Veritone Reports Third Quarter 2022 Results

- Q3 Revenue Up 64% Year Over Year Driven By 131% Increase in Software Products & Services and 20% Increase in Managed Services -

- Q3 Ending Software Customers Up 43% on a Pro Forma Basis Year over Year -

- Record Q3 New Bookings of $16.5 Million, Up 393% Year over Year -

- Ryan Steelberg to be Elevated to Chief Executive Officer, Effective January 1, 2023; Chad Steelberg to Continue Serving as Chairman of the Board -

- Ended Q3 2022 with $196.1 Million in Cash and Cash Equivalents⁽¹⁾ -

DENVER--(BUSINESS WIRE)-- Veritone, Inc. (NASDAQ: VERI), creator of aiWARE, a hyper-expansive enterprise AI platform, today reported results for the third quarter ended September 30, 2022.

“For the third quarter of 2022, Veritone reported revenue of $37.2 million, representing year-over-year growth of 64 percent on a GAAP basis and 5 percent on a Pro Forma basis. Over the same period, new bookings in the quarter grew nearly 400% and Software Products and Services customer count grew 43%, both on a Pro Forma basis,” said Chad Steelberg, Chairman and CEO of Veritone. “I am immensely proud of the team we have assembled, the technology we have developed, and the progress we have made in establishing a world-class AI operating system. Looking ahead, I have total confidence in Ryan and the stewardship he will employ in executing Veritone’s long-term strategy as Chief Executive Officer.”

Ryan Steelberg, President of Veritone added, “Overall, our customer growth, record bookings and increasingly diverse revenue base continue to demonstrate that Veritone’s business is not only resilient but poised for acceleration. We will continue to responsibly invest in growing the business while also leveraging our partners to expand market opportunities.”

Financial Highlights: Third Quarter 2022 Compared to Third Quarter 2021

• Revenue increased 64% on a GAAP basis to $37.2 million and increased 5% on a Pro Forma basis.
• Software Products & Services Revenue increased 131% on a GAAP basis to $20.8 million and decreased 5% on a Pro Forma basis.
• Ending Software Customers of 618 increased 43% year over year and 4% sequentially.
• Managed Services Revenue increased 20% to $16.4 million.
• Loss from operations decreased 67% to $3.6 million and non-GAAP gross profit increased 79% to $30.1 million and was up 3% on a Pro Forma basis.
• GAAP net loss was $4.9 million, as compared to $11.5 million.
• Non-GAAP net loss was $5.7 million, as compared to $2.3 million.
• Cash and cash equivalents⁽¹⁾ were $196.1 million as of September 30, 2022, as compared to $72.6 million as of September 30, 2021.
• Average Annual Revenue (AAR) per customer declined by 18% on a Pro Forma basis driven by a higher mix of newer customers offset by a decline in Amazon.
• Record Total New Bookings of $16.5 million increased 393% on a Pro Forma basis.
  
  Pro Forma basis assumes Veritone owned PandoLogic since the beginning of 2021. See below for a description of our non-GAAP measures and reconciliations to the most directly comparable GAAP measures.

⁽¹⁾ Including approximately $59.5 million of cash received from Managed Services clients for future payments to vendors.

