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Good day, and welcome to the Veritone Inc. Second Quarter 2025 Financial Results Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Cate Goldsmith. Please go ahead.

Thank you, and good afternoon. After the market closed today, Veritone issued a press release announcing results for the second quarter 2025, which ended June 30, 2025. The press release and other supplemental information are available on the Investor Relations section of Veritone's website. Joining us for today's call are Veritone's President and Chief Executive Officer; Ryan Steelberg; and Chief Financial Officer, Mike

Thank you, Cate, and thank you, everyone, for joining us this afternoon. I'm excited to speak with you about our recent quarter and our overall progress we've made against our strategic business priorities. I will start with an update on our exciting results and progress against our growth plans and then Mike will cover our financials in more detail. We are thrilled to report that our revenue of over $24 million for the quarter came in at the high end of our updated guidance in June and is a testament to the demand for our aiWARE platform and our market-leading AI applications and solutions. Our results demonstrate strong organic non-Veritone Hire software revenue growth of over 45% in the quarter and we expect this growth rate to continue through the balance of the year. Veritone is definitively growing again and this growth is being led by our core AI software solutions spanning both commercial and public sector business lines. Since co-founding Veritone in 2014, I can confidently say that there has never been a more exciting moment for our company than right now. We are translating demand into tangible and sustainable growth and what makes this even more compelling is that our fastest growth areas including Veritone Data Refinery, or VDR, and public sector, not only delivered strong results, but also represent our largest pipelines and most expansive addressable markets in our history. We are building momentum in all the right areas and the opportunity ahead of us has never been greater. In the quarter, we secured 104 new software customers and grew our VDR pipeline by over 100% from Q1 and over 33% just since our late June business update. The near-term VDR pipeline now surpasses $20 million as the demand for high-quality training data across both our commercial and public sector verticals remains very strong. We have also broken through with yet another major DoD agency with the signing of our sole source contract with the U.S. Air Force in June. This deal is already contributing revenue in 2025 and we expect it to ramp significantly in 2026 and beyond. Our public sector pipeline is now up to $189 million, up from $110 million at the end of the first quarter. Overall, it has been a fantastic momentum building quarter as we transition into the second half of the year. Our recently announced cost saving initiatives which are expected to generate $10 million in annualized savings, together with our $10 million equity offering we completed in June have strengthened our financial position and enhanced our ability to execute our strategy and focus on driving growth. Mike will provide more detail on these efforts and their impact across our core commercial and public sector verticals shortly. Now I want to provide an updated perspective on the AI landscape and our market opportunity. The AI landscape is indeed evolving rapidly. While enterprise-wide generative tools like copilots and chatbots have scaled quickly, function specific applications remain mostly in pilot mode. This GenAI paradox, as McKinsey describes it, underscores a gap between broad adoption and truly transformative use cases. Agentic AI aims to close this gap, shifting from reactive LLM centric tools to proactive goal-driven agents capable of autonomous workflow execution. These agents combine planning, memory and reasoning capabilities, but also pose new challenges around governance, data fragmentation and effective monitoring and control. Scaling them effectively requires an infrastructure designed for trust, interoperability and flexibility across different vendors. This has been and remains Veritone's clear