Veritone, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Consolidated Financial Statements Details

Consolidated Financial Statements Details

3 Months Ended

Mar. 31, 2023

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Consolidated Financial Statements Details

NOTE 8. CONSOLIDATED FINANCIAL STATEMENTS DETAILS

Consolidated Balance Sheets Details

Cash and cash equivalents

As of March 31, 2023 and December 31, 2022, the Company had cash and cash equivalents of $139,707 and $184,423, respectively, including $67,943 and $93,118, respectively, of cash received from advertising customers for future payments to vendors.

Accounts Receivable, Net and Allowance for Credit Losses

Accounts receivable consisted of the following:


	As of
	March 31, 2023			December 31, 2022
Accounts receivable — Managed Services(1)	$	29,884		$	27,670
Accounts receivable — Software Products & Services(2)		18,442			26,969
Accounts receivable — Other		6,490			2,181
		54,816			56,820
Less: allowance for expected credit losses		(745	)		(819	)
Accounts receivable, net	$	54,071		$	56,001

(1)

Accounts receivable – Managed Services reflects the amounts due from the Company’s advertising customers.

(2)

Accounts receivable – Software Products & Services reflects the amounts due from the Company’s hiring solutions customers.

Allowance for Credit Losses Accounting

The Company maintains an allowance for expected credit losses in order to record accounts receivable at their net realizable value. Inherent in the assessment of the allowance for credit losses are certain judgments and estimates relating to, among other things, the Company’s customers’ access to capital, customers’ willingness and ability to pay, general economic conditions and the ongoing relationship with customers. The Company calculates the expected credit losses on a pool basis for those receivables that have similar risk characteristics aligned with the types of accounts receivable listed in the accounts receivable table above. Allowances have been recorded for receivables believed to be uncollectible, including amounts for the resolution of potential credit and other collection issues. The allowance for expected credit losses is determined by analyzing the Company’s historical write-offs and the current aging of receivables. Adjustments to the allowance may be required in future periods depending on how issues considered such as the financial condition of customers and the general economic climate may change or if the financial condition of the Company’s customers were to deteriorate resulting in an impairment of their ability to make payments. The Company has not historically had material write-offs due to uncollectible accounts receivable.

Property, Equipment and Improvements, Net

Property, equipment and improvements, net consisted of the following:


	As of
	March 31, 2023			December 31, 2022
Property and equipment	$	10,074		$	8,532
Leasehold improvements		254			250
		10,328			8,782
Less: accumulated depreciation		(3,934	)		(3,491	)
Property, equipment and improvements, net	$	6,394		$	5,291

Depreciation expense was $478 and $198 for the three months ended March 31, 2023 and 2022, respectively. Of the $10,074 in property and equipment as of March 31, 2023, $1,934 consisted of work in progress not yet placed in service for internal use software development costs. Depreciation of internal use software development costs was $282 and $41 for the three months ended March 31, 2023 and 2022, respectively.

Accounts Payable

Accounts payable consisted of the following:


	As of
	March 31, 2023		December 31, 2022
Accounts payable — Managed Services(1)	$	27,903	$	17,972
Accounts payable — Other		10,112		18,766
Total	$	38,015	$	36,738

(1)

Accounts payable – Managed Services reflects the amounts due to media vendors for advertisements placed on behalf of the Company’s advertising clients.

Consolidated Statements of Operations and Comprehensive Loss Details

Revenue

Revenue for the periods presented were comprised of the following:


	Three Months Ended March 31,
	2023		2022
Commercial Enterprise	$	28,868	$	33,626
Government & Regulated Industries		1,395		781
Total revenue	$	30,263	$	34,407

The Company serves two customer groups: (1) Commercial Enterprise, which today consists of customers in the commercial sector, including media and entertainment customers, advertising customers, content licensing customers and PandoLogic customers; and (2) Government & Regulated Industries, which today consists of customers in the government and regulated industries sectors, including state, local and federal government, legal, and compliance customers.

Software Products & Services consists of revenue generated from the Company’s aiWARE platform and PandoLogic’s talent acquisition solutions, any related support and maintenance services, and any related professional services associated with the deployment and or implementation of such solutions.

Managed Services consists of revenues generated from content licensing customers and advertising agency customers and related services.

The table below illustrates the presentation of our revenues based on the above definitions:


	Three Months Ended March 31, 2023
			Government &
	Commercial		Regulated
	Enterprise		Industries		Total
Total Software Products & Services	$	12,732	$	1,395	$	14,127

Managed Services
Advertising		10,535		—		10,535
Licensing		5,601		—		5,601
Total Managed Services		16,136		—		16,136

Total Revenue	$	28,868	$	1,395	$	30,263


	Three Months Ended March 31, 2022
			Government &
	Commercial		Regulated
	Enterprise		Industries		Total
Total Software Products & Services	$	17,386	$	781	$	18,167

Managed Services
Advertising		10,968		—		10,968
Licensing		5,272		—		5,272
Total Managed Services		16,240		—		16,240

Total Revenue	$	33,626	$	781	$	34,407

Other Income (Expense), Net

Other income (expense), net for the periods presented was comprised of the following:


	Three Months Ended March 31,
	2023			2022
Interest expense, net	$	(805	)	$	(1,182	)
Other		1,160			(4	)
Other income (expense), net	$	355		$	(1,186	)

Other in the table above consists primarily of foreign exchange gain of $1.2 million.

Provision for Income Taxes

The provision or benefit from income taxes for interim periods is determined using an estimate of the Company’s annual effective tax rate, adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter, the Company updates the estimate of the annual effective tax rate, and if the estimated tax rate changes, the Company records a cumulative adjustment.

The Company’s effective tax rate for the three months ended March 31, 2023 and 2022 was 1.2% and (0.6)%, respectively. The difference between the effective tax rate and the U.S. federal statutory rate of 21% is primarily due to a valuation allowance established on the majority of the Company’s federal and state net deferred tax assets. The change in our year-to-date effective tax rate is primarily driven by year-to-date losses generated by the Company’s foreign subsidiary.

As of March 31, 2023, the Company continues to provide a valuation allowance against all federal and state deferred tax assets. The Company continues to evaluate the realizability of deferred tax assets and the related valuation allowance. If the Company’s assessment of the deferred tax assets or the corresponding valuation allowance were to change, the Company would record the related adjustment to income during the period in which the determination is made.

The Company is subject to taxation in the United States, Israel, the United Kingdom, and various U.S. states. In general, the U.S. federal statute of limitations is three years. However, the Internal Revenue Service may still adjust a tax loss or credit carryover in the year the tax loss or credit carryover is utilized. As such, the Company’s U.S. federal tax returns and state tax returns are open for examination since inception. The Israeli statute of limitations period is generally three years commencing at the end of the year in which the return was filed. The Company is not currently under examination from income tax authorities in the jurisdictions in which the Company does business.

On August 16, 2022, the U.S. government enacted the Inflation Reduction Act (“IRA”) which, among other things, implements a 15% corporate alternative minimum tax based on the adjusted financial statement income for certain large corporations and a 1% excise tax on net share repurchases. The minimum tax and excise tax, if applicable, are effective for fiscal years beginning after December 31, 2022. The Company does not expect the IRA to have a material impact on its financial position, results of operations or cash flows. The Company will continue to monitor additional future guidance from the IRS.