Veritone, Inc. (VERI) Q4 2021 Earnings Call Transcript

Veritone, Inc. (VERI -2.73%)
Q4 2021 Earnings Call
Mar 03, 2022, 4:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good evening. Thank you for attending today's Veritone fourth quarter and year-end 2021 financial results conference call. My name is Bethany, and I will be your moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end.

[Operator instructions] I would now like to pass the conference over to our host. Please go ahead.

Unknown speaker

Good afternoon, and welcome to Veritone's fourth quarter and full-year 2021 conference call. I am the digital twin of Vin Scully, the legendary voice of the Los Angeles Dodgers from 1963 through 2010. Even though I have retired from calling Dodger games several years ago, my voice and passion for sports and great achievements in human history have me here with you today via Veritone Voice, the most advanced AI-powered synthetic voice platform in the world. I'm excited to introduce Veritone's fourth quarter and year-end 2021 conference call.

It's now my pleasure to hand the call off to Brian Alger, SVP, Investor Relations, and Capital Markets. Over to you, Brian.

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

Thank you, Mr. Scully. After the market closed today, Veritone issued a press release announcing results for the fourth quarter ended December 31, 2021. The press release and other supplemental information are available at the Investors section of Veritone's website.

Joining us for today's call are both the live and digital twin versions of Veritone's Chairman and CEO, Chad Steelberg; President Ryan Steelberg; and CFO Mike Zemetra, who will provide prepared remarks and then open up the call for a live Q&A session. We believe having an AI-led earnings call available in multiple languages is an industry first. Shortly after completing today's call, the remarks will be made available in six languages in Veritone's synthetic voices. 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 and non-GAAP net income and loss for the first quarter and full year of 2021, respectively.

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. These forward-looking statements are based on the assumptions as of today, March 3, 2022, and Veritone undertakes no obligation to revise or update them. During this call, the actual and forecasted financial measures that we'll be discussing other than revenue will be presented on a non-GAAP basis, unless noted otherwise.

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 Veritone's results between core operations and corporate. Core operations consist of Veritone's consolidated software products and services, including PandoLogic acquired in late September 2021, and managed services that include Veritone's content licensing and advertising services and their supporting operations, including direct costs and sales, as well as operating expenses for sales, marketing, and product development and certain general and administrative costs dedicated to these operations. Corporate consists of general and administrative functions, such as executive, finance, legal, people operations, fixed overhead expenses, including facilities and information technology expenses, other income or expenses and taxes, and other expenses that support the entire company, including public company-driven costs.

Veritone has aligned its organization to focus on two distinct customer groups: commercial enterprise, and government and regulated industries. Commercial enterprise today consists of customers in the commercial sector, including our media and entertainment customers, advertising customers, content licensing customers, and customers through PandoLogic that are not from the government or regulated industries. Government and regulated industries, also known as GRI, today consist of customers in the government and regulated industry sectors, including state, local and federal governments, legal, compliance, and energy customers. Across the commercial enterprise and government and regulated industries businesses, we separate revenue into two categories: software products and services, and managed services.

Software products and services consist of revenues generated from our aiWARE platform and through PandoLogic software product solutions, any related support or maintenance services, and any related professional services associated with the deployment and/or implementation of such solutions. Managed service solutions consist of revenues generated from our advertising agency and related services, and our content licensing services. Finally, I would like to remind everyone this call is being recorded and will be made available for a replay via a link on the Investors section of the company's website at www.veritone.com. Now I'd like to turn the call over to the digital twin of our Chairman and CEO, Chad Steelberg.

Chad?

Unknown speaker

Thank you, Brian. Good afternoon [Foreing language]. Before we begin, I want to take a moment to say that Veritone stands with Ukraine in its opposition to Russia and hope that one day, our AI is sufficient to help mitigate and, if necessary, actively resolve conflicts of this nature. As Brian noted, I am digital twin Chad.

Our customers, including the sports icon Mr. Vin Scully, are already using our synthetic voice for commercial purposes, and we are using it on this call today to give you a quick demonstration of one of our many aiWARE-powered applications. We suspect synthetic voice earnings calls will become the standard of the future. Without further ado, I'll review our pivotal quarter and year-end performance, which, without question, validates our AI operating system vision, our focused application strategy, and our team's exceptional performance.

Veritone delivered fourth-quarter 2021 revenue of $55 million and bottom-line non-GAAP net income of $17 million, resulting in several firsts for the company. Q4 was our first profitable quarter. 2021 was our first profitable year and our first year of positive cash flow. Our focus on profitability, operating efficiency, and our customer success have paid off.

These results are the culmination of years of hard work and determination and a continuation of a trend that we started nearly two years ago as Q4 is our seventh consecutive quarter of record revenue. While 2021 was a great year financially with revenue growth of 100% and operating leverage improving, the future looks even brighter as the network effect of our land-and-expand strategy and nearly perfect customer retention metrics laid the foundation for continued growth and profitability. We are guiding for full-year 2022 revenue to be more than 60% higher than 2021 with positive EBITDA. More than 2 decades ago, Marc Benioff declared software is dead.

Today, I am proud to state that AI is alive. It is alive in its direct impact on so many services that hundreds of millions of people benefit from on a daily basis. Veritone's aiWARE is now powering critical applications that underpin and make possible the world of tomorrow. Today, AI is alive.

