Veritone Inc (VERI) 2019 Q1 法說會逐字稿

Good afternoon. Welcome to Veritone's First Quarter 2019 Earnings Conference Call. I am Brian Alger, Senior Vice President of Corporate Relations and Investor Relations. After the market closed today, Veritone issued a press release announcing results for the first quarter ended March 31, 2019. The press release is available in the Investors section of our website.

Joining me for today's call are Veritone's Chairman and CEO, Chad Steelberg; and the company's CFO, 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 in Veritone's business strategy and future financial and operating performance, including its expected net revenues for the second quarter of 2019. These forward-looking statements are subject to risks, uncertainties and assumptions that may cause 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, May 8, 2019, and Veritone undertakes no obligation to revise or update them.

In addition to the company's GAAP financial results during this call, we will be presenting and discussing the company's earnings before interest expense, depreciation, amortization and stock-based compensation, adjusted to exclude certain acquisition, integration and financing-related expenses, or adjusted EBITDAS, which is a non-GAAP a 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 link available on the Investors section of the company's website, at www.veritone.com.

Now I would like to turn the call over to our Chairman and CEO, Chad Steelberg. Chad?

Thank you, Brian. Welcome, everyone, and thank you for joining us today. I am very pleased with our strong financial and operating performance in the first quarter. Our revenue was a record $12.1 million, an increase of 177% compared with the first quarter of 2018, reflecting both the contributions of our recent acquisitions and organic growth. We exceeded our forecasted revenues and delivered new products, which continue to expand our customer base and overall TAM while improving our adjusted EBITDAS loss rate.

Last month, our Attribute application received a Product of the Year Award in the Best New Radio Technology category at the 2019 NAB Radio Show. Also, our IDentify and Redact applications, which served critical needs in the law enforcement community are rapidly driving new opportunities at home and abroad. And finally, our Veritone One advertising business posted almost 40% organic growth year-over-year as it continues to leverage aiWARE to differentiate its advertising services. On the whole, Veritone's 2019 is off to a tremendous start.

On last quarter's call, I reviewed the progress we have made on the key objectives we outlined during our IPO in 2017. I'm pleased to report that progress is continuing and in many cases, accelerating.

Recall that our first objective was to increase the nonadvertising component of our revenue mix from 5% at the time of our IPO to a target of 80% or higher. We said last quarter that we expected our aiWARE software and services revenue to exceed 50% threshold by the end of Q2 of this year. I'm pleased to report that we achieved this goal a quarter early. Our total aiWARE software and services revenue in the quarter were $6.4 million, up 29% sequentially and 117% versus the first quarter of 2018. We also made good progress in diversifying our SaaS revenue in the first quarter with more than 20% of our SaaS revenue generated outside of the Media & Entertainment vertical.

The second objective was improving our adjusted EBITDAS loss rate. I am pleased to report that we saw improvement here as well with an adjusted EBITDAS loss rate of the 77% versus 82% last quarter and 233% in Q1 of 2018. As we said in February, we expect to continue to reduce our EBITDAS loss rate on a year-over-year basis going forward.

We continue to gain leverage and synergies from our M&A strategy, the third objective. Wazee Digital had a strong first quarter. With an exciting NCAA Basketball Tournament in March, this acquisition is continuing to open new opportunities for Veritone as we integrate their capabilities. Later this month, we'll be rebranding Wazee Digital as we pursue our integrated solutions for content production, management and monetization.

In addition, Performance Bridge and Machine Box have been instrumental in expanding our TAM. Machine Box has enabled our new IDentify and Redact applications, as well as our ability to generate micro models, and Performance Bridge is driving new relationships and opportunities for us in the podcasting, and on-demand content creation space.

From a product and technology perspective, we have made enormous progress in the past 6 months. As we discussed at our first Analyst Day in March, our aiWARE operating system is now enabling multiple applications that address specific workflows and use cases across all 3 of our current verticals. We have introduced 3 new products: Attribute, IDentify and Redact that leverage many of the core capabilities of our Essentials application suite and our aiWARE operating system that were deployed initially for our Media & Entertainment customers. And more are in development including our Illuminate application for the Legal & Compliance vertical.

