Veritone, Inc. (VERI) Earnings Call Transcript & Summary

Good morning. Welcome to Veritone's analyst update and Tech demo. I'm Brian Alger, SVP of Investor Relations and Capital Markets. Today's presentation is going to cap off 2 weeks of incredible activity for Veritone. We've had 3 investor conferences, an earnings report and, most recently, a financing. Today's presentation is going to walk us through a number of our business units' new technologies and a number of customer testimonials about the business. And after the presentations, we'll hold a Q&A session where each of you can enter in your questions into the chat room, and I will moderate. Now as we move forward, we will be making forward-looking statements. So I want you all to take a quick look at the disclosure page. And with that out of the way, it's my pleasure to introduce our Chairman, CEO and Co-Founder, Chad Steelberg. Chad?

Thanks, Brian. When Ryan and I started Veritone 7 years ago, it was with the primary goal of digitally transforming organizations with AI. Today, we are still pursuing that same vision but with a much more mature platform and organization. As we continue to grow, we will remain focused on the mission to create a better world. The aiWARE platform for enterprise AI is already making significant impacts on this front, whether it is improving the environment through more efficient and resilient energy production or removing bias and improving inclusion and diversity in the workplace, Veritone solutions and services are producing profound results. Ryan, over to you.

Thank you, Chad, for sharing your vision. And finally, the technology has caught up where it needs to be, that I can actually deal with the digital twin version of my brother and not the real Chad. But actually, I'm going to talk a little bit more about what you just saw, which is so exciting. But that actually was built using MARVEL.ai voice synthesis technology, as well as running on the conversational AI framework Wade & Wendy from PandoLogic, again, which we're going to talk to you guys about in a few minutes. So again, thanks, Chad, for sharing that vision. Really excited to talk to you guys about performance of the business and give you a little insight to the future. We are taking a major step forward yet again for this company in terms of both growth and scale, but also growing both organically and through strategic M&A. Our current guidance for 2021 is going to show a significant year-over-year growth of over 82% on a consolidated basis. And we're going to end this year with a run rate that's going to approach $180 million of revenue. We're really excited about that. Also this fourth quarter, as we provided in some guidance, that we're looking at actually a profitable fourth quarter and positive cash flow for the quarter that could have a meaningful impact for the entire year bottom line of 2021 for the business. We are thrilled. And most recently, to help us even continue to further accelerate our growth and provide us the means to look at future strategic acquisitions, we raised approximately $175 million in the public markets earlier this week. Veritone is a clear and prominent leader in the enterprise AI software and solutions space, with hundreds of customers spanning numerous business verticals. One thing we want to stress is that Veritone is a software and product company first. It's our pedigree. It is also one of the clear differentiations of our business against others in the AI space and our competition, highlighted by aiWARE, our proprietary OS for AI platform, that continues to advance and lead the industry. Veritone is a diverse and global company, with over 500 total employees today, including now a significant presence in Israel, which we intend to invest in and staff and build into a world-class AI and development hub. Lastly, Veritone remains very committed to bringing AI to the market for good, with a strong emphasis on transparency and accountability. This slide says it all. It is all about aiWARE, our OS for AI. This innovative proprietary platform continues to advance and lead the industry, helping us scale and deploy AI-based solutions to both small businesses as well as large commercial and government-regulated industries. aiWARE's modular and extensible framework allows us to service businesses of all types and levels of maturity to build, accelerate and leverage AI into the enterprise. Veritone's aiWARE platform has been proven in the industry for years, now supporting hundreds of clients across different business segments. And finally, circling back and talking a little bit more about Chad's Avatar that introduced today's session. What you're seeing is the integration of MARVEL.ai, our proprietary Voice-as-a-Service solution, integrated with Wade and Wendy, the conversational AI framework from PandoLogic. Well, obviously, I hope everybody is excited as I am. And with that, I'm going to transfer it over to Terry Baker, the CEO of PandoLogic, who is going to walk you through an overview of the business and so you can learn more about this recent acquisition. Terry?

I want to spend a few minutes talking about what PandoLogic does, how we do it, and most importantly, who we do it for? PandoLogic shares the vision with Veritone on delivering better outcomes for people through AI. We do this by addressing the growing need of AI across the entire human capital management span, both for large enterprise employers as well as for the staffing and the RPO industry. We've been accelerating the adoption of programmatic through a reseller channel. Large applicant tracking system providers haven't made programmatic a part of their application workflow. That gives us a great land-and-expand opportunity. We liken what we do to an automated self-driving car with a powerful engine. The power of programmatic takes the right ad and it puts it in front of the right people at the right place, at the right time and for the right price. And we know that recruiting can be expensive, especially if you don't do it the right way. And what we enable is the ability to find the right talent cost effectively and through complete automation. And we do this not just for employers, but we also do it for candidates. As you might have seen with Ryan's demonstration of our conversational AI, we simply make for a much better candidate experience as they apply to job opportunities. Well, our engine is producing fantastic results. including some of the following: we've had a 90% compounded annual growth rate over the last 3 years. Our flagship product, pandoIQ Enterprise, has grown year-over-year by over 320%. And just this year alone, we've already delivered over 1.5 million applicants year-to-date. Well, how are we able to generate that significant volume of applicants? The reason is because we put those ads where candidates live, where they're searching for jobs. And this includes some of the publishers that you can see here on the slide, traditional job board providers, social media sites, targeted diversity sites and even really specialized communities. But more important than how we do this is why what we do is so important. And we've all heard and seen the news about the great resignation nation. You may see help wanted signs in windows. And probably most of you have even experienced firsthand what it's like to have dinner in an understaffed restaurant. The labor marketplace is changing dramatically. According to McKinsey Research, 40% of employees plan to quit their job in the next 3 to 6 months. The Department of Labor report in September showed that 3% of the workforce just flipped in the month. That means labor shortages are creating rent disruptions for business. Hardest hit amongst those businesses are health care and service industries, where entry-level talent has more opportunities and choices than ever. The impact of job openings is also having an impact on the supply chain, and that remains a threat to our company's economic growth. One of the big changes that's occurred within the marketplace is that the job seeker is now in control. Companies have to increase benefits. They have to increase salaries in order to recruit the best talent. Well, PandoLogic is at the forefront in this changing, dynamic labor marketplace. And programmatic advertising is producing better results by delivering higher quality in the applicants and hires that companies need. Just 1 example of how we've done this for our clients, Domino's franchises used to use just a single source for trying to find talent. Today, they use programmatic job advertising with PandoLogic, and their applicant volume increased by over 472% and -- while their costs were decreased by 533%. So not only did they get a better yield at a lower cost, but in fact, we eliminated all of the manual intervention that typically is required in job advertising. Well, we don't just do this for quick-service restaurants. We do this for lots of different companies across many different vertical industries from trucking to logistics to media, entertainment, health care, even financial marketplaces and insurance companies. And at this point, what I'd like to do is turn the floor over to one of those clients who can speak firsthand about their experience with PandoLogic. That company is Southern Illinois Healthcare, otherwise known as SIH. SIH operates 4 hospitals and over 74 different health care facilities. And as one of the majority employers in the Southern Illinois region, before COVID, they could generate recruiting simply by relying on referrals and word-of-mouth recruiting. But of course, COVID changed all that and it required a change in their recruiting strategy. And I'd like to introduce you today to the Director of Talent Acquisition, Christine Hampton. Christine?

