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What changed in Veritone, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Veritone, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+427 added−336 removedSource: 10-K (2024-04-01) vs 10-K (2023-03-16)

Top changes in Veritone, Inc.'s 2023 10-K

427 paragraphs added · 336 removed · 259 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeTracker enables our customers to monitor multiple video recordings and feeds when dealing with occlusion within crowded areas and impacts from lighting and distance. Tracker tracks the human body and head, whether or not the head is turned or at an unidentifiable angle and can also track clothing or anything identifiable across multiple videos and feeds.
Biggest changeTracker tracks the human body and head, whether or not the head is turned or at an unidentifiable angle and can also track clothing or anything identifiable across multiple videos and feeds. Government, law enforcement, and justice organizations have used Tracker to find persons of interest from disparate video files and build an understanding of their activities and associations.
Bundled offering of our core applications which enables media broadcasters to ingest their live and archived media into aiWARE and run an array of AI models on the media to identify keywords, faces, logos and objects, enriching the content with additional metadata to allow it to be quickly and easily searched, analyzed, curated and shared in near real-time. aiWARE Processing also includes advanced analytics features that allow users to customize their analytics dashboards and reports and generate live interactive charts with robust filtering capabilities and transforms the way these media broadcasters conduct their business by implementing AI-powered applications in their ad tracking and verification workflows, enabling them to provide advertisers with near real-time ad verification and integrated audience analytics. • Attribute .
Bundled offering of our core applications which enables media broadcasters to ingest their live and archived media into aiWARE and run an array of AI models on the media to identify keywords, faces, logos and objects, enriching the content with additional metadata to allow it to be quickly and easily searched, analyzed, curated and shared in near real-time. aiWARE Processing also includes advanced analytics features that allow users 3 to customize their analytics dashboards and reports and generate live interactive charts with robust filtering capabilities and transforms the way these media broadcasters conduct their business by implementing AI-powered applications in their ad tracking and verification workflows, enabling them to provide advertisers with near real-time ad verification and integrated audience analytics. • Attribute .
IDentify gives agencies a powerful tool to augment their investigative workflows, saving valuable time and resources and helping them investigate cases faster. • Illuminate . Provides users with an effective means of searching voluminous sets of media and electronic documents to support eDiscovery efforts, and particularly their early case assessment efforts.
IDentify gives agencies a powerful tool to augment their investigative workflows, saving valuable time and resources and helping them investigate cases faster. 5 • Illuminate . Provides users with an effective means of searching voluminous sets of media and electronic documents to support eDiscovery efforts, and particularly their early case assessment efforts.
The information provided on, or accessible through, our investor relations website is not a part of this Annual Report on Form 10-K, nor is such information incorporated by reference herein, and such information should not be relied upon in determining whether to make an investment in our common stock. 11
The information provided on, or accessible through, our investor relations website is not a part of this Annual Report on Form 10-K, nor is such information incorporated by reference herein, and such information should not be relied upon in determining whether to make an investment in our common stock. 10
Full-service media advertising agency that provides media planning and strategy, media buying and placement, campaign messaging, clearance verification and attribution, and custom analytics. We 4 leverage our aiWARE platform to help our advertising customers improve their media placements and maximize the return on their advertising spending using real-time ad verification and media analytics. • Influencer Services.
Full-service media advertising agency that provides media planning and strategy, media buying and placement, campaign messaging, clearance verification and attribution, and custom analytics. We leverage our aiWARE platform to help our advertising customers improve their media placements and maximize the return on their advertising spending using real-time ad verification and media analytics. • Influencer Services.
In addition, we may compete with smaller competitors, including developers of AI models, who may develop their own solutions that perform similar services as our platform for specific use cases, as well as with systems integrators that aggregate and integrate cognitive solutions from multiple providers for their clients.
In addition, we may compete with smaller competitors, including developers of AI models, who may develop their own solutions that perform similar services as our 7 platform for specific use cases, as well as with systems integrators that aggregate and integrate cognitive solutions from multiple providers for their clients.
Our customers can save, index and search data insights across engines with aiWARE’s intelligent data lake, which provides time-correlated cognitive metadata indexing and enables multivariate, time-based search in applications. Developers can use this time-correlated data to trigger workflows when certain events occur. • Applications and Cognitive Analytics.
Our customers can save, index and search data insights across engines with aiWARE’s intelligent data lake, which provides time-correlated cognitive metadata indexing and enables multivariate, 2 time-based search in applications. Developers can use this time-correlated data to trigger workflows when certain events occur. • Applications and Cognitive Analytics.
Comprised of three programs that enable radio and television broadcasters, podcasters and social media influencers to generate incremental advertising revenue from premium advertisers, and enable these advertisers to expand their audience reach through unique ad units and new influencer avenues: o Spot Network .
Comprised of three programs that enable radio and television broadcasters, podcasters and social media influencers to generate incremental advertising revenue from premium advertisers, and enable these advertisers to expand their audience reach through unique ad units and new influencer avenues: 4 o Spot Network .
We do not currently face significant competition from third parties for our content licensing Managed Services, particularly in North America; however, many content owners choose to manage the licensing of their content in-house, and 8 content owners that we currently represent may choose to license their content directly in the future.
We do not currently face significant competition from third parties for our content licensing Managed Services, particularly in North America; however, many content owners choose to manage the licensing of their content in-house, and content owners that we currently represent may choose to license their content directly in the future.
We believe that we may face more competition in North America if new content licensing companies emerge or expand their business in the region. As we expand our content licensing services to international markets, we believe that we may face greater competition from established content licensing and talent management companies.
We believe that we may face more competition in North America if new content licensing companies emerge or expand their business in the region. 8 As we expand our content licensing services to international markets, we believe that we may face greater competition from established content licensing and talent management companies.
Our aiWARE platform offers capabilities that mimic human cognitive functions such as perception, prediction and problem solving, enabling users to quickly, efficiently and cost effectively transform unstructured data into structured data, and analyze and optimize data to drive business processes and insights. aiWARE is based on an open architecture that enables new AI models, applications and workflows to be added quickly and efficiently, resulting in a scalable and evolving solution that can be leveraged by organizations across a range of industries.
Our aiWARE platform offers capabilities that are designed to mimic human cognitive functions such as perception, prediction and problem solving, enabling users to quickly, efficiently and cost effectively transform unstructured data into structured data, and analyze and optimize data to drive business processes and insights. aiWARE is based on an open architecture that enables new AI models, applications and workflows to be added quickly and efficiently, resulting in a scalable and evolving solution that can be leveraged by organizations across a range of industries.
Today, law enforcement and other government agencies can leverage our aiWARE platform and applications to organize, review, analyze and gain insight from their various data sources to greatly enhance their investigative workflows and to support their public disclosure requirements.
Today, law enforcement and other government agencies can leverage our aiWARE platform and applications to organize, review, analyze and gain insight from their various data sources to enhance their investigative workflows and to support their public disclosure requirements.
Some customers may also be hesitant to use a new platform and prefer to upgrade products offered by their incumbent platforms for 7 reasons including price, quality, sophistication, familiarity and global presence.
Some customers may also be hesitant to use a new platform and prefer to upgrade products offered by their incumbent platforms for reasons including price, quality, sophistication, familiarity and global presence.
These applications search and rapidly extract actionable insight from evidence, quickly locate case-critical evidence and compliance risks, and analyze, manage, and monetize media assets. 2 • Automate Studio and Developer APIs .
These applications search and rapidly extract actionable insight from evidence, quickly locate case-critical evidence and compliance risks, and analyze, manage, and monetize media assets. • Automate Studio and Developer APIs .
Provides access to run-of-schedule and dayparted ad units for radio and television advertisements from broadcaster participants. o MicroMentions ™. On-demand live read ad unit solution that gives broadcasters the opportunity to execute 10, 15 or 30 second ads outside of their scheduled ad inventory on a guaranteed CPM (cost per thousand) basis.
Provides access to run-of-schedule and dayparted ad units for radio and television advertisements from broadcaster participants. o MicroMentions ™. On-demand live read ad unit solution that gives broadcasters the opportunity to execute 10, 15 or 30 second ads outside of their scheduled ad inventory on a guaranteed CPT (cost per thousand) basis.
To address the ever-growing challenges surrounding unstructured data, we developed aiWARE, our proprietary AI operating system. aiWARE orchestrates AI models, together with a suite of powerful applications, to reveal valuable insights from vast amounts of structured and unstructured data. aiWARE offers capabilities that mimic human cognitive functions such as perception, prediction, problem solving and optimization, enabling users to quickly, efficiently and cost effectively transform unstructured data into structured data, and analyze and optimize data to drive business processes and insights.
To address the ever-growing challenges surrounding unstructured data, we developed aiWARE, our proprietary AI operating system. aiWARE orchestrates AI models, together with a suite of powerful applications, to reveal valuable insights 1 from vast amounts of structured and unstructured data. aiWARE offers capabilities that are designed to mimic human cognitive functions such as perception, prediction, problem solving and optimization, enabling users to quickly, efficiently and cost effectively transform unstructured data into structured data, and analyze and optimize data to drive business processes and insights.
We use our investor relations website as a channel of distribution for important company information, including news and commentary about our business and financial performance, webcasts of our earnings calls and investor events, SEC 10 filings, and corporate governance information, including information regarding our board of directors, our board committee charters and code of business conduct and ethics.
We use our investor relations website as a channel of distribution for important company information, including news and commentary about our business and financial performance, webcasts of our earnings calls and investor events, SEC filings, and corporate governance information, including information regarding our board of directors (our “Board”), our board committee charters and code of business conduct and ethics.
In addition to a self-serve application for voice projects with over 450+ stock voices across 225+ languages, Veritone’s voice solution offers Premium Voices with over 70+ recognizable voice-artist approved AI voices to license, as well as custom voice cloning, a consent-driven cloning solution using text-to-speech or speech-to-speech with built in safeguards.
In addition to a self-serve application for voice projects with over 450+ stock voices across 225+ languages, Veritone’s voice solution offers Premium Voices with over 70+ recognizable voice-artist approved AI voices to license, as well as custom voice cloning, a consent-driven cloning solution using text-to-speech or speech-to-speech.
Enable law enforcement and judicial agencies to leverage AI to automate the redaction of faces and other sensitive information within audio, video and image-based evidence, streamlining their redaction workflows. Redact employs AI technology to automatically detect when persons appear in evidence for review and selection.
Enables law enforcement and judicial agencies to leverage AI to automate the redaction of faces and other sensitive information within audio, video and image-based evidence, streamlining their redaction workflows. Redact employs AI technology to automatically detect when persons appear in evidence for review and selection.
In the case of our hiring solutions, the market for talent acquisition software and services is highly competitive, rapidly evolving and fragmented, and we face competition from programmatic job advertising software companies, traditional human capital management (HCM) companies, companies primarily focused on offering applicant tracking systems, and providers of point solutions for specific use cases such as for recruitment marketing, and these companies include, without limitation, Oracle and SAP.
In the case of our Veritone Hire solutions, the market for talent acquisition software and services is highly competitive, rapidly evolving and fragmented, and we face competition from programmatic job advertising software companies, traditional human capital management (HCM) companies, companies primarily focused on offering applicant tracking systems, and providers of point solutions for specific use cases such as for recruitment marketing, and these companies include, without limitation, Oracle and SAP.
Our customers utilize our products and services to process, analyze and store data in a manner which may cause us to carry out certain processing of personal information that is subject to data protection and privacy laws in various jurisdictions including the European Union and United Kingdom General Data Protection Regulation (“GDPR”), the California Consumer Privacy Act (“CCPA”) laws regulating the use of AI, automated decision making, machine learning, and biometric technologies (including facial recognition), and similar laws and regulations in other jurisdictions, including states and 9 localities within the United States.
Our customers utilize our products and services to process, analyze and store data in a manner which may cause us to carry out certain processing of personal data that is subject to data protection and privacy laws in various jurisdictions including the European Union and United Kingdom General Data Protection Regulation (“GDPR”), the California Consumer Privacy Act, as amended (“CCPA”), laws regulating the use of AI, automated decision making, machine learning, and biometric technologies (including facial recognition), and similar laws and regulations in other jurisdictions, including states and localities within the United States.
Our aiWARE platform’s applications and cognitive capabilities enable users to quickly search and analyze large volumes of audio files, video files, text-based documents and other electronically stored information to identify particular words, phrases, faces, objects and voices, and to redact sensitive information prior to production, greatly increasing the speed, reducing the cost, and improving the results of discovery processes.
Our aiWARE platform’s applications and cognitive capabilities are designed to enable users to quickly search and analyze large volumes of audio files, video files, text-based documents and other electronically stored information to identify particular words, phrases, faces, objects and voices, and to redact sensitive information prior to production, increasing the speed, reducing the cost, and improving the results of discovery processes.
It provides a common software infrastructure that lets customers use end-to-end, AI-powered solutions — from data ingestion to intelligent data analysis — in either general or industry-specific 5 applications. aiWARE Anywhere deployment options include on-premises, in the Veritone cloud, or in a private cloud depending on our customers' needs. • IDentify .
It provides a common software infrastructure that lets customers use end-to-end, AI-powered solutions — from data ingestion to intelligent data analysis — in either general or industry-specific applications. aiWARE Anywhere deployment options include on-premises, in the Veritone cloud, or in a private cloud, depending on our customers’ needs. • Veritone Contact .
Seasonality We experience seasonal fluctuations in our revenue and operating performance as a result of the utilization of our platform and associated revenues from our Software Products & Services. In particular, our hiring solutions revenues have historically been higher in the second half of each fiscal year, consistent with the hiring cycles of our larger customers.
Seasonality We experience seasonal fluctuations in our revenue and operating performance as a result of the utilization of our platform and associated revenues from our Software Products & Services. In particular, our Veritone Hire revenues have historically been higher in the second half of each fiscal year, consistent with the hiring cycles of our larger customers.
Item 1. Busi ness. Overview Veritone, Inc. (collectively with our subsidiaries, referred to as “Veritone,” “Company,” “we,” “our,” and “us”) is a leading provider of artificial intelligence (“AI”) computing solutions and services. We are driven by the belief that AI is key to building a safer, more efficient, transparent and empowered society.
Item 1. Busi ness. Overview Veritone, Inc. (collectively with our subsidiaries, referred to as “Veritone,” “Company,” “we,” “our,” and “us”) is a provider of artificial intelligence (“AI”) computing solutions and services and certain advertising and licensing services. We are driven by the belief that AI is key to building a safer, more efficient, transparent and empowered society.
We currently hold an Authorization to Operate (“ATO”) under the Federal Risk and Authorization Management Program (“FedRAMP”) for our AWS secure government cloud platform to support government customers. Our current architecture gives us the flexibility to deploy many of aiWARE’s capabilities in virtually any environment, including select arm64 architectures, with improved scalability and reliability.
We currently hold an Authorization to Operate (“ATO”) under the Federal Risk and Authorization Management Program (“FedRAMP”) for our AWS secure government cloud platform to support government customers. Our current architecture gives us the flexibility to deploy many of aiWARE’s capabilities in virtually any environment, including select arm64 architectures.
We market and sell our content licensing Managed Services to customers such as major sports networks, advertising agencies, and film production companies that require high value content for their broadcasts and projects. During 2022, ten content licensing customers accounted for approximately 11% of the total Managed Services revenues.
We market and sell our content licensing Managed Services to customers such as major sports networks, advertising agencies, and film production companies that require high value content for their broadcasts and projects. During 2023, ten content licensing customers accounted for approximately 12% of the total Managed Services revenues.
