More than two million refugees have fled Ukraine into neighboring countries due to the largest military operation in Europe since WW2. These refugees are fleeing their homes in hopes to find safety for their families in the homes of strangers from neighboring countries.
This military operation has led most of the developed world to heavily sanction Russia, who is a major global supplier of crude oil and exports $300-400 Billion of goods annually. These sanctions, and the sudden impact on Russia’s economy has materially impacted the revenue of many global companies and financial institutions.
The world is barely back on its feet after two years of a life-altering pandemic that will prove transformative for many industries and social practices. During the pandemic the Fed spent more than $3.5 Trillion on Covid Relief spending.
The Fed dropped the overnight lending rate to 0%.
Supply chain woes during the pandemic have still barely found relief and the cost of freight as well as the inability to provide essential materials in a timely manner has had a material impact on manufacturing and goods services.
These are extraordinary times indeed.
In 2020 we could throw darts to pick stocks and make a cool 100% ROI without trying. Things are a little different now. I appreciate the Rudyard Kipling share from earlier this month-- I remember my dad offering us $20 as kids if we memorized the whole poem.
“If you can keep your head when all about you are losing theirs and blaming it on you.”
It wasn’t long ago I read every post every day on this board, but it’s starting to turn into tv ads during election season. Relentless smear-campaigns against posters and individual stocks.
I get it. The world is kind of a mess. I’m mad about what’s happening in Ukraine-- it’s 2022 for goodness’ sake. Things are stressful. The account balance has lost 50% over the past four months. Every desperate move I make to gain a little back ends up putting me further behind. On top of that, my wife, who handles none of the finances, can’t stop talking about the house she wants me to build for our family… and I think my two-year-old swallowed a Lego, and I really hope that’s Nutella on her hand…
I have a proposal to make.
Whether the market is in the toilet or shooting the moon-- whether it’s Nutella or Sh*tella–let’s use this space to discuss stocks. Let’s narrow it down further to talk about really great companies we believe in-- hyper-growth companies with predictable income, low overhead, strong balance sheets, great leadership, and massive expansive runways for growth. Let’s create a knowledgebase where we freely share everything we have learned about finding great companies to invest in to anyone who comes here seeking wisdom and wants to take part in the crowd-sharing process.
Then let’s break it down together. Let’s realize the potential benefit of this space, and the potential pitfalls. This isn’t Twitter-- We don’t need endless streams of posts about the same thing. This is a place for intelligent, courteous, and productive analysis.
Does it matter what is happening with our stocks right now? I realize we are all in different places in our lives, but if you’re still adding money to the market-- still investing and not yet living solely off your stocks, then every day a great company drops in price is a little gift for you. Do you remember when The DaVinci Code book came out? They didn’t release a paperback copy for three years! They did this because it was selling so well they wanted to fetch the premium rate for as long as possible. Well… all of our companies are trading in paperback right now-- that’s a gift.
Let’s keep investing in great companies and keep our eyes on the horizon. I’d really love a place to crowd-share high growth companies and send well-trained scrutinizing eyes on my picks to continue to learn from.
Since you are all dying to talk about something other than SNOW or UPST, I want to present a high-conviction name for your consideration. Yes, I posted on it recently but did a rather poor job and did not receive any feedback.
As I’ve read through the earnings transcript several times I can’t help but notice how bullish the entire management team is-- from the President to the CEO to the CFO on the call–
Here are some of the highlights:
“Veritone is a leading provider of artificial intelligence (AI) technology and solutions. The company’s proprietary operating system, aiWARE, orchestrates an expanding ecosystem of machine learning models to transform audio, video and other data sources into actionable intelligence. aiWARE can be deployed in a number of environments and configurations to meet customers’ needs. Its open architecture enables customers in the media and entertainment, legal and compliance, and government sectors to easily deploy applications that leverage the power of AI to dramatically improve operational efficiency and effectiveness.”
Q4 Revenue: increased 228% YoY Gross Margin 89% Software Customers: 529 (up 47% from 2020) Total New Bookings Increased 469% YoY
“To support this growth and achieve our near and long-term objectives, we expect to continue making responsible investments. These include forecasted increases in headcount by over 50%, which, today, includes just over 500 full-time employees. Our growth is largely dependent on these hires, the majority of which will be engineers, operational support and sales.”
