Veritone Inc (VERI) 2020 Q2 法說會逐字稿

Good day and welcome to the Veritone Second Quarter 2020 Financial Results Conference Call. (Operator Instructions) Please note, this event is being recorded. I would now like to turn the conference over to Brian Alger. Please go ahead.

Good afternoon, and welcome to Veritone's Second Quarter of 2020 Conference Call. I'm Brian Alger, Senior Vice President of Corporate Development and Investor Relations. After the market closed today, Veritone issued a press release announcing results for the second quarter ended June 30, 2020. This press release is available at the Investors section of our website.

Joining me for today's call are Veritone's Chairman and CEO, Chad Steelberg; President, Ryan Steelberg; and CFO, 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 and operating performance, included in its expected net revenues and non-GAAP net loss for the third quarter of 2020. These forward-looking statements are subject to risks, uncertainties and assumptions that may cause the actual results to differ materially from those stated or implied by those statements. Certain of those risks and assumptions are discussed in Veritone's SEC filings, including its annual report on Form 10-K and its quarterly report, Form 10-Q filed today. These forward-looking statements are based on assumptions as of today, August 10, 2020, and Veritone undertakes no obligation to revise or update them.

During this call, the actual and forecasted financial measures we will be discussing, including gross margin, operating expenses and net loss, will be presented on a non-GAAP basis. Reconciliations to these measures to the corresponding GAAP measures are included in the press release we issued today. Finally, I would like to remind everyone that this call is being recorded and will be made available for replay via a link available on the Investors section of the company's website at www.veritone.com.

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

Thank you, Brian. Veritone posted our strongest financial results ever this quarter despite the unprecedented turbulent times. The success was driven by our talented team which has worked together with ingenuity, resilience and determination, helping our customers leverage our AI technology to improve efficiency and transform their operations. As a result, we posted second quarter revenues of $13.3 million, up 8% year-over-year and 11.5% sequentially. And we are forecasting Q3 results that effectively accelerate Street estimates by a full quarter with a midpoint goal of $14.4 million, which will represent growth of 12.5% year-over-year and 8.5% sequentially.

Our record Q2 results demonstrate the power of our AI operating system and world-class AI applications and the value of our differentiated and diverse portfolio of AI-powered services. On the cost side, we continue our march to profitability. Since shifting our operational focus in the fourth quarter of last year towards achieving cash flow breakeven, we have seen our quarterly non-GAAP net loss improve by 40% since Q3 of 2019 to $5.7 million. We're committed to continuing to reduce our non-GAAP net losses moving forward while simultaneously growing our revenues at double-digit rates.

Now that the fog has lifted somewhat from the earlier days of the pandemic, it is clear that our customers are accelerating their AI implementation across critical parts of their operations to execute more effectively and efficiently. And we are delivering the technology that is making that possible from helping businesses optimize the impact of their advertising spend, giving content owners the ability to quickly and easily search and monetize their audio and video archives; to enabling government agencies to more effectively and transparently protect and serve the communities; and even helping energy companies deliver cleaner, more reliable and affordable power. Our customers see an opportunity to reimagine their operations and help reinvent an increasingly automated and virtual world. And they recognize that Veritone is the best AI partner to help them achieve their ambitious goals with our revolutionary and proprietary technology.

Since Veritone's inception 6 years ago, we have been solely focused on building AI solutions that deliver immediate and measurable value to an initial set of targeted industries while simultaneously developing the AI operating system of the future. Veritone's AI-only focus has resulted in a powerful and growing technology base with over 75 issued and pending patents worldwide. As a result of this investment and clarity of purpose, Veritone is poised to transform every industry across every geography, and we are not alone, but rather align and executing together with some of the world's best technology and system integrator partners like Microsoft, CDW-G and Carahsoft. The flexibility of aiWARE and our developer tools allows us to deepen and build out our existing customer relationships while innovating and exploring new global markets in fields such as energy where we are making tremendous inroads and generating revenues despite only a short time in the market. In the coming weeks, we will be sharing more about how Veritone is leveraging aiWARE and a suite of energy applications based on our patented technology to drive unprecedented efficiency, reliability and cost savings for macro and microgrid operators.

