Veritone, Inc. (VERI) Q4 2020 Earnings Call Transcript

Veritone, Inc. (VERI -7.05%)
Q4 2020 Earnings Call
Mar 04, 2021, 4:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, and welcome to the Veritone fourth-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, senior vice president of corporate development and investor relations. Please go ahead.

Brian Alger -- Senior Vice President of Corporate Development and Investor Relations

Good afternoon, and welcome to Veritone's fourth-quarter and full-year 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 fourth-quarter and full-year ended December 31st, 2020. This press release is available in the investors section of our website.

Joining me for today's call are Veritone's chairman and CEO, Chad Steelberg; president, Ryan Steelberg; and CFO, Mike Zemetra. Following their remarks, we'll 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, including its expected net revenues, non-GAAP net loss for the first quarter and full year of 2021. Please note that for the first time, we will be providing guidance for the full year in addition to the current quarter.

These forward-looking statements are subject to risks, uncertainties, and assumptions that may cause the actual results to differ materially from those stated or implied by those statements. Certain of these risks and assumptions are discussed in Veritone's SEC filings, including its annual report on Form 10-K, which will be filed in the next few days. These forward-looking statements are based on the assumptions as of today, March 4th, 2021, and Veritone undertakes no obligation to revise or update them. During this call, the actual and forecasted financial measures we will be discussing other than revenue will be presented on a non-GAAP basis, unless otherwise noted.

Reconciliations of these measures to the corresponding GAAP measures are included in the press release we issued today. These non-GAAP measures include a breakout of our results between core operations and corporate. Core operations consist of our aiWARE operating platform of software, SaaS, and related services, our content licensing and advertising services, and their supporting operations, including the direct cost of sales, as well as, the operating expenses for our sales, marketing and product development, and to a lesser extent, certain general and administrative costs. Corporate consists principally of general and administrative functions such as executive, finance, legal, people, and IT and other areas that support the entire company, including any public company-driven initiatives and supporting functions.

Finally, I would like to remind everyone that this call is being recorded and will be made available for replay via a link on the investors section of our company's website at www.veritone.com. Now I'd like to turn the call over to our chairman and CEO, Chad Steelberg. Chad?

Chad Steelberg -- Chairman and Chief Executive Officer

Thank you, Brian, and thanks, everyone, for joining us on today's call. 2020 was a pivotal year for the planet with COVID and social unrest shaking the very foundations of society. And yet, in the midst of this turmoil, Veritone demonstrated great agility and speed of thought and execution to not only survive but thrive, delivering for our customers while keeping true to our core mission of building a safer, more vibrant, transparent, and empowered society through artificial intelligence. I'm proud to report that our efforts are paying off.

Fourth-quarter 2020 revenues grew 35% year over year. And today, we are guiding to 2021 full-year revenue growth in excess of 40%, at the high end of our range, driven by our SaaS business growing 60% to 65%. In 2020, aiWARE came into its own as a full-fledged distributed intelligent operating system with massive performance, reliability, and deployment improvements. As a result, demand for our cognitive solutions from our customers and partners across multiple markets this past year is accelerating.

We are very grateful to have so many loyal and successful customers exploring the boundaries of artificial intelligence with us and applying it to their real-world problems. Their results have been profound and have led to repeat and expanding relationships. Our media customers are using aiWARE to learn what makes their audiences tick and, in turn, help them deliver more engaging programming and advertising solutions. Our law enforcement partners are solving heretofore unsolvable crimes and processing crime scene data and other legal evidence at superhuman scale and speed to help find the needle in the haystack and sometimes even the smoking gun.

aiWARE assists investigators in their pursuit of justice while also speeding the disclosure of audio and video footage to the public, increasing transparency, and trust. Soon aiWARE will be helping the U.S. government and our allies to analyze huge volumes of aerial images faster and more accurately than humans to identify threats to our national security. Most recently, we focused the power of aiWARE on addressing the enormous reliability and safety challenges facing electric utilities as they struggle to manage extreme weather, natural disasters, and unpredictable green energy sources with aging grid technology that largely still relies on human-in-the-loop decision-making.

The widespread power outages in California and Texas in the past year have underscored yet again the need for a more robust electrical grid. Our aiWARE Energy Solutions address the critical needs for a better forecasting, synchronization, and optimization to make power grids more resilient and efficient. The early customer data from our forecasting engines, combined with our optimization technology, leads us to believe that our technology will enable our current and future utility partners to realize significant reductions in their spinning reserves, protects critical grid infrastructure, and reduce costs, while at the same time, improving the quality and reliability of service to their customers. We believe aiWARE is uniquely positioned to solve these distributed challenges in the AI energy management market which is projected to exceed $7.8 billion by 2024.

