Earnings Call Transcript - VERI Q4 2022

Operator, Operator

Good afternoon and welcome to the Veritone Inc. Fourth Quarter and Full-Year 2022 Financial Results Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I would now like to turn the conference over to Brian Alger, SVP, Investor Relations and Capital Markets. Please go ahead.

Brian Alger, SVP, Investor Relations and Capital Markets

Thank you, and good afternoon. After the market closed today, Veritone issued a press release announcing results for the fourth quarter and fiscal year ended December 31, 2022. The press release and other supplemental information is available in the Investors section of Veritone's website. Joining us for today's call are both the live and digital twin versions of Veritone's CEO and President, Ryan Steelberg, and CFO, Mike Zemetra, who will provide prepared remarks and then open up the call for a live question-and-answer session. Please note that certain information discussed on the call today, including certain answers to your questions, will include forward-looking statements. This includes, without limitation, statements about our business strategy and future financial and operating performance. These forward-looking statements are subject to risks, uncertainties and the assumptions that may cause the actual results to differ materially from those stated. 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 the assumptions as of today, March 2, 2023, and Veritone undertakes no obligation to revise or update them. During this call, the actual and forecasted financial measures we will be discussing include non-GAAP measures. Reconciliations of these measures to the corresponding GAAP measures are included in the press release we issued today. Also, when we reference pro forma measures, such measures are presented on a combined pro forma basis, treating PandoLogic, as owned by Veritone since January 1, 2021. Finally, I would like to remind everyone that not only has this call been produced with Veritone generative AI, but it is also being recorded and will be made available for replay via a link in the Investors section of Veritone's website at www.veritone.com. Now I'd like to turn the call over to the digital twin of our CEO and President, Ryan Steelberg. Ryan?

