Veritone Reports Third Quarter 2023 Results

- Q3 Total Revenue and Software Revenue of $35.1 and $20.4 million, respectively -

- ARR⁽¹⁾ of $99 million from 3,536 Total Software Products & Services Customers⁽¹⁾, including $48 million from subscription-based customers⁽¹⁾ -

- Over $24 million of annualized cost savings year to date -

- Entered into commitment letter to raise $77.5 million in senior secured debt, of which $37.5 million will be used to repurchase existing convertible debt at 75% of par and $40.0 million in cash for operations -

Veritone, Inc. (Nasdaq: VERI), a leader in designing human-centered AI solutions, today reported results for the second quarter ended September 30, 2023.

“Veritone’s third quarter results highlight progress against our strategic initiatives aimed at transforming the organization to meet evolving demand from companies seeking to leverage artificial intelligence to enhance productivity and boost revenue streams,” said Ryan Steelberg, Chief Executive Officer and President of Veritone. “Since last quarter, Veritone announced partnerships with CHESA and the U.S. Department of Justice, while extending long-standing AI partnerships with the U.S. Soccer Federation, iHeartMedia and many others. Our value proposition is resonating with partners, and Veritone’s AI solutions continue to gain traction in the target market verticals we serve. Year-to-date, Veritone has delivered over $24 million in annualized cost savings while optimizing the balance sheet as the company prepares to embark on its next phase of disruptive growth. Veritone is on a clear path to profitability, and we remain focused delivering long-term shareholder value in the years to come.”

Third Quarter 2023 Financial Highlights

• GAAP revenue of $35.1 million, a decrease of 6% and 22%, respectively, compared to GAAP and Pro forma revenues, respectively, for Q3 2022 driven primarily by declines in Managed Services and Software Products.
• Software revenues of $20.4 million, a decrease of $8.2 million or 29% compared to Pro Forma Software Products & Services revenue for Q3 2022 driven largely from reduced spend from Amazon in Q3 2023.
• Managed Services revenue of $14.8 million, as compared to $16.4 million in Q3 2022.
• Total Software Products & Services Customers⁽¹⁾ of 3,536, down 7% compared to pro forma Q3 2022 largely driven by planned migration of legacy CareerBuilder customers off Broadbean software platform.
• Total New Bookings⁽¹⁾ of $15.5 million, up 85% from Q2 2023, and down 35% compared to Q3 2022 driven by reduced HR consumption from a major customer.
• Annual Recurring Revenue (ARR)⁽¹⁾ of $98.6 million, down 24% compared to ARR for Q3 2022, largely driven by drop in consumption-based ARR from major customer over the trailing twelve months from Q3 2023 as compared to Q3 2022.
• Loss from Operations of $23.1 million, as compared to a loss of $3.6 million in Q3 2022 driven by a one-time non-cash benefit of $14.3 million in Q3 2022 coupled with a decline in non-GAAP gross profit.
• Non-GAAP gross profit of $27.9 million, a decrease of $2.2 million compared to Q3 2022 driven by the reduction in higher margin consumption-based revenue offset by the addition of Broadbean.
• Net Loss of $20.9 million, as compared to $4.9 million in Q3 2022.
• Non-GAAP Net Loss of $7.9 million, as compared to $5.7 million in Q3 2022.
• Cash and cash equivalents⁽²⁾ of $72.1 million on September 30, 2023, as compared to $62.7 million at June 30, 2023.

Note Regarding Pro Forma Information

"Pro Forma” information provided in this press release represents the historical information of Veritone combined with the historical information of Broadbean (as defined below) for the applicable period on a pro forma basis as if Veritone had acquired Broadbean on January 1, 2022. Veritone completed its acquisition of (i) all of the issued and outstanding share capital of (a) Broadbean Technology Pty Ltd ACN 116 011 959 / ABN 79 116 011 959, a limited company incorporated under the laws of Australia, (b) Broadbean Technology Limited, a limited company incorporated under the laws of England and Wales, (c) Broadbean, Inc., a Delaware corporation and (d) CareerBuilder France S.A.R.L., a limited liability company organized (société à responsabilité limitée) under the laws of France, and (ii) certain assets and liabilities related thereto (the foregoing clauses (i) and (ii) together, “Broadbean”) on June 13, 2023.