If there is one thing that we want investors to take away from this afternoon's discussion is that we are seeing an operational inflection point in our business that we think validates the strategy we have been working to implement over the past 5 years. I said earlier that more than 20% of our first quarter's SaaS revenue were generated outside of the Media & Entertainment. In our federal and state and local law enforcement markets, we are generating revenues from 2 new products, IDentify and Redact. And we will soon be releasing our Illuminate application for the Legal & Compliance market, which enables users to significantly increase the efficiency and effectiveness of their early case assessment and eDiscovery processes. These products offer both cloud and hybrid deployments and are being sold through multiple channels, including inside sales, outside sales, and system integrators in the United States and abroad.

While we are pleased with the strong financial start we had in Q1, we're even more excited about the breadth of engagements that we are seeing from our new applications. Given our progress to date, I want to take a moment to outline how we are thinking about our current product offerings, and how we plan to expand and leverage their use going forward.

At the core of everything Veritone delivers is our aiWARE operating system, which enables users to orchestrate a constantly expanding ecosystem of AI engines, including Veritone's proprietary engines, engines from cloud infrastructure providers, curated niche engines and more using a single common platform architecture. Increasingly, through our Machine Box acquisition, we now tune and customize these engines to better meet end users' needs, enabling new applications and use cases.

Additionally, with our custom-built adapters, we are now able to ingest virtually any form of data: video, audio, images and documents, both structured and unstructured while staying agnostic when it comes to source and format.

Just as our individual applications are constantly improving, so is our proprietary orchestration technology conductor. Our first iteration of Conductor was groundbreaking, but it couldn't yet support real-time applications. Our second generation technology, Conductor 2.0, added real-time capability, which opened new opportunities not only in Media & Entertainment but also in our Government vertical. Today, we are working on Conductor 3.0, which will enable users to tune and customize AI engines to maximize engine performance on their specific data sets, moving us one step closer to autonomous learning.

We're also developing ways to get more out of the applications and engines we have today through new tools. Two good examples of this are Flow, our internally developed low-code/no-code tool that enables customers and partners to quickly and easily develop and deploy custom applications on aiWARE; and speaker separation, which improves the efficacy of our transcription capabilities, enabling a number of new use cases. Flow is the core technology that is accelerating the development of our many of our new products, including speaker separation, Illuminate and our Essentials app suite.

Within our targeted verticals, we now have multiple applications addressing the specific needs and workflows of our customers. In our most mature market, Media & Entertainment, our new SaaS applications, Attribute, DMH and Core are now attracting new customers and generating new capabilities and better margins from existing clients. With DMH, for example, we are now able to take our customers' content and using aiWARE, transform it into new content that can be monetized, creating new value for our customers. Importantly, we can capture this new TAM without adding any new products.

Looking further out, through aiWARE and our suite of applications, we will be able to programmatically create new podcast and on-demand content to be delivered to our partners and monetized by Veritone One.

We continue to see the rapid growth and expanding opportunities from our existing products and customers in M&A. In our Government vertical, we serve 2 different but related constituencies, state and local law enforcement agencies and federal agencies. Our traction with state and local departments and municipalities for our IDentify and Redact applications is rapidly accelerating. When we hosted our Analyst Day in mid-March, we had a handful of PoCs underway for IDentify. As of last Friday, we now have signed agreements for 4 trials of IDentify and 7 trials of Redact. Exiting Q2, we expect the number of signed trial agreements to more than double from the current level for each of these applications.

Augmenting the interest being generated by our direct and channel sales efforts, I am pleased to announce that we are now offering Redact through a self-service portal. In fact, I encourage each of you to go to veritoneredact.com to download and test the Redact software yourselves. By reducing the friction in this process, we hope to generate stronger awareness and faster revenue growth from this application.

Our other group of Government customers is federal agencies. As we announced in March, we recently received FedRAMP authorization for our aiWARE Government platform. With the sponsorship of the U.S. Department of Justice, aiWARE Government is now available in the FedRAMP marketplace for other federal agencies to use, and we expect this to open a wide range of other new federal agency opportunities to us.

In the Legal & Compliance vertical, we have just launched our Illuminate application for beta testing with select partners. While this product is very new, we are already seeing very strong interest from a member of our SI partners and customers in the United States and abroad. While other point solutions are being offered in this space, we think that our platform approach and capacity for multivariate search and hybrid deployments are game-changing differentiators.