Thank you. I'm excited to join you today and share details of our work with PandoLogic. Health care systems such as ours have multiple objectives. However, first and foremost, we'll always be serving our communities with the highest level of care. Of course, we need to make sure we're able to attract and hire the right talent. With pandoIQ from Pandologic, we were able to double our monthly applicant numbers. Traffic on our career site increased by 314%. We decreased our time to hire by 8 days, plus we filled 95% of our openings, thanks to the PandoLogic team. In fact, using PandoLogic even helped us fill roles that had previously been opened for more than a year. We also benefited by the knowledge of the PandoLogic team. They really understand recruitment marketing and programmatic in a way that's necessary to support a modern talent acquisition team. Plus, they made everything easy. It really is a true partnership, and has made it possible for us to focus on what our primary mission is, and that's the health and well being of our patients.

Thank you, Christine. It's been our honor to support you and your team in your recruiting strategy. You're not alone. As further validation of our technology and the impact on the marketplace, PandoLogic was recently awarded from Globee Awards, the best technology to combat and reduce the impact of COVID-19. We're proud of that distinction, and we're proud of the fact that we are now at the forefront -- the crossroads between AI and helping people get jobs. Thank you.

Thank you, Terry. Congratulations on all your success, and I look forward to working closely with the teams. Hello, Drew Hilles: I'm SVP, Commercial Sales, SaaS and enterprise at Veritone. Thanks for coming today, looking forward to spending some time with you. I appreciate you taking the time. I look forward to updating you on some of the recent successes and the momentum that we've had since our last update. And also specifically talking about how our customers are using aiWARE, our applications and services, to address current and future challenges and empower their organizations to make better decisions and gain operational efficiencies. We've had great momentum so far this year. And as you can see from some of the metrics, we're 123% of our revenue goal for the commercial enterprise division. Our SaaS year-to-date growth is up 62%. Our application growth is up 25% year-over-year. And VeriAds, our broadcast network that's technology-driven, is up 235% year-over-year, and we had a great year last year as well. Some exciting things to come for our VeriAds network. I look forward to updating you next time on this call. Our international growth is up 40%. We've seen great traction internationally, which I'll talk to in a second. And then something we look at pretty closely are clients that use multiple application services at Veritone through aiWARE or our applications -- that is 21% of our customers are using multiple services and applications. As I mentioned, we had great success internationally this last quarter. We signed 7 new pieces of business, 7 new companies including Bauer Media Group, which is one of the largest broadcasters in the U.K. who are licensing our Discovery application for their entire group, specifically to pull content, search content for greater distribution, content curation and to track ad campaigns. We also signed MediaWorks, the largest broadcaster in New Zealand for Discovery and Attribute applications for them to pull better analytics for their advertisers and for their salespeople to have data conversations for the first time in the history of that company. We also signed 4 MARVEL launch clients last quarter, including Alpha Media, Mythical and Mediacorp., one of the largest broadcasters in Singapore. Some of the use cases we're seeing for synthetic voice and for MARVEL.ai are production, dubbing, internationalization, translation for localization and regionalization, more of a utility. Content distribution has scaled more than ever, and people are taking advantage of MARVEL.ai and synthetic to keep up with that demand. So as you heard Ryan mention earlier, our vision has always been to land and expand. And now we're ready to explode and scale into more companies, larger accounts and new verticals. We've had great traction with 1 to 2 use cases as we've landed and grown usage in existing accounts. We quickly expanded aiWARE into more use cases, more media applications. And aiWARE allows us to operationalize in a company, and that's where we're starting to see some real enterprise growth. We're now scaling into CBG and retail, and I look forward to sharing some of those successes with you next time. But net-net is, we're getting into bigger accounts, Fortune 500 companies, Fortune 1000 companies and new verticals. aiWARE is becoming mission critical to most of our clients. So now I'd like to introduce you to 2 of our great customers. One is Audacy's John Pacino, SVP of Product. He's going to explain to you the power of aiWARE and Automate Studio, and how we enrich millions of hours of content so they can search and discover, programmatically add target, brand suitability and solve multiple problems on multiple platforms for them. Second will be Mike Westra from Snowflake. He will talk about the power of the partnership between Snowflake and Veritone, and how we bring unstructured data and enhance data to Snowflake customers.

Hello. I'm John Pacino from Audacy. I oversee the product and engineering organization for the direct-to-consumer business. And as we look to solve complex audio problems on our platform about how do users discover and find and listen to audio content that matters to them most in the moments around their listening behaviors, we're working with Veritone to take our audio content, work it through their automation and AI tools to be able to understand what is being talked about, how do we present that to the user and how do we recommend content so we're able to create the micro moment with our listeners around the content that is most interesting to them. Veritone's tools allowed us to control our workflows, not only by managing our costs, but also work through the different engines that are available to improve performance, to increase the recommendation scores and to be -- ultimately to be able to deliver a better consumer experience to our listeners and really start to make all audio content discoverable on the Audacy platform.

Hello, Veritone team. I'm Michael Westra at Snowflake, and we are very excited to have our partnership begin to take off. This will be a win-win-win scenario for Snowflake, Veritone and our customers to drive new business opportunities through the many synergies of Snowflake's Data Cloud and Veritone's aiWARE and cognitively enabled applications. What excites me about our partnership together is, there's going to be a tremendous amount of value that we could help unlock for our joint customers and find new business opportunities where we can help them leverage unstructured data within Snowflake's Data Cloud to drive more compute for both of our businesses and drive new use cases and business outcomes for our end clients. Over at Snowflake, we're trying to create a giant global network effect of data. And where Veritone fits into the picture is being able to unlock insights of unstructured data through your AI cognitive capabilities that Snowflake has not been able to previously do. And the -- an outcome here is we're going to be unlocking new data sets in new ways for our end customers to get new insights off of data from this unstructured data. There's many different use cases that we can tackle together, from hospitals and health care providers, being able to track video and image data to figure out are nurses on staff helping out the appropriate patients and then going towards looking at clinical notes and being able to transcribe PDFs to then have these different health care providers, life sciences companies as well as pharmaceutical companies get actionable insights off these different clinical notes to figure out how their drugs are doing, what are the real-world patient outcomes. And then being able to adjust their business priorities based on that type of data.

And now I'm going to turn it over to Sean King, who will talk about Marvel, licensing and Veritone One.

Thank you, Drew. Now I look forward to taking you all through some updates from MARVEL.ai, Veritone One and Veritone Licensing. As you can see from this illustration, aiWARE is at the core of our managed services. aiWARE provides the necessary connectivity and intelligence to these service groups that clearly differentiates us from our competition. In addition to that, it's our expertise in these core functions of advertising and content licensing that have enabled us to launch our newest product and services, MARVEL.ai, our synthetic Voice as-a-Service solution. And what's great about aiWARE in context to our managed services, is this is setting us up for commercial enterprises, brands and companies alike, to be able to navigate real life challenges, both in the real world and in the digitally [ submersed ] world or what others refer to as the metaverse. Let's take a moment to dive into our MARVEL.ai product. MARVEL.ai is the complete Voice as-a-Service solution. MARVEL.ai allows you to create custom synthetic voices in 2 modalities, both text-to-speech and speech-to-speech. But more so it's an end-to-end synthetic voice solution that allows you to manage the voice, control the workflows, allow for licensing, compliance and clearances as well as monetization opportunities. Most recently, the National Association of Broadcasters, or NAV, awarded MARVEL.ai Product of the Year for 2021 for best new AI machine learning technology, something we're very proud of here as a team. MARVEL.ai is differentiated from point solutions in the space that are also creating synthetic voice. It's our heritage and our expertise as a company in both our content licensing, where we have extensive experience in copyright IP protection, but also with Veritone One and our expertise in all things audio and voice clearly differentiate us from our competitors because we understand not just the need to be able to create synthetic voice, but the extensibility of synthetic voice and being able to manage the necessary media workflows to be able to fully take advantage of these opportunities at hand. And our ecosystem, in which we have significant leverage from Veritone One and content licensing, allow us to know that we are the experts in this space that can really bring this to market in a meaningful way for the commercial enterprises. Now let's take a moment to hear 2 samples from MARVEL.ai. First up, DraftKings. Using speech to speech technology, Veritone created a realistic synthetic voice of DraftKings personality, Ross Tucker -- with his approval. First, let's take a moment to hear his real voice. [Presentation]

