Veritone, Inc. (VERI) Q3 2020 Earnings Report, Transcript and Summary

Good day and welcome to the Veritone Third Quarter 2020 Financial Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Brian Alger. Please go ahead.

Good afternoon and welcome to Veritone's third quarter 2020 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 results for the third quarter ended September 30, 2020. This press release 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 loss for the fourth 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 and its quarterly report on Form 10-Q filed today. These forward-looking statements are based on assumptions, as of today November 9, 2020 and Veritone undertakes no obligation to revise or update them. During this call, the actual and forecasted financial measures will be discussing including gross margins, operating expenses, and net loss, as well as the discussion of operating earnings by core operations and corporate will be presented on a non-GAAP basis. 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 this call is being recorded and will be made available for replay via a link on the 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. I'm proud to report that by all measures, Q3 was a record quarter for Veritone. More importantly, we are delivering on our mission to help public and private organizations conquer data complexity, to build a smarter and safer world through the power of artificial intelligence. We continue to make big investments in areas that matter whether it is helping improve transparency in law enforcement or accelerating the adoption of renewable energy. Across the board, the Veritone team performed with skills and agility, helping our customers improve their operations, and build resilience in challenging times through the adoption of our cutting edge artificial intelligence solutions, anchored by our powerful aiWARE operating systems. Q3 revenue increased by 23% year-over-year to a record 15.7 million, up 18% from last quarter. Our momentum was boosted by our timely and well received launch or Veritone Energy, which augments our growing presence in the media and entertainment and government, legal, and compliance markets. Our third quarter non-GAAP net loss decreased by 56% year-over-year, and 26% from Q2 to a record 4.3 million. Our top and bottom line results both significantly exceeded the increased guidance we provided in August. But the story this quarter is not about cost savings or our reduced cash usage, it's about growth. Revenue growth continues to accelerate faster than expectations. And we believe this trend will continue for the foreseeable future. This is highlighted by the fact that our Q3 revenues from aiWARE’s software solutions increased by 43% year-over-year, and 12% sequentially. And we saw increasing momentum particularly in our GLC and energy businesses, which we fully expect to continue to build moving forward. Our GLC business is beginning to hit its stride as revenue growth and bookings accelerate. Public safety ranks is one of the biggest issues facing communities today, with agencies challenged to do more with fewer resources and in some cases to rebuild trust with the communities they serve. Veritone’s AI driven solutions address these critical needs, helping police combat crime more quickly and effectively, but also expediting the release of video footage of crime and police interactions, helping them increase transparency and build trust with citizens. The world is awash in an ever increasing volume of text, video, and audio content. And now it's far too large for humans to review in a timely or efficient manner, if at all. [Technical Difficulty] enabling them to [ingest] and analyze vast amounts of information to make more critical decision to address this opportunity we have added trusted channel partners like Microsoft and CDW-G and have integrated aiWARE with leading platforms like GovQA and George Jon. Veritone has completed several strategic technology integrations with NVIDIA and Alteryx. aiWARE now supports NVIDIA CUDA and their GPU platform. And we've integrated aiWARE’s automate studio with Alteryx analytics platform, enabling organizations across both public and private sectors to run intensive an AI task, machine learning capability, whether on premise or in the cloud. We're also very excited about the growing momentum we are seeing in our recently launched Veritone energy business. Renewable energy sources are projected to be the fastest growing segment of electricity generation over the next decade, but the increasing use of these environmentally friendly resources is creating a significant reliability and [optimization] challenges for utilities. Each year, billions of dollars of infrastructure damage, and energy waste are being caused by utility operators that are ill-equipped to handle the dynamic load created by renewable energy sources. These challenges creates enormous opportunity for Veritone to excel with a suite patented AI solution that helps utilities automatically predict, optimize, dispatch, and trade energy to optimally meet grid demand in real time. We're helping improve grid reliability and efficiency to drive the next wave in the green energy boom. With the growth of our aiWARE business beginning to accelerate, we are adding some key talent to help lead that growth. I'm pleased to introduce you to our new CFO, Mike Zemetra, an industry veteran who brings extensive experience in growing and driving performance in SaaS and digital media companies. Before Mike digs into the key metrics behind our financial performance this quarter, I would like to hand the call over to Ryan, our President and Co-Founder to discuss the operational progress in greater detail. Over to you, Ryan.

