10-Q

Estimated
Fair Value

Estimated Useful Lives (in years)

Customer relationships

Developed technology

Total intangible assets

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2) of the Exchange Act. Yes ☐ No ☒

As of May 8, 2024, 37,738,677 shares of the registrant’s common stock were outstanding.

This Quarterly Report on Form 10-Q contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and we intend that such forward-looking statements be subject to the safe harbors created thereby. All statements made in this Quarterly Report on Form 10-Q that are not statements of historical fact are forward-looking statements. Without limiting the generality of the foregoing, words such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,” “continue,” “can,” “may,” “plans,” “potential,” “projects,” “seeks,” “should,” “will,” “would” or similar expressions and the negatives of those expressions may identify forward-looking statements, although not all forward-looking statements contain these identifying words. Such forward-looking statements include, but are not limited to, any statements that refer to projections of our future financial condition and results of operations, capital needs and financing plans, competitive position, industry environment, potential growth and market opportunities, acquisition plans and strategies, compensation plans, governance structure and policies and/or the price of our common stock.

The forward-looking statements included herein represent our management’s current expectations and assumptions based on information available as of the date of this report. These statements involve numerous known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Factors that may cause or contribute to such differences include, but are not limited to:

All forward-looking statements are necessarily only estimates of future results, and there can be no assurance that actual results will not differ materially from expectations. You should carefully review these risks, as well as the additional risks described in other documents we file from time to time with the SEC. In light of the significant risks and uncertainties inherent in the forward-looking information included herein, the inclusion of such information should not be regarded as a representation by us or any other person that such results will be achieved, and readers are cautioned not to place undue reliance on such forward-looking information, which speak only as of the date of this report.

Moreover, we operate in an evolving environment. New risks and uncertainties emerge from time to time and it is not possible for our management to predict all risks and uncertainties, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual future results to be materially different from those expressed or implied by any forward-looking statements.

Except as required by law, we assume no obligation to update any forward-looking statements, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future. We qualify all of our forward-looking statements by these cautionary statements.

The accompanying notes are an integral part of these condensed consolidated financial statements.

NOTE 2. PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial statements and the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, they do not contain all information and footnotes required by GAAP for annual financial statements. Such unaudited condensed consolidated financial statements and accompanying notes are based on the representations of the Company’s management, who is responsible for their integrity and objectivity. The information included in this Form 10-Q should be read in conjunction with the information included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on April 1, 2024. Interim results for the three months ended March 31, 2024 are not necessarily indicative of the results the Company will have for the full year ending December 31, 2024.

The accompanying condensed consolidated financial statements have been prepared on the same basis as the annual financial statements and, in the opinion of management, reflect all adjustments, which are normal, recurring and necessary to fairly state the Company’s financial position, results of operations and cash flows. All significant intercompany transactions have been eliminated in consolidation. The financial data and the other information disclosed in these notes to the condensed consolidated financial statements reflected in the three month periods presented are unaudited. The December 31, 2023 balance sheet included herein was derived from the audited financial statements but does not include all disclosures or notes required by GAAP for complete financial statements.

Liquidity and Capital Resources

These consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles assuming the Company will continue as a going concern. During the years ended December 31, 2023 and 2022, the Company used cash in operations of $76,421 and generated cash flows from operations of $3,737, respectively, and incurred net losses of $58,625 and $25,557, respectively. During the three months ended March 31, 2024 and 2023, the Company generated cash flows from operations of $15,931 and used cash in operations of $33,785, respectively, and incurred net losses of $25,198 and $22,963, respectively. As of March 31, 2024, the Company had an accumulated deficit of $455,094. Historically, the Company has satisfied its capital needs with the net proceeds from sales of its equity securities, issuances of its convertible debt, borrowings under its term loan and the exercises of common stock options and warrants.