As of such date, we also had 13 issued patents and 41 patent applications pending for examination in foreign jurisdictions (including international PCT applications), all of which are based on counterpart U.S. patent applications pursued by us.
As of such date, we also had 20 issued patents and 5 patent applications pending for examination in foreign jurisdictions (including international PCT applications), all of which are based on counterpart U.S. patent applications pursued by us.
Under these data protection and privacy laws, we are required to maintain appropriate technical and organizational measures to ensure the security and protection of personal data and information, and we must comply (either directly or indirectly pursuant to requirements of our contracts with customers) with a number of requirements with respect to individuals whose personal data or information we collect and process, including, among others, notification requirements and requirements to comply with requests from individuals to (i) opt out of collection, processing and/or sale of their data or information, (ii) delete their data or information, and (iii) receive copies of and other information regarding our collection and processing of their data or information.
Under these data protection and privacy laws, we may be required to maintain certain technical and organizational measures designed to ensure the security and protection of personal data and information, and 9 we may be required to comply (either directly or indirectly pursuant to requirements of our contracts with customers) with a number of requirements with respect to individuals whose personal data or information we collect and process, including, among others, notification requirements and requirements to comply with requests from individuals to (i) opt out of collection, processing and/or sale of their data or information, (ii) delete their data or information, and (iii) receive copies of and other information regarding our collection and processing of their data or information.
We strive to create a diverse and inclusive work environment in which all employees feel a strong sense of community and embody our core values. 41% of our employees are women, and 18% of our employees are members of ethnic or racial minorities and other legally protected classes.
We strive to create a diverse and inclusive work environment in which all employees feel a strong sense of community and embody our core values. 39.6% of our employees are women, and 49.5% of our employees are members of ethnic or racial minorities and other legally protected classes.
We continuously monitor and evaluate employee turnover to identify and address areas of concern to improve employee retention. Company Information We were incorporated as a Delaware corporation on June 13, 2014. Our corporate headquarters are located at 2420 17 th Street, Office 3002, Denver, Colorado 80202. Our telephone number is (888) 507-1737. Our principal website address is www.veritone.com.
We continuously monitor and evaluate employee turnover to identify and address areas of concern to improve employee retention. Company Information We were incorporated as a Delaware corporation on June 13, 2014. Our corporate headquarters are located at 1615 Platte Street, 2nd Floor, Denver, Colorado 80202. Our telephone number is (888) 507-1737. Our principal website address is www.veritone.com.
Customers Software Products & Services We market and sell our Software Products & Services to customers in the Commercial Enterprise and Government & Regulated Industries markets. During 2022, ten customers accounted for approximately 76% of the total revenues from our Software Products & Services, with one customer accounting for approximately 58% of the total revenues from Software Products & Services.
Customers Software Products & Services We market and sell our Software Products & Services to customers in the Commercial Enterprise and Government & Regulated Industries markets. During 2023, ten customers accounted for approximately 44% of the total revenues from our Software Products & Services, with one customer accounting for approximately 22% of the total revenues from Software Products & Services.
We will also provide electronic or paper copies of such reports free of charge, upon request made to our Corporate Secretary at 2420 17 th Street, Office 3002, Denver, Colorado 80202. The SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at http://www.sec.gov.
We will also provide electronic or paper copies of such reports free of charge, upon request made to our Corporate Secretary at 1615 Platte Street, 2nd Floor, Denver, Colorado 80202. The SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at http://www.sec.gov.
We are obligated to comply with the CPRA and the regulations to be implemented thereunder. Moreover, governments, regulators and individuals are increasingly scrutinizing the use of AI and machine learning technologies (including the associated processing of personal data), automated decision making (including in an employment and/or recruitment context), and the processing of biometric data (including through facial recognition technologies).
Moreover, governments, regulators and individuals are increasingly scrutinizing the use of AI and machine learning technologies (including the associated processing of personal data), automated decision making (including in an employment and/or recruitment context), and the processing of biometric data (including through facial recognition technologies).
During 2022, ten advertising customers accounted for approximately 38% of the total revenues from our Managed Services, with one advertising customer accounting for approximately 11% of the total Managed Services revenues.
During 2023, ten advertising customers accounted for approximately 50% of the total revenues from our Managed Services, with one advertising customer accounting for approximately 12% of the total Managed Services revenues.
As of March 10, 2023, in the United States, we have 41 issued patents, which expire between 2030 and 2042, and have 12 patent applications pending for examination.
As of March 25, 2024, in the United States, we have 33 issued patents, which expire between 2029 and 2042, and have 14 patent applications pending for examination.
Digital Media Hub offers intelligent search and discovery capabilities and robust reporting tools, which allow users to access content quickly, and allow rights holders to track downloads and understand what content is most important to users. • Hiring Solutions . Recruitment advertising programmatic software which employers can use to optimize the efficiency of their hiring process.
Digital Media Hub offers intelligent search and discovery capabilities and robust reporting tools, which allow users to access content quickly, and allow rights holders to track downloads and understand what content is most important to users. • Veritone Hire Solutions .
Reviewing video footage to identify and authenticate the appropriate footage to be disclosed, and to redact facial images and other sensitive information prior to disclosure, have historically been time-consuming and largely manual processes.
In addition, public agencies are required to provide certain information, which may include audio and video files, in response to requests from the public. Reviewing video footage to identify and authenticate the appropriate footage to be disclosed, and to redact facial images and other sensitive information prior to disclosure, have historically been time-consuming and largely manual processes.
Whether it is a local police department trying to rapidly solve crimes through analysis of video evidence, a media company searching years of television archives for specific images and video content, or the U.S. military trying to analyze huge volumes of satellite and other aerial images, we believe AI is the only efficient solution to these complex challenges.
Whether it is government or state and local law enforcement agencies trying to solve crimes through the analysis of unstructured video evidence, a media company searching years of television archives for specific images and video content, or global employers trying to operationalize high volumes of hiring data, we believe AI is the only efficient solution to these complex challenges.
Our advertising services also include our VeriAds Network, which is comprised of programs that enable broadcasters, podcasters and social media influencers to generate incremental advertising revenue. In March 2022, we acquired an influencer-based management company to augment and accelerate our advertising services and capabilities. In September 2021, we acquired PandoLogic. Ltd.
Our advertising services also include our VeriAds Network, which is comprised of programs that enable broadcasters, podcasters and social media influencers to generate incremental advertising revenue.
Substantially all of our agreements with channel partners are nonexclusive; however, we 6 allow channel partners to register sales opportunities through our deal registration program, in which case we may grant a channel partner priority to pursue an opportunity for a specified period of time, subject to certain conditions.
Substantially all of our agreements with channel partners are nonexclusive; however, we allow channel partners to register sales opportunities through our deal registration program, in which case we may grant a channel partner priority to pursue an opportunity for a specified period of time, subject to certain conditions. 6 Managed Services We conduct sales and marketing activities relating to our digital content licensing Managed Services business through our direct sales representatives who identify, develop and manage our relationships with strategic Commercial Enterprise customers in the advertising, entertainment/documentary and network broadcasting industries.
Synthetic voice solution that allows content creators and owners across numerous industries to securely create and monetize verified AI voices that can be transformed into different languages, dialects, accents and more.
The PandoSelect platform pairs the PandoIQ programmatic software with conversational AI to provide employers with an all-in-one dashboard to source, engage, qualify, and manage candidates. • Veritone Voice . Synthetic voice solution that allows content creators and owners across numerous industries to securely create and monetize verified AI voices that can be transformed into different languages, dialects, accents and more.
Human Capital Resources As of March 10, 2023, we had a total of 661 employees, substantially all of whom were full-time employees. 217 of our U.S-based employees are located in California, with another 323 employees located in 40 other states.
Human Capital Resources As of March 25, 2024, we had a total of 696 employees, 664 of whom were full-time employees. 196 of our U.S-based employees are located in California, with another 257 employees located in 36 other states. We also have 72 employees located in Israel and 171 employees located in other countries.
We also have 104 employees located in Israel, 14 in the United Kingdom, 1 in Singapore, 1 in Austria and 1 in the Netherlands. We believe that our employees are our greatest asset and our company culture is a critical component of our success.
We believe that our employees are our greatest asset and our company culture is a critical component of our success.
Government & Regulated Industries markets include state and local government, legal and compliance markets, including law enforcement, legal and judicial professionals, and companies and regulatory bodies in highly regulated industries.
We believe that there are near and long term opportunities in Government & Regulated Industries to further grow our business during fiscal 2024 and beyond. Government & Regulated Industries markets include state and local government, legal and compliance markets, including law enforcement, legal and judicial professionals, and companies and regulatory bodies in highly regulated industries.
Although these seasonal factors are common in the technology industry, historical patterns should not be considered a reliable indicator of our future sales activity or performance. Regulatory Environment We are subject to a number of U.S. federal, state, local and foreign laws and regulations, including within Israel and parts of Europe, that involve matters central to our business.
Although these seasonal factors are common in the technology industry, historical patterns should not be considered a reliable indicator of our future sales activity or performance.
This creates significant challenges for companies and 1 governments across the globe, including how to create systematic solutions to address the ever-increasing volume of unstructured data.
Our presence is primarily in the United States, the United Kingdom, France, Australia, Israel and India. The Market Opportunity Today, the existence of unstructured data is growing rapidly, creating significant challenges for companies and governments across the globe, including how to create systematic solutions to address the ever-increasing volume of unstructured data.
To date, the majority of our Software Products & Services and Managed Services revenue is generated from our Commercial Enterprise customers. 3 Software Products & Services Software Products & Services used by our Commercial Enterprise customers include: • aiWARE Processing .
Software Products & Services Software Products & Services used by our Commercial Enterprise customers include: • aiWARE Processing .
Government, law enforcement, and justice organizations have used Tracker to find persons of interest from disparate video files and build an understanding of their activities and associations. This type of “digital forensics” can help investigators create a narrative around an event or an individual contained in a video capturing a crime or an object of interest to track.
This type of “digital forensics” can help investigators create a narrative around an event or an individual contained in a video capturing a crime or an object of interest to track. • Intelligent Digital Evidence Management System (“iDEMS”) .
Government and Regulated Industries Government & Regulated Industries today consists of customers in government and regulated industries, including our state, local and federal government, legal, compliance and, to a lesser extent, energy customers.
Government and Regulated Industries Government & Regulated Industries consists of customers in government and regulated industries, including our state, local and federal government, legal and compliance customers. To date, Government & Regulated Industries represents a smaller portion of our consolidated revenue; however, in fiscal 2023, Government & Regulated Industries grew 56% as compared to fiscal 2022.
Commercial Enterprise Commercial Enterprise today consists of customers in the commercial sector, including media and entertainment, advertising, content licensing and hiring solutions customers.
Commercial Enterprise Commercial Enterprise today consists of customers in the commercial sector, including media and entertainment, advertising, content licensing and our hiring solutions customers, which we now refer to as “Veritone Hire.” To date, the majority of our Software Products & Services and Managed Services revenue is generated from our Commercial Enterprise customers.
Monitors people as objects in video, providing insights to help assess the visual description of a person of interest in a scene, what they are doing, and who they are with, without performing facial detection or other biometric identification that would reveal a person’s identity.
Monitors people in video, providing insights to help assess the visual description of a person of interest in a scene, what they are doing, and who they are with. Tracker enables our customers to monitor multiple video recordings and feeds when dealing with occlusion within crowded areas and impacts from lighting and distance.
Our software, PandoIQ, leverages predictive AI algorithms and machine-learning to help employers save money on their job advertising and source talent faster. The PandoSelect platform pairs the PandoIQ programmatic software with conversational AI to provide employers with an all-in-one dashboard to source, engage, qualify, and manage candidates. • Veritone Voice .
Our Broadbean software is integrated into over 100 unique applicant tracking systems and enables customers to access over 2,500 international job boards to streamline hiring efforts, and our PandoIQ software leverages predictive AI algorithms and machine-learning to help employers save money on their job advertising and source talent faster.
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(“PandoLogic”), a company incorporated under the laws of the state of Israel, which is a leading provider of intelligent hiring solutions and utilizes its proprietary platform, PandoIQ, to accelerate the time and improve efficiency for employers hiring at scale for both mass market and difficult-to-source candidates.
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Cloud-native software portal and applications enabling employers to recruit and operate programmatic advertising software to optimize the efficiency of their hiring processes.
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PandoLogic’s fully autonomous recruiting platform helps employers source talent faster and more efficiently with predictive algorithms, machine learning and AI.
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Saves time and costs for law enforcement officers by using a centralized system to automate the collection and reporting data compliant with the Racial Identity and Profiling Act (RIPA). • IDentify . Enables law enforcement and judicial agencies to increase the speed and efficiency of investigative workflows.
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Our presence is primarily in the United States and Israel. The Market Opportunity Today, unstructured data is growing rapidly and Gartner clients are reporting 30% to 60% growth in unstructured data year over year (2022 Strategic Roadmap for Storage, March 2022).
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Built on Veritone’s award-winning aiWARE TM platform, iDEMS is a cloud-based platform suite comprised of Veritone’s market-leading public sector solutions – Veritone Investigate, Redact, Illuminate, Tracker and IDentify . iDEMS has seamless downstream workflows to centralize digital evidence, streamline redaction, improve analysis and evidence discovery, track persons of interest across all containerized content files and identify persons of interest from an existing records database.
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To date, a small portion of our historical revenue is generated from Government & Regulated Industries customers; however, we believe that there are excellent near and long term opportunities in Government & Regulated Industries to grow our business.
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The solution also provides technical workflow integrations with many of the industry’s leading software platforms and tools.
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In addition, public agencies are required to provide certain information, which may include audio and video files, in response to requests from the public. Recently, statutes in several states have broadened the scope of information required to be disclosed and have shortened the time periods in which such disclosures must be made.
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Regulatory Environment We are subject to a number of U.S. federal, state, local and foreign laws and regulations, including within the United Kingdom, Israel and parts of Europe, that involve matters central to our business. These laws and regulations involve privacy, data protection, intellectual property, competition, consumer protection and other subjects.
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Powerful AI-driven application designed to enable law enforcement and judicial agencies to increase the speed and efficiency of investigative workflows.
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Managed Services We conduct sales and marketing activities relating to our digital content licensing Managed Services business through our direct sales representatives who identify, develop and manage our relationships with strategic Commercial Enterprise customers in the advertising, entertainment/documentary and network broadcasting industries.
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These laws and regulations involve privacy, data protection, intellectual property, competition, consumer protection and other subjects.
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The California Privacy Rights Act (“CPRA”) amends and expands the CCPA to include additional obligations of businesses with respect to collecting, processing and sharing personal information and responding to requests from consumers related to their personal information. Additionally, the CPRA applies to personal information of business representatives and employees.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

116 edited+89 added−24 removed174 unchanged
Biggest changeIn order to remediate the material weakness relating to ITGCs, management is taking remediation actions including: (i) developing and enhancing IT compliance oversight capabilities with specific focus over identification and execution of appropriate ITGCs; (ii) developing a training program addressing ITGCs and policies, including educating control owners concerning the principles and requirements of each control, with a focus on those related to user access and change management over IT systems impacting financial reporting; (iii) developing and maintaining documentation of underlying ITGCs to promote knowledge transfer upon personnel and function changes; and (iv) implementing an IT management review and testing plan to monitor ITGCs with a specific focus on systems supporting our financial reporting processes.