Thank you, Chad and good afternoon everyone. As Chad mentioned, we had a very strong third quarter. Each vertical delivered results above the expectations we had coming into the quarter. The 43% year-over-year growth in our staff business reflects the rapid expansion with our GLC customers and initial revenues from the energy sector. Both verticals hold enormous potential and Veritone is driving hard to deliver on meeting the increasing demand. I'm going to spend a few minutes discussing our third quarter revenues and outlook in each of our businesses before Mike discusses the financial details. Starting with our aiWARE SaaS Solutions revenues were 3.4 million, up 43% year-over-year, and 12% sequentially. In addition to strong revenue growth, bookings continue to improve as customers in the GLC and energy markets accelerated their demand. New bookings in the quarter are up 31.6% year-on-year, including multiple six figure bookings for our new energy solutions. During the quarter, we made significant progress on our seven figure subcontract under our U.S. Air Force development program. We are applying aiWARE’s intelligent process automation capabilities to analyze overhead imagery with AI object detection engines to significantly increase the speed, accuracy, and throughput of the analysis process. Our ultimate goal is to secure a much larger long-term agreement to supply solutions that enable U.S. intelligence and surveillance analysts with much needed assistance in rapidly identifying threats and other activity around the globe. We also announced a number of technology and channel partnerships, including GovQA, George Jon, and March Networks that have already begun to bear fruit by expanding our reach both internationally, as well as domestically. In our media and entertainment vertical, we have now completed a deployment of our aiWARE enabled attribute application across all of iHeartMedia and our TV customers are steadily adding attribute as well. Importantly, as we bring on attribute and other offerings with these existing customers, the incremental margin is considerably higher as the content has already been processed by aiWARE. Now, we would like to discuss our newest vertical, energy. As Chad mentioned, we have already recognized revenues and reached over $1 million of bookings from this new market. Since we made our formal launch announcement in October, customer engagement and demand for energy solutions has grown both domestically and internationally. We are on pace to complete our initial implementation with a large regional utility provider later this quarter, which will be a major milestone for our energy team. While it's too early to break out specific forecast, the enormous market size and the substantial value that we are delivering with our patented technologies lead us to believe that energy could rapidly become one of our largest end markets from a revenue perspective. Based upon these factors we expect again to deliver double digit sequential growth from our aiWARE SaaS Solutions Group in the fourth quarter. In our aiWARE enabled advertising business, the third quarter was another record. We again materially outperformed our peers, as well as our own internal forecasts. Truly an outstanding effort by everyone involved. As the KPI tables reflect, we continue to increase average gross billings from active customers, even as we bring on new accounts and target new media channels. In aggregate, net revenues from our advertising business grew 25%, quarter-over-quarter, and 39% year-over-year. These are tremendous results in any economy, let alone in the midst of a pandemic. We continue to add more stations to our VeriAds Network. Year to date, our VeriAds Network has generated nearly 650,000 of additional operating income in this vertical owing to the fact that our network is leveraging the cognitive processing that we are already monetizing for both our brand and media customers. Entering the fourth quarter, we have tremendous momentum. Although the fourth quarter is typically seasonally slower in this vertical, we expect to post similar results to the September quarter, which should drive full-year 2020 advertising net revenues to better than 25% growth over 2019, and again, simply outstanding results. In our content licensing business, where we leverage the power of aiWARE to index, search, and reposition premium video content for licensing by advertisers and content creators, we were able to post sequential growth of 12% despite continuation of the headwinds facing this group since March. Recently, we announced a new partnership with South China Morning Post, Hong Kong's oldest running English language newspaper. This vast trove of content augments our already strong news base portfolio with unique and timely source material. We also announced a major contract renewal and expansion with CBS News. Given our historical run rate, we believe we could generate more than $10 million in revenue under this contract over the three year term. Our content licensing business is typically seasonally slower in Q4, as content production tapers around the holidays, and there are very few major sporting events on the calendar. In summary, we are seeing strong organic growth across all of our segments. In addition, we continue to look for potential acquisition targets, where we see opportunities to accelerate our entry into new markets, and transform and grow their businesses by integrating aiWARE into their products and solutions. And now, I'll hand it over to Mike Zemetra, our new CFO to detail the financial results of the third quarter, and to outline our financial guidance for the fourth quarter, Mike.