Recent Business Highlights

Veritone entered into a commitment letter with certain funds managed by Highbridge Capital Management, LLC and with certain other lenders on November 7, 2023 to provide a senior secured term loan facility in an aggregate principal amount of $77.5 million (the “Term Loan”). Veritone expects to use the proceeds of the Term Loan to repurchase an aggregate $50.0 million principal amount of its existing 1.75% convertible senior notes due 2026 held by the lenders at a purchase price of $37.5 million plus accrued and unpaid interest and for general corporate purposes.

The Term Loan will have a term of four years, accrue interest at a rate of Term SOFR plus 8.50%, with a 3.00% floor for Term SOFR, payable quarterly, and will require quarterly amortization payments of 2.5% of the principal amount, commencing in June 2024. Veritone may, subject to certain conditions and limitations, elect to make any amortization payment in shares of its common stock. Veritone may prepay the term loan, subject to payment of a premium, at any time and is required to prepay the term loan on certain customary events. Veritone may also, subject to certain conditions and limitations, elect to prepay portions of the Term Loan in shares of its common stock.

Veritone has agreed to issue warrants to the lenders to purchase up to 3,008,540 shares of Common Stock, with 20% of the warrants to be issued for entry into the commitment letter and the remaining 80% conditioned on the closing of the Term Loan. We expect the Term Loan to close in the fourth quarter and replace our Senior Secured ABL Facility.

In other recent developments:

• The company was selected by the U.S. Department of Justice (DOJ) for a $15 million five-year Blanket Purchase Agreement, allowing all DOJ agencies to easily purchase Veritone software and services.
• The Legislative Branch of the U.S. Government will use the company’s cutting-edge solutions to streamline its digital media management efforts through a channel partnership with CHESA, a prominent provider of media workflow solutions.
• Signed and renewed software contracts with CAA, United States Tennis Association, A&E Networks, HBO, Augusta National, and NBC Universal.
• Announced a comprehensive multi-year partnership extension with U.S. Soccer, the governing body of soccer in the United States including the U.S. Women’s and Men’s National Teams, Youth National Teams and Extended National Teams, to continue to serve as the archive of record and a licensing partner for all U.S. Soccer owned content, including all National Teams.
• Announced that Table Rock Management LLC, its subsidiary, entered into an exclusive advertising direct sales monetization agreement with SpokenLayer, a full-service creative studio specializing in custom, short-form digital audio content for the media and entertainment industries.

Financial Results for Three Months Ended September 30, 2023

Delivered third quarter revenue of $35.1 million, a decrease of $2.1 million or 6% from $37.2 million in the third quarter of 2022. Software Products & Services revenue of $20.4 million, declined $0.5 million or 2% year over year driven by reduction in consumption-based revenue from a major customer offset by the addition of Broadbean, which was acquired in June 2023. Managed Services revenue decreased by $1.6 million, or 10%, to $14.8 million, driven by lower advertising revenue and spend. Loss from operations was $23.1 million as compared to a loss of $3.6 million in Q3 2022 driven in part by a non-cash benefit of $14.3 million in Q3 2022 associated with a revaluation of certain contingent consideration, coupled with the decline in non-GAAP gross profit. Non-GAAP gross profit of $27.9 million in Q3 2023 declined by $2.2 million year over year due to a reduction in higher margin consumption-based revenue. Non-GAAP gross margin of 79.5% was relatively flat compared to the third quarter of 2022.

GAAP net loss was $20.9 million, compared to $4.9 million in the third quarter of 2022, driven in part by increased general and administrative expenses. Non-GAAP net loss was $7.9 million compared to $5.7 million in the third quarter of 2022, largely driven by the decline in revenue and corresponding non-GAAP gross margins.

During Q3 2023, Total Software Product & Services Customers of 3,536, on a Pro Forma basis, was down slightly year over year, given the run-off of legacy CareerBuilder customers transitioning off Broadbean’s platform over the last 18 months. Total New Bookings on a Pro Forma basis decreased by 35% to $15.5 million versus the comparable period a year ago largely driven by a reduction in spend from Amazon. Annual Recurring Revenue on a Pro Forma basis decreased 24% year over year to $98.6 million driven in large part by the decline in consumption revenue from Amazon over the trailing twelve months ended Q3 2023 as compared to Q3 2022. Excluding Amazon, Pro Forma Software revenue growth was 4% year over year.

As of September 30, 2023, the Company had cash and cash equivalents of $72.1 million, including approximately $58.0 million of cash received from Managed Services clients for future payments to vendors.

Business Outlook

Fourth Quarter 2023

• Revenue is expected to be in the range of $33.0 million to $34.5 million, as compared to $43.9 million in the fourth quarter of 2022.
• Non-GAAP net loss is expected to be in the range of $5.5 million to $6.5 million, compared to non-GAAP net loss of $2.2 million in the fourth quarter of 2022.