opportunity. Our aiWARE platform provides a scalable, secure and model agnostic foundation for ingesting and operationalizing both structured and unstructured data across disparate enterprise systems securely and at scale. This architecture aligns directly with the emerging Agentic AI mesh where multiple AI agents interact, collaborate and continuously learn while maintaining visibility and control. As organizations move towards more adaptive workflow-driven AI, Veritone offers the infrastructure and purpose-built aiWARE platform to power that evolution, unlocking operational agility, smarter operations and new revenue opportunities. aiWARE also uniquely positions Veritone to capture one of the most compelling opportunities in the evolving AI value chain, training data. As reported just last week by the Wall Street Journal, Big Tech will spend over $400 billion this year on AI CapEx and OpEx in what has become a new tech arms race. As next-generation LLMs and multimodality models become more sophisticated, demand for high- quality domain-specific training data sets has surged. Industry estimates suggest that approximately $3 billion will be spent this year alone by fewer than 50 companies, including the major hyperscalers on acquiring and preparing training data and is expected to grow to over $17 billion by 2032. Veritone is uniquely equipped to serve this market through our VDR solution which transforms massive volumes of unstructured video, audio and text into centralized license ready data sets for internal use or external model training. In the first half of 2025, VDR greatly exceeded our expectations in both adoption and revenue contribution. Data customers across both our commercial and public sector verticals ranging from major media networks to public institutions are using VDR to extract new value from both current and legacy data archives, which often are underutilized, some dating back over a decade. On the buy side, VDR is now directly supplying clean, structured training data to some of the world's largest hyperscalers and AI model developers. In many ways, VDR represents the next-generation solution for unstructured training data, building on what data labeling companies like Scale AI, recently acquired by Meta for over $30 billion and Shutterstock, have done for the training data economy. Veritone's differentiation lies in our ability to process complex and diverse media types and modalities like audio and video at tremendous scale. In the second quarter alone, Veritone aiWARE processed millions of hours of video and audio or in data science speak, over 5 trillion tokens. Through multimodal tokenization, Veritone efficiently transforms these millions of hours of unstructured video and audio assets into the foundation training blocks of intelligent systems. Our aiWARE powered pipeline enables transformer-based sequence modeling and other training methods using discrete audio and video tokens, bringing enterprise-grade media into the era of AI. Whether it's leveraged for third-party model training, fine-tuning enterprise customers models or even for training Veritone's proprietary internal models, we are providing a modern day Agentic stack for customers around their audio, video and text data. As I mentioned earlier, our qualified VDR pipeline now exceeds $20 million, up from $15 million at the end of June and more than doubling since early May. This growth reflects both expansion with existing customers as well as new agreements with leading hyperscalers and foundational model developers. We expect to formalize partnerships with nearly all of the major hyperscalers by the end of 2025. The growth in our commercial business continues to accelerate driven by a growing demand for our differentiated AI-powered software and managed services. We enable IP owners to unlock the full value of all of their media libraries by making them searchable, discoverable and monetizable across a range of channels including advertising, broadcasting, documentary production, TV and film projects and internal initiatives. In the second quarter, Veritone Commercial successfully closed 11 software enterprise deals with clients such as Inter Milan, Laver Cup, United States Soccer Federation, Alpha Media, St. Louis