I'd like to pause for a moment and let the magnitude of these opportunities settle in. I realize that for some, it's hard to believe that a nascent company like Veritone could be leading he world in this AI revolution, but then again, we aren't alone. We stand with giant partners like Microsoft and NVIDIA that are symbiotically collaborating with us as we leverage the performance and flexibility of our third-generation operating system and proprietary Hamiltonian models to usher in a new era of artificial intelligence powered by aiWARE. Our passionate pursuit of this AI-powered future and strong belief in the meaningful role Veritone will play in shaping this trajectory are being driven by many factors, a few of which I will highlight to help align our perspective and expectations with yours.

First, organizations globally are expected to spend more than $100 billion on AI solutions annually by 2025 and we think that's a conservative estimate. We believe the TAM will be even larger as AI adoption diversifies and accelerates, especially for those companies serving both the commercial and government sectors. We are seeing a behavioral change in the marketplace. Organizations are no longer simply experimenting with AI, but rather are depending on it to deliver improved operational performance.

Second, Veritone offers hundreds of fully orchestrated world-class cognitive models and cutting-edge machine learning technologies, including our patented cooperative, distributed inferencing prediction, and optimization models. More companies and government agencies are learning about it across more verticals and geographies. Our customers depend on us to deliver the growth, cost savings, and efficiencies that come with the adoption of our AI platform and cognitive engines. Third, Veritone is a run-anywhere-and-everywhere solution.

Today, aiWARE operates in both AWS and Azure, including our aiWARE Government FedRAMP-certified version. We are also deployed and processing data on the edge and our customers' on-premise data centers. We expect our support of NVIDIA CUDA and EGX to further expand our deployment and use cases into the IoT realm. The symbiotic relationship between Veritone's aiWARE operating system and NVIDIA's advanced processors follows a proven path for success and is reminiscent of the Wintel relationship that dominated the computational computer revolution.

Finally, aiWARE is an open standard-driven OS, a model whose success has been proven time and time again. Just think of Windows over Mac, Linux over Solaris, or even Android over iOS. The largest and most vibrant ecosystems have always been built on open standards. We see aiWARE unlocking several successive levels of value for customers, measured in orders of magnitude on a logarithmic scale.

I look forward to discussing this more in our Inaugural Technology Expo in May. Veritone is quickly maturing as a company in forced in the AI revolution with our management team and go-to-market efforts finding their rhythm. This stability gives me comfort, and more importantly, a strong platform to continue to innovate and make calculated bets on exciting new opportunities. With that, I would like to now hand the call over to Ryan, our president and co-founder, to discuss our operational achievements in greater detail.

Over to you, Ryan.

Ryan Steelberg -- President

Thank you, Chad, and good afternoon, everyone. As Chad mentioned, we had a very strong fourth quarter and finish to our exceptional year. In every area, we delivered results above the expectations we had set when we spoke with you in November. Our SaaS revenue grew by 53% year over year in Q4 and by more than 30% for the full year.

Our GLC and energy markets were the strongest contributors, just as they were in Q3. I also want to call out our exceptional performance of our advertising team. Fueled by the insights and differentiation enabled by aiWARE, this team massively outperformed its peers throughout 2020. Advertising revenue, including the contribution of our VeriAds network grew by over 50% in Q4 compared with Q4 of 2019.

During a year in which many ad budgets were slashed, Veritone showed marked increases in spend from many of our clients, including DraftKings, Purple, HelloFresh, and others. Throughout the year, as customers continue to recognize the differentiated results we provide through aiWARE, we increased gross billings per active customer. Entering 2021, Veritone is currently delivering AI solutions to thousands of customers. We are addressing large and complex problems for our federal government and we are leveraging the same architecture to enhance and augment workflows for hundreds of organizations.

Some of these engagements are multiyear and several million dollar contracts and others can be as little as a few hundred dollars a month, truly democratizing AI and machine learning and delivering it to a much more expansive market. The flexibility, scalability, and performance of the aiWARE operating system enables Veritone, our partners and third-party developers to rapidly create and deploy cognitively driven solutions into virtually any industry. And so we believe that Veritone's market opportunity is substantially larger than other providers. This past quarter, we announced partnerships with NVIDIA and Alteryx, aiWARE is a complementary technology that extends and accelerates AI adoption and efficacy by providing a cognitive OS that unifies big data platforms, advanced processing power and end-user applications into a single holistic solution.