Full Year 2023

• Revenue is expected to be in the range of $126.4 million to $128.0 million, as compared to $149.7 million for fiscal 2022.
• Non-GAAP net loss is expected to be in the range of $36.0 million to $37.0 million, compared to non-GAAP net loss of $15.9 million for fiscal 2022.

These updated financial guidance ranges supersede any previously disclosed financial guidance and investors should not rely on any previously disclosed financial guidance.

Conference Call

Veritone will hold a conference call using its synthetic voice technology, Veritone Voice, to deliver management’s prepared remarks on Wednesday, November 8, 2023, at 8:30 a.m. Eastern Time (5:30 a.m. Pacific Time) to discuss its third quarter 2023 results, provide an update on the business and conduct a question-and-answer session. To participate, please join the audio webcast or dial-in and ask to be connected to the Veritone earnings conference call. To avoid a delay, if dialing in, please pre-register or join the live audio webcast.

• Pre-Registration*
• Live Audio Webcast
• Domestic Call Number: (844) 750-4897
• International Call Number: (412) 317-5293

A replay of the conference call can be accessed one hour after the end of the conference call through November 15, 2023. The full webcast replay will be available through November 8, 2024. To access the earnings webcast replay please visit the Veritone Investor Relations website.

• Domestic Replay Number: (877) 344-7529
• International Replay Number: (412) 317-0088
• Replay Access Code: 7979787

* Please note that pre-registered participants will receive their dial-in number and unique PIN upon registration.

About the Presentation of Supplemental Non-GAAP Financial Information and Key Performance Indicators

In this news release, the Company has supplemented its financial measures prepared in accordance with U.S. generally accepted accounting principles (GAAP) with certain non-GAAP financial measures, including Pro Forma Software Revenue, Non-GAAP gross profit, Non-GAAP gross margin, Non-GAAP net income (loss) and Non-GAAP net income (loss) per share. The Company also provides certain key performance indicators (KPIs), including Total Software Products & Services Customers, Annual Recurring Revenue, Annual Recurring Revenue (SaaS), Annual Recurring Revenue (Consumption), Total New Bookings and Gross Revenue Retention. The Company has posted additional supplemental financial information on its website at investors.veritone.com concurrently with this press release.

Pro Forma Software Revenue represents Software Products & Services revenue on a Pro Forma basis. Non-GAAP gross profit is defined as revenue less cost of revenue. Non-GAAP gross margin is defined as Non-GAAP gross profit divided by revenue. Non-GAAP net income (loss) and Non-GAAP net income (loss) per share is the Company’s net income (loss) and net income (loss) per share, respectively, adjusted to exclude interest expense, provision for income taxes, depreciation expense, amortization expense, stock-based compensation expense, changes in fair value of warrant liability, changes in fair value of contingent consideration, a reserve for state sales taxes, charges related to a facility sublease, gain on sale of asset, warrant expense, acquisition and diligence costs, and severance and executive search costs. The items excluded from these non-GAAP financial measures, as well as a breakdown of GAAP net income (loss), non-GAAP net income (loss) and these excluded items between the Company’s Core Operations and Corporate, are detailed in the reconciliations included following the financial statements attached to this news release. In addition, following the financial statements attached to this news release, the Company has provided additional supplemental non-GAAP measures of operating expenses, loss from operations, other income (expense), net, and loss before income taxes, excluding the items excluded from non-GAAP net loss as noted above, and reconciling such non-GAAP measures to the most directly comparable GAAP measures.

The Company has provided these non-GAAP financial measures and KPIs because management believes such information to be important supplemental measures of performance that are commonly used by securities analysts, investors and other interested parties in the evaluation of companies in its industry. Management also uses this information internally for forecasting and budgeting. The non-GAAP financial measures should not be considered as an alternative to revenue, net income (loss), operating income (loss) or any other financial measures so calculated and presented, nor as an alternative to cash flow from operating activities as a measure of liquidity. Other companies (including the Company’s competitors) may define these non-GAAP financial measures differently. The non-GAAP financial measures may not be indicative of the historical operating results of Veritone or predictive of potential future results. Investors should not consider these non-GAAP financial measures in isolation or as a substitute for analysis of the Company’s results as reported in accordance with GAAP.

