great results, giving us confidence that we will continue to reduce our losses going forward. Without question, Veritone is on its strongest footing ever. Our SaaS business just had its strongest revenue quarters in history, and we've signed new and expanded multi-year agreements with M&E SaaS customers, that we expect to increase our revenues from that market significantly in 2020 and beyond. In addition to that growth, the activity level and the opportunity pipeline in our government, legal and compliance business are both expanding rapidly, giving us further confidence that our revenues from GLC will eventually eclipse, our M&Es SaaS revenues, even as revenues in our M&E business continued to grow off its strong base. Finally, our advertising business continues to far outpace its peers, with double digit revenue growth and net commission margins two to three times the industry average. We've never been more bullish about Veriton's growth prospects than we are today. Now, I would like to hand the call over to Ryan, our President and Co-Founder; to discuss our operational progress in greater detail. Ryan?

Thank you, Chad. As Chad mentioned, our efforts to accelerate our revenue growth and improve our bottom line are already seeing signs of success on both fronts. In each of our business units, we have seen more rapid product development in response to customer engagement, and as a result, our go-to-market initiatives are gaining traction. More immediately, we have realized considerable savings that we expect to deliver additional leverage, as our revenue growth accelerates. The strength in the December quarter was driven by both our advertising and SaaS business units. Our advertising business built of its Q3 strength and delivered another record quarter. Sequentially, our advertising net revenues grew 4% and SaaS revenues grew 22%. Strength and podcast and digital influencers continue to be the primary drivers for our advertising business, with gross billings increasing sequentially by 20% and 28% respectively. These two media channels accounted for 62% of gross billings in our advertising business in Q4. Our VeriAds network continued to show tremendous potential as well, highlighted by Influencer Bridge. In Q4, Influencer Bridge, had over 2,300 unique digital influencers that generated advertising performance. So far in Q1, we've already had over 8,800 unique digital influencers sign up for the Influencer Bridge program, with over 2,100 already delivering advertising performance. We expect to see Influencer Bridge and all of VeriAds drive meaningful acceleration in our advertising revenue growth in 2020. Our SaaS revenues grew to $2.9 million in the quarter, the highest level in Veritone’s history. As we had projected in November, our SaaS bookings were exceptionally strong in the December quarter. Our KPI table in our press release and SEC filings reflects only the non-cancellable and non-variable portions of our bookings. Given that our SaaS customer churn is nearly zero, I think it is worth noting that the total revenue potential of our Q4 bookings inclusive of the cancellable and variable portions with over $11 million. Our land and expand strategy continues to drive both revenue growth and bookings strength in our SaaS business. Two years ago, Veritone began working with iHeartMedia on a limited basis. Over the years, the number of stations and the level of engagement has continued to grow, culminating in Q4 with a significant expansion and extension of our license agreement. Under this expanded agreement Veritone will be ingesting, processing and cognitively indexing, content from nearly 900 iHeart stations, helping iHeart continue its intelligent digital transformation efforts. Along the same line, we announced that the largest media company in Canada, Bell Media, has licensed aiWARE for over 35 of its radio and TV stations in a dozen different markets. This noteworthy contract is another example of our M&E SaaS business expanding into new markets. Bell has 30 TV stations, 109 radio stations and over 200 websites in operation. We intend to execute