Veritone Inc (VERI) 2018 Q3 法說會逐字稿

Good afternoon. Welcome to Veritone's Third Quarter 2018 Earnings Conference Call. After the market close today, Veritone issued a press release announcing its results for the third quarter ended September 30, 2018. The press release is available in the Investor Relations section of Veritone's website.

Joining us today's call are Veritone's Chairman and CEO, Chad Steelberg; and the company's Chief Financial Officer, Pete Collins. Following their remarks, we will open up the call for questions.

Please note that certain information discussed on the call today will include forward-looking statements about future events and Veritone's business strategy and future financial operating performance, including its expected operating performance for the fourth quarter of 2018. These forward-looking statements are subject to risks, uncertainties and assumptions that may cause the actual results to differ materially from those stated or implied by those statements. Certain of these risks and assumptions are discussed in Veritone's SEC filings, including its annual report on Form 10-K. These forward-looking statements are based on assumptions as of today, November 12, 2018, and Veritone undertakes no obligation to revise or update them. In addition to the company's GAAP financial results, during this call management will be presenting and discussing the company's earnings before interest expense, depreciation, amortization and stock-based compensation, adjusted to exclude certain acquisitions and integration-related expenses or adjusted EBITDAS, which is a non-GAAP financial measure. A reconciliation of the company's adjusted EBITDAS to its net loss is included in the company's press release issued today.

Finally, I would like to remind everyone that this call is being recorded, and will be made available for replay via a link available in the Investor Relations section of the company's website at www.veritone.com.

Now I would like to turn the call over to Veritone's Chairman and CEO, Chad Steelberg. Sir, you may proceed.

Welcome, everyone, and thank you for joining us today. I am very pleased with our strong financial and operational performance in the third quarter. Our revenue was a record $7.5 million. We launched 3 exciting new applications for law enforcement and media customers, and we closed 3 strategic acquisitions that strengthen and extend the capabilities of our businesses.

Our Q3 revenue was driven by both solid organic growth with our AI and Digital Content Solutions revenue up 150% year-over-year and our Media Agency revenue up 31% year-over-year, and by contributions from our recent acquisition of Wazee Digital and Performance Bridge, which added $2.2 million in the quarter. We also leveraged this revenue growth together with good operating expense management to reduce our adjusted EBITDAS loss to $8.6 million in Q3 from $11 million in the prior quarter. Our strong organic revenue growth this quarter showed the success we are seeing with our land-and-expand strategy, of signing up new customers for our aiWARE operating system and then increasing our business with those customers as they add more users and take advantage of the exciting applications and engines we are adding through our development efforts and strategic acquisitions.

The third quarter has strengthened my fundamental conviction that the ubiquitous deployment of artificial intelligence requires an AI operating system, much in the same way that mainframes, personal computers and mobile devices require operating systems such as UNIX, Windows and Android, respectively. Veritone's industry-leading AI operating system, aiWARE, is uniquely positioned to lead the industry into a more powerful and ubiquitous cognitive computing future.

Operating systems perform 3 critical functions: first, they orchestrate a wide variety of third-party peripherals and create a common software architecture for applications to interoperate; second, they lower the cost of software development and distribution by delivering high-level developer tools that enable engineers to leverage the communication and infrastructure capabilities of the operating system; and third, they provide the administrative controls and monitoring services that enable end users to manage the overall functions accessibility of the system. While early adopters will trail blaze some vertically integrated applications without an operating system and achieve some modicum of success, in the long term the costs associated with developing and maintaining the full stack, from user interface design to AI model training and development, is untenable. More importantly, these siloed applications fail to benefit from the inherited advantages of an operating system. First, in terms of supporting and benefiting from a broader range of peripherals; in this case, AI engines. And second, solving the challenge of interoperability with the inevitable explosion of more and more AI applications. By developing AI operating system together with general and industry-specific applications that run upon it, rather than a series of point solutions, we are pursuing a path to AI that is unique in the industry and one that we think provides us with material advantages. Our operating system strategy followed a model that has long been proven successful in computational computing by companies like IBM, Microsoft, Apple and Google.