It is alive in the podcast that we listen to every day, synthetically producing the content and advertising that inform and entertain us; in the delivery of our Amazon packages and Domino's pizzas through AI-powered recruiting, diligence and hiring; in saving the planet through optimizing the energy flow in Southern California, increasing efficiency and improving energy forecasting by more than 30%; in protecting our communities by helping police investigate crimes and providing transparency and communication with the public it serves; and in defending America and its allies by helping the Department of Defense manage and understand an ever-growing data set of information being created and collected on the ground, on the sea, in the air and even in space. aiWARE's impact is much bigger than my local community or personal life. It is impacting massive industries in profound ways, touching every corner of the world, and we are only getting started. aiWARE is poised to expand into every facet of our lives, both the real world and the metaverse yet to come.

It's important to note, not all AI companies are equal. Some companies are delivering machine learning models and tools. Others are providing consulting and integration services, and a few are delivering point solution applications in specific industries. However, only Veritone has developed an AI operating system with all of its supporting applications and services that can power a vast array of AI applications across any industry.

In fact, since our IPO roadshow, I have been saying that the future of AI will have a common operating system, just like how traditional computational software runs on a handful of common OSs, like Windows, Mac OSX, or Linux. We remain laser-focused on our AI operating system, aiWARE, and its ability to support an ever-expanding number of applications. aiWARE's mission is to improve enterprise AI capabilities by 100-fold by reducing application development time, boosting performance, and dramatically reducing compute cost. Our unique and differentiated business model paves the way for significant potential upside for our investors, our employees, and our loyal customers.

We do one thing and one thing very well, artificial intelligence. And based on our financial performance and customer metrics, I would say we do it better than anyone else. It's been a long process evolving from a start-up to a profitable AI leader, from building aiWARE as the first AI OS to developing award-winning AI applications. At the end of 2019, as we develop Version 3 of aiWARE, we set the target of expanding our gross margin from 40% to 80-plus percent, and we did it, check the box.

Also in 2019, we predicted law enforcement and public safety would be improved through the ethical use of AI. Check that box as well. Before we even went public, both Ryan and I publicly predicted the use of synthetic human voices in numerous industries. Check again.

aiWARE is more diverse, more powerful, more stable, and more profitable than anyone outside Veritone seems to realize. Similarly, in 2001, nobody thought Amazon, an online bookseller and now our largest customer, could become the online marketplace for everything in the future. But its focus on its core technology, what we now call AWS, is the engine that made that possible and is now the leading engine that powers the cloud. AI is 1,000 times more important, more powerful, and more diverse than any marketplace or cloud-computing infrastructure.

It is the future of humanity, and it's our only focus. We have reached another tipping point, and the continued translation of our vision into reality is accelerating. I'll elaborate. Just six years ago, Veritone had one AI model with one application used by less than five customers in one industry running on Version 1 of aiWARE.

We ended 2021 with hundreds of models, with dozens of applications used by over 500 customers in Ford Industries. Our Q4 results broke many records, including customer growth, negligible attrition, and SaaS revenue contribution, and this is just the beginning. We have been aggressively and systematically going after the market. We have formed numerous strategic relationships with global entities like Deloitte, Microsoft, and the U.S.

Federal government. In 2021, these enterprise partners tested the power of aiWARE. They were able to build new applications from scratch with 10% of the typical cost is one-tenth of the average time. Now they are believers.

And repeatedly, our partners have returned to aiWARE and our managed services teams to develop novel AI solution for their customers. Thus, we have entered a new stage in our land-and-expand strategy as we are now helping our partners land and expand their own AI solutions powered by aiWARE. In 2022, we expect increased adoption and believe it will further accelerate in 2023. This is the tipping point we have been striving for.

This is the point where it really gets interesting, the point where our customers use aiWARE to develop applications for their customers and, in turn, drive the geometric progression of our business, the point where AI application development and Veritone diverge, and the point where aiWARE creates enormous leverage to grow customers, end-users, revenue, and so on. The Veritone of the future will have billions of end-users, millions of customers, with less than 1% of the applications running on aiWARE being developed and owned by Veritone. We are building the OS of the future, and we've reached the tipping point. How do I know we have reached this point? Or rather and equally important for this call, how do I convince investors we have reached this point? Because our hard work is translating to metrics that investors can appreciate, value, compare and understand.

Our record Q4 and full-year 2021 KPIs, both operational and financial, are proof of our progression. In addition, we successfully integrated our acquisition of PandoLogic, proving our ability to grow inorganically at scale. While our technology is complex, our metrics and results are not. We are maniacal in our purpose to declare and prove that AI is alive and available for everyone.

We are leading the world into a new era, a new epoch, a new beginning where our biological limitations are augmented and enhanced through our symbiotic relationship with artificial intelligence. Steve Jobs once famously declared that the computer was a bicycle for the mind. This is one case where Steve may have been shortsighted. The computer is a mind that will one day surpass its creator.

As Ryan and Mike will detail in a moment, Veritone is executing and delivering on the strategy that we envisioned nearly seven years ago as AI gains trust and continues to deliver, accelerating efficiency, and unprecedented positive outcomes. We are convinced that aiWARE with its standardized adapter layer, common intelligent data lake, and standard APIs will drive broad-based enterprise adoption of cognitive solutions. Further enhancing this inherent strength, we find ourselves in an unprecedented period of employment choice. While many businesses are challenged by the current labor environment, Veritone is benefiting from our recent acquisition of PandoLogic and through the exceptional talent, we are now able to attract and leverage.