our land and expand strategy throughout Bell's portfolio, as we deliver them positive ROI. In addition to our success with networks and broadcasters, we're growing our SaaS business with professional sports teams, which use aiWARE to leverage their huge archives of content, identifying and distributing relevant clips from both current and decades of historical content within minutes, to enrich live games and social media. In October, we reported that the San Francisco Giants had licensed our AI-powered rapid media discovery and workflows to further fan engagement. I'm happy to say, that this has led to increased interest from other teams as well. We're now engaged with over 20 professional sport teams in the U.S., and just last week we closed SaaS licensing deals with two additional prominent teams. Since the close of Q4, the activity level and opportunity pipeline in our government legal and compliance business has been expanding rapidly, giving us further confidence in our growth prospects in this business. Our channel partners, which include Microsoft, Deloitte, PRI, and Exact Data are driving increasingly larger contracts into our sales funnel. Although, we don't expect these to produce massive revenue growth in Q1, the sheer number of these contracts and the pipeline of business that our partners have registered, provide meaningful validation that we have the right product fit for the markets we're addressing today. We have executed 81 new SaaS contracts with GLC customers since the beginning of Q4, and our pipeline of new customer opportunities in this market is growing rapidly. We have conducted over 219 customer demos and initiated 11 trials in this market during the same period. Earlier today, we co-hosted another webinar with our partner PRI and our customer, Lake Stevens Washington Police Department, that has over 400 registered attendees. On April 2, Microsoft and Veritone will be co-presenting what is to be the largest webinar to-date. Microsoft is marketing the webinar to its extensive North American public safety customer base. On the federal side, we recognized our first revenues from the U.S. Department of Justice in the fourth quarter, for our FedRAMP certified aiWARE government platform, and as our partners indicated on stage at CES Government, additional business is starting to flow through multiple vectors. Needless to say, we're very bullish on our sales funnel and opportunity pipeline in our GLC business, and we look forward to providing more detail at our upcoming Investor Day, on March 18. Our content licensing business delivered strong year-on-year growth of 21%. Though, as expected it was down sequentially, consistent with its normal seasonal pattern. We expect this business to continue its year-over-year growth in 2020. Recently, we co-host an event in New York City, with one of our licensors, CBS News, where more than 90 potential licensees came to discuss how to leverage CBS's vast library of content. Additionally, we've begun discussions with a number of leading podcasters and digital influencers, to explore how they can further monetize their content through licensing. Of course, this is all additive to the various sports and entertainment customers we currently represent. Finally, on our business realignment and initiatives to improve our path to profitability. We had originally communicated that we expected to achieve $7 million to $9 million of annualized savings. Our Q4 results show that we're at the high end of those projections. As Chad mentioned earlier, we have significantly reduced our cloud compute costs in actual dollars, even with a meaningful increase in processing hours, and associated SaaS revenues. These initiatives are still ongoing and we expect them to deliver further cost improvements in the future. To summarize our bookings are at record levels, our pipeline of new business is growing at an accelerating rate, and we've significantly reduced our cash burn. Pete Collins will now review our financial results for the fourth quarter and full year of 2019, and provide details around our financial guidance. Pete?

