Veritone Reports Second Quarter 2023 Results

– Q2 Total Revenue and Software Revenue of $28.0 and $14.1 million, respectively –

– ARR⁽¹⁾ of $108 million from 3,705 Total Software Products & Services Customers⁽¹⁾, including $47 million from subscription-based customers⁽¹⁾ –

– Cost reduction initiatives achieved to date resulting in over $17 million of annualized savings, including successful divestiture of Energy Group in Q2 2023 –

– Successfully completed acquisition of Broadbean in June 2023, accelerating revenue growth and market share opportunities across +3,000 HR Solutions customers –

DENVER–(BUSINESS WIRE)–Veritone, Inc. (Nasdaq: VERI), a leader in enterprise AI software and services, today reported results for the second quarter ended June 30, 2023.

“Veritone executed against its strategy through opportunistic topline acceleration and long-term margin expansion initiatives in the second quarter,” said Ryan Steelberg, Chief Executive Officer and President of Veritone. “We remain at the forefront of the global AI transformation and are constantly evaluating avenues to further buildout core competencies, achieve operational excellence and preserve our first mover advantage. The global demand for Veritone’s AI software and services that drive productivity and efficiency gains, as well offer actionable insights from disparate data sources, has never been greater. We believe the company is strategically positioned to capitalize on the opportunities that lie ahead to deliver profitable growth and drive long-term shareholder value.”

Second Quarter 2023 Financial Highlights

• GAAP and Pro Forma revenues of $28.0 and $34.7 million, a decrease of 18% and 19%, respectively, compared to GAAP and Pro forma revenues, respectively, for Q2 2022 driven primarily by a decline in one-time nonrecurring Software Products & Services revenue.
• Pro Forma Software Products & Services revenues of $20.9 million, a decrease of $5.8 million or 22% compared to Pro Forma Software Products & Services revenue for Q2 2022.
• Managed Services revenue of $13.9 million, as compared to $15.9 million in Q2 2022.
• Total Software Products & Services Customers⁽¹⁾ of 3,705, flat compared to Total Software Products & Services Customers for Q2 2022⁽¹⁾ and a 1.8% decrease compared to Q1 2023.
• Total New Bookings⁽¹⁾ of $8.4 million, down 62% compared to Q2 2022, driven by reduced HR consumption from Amazon, a major customer.
• Annual Recurring Revenue (ARR) ⁽¹⁾ of $107.9 million, down 17% compared to ARR for Q2 2022, driven by drop in consumption-based ARR.
• Loss from Operations of $28.2 million, as compared to a loss of $3.6 million in Q2 2022 driven by a one-time non-cash benefit of $13.8 million in Q2 2022 coupled with a decline in non-GAAP gross profit.
• Non-GAAP gross profit of $20.2 million, a decrease of $7.3 million compared to Q2 2022 driven by a decrease in one-time software revenue.
• Net Loss of $23.3 million, as compared to $3.3 million in Q2 2022.
• Non-GAAP Net Loss of $13.0 million, as compared to $7.2 million in Q2 2022.
• Cash and cash equivalents⁽²⁾ of $62.7 million on June 30, 2023, as compared to $139.7 million at March 31, 2023.

Note Regarding Pro Forma Information

“Pro Forma” information provided in this press release represents the historical information of Veritone combined with the historical information of Broadbean (as defined below) for the applicable period on a pro forma basis as if Veritone had acquired Broadbean on January 1, 2022. Veritone completed its acquisition of (i) all of the issued and outstanding share capital of (a) Broadbean Technology Pty Ltd ACN 116 011 959 / ABN 79 116 011 959, a limited company incorporated under the laws of Australia, (b) Broadbean Technology Limited, a limited company incorporated under the laws of England and Wales, (c) Broadbean, Inc., a Delaware corporation and (d) CareerBuilder France S.A.R.L., a limited liability company organized (société à responsabilité limitée) under the laws of France, and (ii) certain assets and liabilities related thereto (the foregoing clauses (i) and (ii) together, “Broadbean”) on June 13, 2023.