Great, thank you, Ryan. Before I begin, I would like to thank Chad and Ryan and the entire Veritone team for making my first month a very smooth transition. I've been so impressed with this team, and more importantly, the validations of the aiWARE platform directly from third parties, including some of the largest companies in the S&P 100 today. The proliferation of digital data and our dependency on it in our day-to-day lives today has created many efficiencies and great things in our society. But it has also created a massive amount of problems in efficiencies around the mountains of unstructured content and data. Today, most of which require human intervention to overcome and solve. Whether these are content related at enterprise levels or within the safety and security of our own governments, aiWARE is the only AI platform designed to directly and responsibly solve and create solutions out of this resulting big data problem. The TAM for AI Software is significant, projected to be over 100 billion by 2025 with a CAGR of over 40% year-over-year, and we will play a big part in the AI story. With record Q3 results discussed today, I believe fiscal 2020 is the turning point in Veritone’s evolution, showing massive execution and financial progress, diversification in our revenue mix, and a radical improvement in our bottom line cost structure. The company is laser focused on a strong pathway towards growth and profitability. Turning to Q3, 2020, we posted record results in KPIs across the board, beating our financial guidance with revenue of 15.7 million and non-GAAP net loss of 4.3 million. Q3 2020 revenue was a record 15.7 million, up 23% year-over-year from Q3 2019, including 43% year-over-year growth in our aiWARE SaaS Solutions. I will get deeper into revenue drivers later. Q3 2020 gross profit reached 11.2 million, improving 2.6 million or 30% from Q3 2019. Since the third quarter of 2019, we have realized considerable cost savings, reducing our daily cloud computing expenses by nearly a third. Overall gross margins increase to 71% in Q3 2020, compared with 67.2% in Q3 2019. Q3 non-GAAP net loss was a record 4.3 million, a 5.4 million or 56% improvement from Q3 2019, driven by improvements in core operations and corporate, which I will elaborate on later. Now, I'd like to discuss the Q3 financial performance for a core operations in corporate. We are adding this new enhanced disclosure to provide greater visibility into the profitability of our core operations and our corporate overhead. Turning to our core operations, which consists of our aiWARE SaaS Solutions, including our AI operating system, cognitive engines and applications and related services, our content licensing and advertising agency services, and their supporting operations, including direct path to sales, as well as operating expenses for our sales, marketing, and product development, and to a lesser extent, certain general and administrative costs dedicated to those business activities. As previously discussed, our Q3 revenue of 15.7 million was 23% from Q3 2019. Our aiWARE SaaS Solutions grew 43% year-over-year to 3.6 million, compared with 2.4 million in Q3 of 2019. Driving this improvement were initial revenues from a new market energy where we delivered important technology milestones to a major utility on the east coast, an increased revenue under a U.S. Air Force program, along with growth in our GLC and media markets. While we just launched our energy offerings recently, our conversations with multiple utilities have given us great confidence in our 2021 pipeline and growth prospects in this massive market were over 750 billion is invested in globally, electricity generation and distribution project annually. In addition, our aiWARE enabled advertising services grew by 2.5 million or 39%, largely driven by the initial ramp of our VeriAds offerings. The growth is offset in part by slightly lower content licensing revenues, due to cancellation of some major sporting events as a result of COVID-19. We've reported solid KPIs in Q3. Our advertising services improved average gross billings by 28%, year-over-year to 625,000, compared with [490,000], in Q3 of 2019, driven primarily by increased revenues in aiWARE enabled initiatives across digital and podcasting markets. Our aiWARE SaaS Solutions grew total accounts on the platform by 77% versus Q3 2019, and increased new bookings