Ryan Steelberg, CEO and President

Thank you, Brian. Good afternoon. As Brian noted, I am Ryan's Digital Twin, powered by Veritone generative AI. We are pleased to be with you today to discuss our fourth quarter and full-year 2022 results. Since this is my first earnings call as CEO and President, I want to take a moment to highlight the initiatives we will be prioritizing. Veritone will always focus on software and technology innovation, but we are increasing our emphasis on markets where we have clear differentiation and product-market fit, which leads to significant efficiency and productivity improvements for our customers. Various third-party estimates indicate that these markets represent tens of billions of dollars in potential for our applications, solutions, and services. By concentrating on these areas, we expect to capture a larger market share and boost revenue growth. In my first three months as CEO, we have already made several operational and organizational changes aimed at aligning our go-to-market strategy and technology development with our customers' needs. Together with the executive leadership team, I am committed to operational excellence across all aspects, from hiring to employee engagement, and especially in product development and sales. The leadership team is unified in increasing our focus on productivity and operational excellence. We aim to drive Veritone towards sustainable profitability through growth and innovation. While these changes are largely internal and may not yet be visible externally, we anticipate that they will lead to improved customer engagement and more profitable growth. For the fourth quarter and full-year 2022, Veritone reported revenues of $44 million and $150 million, respectively. Q4 new bookings reached a record $20 million, an increase of 141% year-over-year. Our customer count grew by 21% to 642, and our gross revenue retention remained strong in the high 90s. Our commercial businesses powered by Veritone aiWARE continue to be our foundation and a clear market differentiator, accounting for the majority of our revenues and profits. Additionally, our investments in government and regulated industry solutions outside of energy are showing significant progress, with Q4 2022 GRI bookings growing both sequentially and year-over-year. In 2022, we took several steps to set our strategy and refocus the company for sustainable and profitable growth. During the fourth quarter, we made the strategic decision to buy back $60 million of our convertible debt for a total cost of just over $39 million, significantly improving our balance sheet and demonstrating our confidence in our business and outlook towards profitability. After this debt repurchase, we remained well-capitalized with $184.4 million in cash and cash equivalents as of December 31, 2022. We finished the year with $91 million in unencumbered cash, and our total debt outstanding as of November 2026 is now $141 million. In January, we announced various strategic initiatives that have already begun, including the recruitment of key management talent, organizational realignment, cost reductions, and the divestment of the energy business. The outcome of these actions is a more capable, focused, and efficient Veritone. Our engagement with customers and partners is now closely aligned as we drive value. With increased awareness of AI sparked by the rise of generative AI and ChatGPT, Veritone is committed to continuing to innovate and deliver leading and trusted AI applications and solutions. In mid-February, we announced Veritone aiWARE's support of generative AI models, showcasing several use cases where generative AI is being utilized in production with our customers. The significance of the new public large language models cannot be overstated for Veritone, as conversational AI in these models is another powerful resource for aiWARE to leverage in delivering innovative products and solutions. We believe that generative AI enhances the customer experience and will accelerate the adoption of AI solutions and services for both new and existing clients. We have consistently asserted that artificial intelligence will thrive in both good and challenging times. Our 21% growth in customers and 141% growth in bookings provide clear evidence that our belief holds true. The strength in customers and bookings was evident across all our offerings, further diversifying our business. Now, let's shift to the operational details of our fourth quarter results, starting with commercial enterprise. In Q4 2022, commercial enterprise revenues reached $42.8 million, an 18% increase sequentially, though down 21% year-over-year. Excluding Amazon, Q4 2022 commercial enterprise software and services revenues rose over 70% year-over-year, while managed services revenues were up 12%. For the full year, commercial software and services without Amazon grew over 54%, and managed services grew by 17%. To put it plainly, our 21% year-over-year growth in customers and other commercial revenue growth illustrates our success in reducing reliance on a single customer. Our recent agreements with the Masters, Cannel Media, Fox, Stats Perform, and Odyssey highlight our capability to expand and diversify in a dynamic market environment. By growing our customer base and consistently delivering high-quality products and services, Veritone is positioned to become stronger and less vulnerable to the actions of any single client or market. Moving on to government and regulated industries, or GRI. GRI revenues were relatively stable at $1.2 million in Q4 and $3.8 million for the full year. However, our strong bookings, broad customer engagement, and new product initiatives indicate that our investments in GRI markets are gaining momentum. At the state and local level, we are signing law enforcement agencies regularly. Our suite of offerings is increasing product penetration with virtually no churn. Last quarter, we secured a three-year, seven-figure SaaS contract to serve a statewide agency, the California Highway Patrol, which has already been expanded since we signed. In Q4, we launched Redaction as a service, enhancing our revenue opportunities and speeding up the sales cycle with numerous agencies that are short-staffed and overwhelmed with content. We also announced the availability of Veritone Tracker, a unique solution for person of interest detection and tracking that does not rely on biometric face recognition. This has garnered interest from our entire government customer base, including federal, state, and local agencies, as well as some commercial clients. As we enter 2023, our primary focus is on growing with existing clients and attracting new ones in the markets where we have established clear product-market fit and productivity benefits for our customers. Before I hand over to Mike to discuss the financials in greater detail, I want to note our tough decision to divest our energy group. Although the energy market presents attractive growth potential, our energy business has not performed to expectations. This decision underscores our commitment to focusing on markets with stronger product-market fit and traction. Those familiar with Veritone know that our name derives from Latin, meaning "truth in the signal." In light of the noise surrounding AI in recent months, Veritone provides applications, solutions, and services that cut through the noise to enhance our customers' processes and outcomes while yielding significant margins for our company. Today, we have established ourselves as a leader in delivering AI-enabled results to over 600 commercial clients, and with solid growth in customer retention, we expect to strengthen our position not only in commercial markets but also with targeted government and regulated clients. The people we have attracted and the technology we continue to develop are the foundational elements for Veritone to capture and lead in our targeted markets. Now, I'll turn the call over to Mike Zemetra, our CFO, to provide an overview of the financial results and guidance. Take it away, Mike.