Veritone's AI energy applications are addressing many of the key technical challenges that have impaired the progress of the renewable green energy movement and have cost U.S. energy companies billions in damaged infrastructure and energy loss. By helping to solve these issues, we believe that we can help accelerate the use of renewable energy, which will help reduce global warming and positively impact our planet now and for future generations.

Our solutions in public safety are helping to create more transparent and efficient police forces, that we will be able to maintain public safety more effectively while helping to increase accountability and public trust. These are important goals that are aligned with our founding belief that artificial intelligence is a key to building a safer, more vibrant, transparent and empowered society. We are determined to be an active contributor to shaping our future for the better.

AI-powered solutions are increasingly seen as necessary to compete and in some cases, to simply survive. We see them as a gateway to a better future. The AI revolution is not some far-off idea. That's happening now everywhere, and Veritone is leading the way.

With that, I would like to hand the call over to Ryan, our President and Co-Founder, to discuss our operational progress in greater detail. Over to you, Ryan.

Thank you, Chad, and good afternoon, everyone. As Chad indicated, we had a strong second quarter, much better than we expected when we spoke with all of you in May. We are immensely proud of our team's performance during this truly unprecedented business environment. They have responded very well, staying focused and agile and are continuing to generate strong results. I'm going to spend a few minutes discussing our second quarter revenues and outlook in each of our businesses before passing the baton back to Pete.

In our advertising business, we had a record quarter of just over $7 million, up 20.5% year-over-year, including a strong contribution from our VeriAds network. Our agency business was up 5.1% year-over-year and 4.4% sequentially. It continues to significantly outperform most peers in this space by a wide margin due to our strong focus on digital and social platforms. And our ability to leverage aiWARE to demonstrate ROI across multiple platforms to optimize our clients' advertising programs.

Our agency team did a great job of winning new business and expanding our business with existing clients in the second quarter, which more than offset reductions in ad spending by some clients due to the pandemic. We have also started to see great traction in our VeriAds network. While we launched just this past November, these networks open up new opportunities for media partners to easily generate incremental advertising revenue without impacting their existing ad sales and create new native ad and influencer advertising opportunities for advertisers. We now have over 250 radio stations participating in our spot network and over 3,000 unique digital influencers active on our Influencer Bridge program this year. Looking forward, we expect our advertising revenues to show strong growth in Q3 from both our agency business and our VeriAds network as digital and social platforms continue to outperform other segments of the advertising market.

In our content licensing business, where we leverage the power of the aiWARE to index, search and reposition premium video content for licensing by advertisers and content creators, our team overcame tremendous macro headwinds to deliver a much better second quarter than we had originally expected. While many of the headwinds, including canceled sporting events and slowness in film and television production, continue to challenge this business, the team has added new content libraries and broadened our customer base. As a result, we believe we will be able to sustain the traction we created in the second quarter. And so when content production restarts and college and professional sports come back, we will have a larger base to grow revenues from.

In terms of performance highlights within content licensing. Revenues were down 13.9% year-over-year, including $300,000 in lost revenue from live event services due to canceled sporting events. Excluding live event services, licensing revenues were only down 6.6% year-over-year. We continue to expand and diversify our licensing base of content, including new and expanded relationships with a number of premium content partners and new agreements with digital influencer firms like Collab and Studio71 that have expanded our served market in this business. While we expect the pandemic to continue to impact our content licensing revenues in Q3, we believe the team has stabilized the business and if college professional sports are able to start during Q3, we could see slight growth sequentially.

Shifting to our SaaS businesses. Revenues were just over $3 million, up 12.1% year-over-year, reflecting continued growth with media and entertainment customers and revenues from our new energy solutions. While they were down 3.4% sequentially due to timing issues, we had very strong bookings in the second quarter, including a 7-figure sub contract under a Department of Defense development program that we expect to start generating revenues beginning in Q3. Within M&E SaaS, as our KPI tables reflect, we saw continued account growth in Q2, largely through expansion of our relationships with existing customers. In Q3, we expect to begin deploying Attribute across a number of our customer station portfolios, including iHeartMedia.