Thank you, Ryan, and good afternoon, everyone. Today, I'll review our financial results for the fourth quarter and full year of 2019. Except for revenue data, I will be discussing our financial results today on a non-GAAP basis. A reconciliation of such non-GAAP results to the corresponding GAAP information is in the press release we issued earlier today. Our Q4 net revenues increased 14% year-over-year to $12.4 million, reflecting growth in all of our businesses. Our aiWARE SaaS business delivered its highest ever quarterly net revenues increasing 18% year-over-year to $2.9 million. This growth was driven primarily by our media and entertainment vertical which grew $303,000 or 13%, as we continue to land new customers and expand our business with existing customers. Our aiWARE SaaS monthly recurring revenue or MRR, under agreements that effect at the end of the fourth quarter increased 4% over the third quarter to $568,000. Our aiWARE SaaS bookings in the fourth quarter increased 82% sequentially, to an all-time high of $2.5 million, with the majority of the bookings in the media and entertainment vertical. Our aiWARE content licensing and media services net revenues grew 21% to $3.1 million. And our advertising net revenues increased 9% to $6.5 million, reflecting growth in the digital influencer and podcasts categories. As discussed, our fourth quarter net revenues increased 14% versus the prior year. When comparing Q4, 2019 net revenues to the prior year, it's important to note that Q4 of 2018 included $1.3 million from an advertising clients that spent zero in Q4 of this year, due to its regulatory issues. Excluding the impact of this advertising client in the prior year, our consolidated net revenues grew by 29% year-over-year. Our total operating expenses decreased by 4% to $17.1 million, reflecting the immediate impact of our cost reduction initiatives, which are on track to reduce our annual expenses by over $8 million. Our loss from operations in the fourth quarter was $8.1 million, a $1.3 million improvement compared with the fourth quarter 2018. Our net loss was $8.1 million, or $0.33 per share, compared with $9.3 million, or $0.48 per share for the prior year quarter. Our Q4 adjusted EBITDAS loss of $8.1 million was significantly better than our expectations, and a marked improvement compared with $9.6 million in Q3, 2019 and $9.3 million in Q4 of 2018. As Chad noted, this is the lowest loss we have recorded since the third quarter of 2017. Turning to our full year results. Please remember that in the third quarter of 2018, we acquired three companies, Wazee Digital, Performance Bridge and Machine Box. Our 2019 net revenues were $49.6 million, an increase of 84% compared to $27.0 million in 2018. The companies we acquired in the third quarter of 2018 contributed $25.0 million of net revenues in 2019, compared with $7.0 million in 2018. On an organic basis, excluding the impact of the acquisitions, aiWARE SaaS net revenues increased by 47%. and advertising net revenues were up 16%. Our net loss was $36.2 million or $1.66 per share, compared with $39.0 million or $2.22 per share in 2018. Adjusted EBITDAS loss was $36.2 million, down from $39.0 million in 2018. In 2019, we funded our net cash used in operating activities primarily through the issuance of common stock under our ATM facility. We issued 5.2 million shares and generated net proceeds at $24.4 million. We ended 2019 with cash and cash equivalents of $44.1 million, including prepayments from an advertising clients of $15.0 million. In Chad's remarks, he highlighted a significant shift we made last fall, implementing actions to accelerate our revenue growth and pass the cash flow breakeven. We intend to continue to reduce our adjusted EBITDAS loss each quarter, and as we do so, the amount of cash we need to raise will decrease significantly. We believe that we have ample sources of capital available to us to reach profitability, and as we evaluate these alternatives. One of our objectives is to minimize the resulting dilution to shareholders. Turning to our guidance regarding the first quarter of 2020. We have seen some delays in advertising programs by a few clients that have experienced disruption in their supply chains, due to the impact of the coronvirus outbreak, which will likely push out some advertising revenue, we had expected in the first quarter. Due to the anticipated delays and other uncertainties surrounding the potential impact of the coronavirus, we now expect our total net revenues for the first quarter of 2020 to range from $12.5 million to $12.9 million. However, since we're at the high end of the range of our cost saving initiatives, we expect our non-GAAP net loss to be in the range of $7.6 million to $7.2 million. We look forward to connecting directly with our investors and analysts, at the ROTH Annual Conference on March 16, and our Investor Day at Veritone headquarters in Costa Mesa on March 18. To arrange meetings at these events or in person, we encourage institutional investors to reach out to their respective brokers or contact Brian Alger. At this time, we would like to begin the Q&A session. Operator?