Thank you, Ryan. We continued our strong momentum in the first half of 2025 with solid financial results in Q2. Revenue came in at the top end of our recent guidance with our software products and services, excluding Veritone Hire, growing over 45% year-over- year driven by strong performances across our public sector and commercial enterprise. We ended Q2 with solid customer metrics and contributions made across our software products and services and managed services. As we enter the second half of 2025, we remain very confident on the future growth prospects across our core software products and services, which I will explain in more detail. During my prepared remarks, I will discuss Q2 year-over-year performance and KPIs, which exclude the results of our media agency which are presented as discontinued operations in the corresponding historical financial periods, balance sheet and liquidity position and Q3 and fiscal 2025 guidance. Starting with Q2 2025 performance. Q2 revenue was slightly over $24 million, which was flat from Q2 2024 principally due to a [ $1-point million ] increase from our software products and services offset by a $1.9 million decline in our managed services. The $1.8 million revenue growth in our software products and services was driven by our public sector which grew over 90% year-over- year, coupled with the commercial enterprise software products and services revenue that improved $0.8 million year-over-year. The growth in the public sector was driven by execution of larger deals in Q2 2025 including the Department of Defense and larger public safety agencies, including a top 5 law enforcement agency in the U.S. and Riverside County. We expect these larger public sector deals coupled with our expanding public sector pipeline to generate substantial growth in the second half of 2025 which I will explain in more detail. The growth in commercial enterprise was led by Veritone Data Refinery, or VDR. VDR, which launched in Q4 2024 is one area where we anticipate substantial year-over-year growth throughout the remainder of fiscal 2025 and today has a near-term sales pipeline over $20 million up over 100% from our guidance in Q1 2025. The $1.9 million decline in Q2 managed services was principally driven by a $2 million decline in representation services driven by declines in our VeriAds services and a onetime live event campaign of $1 million in Q2 2024 which did not recur in Q2 2025 offset by $0.1 million improvement in licensing. As we previously discussed, we expect this negative trend in representation services to continue throughout 2025 or until the macroeconomy shows demonstrated improvements over 2024. Overall, Veritone Hire remained relatively flat year-over-year driven largely by the hiring softness in the macroeconomy. Excluding Veritone Hire, our software products and services grew over 45% year- over-year. Turning to key performance metrics across our software products and services in Q2 2025. ARR of $62.6 million, up 7% from Q1 2025 of $58.7 million and down year-over-year from the expected declines in consumption-based revenue from customers across our hiring software products and services over the trailing 12 months. Overall, ARR from recurring subscription-based SaaS customers was up slightly by 2% year-over-year. As of Q2 2025, 81% of our ARR was from subscription versus consumption-based customers, up from 74% at Q2 2024 and flat sequentially from Q1 2025. Total new bookings of $15.8 million, up $1.8 million or 13% year-over-year primarily due to larger renewals across our software customer base. Gross revenue retention continued to be above the 90th percentile and total software product and service customers at 3,067 which was down 9% year-over-year predominantly from our commercial enterprise sector which includes lower consumption-based customers from Veritone Hire and the continuing impact of sunsetting legacy CareerBuilder customers post the June 2023 acquisition of Broadbean and a smaller customers as we focus on larger ARR opportunities offset by an increase across public sector, largely from growth in public safety customers. Q2 GAAP gross profit was $15.3 million compared to $16.4 million in Q2 2024, a decline of $1.1 million largely driven by the higher mix of lower margin revenue in Q2 2025 with GAAP gross margins of 63.9% as compared to 68.2% in Q2 2024. Excluding noncash depreciation and amortization expense, 2025 non-GAAP gross margins were 68.9% as compared to 73.6% in Q2 2024, a decline of 470 basis points largely due to the decline in higher-margin consumption-based revenue coupled with a higher mix of lower margin revenue. Note that in Q2 2025 VDR gross margins were approximately 40%. We expect that as the VDR product matures, margins will initially be similar to Q2 but should expand into late 2025 and 2026 as we grow and diversify the mix of our content offerings. Q2 operating loss of $19.3 million improved by $1 million or 5% year-over-year, primarily driven by lower operating expenses offset by a lower non-GAAP gross profit from the decline in revenue over the same period. Net loss from continuing operations was $26.8 million, an increase of $3.4 million or 14.5% as compared to Q2 2024. The year-over- year increase was principally driven by a $3.4 million change in the estimated fair value of earnout from the divestiture of Veritone One recorded in Q2 2025. Non-GAAP net loss from continuing operations was $8.7 million as compared to $9.7 million in Q2 2024 and $11.1 million in Q1 2025. The improvement was principally due to lower operating losses driven by increased discipline on cost management offset by lower non-GAAP gross profit. Further, in June 2025 we initiated up to $8 million of a targeted $10 million annualized cost reduction through reductions in personnel and improvements in our operating structure, including our platform costs. These cost reductions were initiated in part due to the softness in our managed services coupled with delays in certain public sector deals that were expected to close earlier in 2025. As I will explain further, these reductions should provide us a more efficient cost structure as we manage towards our planned growth in the second half of 2025 and profitability into 2026 and beyond. Turning to our balance sheet. As of June 30, 2025, we held cash