As we highlighted in our recent WideOrbit press release, Attribute is also generating increasing attention among TV station operators in addition to the radio networks. Finally, within our M&E SaaS group, we are increasingly finding synergies with our agency and VeriAds partners, which we believe give us greater insights to develop new products and features and increase our differentiation. We also see the potential to expand our addressable market by linking on-premise MAMs with aiWARE's cloud-based cognitive capabilities. Our GLC SaaS business had a foundational quarter of bookings. Their new bookings in the second quarter exceeded all GLC revenues generated in 2019. Additionally, we have formed multiple technology partnerships that vastly expand our reach and revenue potential.

Companies like Relativity and OpenText have integrated their e-discovery tools with aiWARE, further enabling legal MSPs like Epic, Oasis, ProSearch and Xact Data Discovery to cognitively process large quantities of both unstructured and structured data. We have also recently signed agreements with a leading provider of security and surveillance systems as well as with a software provider specializing in processing Freedom of Information Act requests, adding to our list of channel partners. Importantly, our GLC business activity has begun to shift from being primarily project-based to more strategic and sustainable long-term contracts. While projects will continue to be an important component of our GLC revenues, we expect to see further expansion of GLCs bookings pipeline through our technology and channel partners.

This quarter, we are introducing a new revenue subset of our aiWARE SaaS revenues called other markets. Since we founded Veritone, we have said that aiWARE would find application and use across multiple industries and verticals. Other markets represents those other industries and opportunities within our SaaS revenue line. As shown in our supplemental tables, other aiWARE generated $251,000 of net revenues in the second quarter. These revenues were associated with an initial project with a regional U.S. energy utility. We believe that our technology can be used in many other renewable energy projects around the world. I encourage everyone to visit the Energy Solutions page on our website at veritone.com to learn more.

In addition to our organic growth initiatives, we continue to look for potential acquisition targets where we see opportunities to accelerate our entry into new markets and transform and grow their businesses by integrating aiWARE into their products and solutions.

Pete Collins will now review our financial results for the second quarter and provide details around our financial guidance. Pete?

Thank you, Ryan, and good afternoon, everyone. Each of you should have access to the results we released earlier this afternoon, and Ryan has already provided significant color on the second quarter revenues of our business units.

Our growth strategies are beginning to offset the impact of the COVID-19 pandemic which resulted in our total net revenues increasing 11.5% sequentially and 8.1% year-over-year. As I review the financial results, a couple of items warrant further discussion. As Ryan mentioned previously, VeriAds contributed to the strong growth in our advertising revenues in the second quarter. We account for the VeriAds revenues on a gross basis while our agency revenues are reported on a net basis.

In the second quarter, our non-GAAP gross margins were 71.6%, which is an improvement of more than 400 basis points year-over-year. The year-over-year upward trend is due primarily to the enhancements we have made to our aiWARE software, which are not only reducing our computing costs, but also improving performance and stability, and we expect these benefits to continue.

Regarding our operating costs. We initiated aggressive cost reductions in the fourth quarter of 2019 and additional actions in March 2020. Since then, we have maintained strict cost discipline. These initiatives have been very effective and continue to deliver significant cost reductions. Our second quarter 2020 cash operating expenses decreased by 1.2% compared with the first quarter of 2020 and decreased by 13.2% compared with the second quarter of 2019. With our cost reductions and focus on cash flow breakeven, we have lowered our non-GAAP operating expenses by $12.6 million on an annualized basis since the third quarter of 2019.

Our gross margin improvement, coupled with tight expense controls, helped us to reduce our second quarter non-GAAP net loss to $5.7 million despite the revenue disruption caused by the pandemic.

Then shifting our focus towards reaching cash flow breakeven, our quarterly non-GAAP net losses have dropped 40% since the third quarter of 2019, and we have reduced them sequentially each of the past 3 quarters, achieving the lowest level since we have been a public company. We are committed to continuing our drive to cash flow breakeven going forward.