Recent Business Highlights

• Veritone aiWARE selected by Deloitte to advance AI practice focused on helping clients rapidly discover and manage media, text and data at scale.
• Announced that more than 20% of California law enforcement agencies have adopted Veritone Contact, increasing approximately 80% in 2022.
• Launched SPORTX™, a global intelligent marketplace for sports federations and content producers to license short-form sports video directly to media buyers, maximizing additional revenue streams and their visibility amongst media organizations.
• Unveiled Veritone Tracker, a new AI-powered tracking solution that accelerates investigative efforts requiring rapid processing of video-based evidence in both public and private sectors.
• Established a strategic partnership with Stats Perform, the sports tech leader in data and AI, designed to provide real-time game updates.
• Announced a new strategic partnership with Exterro, the preferred provider of Legal GRC software specifically designed for in-house legal, privacy and IT teams at Global 2000 and AmLaw 200 organizations, to provide automated redaction for audio and video as part of the Exterro platform workflow.
• Released the findings of its second annual nationwide Transparency and Trust Report, focused on the relationship between law enforcement agencies (LEAs) and the communities they serve to provide insight into the broader public opinion on policing in the United States and how new technologies can improve transparency.
• Announced the integration of Veritone Digital Media Hub with iconik’s cloud native media management platform to help media organizations easily manage, share and license their content while speeding the path from media creation to management to monetization.
• Unveiled its next-generation Veritone Voice which gives content creators and publishers one of the most powerful and versatile voice solutions on the market.
• Launched Veritone Voice Network, a multilingual custom AI voice solution and podcast monetization service that combines synthetic voice creation and AI translation services to localize podcasts and grow ad revenues and audiences.

Leadership Transition

Veritone announced new roles for co-founders Chad Steelberg and Ryan Steelberg, effective January 1, 2023. Chad Steelberg, who has served as Chief Executive Officer and Chairman of the Board since Veritone’s inception in June 2014, has indicated he will resign as Chief Executive Officer on January 1, 2023 but will remain Chairman of the Board. Ryan Steelberg, who has served as President and a member of the Board, will become Veritone’s Chief Executive Officer on January 1, 2023, where he will continue to drive innovation and elevate the company’s product offerings. Ryan Steelberg will also continue to serve as a member of the Board.

Financial Results for Three Months Ended September 30, 2022

Achieved third quarter revenue of $37.2 million, up 64% from $22.7 million in the third quarter of 2021. Software Products & Services revenue reached $20.8 million, 131% greater than the third quarter of 2021, driven by customer and revenue growth in Commercial Enterprise. Managed Services revenue grew to $16.4 million, up 20% compared to the third quarter of 2021, driven by growth in content licensing services. GAAP net loss was $4.9 million, compared to $11.5 million in the third quarter of 2021, driven in part by a one-time non-cash benefit in Q3 of $12.9 million associated with estimated earn-out on the PandoLogic acquisition. Net loss margin was 13%, compared to 51% in the third quarter of 2021. Loss from operations decreased 67% to $3.6 million and non-GAAP gross profit increased to $30.1 million, up 79% compared to the third quarter of 2021, driven by continued growth in Software Products and Services. Non-GAAP gross margin improved to 81%, compared to 74% in the third quarter of 2021. Non-GAAP net loss was $5.7 million, compared to $2.3 million in the third quarter of 2021, largely driven by higher investments in people and infrastructure costs to grow and scale our business.

Third quarter Pro Forma Revenue improved 5% from $35.5 million in third quarter 2021. Driving this was Managed Services, which increased 20% year over year, offset by Software Products and Services – Pro Forma, which declined 5% year over year. During Q3 2022, Ending Software Customers increased 43% year over year; however, offsetting this was an 18% decline in AAR driven in large part by Amazon significantly reducing its hiring consumption across our platform.

As of September 30, 2022, the Company had cash and cash equivalents of $196.1 million, including approximately $59.5 million of cash received from Managed Services clients for future payments to vendors.

Business Outlook

Fourth Quarter 2022

• Revenue is expected to be in the range of $44 million to $46 million, as compared to $55.1 million in the fourth quarter of 2021.
• Non-GAAP net income is expected to be in the range of $3.0 million to $4.0 million, compared to $17.0 million in the fourth quarter of 2021.

Full Year 2022

• Revenue is expected to be in the range of $150 million to $152 million, as compared to $115.3 million in 2021.
• Non-GAAP net loss is expected to be in the range of $14 million to $15 million, as compared to non-GAAP net income of $6.8 million in 2021.

These updated financial targets supersede any previously disclosed financial targets and investors should not rely on any previously disclosed financial targets.