Our relationship with NVIDIA truly extends aiWARE everywhere. We've already realized accelerated processing speeds in the cloud through our integration with NVIDIA's CUDA GPUs and with our integration with their IoT platform, EGX, we will deliver cognition and real-time dynamic model creation to the edge. We are applying this to our aiWARE Energy Solutions and believe that it has potential to transform multiple industries. In the case of Alteryx, we've completed our technical integration and are working directly with the company's leadership and customers to deliver unprecedented aiWARE capabilities and develop new use cases.

aiWARE is now available to Alteryx' 7,000-plus end customers as a self-service cloud service for a few hundred dollars per user per month. This integration with Alteryx represents a significant milestone for Veritone and we plan to replicate this integration with other leading data analytics platforms. Looking at aiWARE SaaS solutions in greater detail, revenues in Q4 were $4.4 million, up 53% year over year and 31%, sequentially. We delivered double-digit sequential growth in each of our primary SaaS verticals, accelerating off the strong performance we posted in Q3.

Our opportunities supporting the Air Force continue to grow, augmenting our rapidly increasing activity with the Department of Justice. We are partnering with multiple prime contractors who have recently been awarded contracts under the DOJ's $1.5 billion MEGA 5 Automated Litigation Support contract to support our AR software and cognitive processing services under those contracts. Additionally, we have submitted proposals to provide air anywhere within various groups in the Department of Defense and the broader intelligence community. We recently completed a successful proof-of-concept project for a Canadian government entity, expanding our federal government efforts beyond our domestic market.

At the state and local level, both our direct and channel partner sales initiatives are gaining traction. Our initial direct sales go-to-market is being augmented and expanded by our partners into a number of regional statewide initiatives. While it is too early to detail, the high renewal rate and expansion of engagement gives us increasing confidence in the sustainable growth potential of our SLED offerings where we continue to benefit from strong product fit. In our other markets which are dominated by our energy offerings today, we achieved over 50% sequential growth and are engaged on a number of projects in this rapidly emerging market.

Initial implementation began at the end of the fourth quarter and the first data set started to come back this week. We and our customers look forward to reporting on the very promising results in the near future. In M&E, incremental rent minutes from Attribute across our existing customers, as well as, new account growth in both TV and radio drove our Q4 revenues up more than 12% year on year. As Mike will discuss later, we expect further revenue acceleration in our aiWARE SaaS solutions in 2021.

In our aiWARE-enabled advertising services, our record performance for the fourth-quarter and full-year 2020 is a testament to both the aiWARE technology that we leveraged and to the outstanding efforts of our advertising team which once again executed well above their peer group. In aggregate, Q4 net revenues in our advertising business grew 11%, sequentially, and 50% year over year. These are tremendous results in any economy, let alone in the midst of a pandemic-affected ad market. We continue to gain momentum with our VeriAds network which generated over $4 million of revenue in 2020.

Based on the strong bookings momentum we have already achieved, we are confident that 2021 will be another strong year for our advertising team. In our content licensing services, where we leverage the power of aiWARE to index, search, and reposition premium video and audio content for licensing by advertisers and content creators, we continue to face headwinds associated with the pandemic in addition to the normal seasonal slowness. This drove both sequential and year-on-year declines in content licensing revenue. Fortunately, we are experiencing a seasonal uptick in Q1 and key sporting events like March Madness and Masters are back on calendar, even if they will occur with diminished live crowds.

Both with production activity rebounding, we look forward to content licensing revenue returning to its pre-pandemic levels over the course of 2021. In summary, we expect strong momentum in organic growth across all of our markets in 2021. And now I will hand it over to Mike Zemetra, our CFO, to detail the financial results of the fourth quarter and to outline our financial guidance for the first-quarter and full-year 2021. Mike?

Mike Zemetra -- Chief Financial Officer

Thank you, Ryan. We posted record results in KPIs for the fourth quarter and full year of 2020 across the board, exceeding our financial guidance. For the fourth quarter, we reported $16.8 million in revenue and a non-GAAP net loss of $3.9 million. Since this is our year end, I will first highlight our full-year 2020 results and then spend more time discussing our year-over-year performance in Q4 of 2020, compared with Q4 of 2019, as well as, providing some comments on our sequential performance versus Q3.

Turning to full-year 2020 performance. Full-year revenue was a record $57.7 million, up 16% year over year from $49.6 million in 2019. This growth was driven by improvements in advertising and aiWARE Saas, offset by slight declines in content licensing due to cancellation of some live sporting events caused by COVID-19. In 2020, advertising grew 29% year over year, due largely to our VeriAds networks which we launched in late 2019, coupled with growth in our agency services.

aiWARE SaaS grew 30% year over year as we expanded our footprint in the media and entertainment, GLC, and energy markets. The real story is our sequential improvement in revenue throughout 2020 and the acceleration in our year-over-year revenue growth rate over the course of the year from down minus 2% in Q1 to up 8% in Q2 to up 23% in Q3 and up 35% in Q4. Our aiWARE SaaS growth, in particular, accelerated in the second half of 2020, growing 43% and 53% in Q3 and Q4, respectively, compared with the prior periods. I will get deeper into revenue drivers later.