Thank you. [Operator instructions] Your first question comes from Pat Walravens with JMP Securities. Your line is open.

Oh, great. Thank you and congratulations to you guys. Chad, I guess, if we could start maybe with the aiWARE upgrade and sort of a simplified version of what you did and why that helps gross margin so much that would be really helpful?

Yes. Absolutely. We just took a really fresh look at the technology platform after building it for three years, and we saw some optimizations that not only helped ongoing operating costs in the cloud side, but in that refactoring, it really enabled more of a CICD deployment process, which is a continuous integration and deployment, which really gives us access to new markets. So now we have the ability to do not only on-prem deployed and almost a one click deployment, which expands market opportunities for customers. But we also now have the ability to start to do private cloud deployments, which is essentially a prerequisite for a lot of the government customers that we've been pursuing. So, all-in-all great revenue, our cost savings improvements in the platform, but also seeing sizable market dynamics shifting in our favor based upon some of the refactoring we've done.

Okay, great. And then, I thought the comment about the SaaS revenue potential being greater than $11 million, it was really interesting. Can you explain like, how do you -- $11 million a quarter or a year, what does that mean?

Hey, Pat, its Pete. So that’s more overall potential within the contracts that were signed. But, remember that, when we report our bookings, it's based upon what's not cancellable and also is fixed. So, anything that’s got cancellation terms or is variable, its excluded from the bookings, but we've included that in the revenue potential based upon what we see over the life of the contract.

All right. So that's a total contract value.

Right.

And then last quarter, you guys started talking about the relationship with Microsoft and some joint sales efforts. Can you update us on how that's going?

Yes. It's going very well. So, to this point, most of our co-sale efforts with Microsoft has been with their field sales team, primarily going after and presenting to larger municipalities. We talked a little bit about on the scripted call about talking about the large webinar that's coming up. And why that's so important is, this is really Microsoft inviting all of its municipality customers, which is thousands to participate in this webinar to learn more about Veritone related products and services on Azure. So, we're really excited about that. That ultimately will lead to educating them and their inside sales team, which is 16,000 people and larger. Hopefully, through a positive outcome of the webinar, we will quickly be able to tap into that that large sales base. So they've been a great supportive partner. We're starting to see a lot of registered deals coming in, and we expect good things from that partnership going forward.

Okay. Last one from me. And I know there's a lot of uncertainty, but you mentioned the coronavirus having some impact on the ad business. How do you think it's likely to play out? More people working from home, less travel, some supply chain disruptions. What are you keeping an eye on in your business as we move through this epidemic?

Yes. I think you touched on all the high points. Essentially, in our advertising business we've seen some push out of ad campaigns already by clients, who have already suffered some supply chain disruptions due to the outbreak. And we could experience more push outs from additional customers in the Veritone One business. On the SaaS side, however, we have far less direct exposure of the coronavirus, but we could see some sales cycles extend as customers particularly, in the public safety get distracted with obviously much higher priorities as the epidemic hits U.S. and we fully support their efforts. On the work from home component, definitely we're seeing companies testing with that. We have a great organization here that operates already in three or four different offices. And most of our sales and customer engagements is happening over the phone and video conferencing already. So, from an ongoing operations standpoint, in terms of our employees and how we engage with our customers, I see very little impact towards the business.

Okay, great. Thank you very much.

Sure.

Your next question comes from Darren Aftahi with ROTH Capital Partners. Your line is open.

Hey, guys, thanks for taking my questions. First can we get a follow-up on the gross margin improvement. It looks like non-GAAP went up 400 basis points or 500 basis points. I'm just kind of curious, as you progress on the topline, how does that kind of manifest itself into kind of continued improvement? And what's kind of a theoretical cap on all non-GAAP gross margins as we think about your business going forward?

Well, I'd say Darren, this is Pete, the gross margin improvement is definitely sustainable going forward. I mean, the things that Chad and the team have delivered from a platform cost perspective, we've realized a lot there and we're looking to save some even larger amounts going forward. One thing that you need to remember though, is just that the gross margin is also a product of the revenue mix. And so as the revenue mix shifts, we'll see changes in the gross margin. But overall, we see opportunity, especially as we scale to be able to continue to improve on the overall gross margin for the business.

Darren, this is Chad. We've been able on apples-to-apples basis, since we began this initiative in Q4, actually late Q3, we've been able to bring our total compute cost improvements to about 35% to-date, but we expect that within 2019 by Q3, to get into the 44% range, in total reduction versus peak cost.

Q3, 2020.

2020, yes. So, I don't think we've even come close to tapping what the potential is in terms of cost savings. But more importantly, it's been really a complete overhaul in the system. Our reliability is up, you're close to 4.9 to reliability. Our customers are experiencing far better services through the products we deliver. So, all-in-all really positive results.

That's helpful. Thank you. And then on your SaaS bookings, you said that was the strongest quarter you've had but commentary. So I want to kind of take apart from your comments. So first, you said it's skewed more on the M&E side, but then you made some comments a little bit later in the call or prior and said that basically your legal compliance and government all are building, but you don't expect to kind of see impact maybe in Q1. So could you maybe drill down a little bit more on non M&E and just kind of the visibility you're seeing and where you're kind of getting excited maybe versus 90 days ago when you had your last call?