over 32% over the same period. Our Q3 gross profit of 11.2 increased 30% year-over-year, largely driven by aiWARE SaaS Solutions gross margin expansion. This reflects both the revenue growth across the platform in dramatically lower unit processing costs and efficiencies realized from enhancements to our aiWARE operating system. As we continue to gain scale over the next 12 months to 24 months, we expect to continue driving margin improvements in our aiWARE SaaS solutions. In Q3, for the first time since our inception, core operations posted a record non-GAAP net profit of 0.4 million, as compared with a non-GAAP net loss of 3.9 million in Q3 of 2019. The year-over-year improvement of 4.4 million or 111% was driven by the 2.6 million improvement in the gross profit coupled with decreased operating expenses, particularly in the areas of personnel and professional services, as a result of cost reduction initiatives implemented in Q4 of 2019. Turning to corporate, which principally consists of general and administrative functions, such as executive, finance, legal, people operations, occupancy costs, IT, and other areas to support the entire company, including a [public company] driven initiatives and supporting functions. Q3 corporate non-GAAP net loss was 4.7 million compared with 5.7 million in Q3 of 2019. The year-over-year improvement of 1 million or 18% is principally driven by decreased operating expenses, particularly in the areas of personnel and professional services, due to the cost reductions I discussed earlier, as well as by lower overall travel as a result of COVID-19. Turning to our balance sheet. We ended Q3 2020 with cash and restricted cash at [35.2 million], up 10.3 million from the end of 2019. The nine month increase was largely driven by net cash proceeds from financing of 9 million and 1.3 million of cash generated from operations. During the nine months ended September 30, 2020, we raised net proceeds of 6.5 million in common stock offerings, and 2.5 million through the exercises of warrants and employee stock options. Additionally, we undertook a PPP loan at the onset of the COVID-19 pandemic totaling 6.5 million, which we paid back in full due to the overall improvements in our business, and our ability to access the capital markets during this pandemic. Net cash inflows from operating activities were a positive 1.3 million during the first nine months of 2020. Due principally the positive changes in our working capital of 17.7 million associated mainly with the timing of payments within our advertising agency services, offset by net cash usage, driven primarily by our $16.9 million non-GAAP net loss during the period. As a reminder, a significant portion of our reported cash is essentially held for payments to third parties for advertising agency clients, and our working capital will continue to fluctuate depending on the timing and due dates to payments at any given period. Our unencumbered cash at the end of the quarter was 20.1 million. Turning to our financial guidance for Q4 2020. We expect revenue to be between 16 million and 16.4 million, representing a 30% increase year-over-year at the midpoint. We expect our revenue from aiWARE SaaS Solutions to again post a double digit increase sequentially, and our other businesses to be consistent with their normal seasonal patterns. We expect non-GAAP net loss to be between 4.5 million and 4.0 million, represented a 47% improvement year-over-year at the midpoint. We expect our core operations to once again be profitable on a non-GAAP basis in Q4 2020. And our corporate non-GAAP net loss to be relatively consistent with Q3 of 2020. I look forward to meeting and speaking with investors. We will be presenting and/or participating in several conferences and events throughout the end of 2020, including JMP Securities Small-Cap Technology Forum on November 10, Stifel’s Midwest One-on-One Growth Conference on November 11 through the 12, Roth Technology Virtual Conference on November 11 through the 12 where Chad will be participating in a panel discussion, Craig-Hallum’s Alpha Select Conference on November 17, Northland Securities IoT, Al and Safety Conference on December 7, Roth Deer Valley Consumer Conference on December 10 through the 12. That concludes my prepared remarks. I would like to turn the call over to Chad for final thoughts and then we can open up the line for Q&A.

