Introducing Veritone ($VERI)

Veritone (VERI) Market Cap: $600M Share Price: $17 52wk High: $39

Veritone is a small but growing founder-led artificial intelligence company making the transition into mainstream use through large commercial and government contracts. They are newly profitable on a non-GAAP basis and check many of the boxes we like. The earnings call today referenced accelerating growth in 2022 and 2023. Veritone receives subscription-based revenue as well as consumption and licensing based. There are a few large yellow flags I would draw attention to—first, this is a company with a current market cap under $1B and not completely subscription-based revenue—their acquisition of PandoLogic pushed them into profitability and expanded their AI technology, but its revenue is more cyclical as it is essentially an AI driven job-advertising / matching vehicle (similar to ZipRecruiter). VERI, like most AI providers has many different market opportunities—their proprietary aiWARE product, AI-driven conversation and speech products complete with synthetic speech and language translation services, as well as this AI-driven job advertising business now—At first blush a lot of these separate services don’t add up, but their singular focus is expansion of AI capabilities and the PandoLogic acquisition provided that, as well as an experienced AI development team. I like the market opportunity and leadership, as well as recent success in the gov’t sector with state and federal contracts.

Thanks for taking a look.

From CEO Chad Steelberg, “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.”

President Ryan Steelberg, ” 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. “

About Veritone
“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.”

Revenue: increased 228% YoY
Gross Margin 89%
Software Customers: 529 (up 47% from 2020)
Total New Bookings Increased 469% YoY


FY 2021
Revenue:        $115.3M  +99% YoY       (+41% YoY on “pro forma” basis with acquisition)
Gross Profit:   $93.3M +122% YoY        (+41% YoY on pro forma basis)
*First Year with positive non-GAAP net income of $6.8M versus net loss of $20.6M in 2020*


 __Q1’20   Q2’20   Q3’20    Q4’20    Q1’21    Q2’21    Q3’21     Q4’21     Q1’22 *E__
**REV.$M  11.9    13.27   15.72    16.82    18.3     19.21    22.6       55.1         33M**
**QOQ    -4.2%    11.51%  18.46%   7.0%     8.8%     4.97%   17.96%      144%        -40%**
**YOY    -1.82%   8.13%   22.75%   35.11%   53.96%   44.75%   44.13%     228%         80%**

__**FY 2022 Guide**__ 
**Revenue: $185M (+60% YoY)** 
**Non-GAAP net income $10-$20M (+120% YoY at midpoint, 194% at top end)** 

Q4 / FY 2021 Earnings Transcript

”PandoLogic increased $23.8 million or 50% and organic software products and services grew $7.3 million or 53%. Managed services increased by $11.9 million or 27%. As a percentage of total revenue, pro forma software products and services represented approximately 62% of total revenue in 2021 versus 58% in 2020, 2021 gross profit reached $93.2 million, improving $51.1 million or 122% from 2020. Gross margins expanded to 80.1% in 2021 compared with 72.7% in 2020.”

“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. We have increased opportunities around enterprise offerings within GRI, new product applications like synthetic voice technology, international expansion and licensing and other services, cross-selling of PandoLogic, the recent $249 million BPA announcement with the joint AI commission and significant progress on our energy initiatives.”

Recent Highlights
Awarded Dept. of Defense (DoD) contract in $249M bulk purchase agreement to accelerate Joint Artificial Intelligence Center (JAIC)

Ryan Steelberg, “ Veritone’s penetration and brand within the Federal Government has never been stronger, not just with the DoD, but across the DoJ and numerous other agencies. Ultimately, the results of the past several years of investment will shine in the financial results if not in the press. We expect to see material growth from our government customers represented in our financials this year.”

Partnered with Snowflake(SNOW) to deliver AI-powered data cloud.

Partnered with iHeartMedia to utilize synthetic voice tech and translate podcasts to new markets.

Launched AI driven Intelligent Distributed Energy Resource Management

Ryan Steelberg, “ Veritone has demonstrated the potential to save millions of dollars for energy participants while, at the same time, delivering better grid resiliency and reliability. Already, we have signed a contract with CPV in Southern California and are in advanced contracting discussions with another energy provider on the East Coast.
This week’s formal announcement for our IDERMS suite of energy applications is directly targeting this important market opportunity. With our lead customer in the Southeast U. S., our software continues to run 24/7 in production on their equipment, delivering outstanding results. We are in extended conversations regarding a much broader and extended deployment across the utilities entire clean energy portfolio. Needless to say, as soon as commercial terms are finalized, we look forward to providing more details. On the whole, Veritone is operating at its highest performance in efficiency and with more momentum than in any other time in our company’s history. Our customer engagement is rapidly expanding, and the operational leverage enabled by aiWARE is just beginning to be realized.”

This comments remind me of how Saul talks about our companies providing savings and operational resiliency to their customers—essentially making it very unreasonable for customers to cut services, even during economic challenges.

Partnership with Hapbee to utilize aiWARE operating system within their wellness products.

PandoLogic acquisition to obtain advanced conversational AI capability.

Nearly 100 California Law enforcement agencies using Veritone Contact AI to meet California AB 953 Racial and Identity Profiling Act (RIPA) requirements (Effective in Jan 2022)…

Thanks for your scrutinizing eye and consideration-- It might be too early here but I like the runway, execution, gross margins, and especially the industry. With a P/S around 3x I see a lot of potential with not a whole lot of downside left. I figured putting it on some radars might help others get in early if they execute effectively. One of the primary concerns from the board perspective that I can anticipate is the lumpiness of revenue driven by the cyclical and growing job ad tech (PandoLogic) portion of the business. There are some interesting opportunities here in the metaverse space (speculation), as well as the entertainment / movie / tv industry as producers pursue the opportunity to produce a movie and through the use of speech / language technology translate that technology to multiple languages–I believe this piece alone could have a large future TAM, whether in foreign film, conversation / translation, or metaverse spaces-- Veritone’s technology will even translate using the actor’s voice, essentially removing the need for voice over actors and maintaining the authentic tone and speech patterns of the original actors.

VERI 18.5%

Some Links:………