Biggest changeManagement is taking remediation actions with respect to this material weakness including: (i) developing and enhancing IT compliance oversight capabilities with specific focus over identification and execution of appropriate ITGCs; (ii) developing a training program addressing ITGCs and policies, including educating control owners concerning the principles and requirements of each control, with a focus on those related to user access and change management over IT systems impacting financial reporting; (iii) developing and maintaining documentation of underlying ITGCs to promote knowledge transfer upon personnel and function changes; (iv) implementing an IT management review and testing plan to monitor ITGCs with a specific focus on systems supporting our financial reporting processes; (v) implementing financial reporting control changes to address foreign currency and consolidation matters, evaluating the adequacy of resources surrounding its consolidation process and training individuals in the proper accounting treatment for foreign currency transactions and consolidation under US GAAP, which training was completed in the fourth quarter of 2023; and (vi) hiring additional staff to oversee the implementation and testing of these remediation actions.
We are a “smaller reporting company” under the U.S. federal securities laws, and the reduced reporting requirements applicable to smaller reporting companies could make our common stock less attractive to investors. We are a “smaller reporting company,” and prior to December 31, 2022, we were an “emerging growth company” under U.S. federal securities laws.
We are a “smaller reporting company” under the U.S. federal securities laws, and the reduced reporting requirements applicable to smaller reporting companies could make our common stock less attractive to investors. 31 We are a “smaller reporting company,” and prior to December 31, 2022, we were an “emerging growth company” under U.S. federal securities laws.
Our amended and restated certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for: • any derivative action or proceeding brought on our behalf; • any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or other employees to us or to our stockholders; • any action asserting a claim against us arising pursuant to any provision of the Delaware General Corporation Law, our amended and restated certificate of incorporation or our amended and restated bylaws; or • any action asserting a claim against us governed by the internal affairs doctrine.
Our amended and restated certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for: • any derivative action or proceeding brought on our behalf; • any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or other employees to us or to our stockholders; • any action asserting a claim against us arising pursuant to any provision of the Delaware General Corporation Law, our amended and restated certificate of incorporation or our amended and restated bylaws; or 32 • any action asserting a claim against us governed by the internal affairs doctrine.
As a result of the material weakness described above and other related matters raised or that may in the future be identified, we face potential for adverse regulatory consequences, including investigations, penalties or suspensions by the SEC or NASDAQ, litigation or other disputes which may include, among others, claims invoking the federal and state securities laws, contractual claims or other claims arising from the restatement and material weakness in our internal control over financial reporting and the preparation of our consolidated financial statements.
As a result of the material weaknesses described above and other related matters raised or that may in the future be identified, we face potential for adverse regulatory consequences, including investigations, penalties or suspensions by the SEC or NASDAQ, litigation or other disputes which may include, among others, claims invoking the federal and state securities laws, contractual claims or other claims arising from the restatement and material weakness in our internal control over financial reporting and the preparation of our consolidated financial statements.
We expect to continue to expend substantial financial and other resources on, among other things: • investments to expand and enhance our platform and technology infrastructure, make improvements to the scalability, availability and security of our aiWARE platform, and develop new products; • sales and marketing, including expanding our direct sales organization and marketing programs, and expanding our programs directed at increasing our brand awareness among current and new customers; • hiring additional employees; • expansion of our operations and infrastructure, both domestically and internationally; and 13 • general administration, including legal, accounting and other expenses.
We expect to continue to expend substantial financial and other resources on, among other things: • investments to expand and enhance our platform and technology infrastructure, make improvements to the scalability, availability and security of our aiWARE platform, and develop new products; • sales and marketing, including expanding our direct sales organization and marketing programs, and expanding our programs directed at increasing our brand awareness among current and new customers; • hiring additional employees; • expansion of our operations and infrastructure, both domestically and internationally; and • general administration, including legal, accounting and other expenses.
If any of our key customers, particularly our key advertising customers which have the ability to terminate our agreements on short notice, decides to terminate or not to renew its contract with us, renews on less favorable terms, or 20 suffers downturns in its business leading to a reduction in its marketing spending, and we are not able to gain additional customers or increase our revenue from other customers to offset the reduction of revenues, our business, results of operations and financial condition would be harmed.
If any of our key customers, particularly our key advertising customers which have the ability to terminate our agreements on short notice, decides to terminate or not to renew its contract with us, renews on less favorable terms, or suffers downturns in its business leading to a reduction in its marketing spending, and we are not able to gain additional customers or increase our revenue from other customers to offset the reduction of revenues, our business, results of operations and financial condition would be harmed.
As technology continues to evolve, more tasks currently performed by people may be replaced by automation, robotics, machine learning, artificial intelligence and other technological advances outside of our control. This trend poses a risk to the talent acquisition industry as a whole, particularly in lower-skill job categories that may be more susceptible to such replacement.
As technology continues to evolve, more tasks currently performed by people may be replaced by automation, robotics, machine learning, artificial 21 intelligence and other technological advances outside of our control. This trend poses a risk to the talent acquisition industry as a whole, particularly in lower-skill job categories that may be more susceptible to such replacement.
We are also required to comply with certain regulations required by government customers, such as FedRAMP and CJIS, which require us to incur significant costs, devote management time and modify our current platform 19 and operations. If we are unable to comply with those regulations effectively and in a cost-effective manner, our financial results could be adversely affected.
We are also required to comply with certain regulations required by government customers, such as FedRAMP and CJIS, which require us to incur significant costs, devote management time and modify our current platform and operations. If we are unable to comply with those regulations effectively and in a cost-effective manner, our financial results could be adversely affected.
It is also possible that a third party acquirer of 16 such technology could offer the AI models and technologies to the public as a free add-on capability, in which case certain of our customers would have less incentive to pay us for the use of our platform.
It is also possible that a third party acquirer of such technology could offer the AI models and technologies to the public as a free add-on capability, in which case certain of our customers would have less incentive to pay us for the use of our platform.
Any of the above circumstances or events may harm our reputation, cause customers to stop using our platform, impair our ability to increase revenue from existing customers, impair our ability to grow our customer base, subject us to financial penalties and liabilities under our service level agreements and otherwise harm our business, results of operations and financial condition.
Any of the above circumstances or events may harm our reputation, cause customers to stop using our platform, impair our ability to increase revenue from existing customers, impair our ability to grow our customer base, subject us to financial 16 penalties and liabilities under our service level agreements and otherwise harm our business, results of operations and financial condition.
Although this material weakness did not result in any identified misstatements to the financial statements and there were no changes to previously released financial results, this material weakness could have resulted in a material misstatement to our annual or interim consolidated financial statements that would not be prevented or detected on a timely basis.
Although this material weakness did not result in any identified misstatements to the financial statements and there were no changes to previously released financial results, this material weakness could have resulted in a material misstatement to our annual or interim consolidated financial statements that would not be prevented or detected and corrected on a timely basis.
Under these agreements, the rights holders generally represent and warrant that they have the right to license the content to us and that the authorized use 21 of the content will not infringe any third party copyrights and agree to indemnify us for claims arising from breach of such representations and warranties.
Under these agreements, the rights holders generally represent and warrant that they have the right to license the content to us and that the authorized use of the content will not infringe any third party copyrights and agree to indemnify us for claims arising from breach of such representations and warranties.
For example, the indenture will generally require us to repurchase the convertible senior notes for cash upon the occurrence of a fundamental change of us and, in certain circumstances, to increase the 29 conversion rate for a holder that converts its convertible senior notes in connection with a make-whole fundamental change.
For example, the indenture will generally require us to repurchase the convertible senior notes for cash upon the occurrence of a fundamental change of us and, in certain circumstances, to increase the conversion rate for a holder that converts its convertible senior notes in connection with a make-whole fundamental change.
Additionally, future or past business transactions (such as acquisitions or integrations) could expose us to additional cybersecurity risks and vulnerabilities, as our platform, network, or computer systems could be negatively affected by vulnerabilities present in acquired or integrated entities’ systems and 18 technologies.
Additionally, future or past business transactions (such as acquisitions or integrations) could expose us to additional cybersecurity risks and vulnerabilities, as our platform, network, or computer systems could be negatively affected by vulnerabilities present in acquired or integrated entities’ systems and technologies.
In addition, we rely on third parties, including AWS and Azure, to operate critical business systems and process sensitive information in a variety of contexts, including for hosting, storage and other critical services, required to operate our 17 Software Products & Services and Managed Services.
In addition, we rely on third parties, including AWS and Azure, to operate critical business systems and process sensitive information in a variety of contexts, including for hosting, storage and other critical services, required to operate our Software Products & Services and Managed Services.
Moreover, although we have implemented policies to regulate the use and incorporation of open source software into our aiWARE platform, we cannot be certain that we have not incorporated open source software in our aiWARE platform in a manner that is inconsistent with such policies.
Moreover, although we have implemented policies to 24 regulate the use and incorporation of open source software into our aiWARE platform, we cannot be certain that we have not incorporated open source software in our aiWARE platform in a manner that is inconsistent with such policies.
Any of the foregoing could require us to devote additional research and development 23 resources to re-engineer our products, could result in customer dissatisfaction and may adversely affect our business, results of operations and financial condition.
Any of the foregoing could require us to devote additional research and development resources to re-engineer our products, could result in customer dissatisfaction and may adversely affect our business, results of operations and financial condition.
In addition, we will face risks of doing business internationally that could adversely affect our business, including, but not limited to: • managing and staffing international operations and the increased operating, travel, infrastructure and legal compliance costs associated with numerous international locations; • establishing and managing additional instances of our aiWARE platform in other countries; 14 • adapting, localizing and pricing our products and services for specific countries and to offer customer support in various languages; • additional foreign tax requirements and obligations, and adverse tax consequences and tax rulings; • economic and political instability in some countries; • compliance with local laws, regulations and customs in foreign jurisdictions, particularly in the areas of data privacy and personal privacy, employment and tax and export controls, economic sanctions and anti-corruption laws; and • limited protection for intellectual property rights in some countries.
In addition, we will face risks of doing business internationally that could adversely affect our business, including, but not limited to: • managing and staffing international operations and the increased operating, travel, infrastructure and legal compliance costs associated with numerous international locations; • establishing and managing additional instances of our aiWARE platform in other countries; • adapting, localizing and pricing our products and services for specific countries and to offer customer support in various languages; • additional foreign tax requirements and obligations, and adverse tax consequences and tax rulings; • economic, international conflicts and political instability in some countries; 13 • compliance with local laws, regulations and customs in foreign jurisdictions, particularly in the areas of data privacy and personal privacy, employment and tax and export controls, economic sanctions and anti-corruption laws; and • limited protection for intellectual property rights in some countries.
In addition, if we are unable to continue to meet these requirements, we may not be able to remain listed on NASDAQ. 27 We have identified material weaknesses in our internal control over financial reporting.
In addition, if we are unable to continue to meet these requirements, we may not be able to remain listed on NASDAQ. We have identified material weaknesses in our internal control over financial reporting.
Though we are taking steps to remediate the material weakness, we cannot be assured that the measures we have taken to date, or any measures we may take in the future, will be sufficient to remediate the material weakness or avoid potential future material weaknesses.
Though we are taking steps to remediate the existing material weaknesses, we cannot be assured that the measures we have taken to date, or any measures we may take in the future, will be sufficient to remediate the material weakness or avoid potential future material weaknesses.
If we are not able to remediate the existing material weakness, or if we identify any new material weaknesses in the future, we may be unable to maintain compliance with the requirements of securities laws, stock exchange listing rules, or 28 debt instrument covenants regarding timely filing of information; we could lose access to sources of capital or liquidity; and investors may lose confidence in our financial reporting and our stock price may decline as a result.
If we are not able to remediate the existing material weaknesses, or if we identify any new material weaknesses in the future, we may be unable to maintain compliance with the requirements of securities laws, stock exchange listing rules, or debt instrument covenants regarding timely filing of information; we could lose access to sources of capital or liquidity; and investors may lose confidence in our financial reporting and our stock price may decline as a result.
We may not be successful in gaining new customers in any or all of these markets. Some markets may present unique and unexpected challenges and difficulties.
We may not be successful in gaining new customers in any or all of these markets. Some markets 20 may present unique and unexpected challenges and difficulties.
If one or more analysts ceases coverage of our company or fails to publish reports on us regularly, demand for our stock could decrease, which in turn could cause the trading price or trading volume of our common stock to decline and could result in the loss of all or part of your investment in us. 30 Item 1B.
If one or more analysts ceases coverage of our company or fails to publish reports on us regularly, demand for our stock could decrease, which in turn could cause the trading price or trading volume of our common stock to decline and could result in the loss of all or part of your investment in us. 33 Item 1B.
Our success depends largely upon the continued services of our President and Chief Executive Officer, Ryan Steelberg, and our other executive officers and senior management. We rely on our leadership team in the areas of strategy and implementation, research and development, operations, security, marketing, sales, support and general and administrative functions.
Our success depends largely upon the continued services of our President, Chief Executive Officer and Chairman of our Board, Ryan Steelberg, and our other executive officers and senior management. We rely on our leadership team in the areas of strategy and implementation, research and development, operations, security, marketing, sales, support and general and administrative functions.
In particular, our hiring solutions have historically experienced seasonality in terms of when we enter into customer agreements for our products and services. Consistent with the hiring patterns of our customers, a higher percentage of related revenue is earned in the second half of each year.
In particular, our Veritone Hire solutions have historically experienced seasonality in terms of when we enter into customer agreements for our products and services. Consistent with the hiring patterns of our customers, a higher percentage of related revenue is earned in the second half of each year.
Conversion or exercise of outstanding equity-lined securities may dilute the ownership interest of our stockholders or may otherwise depress the price of our common stock. We have a substantial number of shares of our common stock reserved for issuance upon the exercise of stock options, settlement of restricted stock units and upon conversion of our convertible senior notes.
Conversion or exercise of outstanding equity-linked securities may dilute the ownership interest of our stockholders or may otherwise depress the price of our common stock. We have a substantial number of shares of our common stock reserved for issuance upon the exercise of stock options, settlement of restricted stock units and upon conversion of our convertible senior notes.
For example, during the third and fourth quarters of fiscal year 2022, we experienced a slowdown in our Average Annual Revenue (AAR) per customer which was almost entirely driven by a reduction in hiring consumption from Amazon.
For example, during the third and fourth quarters of fiscal year 2022, we experienced a slowdown in our Average Annual Revenue (“AAR”) per customer which was almost entirely driven by a reduction in hiring consumption from Amazon.
For example, beginning in March 2022, we experienced a reduction in hiring consumption from our largest customer, Amazon, and found that advertisers reduced spending across our managed services when compared to the same periods in the prior year.
For instance, beginning in March 2022, we experienced a reduction in hiring consumption from our largest customer, Amazon, and found that advertisers reduced spending across our managed services when compared to the same periods in the prior year.
A key element of our aiWARE platform is the ability to incorporate and integrate AI models developed by multiple third-party vendors, and we plan to continue to increase the number of third-party AI models incorporated into our aiWARE platform in order to enhance the performance and power of our platform.
A key element of our aiWARE platform is the ability to incorporate and integrate AI models developed by multiple third-party vendors, and we plan to continue to increase the number of third-party AI models incorporated into our aiWARE platform to enhance the performance and power of our platform.
Prior to that, from the completion of our initial public offering (“IPO”) on May 12, 2017 through February 28, 2022, the closing price of our common stock has ranged from a low of $1.52 to a high of $65.91.