As you can hear, Ross Tucker's real voice. Now let's take a moment to listen to his synthetic voice using speech-to-speech technology. [Presentation]

I just love being able to hear that. And the subtle nuances of Ross Tucker's voice and how using a source actor can really capture the spirit, the cadence and the tonality of Ross' voice, all being done synthetically. Now let's hear an example of text-to-speech technology and some of the capabilities that are there. Here, Veritone converted Sounds Profitable narrated podcast into the Spanish weekly podcast. Veritone has created Spanish audio articles using host and native English speaker Bryan Barletta's custom verified multilingual voice, which is allowing to expand his podcast into the Latinx market. So let's hear first, an example of Bryan Barletta's real voice. [Presentation]

Now let's hear the text-to-speech version of Bryan Barletta's voice, but this time, having him speak in Spanish. [Presentation]

I still get the chills every time I hear this. And now what this really showcases is the extensibility and opportunities in which brands, podcasting, commercial enterprises can take their content and personalize it and localize it, making it much more accessible to individuals and just what a powerful tool this can be for commercial enterprises. Veritone One, the world's first and leading audio and influencer agency that has really been able to harness the power of AI to measure and scale both traditional and emerging channels, is still growing and outpacing our competitors. Veritone One has become the pioneer in podcast advertising with 100-plus active advertisers and a 95% renewal rate. And as one of the largest buyers of podcast, YouTube and influencer and endorsed radio ads, have clearly differentiated ourselves and have been known to brands in the advertising community as experts in this space. And that expertise is driven by the insights that come from aiWARE. Just to give another example of scale, Veritone One is currently crafting and producing anywhere between 60,000 and 80,000 ads per month across multiple media channels and continues to be able to show year-over-year growth on average gross billings by advertiser. It's not only a challenge to be able to craft, produce and place these 60,000 to 80,000 ads per month. Also being able to showcase the compliance, the efficacy and the performance of these ads for 100-plus brands on a monthly basis is something that is only possible with aiWARE. And on top of that, it's allowed us to continue to show year-over-year growth in our growth billings for a record 5 consecutive years, which is great to see. Our Veritone Licensing team empowers content creators to create better content, analyze and monetize the content they've already created and ensure proper rights clearances and pricing are in place for every single transaction. Now while this group was hit hardest by the COVID-19 pandemic when production shut down, it didn't slow the team down in looking forward as we continue to grow this division. This past quarter, we signed 3 marquee agreements, first being an agreement with RECUR, which is a 3-year agreement to create NFTs alongside the Pac-12. Second being an exclusive international licensing agreement with CBS News Archive, which is an expansion on our existing agreement here in North America. And lastly, we've recently signed a new 3-year extension with the French Tennis Federation. Again, our services here are clearly differentiated because of aiWARE and the transparency and the discovery of this content that allows these marquee brands and these legacy content holders to trust their assets with us, to be able to know that we're going to obtain all the necessary approvals and we're going to treat every single request with the highest level of service and care. Now I'm really excited to share some of the testimonials from our partners and customers.

It's Jimmy O'Brien from Jomboy Media here. I wanted to tell you guys about our partnership with Veritone over the last couple of years. They reached out to us and helped guide us through branded partnerships when we were a small upcoming channel, and now they've helped us land really successful multiyear deals with awesome companies that are spending big with us and helping grow into the company we're becoming. They've been using the data and the insights, along with the creative freedom that I am a personal fan of, that allows the brands to trust us and we trust them that we know we can market them in our voice, to our audience. And that's helped us grow immensely.

My name is Robert Tuchman and I'm a co-founder of Amaze Media Labs, and I'm here to talk about Veritone and just the incredible partnership we've developed with Amaze Media Labs and our sports networks. From day one, they were our client, but they really treated us like the client and really just being able to put together our sports networks and find sponsors and advertisers for us and really working together. One thing that I was so impressed with and working with other agencies especially, I couldn't believe the amount of attention we were given, really how they talk to us, and it was much more of a consultative approach than just transactional. And one thing that's really incredible about working with Veritone, and I think has been a game changer for us, is just the technology that they've employed in the artificial intelligence and data-driven technology that they use really has helped our networks in being able to deliver for clients. We've never had that opportunity before working with other agencies. And for us, it's really just been a complete game changer for our networks.

We are proud to be a partner of Veritone. They've been best-in-class in handling things on the licensing side. But as an NFT and technology business, we're really excited about all the future potential, different types of things we might be able to do with the Veritone team in the future. They understand technology. They understand licensing, and they understand where we want to go and how we want to approach the metaverse. And we're really excited to be building this wonderful relationship, and we're so excited to release our first product alongside them and their IP in the coming months.

Sounds Profitable is a completely independent podcast adtech and advertising resource in newsletter, podcast and video form. Each week, I write with a focus on helping every single person working professionally in the podcast industry to better educate themselves on the ins and outs of our industry and build them into podcast ad tech and advertising experts. Every aspect of podcast advertising is offensively focused on the U.S. and English-speaking audiences. This mindset seeps through everything we do: from the IAB's ad revenue projections focusing solely on the United States, to the companies gaining the lion's share of investment and attention being primarily U.S. focused or having to shift focus to the States just to gain that attention. Working with Veritone's MARVEL.ai really enables me to accomplish 2 goals. The first is to educate a wider audience. While, unfortunately, I think that a majority of the worldwide audience engaged with podcast advertising are also fluent in English, my goal is to approach them in their own language, starting with Spanish, to really show that I am able to meet them in a space familiar to them. My second goal is to be an example to the entire industry. My podcast and newsletter are as much educational resources as they are testing beds and product demos. By working with MARVEL.ai, every single week, with a company comprised of only me as an employee and 1 fantastic contract audio editor, I'm able to output my content in 2 languages at nearly the same time. So if I can do it, hopefully, those with a bit more infrastructure will realize they can do it themselves, too. What excites me about working with Veritone is that every crazy idea that I bring up, they're ready to talk about it. I think I've carved out this weird little niche, where I truly am excited about podcasting, advertising and technology in the way my son is excited about LEGOs. I want to push the tools to the limits, then implement them fully into my process so that we can see them in action, not just as a onetime solution, but as a constant example of what's possible. I'm excited to explore other languages, to tackle how we translate a show with multiple speakers into another language and make it easier for my editor, Ian, who like me, only speaks English to edit it all together seamlessly. And I can't wait to explore what we can pull off with video as well. The overlap between audio and video is high and the more tools available to help audio personalities seamlessly and competitively enter the video space without building out an entire film studio, the bigger the podcast sphere can grow. I've got a strong feeling that the Veritone team and I will continue to challenge each other with cool ideas for a long time to come.