Full-year gross profit reached $42 million, improving $7.7 million or 22% from 2019. This, too, was largely driven by aiWARE SaaS solutions which I will get into more detail later. Overall gross margins increased to 72.9% in 2020 compared with 68.7% in 2019. Full-year non-GAAP net loss was $20.6 million, a $15.6 million or 43% improvement over 2019 driven by improvements in core operations, and to a lesser extent, in corporate.

2020 non-GAAP net loss for core operations was $0.8 million, a $13.7 million or 94% improvement from 2019, driven largely by margin improvement, coupled with the full-year benefit of cost improvements enacted in the latter part of 2019. I will elaborate more on these improvements later. Now I would like to discuss our results for Q4 of 2020. Our Q4 revenue of $16.8 million was up 35% from Q4 of 2019.

Year over year, aiWARE SaaS solutions grew 53% to $4.4 million, compared with $2.9 million in Q4 2019. Driving this improvement was revenue from our new aiWARE energy market, where we continue to deliver important technology milestones in Q4, along with growth in our GLC and media and entertainment markets. While in the early stages of deliverables across the energy market, we remain incredibly bullish on our 2021 pipeline and growth prospects in this multibillion-dollar market and we expect to announce material developments and new bookings as early as Q2 of 2021. In addition, our aiWARE-enabled advertising services grew by $3.2 million or 50% year over year, driven by both the ramp of our VeriAds networks and growth in our agency services.

Our year-over-year growth was partially offset by slightly lower content licensing revenues due to fewer live sporting events as a result of COVID-19. We reported solid KPI results in Q4. Our advertising services improved average growth billings by 24% year over year to $632,000 in Q4, driven primarily by increased revenues in aiWARE-related initiatives across digital and podcasting markets. Our aiWARE SaaS Solutions grew total accounts on the platform by 77% year over year in Q4.

New bookings were down year over year due in large part to the timing of our large iHeartMedia agreement in Q4 of 2019, coupled with significant pending deals with GLC and energy customers shifting to the first half of 2021. Q4 gross profit reached $12.7 million, improving $3.8 million or 43% from Q4 of 2019. This increase was driven largely by the expansion of our aiWARE SaaS Solutions gross margins to 67.2%, an improvement of 63% versus Q4 of 2019. Sequentially, aiWARE SaaS margins improved each quarter, driven largely by the higher revenue level with a blended incremental margin of over 80% on new accounts and dramatically lower unit processing costs from efficiencies realized in our aiWARE operating system.

Overall, Q4 gross margins increased to 75.6%, compared with 71.8% in Q4 of 2019. As we continue to scale over the next 12 to 24 months, we expect to continue to improve aiWARE gross margins. Q4 non-GAAP net loss was a record $3.9 million, a $4.1 million or 52% improvement from Q4 2019, driven by improvements in both core operations and corporate. In Q4, core operations posted a record non-GAAP net profit of $1.1 million, compared with a non-GAAP net loss of $2.5 million in Q4 of 2019.

The $3.6 million year-over-year improvement was principally driven by the improvement in gross profit. In Q4, corporate non-GAAP net loss was $5 million, compared with $5.6 million in Q4 2019. A year-over-year improvement of $0.6 million or 11% was driven by net decreases in operating expenses, largely around personnel and professional services, yielded by cost reductions enacted in Q4 2019, coupled with lower overall travel as a result of COVID-19. Turning to our balance sheet.

We ended Q4 2020 with cash and restricted cash of $115.7 million, up $70.7 million from $44.9 million at December 31st, 2019. The year-over-year increase was driven largely by net cash provided by financing activities of $69.5 million and net cash provided by operations of $1.4 million. During the year ended December 31st, 2020, we raised net proceeds of $66.3 million in common stock offerings which includes our Q4 2020 sale of 3.5 million shares facing net proceeds of approximately $60 million and raised an additional $3.2 million through the exercises of warrants and employee stock options. The Q4 2020 capital raise gives us sufficient growth capital to execute on our near-term operating plans.

Net cash inflows from operating activities were $1.4 million during 2020, due principally to positive changes in our working capital of $22.8 million, principally associated with the timing of payments in our advertising services, offset by net cash usage driven primarily by our $20.6 million non-GAAP net loss during the period. As a reminder, approximately 35% of our reported cash is essentially held for payment to third parties for our advertising agency services and our working capital will continue to fluctuate depending on the timing and due dates of payments in any given period. Our unencumbered cash at the end of the year 2020 was over $70 million, a substantial improvement from approximately $20 million at the end of Q3 2020. We ended 2020 with 31.8 million shares outstanding.