Recent Business Highlights

• Closed the acquisition of Broadbean, a global leader of software as a service (SaaS) technology that makes talent acquisition and engagement more efficient. Total consideration paid was $53 million in cash on a debt-free basis, subject to certain adjustments in the purchase agreement. The acquisition is expected to significantly strengthen Veritone’s AI-driven human resources product suite, building on the Company’s previous acquisition of PandoLogic.
• Announced a series of product enhancements to Veritone GLC products, delivering greater customization capabilities to enable users in the legal and law enforcement sectors to operate with a higher overall degree of efficiency, effectiveness and seamlessness.
• Through recent customer bookings, Veritone now services over 275 Law Enforcement Agencies (LEA), and thousands of sworn officers. This expansion also includes the cross-selling of HR Solutions with and into the LEA space, with several active customers.
• Veritone, through its GLC division, has contracted with the United States Senate to provide them with an intelligent digital asset management platform utilizing its Digital Media Hub (“DMH”) solution.
• Completed a partnership with Major League Baseball (MLB) to distribute short-form video content through SPORTX, Veritone’s Sports and Media Licensing offering. SPORTX is a premier intelligent marketplace enabling media buyers direct access to sports video from around the globe, maximizing additional revenue streams and increasing visibility for rights holders.
• Secured a three-year HR Solutions SaaS agreement with a large healthcare and health-tech provider for North American job distribution with significant opportunities to expand the relationship globally.
• Executed on $17 million of the annualized strategic cost reduction initiatives announced in Q1 2023, exceeding the annualized savings target for 2023.
• Completed the energy group divestiture, effective June 30, 2023, in exchange for a minority interest in GridBeyond Limited, a privately-held company that delivers intelligent energy solutions.
• Entered into a Ledgered ABL Agreement with Alterna Capital Solutions, LLC for a three-year, revolving credit facility totaling up to $30 million. The credit facility is senior secured by certain domestic accounts receivable and other assets, bears annual interest at US Prime + 1% (9.5% floor), with minimum interest of $0.25 million per year in the event the line is not drawn upon and has a one-time upfront facility fee of $0.45 million. The credit facility provides additional financial flexibility and liquidity on the Company’s balance sheet.

Financial Results for Three Months Ended June 30, 2023

Delivered second quarter revenue of $28.0 million, a decrease of $6.3 million or 18% from $34.2 million in the second quarter of 2022. Driving this decrease was Software Products & Services revenue of $14.1 million, which declined $4.3 million or 23% year over year attributed to $5.7 million of non-recurring software revenue in Q2 2022. Managed Services revenue decreased by $2.0 million, or 13%, to $13.9 million, driven by lower advertising revenue and spend, offset by growth in content licensing services. Loss from operations was $28.2 million as compared to a loss of $3.6 million in Q2 2022 driven in part by a non-cash benefit of $13.8 million in Q2 2022 associated with a revaluation of certain contingent consideration, coupled with the decline in non-GAAP gross profit. Non-GAAP gross profit of $20.2 million in Q2 2023 declined by $7.3 million year over year due to the decrease in one-time software revenue. Non-GAAP gross margin was 72%, as compared to 80% in the second quarter of 2022, and declined primarily due to the mix of revenue.

GAAP net loss was $23.3 million, compared to $3.3 million in the second quarter of 2022, driven in part by the increase in loss from operations. Non-GAAP net loss was $13.0 million, a decline of $5.8 million compared to $7.2 million in the second quarter of 2022, largely driven by the decline in revenue and corresponding non-GAAP gross margins.