In addition, the Company defines the following capitalized terms in this news release as follows:

Core Operations consists of the Company’s aiWARE operating platform of software, SaaS and related services; content licensing and advertising agency services; and their supporting operations, including direct costs of sales as well as operating expenses for sales, marketing and product development and certain general and administrative costs dedicated to these operations.

Corporate principally consists of general and administrative functions such as executive, finance, legal, people operations, fixed overhead expenses (including facilities and information technology expenses), other income (expenses) and taxes, and other expenses that support the entire Company, including public company driven costs.

Software Products & Services consists of revenues generated from commercial enterprise and government and regulated industries customers using our aiWARE platform and HR Solutions, any related support and maintenance services, and any related professional services associated with the deployment and/or implementation of such solutions.

Managed Services consist of revenues generated from commercial enterprise customers using our content licensing services and advertising agency and related services.

About Veritone

Veritone (NASDAQ: VERI) designs human-centered AI solutions. Serving customers in the talent acquisition, media, entertainment and public sector industries, Veritone's software and services empower individuals at the world’s largest and most recognizable brands to run more efficiently, accelerate decision making and increase profitability. Veritone’s leading enterprise AI platform, aiWARE™, orchestrates an ever-growing ecosystem of machine learning models, transforming data sources into actionable intelligence. By blending human expertise with AI technology, Veritone advances human potential to help organizations solve problems and achieve more than ever before, enhancing lives everywhere.

To learn more, visit Veritone.com.

Safe Harbor Statement

This news release contains forward-looking statements, including without limitation, statements regarding the Company’s strategic position to capitalize in the most attractive market verticals and drive long-term shareholder value, statements regarding the Commitment Letter with Highbridge and the expected closing of the Term Loan, and the Company’s expected total revenue and Non-GAAP net loss for Q3 2023 and for full year 2023. In addition, words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “plan,” “should,” “could,” “estimate” or “continue” or the plural, negative or other variations thereof or comparable terminology are intended to identify forward-looking statements, and any statements that refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements. These forward-looking statements speak only as of the date hereof, and are based on management’s current assumptions, beliefs and information. As such, the Company’s actual results could differ materially and adversely from those expressed in any forward-looking statement as a result of various factors. Important factors that could cause such differences include, among other things, our ability to expand our aiWARE SaaS business; declines or limited growth in the market for AI-based software applications and concerns over the use of AI that may hinder the adoption of AI technologies; our requirements for additional capital to support our business growth and the availability of such capital on acceptable terms, if at all; our reliance upon a limited number of key customers for a significant portion of our revenue, including declines in key customers’ usage of our products and other offerings, our ability to realize the intended benefits of our acquisitions and divestitures, including our ability to successfully integrate our recent acquisition of Broadbean; fluctuations in our results over time; the impact of seasonality on our business; our ability to manage our growth, including through acquisitions and our further expansion into international markets; our ability to enhance our existing products and introduce new products that achieve market acceptance and keep pace with technological developments; actions by our competitors, partners and others that may block us from using the technology in our aiWARE platform, offering it for free to the public or making it cost prohibitive to continue to incorporate their technologies into our platform; interruptions, performance problems or security issues with our technology and infrastructure, or that of our third party service providers; the impact of the continuing economic disruption caused by macroeconomic and geopolitical factors, including the COVID-19 pandemic, the Russia-Ukraine conflict and related sanctions, the war in Israel, financial instability, inflation rates and the responses by central banking authorities to control inflation, monetary supply shifts and the threat of recession in the United States and around the world on our business operations and those of our existing and potential customers; the impact of future economic, competitive and market conditions, particularly those related to its strategic end markets; and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the Company. Certain of these judgments and risks are discussed in more detail in the Company’s most recently-filed Annual Report on Form 10-K, and other periodic reports filed with the Securities and Exchange Commission. In light of the significant uncertainties inherent in the forward-looking information included herein, the inclusion of such information should not be regarded as a representation by the Company or any other person that the Company’s objectives or plans will be achieved. The forward-looking statements contained herein reflect the Company’s beliefs, estimates and predictions as of the date hereof, and the Company undertakes no obligation to revise or update the forward-looking statements contained herein to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events for any reason, except as required by law.

VERITONE, INC.

SUPPLEMENTAL FINANCIAL INFORMATION

We are providing the following unaudited supplemental financial information as a lookback of the trailing twelve months and the comparative quarter for the prior year to help investors better understand our recent historical and year-over-year performance. The Software Products & Services supplemental financial information is presented on a Pro Forma basis, as further described below.

Software Products & Services Supplemental Financial Information