10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-38093

Veritone, Inc.

(Exact name of registrant as specified in its charter)

Delaware

47-1161641

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.)

1615 Platte Street, 2nd Floor, Denver, CO 80202

(Address of principal executive offices, including zip code)

(888) 507-1737

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Exchange Act:


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, par value $0.001 per share	VERI	The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2) of the Exchange Act. Yes ☐ No ☒

As of November 10, 2023, 37,052,309 shares of the registrant’s common stock were outstanding.

VERITONE, INC.

QUARTERLY REPORT ON FORM 10-Q

September 30, 2023

TABLE OF CONTENTS


Special Note Regarding Forward-Looking Statements		1
PART I.	FINANCIAL INFORMATION	2
Item 1.	Financial Statements (Unaudited)	2
	Condensed Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022	2
	Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Nine Months Ended September 30, 2023 and 2022	3
	Condensed Consolidated Statements of Stockholders’ Equity for the Three and Nine Months Ended September 30, 2023 and 2022	4
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2023 and 2022	6
	Notes to the Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	43
Item 4.	Controls and Procedures	44
PART II.	OTHER INFORMATION	46
Item 1.	Legal Proceedings	46
Item 1A.	Risk Factors	46
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	48
Item 3.	Defaults Upon Senior Securities	48
Item 4.	Mine Safety Disclosures	48
Item 5.	Other Information	48
Item 6.	Exhibits	49
Signatures		50

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and we intend that such forward-looking statements be subject to the safe harbors created thereby. All statements made in this Quarterly Report on Form 10-Q that are not statements of historical fact are forward-looking statements. Without limiting the generality of the foregoing, words such as “anticipates,” “believes,” “seeks,” “estimates,” “expects,” “intends,” “continue,” “can,” “may,” “plans,” “potential,” “projects,” “should,” “could,” “will,” “would” or similar expressions and the negatives of those expressions may identify forward-looking statements, although not all forward-looking statements contain these identifying words. Such forward-looking statements include, but are not limited to, any statements that refer to projections of our future financial condition and results of operations, capital needs and financing plans, competitive position, industry environment, potential growth and market opportunities, acquisition plans and strategies, compensation plans, governance structure and policies and/or the price of our common stock.

The forward-looking statements included herein represent our management’s current expectations and assumptions based on information available as of the date of this report. These statements involve numerous known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Factors that may cause or contribute to such differences include, but are not limited to:

▪

our ability to expand our aiWARE SaaS business;

▪

declines or limited growth in the market for AI-based software applications and concerns over the use of AI that may hinder the adoption of AI technologies;

▪

our ability to close on our Term Loan (as defined in Note 13) and our ability to obtain any additional capital to support our business growth, and the availability of such capital on acceptable terms, if at all;

▪

our reliance upon a limited number of key customers for a significant portion of our revenue, including declines in key customers’ usage of our products and other offerings;

▪

our ability to realize the intended benefits of our acquisitions and divestitures, including our ability to successfully integrate our recent acquisition of Broadbean (as defined in Note 3);

▪

our identification of existing material weaknesses in our internal control over financial reporting;

▪

fluctuations in our results over time;

▪

the impact of seasonality on our business;

▪

our ability to manage our growth, including through acquisitions and our further expansion into international markets;

▪

our ability to enhance our existing products and introduce new products that achieve market acceptance and keep pace with technological developments;

▪

actions by our competitors, partners and others that may block us from using the technology in our aiWARE platform, offering it for free to the public or making it cost prohibitive to continue to incorporate their technologies into our platform;

▪

interruptions, performance problems or security issues with our technology and infrastructure, or that of our third party service providers;

▪

the impact of the continuing economic disruption caused by macroeconomic and geopolitical factors, including the COVID-19 pandemic, the Russia-Ukraine conflict and related sanctions, the war in Israel, financial instability, inflation rates and the responses by central banking authorities to control inflation, monetary supply shifts and the threat of recession in the United States and around the world on our business operations and those of our existing and potential customers; and

▪

any additional factors discussed in Item 1A (Risk Factors) of Part I of our Annual Report on Form 10-K for the year ended December 31, 2022 and our other filings with the Securities and Exchange Commission (“SEC”), including this Quarterly Report on Form 10-Q and our future SEC filings.