Let's examine these fundamental advantages of aiWARE with real-world examples from this past quarter, because they are critical to understanding our value proposition and the huge market opportunity we see before us. First, let's review the importance of peripheral and application interoperability, which is a fundamental feature of all operating systems. aiWARE creates an abstraction layer between the application's business logic, and the underlying cognitive functions. This enables applications to invoke, through a generalized interface, over 250 cognitive engines on both structured and unstructured data sets to unlock insights and value that were previously unattainable. As new cognitive engines are deployed, the cost and performance benefits are immediately inherited by all aiWARE applications. This separation of concern translates into a future proof and constantly evolving set of solutions that is unlike anything else available in the AI industry today. It further allows heterogenous applications to communicate, share information and extend functionality by leveraging a common operating system, transforming point solutions into powerful application suites. To further strengthen our AI engine ecosystem, in September, we acquired Machine Box, a developer of state-of-the-art machine-learning technologies that give developers a suite of simple yet robust tools and models to quickly and easily create and train customized AI engines across multiple cognitive categories, including face and object recognition, text analytics, data classification, and personalized recommendation. The combination of Machine Box's proven tools with the flexibility and ease of use of Veritone's aiWARE operating system gives developers, system indicators and end customers the ability to produce bespoke end-to-end AI-informed solutions for their specific use cases. These engines are now being used in multiple aiWARE applications and delivering significant value to our customers.

In Q3, we also acquired Wazee Digital, a leader in digital asset management and monetization solutions with an outstanding roster of blue-chip customers making them a great complement to our leading AI-based media analytics solutions. By integrating Veritone's AI capabilities to significantly enhance the capabilities of Wazee's core and digital media hub products, we now uniquely offer content owners a complete AI-based solution suites to help them more effectively and efficiently create, analyze, distribute and monetize their content. We have already begun to have success with cross-selling combined solutions to both companies' customers. And just last week, we closed our first joint deal for a combined solution. We plan to extend the capabilities of this combined solution to fundamentally change the way media companies package and monetize their content, as the media industry moves towards the delivery of content on demand, anytime, anywhere.

Another major advantage of an operating system is that it enables developers to build and deploy virtually any AI solution in a fraction of the time and cost it would take to build that solution from the ground up. aiWARE supplies the framework, most of the AI engines, orchestration logic, database and communication protocols in a turnkey easy-to-use offering. Developers can instead focus on the business logic, user workflows and use cases, leveraging aiWARE for all their cognitive needs.

In Q3, we took advantage of aiWARE's efficiencies by nearly doubling the number of applications running on aiWARE from 7 to 12. Two applications were acquired in the Wazee acquisition, as I mentioned, and 3 more were developed in conjunction with key customers. The Phase 1 integration of Wazee's core and DMH applications in the aiWARE took less than 60 days and was executed by a small internal team. Without aiWARE integrating hundreds of cognitive engines into these applications, would have taken a year or more and millions of dollars. The 3 new applications IDentify, Redact and Attribute, were each conceived, built by third parties and deployed to paying customers within 90 days for less than $100,000 each. A fraction of the time and cost of building them as point solutions. This huge gain in efficiency is a direct result of aiWARE and its developer tools, clearly paralleling the cost savings and efficiencies imbued by traditional operating systems. Without such gains, the PC industry would be an anemic shadow of what it is today. The first 2 of these new applications were created to address important use cases for public safety and judicial agencies. Our new Veritone IDentify application enables agencies to systematically search images of potential suspects shown in video and photographic evidence, which is present in 80% of criminal cases, against known offenders and other databases, something that is currently a time-consuming labor-intensive process. The IDentify application significantly reduces the time and effort required to identify potential suspects, accelerating investigations and allowing investigators to devote more time to other investigative activities. We are seeing a lot of interest in this application from law enforcement agencies and our initial PoC customers have successfully identified over a dozen suspects using it. Our new Veritone Redact application enables law enforcement and judicial professionals to systematically remove selected faces and sensitive data from video evidence, significantly streamlining their video evidence redaction workflows. Currently, this is generally a time-consuming manual process for agencies and one that is growing with the increasing video evidence and Freedom of Information Act requests for the footage by the public. Redact provides these agencies with a powerful tool to improve the efficiency of their disclosure workflows. The third of these applications, Veritone Attribute, is an AI-powered media attribution application that tracks the efficacy of advertising in broadcast radio and television. The application enables users to upload broadcast programming and their Google analytics website data into aiWARE and analyze the correlation between prerecorded, native and organic ad mentions during a broadcast and the audience's actions taken on the advertisers' website in near real time. This intelligent solution is in high demand because it enables broadcasters and advertisers to measure ad campaign effectiveness in real time and optimize ad placements to maximize ROI, which is one of the industry's highest and most challenging priorities.