During the three months ended March 31, 2024, the Company generated cash flows from operations of $15,931, driven principally by the timing of payments from customers and from client advances, partially offset by the Company’s net loss of $25,198. The Company used cash in investing activities of $1,901, driven principally by capital expenditures, and used cash in financing activities of $2,674, driven principally

by the settlement of contingent and deferred consideration. As of March 31, 2024, the Company had cash and cash equivalents of $91,662, including long term restricted cash of $929. Based on the Company's liquidity position as of March 31, 2024 and the Company's current forecast of operating results and cash flows, absent any other action, management determined that the Company will require additional liquidity to continue its operations for the foreseeable future, including over the next twelve months.

In the near term and to meet its obligations as they come due, the Company expects to capture these and potential future cost synergies from the Company’s past acquisitions. The Company expects the cost synergies coupled with the additional cost reduction measures to enable the Company to continue operations for the foreseeable future, including over the next twelve months.

Use of Accounting Estimates

The preparation of the accompanying condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the accompanying condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. 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 senior secured debt, the valuation of non-cash consideration received in barter transactions and the evaluation of its realizability, the valuation of stock awards and stock warrants and income taxes, where applicable.

There has been uncertainty and disruption in the global economy and financial markets due to a number of factors including the wars in Ukraine and Israel, the global inflationary environment and high interest rates. The war in Israel has also adversely impacted the Company’s business operations because the Company has an office and personnel based in Herzliya, Israel. The Company is not aware of any specific event or circumstance that would require an update to its estimates or assumptions or a revision of the carrying value of its assets or liabilities as of the date of filing of this Quarterly Report on Form 10-Q.

These estimates and assumptions may change as new events occur and additional information is obtained. As a result, actual results could differ materially from these estimates and assumptions.

Significant Customers

During and as of the three months ended March 31, 2024, no individual customer accounted for more than 10% of the Company’s revenue and one individual customer accounted for 10% or more of accounts receivable. During and as of the three months ended March 31, 2023, one individual customer accounted for 10% or more of the Company’s revenue and two individual customers accounted for 10% or more of the Company’s accounts receivable. No individual customer accounted for 10% or more of the Company’s accounts receivable as of December 31, 2023.

Contract Balances

Contract liabilities are recorded as deferred revenue when customer payments are received in advance of the Company meeting all the revenue recognition criteria. The Company recognized $5,742 of revenue during the three months ended March 31, 2024 that was included in the deferred revenue balance as of December 31, 2023.

Remaining Performance Obligations

As of March 31, 2024, the aggregate amount of the transaction prices under the Company’s contracts allocated to the Company’s remaining performance obligations was $26,734, approximately 48.0% of which the Company expects to recognize as revenue over the next twelve months, and the remainder thereafter to be recognized over the next three years. This aggregate amount excludes amounts allocated to remaining performance obligations under contracts that have an original duration of one year or less and variable consideration that is allocated to remaining performance obligations. Excluded based on this policy are balances related to Veritone Hire solutions representing gross purchase orders to be satisfied in less than one year. Revenues will be recognized net of costs to fulfill these orders.

Segment Information

The Company operates as one reportable segment. The Company reports segment information based on the internal reporting used by the chief operating decision maker for making decisions and assessing performance as the source of the Company’s reportable segments.

Seasonality

The Company experiences seasonal fluctuations in its revenue and operating performance as a result of the utilization of its platform and associated revenues from its Software Products & Services. In particular, Veritone Hire solutions revenues and advertising have historically been higher in the second half of each fiscal year, consistent with the hiring and spending cycles of the Company’s larger customers. The Company also experiences seasonality as a result of factors such as the timing of large projects, the length and complexity of sales cycles,

trends impacting the Company’s target vertical markets and the Company’s revenue recognition policies and any changes to those policies. Within a given quarter, a higher proportion of the Company’s agreements are signed toward the end of such quarter. 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.

Significant Accounting Policies

There have been no material changes in the Company’s significant accounting policies from those disclosed in its Annual Report on Form 10-K for the year ended December 31, 2023.

