Veritone, Inc. — Q1 2021 Form 10-Q
Unaudited results for the three months ended March 31, 2021, compared with the same period in 2020. Veritone provides AI solutions through its aiWARE platform, content licensing and media services, and advertising services. Amounts below are in U.S. dollars; financial statement amounts are in millions unless noted.
Financial performance
| Metric | Q1 2021 | Q1 2020 | Change |
|---|---|---|---|
| Revenue | $18.295 | $11.904 | +53.7% |
| Gross profit / margin | $13.472 / 73.6% | $8.654 / 72.7% | Margin +0.9 percentage points |
| Operating expenses | $48.831 | $24.716 | +97.6% |
| Operating loss | $(30.536) | $(12.812) | Loss widened |
| Net loss | $(30.567) | $(12.684) | Loss widened |
| Diluted loss per share | $(0.95) | $(0.47) | Loss per share widened |
| Cash provided by operating activities | $6.209 | $1.503 | Increased |
Revenue by stream: advertising was $10.327 million (+72.1%); aiWARE SaaS solutions were $4.685 million (+50.7%); and aiWARE content licensing and media services were $3.283 million (+17.5%). Management attributed SaaS growth to expanded services for existing and new customers, especially in media and entertainment and government, legal and compliance markets. Advertising growth reflected new and expanded client business, including $2.0 million of VeriAds Network revenue.
Cash and cash equivalents were $127.459 million at March 31, 2021, versus $114.817 million at year-end 2020. Total current assets were $172.908 million and current liabilities were $103.041 million. The company reported no outstanding debt and no available credit lines. Cash provided by operations included significant timing and working-capital effects, notably increased cash received from advertising clients for future vendor payments. Of cash and cash equivalents, $51.129 million was advertising-client cash for future vendor payments.
Material changes and unusual items
- General and administrative expense rose to $31.543 million from $11.543 million. Stock-based compensation totaled $21.610 million, versus $4.456 million a year earlier; $16.268 million related to accelerated recognition after performance-based stock options met stock-price milestones.
- The company recorded $3.367 million of charges related to subleasing its former Costa Mesa office, including a $1.894 million disposal loss, a $1.211 million sublease loss and $0.262 million of initial direct costs. Future minimum lease payments were $6.991 million; expected minimum sublease receipts were approximately $4.254 million.
- Management’s non-GAAP net loss was $3.920 million, compared with $6.679 million in Q1 2020. This company-defined measure excludes specified items, including stock compensation and sublease charges, and is not a substitute for GAAP results.
- Shares issued and outstanding increased to 32,676,286 from 31,799,354 at December 31, 2020. Cash proceeds included $2.279 million from warrant exercises and $4.254 million from employee stock plans.
- The company reclassified prior-period presentation of amortization and cost of revenue; it stated the reclassifications did not affect reported net loss.
Outlook, risks and contingencies
- Management expects net losses for the foreseeable future while investing in aiWARE SaaS development and sales. It said existing cash should fund anticipated requirements for at least 12 months from issuance of the financial statements, but may need equity or debt financing if cash is insufficient to support growth. Financing may be unavailable or lead to dilution or restrictive terms.
- Management expects aiWARE SaaS revenue to continue increasing, but provided no numerical revenue or earnings guidance. It plans further investment in energy-market products, sales and engineering over the next 12 to 24 months, and intends to prioritize acquisition opportunities; acquisitions could require additional capital.
- Risks cited include long government sales cycles, project and contract timing, advertising-client and campaign concentration, dependence on live sporting events for some content revenue, technology and infrastructure demands, and uncertainty from COVID-19. Management noted future event cancellations could adversely affect content licensing and media services.
- One customer represented 10% of Q1 2021 revenue; no customer reached that threshold in Q1 2020. Management reported no legal proceeding expected to have a material adverse effect and no material change to the risk factors in its 2020 Form 10-K. A $1.179 million liability was accrued for potential sales-tax exposure.
- Remaining performance obligations were $4.730 million, excluding certain short-duration contracts and variable consideration; approximately 74% was expected to be recognized within 12 months.
Important facts for investors to verify
- Whether SaaS growth, new bookings and total contract value of new bookings translate into durable recognized revenue; Q1 SaaS bookings were $1.864 million and total contract value was $4.068 million.
- How much operating cash flow reflects underlying operations versus advertising-client funds and working-capital timing.
- The trajectory of GAAP operating losses and stock-based compensation, including the impact of one-time accelerated option expense.
- Cash needs and potential dilution if the company pursues acquisitions or growth investments, given its stated lack of debt and credit lines.
- Exposure to customer concentration, sporting-event disruptions, government sales-cycle delays, and the remaining lease obligations after the office sublease.