Veritone, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. Amounts are in U.S. dollars; financial statement amounts are shown in millions unless noted.
Business context
Veritone provides AI software and services through its aiWARE platform, alongside advertising, content licensing and related managed services. Its September 2021 acquisition of PandoLogic added an AI-enabled hiring platform. In March 2022, Veritone acquired an influencer-management company.
Financial performance and liquidity
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Revenue | $34.4 million | $18.3 million |
| Operating loss | $27.1 million | $30.5 million |
| Net loss | $28.4 million | $30.6 million |
| Basic and diluted loss per share | $0.80 | $0.95 |
| Cash provided by operating activities | $10.1 million | $6.2 million |
- Revenue increased 88%. Software Products & Services revenue rose to $18.2 million from $4.7 million, reflecting PandoLogic and growth in existing services; Managed Services revenue increased 19% to $16.2 million. Government & Regulated Industries revenue declined 39% to $0.8 million, mainly due to project timing.
- Non-GAAP gross margin was 79.9%, up from 73.6%. GAAP operating expenses were $61.5 million, up 26%, including $4.7 million of amortization, primarily related to PandoLogic. The reported net loss improved, but non-GAAP net loss widened to $5.2 million from $3.9 million. Non-GAAP measures are company-defined and are not substitutes for GAAP results.
- Cash and cash equivalents were $237.6 million at March 31, down from $254.7 million at year-end. Operating cash flow was positive, while investing activities used $4.1 million and financing activities used $23.2 million, including $14.4 million for the PandoLogic earnout and $9.4 million for taxes on net share-settled awards.
- Current assets were $336.7 million and current liabilities $165.8 million. Convertible senior notes had a $195.4 million carrying amount; $201.3 million principal bears 1.75% interest and is due in 2026. The company reported no other debt obligations.
Material changes and unusual items
- PandoLogic contributed $14.8 million of Q1 2022 revenue; it was not included in reported Q1 2021 results. The company also reported $3.4 million of aiWARE revenue in Q1 2022.
- A $11.6 million increase in the fair value of contingent consideration was recorded as expense, substantially affecting GAAP results. The quarter also included $4.8 million of stock-based compensation and $4.7 million of amortization.
- The company acquired an influencer-management business for preliminary total consideration of $5.8 million, including cash, shares and deferred payments; sellers may also earn up to $4.5 million based on performance milestones.
- Veritone adopted the new lease accounting standard in January 2022 and recognized operating lease right-of-use assets and liabilities. It reported no legal proceedings expected by management to have a material adverse effect.
Outlook, commentary and risks
- Management expects positive consolidated operating cash flow in 2022 and believes current cash is sufficient for anticipated requirements for at least the next 12 months. It forecast full-year 2022 profitability on a non-GAAP net income basis and substantial improvement in consolidated operating results versus 2021, while cautioning that sustained growth and profitability are not assured.
- Management expects seasonal hiring patterns to weigh on PandoLogic revenue in Q2 after a major customer accelerated hiring into early 2022; it expects activity to normalize from Q3. It also anticipated operating losses in the quarter ending June 30, with greater profitability in the second half.
- Management plans continued investment in sales, marketing, engineering, people and infrastructure; these investments were expected to weigh more heavily on results from Q2 onward. It also intends to continue pursuing acquisitions.
- Customer concentration is significant: Amazon accounted for 31% of consolidated Q1 revenue. Management cited long sales cycles in government and regulated markets, hiring and retention challenges, technology and execution risks, and possible volatility in advertising and project-based revenue. The filing also discusses COVID-19-related uncertainty and broader economic disruption, including the war in Ukraine.
Investor facts to verify
- How much future revenue and growth depend on Amazon and PandoLogic, and whether customer concentration declines.
- Whether PandoLogic’s seasonality and the early-year hiring acceleration affect Q2 revenue as management anticipated.
- Whether revenue growth can translate into improved GAAP operating performance amid planned hiring, sales and infrastructure spending.
- The assumptions and subsequent remeasurement of acquisition earnouts and contingent consideration, including the new influencer-business earnout.
- Cash use, convertible-note terms and potential dilution from employee awards and conversion of the notes.