Conference Call

Veritone will hold a conference call using its synthetic voice technology, Veritone Voice, to deliver management’s prepared remarks on Tuesday, November 8, 2022, at 4:30 p.m. Eastern Time (1:30 p.m. Pacific Time) to discuss its third quarter 2022 results, provide an update on the business, and conduct a question-and-answer session. To participate, please join the audio webcast or dial-in and ask to be connected to the Veritone earnings conference call. To avoid a delay if dialing in, please pre-register or join the live audio webcast.

• Pre-Registration*
• Live Audio Webcast
• Domestic Dial-In: 844-750-4897
• International Dial-In: 412-317-5293

* Please note that pre-registered participants will receive their dial-in number and unique PIN upon registration.

About the Presentation of Supplemental Non-GAAP and Pro Forma Financial Information

In this news release, the Company has supplemented its financial measures prepared in accordance with U.S. generally accepted accounting principles (GAAP) with certain non-GAAP financial measures, including Pro Forma Revenue, Average Annual Revenue (AAR), Non-GAAP gross profit, Non-GAAP gross margin, Non-GAAP net income (loss), Non-GAAP net income (loss) per share and Non-GAAP net loss (pro forma). The Company has posted additional supplemental financial information on its website at investors.veritone.com concurrently with this press release.

Pro Forma Revenue includes historical Software Products & Services revenue from the past seven fiscal quarters of each of Veritone, Inc. and PandoLogic Ltd. (unaudited) and presents such revenue on a combined pro forma basis treating PandoLogic Ltd. as owned by Veritone, Inc. since January 1, 2021. Average Annual Revenue (AAR) is calculated as the aggregate of trailing twelve-month Software Products & Services Pro Forma Revenue divided by the average number of customers over the same period for both Veritone, Inc. and PandoLogic Ltd. Non-GAAP gross profit is defined as revenue less cost of revenue. Non-GAAP gross margin is defined as Non-GAAP gross profit divided by revenue. Non-GAAP net income (loss) and Non-GAAP net income (loss) per share is the Company’s net income (loss) and net income (loss) per share, respectively, adjusted to exclude interest expense, provision for income taxes, depreciation expense, amortization expense, stock-based compensation expense, changes in fair value of warrant liability, changes in fair value of contingent consideration, a reserve for state sales taxes, charges related to a facility sublease, gain on sale of asset, warrant expense, acquisition and diligence costs, and severance and executive search costs. Non-GAAP net loss (pro forma) is the Company’s Non-GAAP net income (loss) presented on a combined pro forma basis treating PandoLogic Ltd. as owned by Veritone, Inc. since January 1, 2021. The items excluded from these non-GAAP financial measures, as well as a breakdown of GAAP net income (loss), non-GAAP net income (loss) and these excluded items between the Company’s Core Operations and Corporate, are detailed in the reconciliations included following the financial statements attached to this news release. In addition, following the financial statements attached to this news release, the Company has provided additional supplemental non-GAAP measures of operating expenses, loss from operations, other income (expense), net, and loss before income taxes, excluding the items excluded from non-GAAP net loss as noted above, and reconciling such non-GAAP measures to the most directly comparable GAAP measures.

The Company has provided these non-GAAP financial measures because management believes such information to be important supplemental measures of performance that are commonly used by securities analysts, investors and other interested parties in the evaluation of companies in its industry. Management also uses this information internally for forecasting and budgeting.

These non-GAAP financial measures should not be considered as an alternative to revenue, net income (loss), operating income (loss) or any other financial measures so calculated and presented, nor as an alternative to cash flow from operating activities as a measure of liquidity. Other companies (including the Company’s competitors) may define these non-GAAP financial measures differently.

These non-GAAP financial measures may not be indicative of the historical operating results of Veritone or predictive of potential future results. Investors should not consider these non-GAAP financial measures in isolation or as a substitute for analysis of the Company’s results as reported in accordance with GAAP.