Prior to that, from the completion of our initial public offering (“IPO”) on May 12, 2017 through February 28, 2023, the closing price of our common stock has ranged from a low of $1.52 to a high of $65.91.
We expect this seasonality to continue, which may cause fluctuations in certain of our operating results and financial metrics, and thus difficulties in predictability of our operating results. We have had a history of losses and we may be unable to sustain profitability.
We expect this seasonality to continue, which may cause fluctuations in certain of our operating results and financial metrics, and thus difficulties in predictability of our operating results. We have had a history of losses and we may be unable to achieve or sustain profitability.
Once an acquisition is closed, we may discover hidden costs, resource demands and potential liabilities that were not evident throughout the due diligence process, particularly when such process is undertaken on an accelerated timeline.
Once an acquisition is closed, we may discover hidden costs, resource demands and potential liabilities that were not evident during the due diligence process, particularly when such process is undertaken on an accelerated timeline.
This means that, if and to the extent such regulations are relevant to our operations or those of our customers, certain of the risks and considerations outlined herein may apply equally to our processing of both personal and non-personal information.
This means that, if and to the extent such regulations are relevant to our operations or those of our customers, certain of the risks and considerations outlined herein may apply equally to our processing of both personal and non-personal data.
We may be unaware of the intellectual property rights of others that may cover some or all of our technology. In addition, in operating our platform, we rely significantly on software provided by third parties, including AI models and applications, and we may become subject to similar infringement claims related to such third party software.
We may be unaware of the intellectual property rights of others that may cover some or all of our technology. In addition, in operating our platform, we rely significantly on software provided by third parties, including without limitation, generative AI models and applications, and we may become subject to similar infringement claims related to such third party software.
Compliance with these obligations requires significant management time and attention, and failure to comply could result in government enforcement actions (e.g., investigations, inspections, etc.), negative publicity, litigation (including class action claims), subject us to contractual liability, fines or penalties, additional reporting requirements and/or oversight or result in demands that we modify or cease existing business practices (including bans on processing personal data or orders to destroy personal data).
Compliance with these obligations requires significant management time and attention, and actual or perceived failure to comply could result in government enforcement actions (e.g., investigations, inspections, etc.), negative publicity, litigation (including class action claims) and mass arbitration demands, subject us to contractual liability, fines or penalties, additional reporting requirements and/or oversight or result in demands that we modify or cease existing business practices (including bans on processing personal data or orders to destroy personal data).
In particular, severe ransomware attacks are becoming increasingly prevalent and can lead to significant interruptions in our operations, loss of sensitive data and income, reputational harm, and diversion of funds.
In particular, severe ransomware attacks are becoming increasingly prevalent and can lead to significant interruptions in our operations, loss of sensitive information and income, reputational harm, and diversion of funds.
Significant segments of the market for talent acquisition software and services may have hiring needs and service preferences that are subject to greater volatility than the overall economy. The target customer segment for our hiring solutions span a wide range of company characteristics, including company size, geography, and industry, among other factors.
Significant segments of the market for talent acquisition software and services may have hiring needs and service preferences that are subject to greater volatility than the overall economy. The target customer segment for our Veritone Hire solutions spans a wide range of company characteristics, including company size, geography, and industry, among other factors.
As such, we are vulnerable to service interruptions, delays and outages experienced or caused by these third parties, and we may experience adverse consequences in the event these third party service providers experience a service interruption, delay or outage.
As such, we are vulnerable to service interruptions, delays and outages experienced or caused by these third parties, and we may experience adverse consequences in the event these third-party service providers experience a security incident or other service interruption, delay or outage.
In the event Amazon decides to terminate its contract with us, suffers downturns in its business leading to a further reduction in its budget for our hiring solutions, or decides to develop a competing solution or otherwise take its recruitment and hiring needs in-house, and we are unable to obtain additional customers or increase our revenue from existing customers to offset the reduction of these revenues, we could experience a material adverse effect on our business, financial condition and reported revenue and results of operation.
In the event Amazon decides to terminate its contract with us, further reduce its budget for our Veritone Hire solutions, or develop a competing solution or otherwise take its recruitment and hiring needs in-house, and we are unable to obtain additional customers or increase our revenue from existing customers to offset the reduction of these revenues, we could experience a material adverse effect on our business, financial condition and reported revenue and results of operation.
In addition, we may face risks or experience difficulties in: • effectively managing the combined business following the acquisition, including any international operations of the acquired business and integrating the acquired company’s accounting, human resources and other administrative systems, and coordination of product, engineering and sales and marketing functions; • the potential loss of key employees and customers as a result of competing in the markets in which the acquired company operates; • cultural challenges associated with integrating employees from the acquired company into our organization, and retention of employees from the businesses we acquire; and • achieving anticipated cross-selling opportunities and eliminating any redundant operations with respect to the acquired business.
These risks include: • effectively managing the combined business following the acquisition, including any international operations of the acquired business and integrating the acquired company’s accounting, human resources and other administrative systems, and coordination of product, engineering and sales and marketing functions; • the potential loss of key employees and customers as a result of competing in the markets in which the acquired company operates; • cultural challenges associated with integrating employees from the acquired company into our organization, and retention of employees from the businesses we acquire; and • achieving anticipated cross-selling opportunities and eliminating any redundant operations with respect to the acquired business.
As of such date, we also had 13 issued patents and 41 patent applications pending for examination in foreign jurisdictions (including international PCT applications), all of which are based on counterpart U.S. patent applications pursued by us.
As of such date, we also had 20 issued patents and 5 patent applications pending for examination in foreign jurisdictions (including international PCT applications), all of which are based on counterpart U.S. patent applications pursued by us.
Our current controls and any new controls that we develop may become inadequate because of changes in conditions in our business. Further, weaknesses in our disclosure controls and internal control over financial reporting may be discovered in the future.
Our current controls and any new controls that we develop may become inadequate because of changes in conditions in our business. Further, weaknesses in our disclosure controls and internal control over financial reporting have been identified in the past and may be discovered in the future.
As AI technologies become increasingly incorporated into various mainstream products and offerings, regulatory scrutiny of AI technologies, potentially including our 12 products, will likely increase. Market opportunity estimates are subject to significant uncertainty and are based on assumptions and estimates, including our internal analysis and industry experience.
As AI technologies become increasingly incorporated into various mainstream products and offerings and these technologies advance and develop, regulatory scrutiny 11 of AI technologies, potentially including our products, will likely increase. Market opportunity estimates are subject to significant uncertainty and are based on assumptions and estimates, including our internal analysis and industry experience.
In each of the fourth quarters of 2022 and 2021, we generated a profit on a non-GAAP basis; however, we may not be able to sustain profitability throughout an entire fiscal year or in the future or at all.
In the fourth quarter of 2022, we generated a profit on a non-GAAP basis; however, we may not be able to sustain profitability throughout an entire fiscal year or in the future or at all.
In addition to experiencing a security breach, third parties may gather, collect, or infer sensitive information about us from public sources, data brokers, or other means that reveals competitively sensitive details about our organization and could be used to undermine our competitive advantage or market position.
In addition to security breaches, third parties may gather, collect, or infer sensitive information about us from public sources, data brokers, or other means that reveal competitively sensitive details about our organization and could be used to undermine our competitive advantage or market position.
In addition, a significant portion of the purchase price of companies we acquire may be allocated to acquired goodwill and other intangible assets, which must be assessed for impairment at least annually. If any of these results occurs, our business and financial results could be adversely affected. We plan to expand our international operations, which exposes us to significant risks.
In addition, a significant portion of the purchase price of companies we acquire may be allocated to acquired goodwill and other intangible assets, which must be assessed for impairment at least annually. If any of these results occurs, our business and financial results could be adversely affected.
These malicious activities could result in the unauthorized, unlawful, or accidental acquisition, modification, destruction, loss, alteration, encryption, disclosure, access or misappropriation of our proprietary or confidential information, including of our customers and their employees or third parties, and/or damage to our or our third party service providers’ platform, network, or computer systems.
These and other threats, attacks, disruptions, or accidents could result in the unauthorized, unlawful, or accidental acquisition, modification, destruction, loss, alteration, encryption, disclosure, access or misappropriation of our proprietary or confidential information, including of our customers and their employees or third parties, and/or damage to our or our third party service providers’ platform, network, or computer systems.
Additionally, several U.S. jurisdictions have enacted measures related to the use of AI in products and service. For example, New York City passed a law to regulate the use of automated employment decision tools by employers and employment agencies.
Additionally, several U.S. jurisdictions have enacted measures related to the use of AI in products and services for their potentially discriminatory effects. For example, New York City passed a law to regulate the use of automated employment decision tools by employers and employment agencies.
Technological advances may significantly disrupt the labor market and weaken demand for human capital at a rapid rate. The success of our hiring solutions are dependent on our customers’ demands for talent.
Technological advances may significantly disrupt the labor market and weaken demand for human capital at a rapid rate. The success of our Veritone Hire solutions is dependent on our customers’ demands for talent.
We take steps to detect and remediate vulnerabilities, but we may not be able to detect and remediate all vulnerabilities because the threats and techniques used to exploit the vulnerability change frequently and are often sophisticated in nature. Therefore, such vulnerabilities could be exploited but may not be detected until after a security incident has occurred.
However, we may not be able to detect and remediate all vulnerabilities because the threats and techniques used to exploit a vulnerability may change frequently and are often sophisticated in nature, and as a result, such vulnerabilities could be exploited but may 17 not be detected until after a security incident has occurred.
Operating in international markets requires significant resources and management attention and will subject us to additional regulatory, economic and political risks. Because of our limited experience with international operations as well as developing and managing sales in international markets, our international expansion efforts may not be successful.
Operating and expanding to new international markets requires significant resources and management attention and will subject us to uncertain regulatory, international tax, international conflicts, and economic and political risks. Because of our limited historical experience with expanded international operations, as well as developing and managing sales in international markets, our international expansion efforts may not be successful.
These fluctuations may be due to various factors, many of which are beyond our control, including: • the volume and timing of our revenues and quarterly variations in our results of operations or those of others in our industry; • announcement of new contracts with customers or termination of contracts with customers; 26 • announcement of acquisitions of other companies or businesses, or other significant strategic transactions; • the introduction of new services, content or features by us or others in our industry; • media exposure of our products or of those of others in our industry; • sales of our common stock; • speculative trading practices of certain market participants; • actual or purported “short squeeze” trading activity; • changes in earnings estimates or recommendations by securities analysts; and • general economic and market conditions and other factors, including factors unrelated to our operating performance or the operating performance of our competitors.
These fluctuations may be due to various factors, many of which are beyond our control, including: • the volume and timing of our revenues and quarterly variations in our results of operations or those of others in our industry; • announcement of new contracts with customers or termination of contracts with customers; • announcement of acquisitions of other companies or businesses, or other significant strategic transactions; • announcement of equity or debt financing transactions; • the introduction of new services, content or features by us or others in our industry; • media exposure of our products or of those of others in our industry; • sales of our common stock; • speculative trading practices of certain market participants; • actual or purported “short squeeze” trading activity; • changes in earnings estimates or recommendations by securities analysts; and • general economic and market conditions and other factors, including factors unrelated to our operating performance or the operating performance of our competitors. 29 In recent years, the stock markets generally have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of the listed companies.
Individuals or entities may attempt to penetrate our network, computer system or platform security, or that of our third-party hosting and storage providers, and could gain access to our sensitive data, including customer data.
Individuals or entities may attempt to penetrate our network, computer system or platform security, or that of our third-party hosting and storage providers and other third parties upon which we rely, and could gain access to our sensitive information, including customer data.
If we fail to maintain reliability, security and availability of our platform, network, or computer systems, or if customers believe that our platform does not provide adequate security for the storage of sensitive information or its transmission over the Internet, we may lose existing customers and we may not be able to attract new customers.
If we fail or are perceived to have failed to maintain the reliability, security and availability of our platform, network, or computer systems, or if customers believe that our platform does not provide adequate security for the storage of sensitive information or its transmission over the Internet, we may lose existing customers and we may not be able to attract new customers, negatively impacting our ability to grow and operate our business.
If we enable or offer AI solutions that produce deficient or inaccurate results and analyses, or that are controversial due to human rights, privacy or other social issues, we may experience lower-than-expected demand for our products and services, or competitive, brand or reputational harm.
Further, use of AI technologies in certain scenarios present ethical concerns. If we enable or offer AI solutions that produce deficient or inaccurate results and analyses, or that are controversial due to human rights, privacy or other social issues, we may experience lower-than-expected demand for our products and services, or competitive, brand or reputational harm.
Given that AI, automated decision making and machine learning technologies are core to our business, any increased regulation over these technologies could significantly complicate compliance efforts, increase legal risk and compliance costs for us, the third parties upon whom we rely, and our customers, increase our cost of doing business, impede or prevent our growth plans (including into Europe), require us to change our business operations at significant cost, and, in turn, reduce demand for our products.
Given that AI, automated decision making and ML technologies are core to our business, any increased regulation over these technologies, including the EU AI Act, could make it harder for us to conduct our business, significantly complicate our compliance efforts, increase legal risk and compliance costs for us, the third parties upon whom we rely, and our customers, increase our cost of doing business, impede or prevent our growth plans (including into Europe), require us to change our business operations at significant cost (such as retaining or rebuilding our AI/ML models), and reduce demand for our products.
Difficulty in acquiring and/or retaining these businesses as customers may adversely affect our operating results. We currently generate significant revenue from a limited number of key customers and the loss of one or more of those customers or a significant reduction in the revenues generated from those customers may harm our business, results of operations and financial results.
We currently generate significant revenue from a limited number of key customers and the loss of one or more of those customers or a significant reduction in the revenues generated from those customers may harm our business, results of operations and financial results.
The market price of our common stock has been, and we expect will continue to be, subject to extreme fluctuations over short periods of time. For example, the closing price of our common stock has ranged from a low of $4.85 to a high of $19.77 during the 12-month period ended February 28, 2023.
The market price of our common stock has been, and we expect will continue to be, subject to extreme fluctuations over short periods of time. For example, the closing price of our common stock has ranged from a low of $1.49 to a high of $7.78 during the 12-month period ended February 29, 2024.
We continue to actively monitor the impact of these macroeconomic factors on our financial condition, liquidity, operations, suppliers, industry and workforce, and instituted certain cost saving measures for the third and fourth quarters of fiscal year 2022 as a result of these factors.
We continue to actively monitor the impact of these macroeconomic factors on our financial condition, liquidity, operations, suppliers, industry and workforce, and instituted certain cost saving measures during the second half of 2022 and during 2023 as a result of these factors.
Any of the foregoing could have a material adverse effect on our business, results of operations and financial position and negatively impact our ability to grow and operate our business.
Any of the foregoing could have a material adverse effect on our business, results of operations and financial position and negatively impact our ability to grow and operate our business. The reliability and continuous availability of our platform and services is critical to our success.
Management has also identified a material weakness in internal control over financial reporting relating to information technology general controls (“ITGCs”) in the areas of user access and change-management over certain information technology (“IT”) systems that support our financial reporting processes.
During management’s review of our results for the year ended December 31, 2022, management identified a material weakness in internal control over financial reporting relating to information technology general controls (“ITGCs”) in the areas of user access and change-management over certain information technology (“IT”) systems that support our financial reporting processes.
Certain of these laws are likely to be materially unfavorable to our interests and/or inconsistent with our existing operations, policies, practices or plans (or may be interpreted as such).
Certain of these laws may be materially unfavorable to our interests and/or inconsistent with our existing operations, policies, practices or plans (or may be interpreted as such). We expect other jurisdictions will adopt similar laws.