While we continue to see efficiency gains in our cloud compute and cognitive engine costs, we don't expect to see further reduction in our overall operating expenses as we are now selectively adding incremental talent to support our growth outlook. As of June 30, 2020, we had no long-term debt and cash and cash equivalents of $50.1 million, including $24.2 million of cash received from advertising clients for future payments to vendors compared with $44.1 million at December 31, 2019.

During the second quarter, we received $2.1 million from the exercise of warrants and we raised $3.1 million through the sale of shares at an average price of $16.07 per share. Our lower non-GAAP net losses have allowed us to significantly reduce the amount of cash we have needed to raise. We expect the combination of revenue growth, compute cost reductions and operating expense control to continue to reduce our cash burn and minimize the amount of cash we'll need to raise until we reach cash flow breakeven from operations.

Turning to our guidance for the third quarter of 2020. We expect to see sequential growth in our advertising and GLC SaaS businesses. As a result, we now expect our total net revenues for the third quarter of 2020 to be in the range of $14.2 million to $14.6 million, assuming that major sporting events, such as the NFL and college football seasons and the U.S. Tennis Open, will occur in line with current schedules and our advertising clients do not experience further supply chain disruptions. Revenue at the midpoint of this range would represent growth of 8.5% sequentially and 12.5% year-over-year. Based on this revenue projection and continuing cost controls, we believe we should have -- once again, be in a position to reduce our cash burn sequentially. We expect our third quarter non-GAAP net loss to be in the range of $5.7 million to $5.3 million. The non-GAAP net loss at the midpoint of that range would represent a 42.9% improvement over the third quarter of 2019.

We look forward to connecting directly with our investors and analysts at the Oppenheimer Virtual Conference tomorrow, August 11. To arrange meetings at this event, we encourage institutional investors to reach out to their respective brokers or to contact Brian Alger.

Now I will hand the call back to Chad to summarize. Chad?

Thank you, Pete. Despite the unprecedented environment we find ourselves in, we at Veritone are driven with a renewed sense of urgency to pursue our core mission of helping to build a safer, more transparent and empowered world through artificial intelligence and more specifically, aiWARE. Veritone is leading the next wave of AI innovation with a number of new products in the pipeline, a few of which I'd like to highlight briefly before we open the floor to questions.

First, this month, we will be publicly launching Automate Studio, our low-code workflow designer that helps organizations quickly and easily build production-ready, AI-enriched applications and business processes at scale without the need for AI expertise. We have used Automate Studio internally to accelerate our development of new applications, and we see it bringing AI to robotic process automation and enabling the development of hyperautomation applications across a wide range of industries. We believe this tool will set a new standard for low-code AI process automation, and we thank our beta customers that have helped us over the past 6 months to prepare Automate Studio for widespread release.

Now that Veritone has reached critical mass in both the number of cognitive engines and customers running on aiWARE, we felt an imperative that we begin to shed much-needed clarity on the performance, accuracy and potential hidden bias of AI models. Our Veritone Clarity application, which is scheduled for release this fall, is an important new addition to the aiWARE suite of practical AI solutions that our customers can trust and rely on. Whether you're a Chief Risk Officer or an end user, Veritone Clarity will give you the visibility you need to harness the full potential of artificial intelligence with confidence and peace of mind.

Lastly, we are acutely aware of the current COVID crisis and have been working with external partners to reimagine what health and safety standards on a global scale should look like in an AI-first society. With support from Veritone, our partners have been developing a new framework on top of aiWARE for health and safety monitoring and information sharing. I look forward to sharing more details on this exciting new program, which we have code-named VERISAFE as it rolls out to beta customers this quarter.

As we continue to augment human intelligence with artificial intelligence and reap the financial benefits of our continued success, we acknowledge the inherent responsibility that comes with a technology that is redefining the global balance of power economically, socially and geopolitically. We at Veritone are committed and determined to be on the right side of history by pioneering ethical artificial intelligence.

At this time, we would like to begin the Q&A session. Operator?

(Operator Instructions) Our first question comes from Darren Aftahi with ROTH.