Considerable headcount growth to keep up with rapid acceleration of business.
“where the world sees the great resignation, we see the great opportunity. We no longer have border restrictions on hiring, however, we also need to retain our current employees and with higher inflation and wage increases globally, we will need to reinvest back into our current employees with newer retention rewards, higher annual raises and richer benefits versus historical. In total, we expect these onetime system and retention-related investments to be approximately $5 million of incremental costs to Veritone in 2022”
A culture that understands and values its workforce.
“The Veritone of the future will have billions of end users, millions of customers with less than 1% of the applications running on aiWARE being developed and owned by Veritone. We are building the OS of the future, and we’ve reached the tipping point.”
An vision that matches our desire for nearly infinite growth.
“We have entered a new stage in our land and expand strategy as we are now helping our partners, land and expand their own AI solutions powered by aiWARE. In 2022, we expect increased adoption and believe it will further accelerate in 2023. This is the tipping point we have been striving for. This is the point where it really gets interesting. The point where our customers use aiWARE to develop applications for their customers and, in turn, drive the geometric progression of our business, the point where AI application development and Veritone diverge and the point where aiWARE creates enormous leverage to grow customers, end users, revenue and so on.”
Increased acceleration over the next 2+ years.
“We have formed numerous strategic relationships with global entities like Deloitte, Microsoft and the U.S. Federal Government. In 2021, these enterprise partners tested the power of aiWARE they were able to build new applications from scratch with 10% of the typical cost in one-tenth of the average time.”
The efficiency creation we look for that makes our companies non-negotiable for their customers-- resilient services that are recession proof.
“Customer growth for PandoLogic was over 100% in the quarter. Perhaps more importantly, our commercial business, excluding PandoLogic, grew 61% year-over-year in the December quarter, an outstanding quarter by every measure.”
Organic growth on top of inorganic and accretive acquisition.
“Overall, our revenue pipeline has never been stronger. Our partner-driven channel strategy continues to deliver results. New bookings were $8.2 million in Q4 2021, an increase of over 450%. Organic bookings growth was 238% in the quarter. Our future pipeline is at an all-time high, particularly in GRI, where we expect to immediately begin realizing significant growth in the near and long-term.”
“Immediate” and “significant” growth in the near and long-term. I’d buy that for a dollar.
“AI is 1,000 times more important, more powerful and more diverse than any marketplace or cloud computing infrastructure. It is the future of humanity and it’s our only focus. We have reached another tipping point and the continued translation of our vision into reality is accelerating. I’ll elaborate. Just six years ago, Veritone had one AI model with one application used by less than five customers in one industry running on Version 1 of aiWARE. We ended 2021 with hundreds of models, with dozens of applications used by over 500 customers in 40 industries.”
“As we enter 2022, we are excited to have renewed and/or expanded virtually every single one of our commercial enterprise contracts.”
“Activity is accelerating across local, state, federal and regulated markets.”
Acceptance and acceleration in the government markets will be transformative for Veritone’s aiWARE.
"Heading into 2022, with over 60% consolidated revenue growth, a rock solid balance sheet and profitability we now have the business momentum and financial leverage to accelerate our growth story even further."
“2021 revenue reached a record $115.3 million, up 100% year-over-year. Software products and services revenue increased 329% to a record $59.5 million, driven by the $38.0 million PandoLogic contribution and a 53% year-over-year increase in organic software products and services. Managed services grew $11.9 million, or 27%, well above industry averages. On a pro forma basis, 2021 revenue increased 41% to $148.1 million, driven primarily by software products and services.”
I appreciate the breakdown of organic versus acquisition growth. Organic growth for the year of 41%, but for Q4 it was trending higher (over 60% for commercial business). I expect to see continued acceleration of organic growth in 2022 and 2023.
Veritone currently trades at 3x P/S-- I attribute this primarily to is small market cap and poor brand awareness. If you’ve made it this far thanks for peeking-- if you have a tech-savvy brain, experience in the field, or understand these products better than I do, feel free to reach out to me directly.
Thanks again to the board and everyone who makes this great. I’m looking forward to the next 15+ years of investing with you.