Turning to Q1 and full-year 2021 financial guidance. Today will be the first time Veritone is providing annual guidance on both revenue and non-GAAP net loss. This is the direct result of the high visibility and confidence in our revenue pipeline, and more importantly, in our ability to drive renewals and net retention in our existing customer base. Now turning to Q1 2021.

We are excited to guide Q1 revenue to be approximately $17 million and $17.5 million, representing a 45% increase year over year at the midpoint and sequentially up from our strongest quarter ever in Q4 2020. We expect non-GAAP net loss to be between $4.4 million to $3.9 million, representing a 38% improvement year over year at the midpoint. We plan to invest responsibly in resources in key areas to help accelerate our growth throughout 2021. With this, we are forecasting our core operations division to once again be profitable in Q1 2021, and our corporate overhead non-GAAP net loss to be relatively consistent with Q4 2020.

I'll mention two additional items for Q1. As a result of the recent improvement in our share price, we will recognize a onetime noncash expense of approximately $16.2 million in Q1 2021 associated with divesting in certain performance stock awards during the quarter and a one-time noncash charge of approximately $4.5 million related to write-offs of leasehold improvements, furniture and certain other expenses associated with the sublease of our former corporate headquarters. For full-year 2021, we expect revenue to be between $76 million and $81 million, representing a year-over-year increase at 36% at the midpoint and over 40% at the high end and expect our aiWARE SaaS revenue to grow 60% to 65% year over year. And we expect non-GAAP net loss to be between $18 million and $14 million, representing a 22% improvement year over year at the midpoint.

We are forecasting to invest in growth this year, mainly in sales, engineering, and marketing, as well as, into our infrastructure as we roll out our first year Sarbanes offering requirements, corporate development initiatives and some planned early international expansion efforts. I look forward to meeting and speaking with investors. We plan to host a technology Expo in May 2021 following our Q1 2021 conference call. In addition, we will participate in upcoming events, including the ROTH Conference in March, and the Stifel conference in June.

That concludes my prepared remarks. I would like to turn the call over to Chad for final thoughts, and then we can open up the line for Q&A. Chad?

Chad Steelberg -- Chairman and Chief Executive Officer

Thanks, Mike. Reflecting on 2020, I'm extremely proud of the Veritone family and our continued strong performance. While the path to recovery from COVID-19 and all its economic and social fallout continues to evolve, we remain focused on our core mission. To harness the power of AI to help build a safer, more vibrant, transparent, and empowered society.

Last quarter's results, as well as, our strong 2021 guidance and long-term outlook demonstrate that aiWARE is delivering on its mission. Our expansion into the clean energy sector is a prime example of the universal applicability of aiWARE and the types of large and mission-aligned bets that Veritone will continue to make. We at Veritone see amazing opportunities for our technology to transform the world and we firmly believe that our aiWARE operating system is fundamental to this endeavor. With that, we would like to begin the Q&A session.

Operator?

Questions & Answers:

Operator

[Operator instructions] And the first question comes from Darren Aftahi with ROTH Capital Partners. Please go ahead.

Darren Aftahi -- ROTH Capital Partners -- Analyst

Hi, guys. Thanks for taking my questions. I hope you're well. Nice job on the quarter and nice to see the acceleration on the top line in 2021.

Just three questions, if I may. I think if my math is correct, your aiWARE SaaS revenues somewhere in the $22.5 million for 2021. First question is around the visibility with that. Second question on energy, where are you guys seeing the most traction with grid operators, equipment providers, battery companies, renewables, and maybe just talking about the general sales cycle with each of those? And then last one, any color you can give on Automate Studio, what verticals you're seeing adoption there and kind of is that going to be a needle mover in 2021? Thanks.

Chad Steelberg -- Chairman and Chief Executive Officer

Yeah. Thanks. I appreciate the questions. First one, why don't I tee it up to Mike to address that one, then I'll pick up the second one and the third.

Mike?

Mike Zemetra -- Chief Financial Officer

Yes. Yeah, sure. Thanks, Chad, Darren. Yeah, in terms of visibility, you know, I mentioned it earlier on the call.

You know, I think our -- the reason why we're providing an annual outlook is we are highly confident in that visibility and pipeline, in particular with Saas. So the visibility is there. The confidence is good and we're also -- the net retention that we're seeing even in our advertising business is pretty phenomenal. So -- and very strong in terms of pipeline.

So I hope that answers your question.

Chad Steelberg -- Chairman and Chief Executive Officer

Yeah. Let me -- I'll add on to that, Mike. As we sit here today, the book to business and pacing of existing customers in our M&E, SaaS, and advertising businesses already exceed -- let me be clear on this, already exceeds our revenues from those groups in all of 2020. And to that -- add to that the visibility we have on substantial contracts in the GLP and energy sectors, we are extremely confident in our guidance because of the book of business we know we already have which goes well beyond the classic definition of bookings and even TCV.