The third benefit of an operating system is that it provides a way for users and organizations to manage and monitor the overall function and accessibility of the applications it serves. Unified access, permissions, monitoring and security are just a few of the core functions aiWARE provides. While these services may seem mundane, they are mission critical to enterprise customers. Without these critical services, provided through a single ubiquitous AI operating system that supports both cloud and on-premise deployment, customers will be forced to distribute their data to countless point solutions, increasing their security and data privacy risks and adding significant complexity to their IT infrastructure.

This quarter's significant accomplishments are a testimony not only to the power of aiWARE, but also to our talented and dedicated staff of over 320 employees. Many of us at Veritone have had the opportunity to work at some of the most successful companies in the world like Amazon, IBM and Google. Yet despite our diverse backgrounds and prior successes, we universally believe we are building something of greater significance that will transcend the limits of software itself.

Now I'll turn the call over to our CFO, Pete Collins, to walk us through our financial results and key performance indicators for the third quarter. Pete?

Thank you, Chad, and good afternoon, everyone. Our net revenues in the third quarter of 2018 increased 103% to $7.5 million from $3.7 million in the third quarter of last year, reflecting both the contributions from our acquisitions and organic growth. Our AI and Digital Content Solutions net revenues, which includes revenues from our AI solutions and Wazee Digital's core and digital media hub software platforms, totaled $1.4 million in the third quarter. This was comprised of $1.1 million of net revenues from AI solutions, an increase of 150% from $431,000 in the third quarter last year and approximately $300,000 of net revenues from Wazee Digital, which we acquired on August 31. Our Media Agency net revenues increased 44% to $4.7 million in Q3 this year from $3.3 million in Q3 last year. This increase was driven primarily by an increase in the number of active clients of our Veritone One business, and the contribution of $434,000 of net revenues by Performance Bridge, which we acquired on August 21. Excluding Performance Bridge's clients, we had 78 active Media Agency clients in the third quarter of 2018 compared with 49 in the third quarter of 2017, an increase of 59%.

Our Digital Media Services net revenues, which was comprised of Wazee's content licensing and live event services, following the acquisition, was $1.4 million in the third quarter. We will have a full quarter of revenue from Wazee Digital and Performance Bridge in Q4, but it's important to note that September has historically been one of Wazee's strongest revenue months of the year due to the seasonality of its services business and so we do not expect their Q4 results to reflect 3 months at that level.

Looking closer at our AI operating system business, we grew our net revenues sequentially in each of our vertical markets. The Media & Entertainment vertical delivered the majority of our AI operating systems net revenues in the quarter as we continued to build on the business development work we started in 2016 with our land-and-expand strategy, which delivered revenue growth from several customers, particularly iHeartMedia and Entercom.

Our monthly recurring revenue, or MRR, under agreements in effect at the end of Q3, increased 41% to $191,000 from $135,000 in the third quarter last year. It's important to note that MRR excludes some agreements we have with media customers that are variable revenue as well as the project-based revenues in our legal vertical. That's why our MRR was up 41%, while our total AI operating system revenue was up 150%. We see this dynamic continuing over time.

Our bookings in Q3 were $226,000, which is less than our Q2 bookings, due primarily to the timing and closing some large deals. The timing and closing deals and the terms of those deals can cause significant quarter-to-quarter fluctuations in our bookings. In October, we booked over $200,000 of recurring revenue.

Gross profit increased 74% to $6.0 million or 79% of net revenues from $3.4 million or 92% of net revenues in the same period of 2017. The increase in gross profit in the third quarter of 2018 compared with the prior year period was due primarily to the operating leverage provided by the increase in net revenues from our aiWARE operating system and our recent acquisitions. The decrease in gross margin compared with the prior year period was due primarily to the higher proportion of net revenues from our AI and Digital Content Solutions and Digital Media Services, which generally carry lower gross margins than our Media Agency business.

Now turning to our operating expenses. Our total operating expenses in the third quarter of 2018 decreased 3% to $22.2 million from $22.9 million in the same period of 2017. The decrease in operating expenses is due primarily to lower stock-based compensation expense, which was higher in the 2017 period due to the accelerated vesting of certain performance-based stock options. This decrease was substantially offset by higher compensation and benefits costs resulting from headcount additions, transaction cost related our recent acquisitions and the addition of the operating expenses of those acquired businesses. Our loss from operations was $16.3 million, a decrease of $3.2 million compared with the loss of -- loss from operations of $19.5 million in the third quarter of 2017. Our net loss attributable to common stockholders totaled $15.9 million or $0.86 per share based on 18.6 million weighted average shares outstanding.