For Veritone, the current labor environment is our great opportunity. With over $250 million in cash and a cash flow-positive business, we are investing in our people and leaning into these advantages to further accelerate our growth and outpace our peers. I'll summarize. 2021 was our best year ever, and we expect accelerating growth in 2022 with our revenue guidance projected to be at least 60% higher than 2021, even when it is only forecasting our clear line of sight and omitting our customers' geometric adoption of aiWARE.

Most importantly, this is the year that proved that AI is alive. You might not see it yet, but trust me, it's there in the shows you watch, in the police that protects and serve you better, in the electricity that powers your electric vehicle, and so much more. And it's all running on aiWARE and getting smarter every day. Now I'll turn the call over to Ryan, our President, to provide further details on our operational progress.

Over to you, Ryan.

Thank you, Chad, and good afternoon [Foreign language]. We closed 2021 with yet another record performance. The outstanding results reflect our first full quarter after acquiring PandoLogic. Our integration is on track and cross-selling efforts are already beginning to bear fruit.

Starting with commercial enterprise. On the whole, Q4 '21 commercial enterprise revenues increased 248% over the prior-year period. Within commercial, our managed services grew 20% year over year, and our software and services revenue grew by nearly 1,200%. PandoLogic's contribution was obviously significant.

The business with Amazon, our largest customer, remains quite robust. However, customer growth for PandoLogic was over 100% in the quarter. Perhaps more importantly, our commercial business, excluding PandoLogic, grew 61% year over year in the December quarter, an outstanding quarter by every measure. Veritone is going from strength to strength.

Our bookings, retention, and new market offerings are delivering strong compounding growth. Our bookings hit a record high, eclipsing $8 million, and our organic bookings were up more than 130% versus the year-ago quarter. As we enter 2022, we are excited to have renewed and/or expanded virtually every single one of our commercial enterprise contracts. As Mike will detail shortly, our retention metrics remain in the top tier.

In February, we exemplified our land-and-expand strategy when our long-standing client iHeartMedia, the largest audio, and podcast company, announced it is licensing Veritone's synthetic voice technology for its podcast network. The implications are wide-reaching as Veritone is already the leader in podcast advertising, and we are rapidly building a deep list of synthetic content prospects to follow iHeartMedia's lead. When both large and small commercial businesses seek to leverage synthetic content, they are rapidly turning to Veritone. In November, we unveiled how Veritone's synthetic voice and conversational AI can help companies prequalify applicants.

This is just another example of how Veritone is bringing the metaverse to global enterprises. In the coming weeks and months, we will be talking more about our metaverse offerings. However, our already announced engagements should leave no doubt of Veritone's relevance in this emerging market, of which we are calling this strategy and focus the Veriverse. In addition to iHeart, we are inking deals in a number of voice markets beyond podcasting, like audiobooks, production studios, audio advertising, and digital influencers.

While announced in the prior quarter, our expanded licensing and NFT agreements with the Pac-12 and RECUR deserve attention as they represent just another piece of the Veriverse puzzle enabled by the aiWARE platform and our unique market position. In 2022, we expect to see strong growth from all of our commercial enterprise offerings with growth acceleration being driven by new PandoIQ customers, expanded DMH functionality, aiWARE, driven analytics and workflows, and synthetic voice, all of which are expanding our TAM. Shifting to our government and regulated industries, or GRI. GRI finished 2021 with strong momentum that has carried over into 2022, resulting in early booking strength.

Activity is accelerating across local, state, federal, and regulated markets. Recently, we announced that Veritone Contact has been licensed by nearly 100 California law enforcement agencies. While that rapid adoption is impressive on its own, it is the enterprise sale of our other products that holds greater revenue potential. Although not as material in revenue contribution today, the product-market fit and value that we are delivering into the public safety sector is incredibly high, and our rapid penetration of the California law enforcement agencies reflects that strength.

We are also excited to report significant expansion outside of California with some notable new customers, including the Indiana State Police, Sarasota County Sheriff, Henderson Police Department, DeKalb County Sheriff, and the Chamblee Police Department. In February, we also announced that Veritone was named to a $249 million bulk purchase agreement, or BPA, with the Joint AI Center, or JAIC, for the T&E portion of the broader AI data acceleration initiative. Veritone's penetration and brand within the Federal government have never been stronger, not just with the DoD, but across the DOJ and numerous other agencies. Ultimately, the results of the past several years of investment will shine in the financial results, if not in the press.

We expect to see material growth from our government customers represented in our financials this year. On the regulated side, we continue to make good progress. In February, we announced the statistical results of our forecasting technology up against the California Independent System Operator standard, known as CAISO. CAISO manages the flow of electricity on high-voltage power lines, operates the wholesale energy market, and oversees infrastructure planning in California.

With 31% better forecasting, Veritone has demonstrated the potential to save millions of dollars for energy participants while, at the same time, delivering better grid resiliency and reliability. Already, we have signed a contract with CPV in Southern California and are in advanced contracting discussions with another energy provider on the East Coast. This week's formal announcement for our terms suite of energy applications is directly targeting this important market opportunity. With our lead customer in the Southeast U.S., our software continues to run 24/7 in production on their equipment, delivering outstanding results.