and restricted cash of $13.9 million as compared to $17.3 million at December 31, 2024. The net change in cash reflects net cash outflows from operations of $25.2 million principally driven by our non-GAAP net loss of $19.8 million, deferred purchase consideration of $1.2 million and interest paid on debt of approximately $3 million coupled with the timing of working capital in the quarter offset by net cash inflows from investing and financing activities of $23 million driven by net cash inflows of $29.9 million from our January and June 2025 registered direct offerings partially offset by $3.9 million in debt principal payments and $2.3 million in capital expenditures. Turning to liquidity today. On June 30, 2025, we completed a registered direct offering, selling 6.5 million shares of common stock priced at $1.09 per share and 1.8 million of pre-funded warrants priced at $1.08 per share for gross proceeds of approximately $10 million. Of the total funding, approximately $3 million of the gross proceeds was received in July 2025. Included in the funding was $1 million from our CEO, Ryan Steelberg, which will price at the greater of $1.41 per share which was the closing price of Veritone's stock on June 27, 2025, or the closing price of Veritone stock 2 trading days following the filing of our Q2 Form 10-Q. At June 30, 2025, our consolidated debt is down from a peak of $201 million in December 2021 to approximately $128 million today, comprised of term debt of approximately $37 million maturing in December 2027 and convertible debt of $91.3 million due November 2026. As of today, we have over $25 million available across our $35 million ATM which was established in November 2024. That said, we are currently exploring potential financing structures including discussions with our current debt holders, which we believe could improve our current liquidity position and balance sheet. At June 30, 2025, we had 47.6 million shares issued and outstanding and 2.5 million warrants outstanding to our debt holders. Now turning to updated fiscal Q2 2025 and full year 2025 guidance. Our software products and services revenue pipeline and long- term outlook continue to be at all-time highs. More specifically, we continue to see strong demand across the approximate $10 billion global digital evidence management market. In the public sector alone, we are beginning to march towards our 100% to 150% revenue growth target for fiscal year 2025. In Q2, we announced we were awarded a sole source contract with the Air Force Office of Special Investigations, or OSI. Under the contract, the company's AI-powered solutions, including iDEMS, will provide OSI with advanced investigative, intelligence and counterintelligence capabilities in support of the DoD and interagency mission requirements. During Q2 2025, we began to recognize revenue on the award. This is the initial deployment with plans to roll out our iDEMS solution across the broader DoD investigative and counterintelligence branches over the next several years. While we cannot discuss the magnitude or exact specifics of this deal, it will serve as a substantial growth driver of our public sector revenue in 2025 and '26. We also remain a near-term contract basis on several large projects with various facets of the U.S. federal government and international public safety customers with a near-term sales pipeline in excess of $180 million. As previously noted, on the commercial side, we are seeing strong and increasing demand for our VDR product. More specifically, we are in active discussions with the largest hyperscalers on various VDR initiatives, some of which are near-term agreements that approach or exceed $10 million individually and others are longer-term partnerships where we are being positioned to serve as their provider of choice across their VDR initiatives. Our near-term sales pipeline on VDR which launched in the second half of 2024 is now over $20 million, which is an increase of 100% or $10 million since March 2025 and $5 million since the end of June 2025. More specifically, in Q3 2025, revenue is expected to be between $28 million and $30 million as compared to $22 million from Q3 2024, a 32% increase at the midpoint and 21% sequentially from Q2 2025. In Q3, we expect our software products and services to increase over 45% year-over-year, led by growth in the public sector and commercial enterprise. Specifically, we expect our public sector revenue to grow over 50% year-over-year and our commercial revenue led by VDR to grow over 45%. Included in this growth is our hiring products and services which we expect to be relatively flat year-over-year given the current macroeconomic environment. Consistent with Q2 2025, our managed services is expected to be down year-over-year, principally due to the representation side of our business, which has experienced some slowness as a result of the more challenging macro environment. We expect Q3 non-GAAP gross margins to be around 61% to 63%, driven by the forecasted higher mix of VDR revenue in the period. Q3 non-GAAP net loss is projected to be between $6 million to $6.5 million as compared to $11.1 million in Q3 2024 representing 43% improvement at the midpoint and a 28% improvement sequentially from Q2 2025. Turning to fiscal 2025 outlook. We are updating our prior guidance for fiscal 2025, which we are expecting revenue to be between $108 million to $115 million, which at the midpoint represents a 20% increase year-over-year. The change in our outlook is principally driven by the confidence in some of our more larger growth initiatives across the public sector and commercial VDR coupled with a forecasted decline in managed services reflecting the more challenging macro market today. And non-GAAP net loss to be between $30 million to $25 million, representing a 33% improvement year-over-year at the midpoint. The change is reflective of the timing shifts in revenue coupled with the compression in gross margins on VDR in 2025, which we expect to improve upon fiscal 2026. Before closing the call, I'd like to remind everyone listening that Veritone will be attending H.C. Wainwright's 27th Annual Global Conference, September 8 through the 10, in New York City. That concludes my prepared remarks. Operator, we would now like to open up the call for questions.