Our net loss attributable to common stockholders in the third quarter 2017 was $19.4 million or $1.31 per share based on 14.8 million weighted average shares outstanding.

Now turning to our non-GAAP metrics. Our third quarter earnings before interest expense, depreciation, amortization and stock-based compensation, or EBITDAS, adjusted to exclude certain acquisition and integration-related costs was a loss of $8.6 million compared with a loss of $7.6 million in the third quarter of 2017, and a loss of $11.0 million in Q2 of 2018. The higher adjusted EBITDAS loss compared with the year-ago period was due primarily to the addition of software development, data science, product management, and sales and marketing resources, which we expect will lead to enhancements in our aiWARE operating system and increased net revenues in the future. While our adjusted EBITDAS loss was higher on a year-over-year basis, it was lower than our Q2 loss, due primarily to the increases in net revenues and gross profit.

Now turning to our balance sheet, which remains strong. At the end of the quarter, we had cash, cash equivalents and marketable securities of $64.7 million and no long-term debt. The cash and marketable securities balance includes cash received from clients for future payments of $14.1 million.

Next I'd like to shift gears to our key performance indicators, or KPIs, for both our AI solutions business and our Media Agency business. Please note that these KPIs do not include any contributions from our recent acquisitions. We are currently in the process of reviewing all of our current KPIs as we integrate our recent acquisitions, in order to ensure that they are the best metrics with which to assess our operating performance.

In the third quarter of 2018, we achieved the forecasted increase in 2 of our 4 KPIs. The number of cognitive engines on the platform increased by 38 to 252 versus a forecast of 234, and the amount of media adjusted and processed in the quarter exceeded 2.8 million hours compared with a forecast of 2.7 million hours. We did not achieve the forecasted increase in the number of customers, which finished at 93 versus a forecast of 95 or the number of accounts, which stood at 634 versus a forecast of 655.

It can be difficult to predict exactly when deals will close, we saw that at the end of the third quarter. Three deals closed in October, which added a total of 95 accounts.

For our Media Agency business, we evaluate 3 key performance indicators: first, the number of new clients added under master service agreements; second, the total number of active clients; and third, the average media spend per client. During Q3 this year, we added 10 net new clients compared with 9 net new clients in Q3 last year. In terms of active clients, we had a total of 78 as of the end of Q3 of 2018 compared with 49 at the end of Q3 2017, a 59% increase.

During the third quarter of 2018, our average media spend per client was $540,000, a 17% decrease compared with $649,000 in the third quarter last year, but a 27% percent increase compared with $425,000 in Q2 of this year. Many of the new active clients we have ended in the past year spent less than our historical average media spend per client, which causes our average media spend per client to decrease. This trend is not concerning to us, because it has been more than offset by the increase in the number of active clients, which also reduces our reliance on large clients. It's important to keep in mind that while this business is mature and provides a solid foundation and strong positive cash flow for Veritone, it can also experience volatility in net revenues from quarter-to-quarter.

And now for our business outlook. For Q4 2018 we expect to have net revenues between $9.3 million and $9.7 million. This net revenue range is based upon the signed agreements in place today, the expected net revenues from our Digital Media Services based on recent and historical trends and the amount of ads we have placed for Media Agency clients. This range of net revenues does not include potential projects including e-discovery or Media & Entertainment archive processing that have not yet started, as those are difficult to forecast accurately.

For our AI operating system KPIs, at the end of Q4, we expect to have 89 customers, which is a decrease from 93 at the end of Q3. The Q3 customer count included 8 politics customers and with the end of the midterm election cycle, we do not expect that those customers will renew their contracts before the end of the year. For accounts, we expect to have 728, an increase of 94 accounts over the course of Q4, which includes the 3 M&E deals we closed in October, offset in part by the impact of the politics customers. We expect to add 23 net new cognitive engines in Q4 and reach 275 at the end of the quarter. We expect to process 2.9 million total hours of video and audio content on aiWARE over the course of the fourth quarter.

That completes my financial summary. We're now ready to open the line for questions. Operator?

(Operator Instructions) And our first question is from Mike Latimore with Northland Capital.

So I guess on the sort of core AI solutions business in the quarter, what was the sequential driver there? Was that media customers expanding? Was that a little bit more legal cases? I guess, what drove some of the organic sequential growth there?