We depend on our executive officers and other key employees, and the loss of one or more of these executive officers or key employees or an inability to attract and retain highly skilled employees could adversely affect our business.
Any of these events would likely have an adverse effect on our business, operating results and financial position. We depend on our executive officers and other key employees, and the loss of one or more of these executive officers or key employees or an inability to attract and retain highly skilled employees could adversely affect our business.
If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring our debt or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time.
If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring our debt or obtaining additional equity capital on terms that may be onerous or highly dilutive to our stockholders.
Our customers utilize our Software Products & Services and Managed Services to process, analyze and store data, which may contain personal information that is subject to data protection and privacy laws in various jurisdictions.
Our customers also utilize our Software Products & Services and Managed Services to process data, which may contain personal data that is subject to data protection and privacy laws in various jurisdictions. Our data processing activities subject us to numerous data privacy and security obligations.
Any such claims or litigation could cause us to incur significant expenses and, if successfully asserted against us, could require that we pay substantial damages or ongoing royalty payments, prevent us from offering some portion of our platform, or require that we comply with other unfavorable terms.
We may not have adequate indemnities from, or we may not be successful in enforcing our rights to indemnification by, such third party software providers. 23 Any such claims or litigation could cause us to incur significant expenses and, if successfully asserted against us, could require that we pay substantial damages or ongoing royalty payments, prevent us from offering some portion of our platform, or require that we comply with other unfavorable terms.
Acquisitions also could result in dilutive issuances of equity securities, the incurrence of debt, contingent liabilities, amortization expenses, impairment of goodwill and/or purchased long-lived assets, and restructuring charges, any of which could adversely affect our operating results and financial condition.
Acquisitions could also result in dilutive issuances of equity securities, the incurrence of debt, contingent liabilities, amortization expenses, impairment of goodwill and/or purchased long-lived assets, and restructuring charges, any of which could adversely affect our operating results and financial condition. In addition, we may face risks or experience difficulties successfully integrating acquired businesses, such as Broadbean, with our operations.
We experienced net losses of $25.6 million, $64.7 million, and $47.9 million in fiscal years 2022, 2021, and 2020, respectively. As of December 31, 2022, we had an accumulated deficit of $371.3 million.
We experienced net losses of $58.6 million and $25.6 million in fiscal years 2023 and 2022, respectively. As of December 31, 2023, we had an accumulated deficit of $429.9 million.
Any of these outcomes could adversely affect our business and operating results. Finally, governments and regulators in certain jurisdictions, including Europe, are increasingly seeking to regulate the use, transfer and other processing of non-personal information (for example, under the European Union’s Data Act), an area which has typically been the subject of very limited or no specific regulation.
Finally, governments and regulators in certain jurisdictions, including Europe, are increasingly seeking to regulate the use, transfer and other processing of non-personal data, an area which has typically been the subject of very limited or no specific regulation.
As part of our growth strategy, we have acquired, and we intend to continue to acquire, businesses, services, technologies or intellectual property rights that we believe could complement, expand or enhance the features and functionality of our aiWARE platform and our technical capabilities, broaden our product and service offerings or offer growth opportunities for our business.
We intend to continue to pursue the opportunistic acquisition of other companies, businesses or technologies, which could be expensive, divert our management’s attention, fail to achieve the expected benefits and/or expose us to other risks or difficulties. 12 As part of our growth strategy, we have acquired, and we intend to continue to acquire, businesses, services, technologies or intellectual property rights that we believe could complement, expand or enhance the features and functionality of our aiWARE platform and our technical capabilities, broaden our product and service offerings or offer growth opportunities for our business.
As of March 10, 2023, in the United States, we have 41 issued patents, which expire between 2030 and 2042, and have 12 patent applications pending for examination.
As of March 25, 2024, in the United States, we have 33 issued patents, which expire between 2029 and 2042, and have 14 patent applications pending for examination.
Certain of our Software Products & Services, particularly our IDentify face matching application for law enforcement agencies, utilize facial recognition technology. Facial recognition technology has been the subject of increasing concern and criticism, including over the potential for the technology to misidentify individuals as criminal suspects, and to be used in 25 ways that infringe on individual rights.
Facial recognition technology has been the subject of increasing concern and criticism, including over the potential for the technology to misidentify individuals as criminal suspects, and to be used in ways that infringe on individual rights.
We could incur substantial costs in protecting or defending our intellectual property rights, and any failure to protect our intellectual property could adversely affect our business, results of operations and financial condition. 22 Our success depends, in part, on our ability to protect our brand and the proprietary methods and technologies that we develop under patent and other intellectual property laws of the United States and foreign jurisdictions so that we can prevent others from using our inventions and proprietary information.
Our success depends, in part, on our ability to protect our brand and the proprietary methods and technologies that we develop under patent and other intellectual property laws of the United States and foreign jurisdictions so that we can prevent others from using our inventions and proprietary information.
If we raise additional funds through future issuances of equity or convertible debt securities, our stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our common stock.
The failure to obtain sufficient financing on favorable terms and conditions could have a material adverse effect on our growth prospects. 19 Further, if we raise additional funds through future issuances of equity or convertible debt securities, our stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our common stock.
Our ten largest customers by revenue accounted for approximately 55%, 57% and 34% of our net revenues in fiscal years 2022, 2021 and 2020, respectively. One customer accounted for approximately 25% of net revenues in fiscal year 2022 and 30% in 2021, after not generating significant revenues in fiscal year 2020.
Our ten largest customers by revenue accounted for approximately 39% and 55% of our net revenues in fiscal years 2023 and 2022, respectively. One customer accounted for approximately 12% of net revenues in fiscal year 2023 and 25% in 2022.
Risks Related to the Development and Operation of Our aiWARE Platform and other Products If we are not able to enhance our existing products or introduce new products that achieve market acceptance and keep pace with technological developments, our business, results of operations and financial condition could be harmed.
If we are unable to retain and motivate our existing employees and attract qualified personnel to fill key positions, we may be unable to manage our business effectively, including the development, marketing, sale and delivery of our products and services, which could adversely affect our business, results of operations and financial condition. 14 Risks Related to the Development and Operation of Our aiWARE Platform and other Products If we are not able to enhance our existing products or introduce new products that achieve market acceptance and keep pace with technological developments, our business, results of operations and financial condition could be harmed.
The regulatory framework relating to privacy and data protection issues worldwide is evolving rapidly and is likely to remain uncertain for the foreseeable future.
The regulatory framework relating to privacy and data protection issues worldwide is evolving rapidly and is likely to remain uncertain for the foreseeable future. Consumers’ data privacy expectations are also quickly changing, becoming increasingly stringent, and creating uncertainty.
Ten customers accounted for approximately 76% of our total Software Products & Services revenues in 2022, with one customer accounting for approximately 58% of our total Software Products & Services revenues. Ten customers accounted for approximately 38% of our total Managed Services revenues in 2022, with one customer accounting for approximately 11% of our total Managed Services revenues.
Ten customers accounted for approximately 44% of our total Software Products & Services revenues in 2023, with one customer accounting for approximately 22% of our total Software Products & Services revenues. Ten customers accounted for approximately 50% of our total Managed Services revenues in 2023, with one customer accounting for approximately 12% of our total Managed Services revenues.
We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations.
Our ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations.
Provision of such technologies in compliance with the GDPR is highly challenging and may mean we are unable to provide certain of our products in certain jurisdictions. Such laws may limit the demand for our aiWARE platform for non-governmental use cases that utilize facial recognition technology, which could adversely impact our ability to grow our business in those areas.
Such laws may limit the demand for our aiWARE platform for non-governmental use cases that utilize facial recognition technology, which could adversely impact our ability to grow our business in those areas.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Propert ies. Our principal executive offices are located in Denver, Colorado, which we lease under a lease expiring on September 30, 2023. In addition to our principal executive offices, we lease office space in Irvine, California; New York, New York; and Herzliya, Israel. We lease all of our facilities and do not own any real property.
Biggest changeItem 2. Propert ies. Our principal executive offices are located at 1615 Platte Street, 2 nd Floor, Denver, Colorado 80202. In addition to our principal executive offices, we lease office space in Irvine, California; London, England; Sydney, Australia; and Herzliya, Israel. We also maintain shared office spaces in New York, New York, Paris, France and Noida, India.
We believe our facilities are adequate and suitable for our current needs and that, should it be needed, suitable additional or alternative space will be available to accommodate our operations.
We lease all of our facilities and do not own any real property. We believe our facilities are adequate and suitable for our current needs and that, should it be needed, suitable additional or alternative space will be available to accommodate our operations.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeRegardless of the outcome, any litigation may have an adverse impact on us due to defense and settlement costs, diversion of management resources and other factors. Item 4. Mine Safe ty Disclosures. Not Applicable. 31 PART II
Biggest changeRegardless of the outcome, any litigation may have an adverse impact on us due to defense and settlement costs, diversion of management resources and other factors. Item 4. Mine Safe ty Disclosures. Not applicable. 35 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeMarket Information and Holders Our common stock is listed on the NASDAQ under the ticker symbol “VERI.” As of March 10, 2023, we had 47 holders of record of our common stock based upon the records of our transfer agent, which do not include beneficial owners of common stock whose shares are held in the names of various securities brokers, dealers and registered clearing agencies.
Biggest changeMarket Information and Holders Our common stock is listed on the NASDAQ under the ticker symbol “VERI.” As of March 25, 2024, we had 51 holders of record of our common stock based upon the records of our transfer agent, which do not include beneficial owners of common stock whose shares are held in the names of various securities brokers, dealers and registered clearing agencies.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest change(dollars in thousands) Year Ended December 31, 2022 2021 Revenue $ 149,728 $ 115,305 Cost of revenue 27,432 22,129 Non-GAAP gross profit 122,296 93,176 Non-GAAP gross margin 81.7 % 80.8 % 38 Year Ended December 31, 2022 2021 Revenue $ 149,728 $ 115,305 Cost of revenue 27,432 22,129 Non-GAAP gross profit 122,296 93,176 GAAP cost of revenue 27,432 22,129 Stock-based compensation expense (116 ) (116 ) Non-GAAP cost of revenue 27,316 22,013 GAAP sales and marketing expenses 51,345 28,935 Stock-based compensation expense (2,263 ) (1,716 ) Severance and executive search (86 ) (236 ) Non-GAAP sales and marketing expenses 48,996 26,983 GAAP research and development expenses 43,589 25,075 Stock-based compensation expense (5,056 ) (3,217 ) Severance and executive search (198 ) (14 ) Non-GAAP research and development expenses 38,335 21,844 GAAP general and administrative expenses 44,177 91,667 Depreciation (1,313 ) (538 ) Stock-based compensation expense (11,680 ) (35,014 ) Change in fair value of contingent consideration 22,721 (12,074 ) Charges related to sublease — (3,367 ) State sales tax reserve — (306 ) Acquisition and due diligence costs (2,688 ) (2,698 ) Severance and executive search (256 ) (99 ) Non-GAAP general and administrative expenses 50,961 37,571 GAAP amortization (21,180 ) (8,872 ) GAAP loss from operations (37,995 ) (61,373 ) Total non-GAAP adjustments (1) 22,115 68,267 Non-GAAP income (loss) from operations (15,880 ) 6,894 GAAP other income (expense), net 14,747 (600 ) Gain on debt extinguishment (19,097 ) — Interest expense, net 4,350 538 Non-GAAP other expense, net 0 (62 ) GAAP loss before income taxes (23,248 ) (61,973 ) Total non-GAAP adjustments (1) 7,368 68,805 Non-GAAP income (loss) before income taxes (15,880 ) 6,832 Income tax provision 2,309 2,699 GAAP net loss (25,557 ) (64,672 ) Total non-GAAP adjustments (1) 9,677 71,504 Non-GAAP net income (loss) $ (15,880 ) $ 6,832 Shares used in computing non-GAAP basic net income (loss) per share 36,034 33,298 Shares used in computing non-GAAP diluted net income (loss) per share 36,034 43,928 Non-GAAP basic net income (loss) per share $ (0.44 ) $ 0.21 Non-GAAP diluted net income (loss) per share $ (0.44 ) $ 0.16 39 (1) Adjustments are comprised of the adjustments to GAAP cost of revenue, sales and marketing expenses, research and development expenses and general and administrative expenses and other (expense) income, net (where applicable) listed above.
Biggest change(dollars in thousands) Year Ended December 31, 2023 2022 Revenue $ 127,560 $ 149,728 Cost of revenue 28,256 27,432 Non-GAAP gross profit 99,304 122,296 Non-GAAP gross margin 77.8 % 81.7 % 42 Year Ended December 31, 2023 2022 Revenue $ 127,560 $ 149,728 Cost of revenue 28,256 27,432 Non-GAAP gross profit 99,304 122,296 GAAP cost of revenue 28,256 27,432 Stock-based compensation expense (52 ) (116 ) Non-GAAP cost of revenue 28,204 27,316 GAAP sales and marketing expenses 52,024 51,345 Depreciation (60 ) — Stock-based compensation expense (1,301 ) (2,263 ) Severance and executive transition costs (831 ) (86 ) Non-GAAP sales and marketing expenses 49,832 48,996 GAAP research and development expenses 42,090 43,589 Depreciation (1,499 ) — Stock-based compensation expense (4,445 ) (5,056 ) Variable consultant performance bonus expense (951 ) — Severance and executive transition costs (1,034 ) (198 ) Non-GAAP research and development expenses 34,161 38,335 GAAP general and administrative expenses 73,811 44,177 Depreciation (827 ) (1,313 ) Stock-based compensation expense (5,028 ) (11,680 ) Change in fair value of contingent consideration (2,284 ) 22,721 Acquisition and due diligence costs (9,125 ) (2,688 ) Severance and executive transition costs (1,779 ) (256 ) Non-GAAP general and administrative expenses 54,768 50,961 GAAP amortization (23,715 ) (21,180 ) GAAP loss from operations (92,336 ) (37,995 ) Total non-GAAP adjustments (1) 52,931 22,115 Non-GAAP loss from operations (39,405 ) (15,880 ) GAAP other income (expense), net 30,663 14,747 Loss from business held for sale (2) 1,691 — Gain on debt extinguishment (30,023 ) (19,097 ) Gain on sale of energy group (2,572 ) — Foreign currency impact (133 ) (575 ) Interest expense, net 2,448 4,925 Non-GAAP other expense, net 2,074 0 GAAP loss before income taxes (61,673 ) (23,248 ) Total non-GAAP adjustments (1) 24,342 7,368 Non-GAAP loss before income taxes (37,331 ) (15,880 ) (Benefit from) provision for income taxes (3,048 ) 2,309 GAAP net loss (58,625 ) (25,557 ) Total non-GAAP adjustments (1) 21,294 9,677 Non-GAAP net loss $ (37,331 ) $ (15,880 ) Shares used in computing non-GAAP basic and diluted net loss per share 36,910 36,034 Shares used in computing non-GAAP diluted net loss per share 36,910 36,034 Non-GAAP basic and diluted net loss per share $ (1.01 ) $ (0.44 ) Non-GAAP diluted net loss per share $ (1.01 ) $ (0.44 ) (1) Adjustments are comprised of the adjustments to GAAP cost of revenue, sales and marketing expenses, research and development expenses and general and administrative expenses and other (expense) income, net (where applicable) listed above.
Cash Used in Investing Activities Our investing activities for the year ended December 31, 2022 used cash of $12.1 million primarily for $4.8 million in capital expenditures, $4.6 million to fund a portion of the consideration for our acquisitions, and for an equity investment of $2.8 million in a strategic partner.