We are in extended conversations regarding a much broader and extended deployment across the utility's entire clean energy portfolio. Needless to say, as soon as commercial terms are finalized, we look forward to providing more details. On the whole, Veritone is operating at its highest performance and efficiency and with more momentum than in any other time in our company's history. Our customer engagement is rapidly expanding, and the operational leverage enabled by aiWARE is just beginning to be realized.

Now I would like to hand the call off to Mike Zemetra, our CFO, to go through the financial results and guidance in more detail. Over to you, Mike. 

Thank you, Ryan. First, I want to thank our international investors and analysts around the world in China [Foreign language], Latin America, [Foreign language], in Germany [Foreign language]. Turning to Q4. I am excited to report we are performing at the highest levels with our seventh consecutive record quarter, our first quarter and year reporting positive non-GAAP results, and ending 2021 with cash in excess of $250 million.

More importantly, we have executed everything we outlined to you at the beginning of 2021, including generating over 50% year-over-year organic revenue growth from our software products and services and closing and integrating on our largest acquisition to date, PandoLogic, which contributed $38 million of revenue with over 50% operating margin and generated pro forma revenue growth over 50% year over year and ending the year and quarter profitable for the first time. Heading into 2022 with over 60% consolidated revenue growth, a rock-solid balance sheet, and profitability, we now have the business momentum and financial leverage to accelerate our growth story even further. During my prepared remarks, I will discuss our 2021 and Q4 year-over-year performance in KPIs on a non-GAAP and pro forma basis as if we own PandoLogic since the beginning of 2020, our November 2021 $200 million convertible debt financing and working capital, and Q1 and full-year 2022 guidance. Starting with full-year 2021 performance.

2021 revenue reached a record $115.3 million, up 100% year over year. Software products and services revenue increased 329% to a record $59.5 million, driven by the $38.0 million PandoLogic contributions and a 53% year-over-year increase in organic software products and services. Managed services grew $11.9 million or 27%, well above industry averages. On a pro forma basis, 2021 revenue increased 41% to $148.1 million, driven primarily by software products and services.

PandoLogic increased $23.8 million or 50%, and organic software products and services grew $7.3 million or 53%. Managed services increased by $11.9 million or 27%. As a percentage of total revenue, pro forma software products and services represented approximately 62% of total revenue in 2021 versus 58% in 2020. 2021 gross profit reached $93.2 million, improving $51.1 million or 122% from 2020.

Gross margins expanded to 80.1% in 2021 compared with 72.7% in 2020. On a pro forma basis, gross profit was $124.0 million, up $35.0 million or 39% from the prior year, and gross margins remained relatively constant at 84% in 2021, compared to 83.9% in 2020. I am very pleased to report that for the first time since inception, Veritone generated a full-year positive non-GAAP net income of $6.8 million as compared to a $20.6 million non-GAAP net loss in 2020. The remarkable $27.4 million improvements were driven by core operations, most notably from PandoLogic's approximate 50% operating margin contribution for the last four months of 2021, combined with increases in organic revenue.

On a pro forma basis, non-GAAP net income was $18.5 million, a 56% or $6.7 million improvement, representing an approximate 13% operating margin in each year. Now turning to Q4 2021 financial performance. Q4 revenue was a record $55.1 million, up $38.3 million or 228% from Q4 of 2020. Software products and services increased $35.8 million or 714% to a record $40.2 million in revenue, reflecting $34.0 million PandoLogic contributions and 41% year-over-year increase from organic software products and services led by growth in commercial media and entertainment, and government.

Managed services grew $2.5 million or 20%. On a pro forma basis, Q4 revenue increased 27% from Q4 2020. Software products and services increased 30%, driven by 47% growth in new software customers to 529 at Q4 2021, coupled with Q4 net customer retention of over 120%. On a pro forma basis, PandoLogic grew 28% year over year, driven by over 200% growth in non-Amazon customer revenue.

AAR was relatively flat year over year, which is driven by the timing of new customers, offset by the year-over-year pro forma growth in Amazon. Overall, our revenue pipeline has never been stronger. Our partner-driven channel strategy continues to deliver results. New bookings were $8.2 million in Q4 2021, an increase of over 450%.

Organic bookings growth was 238% in the quarter. 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. We have increased opportunities around enterprise offerings within GRI, new product applications, like synthetic voice technology, international expansion and licensing and other services, cross-selling of PandoLogic, the recent $249 million BPA announcement with the Joint AI Commission, and significant progress on our energy initiatives. In Q4, we reported solid KPI results.

New bookings were $8.2 million, up over 450% from pro forma Q4 2020. Gross retention continued to exceed 90%. Pro forma customers were up 47% year over year, and pro forma software AAR remained consistent year over year at $209,000. In managed services, advertising gross billings per active client increased to $625,000, up 15% over Q4 2020.

Q4 2021 advertising revenue continued to outpace prior year, approximating industry growth versus the robust strength shown in the first half of 2021, largely driven by the timing of new and larger event-driven campaigns by key customers in the first half of 2021. Q4 2021 gross profit reached $48.9 million, improving $36.2 million or 284% from Q4 of 2020. Gross margins expanded to 88.6% up, compared with 75.6% in Q4 2020 and 74.4% in Q3 2021, benefiting from the entire quarter inclusion of PandoLogic, which generated gross margins in excess of 90%. As we continue to scale over the next 12 to 24 months, including the full impact of PandoLogic, we expect total gross margins to exceed 80% throughout 2022, improving sequentially each quarter, reflecting PandoLogic seasonality.