We recognize that is often difficult for those outside of Veritone to quantify the level of interest in artificial intelligence. Perhaps, the best tangible evidence we can share with the financially focused investors is the organic growth in our Media & Entertainment vertical. Anchored by our aiWARE SaaS business, which grew organically by 68% year-on-year and Veritone One, our advertising business, which grew organically 38% year-on-year. Veritone One is clearly gaining market share. And it is a direct result of aiWARE differentiating it from competitors. Media & Entertainment was our first vertical, and based on the current channel and customer engagements, we believe Government and Legal & Compliance are rapidly following similar growth trajectories with more than 20% of our Q1 SaaS revenue originating in these verticals.

With the forthcoming launches of Flow and Illuminate, we anticipate further acceleration of our growth in these markets as well as an expansion of our TAM.

With that, I'll ask Pete Collins, our CFO, to review our Q1 financial results and update our guidance for Q2 2019. Pete?

Thank you, Chad, and good afternoon, everyone. As Chad mentioned, our first quarter results were quite positive driven by net revenue growth and management of operating expenses. From my seat, the first quarter headline is that our organic net revenues increased by 36%, while our operating expenses excluding the businesses we acquired, stock-based compensation and depreciation and amortization increased by just 6%. This shows the operating leverage we can generate now that we have invested in aiWARE for the past 5 years.

First, I'd like to review our financial highlights of the first quarter of 2019 as compared with the first quarter of 2018.

As a reminder, in the third quarter of 2018, we acquired 3 companies, Wazee Digital, Performance Bridge and Machine Box. Our net revenues increased by 177% to $12.1 million due to a $6.2 million contribution from the acquisitions I just mentioned, as well as to the addition of new customers and growth with existing customers.

This quarter, net revenues from our aiWARE Software and Services businesses were 53% of our total net revenues, which is the first quarter that they exceeded 50% of our total net revenues. Our aiWARE SaaS net revenues increased 117% to $2.8 million, including approximately $1.1 million from Wazee Digital's Core and Digital Media hub applications. On an organic basis, our aiWARE SaaS net revenues increased by $365,000 or 29% to $1.6 million from $1.3 million in the first quarter of 2018.

While our year-over-year organic growth in this market reflects good traction, it is even more impressive when you consider that our net revenues in the first quarter last year included approximately $600,000 from a large project in the Legal & Compliance vertical compared with only $85,000 from that vertical this quarter. Our year-over-year organic SaaS revenue growth in our other markets was close to $900,000. That increase was divided roughly equally between our Media & Entertainment and Government verticals. Our net revenues from the Media & Entertainment vertical in the first quarter increased by approximately $429,000 or 68%, as we continue to land new customers and expand our business with existing customers. Our net revenues from the Government vertical in the first quarter were primarily from 3 pilot projects in the law enforcement market. Two of those were in the U.K. and 1 was in the U.S. All 3 were delivered in collaboration with a global consulting firm.

Our aiWARE SaaS monthly recurring revenue, or MRR, under agreements in effect at the end of the first quarter increased by approximately $325,000 or 192%, of which approximately $259,000 came from our acquisitions. Our aiWARE SaaS bookings in the first quarter were $1.3 million, including $580,000 from the acquisitions. Excluding the impact of acquisitions, our SaaS bookings increased approximately 211% year-over-year.

The majority of our first quarter bookings were in the Media & Entertainment and Government verticals.

Our aiWARE content licensing and media services business had net revenues of $3.7 million. The first quarter is generally a strong quarter in this business, so the good portion of its annual revenues come from a major sporting event that occurs in the first quarter.

Our advertising net revenues increased $2.6 million or 83% to $5.7 million, including a $1.4 million contribution from Performance Bridge. Excluding this acquisition, our advertising net revenues increased by 38% compared with the first quarter of 2018, thanks to a combination of new clients and growth with existing clients.

Our total GAAP operating expenses increased to $24.8 million from $17.1 million in the same period of 2018 due primarily to the addition of approximately $3.5 million of operating expenses of the businesses acquired in the third quarter of 2018, and $3.0 million of additional stock-based compensation expense primarily related to performance-based awards and acquisition-related stock awards.

The acquisitions and the higher stock-based compensation collectively made up all but $1.2 million of the year-over-year increase in our GAAP OpEx. This demonstrates that we are managing our overhead closely while continuing to invest in software and product development.

