Veritone, Inc. (VERI) Q2 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call reveals strong growth in public sector and VDR, despite some margin compression. The company has a robust pipeline, with significant contracts like the Air Force driving demand. Management's confidence in meeting guidance and expanding customer base in regulated industries is promising. Despite some financial misses, the optimistic guidance and strategic expansions suggest a positive stock reaction.
Key Financial Performance
Revenue $24 million for Q2 2025, flat year-over-year. The growth in software products and services by $1.8 million was offset by a $1.9 million decline in managed services. The software growth was driven by a 90% increase in public sector revenue and an $0.8 million increase in commercial enterprise software revenue. The decline in managed services was due to a $2 million drop in representation services and a one-time live event campaign in Q2 2024 that did not recur.
Software Products and Services Growth 45% year-over-year growth excluding Veritone Hire. This was driven by strong performances in public sector and commercial enterprise.
Public Sector Revenue 90% year-over-year growth in Q2 2025. This was driven by larger deals, including contracts with the Department of Defense and major public safety agencies.
Commercial Enterprise Software Revenue Increased by $0.8 million year-over-year in Q2 2025. Growth was led by Veritone Data Refinery (VDR), which has a near-term sales pipeline exceeding $20 million.
Managed Services Revenue Declined by $1.9 million year-over-year in Q2 2025. This was due to a $2 million drop in representation services and the absence of a one-time live event campaign from Q2 2024.
ARR (Annual Recurring Revenue) $62.6 million in Q2 2025, up 7% from Q1 2025 but down year-over-year due to declines in consumption-based revenue from hiring software products.
Gross Revenue Retention Above 90% in Q2 2025, indicating strong customer retention.
GAAP Gross Profit $15.3 million in Q2 2025, down $1.1 million year-over-year. This was due to a higher mix of lower-margin revenue.
GAAP Gross Margins 63.9% in Q2 2025, down from 68.2% in Q2 2024. The decline was due to a higher mix of lower-margin revenue.
Non-GAAP Gross Margins 68.9% in Q2 2025, down from 73.6% in Q2 2024. The decline was due to a higher mix of lower-margin revenue and a decrease in higher-margin consumption-based revenue.
Operating Loss $19.3 million in Q2 2025, improved by $1 million year-over-year due to lower operating expenses.
Net Loss from Continuing Operations $26.8 million in Q2 2025, an increase of $3.4 million year-over-year. This was driven by a $3.4 million change in the estimated fair value of earnout from the divestiture of Veritone One.
Non-GAAP Net Loss from Continuing Operations $8.7 million in Q2 2025, improved from $9.7 million in Q2 2024. The improvement was due to lower operating losses driven by cost management.
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Operating Highlights
aiWARE platform: Revenue of over $24 million for the quarter, driven by demand for AI applications and solutions. Strong organic non-Veritone Hire software revenue growth of over 45%.
Veritone Data Refinery (VDR): Pipeline grew by over 100% from Q1, surpassing $20 million. VDR processed millions of hours of video and audio, contributing significantly to revenue.
Intelligent Digital Evidence Management System (iDEMS): Signed a multiyear agreement with the U.S. Air Force, contributing revenue in 2025 and expected to ramp in 2026.
Public Sector: Pipeline increased to $189 million, up from $110 million in Q1. Signed 35 new public sector customers, including major agencies like the U.S. Air Force.
Commercial Sector: Closed 11 software enterprise deals with clients like ESPN and Inter Milan. VDR adoption and revenue contribution exceeded expectations.
Cost-saving initiatives: Implemented $10 million in annualized savings through personnel reductions and operational improvements.
Equity offering: Completed a $10 million equity offering in June to strengthen financial position.
AI landscape positioning: Focused on Agentic AI and scalable AI infrastructure to address governance and data challenges. Positioned to capture opportunities in training data market, expected to grow to $17 billion by 2032.
Partnerships: Formalized partnerships with major hyperscalers and foundational model developers, with plans to expand further by end of 2025.
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Risk or Challenges
Revenue Dependency on Public Sector: The company's significant reliance on public sector contracts, such as the U.S. Air Force and other government agencies, poses risks if these contracts are delayed, reduced, or canceled. This dependency could lead to revenue volatility.