Our investing activities for the year ended December 31, 2022 used cash of $12.1 million primarily for $4.8 million in capital expenditures, $4.6 million to fund a portion of the consideration for our acquisitions, and for an equity investment of $2.8 million in a strategic partner.
In assessing goodwill impairment, we have the option to first assess qualitative factors to determine whether 42 the existence of events or circumstances leads to a determination that the fair value of a reporting unit is less than its carrying amount. Our qualitative assessment of the recoverability of goodwill considers various macro-economic, industry-specific and company-specific factors.
In assessing goodwill impairment, we have the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that the fair value of a reporting unit is less than its carrying amount. Our qualitative assessment of the recoverability of goodwill considers various macro-economic, industry-specific and company-specific factors.
For Performance Options, 43 expense is recognized over a graded-vesting attribution basis over the period from the grant date to the estimated attainment date, which is the derived service period of each tranche of the award. We recognize actual forfeitures as they occur and do not estimate forfeitures in determining our stock-based compensation expense.
For Performance Options, expense is recognized over a graded-vesting attribution basis over the period from the grant date to the estimated attainment date, which is the derived service period of each tranche of the award. We recognize actual forfeitures as they occur and do not estimate forfeitures in determining our stock-based compensation expense.
If economic, political, or market conditions deteriorate, or if there is uncertainty around these conditions, our customers and potential customers may elect to decrease their software and 36 technology solutions budgets by deferring or reconsidering product purchases, which would limit our ability to grow our business and negatively affect our operating results.
If economic, political, or market conditions deteriorate, or if there is uncertainty around these conditions, our customers and potential customers may elect to decrease their software and technology solutions budgets by deferring or reconsidering product purchases, which would limit our ability to grow our business and negatively affect our operating results.
The supplemental financial information for our Managed Services includes: (i) average gross billings per active agency client, and (ii) revenue. Software Products & Services Supplemental Financial Information The following table sets forth the results for each of our Software Products & Services supplemental financial information.
The supplemental financial information for our Managed Services includes: (i) average gross billings per active Managed Services client, and (ii) revenue. Software Products & Services Supplemental Financial Information The following table sets forth the results for each of our Software Products & Services supplemental financial information.
These cost reduction initiatives began in the latter half of 2022 and will continue through the first half of 2023, and include reductions in workforce and certain legacy operating costs, as well as the divestiture of our energy group. As a result of these initiatives, we believe we will be able to accelerate our pathway toward long term profitability.
These cost reduction initiatives began in the latter half of 2022 and will continue through the first half of 2024, and include reductions in workforce and certain legacy operating costs, as well as the divestiture of our energy group. As a result of these initiatives, we believe we will be able to accelerate our pathway toward long term profitability.
We believe our Software Products & Services will extend the capabilities of many third-party software platforms and products that are widely used today. For example, we believe that, when integrated with aiWARE, our hiring solutions customers will be given greater visibility and transparency in their hiring processes.
We believe our Software Products & Services will extend the capabilities of many third-party software platforms and products that are widely used today. For example, we believe that, when integrated with aiWARE, our Veritone Hire solutions customers will be given greater visibility and transparency in their hiring processes.
The following tables set forth the calculation of our non-GAAP gross profit and non-GAAP gross margin, followed by a reconciliation of non-GAAP to GAAP financial information presented in our consolidated financial statements for years ended December 31, 2022 and 2021.
The following tables set forth the calculation of our non-GAAP gross profit and non-GAAP gross margin, followed by a reconciliation of non-GAAP to GAAP financial information presented in our consolidated financial statements for years ended December 31, 2023 and 2022.
These global economic conditions and any continued or new disruptions caused by these conditions may negatively impact our business in a number of ways. For example, our hiring solutions are sold to businesses whose financial conditions fluctuate based on general economic and business conditions, particularly the overall demand for labor and the economic health of current and prospective employers.
These global economic conditions and any continued or new disruptions caused by these conditions may negatively impact our business in a number of ways. For example, our Veritone Hire solutions are sold to businesses whose financial conditions fluctuate based on general economic and business conditions, particularly the overall demand for labor and the economic health of current and prospective employers.
Our acquisition strategy is threefold: (i) to increase the scale of our business in markets we are in today, (ii) to accelerate growth in new markets and product categories, including expanding our existing engineering and sales resources, and (iii) to accelerate the adoption of aiWARE as the universal AI operating system through venture or market-driven opportunities.
Our acquisition strategy has been threefold: (i) to increase the scale of our business in markets we are in today, (ii) to accelerate growth in new markets and product categories, including expanding our existing engineering and sales resources, and (iii) to accelerate the adoption of aiWARE as the universal AI operating system through venture or market-driven opportunities.
We then deduct from the Prior Year Quarter Revenue any revenue from Ending Software Customers who are no longer customers as of the current period end, or Current Period Ending Customer Revenue.
We then deduct from the Prior Year Quarter Revenue any revenue from Software Products & Services Customers who are no longer customers as of the current period end, or Current Period Ending Software Customer Revenue.
Cash Provided by Financing Activities Our financing activities for the year ended December 31, 2022 used cash of $61.9 million, consisting of $39.0 million to pay for the repurchase of a portion of our outstanding Convertible Notes, $14.4 million to pay the 2021 earnout for PandoLogic and $9.8 million to pay taxes paid related to the net share settlement of equity awards, partially offset by $1.3 million in proceeds received from the exercise of stock options and purchases of shares under our ESPP.
Our financing activities for the year ended December 31, 2022 used cash of $61.9 million, consisting of $39.0 million to pay for the repurchase of a portion of our outstanding Convertible Notes, $14.4 million to pay the 2021 contingent consideration for PandoLogic and $9.8 million to pay taxes paid related to the net share settlement of equity awards, partially offset by $1.1 million in proceeds received from the exercise of stock options and purchases of shares under our ESPP.
For example, our net headcount grew approximately 24% since the beginning of 2022. In addition, during the year ended December 31, 2022 we made substantial investments in our existing employee base, including higher annual raises and increased benefits, in order to compete in a challenging and constrained labor environment.
For example, our net headcount grew approximately 8% since the beginning of 2023. In addition, during the year ended December 31, 2023 we made substantial investments in our existing employee base, including higher annual raises and increased benefits, in order to compete in a challenging and constrained labor environment.
While management believes there is a substantial opportunity to increase revenue longer term, current economic conditions have negatively impacted our business operations and financial results, and there is no certainty that any future investments, which could be significant and include future potential acquisitions, will result in significant enterprise revenue realization or revenue growth when compared with historical revenue.
While management believes there is a substantial opportunity to increase revenue longer term, current economic conditions have negatively impacted parts of our consumption-based operations and financial results, and there is no certainty that any future investments, which could be significant and include future potential acquisitions, will result in significant enterprise revenue realization or revenue growth when compared with historical revenue.
The extent of the impact of these factors on our operational and financial performance, including our ability to execute our business strategies and initiatives in the expected time frame, will depend on future developments, and the impact on our customers, partners and employees, all of which are uncertain and cannot be predicted.
The extent of the impact of these factors on our operational and financial performance, including our ability to execute our business strategies and initiatives in the expected time frame, will depend on future developments, and the impact on our customers, partners and employees, all of which have uncertainty and cannot be predicted.
The results for non-GAAP net income (loss), are presented below for the years ended December 31, 2022 and 2021. The items excluded from these non-GAAP financial measures, as well as a breakdown of GAAP net loss, non-GAAP net income (loss) and these excluded items between our Core Operations and Corporate, are detailed in the reconciliation below.
The results for non-GAAP net income (loss), are presented below for the year ended December 31, 2023 and 2022. The items excluded from these non-GAAP financial measures, as well as a breakdown of GAAP net loss, non-GAAP net income (loss) and these excluded items between our Core Operations and Corporate, are detailed in the reconciliation below.
The supplemental financial information for our Software Products & Services includes: (i) Software Revenue – Pro Forma, (ii) Ending Software Customers, (iii) Average Annual Revenue (AAR), (iv) Total New Bookings, and (iv) Gross Revenue Retention, in each case as defined in the footnotes to the table below.
The supplemental financial information for our Software Products & Services includes: (i) Pro Forma Software Revenue, (ii) Total Software Products & Services Customers, (iii) Annual Recurring Revenue, (iv) Total New Bookings, and (iv) Gross Revenue Retention, in each case as defined in the footnotes to the table below.
The principal estimates relate to the accounting recognition and presentation of revenue, allowance for doubtful accounts, purchase accounting, impairment of long-lived assets, the valuation of contingent consideration, the valuation of non-cash consideration received in barter transactions and evaluation of realizability, the valuation of stock awards and stock warrants and income taxes, where applicable.
The principal estimates relate to the accounting recognition and presentation of revenue, allowance for credit losses, purchase accounting, impairment of long-lived assets, the valuation of contingent consideration, the valuation of 46 non-cash consideration received in barter transactions and evaluation of realizability, the valuation of stock awards and stock warrants and income taxes, where applicable.
Liquidity and Capital Resources We have historically financed our business through the sale of equity and debt securities. Our principal sources of liquidity are our cash and cash equivalents, which totaled $184.4 million as of December 31, 2022, compared with total cash and cash equivalents of $254.7 million as of December 31, 2021.
Liquidity and Capital Resources We have historically financed our business through the sale of equity and debt securities. Our principal sources of liquidity are our cash and cash equivalents, which totaled $79.4 million as of December 31, 2023, compared with total cash and cash equivalents of $184.4 million as of December 31, 2022.
Due to uncertainties related to the ability to utilize historical U.S. federal and state deferred tax assets in future periods, we have recorded a valuation allowance against these net deferred tax assets in the amount of $81.1 million, as of December 31, 2022. These assets consist primarily of net operating loss and tax credit carryovers and non-deductible stock-based compensation.
Due to uncertainties related to the ability to utilize historical U.S. federal and state deferred tax assets in future periods, we have recorded a valuation allowance 48 against these net deferred tax assets in the amount of $88.4 million, as of December 31, 2023. These assets consist primarily of net operating loss and tax credit carryovers and non-deductible stock-based compensation.
During the year ended December 31, 2022, we reported a non-GAAP net loss of $15.9 million as compared to non-GAAP net income of $6.8 million during the year ended December 31, 2021. To continue to grow our revenue, we will continue to make targeted investments in people, namely software engineers and sales personnel.
During the year ended December 31, 2023, we reported a non-GAAP net loss of $37.3 million as compared to a non-GAAP net loss of $15.9 million during the year ended December 31, 2022. To continue to grow our revenue, we will continue to make targeted investments in people, namely software engineers and sales personnel.
As a percentage of revenue, research and development expenses increased to 29% in 2022 from 22% in 2021. General and Administrative.
As a percentage of revenue, research and development expenses increased to 33% in 2023 from 29% in 2022. General and Administrative.
We are a leader in AI-based Software Products & Services. Our proprietary AI operating system, aiWARE, uses machine learning algorithms, or AI models, together with a suite of powerful applications, to reveal valuable insights from vast amounts of structured and unstructured data.
Our proprietary AI operating system, aiWARE, uses machine learning algorithms, or AI models, together with a suite of powerful applications, to reveal valuable insights from vast amounts of structured and unstructured data.
To the extent that economic uncertainty or attenuated economic conditions cause our customers and potential customers to freeze or reduce their headcount as we experienced throughout 2022, and reduce their advertising spending, demand for our products and services may be negatively affected in 2023 and beyond.
To the extent that economic uncertainty or attenuated economic conditions cause our customers and potential customers to freeze or reduce their headcount, and reduce their advertising spending, demand for our products and services may be negatively affected.
(5) “Gross Revenue Retention”: We calculate our dollar-based gross retention rate as of the period end by starting with the revenue from Ending Software Customers for Software Products & Services as of the 3 months in the prior year quarter to such period, or Prior Year Quarter Revenue.
(7) “Gross Revenue Retention” represents a calculation of our dollar-based gross revenue retention rate as of the period end by starting with the revenue from Software Products & Services Customers as of the 3 months in the prior year quarter to such period, or Prior Year Quarter Revenue.
In connection with the acquisition of PandoLogic, a deferred tax liability is established for the future consequences attributable to differences between the financial statement carrying amounts of the acquired non-goodwill intangible assets and their respective tax basis. No deferred tax asset or liability is recorded on PandoLogic goodwill, $33,111 of which is not deductible for tax purposes.
In connection with the acquisition of PandoLogic, a deferred tax liability is established for the future consequences attributable to differences between the financial statement carrying amounts of the acquired non-goodwill intangible assets and their respective tax basis. Of the goodwill recorded on the acquisition date, $1.9 million is deductible for tax purposes.
While we believe we will be successful in these endeavors, we cannot guarantee that we will succeed in generating substantial long term operating growth and profitability. We expect to continue pursuing a strategy of acquiring companies to help accelerate our organic growth.
While we believe we will be successful in these endeavors, we cannot guarantee that we will succeed in generating substantial long term operating growth and profitability. Historically, we have pursued an opportunistic strategy of acquiring companies to help accelerate our organic growth.
As a percentage of revenue, general and administrative expenses declined to 30% in 2022 from 80% in 2021. 46 Amortization. Amortization expense increased in 2022 compared with the corresponding prior year period due to the addition of amortization expense related to our PandoLogic acquisition and our 2022 acquisitions.
As a percentage of revenue, general and administrative expenses increased to 58% in 2023 from 30% in 2022. 51 Amortization. Amortization expense increased in 2023 compared with the corresponding prior year period due to the addition of amortization expense related to our 2022 and 2023 acquisitions.
Risk Factors” of Part I of this Annual Report on Form 10-K and our other filings with the Securities and Exchange Commission (“SEC”), including future SEC filings.
Risk Factors” set forth in Part I of this Annual Report on Form 10-K and our other filings with the SEC, including future SEC filings.
For the year ended December 31, 2022, our total loss from operations decreased to $38.0 million compared to $61.4 for the year ended December 31, 2021.
For the year ended December 31, 2023, our total loss from operations decreased to $92.3 million compared to $38.0 million for the year ended December 31, 2022.
During the year ended December 31, 2022, we generated revenue of $149.7 million as compared to $115.3 million during the year ended December 31, 2021.
During the year ended December 31, 2023, we generated revenue of $127.6 million as compared to $149.7 million during the year ended December 31, 2022.
Quarter Ended Mar 31, Jun 30, Sept 30, Dec 31, Mar 31, Jun 30, Sept 30, Dec 31, 2021 2021 2021 2021 2022 2022 2022 2022 Avg billings per active Managed Services client (in 000's) (6) $ 582 $ 622 $ 615 $ 625 $ 684 $ 736 $ 747 $ 823 Revenue during quarter (in 000's) (7) $ 10,327 $ 9,968 $ 9,647 $ 10,857 $ 10,735 $ 9,625 $ 10,035 $ 11,074 (6) Avg billings per active Managed Services customer for each quarter reflects the average quarterly billings per active Managed Services customer over the twelve-month period through the end of such quarter for Managed Services customers that are active during such quarter.
Quarter Ended Mar 31, Jun 30, Sept 30, Dec 31, Mar 31, Jun 30, Sept 30, Dec 31, 2022 2022 2022 2022 2023 2023 2023 2023 Avg billings per active Managed Services client (in 000’s) (1) $ 684 $ 736 $ 747 $ 823 $ 771 $ 576 $ 630 $ 647 Revenue during quarter (in 000’s) (2) $ 10,735 $ 9,625 $ 10,035 $ 11,074 $ 9,337 $ 6,876 $ 9,117 $ 8,612 (1) Avg billings per active Managed Services customer for each quarter reflects the average quarterly billings per active Managed Services customer over the twelve-month period through the end of such quarter for Managed Services customers that are active during such quarter.