So moving to the second question, I think it was related to energy and sort of the go-to-market cycle there. Remember, we just launched our energy business in Q3 of last year. And as it ramps, it, of course, is going to be a little bit lumpy. Q4 energy revenues, however, were up roughly 50% from Q3, and as I said in my prepared remarks, right, we began getting collecting data back from our VE utility customers this past month and the early results are extremely impressive.

So stay tuned on what that means for the rollout here. But our go-to-market cycle is really penetrating primarily utility and IPP, independent power providers in the market today that already have existing operations and customers. This is where our technology makes the biggest difference and impact to end customers. And you've seen, as I mentioned again in prepared remarks, what's happened in California and Texas, and I think that's not unique.

I mean what we're seeing in Florida and other markets, they're having just a really difficult time with their green energy deployments, causing just massive catastrophes at the hardware level, as well as, in their ability to deliver quality power on a consistent basis to their end customers, especially as green power starts increasing as a total percentage of overall power supplied to those grids. It just becomes a greater and greater impact factor that can't be mitigated by other sources. So being able to predict, optimize, and control that grid and those green energy sources is going to be paramount to achieving our green energy objectives, not only domestically but abroad, and our go-to-market cycle is really classic business development. We've got a few channel partners that have already been engaged with us, but also, we are working with direct sales and have a number of the biggest utility companies, both domestically, internationally, engage with us.

So the last question was Automate Studio. Automate Studio launched, obviously, last year, we did a significant integration with Alteryx that we announced just recently. We're already starting to see upticks in customer adoption and use cases there. And we're working, as Ryan mentioned, with Alteryx management team and their go-to-market motion, both in the federal government sectors, as well as, in the commercial side with some really interesting novel use cases that begin to augment their analytics platform with now true artificial intelligence that can be applied to nearly any use case in those sectors.

So stay tuned there as we continue to roll that service out. What I'm most excited about that go-to-market motion is it's the first time Veritone has offered a completely self-service SaaS platform that allows end customers to self-sign up and provision and pay for our aiWARE solutions, specifically Automate Studio. So every great SaaS company that you can name has always had a direct self-service service that's been made available. I think Veritone is following in those footsteps.

Darren Aftahi -- ROTH Capital Partners -- Analyst

Thanks for the color.

Chad Steelberg -- Chairman and Chief Executive Officer

Sure.

Operator

The next question comes from Brad Reback with Stifel. Please go ahead.

Brad Reback -- Stifel Financial Corp. -- Analyst

Great. Thanks very much. A couple of quick ones from me. The sequential growth in the SaaS business, nothing short of outstanding, very strong.

How should we think about the shape of that curve over the course of '21? Were there any one-time items that drove 4Q a little higher and maybe there's -- a little low on 1Q or is this the new base level?

Chad Steelberg -- Chairman and Chief Executive Officer

Mike, why don't you take that?

Mike Zemetra -- Chief Financial Officer

Yeah. Yeah. I can take that one. I mean, in terms of next quarter, I think you're going to see similar things with sequential growth really coming from GLC and energy.

And then as we started, I mentioned, in Q2, we're looking to announce very promising activities around the energy sector. So there may be some onetime things in there like deliverables that would be enterprise level, for example and then it will sort of normal its way down. But our projections here on a quarter-over-quarter basis will follow our plan to follow a similar pattern with what you saw in 2020 as far as sequential growth.

Brad Reback -- Stifel Financial Corp. -- Analyst

Great. Got it. And then sort of one housekeeping note. What's the right share count that we should be using for the quarter and for the full year?

Mike Zemetra -- Chief Financial Officer

As far as the quarter, it's about 31.8 million shares.

Brad Reback -- Stifel Financial Corp. -- Analyst

And the year?

Mike Zemetra -- Chief Financial Officer

And, yeah, I would use 31.8 million right now for the year as well.

Brad Reback -- Stifel Financial Corp. -- Analyst

OK. Great. Thanks very much guys.

Mike Zemetra -- Chief Financial Officer

Good. Thanks, Brad.

Operator

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

Patrick Walravens -- JMP Securities -- Analyst

Oh, great. Thank you and let me add my congratulations on all the acceleration. If I can ask a big picture one for Chad, and then Mike, a follow-up for you. So Chad, can you help investors understand the distinctions between Veritone's strategy in AI and some of the other public companies like C3 and Palantir and Snowflake?

Chad Steelberg -- Chairman and Chief Executive Officer

Yeah. Hi, Pat. How are you today? Great. Happy to answer the question.

