Veritone, Inc. — FY2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020. This is an annual report, not a standalone fourth-quarter filing; selected Q4 operating indicators are included below. Veritone provides AI software and SaaS through its aiWARE platform, alongside advertising, content licensing and media services.
Financial performance
| Metric | FY2020 | FY2019 | Change |
|---|---|---|---|
| Revenue | $57.7 million | $49.6 million | +16.2% |
| Gross profit / margin | $42.0 million / 72.9% | $34.4 million / 69.3% | Margin +3.6 percentage points |
| Operating loss | $47.7 million | $64.1 million | Loss narrowed |
| Net loss | $47.9 million | $62.1 million | Loss narrowed |
| Basic and diluted loss per share | $1.73 | $2.85 | Loss per share narrowed |
| Cash from (used in) operations | $1.4 million | ($30.4 million) | Improved |
Revenue mix: Advertising was $31.6 million (+29.5%); aiWARE SaaS was $13.9 million (+30.1%); and aiWARE content licensing and media services were $12.3 million (-16.0%). VeriAds revenue rose to $4.0 million from $0.1 million. In Q4 2020, SaaS revenue was $4.4 million; platform accounts reached 1,896, up 77% year over year.
Expenses and margins: Cost of revenue was $15.7 million. Total operating expenses were $105.4 million, down 7.3%; sales and marketing fell 15.4% and R&D fell 36.9%, while G&A rose 5.8%. Management attributed improved gross margin to lower computing costs and a larger SaaS revenue mix. Stock-based compensation was $19.5 million.
Balance sheet, liquidity and financing
At year-end, cash and cash equivalents were $114.8 million, up from $44.1 million; current assets were $156.6 million and current liabilities $88.2 million. Total liabilities were $89.4 million and stockholders’ equity was $88.2 million. Veritone reported no outstanding debt obligations and no available credit lines.
Operating cash flow turned positive, but included a $29.2 million increase in accrued media payments and was affected by advertising-client cash collected for subsequent vendor payments. Year-end cash included $40.1 million received from advertising clients and content licensees for future vendor payments. Investing activities used $0.1 million; financing activities provided $69.4 million.
Equity financing was significant: a December offering of 3.45 million shares generated approximately $59.8 million net, and ATM sales generated approximately $6.0 million net. Shares outstanding rose from 25.7 million at year-end 2019 to 31.8 million at year-end 2020. Management said cash should fund ordinary operations for at least 12 months from the filing, while noting potential future capital needs, including for acquisitions.
Changes, outlook and material items
- Revenue growth came from advertising and SaaS; content licensing and media services declined as COVID-19 disrupted live sporting events and entertainment production.
- Management reported strong second-half SaaS growth, led by government, legal and compliance, and energy markets. It expects continued SaaS growth, but gave no specific financial guidance.
- Management expects continued operating losses in the near term and anticipates increased sales, marketing, product and engineering investment, including in energy and new technology integrations. It also plans to pursue acquisitions and may need additional financing.
- COVID-19 caused delayed customer decisions and event-related disruption. Management said it saw no year-over-year decline in advertising or SaaS revenue in 2020, but future effects remained uncertain.
- The 2019 material weakness in accounting for advertising net revenue was reported as remediated by year-end 2020; management concluded internal controls were effective. The independent auditor did not attest to internal control effectiveness because Veritone was an emerging growth company.
- In Q1 2021, stock-price milestones were achieved, triggering $16.3 million of remaining performance-option compensation expense. A February 2021 office sublease led to approximately $4.5 million in charges in Q1 2021.
- Veritone recorded a $1.0 million liability for potential state sales-tax exposure. It reported no legal proceedings expected by management to have a material adverse effect.
Key investor verification points
- Assess whether SaaS growth, especially in government and energy, converts into durable contracted revenue and cash generation; remaining performance obligations were $5.0 million at year-end.
- Examine operating cash flow quality, including the effect of accrued media payments and cash held for future vendor payments.
- Track customer concentration: the ten largest customers represented 34% of total revenue in 2020 versus 24% in 2019; one advertising client contributed 15% of that service line’s revenue.
- Monitor future capital requirements, dilution, stock-based compensation and acquisition spending, as well as the Q1 2021 option-expense and sublease charges.
- Review exposure to COVID-19-related event disruption, facial-recognition restrictions, privacy and data-security regulation, and the disclosed sales-tax contingency.