Non-GAAP Gross Profit For the year ended December 31, 2022, our total loss from operations decreased to $38.0 million compared to $61.4 for the year ended December 31, 2021.
Non-GAAP Gross Profit For the year ended December 31, 2023, our total loss from operations increased to $92.3 million compared to $38.0 million for the year ended December 31, 2022.
As a result of continuing to diversify our customer base and increase sales within our existing customer base, we intend to continue to increase our sales and marketing spending in the near term as compared to the trailing twelve months; however, these increased investments will be somewhat offset by our 2023 cost reduction initiatives.
As a result of our efforts to diversify our customer base and increase sales within our existing customer base, as well as the June 2023 acquisition of Broadbean, we increased our sales and marketing spending in the near 38 term as compared to the trailing twelve months; however, these increased investments were partially offset by our 2023 and 2024 cost-reduction initiatives.
(2) “Ending Software Customers” includes Software Products & Services customers as of the end of each respective quarter set forth above with trailing twelve-month revenues in excess of $2,400 for both Veritone, Inc. and PandoLogic and/or deemed by us to be under an active contract for the applicable periods.
In prior periods, we provided “Ending Software Customers,” which represented Software Products & Services customers as of the end of each fiscal quarter with trailing twelve-month revenues in excess of $2,400 for both Veritone, Inc. and PandoLogic Ltd. and/or deemed by the Company to be under an active contract for the applicable periods.
As of December 31, 2022, we have future cash requirements to pay the PandoLogic Earnout amount for 2022 of $10.8 million in a combination of cash and stock in the first quarter of 2023 and to pay $5.3 million in purchase consideration commitments related to the VSL acquisition, the VocaliD acquisition, and the March 2022 acquisition that will be paid in 2023 and in 2024.
As of December 31, 2023, we have future cash requirements to pay $5.3 million in purchase consideration commitments related to the VSL acquisition and the March 2022 acquisition that will be in 2024.
Nevertheless, we continue to see significant opportunities for growth in our Software Products & Services and our aiWARE platform sales to existing and newly acquired customers, and where our AI solutions could add tremendous value in content creation and distribution, including in the news, television and film industries.
Nevertheless, we continue to see significant opportunities for growth in Software Products & Services and our aiWARE platform sales to existing and newly acquired customers, and where our AI solutions could add near and long-term value in the government and regulated industries and content creation and distribution across the global media and entertainment industry.
If the estimated future cash flows from the use of the asset are less than the carrying value, an impairment charge would be recorded to write down the asset to its estimated fair value.
If the estimated future cash flows from the use of the asset are less than the carrying value, an impairment charge would be recorded to write down the asset to its estimated fair value. During the year ended December 31, 2023, we experienced multiple adverse financial trends.
(3) “Average Annual Revenue (AAR)” is calculated as the aggregate of trailing twelve-month Software Products & Services revenue divided by the average number of customers over the same period for both Veritone, Inc. and PandoLogic.
In prior periods, we provided “Average Annual Revenue,” which was calculated as the aggregate of trailing twelve-month Software Products & Services revenue divided by the average number of customers over the same period for both Veritone, Inc. and PandoLogic Ltd. Annual Recurring Revenue is not comparable to Average Annual Revenue (SaaS).
The fair value of stock-based awards (other than Performance Options) is amortized using the straight-line attribution method over the requisite service period of the award, which is generally the vesting period.
Treasury notes as of the grant date with a remaining term approximately equal to the expected term of the award. The fair value of stock-based awards (other than Performance Options) is amortized using the straight-line attribution method over the requisite service period of the award, which is generally the vesting period.
(in thousands) Year Ended December 31, 2022 2021 Cash provided by operating activities $ 3,737 $ 7,234 Cash used in investing activities (12,104 ) (53,843 ) Cash (used in) provided by financing activities (61,928 ) 186,514 Net (decrease) increase in cash, cash equivalents and restricted cash $ (70,295 ) $ 139,905 Cash Provided By Operating Activities Our operating activities generated cash inflows of $3.7 million in the year ended December 31, 2022, due primarily to our net loss of $25.6 million, adjusted by $1.0 million in non-cash expenses, including $22.5 million in depreciation and amortization and $19.3 million in stock-based compensation expense, offset in part by $22.7 million from a change in the fair value of contingent consideration and a $19.1 million net gain on debt extinguishment, with an additional $28.2 million and from the net working capital increase primarily due to a decrease in accounts receivable of $29.7 million. 47 Our operating activities provided cash of $7.2 million in 2021, primarily due to a net increase of $31.0 million in cash received from advertising customers for future payments to vendors, offset by the effect of our net loss of $70.6 million, adjusted by $70.7 million in non-cash expenses, including $40.1 million in stock-based compensation expense and $18.3 million in change in the fair value of contingent consideration.
Our operating activities generated cash inflows of $3.7 million in the year ended December 31, 2022, due primarily to our net loss of $25.6 million, adjusted by $1.0 million in non-cash expenses, including $22.5 million in depreciation and amortization and $19.3 million in stock-based compensation expense, offset in part by $22.7 million from a change in the fair value of contingent consideration and a $19.1 million net gain on debt extinguishment, with an additional $28.2 million and from the net working capital increase primarily due to a decrease in accounts receivable of $29.7 million.
We then divide the total Current Period Ending Customer Revenue by the total Prior Year Quarter Revenue to arrive at our dollar-based gross retention rate, which is the percentage of revenue from all Ending Software Customers from our Software Products & Services as of the year prior that is not lost to customer churn. 40 As we grow our business for our Software Products & Services, we expect that our supplemental financial information will be impacted in different ways based on our customer profiles and the nature of target markets.
We then divide the total Current Period Ending Software Customer Revenue by the total Prior Year Quarter Revenue to arrive at our dollar-based gross retention rate, which is the percentage of revenue from all Software Products & Services Customers from our Software Products & Services as of the year prior that is not lost to customer churn.
(7) Managed Services revenue and metrics exclude content licensing and media services.
(2) Managed Services revenue and metrics exclude content licensing and media services, and Table Rock Management.
Supplemental Financial Information We are providing the following unaudited supplemental financial information regarding our Software Products & Services and Managed Services as a lookback of the prior year to explain 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.
The historical amounts would not have a major effect on prior period results. 43 Supplemental Financial Information We are providing the following unaudited supplemental financial information regarding our Software Products & Services and Managed Services as a lookback of the prior year to explain our recent historical and year-over-year performance.
For the year ended December 31, 2022, our total revenues increased to $149.7 million compared to $115.3 million for the year ended December 31, 2021, an increase of 30%. For the year ended December 31, 2022, our total loss from operations decreased to $38.0 million compared to $61.4 for the year ended December 31, 2021, a decrease of 38%.
For the year ended December 31, 2023, our total revenues were $127.6 million as compared to $149.7 million for the year ended December 31, 2022, a decrease of 15%. For the year ended December 31, 2023, our total loss from operations was $92.3 million as compared to $38.0 million for the year ended December 31, 2022, an increase of 143%.
The U.S. federal and state NOLs are projected to expire beginning in 2034 and 2030, respectively, unless previously utilized. The U.S. federal NOLs generated after January 1, 2018 may be carried forward indefinitely, subject to an 80% taxable income limitation on the utilization of the carryforwards.
The U.S. federal NOLs generated after January 1, 2018 may be carried forward indefinitely, subject to an 80% taxable income limitation on the utilization of the carryforwards. The foreign loss carryforwards can be carried forward indefinitely.
Investors should not consider this supplemental non-GAAP financial information in isolation or as a substitute for analysis of our results as reported in accordance with GAAP. 37 Reconciliation of GAAP net loss to Non-GAAP net loss (in thousands) Year Ended December 31, 2022 2021 Core Operations (1) Corporate (2) Total Core Operations (1) Corporate (2) Total Net income (loss) $ (19,027 ) $ (6,530 ) $ (25,557 ) $ 8,298 $ (72,970 ) $ (64,672 ) Provision for income taxes 1,805 504 2,309 2,658 86 2,744 Depreciation and amortization 21,936 557 22,493 8,984 426 9,410 Stock-based compensation expense 10,138 8,977 19,115 6,575 33,488 40,063 Change in fair value of contingent consideration — (22,721 ) (22,721 ) — 12,074 12,074 State sales tax reserve — — — — 306 306 Interest expense, net — 4,350 4,350 — 493 493 Gain on debt extinguishment — (19,097 ) (19,097 ) — — — Acquisition and due diligence costs — 2,688 2,688 — 2,698 2,698 Charges related to sublease — — — — 3,367 3,367 Severance and executive search 512 28 540 — 349 349 Non-GAAP Net Income (Loss) $ 15,364 $ (31,244 ) $ (15,880 ) $ 26,515 $ (19,683 ) $ 6,832 (1) Core operations consists of our consolidated Software Products & Services and Managed Services that include our content licensing and advertising 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.
Investors should not consider this supplemental non-GAAP financial information in isolation or as a substitute for analysis of our results as reported in accordance with GAAP. 41 Reconciliation of GAAP net loss to Non-GAAP net loss (in thousands) Year Ended December 31, 2023 2022 Core Operations (1) Corporate (2) Total Core Operations (1) Corporate (2) Total Net loss $ (46,133 ) $ (12,492 ) $ (58,625 ) $ (19,027 ) $ (6,530 ) $ (25,557 ) (Benefit from) provision for income taxes (4,022 ) 974 (3,048 ) 1,805 504 2,309 Depreciation and amortization 25,216 885 26,101 21,936 557 22,493 Stock-based compensation expense 7,259 3,567 10,826 10,138 8,977 19,115 Change in fair value of contingent consideration — 2,284 2,284 — (22,721 ) (22,721 ) Interest expense, net 10 2,438 2,448 — 4,350 4,350 Foreign currency impact — (133 ) (133 ) — — — Gain on debt extinguishment — (30,023 ) (30,023 ) — (19,097 ) (19,097 ) Acquisition and due diligence costs — 9,125 9,125 — 2,688 2,688 Gain on sale of energy group — (2,572 ) (2,572 ) — — — Loss from business held for sale (3) 1,691 — 1,691 — — — Variable consultant performance bonus expense (4) 951 — 951 — — — Severance and executive transition costs 2,676 968 3,644 512 28 540 Non-GAAP Net (Loss) Income $ (12,352 ) $ (24,979 ) $ (37,331 ) $ 15,364 $ (31,244 ) $ (15,880 ) (1) Core operations consists of our consolidated Software Products & Services and Managed Services that include our content licensing and advertising 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.
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, 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 due diligence costs, and severance and executive search costs.
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, adjusted to exclude provision for income taxes, depreciation expense, amortization expense, stock-based compensation expense, changes in fair value of contingent consideration, interest income, interest expense, foreign currency gains and losses, acquisition and due diligence costs, gain on sale of energy group, loss from business held for sale, variable consultant performance bonus expense, and severance and executive transition costs.
In the event that actual results differ from these estimates or we adjust these estimates should we believe we would be able to realize these deferred tax assets in the future, an adjustment to the valuation allowance would increase income in the period such determination was made. 44 Results of Operations The following tables set forth our results of operations for the years ended December 31, 2022 and 2021, in dollars and as a percentage of our revenue for those periods.
In the event that actual results differ from these estimates or we adjust these estimates should we believe we would be able to realize these deferred tax assets in the future, an adjustment to the valuation allowance would increase income in the period such determination was made.
The decrease in our cash and cash equivalents as of December 31, 2022 as compared with December 31, 2021 was primarily due to the $39.0 million repurchase of a portion of our outstanding Convertible Notes in December 2022, investments and acquisitions made during the year ended December 31, 2022, taxes paid related to net share settlement of equity awards, and the payment of the 2021 PandoLogic Earnout, offset slightly by cash proceeds of $3.7 million from operating activities in the year ended December 31, 2022.
The decrease in our cash and cash equivalents as of December 31, 2023 as compared with December 31, 2022 was primarily due to our loss from operating activities of $92.3 million, the $37.5 million repurchase of a portion of our outstanding Convertible Notes in December 2023, investments and acquisitions made during the year ended December 31, 2023, including the net acquisition of $50.3 million for Broadbean in June 2023, taxes paid related to net share settlement of equity awards, and the payments of certain legacy acquisition contingent consideration, offset by gross cash proceeds of $77.5 million received from our December 2023 senior secured Term Loan in the year ended December 31, 2023.
(dollars in thousands) Year Ended December 31, 2022 2021 Revenue $ 149,728 $ 115,305 Operating expenses: Cost of revenue 27,432 22,129 Sales and marketing 51,345 28,935 Research and development 43,589 25,075 General and administrative 44,177 91,667 Amortization 21,180 8,872 Total operating expenses 187,723 176,678 Loss from operations (37,995 ) (61,373 ) Other income (expense), net 14,747 (600 ) Loss before provision for income taxes (23,248 ) (61,973 ) Provision for income taxes 2,309 2,699 Net loss $ (25,557 ) $ (64,672 ) Year Ended December 31, 2022 2021 Revenue 100.0 % 100.0 % Operating expenses: Cost of revenue 18.3 19.2 Sales and marketing 34.3 25.1 Research and development 29.1 21.7 General and administrative 29.5 79.5 Amortization 14.1 7.7 Total operating expenses 125.4 153.1 Loss from operations (25.4 ) (53.1 ) Other income (expense), net 9.8 (0.5 ) Loss before provision for income taxes (15.5 ) (53.6 ) Provision for income taxes 1.5 2.3 Net loss (17.1 ) (56.0 ) Year Ended December 31, 2022 Compared With Year Ended December 31, 2021 Revenue Year Ended December 31, 2022 Year Ended December 31, 2021 Commercial Government & Commercial Government & Enterprise Regulated Total Enterprise Regulated Total Software Products & Services (1) $ 80,749 $ 3,829 $ 84,578 $ 55,484 $ 4,031 $ 59,515 Managed Services 65,150 — 65,150 55,790 — 55,790 Revenue $ 145,899 $ 3,829 $ 149,728 $ 111,274 $ 4,031 $ 115,305 (1) Software Products & Services consists of aiWARE revenues of $27.2 million and $21.2 million for the years ended December 31, 2022 and December 31, 2021, respectively, as well PandoLogic revenues of $57.4 million and $38.3 million for the years ended December 31, 2022 and December 31, 2021, respectively.