[Operator Instructions] And your first question comes from Scott Buck with H.C. Wainwright. And your next question comes from Jesse Sobelson with D. Boral Capital.

I think the big thing, this is a great quarter doing exactly what you guys said you were going to do. You've got this guidance for the rest of the year that points to some pretty significant acceleration in the growth rate. I mean I'm talking of the midpoint near 30% year- over-year here. While you've provided a lot of details on growing the business to signing the contracts with -- within the public sector, the growth in the pipeline. Can you guys elaborate on what specifically needs to convert, whether it's revenue recognition from this Air Force contract or any VDR pipeline signings that need to happen to support this step up in the acceleration that we're seeing guided for the top line? And I'm just kind of curious what gives you the level of confidence into the visibility you have for that acceleration.

Thank you, Jesse. I think as we sit here right now, we probably have our smallest gap of go get revenue to realize that guide for Q3. And I say a bunch of that already in terms of bookings and visibility for the balance of the year. So again, as we sit here today, in the end of the first week in August, our delta of go get to hit that guide midpoint and hopefully the high end is the smallest it's ever been. The other way of saying that is sort of the contracted opportunities and the businesses and opportunities that we're currently servicing will support the balance of that opportunity for revenue. So again, we're -- we have the customers. We are transacting as we -- as Mike and I both mentioned, we're already generating revenue from these new DoD contracts. We're already generating revenue from these new customers with VDR. So we're very, very excited. We've been sort of waiting for this to happen, and they're all kind of hitting on all cylinders right now.

Awesome. That's really great detail. It's really exciting to see. We're excited here too. I guess I'll just back up and ask a broader level question here as well and then take a step back. But just with the -- within AI everything's moving very fast. There's very rapid advancements in even generative AI. How do you view Veritone's differentiation, particularly in these regulated industries like defense and law enforcement versus the broader AI platforms out there such as like Palantir, Microsoft or other open source options.

I think first and foremost, and this goes back all the way to our founding. we kind of and thankfully had a vision that AI-based models were going to become commoditized over time. There'd be thousands of vision models, there'd be thousands of speech models, and even today, there's hundreds of next-generation LLMs and multimodal models. The key is having a platform, aiWARE, that, in effect, can manage the full end-to-end stack, but be agnostic to these models or independent of these different models, meaning customers like iHeartMedia and others, they've been customers for many years. We own, I'll say the software platform application layer with these entities. And so as models advance, they don't have to go anywhere. So they can rely on the full technology stack of Veritone and aiWARE as this -- as the models mature. The one thing though, that was kind of a byproduct, and candidly, and VDR is kind of a culmination of the scale that we've been accumulating over the last decade. But as you've just read through and a good parallel is what Altman just described when OpenAI opened a couple of their weighted models as many of us have read about, what they did in open source was their training data, right, which is really interesting. And so what that points to is when you think about Veritone and why we are such a strategic partner and able to not only maintain these long-lasting relationship with customers, but able to bring on net new big customers -- it is not just about the understanding the orchestration of the AI and the models, but it's also understanding the unstructured data at huge scale. I gave a little tease in my speech which we're going to follow up on and talk a lot more over the next few weeks, but our scale of tokenizing audio and video and other forms of unstructured data is at huge scale. I actually mentioned that we, in effect, tokenized or, in effect, realized over 5 trillion tokens of -- in terms of scale for audio and video processing just in Q2. Based upon the research if you kind of look at what it took to build these other foundational models, that's massive scale. And frankly that was just in one quarter. So again, our differentiation is not just understanding and making a very early bet that there were going to be hundreds, thousands, millions of AI models, but we made a bet that it's going to be -- you need to have the orchestration of not just the models but the true understanding of the end-to-end platform that can manage the unstructured and structured data at the same time. The last thing I'll put a little bow on that is we're platform agnostic, we're not limited to a single cloud provider. Our platform has now been successfully deployed in air gap network isolated environments. So not only can we run this readily available in public clouds, in government clouds, but we can also run it in network isolated environments and even on-prem, which is a big differentiator.

And your next question comes from Glenn Mattson with Ladenburg.

Congrats on the quarter. First on iDEMS. In the past, you've spoken about multiple kind of -- I think you said 7- or 8-figure kind of multiyear size deals of the -- the win in the Air Force is a significant one clearly. I guess partly, I'm curious, do you need to close more of those style deals to meet your guidance for the year you reiterated? So I'm guessing you feel pretty comfortable there. But also just can you speak to like what winning that contract and what it means for these next contracts, does it get easier to close them as you get more reference customers of that size? Any color, that'd be great.