Thanks Mike. It's great to welcome Mike to the team. I would also like to thank Pete Collins for his dedication and effort over the past four years with Veritone. Pete has done an outstanding job of getting the company to where it is today. We wish Pete the best of luck in his future endeavors. It's likely not our last quarter, I'm extremely proud of the Veritone family and their continued strong performance. While the path to recovery from COVID-19, and all its economic and social fallout remains unclear, we the Veritone family remain focused on our core mission to harness the power of AI to help build a safer, more vibrant, transparent, empowered society. This quarter's results and our bullish outlook for Q4 and beyond demonstrate that aiWARE is delivering on this mission by making law enforcement more transparent by protecting America's global interest through advanced image analysis, by improving our judicial rigor through intelligent evidence processing, and by accelerating our path to cleaner, more reliable energy. We at Veritone see amazing opportunities for our technology to transform our world, and we know our greatest days lie ahead. With that, we would like to begin the Q&A session. Operator?

Thank you. [Operator Instructions] Our first question comes from Darren Aftahi with ROTH Capital Partners. Please go ahead.

Hey, guys, thanks for taking my questions. Congrats on the quarter. Hope you guys are well. Wanted to ask, I know energy is new, but it seems like you guys are fairly bullish on that. So could you maybe just step back – two part question first, talk a little bit about your three verticals in AI, SaaS, and kind of as you look at pipeline opportunity, kind of what represents the most material opportunity over the kind of the next 12 months? And then second, just the energy opportunity, where is kind of the low hanging fruit versus some of these longer-term contracts you might be able to, you know, advance the platform. And then my last question on energy, I'm just kind of curious, go to market strategy, how much this is going to inside sales channel partners, etcetera? Thanks.

Hey, Darren. Thanks for the question. This is Chad. I'll take the first one. And then we'll kind of banter around on the back half of those. You know, from a macro perspective, right, our three primary verticals. Today from a good market standpoint, being media and entertainment and our monetization group, GLC, and now energy, we just saw strong growth across all three categories, and really underpinned by the continuity that aiWARE is bringing to those solutions, and the efficiencies of scale that we're getting across all those verticals interoperating on one common platform. The business, you know, from a go to market standpoint, you know, we saw on the energy side, just an immediate traction out of the gates, which was frankly a little bit unexpected. We knew our technology was more advanced than anything else that was out there, but having the best technology doesn't always lead itself to necessarily being adopted that quickly, but in the energy space, I think that the problem where the [indiscernible] with regard to some of the damages that have been done over the last decade to the infrastructure as renewables have been, you know, being deployed. The legacy grid itself just doesn't lend itself well to being a handle bidirectional energy flows, and the unpredictability be predictability on the supply side of energy. So, the CTOs of these companies have really latched on to our solutions. And we've got a very clean path for them to adoption, with regards to our ability to simulate the problem and our solution for them looking at historical data. And then a very well thought out and progressive plan for deployment, which we're now in phasing. On the GLC side, again, probably our best quarter ever, in that category, strong support from our existing customers, and our channel partners like Microsoft and some of our new one like George Jon and others. The legal side as well continues to progress with the Department of Justice. And some of the Air Force contracts that we've been awarded in our partnership program on the [indiscernible] side has also been very fruitful. And we have high expectations that we will be awarded a longer-term contract around some of our satellite and reconnaissance image processing capability. And then media and entertainment just remains the bedrock of the company. We have great traction with our partners, we continue to have near zero attrition, and revenue expansion across multiple new applications that we continue to foster and develop with our partners. So, I can't really speak to any negatives. COVID itself as kind of a backdrop has been, I think, an accelerant to our businesses as companies have changed the way in which they operate and are looking for more efficient and more remote capabilities. We've just hit the nail on the head and I think our, you know, 40% plus growth in the aiWARE SaaS side of our business is evident of that fact. And I don't think it's going to slowing time anytime soon. When I talk about energy on more specific, on go to market, I think your second question, energy is really interesting. Again, we were getting pulled into partners that are just reading some of the scientific papers on our Hamiltonian solution, which is our proprietary machine learning algorithm for optimizing the grid. It's not specific to grid and energy optimization to be applied to really any optimization or machine learning process, but it's very well suited for the challenges in a distributed grid environment. And so those CTOs are reading these papers and attending conferences that our Chief Data Scientist, Dr. Wolf Kohn attends and speak that frequently. So, I think we've just got a really good traction and pull-through through the technology side of these companies. From the clients health standpoint it's really, you know, primarily grid operators was our first foray into the market, but then right behind that, as we start to deploy the solution, the deployment has us integrating with everything from solar panel companies, to transformers, and inverters, to some of the status systems that are in those energy grids themselves. So, we're starting to see ourselves having strategic conversations with existing legacy hardware suppliers in a multi trillion dollar global market. On the other side though, we've also seen expansion outside of the grid operators and the energy – traditional energy companies to some of the renewable providers, as well as some of the new trading desks that are starting to pop up as, you know, kind of my version of what I thought energy trading look like with more on the financial side back in the [Enron] days, nothing could be further from the truth. There's now multiple energy exchanges where people are – and energy companies are buying and selling energy in real time, and transacting and trading that energy across grid. So I think we're looking at a very bright future for democratize, decentralized, and decarbonized energy platform for the United States [and beyond] that Veritone is going to play a very strategic role on making a reality.