Yes. So for government, legal and compliance, we know we're definitely seeing a lot more sales activity both direct and through our channel partners, inclusive of Deloitte, Microsoft and others. Without going into much detail, there are deals being registered through these strategic partners, which obviously puts us in sort of an opportunity phase where we lead to proposals and ultimately undervalued contracts and so that's kind of the game plan. So, if you look at scale and volume of activity, we sort of represented that we had a significant increase in the number of trials. Redact product specifically, has seen strong interest where we've -- now had well over like 70 unique police agencies from inception now test and use that product line. That is one of the feature products that you're going to hear about on the Microsoft webinar on April 2. And we encourage you or anybody else is interested to participate in that. Is there any other questions I can answer for you as it relates to the GLC?

Well, let me let me step into that GLC for a second, a little more detail. When you think about the contracts that we've been pursuing, if they go through a multiple phases in terms of our ability to actually get a deal across the finish line and translate that into revenue. But what we're hearing across the Board is we have now been selected by multiple large municipalities, at both the federal and the local level that we are the contract award winner. But for us in our conservative nature, in terms of how report bookings, as well as revenue, we're basically withholding that until we finally see the booking come across the door and the contract signature in our desk.

Okay, that's helpful. So, last one from me on Pete's comments about the $2.5 million bookings, as it compares to sort of the $11 million potential. Is that upside in terms of contract value, as it kind of over index towards M&E, or is it fairly spread across kind of all of your verticals you're currently looking at? Just trying to kind of understand where that upside potential could basically lie beyond maybe the M&E vertical?

Well, the majority of those bookings are associated with media and entertainment. The qualification of $11 million, it's not that the contracts have term limits, they have termination clauses. Based upon our historical performance and just our relation we have with our customers, our churn historically has been near zero, so we do not expect people to do early terminate those agreements. So I don't think of it necessarily as upside. They are contracted opportunities, but they do have the option at like an annual term, they all vary a little bit differently to terminate, we don't expect them to. Hence, we expect to realize the potentially full $11 million plus over the total contract value of those agreements. But again, the majority of those bookings and the majority of that, I'll say, opportunistic bookings of the $11 million is majorly in the media and entertainment space.

Great. Thank you.

Your next question comes from Mike Latimore with Northland Capital Markets. Your line is open.

Thanks a lot. Just on the $11 million is that sort of a three year horizon there roughly?

Yes. There are few agreements that go out to three years, I think the majority of them are in two years period.

Okay, got you. And then on the Redaction customers, I have in my notes that you had 25 Redaction customers last quarter. On an apples-to-apples basis like, how many do you have this quarter, I heard 70 number but I'm not sure that's the same metric.

Alright. So, let's see customers. I think we have 55 actives redact customers in this quarter, as compared to 34 active in Q3, which represents a 61% growth over the active and those are active GLC customers.

Active. Okay, great. And I assume these transparency laws are a big driver there?

Yes, it depends, I mean, as you know, each state municipality is different, but again, we use it as do our partners, as a marketing tool to help continue to drive that. But, I think the ability to quickly bring that process automation to these police agencies is a very attractive product offering that again, is heightened because of the changes in legislation.

But Mike, there's also some agencies that are outside of states that have the mandatory requirements that are also just more forward-looking, who are pursuing that capability as well.

Okay, great. And then on, you talked -- I think you mentioned in here that you expect the GLC category to potentially be larger than the M&E category over time. I guess, that would be I'm guessing, a revenue comment. When should we start seeing some of the GLC bookings exceeds the M&E bookings?

I think we're in those phases that we're being awarded under contracts. And so we should start to see material bookings over the next few quarters.

Okay, thanks.

Your next question comes from Chad Bennett with Craig-Hallum. Your line is open.

Pete, in the revenue guide for the first quarter, how should we think about aiWARE SaaS revenue either on a sequential basis or year-over-year?

Yes, we don't really give guidance at that level, Chad. It's really more the overall number of 12.5 and 12. 9. But I think that the way to think about it, is the SaaS business is continuing to do well and we're not expecting any big disruption there.