All forward-looking statements are necessarily only estimates of future results, and there can be no assurance that actual results will not differ materially from expectations. You should carefully review these risks, as well as the additional risks described in other documents we file from time to time with the SEC. In light of the significant risks and uncertainties inherent in the forward-looking information included herein, the inclusion of such information should not be regarded as a representation by us or any other person that such results will be achieved, and readers are cautioned not to place undue reliance on such forward-looking information, which speak only as of the date of this report.

Moreover, we operate in an evolving environment. New risks and uncertainties emerge from time to time and it is not possible for our management to predict all risks and uncertainties, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual future results to be materially different from those expressed or implied by any forward-looking statements.

Except as required by law, we assume no obligation to update any forward-looking statements, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future. We qualify all of our forward-looking statements by these cautionary statements.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

VERITONE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share and share data)

(Unaudited)


	As of
	September 30, 2023			December 31, 2022
ASSETS
Cash and cash equivalents	$	72,070		$	184,423
Accounts receivable, net		49,691			56,001
Expenditures billable to clients		24,447			22,339
Prepaid expenses and other current assets		15,179			15,242
Total current assets		161,387			278,005
Property, equipment and improvements, net		11,595			5,291
Intangible assets, net		89,397			79,664
Goodwill		78,388			46,498
Long-term restricted cash		869			859
Other assets		17,787			14,435
Total assets	$	359,423		$	424,752
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable	$	40,512		$	36,738
Accrued media payments		84,346			102,064
Client advances		14,867			16,442
Deferred revenue		11,821			2,600
Contingent consideration, current		500			8,067
Other accrued liabilities		34,197			27,412
Total current liabilities		186,243			193,323
Convertible senior notes, non-current		138,416			137,767
Contingent consideration, non-current		317			—
Other non-current liabilities		15,744			13,811
Total liabilities		340,720			344,901
Commitments and contingencies (Note 9)
Stockholders' equity
Common stock, par value $0.001 per share; 75,000,000 shares authorized; 37,082,144 and 36,321,222 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively		37			36
Additional paid-in capital		460,827			451,162
Accumulated deficit		(442,071	)		(371,271	)
Accumulated other comprehensive loss		(90	)		(76	)
Total stockholders' equity		18,703			79,851
Total liabilities and stockholders' equity	$	359,423		$	424,752

The accompanying notes are an integral part of these condensed consolidated financial statements.

VERITONE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE LOSS

(in thousands, except per share and share data)

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
Revenue	$	35,133		$	37,196		$	93,363		$	105,838
Operating expenses:
Cost of revenue		7,187			7,097			21,761			20,725
Sales and marketing		12,892			13,920			38,706			37,565
Research and development		10,410			11,784			32,456			32,735
General and administrative		21,082			2,502			57,504			27,127
Amortization		6,624			5,504			17,767			15,730
Total operating expenses		58,195			40,807			168,194			133,882
Loss from operations		(23,062	)		(3,611	)		(74,831	)		(28,044	)
Other income (expense), net		(2,456	)		(1,249	)		1,409			(3,666	)
Loss before provision for income taxes		(25,518	)		(4,860	)		(73,422	)		(31,710	)
(Benefit from) provision for income taxes		(977	)		26			(2,622	)		(1,442	)
Net loss	$	(24,541	)	$	(4,886	)	$	(70,800	)	$	(30,268	)
Net loss per share:
Basic and diluted	$	(0.66	)	$	(0.13	)	$	(1.92	)	$	(0.84	)
Weighted average shares outstanding:
Basic and diluted		36,991,650			36,202,496			36,810,878			35,924,413
Comprehensive loss:
Net loss	$	(24,541	)	$	(4,886	)	$	(70,800	)	$	(30,268	)
Foreign currency translation (loss) gain, net of income taxes		1,749			66			(14	)		642
Total comprehensive loss	$	(22,792	)	$	(4,820	)	$	(70,814	)	$	(29,626	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