A few, if I may. First, on the energy revenue that you produced in the quarter. Chad, you mentioned the utility company. Could you just talk, kind of, one, what is it that you're doing for the utility company; kind of two, how the product is differentiated? And it sounded like by your comments, there are some lags on this sort of how big of an opportunity with that. Second one on your sequential growth in revenue of, I think it's slightly over $1 million quarter-to-quarter. Can you talk about -- and I obviously understand it's mostly made up of advertising and SaaS. Can you talk about what the growth kind of components are for each of those? I know you called out GLC. You also called out your advertising business, which is a little bit more granularity. And then last one for me. Did you guys receive any revenue from the DOJ in the quarter?

Perfect. Darren, thanks so much for the question. So our energy initiative, we mentioned it briefly on the last quarterly call, and we finally rolled that out in the Q2. And our main focus is about delivering and enabling great -- resiliency and efficiency through our proprietary AI. Others in this industry over the years, as you know, have focused on disruptive innovation when dealing with new renewable energy sources, such as wind and solar, which are oftentimes incompatible with existing energy infrastructure and sometimes even at odds with the economic realities of public utilities. As a result, they have found significant resistance from a number of vectors. Veritone's energy forecaster and our optimization solution as well as our controller technology helps mitigate these systemic hurdles and accelerate our path to a cleaner and more reliable energy. What's important to note is that Veritone and our artificial intelligence is not a clean energy technology per se. But our proprietary model is running on aiWARE can help create an intelligent and coordinated backbone that supports the entire energy ecosystem. From a macro and microgrid operators to equipment and infrastructure suppliers, such as batteries, solar inverters, controllers, all the way actually down to end-user devices such as smart meters. So our potential customer base in energy is extremely diverse and it's poised for some significant growth in the future. Does that make sense?

Yes, it does.

Perfect. Pete, you want to take the next one on the revenue breakdown?

Sure. Darren, so the revenue growth that we talked about is focused on a couple parts of the business. So in advertising, we've continued to see revenue growth with a number of our existing customers. And the nice thing about that is we basically -- once it gets locked in at the beginning of the quarter, we've got a very solid picture of what the quarter revenue is going to look like in that part of the business. So we feel really good about that revenue growth with existing customers in the advertising agency business over the course of Q3 growing over Q2. In GLC, one of the things that Ryan talked about was the real strong bookings quarter that we had in the second quarter. And that lays the foundation for the revenue growth that we're counting on in the third quarter in that part of the business. So that's the other part, the other aspect of the business that we called out in our remarks. We're -- I think if we get some favorable breaks or honestly, if we see some things that stay as we expect them today, especially in content licensing and don't see some of the sporting events fall off that we would expect to be able to see revenue growth across all parts of the business in the third quarter. But that's a little -- that some of the sporting events are obviously out of our control and are kind of a bit dynamic at this point. So not necessarily certain about that, but definitely certain about the revenue growth sequentially in advertising and GLC.

Great. That's helpful. And then just lastly, any revenue recorded from the...

DOJ, yes. So no revenue recorded in Q2 under that. If you remember, that just got signed in May. And so the second quarter was spent doing a lot of training and getting everything basically ramped up, but we are expecting to see revenue from the DOJ in Q3.

Our next question comes from Patrick Walravens with JMP Securities.

Great. Congratulations, in particular, on the guidance for Q3. Chad, I want to ask you a really big picture question, which is sort of around what spending is like for AI projects in general. And I realize that yours tend to be more focused, and that's helpful. But for context, we were talking to the CEO of another big public AI company. And -- for whom things slowed this quarter. And his comment was, look, the number 1 spending priority of companies is enabling their employees to work from home. Number 2 is now around making sure that when they enable everyone to work from home, they're doing that in a safe way, and so it's around cybersecurity. And then a lot of our projects, which used to be number 1, are now number 3. And so that cause sales cycles to lengthen and deal sizes to go down. And I'd just love to hear your reaction, and then it sounds like things are different for you. And how you have your sales team working around those kinds of issues?