On a pro forma basis, our Q4 gross profit of $48.9 million increased $10.1 million or 26% versus Q4 2020. Pro forma gross margins were relatively flat year over year at 88.6% to 89.6%. Q4 net income was a record $17.0 million, improving $20.9 million year over year. Core operations posted record net income of $21.2 million, compared with $1.1 million in Q4 2020, reflecting PandoLogic and the aforementioned gross margin expansion.

The corporate net loss improved to $4.3 million, compared to $5.0 million in Q4 2020, driven principally by lower personnel-related and rent expenses year over year. On a pro forma basis, Q4 non-GAAP net income increased $1.4 million or 9% versus Q4 2020, reflecting improved revenue and gross profit, offset by increased investments in opex, namely sales and engineering, organically and at PandoLogic to fund growth. Turning to our balance sheet. At December 31, 2021, we held cash and restricted cash of $254.7 million, including $66 million received from managed services clients for future payments to vendors.

This compares to $114.8 million at December 31, 2020. The increase reflects net cash inflows of $176.6 million from our November 2021 convertible debt offering and $7.2 million from operations, offset by $53.7 million in net cash used for the acquisition of PandoLogic. 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 Q4 2021 was over $188 million, which is sufficient to operate the existing business and support growth for the foreseeable future.

As a reminder, the result of the convertible debt financing was $201.3 million in gross proceeds after the greenshoe, generating net proceeds of $176.6 million to Veritone. Total cost of capital, including the capped call and 1.75% coupon, is approximately 3.8% with annual interest cash costs of approximately $3.5 million. We plan to use the proceeds for general corporate purposes and strategic acquisitions. We ended December 31, 2021, with 35 million shares outstanding.

Lastly, I want to note that in connection with PandoLogic achieving its 2021 financial target, we expect to pay out $21.7 million to PandoLogic shareholders by the end of Q1 2022, which will be comprised of $14.4 million in cash and $7.2 million in stock or approximately 350,000 shares valued at $20.53 per share. Turning to financial guidance for Q1 and full-year 2022. 2022 will be a significant growth year for Veritone. To support this growth and achieve our near and long-term objectives, we expect to continue making responsible investments.

These include forecasted increases in headcount by over 50%, which today includes just over 500 full-time employees. Our growth is largely dependent on these hires, the majority of which will be engineers, operational support, and sales. In addition, we have an active pipeline of strategic acquisitions to accelerate our planned organic growth and scale. In order to manage future growth and scale, we also need to invest in our infrastructure, including planned deployments of global systems, such as Oracle and Workday, in the first half of 2022.

Lastly, as Chad mentioned at the outset, where the world sees the great resignation, we see the great opportunity. We no longer have border restrictions on hiring. However, we also need to retain our current employees. And with higher inflation and wage increases globally, we will need to reinvest back into our current employees with newer retention rewards, higher annual raises, and richer benefits versus historical.

In total, we expect these one-time system and retention-related investments to be approximately $5 million of incremental costs to Veritone in 2022 versus 2021. With that backdrop and a reminder that PandoLogic has significant revenue seasonality with the lowest hiring in Q1 and accelerating quarterly throughout the year, we expect Q1 2022 revenue to be between $32.5 million and $33.5 million, representing an 80% increase year over year at the midpoint versus Q1 2021 GAAP and an increase of 39% versus Q1 2021 pro forma. Software products and services revenue is projected to increase over 80% as compared to Q1 2021 pro forma revenue, reflecting customer growth while maintaining consistent AAR and gross and net retention rates. Managed services revenue is expected to grow in the mid to high single digits.

We expect Q1 2022 non-GAAP net loss to be between $3.5 million and $4.5 million, which is relatively flat versus Q1 2021 on both a GAAP and pro forma basis. As a reminder, the majority of our operating costs are fixed and payroll-driven when comparing Q1 2022 to Q4 2021, the seasonal decline in revenue results, and a decrease of over $20 million in gross profit. Even with this, we are still forecasting our core operations to be profitable in Q1 2022 and our corporate overhead non-GAAP net loss to be relatively consistent with Q4 2021. For full-year 2022, we expect revenue to be between $180 million and $190 million, representing a year over year increase of over 60% at the midpoint on a GAAP basis and near 30% increase on a pro forma basis for 2022.

We expect our combined software products and services revenue growth to be over 100% year over year on a GAAP basis. We expect full year non-GAAP net income to be between $10 million and $20 million. At the midpoint, this represents an over 100% improvement when compared to 2021 non-GAAP net income. If you exclude the previously discussed one-time expenses associated with retention and system upgrades, non-GAAP net income would be projected to be slightly up when compared to 2021 pro forma.

It should be noted that in 2022, we expect our fully diluted share count to be between 45.2 million and 47.2 million shares, largely due to the as if converted accounting associated with our convertible debt offering and, to a lesser extent, the outstanding options, warrants, and RSUs held primarily by our employees. Before I close, we will be speaking at the following investor conferences this month: the JMP Securities Technology Conference, March 7 and 8; and the 34th Annual ROTH Conference, March 13 through the 15th. Operator, now we would like to open up the call for questions.

Questions & Answers:

Operator

Certainly. [Operator instructions] The first question comes from the line of Darren Aftahi with ROTH Capital Partners. Please go ahead.