So the driver there was the Media & Entertainment category. And in my remarks, I mentioned specifically 2 of our largest clients, iHeartMedia and Entercom. And I think we've covered this in the past, but just to kind of reiterate, these are customers that we started out with, just servicing small market of theirs, 5 to 8 stations, and today we're into the hundreds of stations we're serving for them and providing service to. So that's just another testament to kind of that land-and-expand strategy that we started back in 2016 and seeing the fruition of that coming through today.

Great, great. And then just in terms of the revenue segments, so these are the 3 new revenue segments and we should assume those will be presented consistently going forward here?

Yes, that's the plan. As -- when we stepped back and tried to figure what was the best way to communicate kind of the categories of revenue between the Media Agency and then with the addition of the live event services and the licensing business from Wazee, we felt that these 3 categories was the best way to do it.

Got it. And then you said your fourth quarter added -- and thanks for giving revenue guidance. Your fourth quarter guidance, you said it does not include new e-discovery, is that what you said?

Yes, what we said was that it doesn't include any of the -- any projects that hadn't already been started. So we didn't forecast anything coming in the last, basically, 45 days of the quarter. Because frankly, we don't have enough visibility to be able to do that.

Okay. And then just last one for me. Is -- what should we think about gross margin being with the new kind of revenue mix here?

Yes, I think that the -- what you're going to see is, is the AI -- the 2 AI businesses continuing to grow, they carry a lower gross margin rate than the agency business. So that will continue to reduce the gross margin rate, but obviously, the gross profit dollars should be scaling nicely as revenue grows.

Our next question come from Darren Aftahi with Roth Capital.

Just a couple, if I may. So when you guys acquired Wazee, you talked about I think -- Chad, and particularly in your prepared remarks on the M&A call, just some of the bigger media clients, HBO, Viacom, Fremantle, won't go through those. I'm just kind of curious, with a few months under your belt, where you stand in terms of kind of the upsell with AI, that's kind of question one. Two, you talked about expansion into government vertical with Wazee, I'm kind of curious where that stands. And then Pete, if you can indulge us, you didn't have a full operating cost quarter with the acquisitions. As we think about growth, should we think about improvement in EBITDAS sequentially? And if you could maybe kind of categorize that, give us a sense, it'd be helpful.

Yes, sure. So the first integration that we completed with Wazee's 2 product lines was really about getting some of the core AI cognitive functions integrated so that users of their application could surf its content faster. Again using facial recognition, speech, transcription, et cetera. And the first client that we rolled it out to was actually the USTA with a live event. And allowed their media partners to literally sift through thousands of hours of broadcast across multiple courts, literally in real time. So that happened within weeks of the acquisition closing. Since then we've done even further integration. Just last week, as I mentioned in the prepared remarks, that we closed a fairly significant deal on a jointly integrated product. So we think this is going to continue to expand across their existing customer base in terms of cross-sells. But also to your next question, it's opening up opportunities in the law enforcement space as well. So Wazee had a contract last year, it was kind of a pilot for them working with a government agency. I think it bled into this year as well. Some of the things that we're working on, on our new applications like Redact and IDentify are core to Veritone and obviously interoperate with the other applications, which include now Wazee, et cetera. So I think that it's not about having -- again, it's just a set of point solutions on a common framework, it's becoming an interoperable suite of applications that these different industry partners can use as the needs arise.

And then, Darren, let me pick up your -- the third part of your question. So from an EBITDAS perspective, we didn't give any guidance for the fourth quarter as it relates to EBITDAS, but what we have said in the past is that the performance of Wazee and Performance Bridge on a combined basis was just slightly positive from an EBITDAS perspective. So we would expect that to continue into the fourth quarter.

Great. And just if I can sneak in one last one, I know you kind of called out some political customers on AI business, but I'm curious, was that impactful in your agency business? And should we see kind of a bell curve there too as well, just given midterm elections are over?

No, I don't think so, because we don't have those customers as -- or those type of advertisers as clients of our Media Agency. So it didn't drive our business in Q3 from that side of the shop.

Our next question come from Tom Diffely with D.A. Davidson.

Just curious, first of all, what impact, if any, the acquisitions had on your kind of core KPIs that you report every quarter?

So in a quarter, Tom, the KPIs that we reported excluded any impact from both Wazee and Performance Bridge. So it's an apples-to-apples comparison in -- for the Q3 KPIs to the prior quarters.

Okay. And then is that true with the guidance going forward then? Or does that include them?

It's -- we have excluded them from the Q4 KPIs as well. So everything's on a same basis, if you think about kind of just the prior aiWARE and Media Agency business that we had.

Okay, no, that's great. Okay. And then when you look at the new engines that were added, quite a few during the quarter, any new categories there? Or anything you can say about what most of those engines were for, what category they were in?