Mike Zemetra, CFO

Thank you, Ryan. I am excited to report that we continue to make substantial financial progress, ending the year with solid customer metrics and contributions made across our software products and services and managed services. This includes our second time reporting positive non-GAAP income in Q4 2022 and ending the year with a much-improved balance sheet and cash in excess of $180 million. During my prepared remarks, I will discuss our fiscal 2022 and Q4 year-over-year performance and KPIs, our December 2022 debt buyback and Q1 and fiscal 2023 guidance, highlighting the scalability of our revenue and business risks heading into fiscal 2023, focused on near-term profitability and projected full-year results. Starting with full-year 2022 performance. Revenue was a record $149.7 million, up 30% year-over-year from $115.3 million in 2021. This growth was driven largely by software products and services, which increased $25.1 million or 42% to a record $84.6 million in revenue and secondarily from managed services, which increased $9.4 million or 17%. The increase in software products and services was driven largely from the Q3 2021 acquisition of PandoLogic and 30% organic growth from legacy software products and services revenue, led by growth in commercial media and entertainment. On a pro forma basis, fiscal year 2022 revenue increased slightly by 1% from 2021 pro forma revenue of $148.1 million. Driving this pro forma variance was software products and services, which decreased $7.8 million or 8%, offset by the $9.2 million increase in managed services. The pro forma decline in software products and services was driven by our hiring solutions, which decreased $13.8 million or 19% year-over-year, offset by the increase in organic software products and services of $6.4 million or 30%. Our hiring solutions revenue declined on a pro forma basis, due to a year-over-year decrease of 38% from Amazon, our largest customer, offset by revenue growth of over 78% from other hiring solutions customers. Apart from Amazon going through its well-publicized post-pandemic changes, our hiring solutions customer growth has been a monumental 80% since we acquired PandoLogic through December 2022. As I will discuss later in our guidance, while we expect a strong jobs economy throughout 2023, including continuing new and existing customer growth across our hiring solutions platform, we are projecting revenue from Amazon to be slightly down year-over-year as we settle into the post-pandemic higher interest rate and inflationary economy throughout 2023. In 2022, Amazon represented approximately 25% of our consolidated revenue, down from approximately 40% of our pro forma 2021 revenue. We expect customer growth and strong net revenue retention to further reduce the revenue concentration in 2023. As a percentage of total revenue, software products and services represented approximately 56% of consolidated revenue in fiscal 2022 versus 62% in fiscal 2021 on a pro forma basis. Full-year non-GAAP gross profit reached $122.3 million, as compared to $93.2 million in 2021, improving $29.1 million or 31%. This too was largely driven by the growth across our business, while overall non-GAAP gross margins improved to 81.7% in 2022, as compared with 80.8% in 2021, driven in large part by the mix of revenue growth in 2022. Non-GAAP net loss was $15.9 million, as compared to non-GAAP net income of $6.8 million in 2021, a decline of $22.7 million, driven by increased investments made in core operations most notably additions of sales and engineering staff made in the first half of 2022 and to a lesser extent, from corporate investments around new system launches and higher professional fees. This was to support our first-year Sarbanes-Oxley compliance efforts as we exit emerging growth status in 2022, partially offsetting this was the year-over-year improvement in non-GAAP gross margin. Overall, non-GAAP net loss was also down when compared to pro forma 2021 non-GAAP net income of $18.5 million driven by the aforementioned declines in our hiring solutions revenue, coupled with increased investments in our operations. We opened 2022 with 560 full-time employees, ramped up in the first half of 2022 to over 720 and with cost-cutting measures that began in the second half of 2022 and we are now at approximately 655 full-time employees or approximately 9% lower versus our height in mid-2022. Now more specifically to Q4 2022 performance. Revenue was $43.9 million, down 20% or $11.3 million from Q4 of 2021, driven largely by software products and services, which decreased 32% or $13 million driven by Amazon. Offsetting this decline was other software products and services revenue, which collectively grew by $6.2 million or 60% year-over-year driven by overall customer growth over 120% net retention, excluding Amazon and gross revenue retention in the high 90 percentiles. Overall, our revenue pipeline and long-term outlook remains strong. Our partner-driven channel strategy continues to deliver results with record new bookings of $20 million in Q4 2022, an increase of 141% from Q4 2021. With increased opportunities around our offerings within commercial enterprise and GRI, newer generative AI product applications around NLP and hiring solutions expanded managed services to now include redaction as a service and accelerated cross-selling opportunities across our platform, our future pipeline is at an all-time high, particularly in GRI where we expect to immediately begin realizing significant growth in the near and long-term. In Q4, we reported solid KPI results. New bookings were $20 million, up 141% from Q4 of 2021. Gross revenue retention continued to be in the high 90th percentile, and software customers were up 21% year-over-year. In Managed Services, advertising gross billings per active client increased to a record $823,000, up 32% over Q4 of 2021. Overall, Q4 2022 advertising revenue continued to outpace the prior year and exceeded industry growth in large part due to the performance nature of our advertising platform. Q4 2022 non-GAAP gross profit reached $37.2 million, declining $11.7 million or 24% from Q4 of 2021, largely due to the decrease in our hiring solutions revenue. Overall, Q4 non-GAAP gross margins were 84.7%, as compared with 88.6% in Q4 of 2021. Software products and services non-GAAP gross margins benefit from the inclusion