Wow, thank you, everyone, for giving the time and your voice to talk about some of the amazing things we're working on together. Really appreciate our customers, our vendors and our partners. Now I'd like to turn the mic over to Jon Gacek, Head of Government, Legal & Compliance for Veritone.

Hello. My name is Jon Gacek. I manage the government, legal, compliance team as part of our regulated business unit, officially known as GLC. I'm looking forward to walking you through the update from our last Investor Day, and we'll get you up to speed as to what we've been up to. I'm going to pull up a slide right now that I showed at the last meeting. And just to talk about overall how we look at the business, where we're finding success and how we're finding success. So if you recall, the slide that's up on the screen now, everything in GLC starts with aiWARE. We use the benefits and the strengths of the platform to build out solutions that fit into the various segments of GLC. Common piece parts, common solutions positioned appropriately for the vertical, but it's built up the common platform of aiWARE and a common set of applications. The 4 pieces of the GLC team are legal -- so that's the commercial legal market through MSPs: State and local government, so local county and state; both police, district attorneys, public defenders. Actually starting in this last 6 months to spread out into some other agencies, and I'll talk about that in a minute. And then when we look at the federal government, we break it into 2 parts: civilian and then DoD and Intel. Those are the 4 elements of what makes up GLC. We've had great progress in all 3. A couple of general highlights I want to share. First, deal sizes have started to grow, which is important. And really, that's about our partnerships and our ability to get into conversations at a bigger scale. Two, we still have a great product market fit. Illuminate and Redact are both great products for the market. I'm going to talk about a new product that we've introduced that's been amazingly successful since we last spoke. It's a product we call Contact, but really good product market fit inside the GLC product scenario. And then the final thing I'd say is our importance in the market, both with end users and partners, has continued to grow and expand. And you'll see that in our presence as well as who we're working with, things we get invited to and the opportunities that we're chasing. We announced last May, so May of 2020, that we had received our initial ATO with the U.S. Attorney's Office of the DOJ. Great end user, one of the biggest agencies in the government. And very quickly, it became clear to the DOJ and to us that the opportunity for us to work together was much broader than we were officially authorized to do. And so over most of 2020, we worked hard to expand our presence inside of the DOJ, and that culminated in an announcement a few weeks ago where two major things happened -- actually, 3 major things happened. One, we are the first vendor inside of FedRAMP to be multi-cloud. So the Veritone solution is available in both Azure Gov and AWS Gov. And so the agency can pick which cloud they prefer. Some do feel strongly about which cloud they're in, others don't, but we are the first to be across both, and multi-cloud is a very, very large topic inside of the federal government today. So very proud of our team, a great accomplishment, a lot of work to get to that spot. The second thing was we expanded the applications that are available inside of this FedRAMP environment. So we have our Relativity connection -- aiWARE for Relativity is in there. We have Illuminate, we have Redact and we have Automate Studio. The latter 3 are an expansion of our capabilities across the entire platform. And then the third element that is new is, we can now sell and agencies across the entire DOJ can look at our security approval and use Veritone. They might have to do a little bit of work on their own for their very specific requirements like the FBI or U.S. Marshals in particular, they have some unique security characteristics. But generally speaking, we have an authority to operate across the entire DOJ. Those 3 steps are very big for us and will be big drivers of revenue going forward in 2022 and beyond. Another big initiative for us since last May has been around really our story out and connecting with end-user customers. And what I mean by that is, we know we have great product market fit, but we wanted to up the level of how people think about us when they have a problem, when they come to us; we want to be top of mind. And so we've done a lot of work in marketing. One of the great examples, which we just released was a transparency survey that we did across citizens in the United States around what were they looking for with police transparency, but really their relationship with their local police agency. And it was very enlightening. It's been not controversial at all. Actually, what's been great about it is we're on the side of the angels in both ways. Police officers want to be transparent and citizens want more transparency and everybody wants to be safe. If you haven't had a chance to read it, please take a look. It's pretty interesting and kind of consistent with themes that we see across the government and in the media every day, and you can kind of draw your own conclusions. What was great about it, however, is the response that we got to it. And the reason that we did it is, several of the products that we sell into the space are really about helping the police agencies or the government agency be transparent, be more efficient, do things that they can't do without AI that with a human-only solution, it's too expensive or too difficult to actually be as transparent. An example would be there's an officer shooting in a police agency. And instead of the media putting out their report around what happened, if you had a body cam and you want to get that video out, very, very time-consuming and difficult to redact that video. If you use the Veritone Redact product, you can do it much quicker. The technology is helping the agency do it faster. And now the agency can get that data out and get the information out early and have their own narrative of what actually happened. Police chiefs across the country are appreciating that message of what I just described. We actually hosted a webinar last week in conjunction with Microsoft, had amazing attendance across the U.S., very large police agencies and a panel of thought leader chiefs talking about this problem and how much technology helped. Now Veritone got some nice plugs in that if you get a chance to look at it. But the real point of it is, upping our game across this market to understand that when you're thinking about these kinds of problems, Veritone comes top of mind. And from that, it just leads to more and more opportunities, more and more revenue, which is ultimately our goal. But it's confirmation that what we're doing is making a difference. Along those lines, we actually launched a new product called Veritone Contact. It was very, very specific and targeted at a new law here in California, professionally known as the RIPA law, but it's about reporting and racial profiling [ of ] police officers. It's been in existence for about 3 years. But this year, it's gone from maybe 18 agencies having to comply to over 500. Everybody in California has to begin to comply with this new law starting in January 1, 2022. So in conjunction with one of our police agency customers, we spec-ed out and built an application to make it more efficient and easier for the police agencies to comply with the law and also a solution that did, in fact, comply with the laws. So think of it as a time saver and it's something that every officer is going to use every day. So across California now, every police officer has to document some questions around what happened on a particular stop anytime they have contact with a citizen. And it can be a very arduous process. Some of the solutions that are out there can take 8 minutes to 10 minutes to fill out per stop. Imagine how much time that would take for a police officer to do over a course of 1 shift and eliminating his ability to actually be on patrol and engaging to keep citizens safe. So we've built an application that is very, very efficient, very fast, very unique in the Veritone kind of way, where an officer can fill out a report in 1 to 2 minutes. And that has really been well received. As of today, we have over 80 of the 500 agencies as customers. January 1, we'll turn them on. We'll have 4,000 to 5,000 officers every day using the Veritone platform. And the feedback we've gotten has been amazing. And it's been a very good step for us because it's the first time we've had a solution that goes right to the officer, right? Right to the core of policing. And I think, again, the community really, really appreciates that. And so what I'd like to do now actually is introduce one of our customers, Captain Murphy, who is both a customer of the Veritone Redact product, but also this focused on Contact. And I'd like to turn it over to him to explain to you their process and how they view Veritone and our commitment to what they're trying to get done.

I'm Justin Murphy, and I work for the Escondido Police Apartment in San Diego County. We tested several platforms to potentially use to report our data to DOJ. And we chose Veritone Contact because, mainly, the ease of use. As an example, when you have more than 1 person stopped, to put more than 1 person on a contact was really important for us because it saves so much time for the officer to not have to write multiple reports for multiple people on 1 stop. Potentially, these stops could have 3, 4, 5 people, and that could be 5 to 8 minutes per person if we're using certain platforms. And with using the Veritone contact, we can get multiple people on 1 report in under 2 minutes. And that was a huge value for us and having officer time spent, again, doing what's more important, which is out serving the community as opposed to sitting in their vehicles and writing reports. That was a big benefit for us in addition to the ease for the supervisors to look at the reports, quickly check for PII over multiple reports and then be able to approve those and get them ready to be sent to DOJ so that they could be doing what they are paid to do, which is to supervise our officers. When you work with a company like that, that's willing to bend over backwards for you to help, and they have a great product and they have good people that you talk to -- everybody that I have spoken with has been phenomenal at Veritone. So very happy with the product. I really like the product and the people, and that's probably some of the main reasons why we wanted to stick with Veritone.