With the acquisition of Machine Box, which we mentioned, we picked up, I would say, some derivative categories of cognition and some refinements. But during the quarter, I don't think there was any material changes to the categories. It was really about the ability to go from big, large, generalized engines down to more specific narrow-cast engines that conductor can leverage more effectively. That's -- the result of which is obviously higher levels of accurate cognition.

Yes, okay, that makes sense. And then finally, well, I guess, first, when you look at AI dollars per hour, obviously that jumps around quite a bit. Is that simply kind of reflecting how -- what percentage of it is audio versus video, is that the main driver there?

That's one of the drivers. I think volume is another one, so the 3 kind of core metrics or 4 core metrics we track, obviously, what types of cognition engines are being run; the -- and then obviously, whether it's audio or video has a dramatic effect in terms of the number of engines you can apply to those different content sets; and then volume of media coming from discrete customers. Some of our customers are processing hundreds of radio stations and TV stations 24 hours a day, while others are very spotty. So those rates also change.

Okay. And then finally, Pete, when you look at the added cost or expenses of the acquisitions, what does that do to kind of the run rate of expenses going forward?

So we really haven't given guidance on OpEx, like I was sharing with Darren. But there is a month of the 2 businesses, Wazee and Performance Bridge, in the third quarter and so we'll ramp it up to basically a run rate for the fourth quarter. There is -- we've made very few changes from a headcount perspective, almost none. We brought over basically their full teams and have been busy integrating them into our business, adding their capabilities to serve our clients. So I wouldn't expect a significant deviation from kind of the implied run rate coming out of the month in September.

Our next question is from Sameet Sinha with B. Riley FBR.

A couple of questions. So Pete, I guess starting out with your revenue guidance. Can you help us with what's the organic growth for the fourth quarter? And how much from acquisitions? And second one, Chad, probably for you, it's -- when you look at clients like iHeartMedia and Entercom, and you said how they were only in a handful of stations earlier, now in hundreds of stations, so that's one vector for growth as you grow into new stations. How about the revenue per market? Or as you mature within that base, how much have you seen revenue per station go up, so that kind of gives us another vector for growth? Then I have a follow-up question.

Sameet, on the organic versus inorganic growth rate, I mean we're not breaking it down below just the general guidance we gave of $9.3 million to $9.7 million in net revenue. We did mention that the month of September is a very good month for Wazee and so while the combination of Wazee and Performance Bridge added $2.2 million into the third quarter that it's not reasonable to take that amount and extrapolate that into the whole fourth quarter at that same run rate. So I think that's the guidance -- that's the information that we've provided to this point.

Sameet, and with regards to the kind of land-and-expand strategy as it relates specifically to radio stations or even any of our customer bases, essentially on a market-by-market basis we're seeing more and more stations within that market adopt the platform. But within -- on a specific stream because audio has specific, obviously, limitations in the fact that it's only audio.

(technical difficulty)

Sameet, can you maybe mute your phone? Thank you. Perfect, thanks. But with regards to other forms of media, whether that's in video coming from other broadcasters in the TV world or from public safety, the breadth of cognition that, that enables by running different engines, not just the basic transcription is really starting to expand rapidly. So I think in radio, we're seeing the expansion coming less from more cognitive engines or more hours of media being processed on a single station versus just having more stations being deployed on the platform. In other forms of media, again, in public safety as well as in Media & Entertainment with video assets, we're seeing that expansion rate increase both in terms of the applications that they're using, the number of employees at those companies that are using those applications and the types of engines that they're running against that content.

Got it. One final question for Pete. Pete, I don't know if you've ever given out the gross margin profile of these acquisitions?

No, what we talked about was the revenue and then their impact on the EBITDAS level. So revenue, we -- as I said, we've shared with that. And then as I was sharing I think earlier with Darren, that the impact from a OpEx perspective is really more viewed at the EBITDAS level and they were slightly positive on a combined basis when we acquired them.

And at this time, ladies and gentlemen, this concludes our Q&A session. If your question wasn't taken, you may contact Veritone's Investor Relations team at veri@liolios.com. I would now like to turn the call back over to Mr. Steelberg for his closing remarks.

Thank you for joining us on the call today. We want to thank our employees, partners and investors for supporting us as we pursue our mission of building the AI operating system of the future. We look forward to updating you on our progress on our next call. Operator?

Thank you for joining us today for Veritone's Third Quarter 2018 Earnings Call. You may now disconnect.