Going forward, we will focus -- keep a focus on driving revenue growth while controlling our spending, which will reduce our use of cash.

Depreciation and amortization expenses increased by approximately $780,000 year-over-year due to the amortization of intangibles related to the businesses we acquired in the third quarter of 2018. Our loss from operations was $16.5 million compared with a loss of $13.2 million in the first quarter of 2018. Our net loss totaled $16.3 million or $0.84 per share compared with a net loss of $13.0 million or $0.81 per share for the prior year quarter.

Now turning to our non-GAAP results. Our first quarter adjusted EBITDAS loss was $9.3 million or 77% of net revenues, down from $10.2 million or 233% of net revenues in the first quarter of last year, and $8.9 million or 82% of net revenues in the fourth quarter of 2018.

In 2019, we are continuing to leverage our revenue growth and prudent expense management and expect to reduce our adjusted EBITDAS loss rate in each quarter of 2019 on a year-over-year basis.

Our balance sheet remains strong. As of March 31, 2019, we had cash and cash equivalents and marketable securities totaling $50.9 million, and no long-term debt. The cash and marketable securities balance includes cash received from clients for future payments of $9.2 million.

During the first quarter, we issued 662,000 shares of common stock via our ATM facility at an average price of $6.55 per share, resulting in net proceeds of $4.2 million.

Turning to our guidance. I'd like to mention 2 key factors that impact the comparison of our first quarter net revenues to the second quarter outlook. First, our aiWARE SaaS revenues from the Government vertical in Q1 were generated from 3 pilot projects. We are working with our global consulting firm partner and 2 of their government customers to transition to annual or longer agreements, but as the negotiations are ongoing, we have not yet factored any revenue from these projects into our guidance. The other factor to consider is that we expect our aiWARE content licensing and media services revenue to decrease in the second quarter by approximately $700,000 compared with Q1 due to normal seasonal patterns in this business.

Based on these factors, we expect that our second quarter net revenues will be between $12.1 million and $12.5 million, and our adjusted EBITDAS loss rate will be similar to our first quarter results. This net revenue range is based upon the signed agreements in place today, the expected net revenues from our aiWARE content licensing and media services based on recent and historical trends, and the planned spending by our advertising clients. This range of net revenues does not include potential projects, including eDiscovery or Media & Entertainment archive processing that have not yet started as those are difficult to forecast accurately.

And with that, I'll turn the call back over to Chad for his additional remarks. Chad?

Thanks, Pete. We are very pleased with our start to 2019. The takeaway from our standpoint is that the operational inflection points of product, channel and revenue diversification we have discussed since our IPO are happening. This early momentum is encouraging us to move forward aggressively to pursue the huge opportunity we see for our technology.

In the upcoming months, we expect to see further revenue diversification across products, geography, verticals and channels. Over the next several weeks, we look forward to connecting directly with our investors and analysts.

Next week, we will be at the Oppenheimer Emerging Growth Conference in New York City. Then on the week of May 29, we will be attending the Craig-Hallum one-on-one conference in Minneapolis. Finally, we will be in London in the week of June 18 for the Fifth Annual ROTH London Conference. To arrange meetings at any or all of these events, we encourage institutional investors to reach out to their respective brokers, or please contact Brian with questions about these events.

Operator, I would like to begin the Q&A session.

(Operator Instructions) Your first question comes from Chad Bennett with Craig-Hallum.

Great job again on the execution and beating the quarter, and good to see that coming from both sides of the business. So maybe for Chad, it seems like -- M&A is doing great but it seems like there's something going on under the hood in terms of momentum behind the other verticals. And I assume it's mainly Government-driven, but maybe it's Legal also. And specifically, for your IDentify and Redact applications, kind of what's really driving that? I mean, your proof of concepts, you say are going to double this quarter. Your revenue coming from these new verticals is now becoming real. What's really driving the Government growth and maybe the traction you're seeing whether it's proof of concepts or overall revenue there?

Yes. It's actually a couple of different factors. On the federal side, the growth that we've seen in Q1 is really related to the penetration into the channel markets, specifically with -- on some of large global system integrators that have been working both domestically and internationally at both the federal and the local level, where they're applying aiWARE to solve some really difficult challenging problems. And we're now into the contracting phase with some of the partnerships they've brought us.