Pat, great, great question. At a macro level, I think Veritone is in a very different part of the AI ecosystem. As you know, we've been spending an exorbitant amount of time building an AI operating system that both can operate very easily in any cloud environment, but also can be deployed on a local basis, yet accessed remotely. So you still protect customers, security of their data and information. And what that's really created, Pat, that infrastructure and then building applications on top of that, that are specific for certain use cases, as we like to think about Human-in-the-loop processes. As this entire movement has moved literally hundreds of millions, if not billions on a global basis to working from home, it's completely disrupted and changes the way in which their jobs need to be processed. And not only from a communication standpoint, which is one of the first things that you touched on, which is how do you communicate effectively with employees and staff and customers, which companies like Zoom and others have obviously capitalized on. And then the second wave, which is cybersecurity, how do you -- when you're working everyone from home, how do you ensure the safety and security of not only your corporate information but also your customer data is mission-critical. Veritone really tackles the third and I think the biggest opportunity there, which is how do you leverage remote systems in a very effective way and automate and drive efficiency and automation and collaboration, where before humans were forced to be in the loop to really sort of tackle and communicate in solving crimes and identifying suspects, in processing evidence for Department of Justice, even in media and entertainment. So as those employees have moved to home, they become more and more reliant upon technology to do the heavy lifting. And I'm not just talking about computational lifting, I'm talking about actual cognitive capabilities of solving very challenging problems that therefore were only able for humans and honestly, a lot of that data was only available in the corporation themselves. So when they wanted to view the footage or do the analysis on the crime scene, they were required to be at the precinct or at the corporation. With aiWARE in our new applications, they can now do all that remotely. So I think what you're seeing is a real resurgence of people and corporations and institutions looking at AI as a disruptive technology to enable them to continue to move forward. But -- and what they're finding, at least what we're seeing is the adoption rate of our technology is accelerating, and they're finding great success with it as it rolls out.

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

So first one, Chad, I was wondering if you could follow-up on what you talked about as far as responsible AI going forward. And just kind of curious what the impact has been from some of these companies deciding to pull their facial recognition programming off of their networks and off of their systems. Any kind of big picture view of what AI looks like from a facial recognition going forward would be great.

Yes. No, great question. I think that's been obviously at the forefront of the news lately with all of the BLM matters that have been flying around. As you know, and we've stated it like front and center on our website, we founded this company on the belief that AI is the key to solving some of society's most challenging problems. And if used ethically, will help create a more transparent, efficient and just society, period. AI is not like any other technology or technical innovation we've ever seen, like Microsoft Word or a hammer for that matter. AI is uniquely responsible for the outcome, not just the action. Heretofore, outcome was something that was really -- humans were held accountable and responsible for that solely, not the machine. And AI is starting to shift that responsibility to now a more shared basis. So Veritone sees itself as a partner with industries we serve. And if we can provide better outcomes, obviously, we expect not only to share in the financial benefits, but also we live in the same society. So as we look what's happening in public safety, and the use of facial recognition and the use of identity management, et cetera, I think all of that from a cybersecurity standpoint, like Pat's last question to I'm being able to identify suspects at crime scenes and being able to process that remotely. The world is changing and AI and facial recognition is a part of that mix. So we lean into it, but we do so in a very ethical way and a very transparent way that conforms with all of the necessary laws and first amendment, second amendment, rights that we're protecting. So I hope that answers the question.

Yes. No, that's great. And then obviously, your relationship with the radio stations is a great asset for you. I'm curious, how much is there to expand in your land and expand strategy in -- across your domestic radio stations? And what is the international opportunity for you?

This is Ryan. I can take that, yes. I think there's still substantial growth opportunities, both domestically and internationally in terrestrial broadcasters and also online streaming-based groups and OTT-related networks. For a few reasons and kind of somewhat analogous to what Chad was talking about, I mean, a lot of our resources and tools are helping accelerate the productivity and bringing more efficiencies to operations while these large corporations and their employee bases are working from home. So very similar to how we're bringing remote and enhanced and augmented efficiencies in government, legal and compliance, we're doing the exact same thing in media and entertainment. Salespeople can analyze very complex feeds and verify ad placement whether that's a preproduced spot or a native integration, literally on the fly from home and get the results delivered to their mobile device, for example. They can also do live air checks. The programmers can get real-time assessment of trending topics and whatnot, and they can do this all remotely. So I think we are right in the middle of being not just a digital transformation solution as they're incorporating more AI, but we're fundamentally helping bring not only efficiencies but revenue growth opportunities. So I think because of those aspects, despite the headwinds that other legacy enterprise groups in broadcast may be dealing with, we see significant increase in opportunity as we -- not just -- even with our current product lines, absolutely, but also what we continue to develop and innovate, I think we'll see great success.