Yes. I'll pick those off. First, of course, our ability to point to a very large multifaceted contract with the Air Force spreads quickly. And we can attest, and what we kind of spoke to is that we are seeing a multitude of different opportunities and inbound demand spread quickly across the DoD and even outside the DoD because of the Air Force contract announcement. And that's, I'd say, commensurate with any other type of business. So referral and having that public disclosure is very, very important. The second thing is relative to our pipeline, the OSI Air Force contract alone presents a great, huge opportunity for years to come. And remember, the Air Force and the group that we're working with, yes, it's today kicking off with OSI, but this is an entity that is really taking the charge in some areas, the lead on expanding this overhaul of the government's law enforcement and counterterrorism opportunities into other agencies as well. So yes -- and this opportunity for us really is the tip of the iceberg for expansion just in the areas of use cases for investigations and counterterrorism. We expect this to expand into other agencies as well. So we do have a healthy pipeline that crosses over into many other areas of DoD. And -- but again, to sort of be specific to your question is, we have enough meat if we can just execute on, frankly, the kind of customers that we already have, I think we're pretty confident to hit many of our goals. That being said, as we attested to a material increase in the size of our pipeline, we are bringing on more and more new customers, as we mentioned, 35 new customers in public sector in the previous quarter and we expect that to continue to accelerate here over the next few quarters.

You also mentioned the top 5 public safety customer. I'm not -- I can't recall if you've mentioned that in the past or not, but can you give any more color around what the -- what kind of an agency and what the use cases are that currently?

It's an iDEMS' customer. It's one of the biggest law enforcement agencies in the world. We're not at liberty to give specific names, but let's just say, hopefully, we're closing some homicide and murder investigations, leveraging our next-generation AI-based software here. But we're thrilled and we're all excited about our DoD efforts, but our state and local law enforcement business continues to grow and thrive as well. And the Sheriff's Department, which we talked about and also this police agency is kind of a good representation of the demand for our solutions in SLED as well.

One more if I could squeeze in on VDR. You talked -- I think the pipeline you think is $20 million now. Can you quantify, just give some more color on how you come up with that number and what that means as it translates to revenue? I know in that pie chart on your slide deck you up the range, the higher end of the range kind of -- can you just kind of help us understand like the bridge between that and revenue and timing?

Yes. So I think as Mike articulated in his remarks, that near-term pipeline is kind of qualified as $20 million with high visibility between the next 3 to 12 months. VDR could just continue to grow and grow and grow. I think we've really hit a perfect use case sweet spot as I articulated in my remarks. I really do believe Veritone has created a more technology version for unstructured data that scale AI did in others in primarily legacy data labeling efforts to help train data. We are working with many of the largest hyperscalers and model developer companies today. So we are representing them in providing and helping them train their next-generation AI models. And the budgets are massive. So again, we are being successful. I've -- it's probably -- I'm very excited about public sector. I'm very excited about DoD, but VDR could be lightning in a bottle. Still a lot more work to do, but I think we've got great product market fit right now and it pedals down on sort of our bullishness for VDR.

Congrats.

Thank you.

And your next question comes from Seth Gilbert with UBS.

The full year guide by $4 million and reduced the high end of the non-GAAP net loss by $5 million. So just curious if you could talk about where you're making investments or is there anything didn't anticipate in 2H cost?

Yes, I can take this.

The first -- did you hear the first part of that, Mike, I didn't hear the first part of the question, but if you got it.

I didn't hear the first part, but yes, I think I can articulate it. Just in terms of the non-GAAP net loss, what I explained is just kind of the velocity of VDR and the compression on margins. And so while we raised the top end of the revenue guide, we tightened on the lower end or I guess the higher end on the non-GAAP net loss as a result of that margin compression.

Got it. Sorry, I was switching between a few calls. Maybe one more. If the public sector grows 50% in 3Q, which I believe I heard you say on the call, then in order to get to the 100% to 150% year-over-year guide for the year, you need to grow the public sector by about $3 million quarter-over-quarter or maybe almost 300%. So I'm just wondering if that's fair to assume a big uptick in 4Q. And is it all from the DoD revenue kind of maybe hitting in 4Q?

Yes. On 4Q, I mean we're not giving specific guidance, but I think your math is probably directionally accurate and it's not dependent on a single contract, but that contract obviously is a vehicle for a good portion of that growth.

And your next question comes from Scott Buck with H.C. Wainwright.

The 3Q guide suggests a nice sequential step-up in revenue. I'm curious, what do you think you kind of have in hand versus what you have to go out and earn here over the next couple months to meet the midpoint of that guide?