of our hiring solutions, which generate non-GAAP gross margins in excess of 90%. As a result, the overall non-GAAP gross margin came down in Q4 2022, as compared to Q4 2021. We expect consolidated non-GAAP gross margins to continue to exceed 80% throughout fiscal 2023 with sequential improvement each quarter consistent with the seasonality of our business. Q4 non-GAAP net income was $2.2 million, as compared to $17.0 million in Q4 of 2021, driven largely by the decline in revenue from our hiring solutions coupled with increased investments in sales and engineering personnel across our core operations in order to grow and scale our aiWARE platform and business. Q4 2022 corporate operations remained relatively flat year-over-year. Turning to our balance sheet. At December 31, 2022, we held cash and restricted cash of $185.3 million, compared to $255.6 million at December 31, 2021. The $70.3 million decrease reflects net cash outflows from financing and investing activities of $74.0 million, offset slightly by net cash inflow from operations of $3.7 million. During Q4 2022, we used $39 million to repurchase $60 million or 30% of our outstanding convertible debt, generating a net gain of $21.0 million. In addition, net cash outflows from financing and investing activities included $21.7 million towards acquisitions, including $14.4 million of cash towards PandoLogic's 2021 earn-out, $9.8 million in net share settlements of equity awards and $4.8 million in capital expenditures. Net cash inflows from operating activities of $3.7 million consists of net positive changes in our working capital of $24.9 million, principally associated with the growth and timing of payments in our managed services largely offset by our $15.9 million non-GAAP net loss in cash interest and taxes paid in 2022. Of the total $184.4 million in cash, approximately $93.1 million of our reported cash is essentially held for payments to third parties from our managed services. We ended December 31, 2022, with 36.3 million shares outstanding and convertible debt of $141 million principal, 1.75% interest due November 2026. Looking ahead to Q1 2023, I want to point out one-time cash and stock items. As a reminder, in the second half of 2022, we negotiated a settlement on PandoLogic's 2022 earn-out of approximately $8 million in cash and $135,000 of Veritone's stock payable in Q1 2023. When aggregated, the final consideration paid for the PandoLogic acquisition was approximately $115 million in total or $35 million less than the target price of $150 million. If we average the last two years of revenue, this comes to a price around 1.8 times revenue. Turning to financial guidance for Q1 and fiscal 2023. Fiscal 2023 is shaping to be a challenging year with the backdrop of a possible recession, given inflationary and interest rate pressures. Taking these macro factors into consideration, we approached our 2023 planning with a very conservative approach on revenue with heightened discipline around costs as we march towards profitability. In February this year, we announced $12 million to $15 million of annualized cost savings initiatives, which included cutting back on certain operating expenses and headcount reductions; and finally, the divestiture of our energy group, which we are tracking to finalize in the first half of 2023. I'm happy to report that we've executed on approximately $7.5 million of annualized savings through today or approximately 50% of the high end of our stated range and expect to continue to update you on further progress when we announce Q1 earnings in May 2023. With that backdrop, we are guiding Q1 revenue to be between $29.5 million and $30.5 million, representing an 11% decrease year-over-year at the midpoint. Driving this decline is our high-volume hiring solutions, including Amazon, who have returned back to non-pandemic hiring trends in Q1 2023 versus Q1 2022. As a result, we expect our Q1 2023 hiring solutions revenue to be down as much as 50% year-over-year in Q1 2023 returning back to more seasonal trends in Q2 and in the second half of 2023. Offsetting this will be GRI, which we expect to improve at or above 100% in Q1 2023 versus Q1 2022 driven by new and existing customer growth. Our managed services is expected to be fairly flat in Q1 2023 versus 2022 with expected advertising revenue to remain comparable in the first half of 2023 versus 2022 given the current economic environment. Risks to our Q1 revenue guidance include execution on new enterprise deliverables, namely across GRI, which can be unpredictable and our concentration of Amazon, which usage of our hiring platform can vary. And Q1 quarterly non-GAAP net loss is expected to be between $8.5 million and $9.5 million, which is down by $3.8 million compared to Q1 2022, driven by the previously discussed year-over-year decline in our hiring solutions revenue. As a reminder, Q1 is our seasonally lowest performing quarter as the majority of our costs are fixed and payroll driven. For full-year 2023, we expect revenue to be between $158.0 million and $168.0 million, representing a year-over-year increase of 9% at the midpoint. As a reminder, and given the current economic outlook, we are forecasting our revenue conservatively in 2023, including a year-over-year decline of approximately 10% from Amazon, certain one-time software sales revenues in 2022 that are not recurring in 2023 and the disposition of our energy revenue and group in the first half of 2023. If we exclude the impact of these, our revenue guidance would indicate over 20% improvement in 2023 versus 2022. Risks to our annual revenue guidance include the macro economy and the result of continued inflation and higher interest rates on our customers' execution on new enterprise deliverables, namely across GRI and continued customer growth and retention metrics from our software products and services. We expect full-year non-GAAP net loss to improve substantially in 2023 and be between $7.0 million and $1.0 million as we continue to progress towards profitability. At the midpoint, this represents a 75% improvement when compared to fiscal 2022 non-GAAP net loss. Before I close, we will be speaking at the following investor conferences, The JMP Securities Technology Conference in San Francisco on March 7 and the 35th Annual ROTH Conference in Dana Point on March 13 and 14. That concludes my prepared remarks.