VERITONE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share amounts)

(Unaudited)


	Three Months Ended September 30, 2023
												Accumulated
						Additional						Other
	Common Stock					Paid-in			Accumulated			Comprehensive
	Shares			Amount		Capital			Deficit			Loss			Total
Balance as of June 30, 2023		36,889,862		$	37	$	458,385		$	(417,530	)	$	(1,839	)	$	39,053
Common stock issued under employee stock plans		222,927			—		420			—			—			420
Common stock withheld for employee taxes		(30,645	)		—		(85	)		—			—			(85	)
Stock-based compensation expense		—			—		2,107			—			—			2,107
Net loss		—			—		—			(24,541	)		—			(24,541	)
Other comprehensive loss		—			—		—			—			1,749			1,749
Balance as of September 30, 2023		37,082,144		$	37	$	460,827		$	(442,071	)	$	(90	)	$	18,703


	Nine Months Ended September 30, 2023
												Accumulated
						Additional						Other
	Common Stock					Paid-in			Accumulated			Comprehensive
	Shares			Amount		Capital			Deficit			Loss			Total
Balance as of December 31, 2022		36,321,222		$	36	$	451,162		$	(371,271	)	$	(76	)	$	79,851
Common stock issued under employee stock plans		816,690			1		1,062			—			—			1,063
Common stock withheld for employee taxes		(191,568	)		—		(1,088	)		—			—			(1,088	)
Common stock issued as part of contingent consideration		135,800			—		756			—			—			756
Stock-based compensation expense		—			—		8,935			—			—			8,935
Net loss		—			—		—			(70,800	)		—			(70,800	)
Other comprehensive loss		—			—		—			—			(14	)		(14	)
Balance as of September 30, 2023		37,082,144		$	37	$	460,827		$	(442,071	)	$	(90	)	$	18,703

The accompanying notes are an integral part of these condensed consolidated financial statements.


	Three Months Ended September 30, 2022
												Accumulated
						Additional						Other
	Common Stock					Paid-in			Accumulated			Comprehensive
	Shares			Amount		Capital			Deficit			Income			Total
Balance as of June 30, 2022		36,128,363		$	36	$	440,809		$	(371,096	)	$	472		$	70,221
Common stock issued under employee stock plans		226,577			—		417			—			—			417
Common stock withheld for employee taxes		(32,475	)		—		(217	)		—			—			(217	)
Stock-based compensation expense		—			—		5,172			—			—			5,172
Net loss		—			—		—			(4,886	)		—			(4,886	)
Other comprehensive gain		—			—		—			—			66			66
Balance as of September 30, 2022		36,322,465		$	36	$	446,181		$	(375,982	)	$	538		$	70,773

	Nine Months Ended September 30, 2022
												Accumulated
						Additional						Other
	Common Stock					Paid-in			Accumulated			Comprehensive
	Shares			Amount		Capital			Deficit			(Loss) Income			Total
Balance as of December 31, 2021		34,972,256		$	35	$	431,606		$	(345,037	)	$	(104	)	$	86,500
Cumulative-effect of accounting change adopted as of January 1, 2022		—			—		—			(677	)		—			(677	)
Common stock issued under employee stock plans, net		1,378,922			1		1,198			—			—			1,199
Common stock withheld for employee taxes		(497,593	)		—		(9,726	)		—			—			(9,726	)
Common stock issued for acquisition		116,550			—		1,929			—			—			1,929
Common stock issued as part of contingent consideration		352,330			—		6,440			—			—			6,440
Stock-based compensation expense		—			—		14,734			—			—			14,734
Net loss		—			—		—			(30,268	)		—			(30,268	)
Other comprehensive gain		—			—		—			—			642			642
Balance as of September 30, 2022		36,322,465		$	36	$	446,181		$	(375,982	)	$	538		$	70,773

The accompanying notes are an integral part of these condensed consolidated financial statements.

VERITONE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)


	Nine Months Ended September 30,
	2023			2022
Cash flows from operating activities:
Net loss	$	(70,800	)	$	(30,268	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization		20,154			16,494