Darren Aftahi -- ROTH Capital Partners -- Analyst

Hey, guys. Good afternoon. Thanks for taking my questions, and congrats on the nice work. A couple, if I may.

Mike, did I hear you right, you gave a GAAP growth number for '22 for software and services? Is that's correct? I'm just kind of curious what the underlay is on a pro forma basis? And then within that pro forma growth number, how contributory are things like government, basically GRI and MARVEL.ai? And then lastly, I know you talked about the incremental investment. But in terms of the acquisition, I mean, what are you guys going to do with that sort of net $200 million unencumbered cash in 2020? Are we going to see more acquisitions? Thank you.

Ryan Steelberg -- President

All right. That was a lot of questions. So maybe I'll start with the pro forma growth. So we don't really break out in terms of guidance what the pro forma growth is going to be.

But you can go back and look at -- we grew over 50% pro forma year over year in 2021 versus 2020. Now my expectation is it's not going to be that good because we do have concentration with Amazon. Amazon had a great year this year, and they just are significant in terms of hiring and PandoLogic. But you can expect, consistent with what we said all along, our 40%-plus target.

As far as what's going to comprise that growth, I mean, we're certainly going to see growth in commercial enterprise. PandoLogic is going to grow nicely. The synthetic stuff we talked about today is going to contribute to growth. But more importantly, I think you will see growth in GRI, particularly in government and on the energy side.

So it will be a healthy mix of both. And then as far as the capital, I mean, we've got a healthy balance sheet. None of our guidance includes acquisitions. We feel like we're in a good spot to be aggressive but to be responsible.

And so as I mentioned before, the use of proceeds on that is probably going to be for operating purposes and then for future acquisitions but nothing specific today. 

Darren Aftahi -- ROTH Capital Partners -- Analyst

Thank you.

Operator

Thank you, Mr. Aftahi. The next question comes from the line of Patrick Walravens with JMP Securities. Please go ahead.

Pat Walravens -- JMP Securities -- Analyst

Great. Thank you. Actually, Chad, I have to give credit to this question to my wife, who was walking through the kitchen and I go, this is Chad's digital twin talking. She's like, what's that? And I explained what it was.

And she goes, how do they do that? And I think that's right. I think that's a great question. How do you do that? So let's start with that, then I'll ask for something more traditional.

Chad Steelberg -- Chairman and Chief Executive Officer

Yes, absolutely. So as you could tell, there was some discrepancy in terms of the quality of the audio. If you know Ryan's voice, my voice, and Mike's voice, from my perspective, you could really tell that Ryan kind of was probably the best voice out there in terms of mimicking his voice most, right? Wouldn't you agree? 

Pat Walravens -- JMP Securities -- Analyst

Yes, I noticed that. Yes, yes.

Chad Steelberg -- Chairman and Chief Executive Officer

You noticed that I sound a little bit robotic. I sounded like that was kind of like Roboto guy. And then Vin Scully was epic. And it really comes down to and we're just literally chatting about this while the prepared remarks were being read, that the way it works is you provide a small sample of training data set.

And the better your training data set, the better the model performs. It's all hosted on aiWARE. Basically, we take the audio in. We run it through a training model, and we generate a voice profile that basically represents the individual.

We then can just feed text straight into the system and specify which voice we want to have prepared the remarks. So that's how we did this. You can also do voice to voice, where I can have you speaking live, Pat, but have the output of your speaking could be translated into an individual. So really, really powerful stuff.

Now the reason why I didn't sound necessarily as good as I've been busy, and I didn't have the time to spend on the training data. So I came out a little bit staccato, but you can really see where this goes. And I think it really also amplifies how important access to AI is for everybody. Because if you don't have access to AI and the ability to get the training data built up, you really are going to not have the same level of capabilities in communicating and access.

So it's interesting.

Pat Walravens -- JMP Securities -- Analyst

Yes. And can you just use -- so for example, lots of recordings you've been talking. Can you just use all those recordings? Or do you actually have to spend time on it live? 

Chad Steelberg -- Chairman and Chief Executive Officer

You can actually use -- go ahead, Ryan.

Ryan Steelberg -- President

Yes. Well, I mean, again, one of the luxury that we have of working with so many media and entertainment customers, as you know, we're sitting on tens of millions of hours of content and obviously our ability to ingest that into aiWARE, separate that content out, right, speaker separation, et cetera. We are also in a very unique situation to do this at scale. So our ability to isolate the voices, in effect, programmatically creating training data, right, which is a very unique opportunity for us.

But yes, we can repurpose a lot of historical footage. Obviously, the better quality -- think of it as just quality of training data begets quality of model relative to a number of hours of training data. So if I could have -- if we could isolate super high quality an hour worth of training data at a very high-fidelity bit rate performance, we may need one-tenth amount of training data. But to be clear, we're not talking about the difference of Ryan, my voice, of spending 100 hours of training data.

We're talking to the difference of only a few hours between Chad and Ryan. So this is something that we're obviously very excited about. We put out a press release about iHeartMedia, the largest audio company in the world, using this technology. And you've got a little bit of snippets in our speeches about the different languages.

So we're really excited about several of the major use cases that we're taking this to market with.

Pat Walravens -- JMP Securities -- Analyst

All right. Awesome. OK, now my more traditional question. So look, how would you guys characterize the demand environment that you're selling into now? And in particular, we're -- hopefully, it's going to stay this way, but we're exiting the pandemic, right? So is there a big sort of during the pandemic versus post-pandemic difference in buying behavior?