On the local level, specifically the state and local law enforcement, the 2 applications, IDentify and Redact are really seeing fantastic traction, both in terms of the efficacy, in terms of being able to identify suspects through video-based surveillance data, matched up against known offenders' databases. I think since inception, now we're well over 100 suspects that have been successfully identified with the technology in just a couple of initial pilots.

And the second is really some of the legal challenges with regards to the Redaction applications. So you're now seeing legislation come down in California, Ohio and many other states, which are now from a public information disclosure perspective, are forcing law enforcement to -- on a far more rapid timeline be forced to disclose a redacted version of their audio and video-based evidence. And so this new compliance law is really creating a fantastic opportunity that Veritone's new Redaction application is fitting perfectly with that market demand.

So is that -- so that's new to me. Is there a timeline or a deadline that they have to be in compliance with that video redaction standard, I guess?

Actually, there is. There's actually 2 laws that went into effect in the state of California. I don't have the numbers right in front of me at this point in time, but I can probably look them up. But one is actually coming live in July, goes into effect and rapidly accelerates I think it's less than 30 days before actually, fines start to -- actually, it's 45 days before fines go into effect if they can't properly redact and disclose that evidence.

What are their options other than Redact, Chad?

There's a number of applications historically that have been used in this process, all involving heavy manual labor specifically from products like Adobe Premiere, where law enforcement officials have to sit down and manually track faces and other personalized -- personally identifiable information that they like to redact from the videos.

Great. That sounds really interesting. And then secondly, I think at least from my standpoint, and talking with investors here, some confusion about the status of your formally, I think, very large shareholder Acacia and kind of where we sit today from an ownership standpoint there. Are you guys comfortable disclosing kind of where they're at and what form of equity they own these days?

Chad, I'll take that. This is Pete. Acacia filed a regulatory filing as of the end of March recently and indicated that their total interest is 1.7 million shares, however, that includes 1.1 million warrants that are priced at $13.61 a share. So the number of shares that they actually hold is around 600,000 to 650,000, which is basically equal to about 1 days trading from an average perspective in our stock. So the amount of shares that their -- they hold, excluding the warrants, has been decreasing since back in August.

Okay. Now that's a great color. I think it will be helpful. One last one for me, maybe for Pete. Pete, as we kind of annualize, I guess on the acquisitions in the September quarter, maybe more so on the December quarter, how should we think about the SaaS aiWARE (sic) [aiWARE SaaS] business growth from an organic basis as we look at it when we lap these transactions? And I'll hop off.

Well, last quarter, our SaaS growth was up 29% on an organic basis. And as Chad was just describing to you, we did pick up a good amount of revenue in the Government sector in the first quarter. It was about 20% of our revenue in the quarter, which was very nice. But we're seeing traction now with the development from a marketplace perspective on Redact as well as IDentify, the additional pilots and proof of concepts that we are working on in there, the trials that we've got indicate the traction that we've got.

So I'd say that, Chad, from a marketplace perspective, we're seeing very good traction across all 3 verticals in SaaS, and we don't see any reason why that wouldn't continue going out when we start to anniversary the acquisitions of Wazee and the other 2 businesses in the second half of the year.

Yes. Thanks, Chad. Chad here. I was able to look up those 2 bills so -- for our investors and for your own edification. In California, for example, the 2 new laws were Senate Bill 1421 and Assembly Bill 748. And they repealed prior laws that treated most tax and law enforcement records as confidential, expanding the types of records and that law enforcement agencies are now required to release in response to public records request as well as shortening the time deadlines for their releases. So we're seeing a similar law to that actually being enacted both in Nevada and Ohio, and we expect it to continue.

Your next question comes from Mike Latimore with Northland Capital.

This is [Vijay Devar] for Mike Latimore. I'm interested in knowing more about your combined Wazee and aiWARE offering. Would you speak a little bit about the number of deals you were able to land in last quarter and an impact on the ASPs for this combined offering?

Yes. At a high level, the integration has gone extremely well, especially pleased with the way the teams have come together. In fact, 2 of the executives at Wazee are now core parts of our product and go-to-market sales team. The Wazee applications themselves now have the capabilities to have real-time cognitive search integrated into their data stores, which expands the capabilities of a customer looking for a specific audio and video-based clips at events such as the NCAAs and other major events like golf, et cetera.

So again, part of our core initiative there was not only to be able to ingest more content at a quicker rate, which we have accomplished but also to expand and provide better transparency into identifying the appropriate clips in real time.