Macroeconomic Environment: The challenging macroeconomic conditions have negatively impacted the managed services segment, particularly representation services, and could continue to do so until the economy improves.
Managed Services Decline: The managed services segment, including VeriAds services, has experienced a decline, with no clear indication of recovery in the near term. This could impact overall revenue growth.
Cost Structure Adjustments: The company has initiated cost-saving measures, including personnel reductions, to address financial challenges. While these measures aim to improve efficiency, they may also impact operational capacity and employee morale.
VDR Gross Margins: The Veritone Data Refinery (VDR) product has relatively low gross margins (approximately 40%), which could pressure overall profitability, especially as VDR revenue grows.
Debt Levels and Liquidity: The company has a high level of consolidated debt ($128 million) and is exploring financing options to improve liquidity. This financial leverage could pose risks if not managed effectively.
Hiring Market Challenges: The Veritone Hire division faces challenges due to a soft hiring market, which has limited growth in this segment.
Dependence on Hyperscalers: The company's reliance on partnerships with major hyperscalers for VDR initiatives could pose risks if these partnerships do not materialize as expected or if hyperscalers choose alternative providers.
Regulatory and Governance Challenges: The evolving AI landscape introduces challenges around governance, data fragmentation, and effective monitoring and control, which could impact the company's ability to scale its AI solutions effectively.
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Guidance & Outlook
Revenue Growth: Veritone expects revenue for Q3 2025 to be between $28 million and $30 million, representing a 32% year-over-year increase at the midpoint and a 21% sequential increase from Q2 2025. For fiscal 2025, revenue is projected to be between $108 million and $115 million, reflecting a 20% year-over-year growth at the midpoint.
Public Sector Growth: Public sector revenue is expected to grow over 50% year-over-year in Q3 2025, driven by contracts such as the U.S. Air Force agreement and other government projects. The public sector pipeline has grown to nearly $200 million, with significant contributions expected in 2025 and 2026.
Commercial Sector Growth: Commercial revenue, led by Veritone Data Refinery (VDR), is expected to grow over 45% year-over-year in Q3 2025. The VDR pipeline has surpassed $20 million, doubling since early 2025, with expectations to formalize partnerships with major hyperscalers by the end of 2025.
Managed Services: Managed services revenue is expected to decline year-over-year in Q3 2025 due to challenges in the representation side of the business and macroeconomic conditions.
Profitability and Cost Management: Non-GAAP net loss for Q3 2025 is projected to be between $6 million and $6.5 million, a 43% year-over-year improvement at the midpoint. For fiscal 2025, non-GAAP net loss is expected to be between $30 million and $25 million, representing a 33% improvement year-over-year at the midpoint. Cost-saving initiatives are expected to generate $10 million in annualized savings.
AI and VDR Market Opportunity: The demand for high-quality training data is expected to grow significantly, with the VDR product positioned to capture this market. Veritone anticipates substantial growth in VDR revenue throughout 2025 and 2026, with gross margins expected to improve as the product matures.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:Can you elaborate on what needs to convert to support the acceleration in growth rate guided for the top line?
A:The company has the smallest gap of 'go get' revenue to realize the Q3 guide. Most of the revenue is already contracted or visible, with new DoD contracts and VDR customers already generating revenue. The opportunities and businesses currently being serviced will support the revenue growth.
Q:How does Veritone differentiate itself in regulated industries like defense and law enforcement compared to broader AI platforms?
A:Veritone's aiWARE platform is agnostic to AI models and can manage the full end-to-end stack. It supports unstructured data at scale, tokenizing over 5 trillion tokens in Q2 alone. The platform is also platform-agnostic, deployable in public clouds, government clouds, air-gapped environments, and on-premises, which is a significant differentiator.
Q:Do you need to close more large deals to meet your guidance for the year?
A:The Air Force contract has created significant opportunities and inbound demand across the DoD and beyond. The company has a healthy pipeline and expects to meet goals by executing on existing customers and expanding into new areas. They added 35 new public sector customers in the previous quarter and expect this to accelerate.
Q:Can you provide more details about the top 5 public safety customer?
A:The customer is one of the largest law enforcement agencies in the world, using AI-based software for investigations like homicide and murder cases. The company cannot disclose specific names but highlighted the growing demand for their solutions in state and local law enforcement.