Thanks, Captain Murphy. I really appreciate you taking the time to share your experience with Veritone. We appreciate the partnership with you and the fact that you are both a Redact customer and a Contact customer is not lost on us, and we're hoping to do more with your agency in the future. What I want to do next was put up a slide that I showed 6 months ago at the Investor Day, just kind of tying this all together. And I'm not going to go through all these in detail, but what I want to say about it is, these elements, these key assertions are still true and I feel more strongly about them than ever. We do make people and processes more efficient. That's our value. There's no question. We are having a good luck with partnerships. The flexibility around aiWARE and what it does is core to everything. I could spend a lot of time regurgitating all that. I'll just tell you that is the truth, and that's what we're built on. Our strategy is right. AiWARE and what we're doing is the future, and I feel very good about that. One of the things that's new, and I've added a new bullet here in blue, is I'm very, very proud of the team and feel great about the reception that we're getting of really being a player in this space. We are getting reached out to now, solicited to present on things. We are really connecting with the groups that we're saving time and money for. I had the opportunity to speak at a gathering down in San Diego with all of the police chiefs, the sheriff, and all the federal agencies down in San Diego. Great group. They invited us down to hear about how we can help them. Ultimately, our value to those end users is how we're going to build this business. And we're starting to get very, very good reception that we have something and people appreciate how focused we are on their particular problem set in government, legal and compliance. And then finally, it is early, AI is early, Veritone is just getting started, and there's a lot of interesting things that are going to happen over the next several years.

Thanks, Jon. Hey, I'm Greg Loose. I am in charge of Veritone's Enterprise AI Solutions group, our Professional Services group. And I'm here to speak a little bit about some of our Professional Services offerings and, I think more fun, talk about a couple of our recent projects and demos. We started our enterprise AI services group at the beginning of the year. We've had an opportunity to work on a handful of pretty strategic important projects, and it's been a pretty interesting evolution. We started at the beginning of the year actually launching -- helping launch MARVEL.ai, which you've heard about in some of the previous speakers. We have refined those processes. It was a great learning experience for us. And we've really refined those processes and kind of gotten a better feel for the types of services that we want to offer and really how that stacks against our enterprise AI suite. So we look at the services we're offering, and this is a real replica of all of the components of our enterprise AI stack. So at the top, we talk about enterprise business applications, being able to build full suite application experiences for customers, you'll see a couple of examples later on that. Intelligent process automation is really at the heart of everything we do, being able to get data in and out, efficiently processed efficiently through our aiWARE platform and integrated into third-party partners and systems. The analytics associated with all this is super important to being able to make decisions, being able to take action against data in different unique ways. We'll see a demo of that later through 1 of our media customers. The platform cannot be underestimated of what we're doing to enable unique experiences for cognition, being able to deploy new models quickly, being able to test those models, being able to put those models into production very efficiently. These can be off the shelf. These can be custom models, these can be models from -- derived from open source components. So our ability to be able to support and implement projects across the spectrum of our platform is really why we're built. And -- and furthermore, why we are here is to really help drive our customers' strategic objectives. So we want to take on the biggest projects, the ones that are giving our customers the most scale, that will extend their investment in aiWARE and Veritone as well as extend their investment in their own platforms and own software. And that's really how we're gearing up and staffing our group. This slide highlights a few of our customers that we've worked with in the past year, 1.5 years and engaging in this professional services model. And again, a little more succinct summary of the services that we're offering from full suite application development down to implementations of customers' workflows, integrations into their third-party systems. This could be VCAM systems, MAMs, data lakes, et cetera, being able to report and visualize that data as well as that onboarding of the model. We can't emphasize that enough. We're, at the base, an AI company. And being able to quickly find, adapt, onboard, train these models, whether it's ones that we worked with in the past or the customer will bring to us, we can help support that. Next talk about a couple of specific projects that we want to hear demo of what we've done. One is intelligent data lake analysis project. The second is a real-time transcription project.

So as Greg mentioned, we performed this analysis leveraging our intelligent data lake. And I think this is -- this dashboard is a really great tangible example of the larger aiWARE data management strategy here. And so while data assets have transitioned from structured data towards things like audio, video and imagery, analytics at scale is still mostly done through queries from structured data sets. So aligning with Veritone's mission to democratize AI, making data exploration, customer visualizations and self-service analytics, providing those in a familiar setting, our users will be able to further drive actual decisions, innovation and reduce time to market for their objectives. So in this use case, we did a brand safety analysis to help gain further insights around the content playing within the iHeartMedia platform. And as you can see, we were able to generate some actionable insights to help us understand key metrics around brand messaging, and content classification for suitability of ad placements within specific types of content. So in the dashboard here, you can see that we counted the brand mentions across podcasts and ads, but also did some analysis as to when in that content the brand was actually being mentioned. So from 0 to 5 minutes or to 25 minutes or kind of more in the middle of that content is where the majority of those brand mentionings are occurring. It's good information to have. From an advertiser brand safety perspective, as an advertiser, knowing what types of content is being produced and presented, to where -- when my ads will actually be played next to them, front of them, after them, gives me a lot of comfort in understanding that nothing is being said that would be in contrary to our brand's positioning and belief statements. And so by looking at IAB classifications, specific words and topics as well as just simple things like offensive word counts, we're able to provide a different level of comfort for that advertiser and to ensure again that their brand position or kind of where they stand isn't being -- isn't in conflict with some of the content that's being produced and presented at the time. Thank you.

My name is Gus Blocker, and I'd love to introduce you to Veritone [ ScribeO ]. [ ScribeO ] is an application we are developing in collaboration with Microsoft and the Navy JAG. The Navy JAG has a requirement to provide near real-time transcription for all their courtroom proceedings and to disseminate the courtroom transcripts to outside stakeholders. They need a portable solution, a solution that cannot only leverage the power of the cloud, but also has the ability to be run completely disconnected from the cloud as well. After all, many other cases take place in locations where cloud access is impossible. Only an enterprise platform like aiWARE has the ability to meet this challenge. Put simply, [ ScribeO ] it would not be possible without the power of the aiWARE platform. Let's take a look at the product. After setting up a case in [ ScribeO ], the court reporter begins the court proceedings. In just a moment, you will hear the recording of the trial participants. Shortly after you hear them, you will begin to see the transcription of their remarks on the screen. [Presentation]

As previously mentioned, [ Scribo ] is an aiWARE-native application built by Veritone's professional services team, leveraging the same development resources we make available to our commercial and government customers. We look forward to delivering the final solution to the Navy JAG so that they can begin to roll up to our over 200 JAG courtrooms around the world. And as Jon mentioned earlier, we believe the solution is applicable to other federal, state and local agencies, too. Stay tuned.

Thanks, everyone, for listening to us. We're excited to share more of our journey in the coming months. Now I want to hand you to Sean McEvoy, who is in charge of Veritone's Energy Group and will share some of the things that he and his group are working on.