Chad Steelberg -- Chairman and Chief Executive Officer

Yes. Ryan, why don't you take that?

Ryan Steelberg -- President

Sure. I don't -- I mean our products, I don't think any of them have been directly correlated to the pandemic at all. The macro trends of people having choice to work remotely these days is obviously here to stay. But if you kind of look at all of our different business lines, I would say more than anything, maybe the COVID pandemic maybe was a catalyst for some of these things.

But again, as we see the demand for our products and services with state and local law enforcement, Fed, energy, and our traditional commercial products, we don't see any sort of dissipation at all on demand. And in certain areas, we actually see acceleration. So again, Pando was -- I mean, I'm sorry, the COVID and pandemic was definitely a catalyst for some elements, but I think our business is very diverse and it's very strong.

Pat Walravens -- JMP Securities -- Analyst

OK, great. Thank you.

Operator

Thank you, Mr. Walravens. Our next question comes from the line of Koji Ikeda with Bank of America. Please go ahead.

Koji Ikeda -- Bank of America Merrill Lynch -- Analyst

Hey, Chad, Ryan, and Mike. Thanks for taking the questions. So a couple of questions for me. First one, kind of going back to the government opportunity here.

So kind of finished the year, it looks like around $4 million of revenue. But a couple of big announcements over the past few weeks with the law enforcement contract and especially that DoD contract. So how should we be thinking about maybe the adoption or the revenue opportunity between both of those? And then more specifically on DoD, how long of an opportunity is this? I mean it's a pretty big contract. I do understand there's a bunch of different other companies that are also within that contract.

Is this a one-year opportunity, two-year opportunity, or maybe even longer like a 10-year opportunity?

Ryan Steelberg -- President

I'll take this one, Chad.

Chad Steelberg -- Chairman and Chief Executive Officer

Go for it, Ryan.

Ryan Steelberg -- President

Yes. So the opportunity with the Department of Defense, specifically the JAIC division, the Joint AI Center, these are efforts that started years ago. And that's just the price you pay to get into the space and tackle. What you see for us being able to successfully bid and be awarded as part of these bulk purchase agreements, OTA agreements, and others, it is a huge milestone.

We can't really undersell that. And yes, there is still a multitude of different customers under this BPA. But we're also, as you can imagine, heavily involved in a multitude of different awards and opportunities, not just within the JAIC but across many different areas of the Federal government. So this is one of many.

It will be a multiyear opportunity. We do expect specific task orders to come down here shortly for this BPA. But to be very clear, we are an approved vendor now, right? And that's a big thing. Obviously, the investments we made in FedRAMP and all of our security protocols, our provisioning with partners like Deloitte and others, are starting to pay dividends.

And we see this really as the tip of the iceberg.

Koji Ikeda -- Bank of America Merrill Lynch -- Analyst

Got it, got it. OK. Thanks for that, Ryan. And then maybe a question for Mike.

Synthetic Mike was rattling off a lot of PandoLogic numbers. I just wanted to make sure I got it right. What was the full-year contribution from a pro forma basis of PandoLogic? And I guess first housekeeping question.

Mike Zemetra -- Chief Financial Officer

Yes, $38 million of revenue with a slightly over 50% contribution mark for --not pro forma but for our GAAP year, yes, for Q4 and Q3.

Koji Ikeda -- Bank of America Merrill Lynch -- Analyst

OK. So do you think kind of the -- so i guess from a pro forma basis, then it's probably about $75 million. Is that right? And you're just thinking about that --

Mike Zemetra -- Chief Financial Officer

Probably closer to $70 million. Yes, closer to $70 million on a pro forma basis.

Koji Ikeda -- Bank of America Merrill Lynch -- Analyst

OK, $70 million, still well above the $50 million. So how do we think about the growth with PandoLogic, contribution of Pandologic within the 2022 guidance. Thanks for taking my questions, guys. 

Mike Zemetra -- Chief Financial Officer

Sure. Yes, this is the gift that keeps on giving, very healthy double-digit growth. I mean 30% plus year over year. And what's happening with PandoLogic, Ryan alluded to it, is sort of post pandemic, the world has changed.

And we call it the great opportunity where not just the employer has challenges in hiring, but the employee now has complete flexibility because we're all mobile. And that requires technology to find that right person and for that person to find the right employer. And we are projecting very healthy triple-digit growth in non-Amazon-related customers. So we're very happy with PandoLogic and its projections.

Koji Ikeda -- Bank of America Merrill Lynch -- Analyst

Got it. Thanks, Mike. Thanks for taking my questions, guys.

Mike Zemetra -- Chief Financial Officer

Yes.

Operator

Thank you, Mr. Ikeda. The next question comes from the line of Chad Bennett with Craig-Hallum. Please go ahead.

Chad Bennett -- Craig-Hallum Capital Group -- Analyst

Great. Thanks for taking my questions. Again, one for Mike probably. So again, I don't recall because it was rapid fire a little bit on the prepared remarks.

So on the $8.2 million in bookings for the quarter, did you say how much was Pando related and non-Pando in your prepared?

Mike Zemetra -- Chief Financial Officer

No, we don't break that down. But the majority is organic.