Recently Adopted Accounting Pronouncements

In September 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326) which requires measurement and recognition of expected credit losses for financial assets held. This standard was effective for the Company beginning in the first quarter of fiscal year 2023. The Company adopted this guidance on January 1, 2023 and the impact of the adoption was not material to our condensed consolidated financial statements as credit losses are not expected to be significant based on historical collection trends, the financial condition of payment partners, and external market factors.

In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires entities to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC Topic 606, Revenue from Contracts with Customers, in order to align the recognition of a contract liability with the definition of a performance obligation. The Company adopted this guidance on January 1, 2023. The adoption of this guidance did not have a material impact on the Company’s condensed consolidated financial statements.

NOTE 3. BUSINESS COMBINATIONS AND DIVESTITURE

Broadbean Acquisition

On June 13, 2023, the Company acquired Broadbean (as defined below), a global leader of talent acquisition software-as-a-service technology, pursuant to a securities and asset purchase agreement whereby the Company acquired (i) 100% of the issued and outstanding share capital of (a) Broadbean Technology Pty Ltd I, (b) Broadbean Technology Limited, (c) Broadbean, Inc., and (d) CareerBuilder France S.A.R.L., and (ii) certain assets and liabilities related thereto (the foregoing clauses (i) and (ii) together, “Broadbean”). The acquisition is intended to strengthen Veritone’s AI-driven human resources product suite, building on the Company’s previous acquisition of PandoLogic.

The total purchase consideration was $53,301 (the “Broadbean Acquisition Consideration”), which consisted of cash payments of $53,301 at closing. During the year ended December 31, 2023, the Company incurred $4,214 in acquisition-related expenses. The following table summarizes the fair value of the Broadbean Acquisition Consideration:


Broadbean Acquisition Consideration	Amount
Cash consideration at closing	$	53,301

The allocation of the Broadbean Acquisition Consideration to tangible and intangible assets acquired and liabilities assumed is based on estimated fair values and is as follows:


Allocation of Broadbean Acquisition Consideration**	As Reported		Measurement Period Adjustment			As Adjusted
Cash and cash equivalents	$	3,029	$	4		$	3,033
Accounts receivable, net		7,910		(93	)		7,817
Prepaid expenses and other current assets		1,008		(1	)		1,007
Property, equipment and improvements, net		4,348		(4,005	)		343
Intangible assets		27,500		—			27,500
Other assets		1,115		2,371			3,486
Total assets acquired		44,910		(1,724	)		43,186
Accounts payable		1,369		(262	)		1,107
Deferred revenue		10,134		(105	)		10,029
Other accrued liabilities		4,565		489			5,054
Other non-current liabilities		7,565		(947	)		6,618
Total liabilities assumed		23,633		(825	)		22,808
Identifiable net assets acquired		21,277		(899	)		20,378
Goodwill		31,947		976			32,923
Total purchase consideration	$	53,224	$	77		$	53,301

**The excess of the total consideration over the tangible assets, identifiable intangible assets, and assumed liabilities is recorded as goodwill. Goodwill is primarily attributable to opportunities to cross-sell into our Commercial Enterprise customer base and to the assembled workforce. Tax deductible goodwill generated from the acquisition is $3,728.

During the year ended December 31, 2023, the Company continued finalizing its valuations of the assets acquired and liabilities assumed in the acquisition of Broadbean based on new information obtained about facts and circumstances that existed as of the acquisition date. During the year ended December 31, 2023, the Company recorded measurement period adjustments, as shown in the table above.

Identifiable Intangible Assets

The identifiable intangible assets acquired consisted of the customer relationships and developed technology with estimated useful lives of four to five years. The Company amortizes the fair value of these intangible assets on a straight-line basis over their respective useful lives.

Developed technology relates to Broadbean’s internally developed software. The Company valued the developed technology using the relief- from- royalty method under the income approach. This method is based on the application of a royalty rate to forecasted revenue that is expected to be generated by the existing developed technology. The economic useful life was determined based on the technology cycle related to the developed technology, as well as the timing of cash flows over the forecast period. Customer relationships relate to the sales of products and services to Broadbean’s existing customer base. The Company valued the customer relationships using the multi-period excess earnings method under the income approach. This method reflects the present value of the projected cash flows that are expected to be generated by the existing customer relationships less charges representing the contribution of other assets to those cash flows. The economic useful life was determined based on historical customer turnover rates, as well as the timing of cash flows over the forecast period.