Thank you, Greg. That was an awesome update. Hi, everybody. It's nice to be back here again. My name is Sean McEvoy, and I head up the Energy business for Veritone. So since we've last spoken, the Energy team has been fully focused on building out our intelligent DERMS platform, which is powered by aiWARE. In addition to that, we have been fulfilling our customer projects for both the utility and the microgrid sectors. Our iDERMS solution adds the intelligence needed to ultimately operate renewable energy grids at scale. So let's look at kind of some of the details around that. I'm very proud to stand here and say that we have successfully implemented and commissioned our iDERMS solution at a major utility in the U.S. Since May of this year, we have expanded our use cases on our platform to include battery optimization and solar smoothing. And we are now able to communicate to all types of physical devices and systems that are on the grid. And this really helps us to accelerate our implementations. So let's discuss how this AI difference helps our customers today. In this example, you can see our forecasters in action. We have 2 forecasters. One is providing a solar irradiation forecast at a 15-minute interval, and the 1 below it is the power forecast, which is providing a day ahead forecast. And you can see the difference here between week 1 and week 7. These percentages indicate the deviation between our predicted forecast and the actual. And after week 7, we are getting like seriously close to being almost like perfect. And what this does is it allows our customers to be able to better plan their energy needs. And when you're able to plan better, you don't need as much in reserve, which saves you thousands of dollars in fossil fuel costs and also you're able to reduce your carbon emissions. And so this is an example of our last implementation that we did at a major utility in the Southeast of the U.S. As you can see here, this was in Florida. This customer came to us with 3 main problems. The first problem was that their solar output was very unpredictable. And they were covering this with major amounts of fossil fuel spinning reserve, right up to 100%. In addition to that, they were burning out their inverters prematurely because of the intermittency and the variability of the solar output. And then, thirdly, the power being generated was so choppy that it was not being accepted directly into the grid. And so we were able to successfully deploy our iDERM solution at this utility, and were able to solve their problems by; A, providing them with accurate forecasting; b, we were able to provide them with predictive control that was able to protect their inverters from burning out; and c, we were able to optimize their battery to provide solar smoothing such that it improves the quality of the power output, which made the plant dispatchable. And you can see here on the right-hand side in like hard dollar savings to their bottom line, that we were able to help them with like hundreds of millions of savings -- also 25% daily reduction in carbon emissions, and were able to improve grid frequency and the overall quality of their power output. And needless to say, we are now talking about enterprise type rollout across their entire plant operations. And now we're going to hear from our industry experts and partner testimonials. First off, we have Julia Hamm, President and CEO of a Smart Electric Power Alliance; and then we have our partner, Sunil Cherian from Spirae.

I've been working in the energy industry for more than 2 decades now. And I have to get asked the question about where do we need to focus efforts in terms of technology development. And the obvious answer in our industry these days is often things like long duration energy storage, hydrogen, other new technologies that are more on the generation, the transmission, distribution side of things. And those are critically important for us to get to a net zero carbon economy. But I also always like to remind everyone of the importance of AI, and that is becoming increasingly important in our industry as the system becomes more and more complex, as we're moving from large central station power plants just transmitting power being distributed to customers period, end of story, to this place where customers are prosumers. They are producing electricity. They're using it. They're sometimes sending it back to the grid. There's so many more complexities in the system and AI can be an extremely valuable tool both to the system operators and to customers to really help simplify and, ultimately, optimize the system.

The energy industry is seeing a proliferation of DERs these days, everything from solar storage, electric vehicles and the integrated management of these systems is becoming a huge issue and an opportunity all over the world. The 2 challenges that the industry faces are, one, managing these equipment behind the meter to meet certain objectives. So that's the edge of the grid problem. The other side of the problem is, when all of this data is actually aggregated, you're talking huge amounts of data that are streamed back into some centralized system. At that point, to actually make sense of information at the asset level, at the site level and at the fleet level, you really need additional technologies. And that's really where AI and machine learning and all types of analytical capabilities comes into play. Managing these huge volumes of data to make sense of that. Online, you do that on-premises; offline, you do that in the cloud. But you can actually make sense of this huge amount of data and then use that to actually optimize the operation of your facilities. So I think the integration of these 2 sites really form sort of 2 sides of the same coin. And I think, working together, I think that's what's going to transform the energy industry as we know it for the next probably 50 years.

Thank you. And I would like to introduce Mike Zemetra, who's going to provide you with a financial update.

Go ahead, Brian. Looks like we lost Mike, you're on mute.

Okay, guys. Well, hopefully, Mike will reconnect. A little snafu here of going live. Mike, are you back?

Brian, let's kick him off, and I'll let you kind of kick off the slides and then Mike [ joins you. ]

Great. Great idea. Well, everyone, as Mike's logging back on, I'm happy to provide you guys with the financials update. First, to start it out, we are going to recap the acquisition of PandoLogic. That acquisition, which closed at the middle of September, was transformative for the company. As most of you on the call know, we paid total consideration of $150 million. Of that, $85 million was paid upfront in cash and stock and the remainder is in an earnout based upon financial metrics that will be earned over the course of this fiscal year as well as next fiscal year. PandoLogic was strategic in a number of different ways. It delivers obviously, efficiency and performance for the hiring and recruitment markets, obviously. We heard earlier today from Terry in terms of how that value is becoming so strategic and important in the marketplace today. The synergies of our platforms are already being realized as Ryan and some of the others have shown you with Wade & Wendy, matching up with MARVEL.ai. We see cross-selling opportunities into the Fortune 100 customers. And ultimately, over time, it's going to lead to extensibility of the overall enterprise approach for the company. And hopefully, that came through in a number of the presentations today. Just to recap as well. Many of you were on the earnings call, and you saw our earnings release just a couple of weeks ago. But to recap, we are seeing a breakout in terms of performance. You can see in the gray bar there, with our midpoint of our guidance, we're looking at over $104 million of revenues. Since our inception, that represents a 64% CAGR year-on-year. That's an acceleration, obviously, with the acquisition of PandoLogic coming into play. Our profitability has also improved, and you see that on the slide in terms of gross margins, and our net income margin is also improving. Current gross margin is about 82% with a non-GAAP net income. Mike, I see you joined back in. Do you want to take over here?

Yes. Sorry. Sorry about that. I don't know what happened technically. It's fun -- fun about doing things live. So we're on the robust and prior financial performance slide, Brian? I just want to make sure?.

We covered that briefly. Mike, so why don't you move to -- you can just do it again. I mean, we didn't really cover that much. So why don't you start from there.