Chad Bennett -- Craig-Hallum Capital Group -- Analyst

Majority organic. OK. And then of that $8.2 million in bookings, is -- and then maybe also going forward, more for the organic software business, how much of that business, either bookings or revenue is recurring at this point or truly SaaS?

Mike Zemetra -- Chief Financial Officer

Yes. So a healthy -- we've disclosed before, PandoLogic's revenue is more event-driven, which creates the seasonality.

Chad Bennett -- Craig-Hallum Capital Group -- Analyst

Yes. I was speaking more of non-Pando, I guess, I'm more focused on.

Mike Zemetra -- Chief Financial Officer

Yes. I mean, as far as exact percentage, I mean, I'd say the majority is actually SaaS. I mean on the M&A side, it's recurring type of revenue. On the GRI side, it is -- at least for the past 12 months, it has been recurring for the most part.

But we will see some enterprise here shortly, where it will be sort of proof of concept with revenues maybe coming on deliverables and then more fully bled out SaaS recurring post delivery. But the majority certainly on the commercial side outside of Pando is recurring.

Chad Bennett -- Craig-Hallum Capital Group -- Analyst

Got it. And then maybe one last one real quick for me. Just on -- with what you indicated in terms of Pando growth this year, which looks pretty impressive off a great year. So we're going to be potentially north of $90 million in that business if I'm kind of doing the math right.

In terms of how we think about contribution margin, EBITDA, is that -- I mean I know it's all in one, but that business still kind of potentially turns out 50% type EBITDA margins at above that $90 million run rate. Or should we think differently on that?

Mike Zemetra -- Chief Financial Officer

Yes. I mean, yes, plus or minus a few percentage points, but that's the best way to think about it.

Chad Bennett -- Craig-Hallum Capital Group -- Analyst

OK. Thanks much.

Mike Zemetra -- Chief Financial Officer

Yes.

Operator

Thank you, Mr. Bennett. Our next question comes from the line of Mike Latimore with Northland Capital Markets. Please go ahead.

Mike Latimore -- Northland Securities -- Analyst

Great. Thank you. Yes, love the presentation there. I was fun.

In terms of the PandoLogic Veritone kind of cross-sell opportunities, I know it's still early days. But maybe can you talk a little bit about what you're seeing? What kind of use cases are emerging here?

Ryan Steelberg -- President

Mike, I'll take that.

Chad Steelberg -- Chairman and Chief Executive Officer

Ryan, why don't you take that?

Ryan Steelberg -- President

Yes. We see almost every single one of our mutual customers applicable for both Pando services and, frankly, the balance of AI-related services. We have already closed deals cross-selling. I think the integration, we really don't even look at them internally, candidly, between like organic and inorganic.

We really are becoming a very single-integrated company. And they're definitely benefiting not just from our enhanced technology capabilities and we're not going into details today, but we've already made some great milestones as it relates to aiWARE integration with PandoLogic. But also our ability to -- which is kind of unique is they really historically have tapped into talent acquisition budgets. Obviously, Veritone has a very strong branding and advertising side of our business as well.

And you're seeing those two elements come more congruous together where, obviously, the branding and corporate side of advertising and brand building is now getting a lot more involved in talent acquisition. Obviously, hiring is a major issue for a lot of companies. So we're really excited. And we think there's just a ton of synergy that we expected, but we're already seeing the realization of that.

Mike Latimore -- Northland Securities -- Analyst

Great. And then on PandoLogic, what kind of innovations or technology advancements are you thinking about this year for Pando itself?

Ryan Steelberg -- President

I think the big one is just the continued advancement of PandoIQ making -- again, trying to streamline all of the programmatic nature of the opportunity. As we go from large, I'll say, more dominantly national accounts, like Amazon and others, we're seeing very strong demand for, I'd say, more regional and local opportunities where there's just a ton of, let's say, hiring demand and turnover issues. So trying to make it as efficient when we look at local and regional-based hiring is something that is a core focus of ours. Also, the integration, which we touched on in the previous call and sort of talked a little bit as we've gone through the acquisition, is the conversational AI and Wade & Wendy integration, which we'll be talking about in some of the product updates here over the next several weeks.

But trying to really automate that so you really have a continuity from an end-to-end perspective as the candidate enters the door in the system, all the way through the onboarding process. We're really excited about the growth and opportunities for leveraging AI and our conversational AI framework to automate that.

Mike Latimore -- Northland Securities -- Analyst

Great. Thanks a lot.

Ryan Steelberg -- President

Thank you.

Operator

Thank you, Mr. Latimore. There are no additional questions waiting at this time. I would now like to pass the conference back 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. I'm very pleased with Veritone's performance this past quarter and past year. But I'm even more excited about what lies ahead. We appreciate your time today and the opportunity to share the exciting progress we are making toward our mission of making the world better through artificial intelligence.

Until next time, goodbye.

Operator

[Operator signoff]

Duration: 55 minutes

Call participants:

Unknown speaker

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

Darren Aftahi -- ROTH Capital Partners -- Analyst

Ryan Steelberg -- President

Pat Walravens -- JMP Securities -- Analyst

Chad Steelberg -- Chairman and Chief Executive Officer

Koji Ikeda -- Bank of America Merrill Lynch -- Analyst

Mike Zemetra -- Chief Financial Officer

Chad Bennett -- Craig-Hallum Capital Group -- Analyst

Mike Latimore -- Northland Securities -- Analyst

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