In addition, the Company defines the following capitalized terms in this news release as follows:

Core Operations consists of the Company’s aiWARE operating platform of software, SaaS and related services; content licensing and advertising agency services; and their supporting operations, including direct costs of sales as well as operating expenses for sales, marketing and product development and certain general and administrative costs dedicated to these operations.

Corporate principally consists of general and administrative functions such as executive, finance, legal, people operations, fixed overhead expenses (including facilities and information technology expenses), other income (expenses) and taxes, and other expenses that support the entire Company, including public company driven costs.

Software Products & Services consists of revenues generated from commercial enterprise and government and regulated industries customers using our aiWARE platform and PandoLogic’s talent acquisition software product solutions, any related support and maintenance services, and any related professional services associated with the deployment and/or implementation of such solutions.

Managed Services consist of revenues generated from commercial enterprise customers using our content licensing services and advertising agency and related services.

About Veritone

Veritone (NASDAQ: VERI) is a leader in enterprise artificial intelligence (AI) software and solutions. Serving organizations in both commercial and regulated sectors, Veritone’s software, services, and industry applications accelerate and maximize digital migration, empowering the largest and most recognizable brands in the world to run more efficiently, accelerate decision making and increase profitability. Veritone’s hyper-expansive Enterprise AI platform, aiWARE™, orchestrates an ever-growing ecosystem of machine learning models to transform audio, video and other data sources into actionable intelligence. Through professional and managed services, as well as its robust partner ecosystem, Veritone develops and builds AI solutions that solve the problems of today and tomorrow.

To learn more, visit Veritone.com.

Safe Harbor Statement

This news release contains forward-looking statements, including without limitation statements regarding the Company’s expectations regarding its significant opportunity to grow market share and the Company’s expected total revenue and Non-GAAP net income(loss) for Q4 2022 and for full year 2022. In addition, words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “plan,” “should,” “could,” “estimate” or “continue” or the plural, negative or other variations thereof or comparable terminology are intended to identify forward-looking statements, and any statements that refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements. These forward-looking statements speak only as of the date hereof, and are based on management’s current assumptions, beliefs and information. As such, the Company’s actual results could differ materially and adversely from those expressed in any forward-looking statement as a result of various factors. Important factors that could cause such differences include, among other things, the impact of the economic disruption caused by the COVID-19 pandemic and the Russian invasion of Ukraine on the business of the Company and that of its existing and potential customers; increasing interest rates and inflationary pressure; the Company’s ability to achieve broad recognition and customer acceptance of its products and services; the Company’s ability to continue to develop and add additional capabilities and features to its aiWARE operating system; the development of the market for cognitive analytics solutions; the ability of third parties to develop and provide additional high quality, relevant machine learning models and applications; the Company’s ability to successfully identify and integrate such additional third-party models and applications onto its aiWARE operating system, and to continue to be able to access and utilize such models and applications, and the cost thereof; as well as the impact of future economic, competitive and market conditions, particularly those related to its strategic end markets; and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the Company. Certain of these judgments and risks are discussed in more detail in the Company’s Annual Report on Form 10-K, as supplemented by Amendment No. 1 to our Quarterly Report on Form 10-Q/A for the three months ended March 31, 2022, and other periodic reports filed with the Securities and Exchange Commission. In light of the significant uncertainties inherent in the forward-looking information included herein, the inclusion of such information should not be regarded as a representation by the Company or any other person that the Company’s objectives or plans will be achieved. The forward-looking statements contained herein reflect the Company’s beliefs, estimates and predictions as of the date hereof, and the Company undertakes no obligation to revise or update the forward-looking statements contained herein to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events for any reason, except as required by law.

VERITONE, INC.
SUPPLEMENTAL FINANCIAL INFORMATION

We are providing the following unaudited supplemental financial information as a lookback of the trailing twelve months and the comparative quarter for the prior year to help investors better understand our recent historical and year-over-year performance. The Software Products & Services supplemental financial information is presented on a Pro Forma basis, as further described below.

Software Products & Services Supplemental Financial Information

Managed Services Supplemental Financial Information