Okay. Great. That's helpful. And then finally, Pete, when you look at the operating expense or the cost structure, how has COVID impacted it during the quarter? I assume there was decreased travel and maybe some delayed hiring, but just wondering what kind of the one term -- onetime impacts of expenses were.

Yes. So Tom, the reduction in our travel and entertainment expenses was in the neighborhood of probably $300,000 for the quarter on a year-over-year basis. Your comment about head count, honestly, we actually did a great job of attracting and adding new talent in the quarter. So we actually increased our head count by about 16 people over the course of the quarter. So I think we were -- things were a little slow back in late first quarter when the pandemic kind of really erupted. But our team found some great people to join us. And over the course of the second quarter, we actually increased our head count and really pleased with some of the very talented people we've brought on to the company.

Our next question comes from Chad Bennett with Craig-Hallum.

So maybe one for Pete. So it looks like RPO was down about 22% sequentially, total RPO. And then current was down a couple of percent. How does that rhyme -- just from a definition standpoint, how does that rhyme with kind of your commentary around record bookings, especially in the GLC vertical?

Well, the GLC vertical, Chad, in particular, with the rollout of the enhanced capabilities has been able to -- basically, it had a low base to build off of and was very successful in getting new contracts this quarter. As we said, that it was the first quarter where it got into the 7-figure range in bookings. So we're really pleased with what we're seeing in that market. Across the board, there are -- as we're building the business, we do see the growth from a revenue perspective is not always consistent quarter-to-quarter. And so there are times where one part of the business picks up, while the other one might not be as growing at the same pace. And this was the quarter for GLC to really step up and deliver some great bookings in the quarter.

Okay. And then maybe a follow-up on that one, just with respect to the September quarter guide that you gave. I think you described -- obviously, the advertising business is going to grow at a pretty nice rate again, and it sounds like there's potentially some upside to content if we get some sports back. But just on the aiWARE SaaS business, I think you indicated or at least qualitatively said GLC revs should be up sequentially, if I have that right, in the September quarter. What are your thoughts on overall aiWARE SaaS revs? Are they going to be up overall sequentially in the September quarter?

Yes. We're expecting the overall aiWARE to be up in the third quarter, sequentially.

Okay. Got it. Got it. And then maybe one last one real quick. Just in terms of the upside potential with the DOJ, I know you're just getting them going and ramping them up. I mean do we have any way of thinking about a relative magnitude standpoint where we could be 6 months from now, let's just say, in the contract?

No. I mean I think that our approach on that is to do a lot of training and development and starting with people at sort of the case-by-case level of doing projects with various offices within the DOJ. And as we build that pipeline and kind of get that flywheel going, if you will, we look forward to being able to update our analysts and investors about the development there. I mean we're very pleased and excited about the opportunity there, but it's a bit of -- in the early days that we're in, it's difficult to quantify exactly what the upside is there. And that's why we're in a position where we're just giving you an update as we get results and not trying to get ahead of ourselves and be too aggressive in making forecasts.

Our next question comes from Mike Latimore with Northland Capital.

This is [Antal Sau] on for Mike Latimore. Could you tell me what time horizon do you see the government SaaS segment reaching the same level as media and entertainment?

Sorry, let me just rephrase that question. You're asking, over what time frame we're going to see the GLC revenues match up with the media entertainment revenues?

Yes, right. That segment.