During Q2 2023, Total Software Product & Services Customers of 3,705, on a Pro Forma basis, remained relatively flat year over year, given the focus of Broadbean over the last 18 months on customer retention. Total New Bookings on a Pro Forma basis decreased by 62% to $8.4 million versus the comparable period a year ago largely driven by a reduction in spend from Amazon. Annual Recurring Revenue on a Pro Forma basis decreased 17% year over year to $107.9 million driven in large part by the decline in consumption revenue from Amazon over the trailing twelve months ended Q2 2023 as compared to Q2 2022, offset by a 7% increase in subscription-based revenue year over year to $47.7 million. Excluding Amazon, Pro Forma Software revenue growth was 19% year over year.

As of June 30, 2023, the Company had cash and cash equivalents of $62.7 million, including approximately $52.7 million of cash received from Managed Services clients for future payments to vendors.

Business Outlook

Third Quarter 2023

• Revenue is expected to be in the range of $35.5 million to $37.5 million, as compared to $37.2 million in the third quarter of 2022.
• Non-GAAP net loss is expected to be in the range of $6.5 million to $8.5 million, compared to non-GAAP net loss of $5.7 million in the third quarter of 2022.

Full Year 2023

• Revenue is expected to be in the range of $128.0 million to $135.0 million, as compared to $149.7 million for fiscal 2022.
• Non-GAAP net loss is expected to be in the range of $28.0 million to $33.0 million, compared to non-GAAP net loss of $15.9 million for fiscal 2022.

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

Conference Call

Veritone will hold a conference call using its synthetic voice technology, Veritone Voice, to deliver management’s prepared remarks on Tuesday, August 8, 2023, at 4:30 p.m. Eastern Time (1:30 p.m. Pacific Time) to discuss its second quarter 2023 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 Call Number: (844) 750-4897
• International Call Number: (412) 317-5293

A replay of the conference call can be accessed one hour after the end of the conference call through August 15, 2023. The full webcast replay will be available through August 8, 2024. To access the earnings webcast replay please visit the Veritone Investor Relations website.

• Domestic Replay Number: (877) 344-7529
• International Replay Number: (412) 317-0088
• Replay Access Code: 5278672

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

About the Presentation of Supplemental Non-GAAP Financial Information and Key Performance Indicators

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 Software Revenue, Non-GAAP gross profit, Non-GAAP gross margin, Non-GAAP net income (loss) and Non-GAAP net income (loss) per share. The Company also provides certain key performance indicators (KPIs), including Total Software Products & Services Customers, Annual Recurring Revenue, Annual Recurring Revenue (SaaS), Annual Recurring Revenue (Consumption), Total New Bookings and Gross Revenue Retention. The Company has posted additional supplemental financial information on its website at investors.veritone.com concurrently with this press release.

Pro Forma Software Revenue represents Software Products & Services revenue on a Pro Forma basis. 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. 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 and KPIs 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. The 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. The 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 HR 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 artificial intelligence (AI) solutions. Serving organizations in both commercial and regulated sectors, Veritone’s software, services and industry applications simplify data management, empowering the largest and most recognizable brands in the world to run more efficiently, accelerate decision making and increase profitability. Veritone’s leading 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 its robust partner ecosystem and professional and managed systems, 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 strategic position to capitalize in the most attractive market verticals and drive long-term shareholder value and the Company’s expected total revenue and Non-GAAP net loss for Q3 2023 and for full year 2023. 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, 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 requirements for 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, 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 economic disruption caused by the recent and potential future disruptions in access to bank deposits or lending commitments due to bank failures, the impact of the continuing economic disruption caused by the COVID-19 pandemic and the Russian invasion of Ukraine on the business of the Company and that of our existing and potential customers and increasing interest rates, inflationary pressures and the threat of a recession in the United States and around the world; 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.

Contacts

Company Contact:
Mike Zemetra

Chief Financial Officer

Veritone, Inc.

investors@veritone.com

IR Agency Contact:
Stefan Norbom

Prosek Partners

203-644-5475

snorbom@prosek.com

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