Okay. Great. Well, we have a solid history of revenue growth and attractive profitability, including organic and inorganic growth. Our 5-year revenue CAGR is over 64%, with trailing 12-month growth over 40%. Including the midpoint of Q4 2021 guidance, we are projected to eclipse $100 million in annual revenue for the first time since our inception, representing a 165% increase year-over-year from Q4 2021, driven by growth from our software products and services. On a pro forma basis, including the impact of PandoLogic in 2021, Q3 2021 revenue growth was 34%, but more importantly, this was led by software product and services growth of over 50%. Our software products and services growth was driven by 34% growth in any customers year-over-year to 433 in total, an astonishing over 90% increase in AAR, or average annualized revenue per customer. With consolidated gross margins over 80%, and gross revenue retention in excess of 90%, Q3 2021 generated a pro forma 11% operating margin. Turning to the next slide. We accelerated our revenue growth since Q1 2020, generating over 110% CAGR through Q4 2021 midpoint of our guidance. More importantly, we are guiding Q4 2021 to non-GAAP net income, which is our proxy for free cash flow, to profitability for the first time since our existence, which effectively brings 2021 near breakeven. By comparison, we generated over $20 million of non-GAAP net loss in fiscal 2020. This substantial revenue growth and overall improvement in our net operating results is driven by the growth of our software products and services, which new customers drive incremental gross margin growth in excess of 80%. In Q3 2021, our software products and services grew an astonishing 169% year-over-year and over 60% sequentially from Q2 2021. As a mix of our revenue, software products and services represent approximately 40% of our consolidated revenue in Q3, substantially up from less than 22% in Q3 2020. Our managed services, which includes our advertising and licensing services, grew in line with industry standards, or 10%, year-over-year. Turning to the next slide. Now I'd like to spend a few minutes discussing our Q3 2021 organizational alignment, which will help us to be more agile and scalable, particularly around enterprise opportunities. First, we separated our customer focus into 2 distinct service units, commercial enterprise and government and regulated industries or GRI. Our commercial services today include software products and services for legacy media and entertainment, and PandoLogic services and managed services from advertising and licensing services. Commercial service go-to-market strategy includes more direct sales force and marketing, with ability to expand into future verticals such as health care, fintech and manufacturing. GRI includes software product services from legacy government, legal compliance and energy services. GRI go-to-market strategy is more heavily influenced by our plus 160 channel partners, some of which you heard from today, and the ability to now expand deeper into these verticals. Growth drivers for software products and services will heavily be influenced by enterprise offerings where average AAR, or average annual revenue per customer, can more than exceed the 200,000 we're achieving today. Long term, we are targeting software, product and services growth to exceed 40% CAGRs, and our managed services to grow in line with industry norms at or around 10% to 20%. Turning to the next slide. In terms of Q3 2021 performance, commercial enterprise, which is the more mature of our business services, represented over 90% of our revenue in Q3 2021, and grew an astonishing 46% year-over-year, led by over 200% growth in software products and services, driven by our growing media and entertainment vertical and PandoLogic. While just in the early phases of growth, GRI's growth was modest year-over-year, but significant quarter-over-quarter sequentially. We have a substantial pipeline of growth in GRI and expect that as early as fiscal 2020, GRI will become a more material part of our growth and revenue contribution. Turning to the next slide, a quick update on LTV for our software products and services customers. In May this year, we showed you Q1 2021 LTV per customer to reach approximately $1 million, driven by AAR of 115,000, gross margins of 72% and gross retention above 90%. Well, I'm super excited to show you a nearly 70% improvement to Q3 2021, which, on a pro forma basis, was over $1.7 million LTV, driven by an approximate 2x increase in AAR to $208,000, and 14% improvement in margins to 82%. Our CAC remains very small, with total sales headcount at 32, which grew from 20 in Q1 2021, largely due to the addition of PandoLogic. Overall, sales and marketing represented less than 10% of our headcount today, largely because of our focus on channel. Go to the next slide. I'm super excited to report that we executed an amazing convertible financing this week, which was initially targeted at $150 million and subsequently upsized to $175 million plus a full 15% greenshoe as the deal was 3x oversubscribed. While we are forecasting future profitability, our unencumbered cash was approximately $15 million at September 30, leaving us with some challenges to grow more aggressively and acquire future M&A targets. Working with the teams of Bank of America and UBS, the terms of the convert included a premium conversion price of $36.76, which represented over 143% of our 50-day moving average, a cap call around our 52-week high of $48.55, an interest rate of 1.75%, 3-year no-call until November 2024, payable in cash or stock at our discretion. The total cost of capital is slightly over 3.5% and most important, no financial covenants. Including the full greenshoe and after fees, net proceeds were slightly over $175 million, bringing pro forma cash to over $250 million by the end of Q4 2021. We plan to use the cash for general corporate purposes, including accelerating our organic growth and growth from future acquisitions. Now to our long-term model. I'm most excited to update you on our 5-year long-term outlook. With the strongest balance sheet we've ever had and forecasted profitability beginning next quarter, our 5-year plan has accelerated significantly since we last spoke in May 2021. Assuming a long-term CAGR of 44%, unchanged since our last update, and pro forma fiscal 2021 revenue of $137.5 million, which includes the full year of PandoLogic at our midpoint, fiscal 2026 revenue would be in excess of $850 million, a 70% improvement from our update in May, and more importantly, we would reach our previous 5-year $500 million well above a year before. And assuming we hold operating margins to 20%, non-GAAP net income would be an astonishing $167 million, representing a 67% improvement from our May update. As you can see, we are committed to accelerating our 5-year growth outlook. Over the past 12 months, we have executed, expanded our business to now include significant engineering and operations in Israel, completed our largest acquisition and financing since our inception, and most importantly, we have scaled our business to eclipse $100 million in annual revenue and significant profitability for the first time in Q4 2021. While we have not given guidance for fiscal 2022, Wall Street consensus has us growing over 70% and generating positive non-GAAP net income or cash flow in 2022. We are committed to responsible growth and whether it's from expansion of our aiWARE offerings, energy, recent and significant government wins in progress, the launch of MARVEL.ai and entrance into the metaverse or our growing recruiting platform, we are executing at the highest levels and staying true to our mission of using AI to change the world for the better. I have never been more excited about our growth prospects than I am today. That concludes my presentation. Operator, we can now open up the line for Q&A.

Brian, I think you might be on mute .

Good catch, Ryan. I was actually asking you a softball question while we're populating the question queue here. Ryan, can you just maybe double tap on MARVEL.ai? It was present in a number of our talks today and there are some demos. Maybe talk to the momentum and the extensibility of what Voice as a Service means for Veritone and how it positions us with the breadth of our customer base.

Yes. And I think I'll start with is not -- how seamless it was and how efficient and timely it was to actually create MARVEL.ai, right? And because all of our media and entertainment of customers in that segment have already been long-standing customers of Veritone and aiWARE, where we've been ingesting their content. We've been indexing it. And in this case, with MARVEL, the ability to isolate voices and audio from a video stream, for example. That, coupled with the development and application framework of aiWARE, we literally ideated and sort of rolled Marvel out in its first iteration in just over a couple of months. And that is a testament of the power of aiWARE and the benefit that our customers are making that they cannot just ideate and build out intelligent workflows, but they actually get all the way to completed MVP applications that generate real value quickly. MARVEL is a manifestation of that exact opportunity. And so very simply for our customers, who have invested a ton of energy and time to create great content, the reality is that there's limitations. And our ability to help leverage that content as training data to create hyperrealistic synthetic voices and content -- and obviously, you saw a little tease of Chad's Avatar earlier in the presentation today -- we really will help open up the extensibility and distribution opportunities for media and entertainment companies by leveraging synthetic content through MARVEL at scale.

Awesome. Thanks, Ryan. Let's get into the questions. First 1 we have is coming from Darren at ROTH Capital. Darren is talking about PandoLogic here, and he'd like to know a little bit more with the customer base. We have a lot of clients in logistics, QSR, retail, et cetera. Are there any exclusivities, or is there an opportunity to go after the peers, for instance, a Pizza Hut or a UPS, Walmart, et cetera? And why aren't they using PandoLogic yet?

Well, right now, there are no exclusivities. Like all things, when we want to make sure that we are open and appropriate to any customer who wants to use our programmatic technology. But again, I think it's just the -- some of it was just a brilliantly growth initially with a few customers. Our pipeline is significant with PandoLogic, not just on their historical pipeline, but also now where we're cross-selling and co-selling to our hundreds of Veritone customers. So again, we are -- there is no specific verticals we're going after as Terry articulated -- due to, and from the benefit of the way that they architected their platform we can really start attacking not just big national logistic groups like the Amazons of the world and quick service restaurants, but health care, small businesses, right? Both from a national focus and a local focus. So again, we are very optimistic about the growth of Pando as well as expanding into really all types of businesses, where, frankly, we're all suffering from trying to fill those open shop racks.