First, I think we can all agree that AI represents one of the greatest technological breakthroughs in the history of mankind. And as such, there is an enormous market opportunity to enterprise -- for enterprise artificial intelligence to augment and disrupt industries. You know, it's forecast, as I mentioned in my prepared remarks, to exceed over $100 billion annually with just a few years and we think that's a conservative estimate. But to answer your question more specifically, using that data as a backdrop, AI companies were -- are going to deliver on this opportunity through a number of different approaches.

Some are delivering point solution software. Others, as you just mentioned, like C3 and Palantir are more consulting and services-driven. While yet again, others are building out the hardware and compute infrastructure required to support this growth. Our approach is unique to this, leveraging our proprietary aiWARE operating system to deliver a universal platform for enterprise AI software that runs everywhere.

The diversity of our customers and the applications running on the aiWARE and the growth that we are experiencing reinforce our confidence in our strategic approach. Furthermore, as I discussed on the call, we are patterning our business and technology strategies on a historically successful playbook that's been pioneered by some of the largest technology companies in existence. And some of whom, not by happenstance, as you know, also happen to be some of our strategic partners. So we think we are very uniquely positioned in the AI marketplace.

But at the same time, extremely complementary to assist other companies in the space, like Alteryx and others, to start to fill some of the gaps in their product road map and really build a symbiotic relationship with companies like NVIDIA to drive further adoption and accelerate AI's importance in the market.

Patrick Walravens -- JMP Securities -- Analyst

All right. That's super. Thank you. And then, Mike, you know, in your script, you had something that you don't hear very often that kind of caught my attention.

So I was just wondering if you can elaborate on it. There is something about material developments and new bookings as early as Q2.

Mike Zemetra -- Chief Financial Officer

Yeah. So I sort of alluded to it earlier. This will be in the energy market. So a lot of the stuff that we've been working on, we're going to be looking forward to announcing some great stuff in the second quarter.

Patrick Walravens -- JMP Securities -- Analyst

OK. And then maybe one more just quick one. I mean, Chad, when you look at what happened in Texas, is that something that AI could have helped with?

Chad Steelberg -- Chairman and Chief Executive Officer

You know, it's interesting, when you really peel back the covers of what happened there, yes, we could have forecasted it. Yes, our modeling and control software would have given operators, I think, a much better picture and tried to control it. But at the end of the day, what happened in Texas was so severe that they ended up having some of their infrastructure, their wind turbines completely froze. They had major infrastructure on their coal-fired plants basically failing and even, I think, for 48 hours, they even had a nuclear energy power plant go offline.

So the confluence of the these factors regardless of controlling energy was so catastrophic that I don't think we would have been able to mitigate much of it. But at the end of the day, like as the infrastructure and independent power providers begin to flourish on the market and you start seeing more interconnects like the [Inaudible] exchange, but even on broader distribution long-haul lines, our technology would have absolutely mitigated it. Because we would have been able to pull in additional power from areas not being hit by that storm on a dynamic real-time basis to mitigate a lot of the impact that they had. So with the current infrastructure, probably difficult, but with what's planned in the future and what we're seeing in the road maps for a lot of the utilities, our technology would have been absolutely critical to mitigating that.

Patrick Walravens -- JMP Securities -- Analyst

OK. Great. Thank you.

Chad Steelberg -- Chairman and Chief Executive Officer

Thanks.

Operator

Next question comes from Mike Latimore with Northland Capital Markets. Please go ahead.

Unknown speaker

Hi, guys. This is [Inaudible] on for Mike. Congrats on a great quarter. Could you just give me an update on what type of revenue are you seeing in energy vertical? Or like is it license or recurring? And is the energy problem is more heavily weighted to new logos or upsells?

Chad Steelberg -- Chairman and Chief Executive Officer

I'll take that, Mike. So I'll take the second half. So it's both upsells and upgrades to existing customers as we expand the deployment across more additional green energy infrastructure, which includes both solar, as well as, battery infrastructure. But at the same time, we've got a very robust pipeline of other independent power providers and utility companies that will consist of, obviously, new logos that we'll be adding to our roster in 2021.

And the first question you asked again was?

Unknown speaker

Yeah, it's what revenues are you seeing energy verticals, yeah?

Chad Steelberg -- Chairman and Chief Executive Officer

Yeah, Mike.

Mike Zemetra -- Chief Financial Officer

Yeah, no problem. Yeah. So it'll be a variety. I think early on, you're going to see agreements that will be enterprise-type, but have some flavor of SaaS in terms of maintenance and support, and then you'll see also pure SaaS deliverables.

So it will be a mixture of both.

Unknown speaker

OK. All right. And how is the visibility into the legal project pipeline, like any catalyst this year for accelerating growth?

Chad Steelberg -- Chairman and Chief Executive Officer

Mike, why don't you take that one as well? I know you're more close to it.