Operator, Operator

We will now begin the question-and-answer session. Our first question is from Darren Aftahi of ROTH MKM. Please go ahead.

Darren Aftahi, Analyst

Thank you for taking my questions. I have two. First, you sound quite optimistic about your outlook for GRI. Could you elaborate on that enthusiasm and discuss how your newly launched tracker product for forensics fits into this? My second question pertains to your HR product, which seems to serve as a defensive tool in a lower growth environment, despite ongoing hiring. Could you share insights on trends within that business, especially outside of Amazon and your main customers? Thank you.

Ryan Steelberg, CEO and President

Thank you. In GRI, we have released several updates, and I have previously mentioned our ongoing strength and growth in local law enforcement at the city, county, and state levels, which has been accelerating. Currently, we have hundreds of customers and are signing new ones almost daily. However, historically, the products we've offered have been lower ticket item sales. We appreciate that aiWARE provides a versatile platform that allows us to onboard customers with limited budgets who want to invest in and enhance their operations with AI. Conversely, we are seeking opportunities to increase revenue. We have established strong relationships, a solid product-market fit, and a good brand presence in the industry. Tracker is one of the solutions we are excited to market, as we anticipate larger and more valuable opportunities. Additionally, some long-term deals we have been pursuing in state and local law enforcement are beginning to close. As you know, these processes can be lengthy. We previously mentioned the California Highway Patrol and a statewide deal concerning our SLED-based products, and we remain optimistic. We have been able to expand our pipeline and are now witnessing favorable results while maintaining cost discipline. Specifically regarding Tracker, we are already in discussions with many of our customers about this proprietary solution, including groups like BART and the Department of Justice, along with various local law enforcement agencies across the country. Regarding HR talent acquisition solutions, PandoLogic has experienced significant year-over-year growth of over 60% against the fourth quarter for non-Amazon business, highlighting strong product-market fit. Revenues and new customer growth in this area continue to rise, and we are very positive about this market. We expect the tight labor market to keep this segment robust, and we plan to keep investing here. We believe we have a clear product-market fit and competitive advantages over smaller competitors. The adoption of programmatic solutions within the HR talent acquisition market is still relatively low, indicating we are early in this growth phase. Given that the programmatic advertising spending for job acquisition in the U.S. exceeds $85 billion per year, we see a significant market opportunity ahead and intend to invest heavily in it.

Darren Aftahi, Analyst

Thanks, Ryan.

Operator, Operator

The next question is from Koji Ikeda of Bank of America. Please go ahead.

Koji Ikeda, Analyst

Yes. Hey guys. Thanks for taking the questions. I actually kind of wanted to follow-up on that GRI segment and you're guiding us some pretty good growth there. But also in the prepared remarks, you talked a little bit about deliverable risk. I was wondering if you could just describe what that deliverable risk is for the GRI segment?

Ryan Steelberg, CEO and President

There are some agencies currently evaluating the possibility of deploying aiWARE in a commercial cloud environment. As you may remember, aiWARE was designed to be platform-independent, compatible with on-premises solutions as well as Azure, Google Cloud, and AWS. Although we are fully operational on Azure Gov and Fed, many agencies are assessing how to work within their specific and frequently changing security protocols to determine if they can implement and utilize aiWARE and its related applications in a public cloud setting rather than a government cloud environment. The issue is not a technical barrier; rather, it involves navigating the fluctuating security requirements that municipalities are addressing. Regarding Tracker, this is a new product. We have established, reliable products for the SLED market, such as contact, redact, and illuminate. Tracker, however, is just beginning its entry into the market. We have adopted a cautious approach in our forecasts concerning Tracker's contribution for 2023. Given that it is a new product, we wanted to proceed conservatively, acknowledging that there is some risk associated with its deployment due to its novel nature.