Okay. I think that the Q2 bookings strength in the GLC is indicative of the strong growth that we've got there. But as it stands right now, the bulk of the aiWARE SaaS revenue is still coming from media and entertainment. So Ryan talked about some of the growth that we see there and the opportunity to expand with radio station groups. We also see other parts of the media and entertainment business that we can continue to grow in. And GLC, we think, it's going to grow at a faster pace. But frankly, there's no internal concern about having to have GLC exceed M&E. Frankly, we're trying to serve customers in both of those markets and see them kind of developing somewhat independently. There's not a scarcity of resources that needs to be balanced between those 2. So we see a lot of -- the faster pace growth is going to be in GLC, but we still see opportunities over the long term to support businesses in the media and entertainment space. I don't know, Ryan, is there anything else you'd want to add on that?

Yes. I would just say, we're -- obviously, energy, that's very early on, and -- but we're pretty optimistic about what that potential opportunity looks like as well. So if you include kind of other Veritone other aiWARE-based revenues, which is part of our SaaS line items, we are confident that our nonmedia and entertainment initiatives are going to continue to accelerate. And they definitely have the potential to surpass M&E. But to Pete's point, we're not disproportionately focusing on those new lines. We're kind of accepting the growth as the demand is being processed.

Yes, Ryan. Let me add. This is Chad. Let me give one more color to that, if I can. It's also really important to note that with Automate Studio, Veritone is no longer regulated or restricted to just the industries as noted by Pete and Ryan. But rather, we are now a leading company in the hyperautomation category that's just now emerging. And so I think it's really important to note that aiWARE and our SaaS-based solutions are going to be diversifying quickly into solutions and industries that are well outside of what we historically have served with a far more omni use type tool set. So again, pay attention to that as well. So I don't think so much is the company about being vertically focused in one or another, but rather an AI generalist tackling multiple markets simultaneously.

Yes, that's helpful. And what size -- what's the size of your pipeline with the Microsoft? And how has it built since the May launch?

Ryan, do you want to take that?

Ryan, do you want to take that?

Yes. I think our pipeline for -- and Microsoft historically has been representing us from a kind of co-sell focused almost exclusively on state and local law enforcement. So we did -- so the pipeline does look very strong. Obviously, there's thousands and thousands of local police departments and sheriff departments across the United States. That's the kind of main collaboration in terms of sales efforts between Microsoft and Veritone today. So the pipeline is quite large. And again, that's primarily focused on our 3 application suite in public safety, Redact, Identify and Illuminate. We still see very, very high demand for all 3 of those products. And so we see it as a very high ceiling and Microsoft does provide one of the great mechanisms by which to tap into those different potential agency accounts. So pipeline is very high, but again, we're not sort of handicapping a specific size of the opportunity.

Yes. Okay. And the last one. How much of the government and legal pipeline is Redact versus another application?

Ryan again? What application?

It was how much of the pipeline. How much of the pipeline is Redact in the legal department versus others? And to answer your question, in our legal department, it's actually not Redact. Our L in the GLC part of our business is primarily around e-discovery of audio and video-based evidence analysis. That's through a set of tools and integrations that we've done primarily with Relativity that makes its way down to MSPs like Epic and others that we talk about them as project work. It's a little bit of a misnomer. Our team doesn't actually do any of the "project." It's defined more project in terms of they're using our SaaS-based software to analyze a specific case for audio and video and evidence discovery.

This concludes our question-and-answer session. I would like to turn the conference back over to Chad Steelberg for any closing remarks.

Thank you, operator, and thank you all for joining us on today's call. As I said, I'm so proud of the way our entire team has responded to this very challenging situation. I want to personally thank each and every one of them for their tireless efforts these past 5 months. And for their unwavering focus on continuing to pursue our vision of building the world's leading AI solutions company. We have huge opportunities in our business, and our teams are better positioned to capture them than they ever have been before. While we know that our future is bright, I would be remiss if I did not address the hardships being faced by many in these difficult times. Our prayers are with everyone who has been impacted by this pandemic, especially those who have lost loved ones. At times like these, we are reminded that values matter, that relationships and connections matter. In addition to being in a public health crisis, this pandemic has created mobility crisis. And Veritone is committed to helping bring together the customers and the communities we serve. We look forward to reporting to you on our progress. Goodbye.

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