Veritone, Inc. — FY 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. This is an annual report, not a standalone fourth-quarter filing. Veritone provides AI software and services through its aiWARE platform, alongside advertising and content-licensing services.
Financial performance and liquidity
| Metric | FY 2023 | FY 2022 |
|---|---|---|
| Revenue | $127.6 million | $149.7 million |
| Software Products & Services revenue | $68.4 million | $84.6 million |
| Managed Services revenue | $59.2 million | $65.2 million |
| GAAP operating loss | $92.3 million | $38.0 million |
| GAAP net loss | $58.6 million | $25.6 million |
| Non-GAAP net loss | $37.3 million | $15.9 million |
| Cash from operating activities | $(76.4) million | $3.7 million |
| Cash and cash equivalents at year-end | $79.4 million | $184.4 million |
- Non-GAAP gross margin was 77.8%, down from 81.7%; management cited revenue mix, including lower-margin Managed Services and weaker consumption-based software revenue.
- Year-end principal debt comprised $77.5 million under a senior secured term loan and $91.2 million of convertible notes. The term loan matures in December 2027; the notes mature in November 2026.
- The term loan bears interest at Term SOFR plus 8.50%, subject to a 3.00% SOFR floor. Its effective annual interest rate was approximately 31.3% in 2023, including debt discount and issuance-cost effects.
- Current assets were $182.8 million and current liabilities were $188.8 million at year-end. The term loan requires at least $15.0 million of unrestricted cash at all times.
Material changes and notable items
- Revenue fell 15% year over year. Software Products & Services declined about 19%, primarily due to lower Veritone Hire consumption, reduced Amazon spending and lower one-time software revenue; Broadbean, acquired in June, partly offset the decline.
- Amazon represented 12% of consolidated revenue in 2023, versus 25% in 2022. Management expects it to account for less than 5% in 2024.
- Government & Regulated Industries revenue increased 56% to $6.0 million, though it remained a small share of total revenue. Managed Services revenue declined about 9%, mainly reflecting reduced advertising spending.
- Veritone acquired Broadbean for $53.3 million and divested its energy group, receiving GridBeyond preference shares valued at about $2.0 million and cash. The divestiture generated a $2.6 million gain.
- In December, the company drew a $77.5 million secured term loan and used $37.5 million of proceeds to repurchase $50.0 million principal of convertible notes. The transactions produced a one-time $30.0 million GAAP gain on debt extinguishment; this was not operating income.
- Cash declined by $105.0 million, reflecting operating cash use, Broadbean acquisition spending and the note repurchase, partly offset by term-loan proceeds. The company reported an accumulated deficit of $429.9 million.
Outlook, risks and contingencies
- Management stated that, based on year-end liquidity and its current forecast, Veritone would need additional liquidity to continue operations for the foreseeable future, including the next twelve months, absent other action. It expects acquisition synergies and planned cost reductions to support operations over that period; achieving those savings is not assured.
- The company reported more than $34 million of net annualized strategic cost reductions executed through February 2024. Management expected some weakness in hiring-related consumption and advertising to continue into Q1 2024, while stating the overall 2024 impact was not expected to be significant. The filing does not provide quantified revenue or earnings guidance.
- Key risks include continued losses and cash burn, substantial debt service and refinancing needs, restrictive loan covenants, reliance on major customers, uncertain AI-market adoption, competition, and privacy, biometric-data and AI regulation. The company also cited macroeconomic and geopolitical uncertainty, including effects on its Israel operations.
- Management identified material weaknesses in internal controls, involving foreign-currency consolidation, IT access and change-management controls, and entity-level oversight and monitoring. Management and the auditor concluded internal control over financial reporting was ineffective at year-end; the auditor issued an adverse opinion on those controls. The financial-statement audit opinion was unqualified. Remediation is ongoing, and acquired Broadbean was excluded from the 2023 internal-control assessment.
- No legal proceedings were reported that management believed would have a material adverse effect. The company disclosed $2.0 million of gross uncertain-tax-position liabilities, with payment timing and amount not reasonably estimable.
Important facts for investors to verify
- Whether operating cash burn improves and whether the planned cost savings and acquisition synergies are realized; monitor liquidity against the $15.0 million covenant floor.
- Whether Veritone can fund operations and service or refinance its debt without unfavorable terms, dilution, or covenant consequences.
- Whether customer concentration continues to decline, including whether Amazon’s share falls below management’s stated 2024 expectation.
- Whether Broadbean integration, customer retention and cross-selling deliver the expected benefits, and whether software revenue stabilizes.
- Whether internal-control weaknesses are remediated and validated over sustained reporting cycles.
- How the company’s stated non-GAAP results reconcile to GAAP results, particularly given the large debt-extinguishment gain and other excluded items.