That's really a little more in. That was perfect. That was great answer. Thank you for that. Just one on the financials, maybe for Mike, and Mike welcome. It looks like you guys grew sales, I think 2.5 million sequentially, but cost of goods went up by a couple hundred thousand. I know you talked about cloud efficiencies, and then you've also talked about with iHeart, once you get one application on some kind of pass through margin down. I'm just curious, as you grow revenue, how sustainable is that margin improvement that we saw in the third quarter? Thanks.

Darren, we're not going to give any detail color going forward, other than we do expect more efficiencies. And as I mentioned, during the call, those efficiencies are really coming from two parts. One is, the growth in more accretive revenue; and two, the cost cutting efficiencies we've done specifically around cost of sales. We're going to continue to drive that margin. You know, obviously, the hurdle is going to get harder and harder as you go forward in terms of sequential and year-over-year improvement, but we're laser focused on it.

Thanks.

Our next question comes from Pat Walravens with JMP Securities. Please go ahead.

Oh, great. Thank you and congratulations. Great quarter.

Thanks Pat.

Chad, can you just step back for a second, and, I mean, in Q1 revenue, negative 2%. [indiscernible] in Q2, 8% in Q3, 23%, and you're guiding at the midpoint to 30% in Q4. So that's quite an acceleration. Can you just sort of simplify it for us? And just, you know, if there's sort of one or two or three things that you would point to is the driver behind the acceleration with this company? What would you say they are?

You know, I'm surprised you're asking me the softball question. I thought I was going to get Pat the normal from you, which is, you know, how is Biden versus Trump affect your business? But I'll gladly answer the trend question. You know, we've been laser focused in last year and this year on hardening the eyewear operating system. And by [hardening], I'm referring to its reliability, stability and flexibility to be adapted, to really any used cases out there in the market. And we really achieved that goal, as we mentioned in Q3, Q4 of last year, and it sets the stage for our sales engineers, and our inside sales and outside sales and our business partner and our channel partners to now finally start to be able to reliably deploy aiWARE and its power to really any industry. Today, we're operating in three, but the fact that we're getting so much leverage on that technology, and what's driving down our operating costs at the same time is it improving the efficiency of our cost of sales and the efficacy of our products. I think the other one is, is once a customer has tasted aiWARE with one application, I think Darren mentioned this in this call, and they're on the operating system. It's now literally a couple of clicks than a phone call and you got a new application and running. And the margin improvement for us on those secondary and tertiary applications that the same customers are now using the – again just creates great efficiency for us as a business and delivers more value to our customers, more quickly.

Okay, that's great. And so yeah, you brought it up. So, let's hear it. What does the election mean for you guys?

Yeah, I see it was coming. I think we're agnostic to it. Honestly, the industries that we're operating in are so important, strategically, the United States that the drivers, whether it be an energy or in government, legal and compliance are beyond sort of basic, you know, four year political movements that might be happening. And so, you know, we've been playing across the aisle, with really no challenges as an operating group in those sectors and believe that we will work very well with the Biden team as they come to power. On the media and entertainment side, I think, you know, we've had a tough [indiscernible] in this in this COVID situation. I think as COVID gets under control, I think media and entertainment despite performing very well, given our peers. I think we'll even continue to see acceleration as that subside.

Okay, great. We'll dig into all that more tomorrow. Thank you, Chad.

Thanks, cheers.

Our next question comes from Tom Diffely with D.A. Davidson. Please go ahead.

Yes, good afternoon. So, maybe first a follow up to the previous question on the model itself, on average, Mike it looks like you're guiding for revenue growth quarter-over-quarter, but roughly flat EPS. I'm just curious if there's any particular costs or expenses that we should think about [going into] fourth quarter?

Yeah, that's a great question. I mean, we're, you know, the growth that we're targeting particularly in the energy sector and the GLC markets, you know, we're going to be investing in those. So, you will have modest increases from an operating perspective. But overall, you know, not significant.

Okay. And I know, obviously, media did quite well in this tough year, anyway to quantify how much revenue you did lose from the delayed or canceled events that will most likely come back next year?

Ryan, do you have any insights on that? You can put some quantity around, but I don't think we do.

Yeah, I don't think we're we would be able to reconcile that since some of these events are, you know, happening again, you know, and being rebroadcast at a later date, such as the Masters. But it was not inconsequential sum, but I don't think it was overly material. So again, as we look at sort of 2021, even if we see delays for major sporting events, or I'll say, a very light audience based live events, I still don't think it's going to have a material impact on a negative basis to our business going forward.