Koji Ikeda, Analyst

Got it. Ryan, that's super helpful. And just a follow-up here. I'm going to ask you the generative AI question with all the hype surrounding it, and I did see you guys have a press release around it. Just curious if you could talk a little bit about if this generative AI has affected your pipeline positively or negatively? And maybe more importantly, has this maybe opened the door to conversations into end markets where you haven't had much penetration before? Thanks, guys.

Ryan Steelberg, CEO and President

Thank you. Let me start by saying that our team has been quick and adaptable in responding to market changes and opportunities. We have had good foresight on key technology trends. We began working with large language models, specifically early versions of GPT, back in 2019. Our conversational AI framework and technology stack in our HR Solutions business, previously known as Wade & Wendy, combines domain-specific large language models, which can be thought of as proprietary versions of ChatGPT, alongside public large language models like ChatGPT. This is not new for us; we've been building and deploying this technology for years. We're also excited about the significance of these large language models entering the market. As we developed aiWARE over the years, this represents just another category of AI models that we can deploy and activate through aiWARE. When we announced a couple of weeks ago the consolidation of our initiatives in generative AI, including synthetic voice, under the name Veritone generative AI, we shared real production use cases. We are actively generating revenue from our generative AI deployment on aiWARE, and it has indeed opened up broader discussions, not just with new customers but also with existing ones. Currently, we are in discussions with large media groups like CBS News, acting as their trusted AI partner. We're collaborating with them to ideate and leverage these generative AI solutions on the content we already possess. One major advantage we have is our extensive data resources, including vast amounts of client audio, video, and structured data. We are well-positioned to quickly and efficiently activate and utilize these new AI models, including large language models, delivering scalable solutions and production-based use cases in weeks rather than just issuing a press release and planning for the future.

Operator, Operator

The next question is from Patrick Walravens from JMP Securities. Please go ahead.

Aaron Kimson, Analyst

Hi, this is Aaron Kimson on for Pat. First off, can you guys elaborate on the rationale for divesting the energy business? What were your learnings there? And what does it show investors about the company's current priority?

Ryan Steelberg, CEO and President

Yes. The energy market and really the product market fit we had, it was appealing and we had some early indications that we had a decent product market fit for us to really try to build and deploy solutions to optimize the energy grids and to help orchestrate the input and distribution of green energy-based solutions and renewables onto legacy grids. That being said, it was an expensive initiative that was not performing up to the growth and scale as other areas of the business. And so as we were looking at areas starting really in the middle of last year of areas where we could start to save money, but be able to repurpose that focus and those resources onto other areas, specifically, as we mentioned, such as generative AI and synthetic voice in other areas of investment, we just felt it was a better appropriation of resources and focus, not just at the coder line level, but at the management level, that if we had to make a tough decision, energy, with its nascent positioning so far for us as a company, was one of the areas on the chopping block that we felt should not be part of Veritone proper. We're not closing the door to be clear on the energy opportunity, but those will most likely be through strategic partners, such as Deloitte and others, as opportunities arise as compared to Veritone Direct going after and building proprietary applications and services for that industry.

Aaron Kimson, Analyst

Very helpful. And then maybe just a follow-up for Mike. What are the key points you have made to investors on the balance sheet after the repurchase of the convertible debt at the end of November? Would you be open to doing a second repurchase kind of like Bandwidth did earlier this week?

Mike Zemetra, CFO

Yes. I mean, I think we're always going to be opportunistic in terms of the use of our cash. And I think taking down our debt was fiscally responsible and tied to our confidence in our outlook in terms of the operations. As far as going forward, again, if opportunities arise and it makes sense, we're certainly open to doing more. But at the moment, we're not looking into it.

Operator, Operator

The next question is from Nick Mattiacci of Craig-Hallum. Please go ahead.