Okay. And I'm trying to rhyme the commentary on the ad business, obviously the near-term headwinds from the virus and kind of delayed spend here too. I think it was commentary about reacceleration in the advertising revenue this year. Can you help me out with that?

Yes, the overall business and like the annual media plans that have been shared with us, from our advertising clients, kind of back in the first say three to four weeks the year, showed really strong growth, double digit growth on a year-over-year basis in the advertising agency. What we've seen in the last three weeks though, is that the impact of the supply chain disruption on a handful of our clients. And so the way that we look at that is for this quarter, we're expecting that to be about a $300,000 reduction in revenues from what we had originally expected, due to that supply chain disruption. So, the overall market, the overall services that we're providing are trending very well, as I said at a low double digit, year-over-year increase in the annual spend plans for our clients. And supporting that is the introduction and the continued expansion of our VeriAds product as well. But then the more near-term impact of issues at our clients that we're projecting to be about a $300,000 topline hit in Q1.

Okay. And then maybe last quick one from me, Pete. If the company was profitable, what would be the fully diluted share count?

I don't have that off the top of my head.

It depends on where the stock price is and some of the options are price sensitive.

Most of the options at this point are underwater.

Okay. All right. Thank you.

[Operator instructions] Your next question comes is from Steve Banta with Banta Asset Management. Please go ahead.

Hey, guys, congratulations to the entire team on a great fourth quarter and it looks to be a great full year. I'm curious, would you be able to provide a little more color on how you're viewing your path to profitability number one? And number two, you guys have any thoughts on, say, something like a potential credit facility in lieu of additional with drawn ATM that could alleviate some dilution concerns?

Yes, why don’t Pete take the second one first?

Yes, let me just start on that one. So we've got a lot of different options available to us from a financing perspective. I mean, first of all with the facilities we've got, we think we've got sufficient resources to get to profitability, but then it's a matter of which are the best options available to us. So, we're pursuing opportunities that kind of span the ranges of financing alternatives and obviously, minimizing the dilution to our shareholders is utmost in our outlook. But we're also still looking at it and evaluating the various alternatives that we've got. But, with the capabilities we've got today, we think we can get to profitability with the resources we have.

Perfect. With regards to our overall general path to profitability and the progress we've made in the past, quarter and a half, at the end of the day, it comes down to really three things. One is as we have to continue to drive topline revenue growth by expanding the customer base that are continuing to use aiWARE and in their automated process automation solutions, both in media and entertainment as well as public safety. I don't think we're going to have to move into any new verticals to achieve that profitability. There's plenty of pent up TAM. This heavy lift and sort of the improvement of the architecture and operating performance and then obviously resulting in the improved gross margin, is really a systemic benefit that will perennially assist the company as we continue to drive topline revenue more that will hit the bottom line. So, the team has really come together. I think the BU reorganization that we did in the fourth quarter, while we anticipated the leadership team that that would have dramatic improvements in terms of customer focus and our ability to again, align people's personal interests with what we're trying to achieve in the market. The results of that realignment across the board from staff level employees to executives has been I think, surpassed all of our expectations. So I think employee realignment really focusing on cost cutting where possible that's not going to impact any of our capabilities to address our customers' needs and desires. In fact, we're seeing the exact inverse of what you'd expect when you typically tighten your belt like this. We're seeing actually improved engineering cycles, faster terms of go-to-market and more dedicated channel partner relationships that are creating a cheaper cost of sale. So across the Board, I think we're just a leaner meter organization with an eye on the prize of profitability as soon as we can possibly achieve it.

Great. Thanks, guys.

There are no further questions at this time.

Thank you, operator, and thank you all for joining us on today's call. We're excited about the progress we made in 2019 and we're continuing the momentum in 2020. We have huge opportunities in our businesses, and our teams are better positioned to capture them than they ever have been. In the coming months, we expect to see significant revenue growth and diversification across product, verticals and channels and we look forward to reporting to you on our progress. Goodbye, have a good day.

This concludes today's conference.