Okay, great. And then Chad, going back to the energy markets, you are doing a nice large regional utility work right now? Is this a situation where, you know, it's kind of your proof of concept, and to kind of how that goes, it could really open the door or things are already, you know, moving pretty quickly with other players?

No, great question. No, this is not a proof of concept. We're in full deployment mode right now with a major U.S. utility, with high expectations, given the modeling that we've already done in our simulators. The expectations on both sides are very high. And we expect those to be to me reached here very quickly. And on the business development side, we have great traction, again, in a multiple different vectors, obviously, energy operators, both legacy grid operators, and the renewable micro grids that are now popping up, all have great affinity towards our solutions, but I think that one of the more interesting opportunities that's out there that I just briefly touched on was on the energy trading desks that are [starting to happen]. In Texas, for example, there's the air cloud exchange, there's another one out here in the west as well, [where air], I think it's 50 megawatts is the required energy that you have to be providing to the grid to the [exchange], flatten and smooth out and reduce costs to the end user with regards to our U.S. energy bill. So, very exciting capabilities and Veritone’s arbitrage solutions and predicting plays a great role in that new solution.

Okay, thanks for the color.

Our next question comes from Michael Latimore with Northland Capital. Please go ahead.

Hi, this is [indiscernible] on for Mike. Congrats on a great quarter. I want to know, did you have bookings at Microsoft as a partner in the quarter? So, could you discuss end used cases and the potential size?

Yeah, I think you're talking about any activity specifically with Microsoft specific used cases, but I will comment on – so the size on what I can say is, you know, Microsoft has been a very active partner with us, I'd say highlighted by, you know, most recently our sort of collaboration with GovQA in selling to both as a regional and statewide organizations. But it really runs the gamut, Redact – Veritone Redact, our programmatic and automated Redaction application suite, is really gains traction. I think we're servicing, you know, well over 100 channel opportunity in direct sales efforts to regional and smaller agencies as well.

Okay. And how well did legal do in the quarter as compared to your expectation? And is this an important growth category for you next year?

Yeah Ryan you’re going to handle that.

The Department of Justice and legal versus, you know, more traditional public safety, we don't segment out our revenues that way. Again, but GLC in its entirety had a very, very strong quarter. And we expect those growth to continue in the foreseeable future. Obviously, our relationship with the Department of Justice continues to build as our deployments and our FedRAMP continue to harden with the progress that we made with aiWARE. So, I think that we will continue to see positive growth both out of the again, public safety and the legal side of the business.

Okay, thank you.

Thank you.

Our next question comes from Nick Mattiacci with Craig-Hallum. Please go ahead.

Hi, this is Nick Mattiacci on for Chad Bennett. Thanks for taking my questions. So, just on the aiWARE business, I'm curious how much of that is recurring in this quarter? And if you could speak about that through the lens of the media and entertainment vertical and then also the new energy bookings?

Yeah, Mike, why don't you take that one?

Yeah, sorry. So, it's about 50/50. I mean, the growth from the SaaS perspective is 43% year-over-year, and then equal side. On the media side, the growth predominantly from the VeriAds business, so it's about 50/50.

And then on the new energy bookings, Can you talk about…

We don't give exact – yeah, we don't give exact details. But just know that between GLC and energy, I mean, these are growing 100% quarter-over-quarter. So these are very high growth areas for us at the present moment.

Alright. And then just one last one for from me. So, it looks like RPO is down 15% quarter-over-quarter, could you just help me reconcile that with just some of your other commentary about SaaS business? Thank you.

Yeah, I mean, it's down slightly, but it’s not material.

Great, thanks.

[Operator Instructions] I’m showing no further questions. This concludes our question-and-answer session. I would like to turn the conference back over to Chad Steelberg for any closing remarks.

Thank you, operator. And thank you all for joining us on today's call. As I said, I am so proud of the way our entire team has performed to achieve these record results. I want to personally thank each of them for their tireless efforts and for their unwavering focus on continuing to pursue our vision of building the world's leading AI solutions company. We have huge opportunities on our business, and our teams are better positioned to capture them than they ever have before. We look forward to reporting to you on our progress. Goodbye.

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