Nick Mattiacci, Analyst

This is Nick on for Chad Bennett. Thanks for taking our question. So, if you could remind us on the non-Amazon PandoLogic portion of the business, just how the pricing and your visibility into revenues might differ from the Amazon relationship? And then maybe on that same subject, what are some of the verticals that you're looking to this year to drive growth ex Amazon?

Ryan Steelberg, CEO and President

Mike, do you want to take the revenue allocation distribution of Amazon versus non-Amazon?

Mike Zemetra, CFO

Yes. I mean the pricing in terms of the model isn't highly differentiated. It may be differentiated by the target in terms of the candidate and where that candidate best gets filled. But as far as the overall model, it isn't necessarily differentiated between Amazon and non-Amazon. As far as targeted markets, I mean, we're seeing a lot within health care, for example, shortages in nursing and things along those lines, transportation. Other markets that really are non-technology driven that are continuing to expand. I think a lot of what you're reading in the news in terms of recession and layoffs has been principally driven in the technology market. Whereas if you look at retail, health care, transportation and other markets, they're continuing to grow. In addition, we're also going to be cross-selling and we are actively cross-selling the product in the government, which is the largest hiring entity in the U.S.

Ryan Steelberg, CEO and President

Yes. We're already into the phase of contracting the hiring solutions with and into state and local law enforcement, which we're very excited about. In addition, the other areas, so against the pullback of Amazon, as we articulated, we're confident in offsetting that again with the growth of the non-Amazon enterprise business for our HR-based solutions. And then an additional, our refocus on the verticals that we do have strong product-market fit and strong traction already have very good and solid SAM and TAM. So, as we have already addressed HR and the talent acquisition budget of over $85 billion in the U.S. alone is a great growth opportunity for our enterprise businesses in our HR talent acquisition solutions. And then also just one segment of the opportunity in meeting and entertainment is the localization of content. As we're going in advancing in terms of globalization of content and media, both exporting U.S.-based content media assets, but also importing foreign language content, the localization business is expected to increase. This is already a $54 billion a year industry, just the localization of content. And obviously, we're right in the middle of it with a very specific product market fit solutions to help accelerate that. And so those are two, obviously, media and entertainment, and we do continue to see as a growing opportunity for us, including our licensing business, which we touched on earlier today. And we remain very bullish on our enterprise business for our HR talent solutions, considering the tight labor market and the clear ROI benefits that our programmatic solution brings to bear on that opportunity.

Nick Mattiacci, Analyst

Got it. And then if you could just touch on your expanded relationship with Deloitte. I know it's still pretty early, but any indications of traction thus far with Deloitte and where we might see that show up in the results?

Ryan Steelberg, CEO and President

Deloitte continues to be very active in our GRI segment, primarily focusing on various aspects of the Federal sector, especially Federal SIV and some on the Federal DoD side. We are currently exploring the use of AI and other solutions related to TMT, including potential localization and synthetic voice applications. However, we are not solely dependent on this; we have a growing channel opportunity with over 50 different channel partners at present. While Deloitte is an important partner, we expect our relationship with them to continue expanding in the future.

Mike Zemetra, CFO

Yes. Maybe just to echo that, more recently, we've actually expanded more partnerships with both Amazon and Azure. So, this is definitely this partner-driven model is highly successful for us.

Operator, Operator

There are no additional questions at this time. This concludes our question-and-answer session. I would like to turn the conference back to Ryan Steelberg for closing remarks.

Ryan Steelberg, CEO and President

Thank you, operator. As I approach my third month as CEO, I am enthusiastic and very confident about Veritone's future. Over the past several years, we have developed Veritone and aiWARE to establish a standard for enterprise AI software and solutions. Our strong and diverse customer base, consistently high gross margins, exceptional customer retention rates, and our talented staff should give our stakeholders strong optimism about our future. We recognize that aiWARE can be quite cluttered and overwhelming for many, especially with the recent noise surrounding generative AI. We believe that Veritone is the trusted guide for both new and existing enterprise customers. Our confidence is supported by our high retention rates and over 120% net retention revenue growth from non-Amazon business. We will conclude by reiterating our focus for 2023, which is operational excellence. This involves continuing to streamline our operations, enhancing efficiency, and reducing costs. We will remain dedicated to successful markets where we have a strong product-market fit, such as HR talent acquisition, TMT, and GRI, while passionately driving technology innovation. We are committed to delivering the latest, most reliable, and scalable AI-based solutions to the market. Thank you for your attention, and I look forward to future communications with you.

Operator, Operator

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