Mike Zemetra -- Chief Financial Officer

Yeah. Yeah. So I mean, listen, we're having good experience on the legal side. You know, that's an area that can tend to be a little bit bumpy because it is highly dependent upon usage.

However, in terms of the Fed and utilizing some of our products in the legal side, we have great visibility on that. So the pipeline looks robust and we feel pretty confident it's going to continue to grow.

Unknown speaker

All right. And the last one, how important will Microsoft be as a channel this year?

Chad Steelberg -- Chairman and Chief Executive Officer

Yeah. I can answer that one, Mike. Microsoft, I think, is going to continue to be a strong go-to-market partner for us, both in terms of the sales motion but also a technology partner as we've expanded aiWARE to run natively on Azure. And that's just garnering further and further steam as more and more customers are piling in that cloud environment.

So as that symbiotic relationship continues to foster, I think Microsoft will be leaning into the relationship even more. So stay tuned.

Unknown speaker

Thank you.

Operator

[Operator instructions] The next question comes from Nick Mattiacci with Craig-Hallum. Please go ahead.

Nick Mattiacci -- Craig-Hallum Capital Group -- Analyst

This is Nick Mattiacci on for Chad Bennett. You guys mentioned you were partnering with a couple of multiple primary contractors for Air Force contracts. Can you just expand on what you're seeing there? And if that's an extension of the Air Force contract you guys won last year?

Chad Steelberg -- Chairman and Chief Executive Officer

Yeah. Ryan, Ryan, why don't you take that one.

Ryan Steelberg -- President

Yeah. So I think right now, as we discussed in our earnings call, we have teaming agreements with multiple -- actually almost up to a dozen of major Tier 1 prime contractors, ranging from BAE Systems to others. So our strategy is to both continue to reinforce and work through direct and executed teaming agreements with these large prime contractors. But what you'll see over the next few quarters is, Veritone's more aggressive approach and pushing to be more -- and bidding on more as a prime contractor.

Some of these use cases and opportunities, we feel that we, in effect also could be ultimately sole source. A good analogy of that would be our IDIQ with the Department of Justice, where we are the sole source prime contractor in that initiative. So again, we're going to be following a very traditional and successful playbook by being both a prime and a sub.

Nick Mattiacci -- Craig-Hallum Capital Group -- Analyst

Got it. And then I guess on the DOJ deal, I think last we heard in Q2 is that it was just beginning to ramp with revenues expected in Q3. Could you give us an idea of how much revenue was recognized in the second half of the year for that DOJ deal?

Ryan Steelberg -- President

Well, we won't break that out individually. What we can tell you is, as we -- our first ATO, authorization to operate with the Department of Justice was limited to their state attorneys' offices and what you'll see over the next few quarters is a material expansion of that relationship and compliance to support the breadth of the DOJ. We feel confident that we'll be able to talk more about that in Q2, but we do continue to believe that the DOJ will be one of our largest, if not our largest Fed customer for 2021 and beyond.

Nick Mattiacci -- Craig-Hallum Capital Group -- Analyst

OK. And just one last one for me. I asked about the energy vertical, but could you just characterize in any way the expected aiWARE revenue for 2021? Just the mix between upfront perpetual revenue and recurring revenue?

Chad Steelberg -- Chairman and Chief Executive Officer

Yeah. I think Mike addressed that on the prior question, but Mike, why don't you reiterate.

Mike Zemetra -- Chief Financial Officer

Yeah. I mean, it's a mix. I mean, we do have, in parts of our business, we're dependent upon usage and our -- other parts of our business, it's recurring and there'll be some enterprise-type stuff, particularly in the second quarter that will be a little bit more onetime. So it will be a mixture.

Nick Mattiacci -- Craig-Hallum Capital Group -- Analyst

Congrats on the quarter. Thanks.

Mike Zemetra -- Chief Financial Officer

Thank you.

Operator

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

Chad Steelberg -- Chairman and Chief Executive Officer

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 performed to achieve these record results. I want to personally thank each of them for their tireless efforts 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 all areas of our business and our teams are better positioned to capture them than they have been ever before. We look forward to reporting to you on our progress in the future. Goodbye. Have a good day.

Operator

[Operator signoff]

Duration: 51 minutes

Call participants:

Brian Alger -- Senior Vice President of Corporate Development and Investor Relations

Chad Steelberg -- Chairman and Chief Executive Officer

Ryan Steelberg -- President

Mike Zemetra -- Chief Financial Officer

Darren Aftahi -- ROTH Capital Partners -- Analyst

Brad Reback -- Stifel Financial Corp. -- Analyst

Patrick Walravens -- JMP Securities -- Analyst

Unknown speaker

Nick Mattiacci -- Craig-Hallum Capital Group -- Analyst

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