Q:Can you explain the $20 million VDR pipeline and its revenue implications?
A:The $20 million pipeline has high visibility for the next 3 to 12 months. VDR is gaining traction with hyperscalers and model developers, representing a significant opportunity. The company is optimistic about VDR's growth potential and its ability to scale.
Q:Why was the full-year guidance adjusted, and what are the cost implications?
A:The guidance adjustment reflects the velocity of VDR and margin compression. While revenue guidance was raised, the non-GAAP net loss was tightened due to these factors.
Q:Is it fair to assume a big uptick in Q4 public sector growth, and is it dependent on DoD revenue?
A:Yes, a significant uptick in Q4 public sector growth is expected, driven by the DoD contract and other opportunities. The growth is not dependent on a single contract but is supported by the Air Force contract and other initiatives.
Q:What do you have in hand versus what you need to achieve to meet the Q3 revenue guide?
A:The company has the smallest 'go get' delta in a long time, with most deal flow already under contract or in progress. The Air Force contract and VDR are key contributors to meeting the guide.
Q:Did you disclose the revenue from the Air Force contract during the quarter?
A:No, the company did not disclose specific revenue figures for the Air Force contract and does not plan to break down specific contracts.
Q:Are there significant customer concentrations in the VDR pipeline?
A:The VDR space is dominated by about 50 major players, but the company is engaged with most of them. There is no single customer dominating the pipeline, but the ecosystem is concentrated among these major players.
Q:Is the sales process for VDR improving?
A:Yes, the sales process is improving, as evidenced by the increasing pipeline and repeat business. Customers are building trust in Veritone's ability to deliver at scale, and the company is learning more about customer needs.
Q:Review of Unclear Management Responses
A:Management avoided providing specific revenue figures for the Air Force contract, citing a policy of not breaking down specific contracts or line items.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI landscape
AI software
ATS
Air Force
Big
Executive
LLC Research
LinkedIn
Officer
President Chief
Research Division
Scott
United States
Veritone opportunity
agent
control
date
demand quality
division
foundation
generation
hour video
iDEMS
infrastructure
lead
medium service
million hour
model training
opportunity AI
opportunity aiWARE
sector vertical
solution AI
source
token
tool
use case
video audio
work DoD
VERI Transcript
Veritone, Inc. (VERI) Q3 2025 Earnings Call Transcript
Positive11-6
The earnings report indicates strong revenue growth, particularly in software products and services, and significant debt reduction. The Q&A section reveals optimism about future revenue, despite some short-term public sector delays. The company's strategic moves, like convertible debt repurchase and cost management, suggest a positive outlook. The positive guidance and actions to improve financial health likely lead to a stock price increase.
Veritone, Inc. (VERI) Q2 2025 Earnings Call Transcript
Positive8-8
The earnings call reveals strong growth in public sector and VDR, despite some margin compression. The company has a robust pipeline, with significant contracts like the Air Force driving demand. Management's confidence in meeting guidance and expanding customer base in regulated industries is promising. Despite some financial misses, the optimistic guidance and strategic expansions suggest a positive stock reaction.
Veritone, Inc. (NASDAQ:VERI) Q1 2025 Earnings Call Transcript
Unknown5-9
The earnings call summary presents a mixed picture. While there are positive aspects like the projected revenue growth in the public sector and the potential of the VDR, these are offset by disappointing revenue figures and a weak Q1 guidance. The share repurchase program and reduced debt are positives, but the Q&A section reveals uncertainties regarding timing and execution of contracts. Given the balance of positive and negative factors, the overall sentiment is neutral, suggesting minimal stock price movement in the short term.
Veritone, Inc. (VERI) Q1 2025 Earnings Call Transcript
Unknown5-8
The earnings call reflects a mix of positive and negative elements. While there is optimism in public sector growth and VDR contributions, financial performance shows declines in revenue, gross margins, and customer numbers. The registered direct offering indicates potential dilution, and management's vague responses in the Q&A add uncertainty. Despite debt reduction and improved net loss, the overall sentiment leans negative due to weak current financials and unclear guidance, suggesting a likely stock price decline in the range of -2% to -8%.
VERI Slides
VERI Report
Frequently Asked Questions
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They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