Great. And this 1 is probably for Mike. [ Peter Capri ] asks, with Amazon and FedEx as named customers, is there any associated seasonality that investors should anticipate?

Yes, that's a great question. So the PandoLogic business experienced seasonality similar to their customer, makeup most notably Amazon. So if 100% of their revenue throughout the year, most likely 10% of that comes in Q1, 20% in Q2, probably another 25%, 30% in Q3 and then 40% in Q4. So you can expect to see that seasonality start as early as Q1.

Great. Good question coming in from [ Rich ] over at Needham, asking a question about further ATOs in other departments within the federal government. Obviously, we had our announcement with the DOJ being dual cloud authorized. What about other departments such as the DoD? Are there other ATOs in the pipeline?

There are, however, it's not a prerequisite to service the businesses that we already are because aiWARE is also being deployed on the edge. So meaning does -- it is not subject to be deployed in FedRAMP for like, for example, DoD work. So we're actively working with partners, working with end customers in other branches of the government that are not restricted or bound to be only in cloud, right? For FedRAMP. So I'd just make that clear. But that being said, obviously, the DOJ is a very large group. A lot of people are looking at it, and that will help us accelerate when there is an immediate business need for us to service in the cloud for some of these different groups. But again, those efforts are underway. We have a dedicated team that has been working on supporting our FedRAMP environments now for years. So we're well down the path there. But again, we will be -- there's an expense to everything. But again, we -- I think because of the nature and extensibility of the architecture of aiWARE, that is not impeding our ability to service other branches of government.

Great. A question towards the GRI side of the house here coming from [ Arthur Weiss. ] Selling cycle for the government and regulated industries is notoriously long. However, with customers, #2, 3 and 4 coming down the pipe, is it going to accelerate? Does it look like your software is paying off? And what is the anticipated sales cycles as you move forward?

What they're referring to specifically, I mean, that was 1 bundle of all GRI. So as you've seen, it depends on the products and nature. So as Jon Gacek articulated as it relates to state and local law enforcement, for example, and those products and services, Contact -- we're signing basically customers almost every single day, right? So the contract cycle is somewhat relative to the budget of each respected [ popular ] service, right? And there's -- and each municipality, based upon state and region, has different key account cutoffs. So meaning if software products or any proctor service is priced below x, right, certain agencies have the ability to really almost, on an ad hoc basis, contract for such services. So again, we kind of span the opportunity between, I'll call it, turnkey transactional-based applications, but also then going after and facilitating larger enterprise-like deals, which we mentioned the JAG and Microsoft, right? With the courtrooms. So again, they do impact. And obviously, we're in the RFI and RFP stages for numerous deals. But again, it's not impeding our ability to transactionally sell products and services today because of, again, our unique differentiation supporting the applications.

Great. A bunch of questions coming in here, so I'm going to try and ask that we maybe tighten up the answers as we are kind of bumping up against some time, and I want to get to all these questions. Maybe this one is for Mike. Mike, can you go through and explain in kind of basic terms what the cap call provision does and what that means with the $48.55?

Yes. So assuming that we can achieve 100% revenue growth from where we started in pricing, we have the ability to then put the convertible back to the bondholders at the cap call provision, which is 175% of the pricing. It's something we actually went into the market. We had to buy that as a part of the proceeds. And so that will entirely be at our option. But in the event we don't exceed 100%, we can still exercise at the 132.5% premium, and we could do that either in cash or in stock.

Great. And I'm going to put a couple of questions together here on the PandoLogic side. First, what's going to take for PandoLogic to expand internationally? And then maybe follow on with that, Mike, is, how does PandoLogic factor into the long-term growth rate? Is it consistent with what you just discussed for the 5-year model? And is it consistent with what you've talked about with software and SaaS previously?

Okay. I'll cover the international real quick. No, we don't see any impediments for us to very quickly ramp up international. In many areas, obviously, where there's English is still a standard format in terms of the software interface, that should not be an impediment. Also in terms of the plumbing and distribution or applying the AI to other job listing boards internationally is really not -- it hasn't been an issue. So again, like everything is just the sales kind of picked up early with a concerted focus in North America and the United States first, but you will see growth internationally, and we don't expect a major technical tax to achieve such.

Yes. And then on PandoLogic, I mean, listen, PandoLogic -- the best thing that ever happened to PandoLogic is they got the largest commercial enterprise employer probably in the world. They're going to -- Amazon is going to hire over 1.5 million people this year, which is going to be more than the entire S&P 100. So that accelerated really in the back half of 2020. So from a comparability standpoint, the 90% plus CAGR that Terry talked about over the past 3 years is going to slow down just because of the mix of Amazon revenue being significant. That being said, PandoLogic is still forecasted to grow very healthy double digits. I don't think they're going to be in the 40% ZIP code, but they're going to be certainly north of 20%. On top of that, when we think about that 44% CAGR, it's going to be a mix of both. So we're still organically scheduled on an overall basis to hit or exceed that.

Great. A question coming in on the energy front. Sean went over some of the savings that the customers are realizing, $142 million over 5 years, spending reserves, et cetera. How do we correlate that benefit to value that Veritone is going to realize?

Well, we're not pricing against a percentage of savings. Again, we're looking at is more of a traditional SaaS model with a license model. So we're not going to go into details on a per-deal basis, what the structure looks like. But again, as of right now, we're not sort of tying as to a percentage of yield lift. But again, that is obviously being taken into account, right? So when they're looking at the opportunity and the proposals that we're putting in forth, right? As it relates to aiWARE for deployment against these grids and micro grids, they are obviously looking at that expense structure relative to potential savings. Some of the savings, though, are, to be clear, even if they have a license, it's really up to -- a decision to the grid operators, for example, to choose to turn off their spinning reserves, right? So right now, there's an expense, it's kind of like a hedge against it. In certain markets, where there's more consistent, let's say, weather patterns, they may be running at -- their spinning reserves at a lower utilization rate. In other markets where there's high variability in terms of cloud coverage and moisture, et cetera, they may be operating significantly higher percentage of spinning reserves. So the point is we want to stay independent of that, and we want to make sure we have a clean license agreement and a SaaS arrangement with the grids and the micro grids that are independent at times for what it, I'll call it, the compliance or hedging decisions about when to spin up or spin down spinning reserves.

Great. Well, we tried to keep this under 90 minutes, we're right up against it. Any other questions that people have, please shoot them to me directly at my e-mail, it's [email protected]. Ryan, do you want to make any closing remarks before we close this up?

Yes. I mean again, I hope everybody we started right promptly at 9:00. So maybe those who missed kind of my intro and Chad's intro, I please encourage you to come back and pick and choose and watch the video, which we're going to post. But again, I think what we really saw here in sort of summary form was kind of the result and realization of the vision that we set out a long time ago, about building an operating system for AI and the ability to build extensible workflows and applications on that common stack. And it's matured a ton. And I think the results in all the testimonies you heard today substantiate that. And so we're proud to be a definitive leader in the AI enterprise space. And please keep an eye on us, and hopefully, you guys are interested in being shareholders because we're going to be doing a lot of really exciting things, and we're very optimistic about our growth for the future.

Great. With that, we'll wrap things up. Thank you, everyone.

Thank you.