Veritone, Inc. — Q2 2021 Form 10-Q
Reporting period: Three and six months ended June 30, 2021. Dollar amounts are in millions unless stated otherwise. Veritone provides AI solutions through its aiWARE platform, along with content licensing and media services and advertising services.
Financial performance
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue | $19.2 | $13.3 | $37.5 | $25.2 |
| Gross profit / margin | $14.0 / 72.8% | $9.5 / 71.6% | $27.4 / 73.2% | $18.2 / 72.1% |
| Operating loss | $(12.6) | $(11.6) | $(43.2) | $(24.4) |
| Net loss | $(12.7) | $(11.8) | $(43.3) | $(24.5) |
| Basic and diluted loss per share | $(0.39) | $(0.43) | $(1.33) | $(0.91) |
- Q2 revenue increased 44.8%; first-half revenue grew 49.0%. By segment, Q2 advertising revenue rose 41.6%, aiWARE SaaS revenue 85.9%, and content licensing and media services 13.3%.
- For the first half, advertising revenue rose 55.7%, aiWARE SaaS 68.0%, and content licensing and media services 15.2%. Management attributed growth to expanded business with existing customers and new clients; SaaS growth was strongest in media and entertainment, with contributions from government, legal and compliance customers.
- Gross margin improved year over year, which management attributed primarily to SaaS growth; new SaaS customers generated incremental gross margins above 80%.
- Operating expenses were $31.9 million in Q2, up 28.3%, and $80.7 million in the first half, up 62.9%. First-half general and administrative expense more than doubled to $47.2 million, primarily reflecting higher stock-based compensation, sublease-related charges and personnel costs.
Cash, liquidity and capital
- Cash and cash equivalents were $120.6 million at June 30, 2021, compared with $114.8 million at year-end 2020. The balance included $48.2 million collected from advertising clients for future vendor payments. Restricted cash was $0.9 million.
- First-half operating cash use was $1.0 million, versus $2.8 million in the prior-year period. Investing activities used $0.3 million; financing activities provided $7.1 million, including $4.8 million from employee stock plans and $2.3 million from warrant exercises.
- The company reported no outstanding debt and current liabilities of $104.7 million, including $68.3 million in accrued media payments. Management said existing cash was expected to fund ordinary-course operations for at least 12 months from the filing date, while cautioning that future financing may be needed.
Material changes, outlook and risks
- First-half GAAP net loss widened to $43.3 million from $24.5 million. Stock-based compensation was $28.2 million, including a one-time $16.3 million charge after performance-based option milestones were achieved. The company also recorded $3.4 million of charges related to subleasing its former Costa Mesa office, including a $1.9 million asset-disposal loss and a $1.2 million sublease loss.
- In July 2021, Veritone agreed to acquire PandoLogic for stated total consideration of $150 million: $50 million cash and approximately $35 million in stock upfront, plus up to $65 million in performance-based earnouts payable in cash and stock. Closing was expected by late Q3 2021 and remained subject to customary conditions. Management anticipated more substantial operating-results improvement as early as Q4, citing expected PandoLogic fiscal 2021 operating cash flows of over $25 million; these are expectations, not reported results.
- Management expected operating losses to continue through Q3 and in the near term, while planning continued investment in SaaS product development, sales, engineering and newer markets, including energy. The company also flagged long sales cycles, infrastructure capacity needs, customer and advertising-revenue concentration, and dependence on sporting-event schedules. COVID-related disruption could again affect content and media-services revenue.
- The PandoLogic transaction carries execution and integration risks, including employee retention, international operations, cross-selling and potential business disruption. Veritone stated it may need additional financing for acquisitions or growth; future equity financing could dilute shareholders and debt financing may impose restrictions.
- Veritone accrued $0.845 million for potential state sales-tax exposure at June 30, 2021. It reported no legal proceedings expected by management to have a material adverse effect. Management concluded disclosure controls were effective at a reasonable-assurance level.
Key facts for investors to verify
- Whether the PandoLogic acquisition closed as expected, the final cash and stock consideration, earnout terms and financing impact. The filing gives July 21 as the agreement date in one section and July 22 in another.
- Whether SaaS bookings, contract value and revenue growth continued; Q2 new bookings were $3.6 million and total contract value of new bookings was $4.1 million, while platform accounts were 1,820.
- How much reported losses and expense growth reflect recurring operations versus stock compensation, office sublease charges and acquisition costs; also monitor share issuance and potential dilution.
- Whether cash resources remain adequate given continuing losses, media-payment obligations, acquisition spending and the company’s stated possibility of future financing.