Okay. But did you -- were there any deals won during the quarter? Or how does the pipeline look?

Yes. The pipeline for the business continues to expand nicely. We're cross-selling both to our existing customers as well as upselling aiWARE products to Wazee's customers. So the interest was very strong. We continue to see growth throughout Q1 and expect that to continue for the balance of the year.

In terms of new customers, again, we're not making comments specifically on customers on this call. But when we do, and you'll have the capability through press releases.

Your next question comes from Darren Aftahi with Roth Capital Partners.

Nice quarter. Wanted to dig a little deeper on Attribute. Chad, maybe can you just talk a little bit about the traction there and what you're seeing? And then how that kind of transcends the ability to cross-sell both the DMH as well as Veritone One just given how that kind of connects?

Second question on Illuminate just wanted to get some clarity. How many customers are either -- currently are going to be in beta when that gets launched or paid pilot? And then Pete, you've rattled off some numbers in your prepared remarks. I think about aiWARE with SaaS, 1 was Government and I think the other was Media & Entertainment. If you just repeat those numbers, that would help.

Okay. Yes. Perfect. So talking about the Attribute application, again, winning the NAB Product of the Year in Radio Award was spectacular for us earlier this month. I think that's a testimony to the efficacy and product fit for -- for market perspective. We've signed a number of different large broadcasters, we have a number of others still in the pipeline in process and contracting. I believe this is a game changer for broadcast-based media both for radio and for television, not only both domestically but abroad. It really puts broadcast media on an even playing field with its digital counterparts such as Google, Yahoo!, et cetera, and in terms of being able to measure the true impact of the campaigns that are running across their network, both in terms of knowing exactly when the ad runs but also correlating that back to the actual response that's happening on the websites for those advertisers.

In terms of how that application actually impacts the Wazee side, it's not really a tight correlated fit to the DMH product. It's obviously having a tremendous impact in terms of Veritone One. And in Veritone One, it doesn't have anything in terms of secret sauce in terms of better nonexclusive access or better access to Attribute. It just knows how to leverage that product and the great results based upon the campaigns that Veritone One are placing in the intelligence. The difference now is it can be measured by our clients. And the value truly quantified in terms of the benefit that it's exceeding what other agencies can produce.

That make sense?

It does. I guess sort of joining with the DMH is -- given you have that kind of unique set with Attribution (sic) [Attribute]. Would someone who's advertising, effectively selling inventory -- if they own content, are you seeing any scenarios where they're actually being attracted to become kind of -- both the content and the advertising side, and hence you got the whole ecosystem? Or maybe it's a little bit too early for that?

Yes. I think it's still too early for that. Attribute right now is really being used by the broadcasters themselves in terms of being able to help advertisers quantify the value that they're providing to their advertising clients.

In the case of the DMH, it's really about being able to use aiWARE to search and identify the appropriate content in near real-time and deliver that to the appropriate audience. Attribute doesn't necessarily factor into that equation at this point in time.

To move on to your second question though, Illuminate, we run a number of beta tests in Q1. The results have been quite positive. We expect to see, call it, a half a dozen of customers coming onto the platform and some types of paid pilots or unpaid pilots in Q2 as we work out some of the go-to-market issues and really expect from a revenue standpoint that to gain traction in Q3.

And Darren, let me pick up the question you had about the numbers I was rattling off. Let me see if I can go back and go over it a second time. So on our organic SaaS business, a year ago, our revenues were $1.3 million, and this year, they were $1.6 million. But a year ago, they included about $600,000 from the Legal & Compliance vertical and we only had $85,000 in that vertical this year. As you know, we had called out that there was a large project in the first quarter last year. So what drove the increase of $300,000 was really about $900,000 of increased revenue across both the Media & Entertainment and the Government verticals.

So in Media & Entertainment, it's a combination of new clients as well as the land and expand with existing clients, and that delivered about $429,000 year-on-year increase or 68% increase. And then on the Government side, it was over $400,000 of revenue primarily from 3 pilot projects with the global system consulting firm -- global consulting firm, 2 of those were in the U.K., and 1 was in the U.S.

(Operator Instructions) There are no further questions at this time. I will now turn the call back over to the presenters.

Thank you for joining us on today's call. 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?

This concludes today's conference call. You may now disconnect.