(dollars in thousands) Year Ended December 31, 2023 2022 Revenue $ 127,560 $ 149,728 Operating expenses: Cost of revenue 28,256 27,432 Sales and marketing 52,024 51,345 Research and development 42,090 43,589 General and administrative 73,811 44,177 Amortization 23,715 21,180 Total operating expenses 219,896 187,723 Loss from operations (92,336 ) (37,995 ) Gain on debt extinguishment 30,023 19,097 Other income (expense), net 640 (4,350 ) Loss before provision for income taxes (61,673 ) (23,248 ) (Benefit from) provision for income taxes (3,048 ) 2,309 Net loss $ (58,625 ) $ (25,557 ) 49 Year Ended December 31, 2023 2022 Revenue 100.0 % 100.0 % Operating expenses: Cost of revenue 22.2 18.3 Sales and marketing 40.8 34.3 Research and development 33.0 29.1 General and administrative 57.9 29.5 Amortization 18.6 14.1 Total operating expenses 172.5 125.4 Loss from operations (72.5 ) (25.4 ) Gain on debt extinguishment 23.5 12.8 Other income (expense), net 0.5 (2.9 ) Loss before provision for income taxes (48.5 ) (15.5 ) (Benefit from) provision for income taxes (2.4 ) 1.5 Net loss (46.1 ) (17.1 ) Year Ended December 31, 2023 Compared With Year Ended December 31, 2022 Revenue Year Ended December 31, 2023 Commercial Government & Enterprise Regulated Total Software Products & Services (1) $ 62,410 $ 5,991 $ 68,401 Managed Services 59,159 — 59,159 Revenue $ 121,569 $ 5,991 $ 127,560 Year Ended December 31, 2022 Commercial Government & Enterprise Regulated Total Software Products & Services (1) $ 80,749 $ 3,829 $ 84,578 Managed Services 65,150 — 65,150 Revenue $ 145,899 $ 3,829 $ 149,728 (1) Software Products & Services consists of aiWARE revenues of $21.1 million and $27.2 million for the years ended December 31, 2023 and December 31, 2022, respectively, as well as Broadbean revenue of $19.1 million for the year ended December 31, 2023 and PandoLogic revenues of $28.2 million and $57.4 million for the years ended December 31, 2023 and December 31, 2022, respectively.
We believe there are strategic acquisition targets that can accelerate our entry into and expand our existing market share in key strategic 35 markets, as well as our ability to grow our business. As a result, we will continue to prioritize corporate development efforts throughout 2023.
While we believe there are strategic acquisition targets that can accelerate our entry into and expand our existing market share in key strategic markets, as well as our ability to grow our business, there is no certainty our historical or future acquisitions will achieve these objectives.
In the years ended December 31, 2022 and 2021, substantially all of our revenue was derived from customers located in the United States. We believe that there is a substantial opportunity over time for us to expand our service offerings and customer base in countries outside of the United States.
We believe that there is a substantial opportunity for us to continue expanding our service offerings and customer base in countries outside of the United States.
Department of Justice and progress with the Joint Artificial Intelligence Commission (“JAIC”) and Department of Defense (“DOD”) . However, many enterprise-level opportunities with Government & Regulated Industries customers can involve long sales cycles, during which we must invest significant time and resources without a guarantee of success.
However, many enterprise-level opportunities with Government & Regulated Industries customers can involve long sales cycles, during which we must invest significant time and resources without a guarantee of success. Growing our existing and new Software Products & Services customer base is critical for our success.
Non-GAAP gross profit is the Company’s revenue less its cost of revenue. Non-GAAP gross margin is defined as Non-GAAP gross profit divided by revenue. Non-GAAP net loss (pro forma) is the Company’s net loss excluding the items set forth below presented on a combined pro forma basis treating PandoLogic Ltd. as owned by Veritone, Inc. since January 1, 2021.
Non-GAAP gross margin is defined as Non-GAAP gross profit divided by revenue. Non-GAAP net loss (pro forma) is the Company’s net loss excluding the items set forth below.
Under the simplified method, the expected term is calculated as the midpoint between the weighted average vesting date and the contractual term of the options. The expected term for Performance Options considers the remaining term of the option after the attainment date and the ratio of the stock price at the attainment date to the option exercise price.
The expected term for stock options other than Performance Options represents the period of time that stock options are expected to be outstanding and is determined using the simplified method. Under the simplified method, the expected term is calculated as the midpoint between the weighted average vesting date and the contractual term of the options.
Any of these events would likely have an adverse effect on our business, operating results and financial position.
Any of these events would likely have an adverse effect on our business, operating results and financial position. Due to the nature of our business, the effect of these macroeconomic conditions may not be fully reflected in our results of operations until future periods.
In addition to continued market disruptions caused by the COVID-19 pandemic, global economic and business activities continue to face widespread macroeconomic uncertainties, including labor shortages, inflation and monetary supply shifts, recession risks and disruptions from the Russia-Ukraine conflict.
Impact of Current Global Economic Conditions Global economic and business activities continue to face uncertainty as a result of macroeconomic and geopolitical factors, lingering economic disruption caused by the COVID-19 pandemic, labor shortages, inflation rates and the responses by central banking authorities to control inflation, monetary supply shifts, recession risks, disruptions from the Russia-Ukraine conflict, and the war in Israel.
As noted above, our non-GAAP gross profit is calculated as our revenue less our cost of revenue, as follows: (dollars in thousands) Year Ended December 31, 2022 2021 $ Change % Change Revenue $ 149,728 $ 115,305 $ 34,423 29.9 % Cost of revenue 27,432 22,129 5,303 24.0 % Non-GAAP gross profit 122,296 93,176 29,120 31.3 % Non-GAAP gross margin 81.7 % 80.8 % The increase in non-GAAP gross profit and non-GAAP gross margin in the year ended December 31, 2022 compared with the prior year was due primarily to growth in Software Products & Services revenue, including a full year of hiring solutions revenue in our 2022 results.
As noted above, our non-GAAP gross profit is calculated as our revenue less our cost of revenue, as follows: (dollars in thousands) Year Ended December 31, 2023 2022 $ Change % Change Revenue $ 127,560 $ 149,728 $ (22,168 ) (14.8 )% Cost of revenue 28,256 27,432 824 3.0 % Non-GAAP gross profit 99,304 122,296 (22,992 ) (18.8 )% Non-GAAP gross margin 77.8 % 81.7 % The decrease in non-GAAP gross profit and non-GAAP gross margin in the year ended December 31, 2023 compared with the prior year was due primarily due to decreases in revenue compared to the corresponding prior year periods.
Other Income, Net Other income, net for 2022 was comprised primarily of a net gain on debt extinguishment of $19.1 million, partially offset by interest expense, net of $1.2 due primarily to the Convertible Notes we issued in November 2021.
Other Income, Net Other income, net for 2023 was comprised primarily of a gain on the sale of the energy group of $2.6 million, partially offset by net interest expense of $1.8 million.
Historically, we have derived a large portion of our Software Products & Services revenue from applications we internally developed from our aiWARE platform and actively sold across various customers, but our growth in 2022 was driven by the inclusion of PandoLogic in our financial results for the entirety of 2022 as compared to 2021 when we acquired PandoLogic in September 2021.
Historically, we have derived a large portion of our Software Product & Services revenue from applications we internally developed from our aiWARE platform and actively sold across various customers.
We believe there will be significant near and long-term opportunities for revenue growth from Government & Regulated Industries markets due to customer adoption of our products and services related to AI technologies and more recently with our official Authorization to Operate, or ATO, of our aiWARE platform across the entire U.S.
In Government & Regulated Industries markets, we see growth opportunities with customer adoption of our products and services related to AI technologies and with our official Authorization to Operate, of our aiWARE platform across the entire U.S. Department of Justice and progress with the Chief Digital and Artificial Intelligence Officer and Department of Defense, including our recently announced iDEMS platform.
Stock-Based Compensation Expense We record stock-based compensation expense associated with restricted stock, restricted stock units and stock options granted under our stock incentive plans, and purchase rights granted under our Employee Stock Purchase Plan (“ESPP”).
The result of the analyses was that the assets were not impaired, as the expected cash flows exceeded the carrying value for each asset group . 47 Stock-Based Compensation Expense We record stock-based compensation expense associated with restricted stock, restricted stock units and stock options granted under our stock incentive plans, and purchase rights granted under our Employee Stock Purchase Plan (“ESPP”).
(unaudited) and presents such revenue on a combined pro forma basis treating PandoLogic Ltd. as owned by Veritone, Inc. since January 1, 2021. Average Annual Revenue (AAR) is calculated as the aggregate of trailing twelve-month Software Products & Services Pro Forma Revenue divided by the average number of customers over the same period for both Veritone, Inc. and PandoLogic Ltd.
In prior periods, we provided “Average Annual Revenue,” which was calculated as the aggregate of trailing twelve-month Software Products & Services revenue divided by the average number of customers over the same period for both Veritone, Inc. and PandoLogic Ltd. Annual Recurring Revenue (Consumption) is not comparable to Average Annual Revenue.
The following table sets forth the reconciliation of pro forma revenue to revenue and the calculation of AAR.
All numbers used to determine Gross Revenue Retention are calculated on a Pro Forma basis. The following table sets forth the reconciliation of revenue to pro forma revenue and the calculation of pro forma annual recurring revenue.
(4) “Total New Bookings” represents the total fees payable during the full contract term for new contracts received in the quarter (including fees payable during any cancellable portion and an estimate of license fees that may fluctuate over the term), excluding any variable fees under the contract (e.g., fees for cognitive processing, storage, professional services and other variable services).
Management uses “Annual Recurring Revenue (Consumption)” and we believe Annual Recurring Revenue (Consumption) is useful to investors because Broadbean significantly increases our mix of subscription-based SaaS revenues as compared to Consumption revenues and the split between the two allows the reader to delineate between predictable recurring SaaS revenues and more volatile Consumption revenues. 44 (6) “Total New Bookings” represents the total fees payable during the full contract term for new contracts received in the quarter (including fees payable during any cancellable portion and an estimate of license fees that may fluctuate over the term), excluding any variable fees under the contract (e.g., fees for cognitive processing, storage, professional services and other variable services), in each case on a Pro Forma basis.
The period-to-period comparisons of our historical results are not necessarily indicative of the results that may be expected in the future.
Results of Operations The following tables set forth our results of operations for the years ended December 31, 2023 and 2022, in dollars and as a percentage of our revenue for those periods. The period-to-period comparisons of our historical results are not necessarily indicative of the results that may be expected in the future.
For the year ended December 31, 2022, our non-GAAP gross margin (calculated as described in “Non-GAAP Financial Measures” below) improved to approximately 82% compared with approximately 81% for the year ended December 31, 2021, driven by growth of new customers across our Software Products & Services and the inclusion of a full year of our hiring solutions revenue results, which collectively generated incremental non-GAAP gross margins in excess of 80% during the year ended December 31, 2022.
For the year ended December 31, 2023, our non-GAAP gross margin (calculated as described in “Non-GAAP Financial Measures” below) declined to approximately 78% as compared to 82% for the year ended December 31, 2022, driven in large part by the mix of revenue as compared to 2022.
The increase in cost of revenue in 2022 compared to 2021 was primarily due to our higher revenue level, as discussed above. As a percentage of revenue, cost of revenue improved to 18.3% in 2022 as compared to 19.2% in 2021 driven by the higher mix of software products and services in 2022, which generally have lower cost of revenues.
The increase in cost of revenue in 2023 compared to 2022 was primarily due to a shift in the mix of revenues from higher margin Software Products & Services products to lower margin Managed Services products.
Cash Flows A summary of cash flows from our operating, investing and financing activities is shown in the table below.
We expect these cost synergies and cost reduction measures to enable us to continue our operations for the foreseeable future, including over the next twelve months. 52 Cash Flows A summary of cash flows from our operating, investing and financing activities is shown in the table below.
Our Software Products & Services grew 42% year over year and represented 56% and 51% of our consolidated revenue in the years ended December 31, 2022 and 2021, respectively, and our Managed Services grew 17% year over year, and represented 44% and 49% of our consolidated revenue in the years ended December 31, 2022 and 2021, respectively.
Our Software Products & Services revenue was $68.4 million and $84.8 million during the years ended December 31, 2023 and 2022, respectively, and represented 54% and 56% of our consolidated revenue during the years ended December 31, 2023 and 2022, respectively.
Operating Expenses (dollars in thousands) Year Ended December 31, 2022 2021 $ Change % Change Cost of revenue $ 27,432 $ 22,129 $ 5,303 24.0 % Sales and marketing 51,345 28,935 22,410 77.4 % Research and development 43,589 25,075 18,514 73.8 % General and administrative 44,177 91,667 (47,490 ) (51.8 )% Amortization 21,180 8,872 12,308 138.7 % Total operating expenses $ 187,723 $ 176,678 $ 11,045 6.3 % Cost of Revenue.
Operating Expenses (dollars in thousands) Year Ended December 31, 2023 2022 $ Change % Change Cost of revenue $ 28,256 $ 27,432 $ 824 3.0 % Sales and marketing 52,024 51,345 679 1.3 % Research and development 42,090 43,589 (1,499 ) (3.4 )% General and administrative 73,811 44,177 29,634 67.1 % Amortization 23,715 21,180 2,535 12.0 % Total operating expenses $ 219,896 $ 187,723 $ 32,173 17.1 % Cost of Revenue.
In addition, we plan to divest our energy group in the first half of 2023, and we intend to reduce and consolidate expenses tied to software, outside services, and cloud-based processing throughout 2023. Opportunities, Challenges and Risks In 2022 and 2021, we derived our revenue primarily through our Commercial Enterprise customers, and secondarily, through our Government & Regulated Industries customers.
Chad Steelberg continues to serve as a member of our Board. 37 Opportunities, Challenges and Risks In 2023 and 2022, we derived our revenue primarily through our Commercial Enterprise customers, and secondarily, through our Government & Regulated Industries customers. We are a leader in AI-based Software Products & Services.
The increase in sales and marketing expenses of $22.4 million or 77% in 2022 compared with 2021 was primarily due to an increase of $13.5 million relating to our acquisition of PandoLogic in September 2021, increases in personnel-related costs of $4.2 million from the addition of new sales and marketing resources, and increases in marketing spend of $1.8 million.
Sales and marketing expenses increased $0.7 million, or 1% in 2023 compared with 2022, primarily due to increases in personnel-related costs from the addition of new sales and marketing resources, including the acquisition of Broadbean in June 2023. As a percentage of revenue, sales and marketing expenses increased to 41% in 2023 from 34% in 2022. Research and Development .
Additionally, and as a result of the recent pullback in the macroeconomic environment caused by high inflation, rising interest rates and recent and potential future disruptions in access to bank deposits or lending commitments due to bank failures, we expect some of our customers may reduce advertising spending across our managed services in 2023 when compared to same periods in the prior year.
As a result of the recent pullback in the macroeconomic environment caused by high inflation, rising interest rates, and geopolitical factors including the Russia-Ukraine conflict and the war in Israel, some of our customers reduced consumption-based and advertising spending across our Commercial Enterprise customer base across parts of our Veritone Hire solutions and Managed Services, in the year ended December 31, 2023 when compared to the prior year.
We have historically generated a significant portion of our revenue from a few major customers.
We have historically generated a significant portion of our revenue from a few major customers. As we continue to grow and diversify our customer base, we expect that our dependency on a limited number of large customers will be minimized.
The risk-free rate is based on the implied yield of U.S. Treasury notes as of the grant date with a remaining term approximately equal to the expected term of the award.
The expected term for Performance Options considers the remaining term of the option after the attainment date and the ratio of the stock price at the attainment date to the option exercise price. The risk-free rate is based on the implied yield of U.S.
In 2021, our investing activities used cash of $53.8 million, primarily to fund a portion of the consideration for the acquisition of PandoLogic.
Investing Activities Our investing activities for the year ended December 31, 2023 used cash of $54.9 million primarily for $50.2 million to fund our acquisition.
Contractual Obligations and Known Future Cash Requirements As of December 31, 2022, our only debt obligations were the Convertible Notes issued in the fourth quarter of fiscal year 2021, net of amounts repurchased in 2022.
Contractual Obligations and Known Future Cash Requirements As of December 31, 2023, our debt obligations are comprised of our Term Loan and 2026 Convertible Notes.

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