Veritone, Inc. — FY2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. This is an annual filing, not a standalone fourth-quarter report. Veritone provides AI software and services through its aiWARE platform, hiring solutions, advertising agency and digital-content licensing services.
Financial performance
| Metric | FY2022 | FY2021 |
|---|---|---|
| Revenue | $149.7 million | $115.3 million |
| Software Products & Services revenue | $84.6 million; +42% | $59.5 million |
| Managed Services revenue | $65.2 million; +17% | $55.8 million |
| GAAP operating loss | $38.0 million | $61.4 million |
| GAAP net loss | $25.6 million | $64.7 million |
| Non-GAAP net income (loss) | $(15.9) million | $6.8 million |
| Non-GAAP gross margin | 81.7% | 80.8% |
| Cash from operating activities | $3.7 million | $7.2 million |
Revenue increased 30%. Software Products & Services growth was driven substantially by including a full year of PandoLogic, acquired in September 2021, as well as expanded services to existing customers. Managed Services growth reflected licensing, advertising and live-event activity. Government & Regulated Industries revenue declined 5% to $3.8 million. The filing says the company generated non-GAAP profit in each fourth quarter of 2022 and 2021, but does not provide a clear Q4 profit value in the supplied text.
Liquidity, debt and balance sheet
- Cash and cash equivalents were $184.4 million at year-end, down from $254.7 million. The balance included $93.1 million received from advertising customers for future vendor payments.
- Operating cash flow was positive but lower year over year. Investing activities used $12.1 million; financing activities used $61.9 million, including $39.0 million for debt repurchases and $14.4 million for the 2021 PandoLogic earnout.
- Veritone repurchased $60.0 million principal amount of its 1.75% convertible notes at about 65% of par, recognizing a $19.1 million extinguishment gain. Remaining principal was $141.25 million, due November 2026; balance-sheet carrying value was $137.8 million.
- Current assets were $278.0 million and current liabilities $193.3 million at year-end. Stockholders’ equity was $79.9 million; accumulated deficit was $371.3 million.
- Management said existing cash was expected to fund ordinary-course operations for at least 12 months from the filing date. Upcoming obligations included a minimum $10.8 million 2022 PandoLogic earnout, payable in cash and stock, and acquisition consideration commitments.
Changes, outlook and notable items
- Operating loss narrowed, but the company remained loss-making under GAAP and reported a non-GAAP net loss for FY2022. Management cautioned that profitability may not be sustained.
- Customer concentration is material: the largest customer represented approximately 25% of consolidated revenue in 2022, down from 30% in 2021. Amazon’s reduced hiring consumption from Q2 2022 contributed to lower average revenue per software customer; AAR fell to $140,000 in Q4 from $209,000 in Q4 2021, despite software customers increasing to 642.
- Management announced cost-reduction initiatives targeting $12–$15 million in annualized savings over FY2023, including workforce reductions, lower software and outside-service costs, reduced cloud-processing expense, and a planned energy-group divestiture. Management expects these actions to advance its path toward profitability; this is not a formal earnings forecast.
- Management cited potential growth in government markets and aiWARE, including its government authorization to operate, but noted long procurement cycles and uncertain conversion of opportunities into revenue. It also described possible 2023 pressure from weaker hiring and advertising demand amid inflation, higher interest rates and recession risk.
- Acquisitions during 2022 included an influencer-management business, VocaliD and VSL. The company also introduced generative AI capabilities in aiWARE and said it planned additional image- and video-generation model support in Q2 2023.
- Chad Steelberg resigned as CEO effective December 31, 2022; Ryan Steelberg became CEO on January 1, 2023. The filing reported that deposits held at Silicon Valley Bank became available after the bank’s closure in March 2023 and that the company transferred most deposits elsewhere.
- The company revised its previously issued 2021 financial statements for an acquisition-accounting error; it assessed the prior-period errors as immaterial. The financial-statement auditor gave an unqualified opinion, but both management and the auditor concluded internal control over financial reporting was ineffective at year-end due to IT general-control weaknesses. A separate weakness concerning oversight of valuation specialists was reported remediated.
Key risks and contingencies
- Dependence on a limited number of customers, particularly Amazon, creates potential revenue volatility; Amazon had no long-term contract with Veritone.
- Continued operating losses, cash use, debt service and possible need for additional capital could constrain growth or dilute shareholders.
- AI adoption, accuracy, privacy, biometric/facial-recognition rules and other regulation may affect product demand, costs and market access.
- The platform depends partly on third-party AI models and cloud providers, including AWS and Azure; outages, security breaches or loss of technology access could disrupt service.
- Management said no pending legal proceedings were expected to have a material adverse effect. It disclosed tax, intellectual-property and other operational risks, but no material litigation contingency was identified in the supplied filing text.
Investor verification priorities
- Track customer concentration and Amazon hiring-related revenue, as well as software-customer AAR and retention.
- Reconcile reported cash with funds designated for advertising-vendor payments and monitor operating cash generation against management’s 12-month liquidity assessment.
- Review the convertible-note terms, remaining principal, interest burden and potential dilution from conversion.
- Verify progress and realized savings from the $12–$15 million cost program, the energy-group divestiture and management’s profitability objectives.
- Monitor remediation and independent testing of IT controls, given the auditor’s adverse internal-control opinion, and assess any future restatements or reporting delays.
- Assess acquisition earnout and deferred-payment obligations, and whether acquired businesses deliver the expected growth and integration benefits.