Scott, as I kind of mentioned earlier, you may have been off the call, but I said right now we probably have the smallest delta of go get that we've really had in any quarter. We have a lot of the deal flow kind of in the works already, either under contract and just delivering, executing against such as VDR or areas that again, we had to get over the hump to get the Air Force contract done with initial phases deployed. But now that, that contract and award is live and our initial software has been deployed again, now it's just ramping and scaling. So again, to be very clear, I would say our contracted opportunity provides us probably the best resolution for us to, I'd say, perform against the guide with the smallest delta of go get that we've had in a very long time.

That's great and very helpful. Did you disclose what revenue from the Air Force was during the quarter?

No, we do not.

Can you?

No, we're not going to. We're not going to break down specific contracts or specific line items.

Fair enough. On the VDR pipeline, are there significant customer concentrations in there or is it fairly evenly dispersed?

I think the space in general, as I've said in our -- in my prepared remarks, the space is dominated by really the top 50 major players. So it is a massive category, but it is dominated by 50 players around that area. So again, unlike other areas of our business where we have thousands of customers you can sort of interpret that, again, to be clear, we don't have a single customer who's dominating it. But in terms of the current ecosystem out there, this is both good and bad. It is -- the super majority of the spend is concentrated to about 50 major big tech companies today and AI model development companies. On the flip side, the positive side is I probably -- as we stated, we're engaged with almost all of them already, right? We're not actively doing business with all of them yet. I think we did say as our goal is to be actively engaged in working with all of the major hyperscalers by the end of the year. So on one side I would say there is the potential of concentration within that 50 group, but on the opposite side is it affords us the ability because of the killer offering that we have and the great assets that we have, we're already engaged with near majority of the 50 already.

Okay. And as you guys have gone out and sold VDR or spoken to customers on VDR, are you getting better in that sales process? I mean I imagine each incremental opportunity your sales team was able to learn a little something new and might be more efficient moving forward.

Yes. I'll say empirically the answer is yes, based upon the data we provided where we continue to increase our pipeline, right? And a lot of that pipeline increase is not just net new customers, but it's repeat business or expanded business with existing customers in VDR. So I would say that is a good testament to not just us getting better on the sales process, but people getting through trials, building confidence and trust in our VDR products and solutions to accelerate. So I'd say that's exciting. On the flip side, audio and video and unstructured data as a training data class is relatively newer. So again, part of it is just familiarity with a lot of different groups who are, let's say, first time really trying to think about what their next-generation multimodality video- based models may look like or groups who are trying to fine-tune legacy multimodality models. So not only, I would say it's 2 sides, not only are we learning more about what these different groups are trying to achieve with their next-generation models, but on the flip side they are learning more about us. And I can say confidently is we're building great trust. People know that Veritone can deliver at scale and I did touch on kind of this scale and size of tokens that we are dealing with. And we're talking about hundreds of millions, billions and obviously potentially trillions of tokens in the context of just the scale of the audio and video that we're dealing with. So we're bullish, and I'd say it's really 2 sides. One, we're getting more confident. And two, our customers who we're working with and selling to are getting more confident in -- with a higher level of trust in us.

This concludes our question-and-answer session. I would like to turn the conference back over to President and Chief Executive Officer, Ryan Steelberg, for any closing remarks.

Well, first, I'd like to thank everybody. I'm obviously very excited about this quarter. It's taken us a long time to clean up a lot of things, but as sort of we've been sort of indicating now for a few quarters, there's really a lot of excitement on some killer core assets in our AI software business and VDR that we knew were coming. And this quarter kind of culminated in a couple things. One, got over the hump with the big OSI Air Force contract and really started to sort of jog into a run with the growth of VDR, which is going to be a great accelerant for the balance of the year and into the future. 45% year-over-year growth in the second quarter in our core AI software is phenomenal. And I think there's a lot -- there's a high ceiling there. So again, we're exiting this quarter and moving into the second half of the year with a purview into next year, feeling great. We still got to execute, but our pipeline's large. We're dealing with some of the largest tech companies out there who we're selling with. And sort of, finally, the sky's the limit for Veritone. Mike already covered it, but please check our IR sites or please register. We are going to be attending a multitude of different financial conferences here over the balance of the year and into the first quarter of next year. Hope to meet and talk to both our existing and new investors, but appreciate everybody's time today. Thank you.