The valuation of the intangible assets acquired along with their estimated useful lives, is as follows:

Taxes

In connection with the acquisition of Broadbean, a net deferred tax liability of $3,741 was established primarily relating to non-goodwill intangible assets and recorded within other non-current liabilities on the Company’s condensed consolidated balance sheets. The amount of tax-deductible goodwill as of the purchase date is $3,728. The allocation of purchase consideration to deferred tax assets and liabilities and income

taxes payable is preliminary as the Company continues to evaluate certain balances, estimates and assumptions during the measurement period (up to one year from the acquisition date).

Unaudited Pro Forma Results

The unaudited pro forma financial information in the table below summarizes the combined results of operations for the Company and Broadbean as if the companies were combined for the three months ended March 31, 2024 and 2023, respectively. The unaudited pro forma financial information for all periods presented included the business combination accounting effects resulting from this acquisition, including adjustments to reflect recognition of intangible asset amortization. The unaudited pro forma financial information as presented below is for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of January 1, 2023 or the results that may occur in the future.

The unaudited pro forma financial information was as follows:


	Three Months Ended March 31,			Three Months Ended March 31,
	2024			2023
Net revenue	$	31,636		$	38,559
Loss before provision for income taxes		(26,243	)		(24,701	)
Net loss		(25,198	)		(24,072	)

Energy Group Divestiture

On June 30, 2023, the Company completed the sale of its energy group (the “Energy Divestiture”) to GridBeyond Limited, an Ireland-based privately held company (“GridBeyond”) that delivers AI-powered energy solutions, pursuant to an asset purchase agreement. The Company received 4,160,644 shares of Series B Preference Shares in GridBeyond valued at approximately $2,021 as of June 30, 2023, as well as $549 to be paid in cash. The Energy Divestiture resulted in a pre-tax gain of $2,572 in second quarter of 2023. The Energy Divestiture does not meet the criteria of discontinued operations because the disposal does not have a major effect on the Company’s operations and financial results. In April 2024, the Company sold its interest in GridBeyond for $1,800 in cash.

NOTE 4. DEBT

Senior Secured Term Loan

On December 13, 2023 (the “Closing Date”), the Company and certain of its subsidiaries, as guarantors, entered into a Credit and Guaranty Agreement (the “Credit Agreement”) with certain funds managed by Highbridge Capital Management, LLC and with certain other lenders (collectively, the “Lenders”) and Wilmington Savings Fund Society, FSB, as administrative agent and collateral agent. The Credit Agreement provides for a $77,500 senior secured term loan (the “Term Loan”), which was fully drawn by the Company on the Closing Date. On the Closing Date, the Company used $37,500 of the Term Loan proceeds to repurchase $50,000 of its 2026 Convertible Senior Notes. As a result of the collective transactions at the Closing Date, the Company recorded the Term Loan at fair value and recognized a one-time gain of $30,000 on the extinguishment of convertible debt. The initial discount on the Term Loan of $23,807 along with the capitalized issuance costs of $3,120 each will be amortized to interest expense over the term of the loan using the effective interest method. During the three months ended March 31, 2024, $1,332 was recognized as the amortization of initial discounts and issuance costs.

The Company is the borrower under the Credit Agreement and all indebtedness outstanding under the Credit Agreement is guaranteed by each of the Company’s direct and indirect material subsidiaries (the Company and the guarantors, collectively, the “Credit Parties”). Pursuant to a Pledge and Security Agreement, dated December 13, 2023 (the “Pledge and Security Agreement”), the Term Loan is secured by a first-priority security interest in and lien on substantially all tangible and intangible property of the Credit Parties and a pledge of equity interests held by the Credit Parties. The Credit Agreement has certain customary default provisions, representations and warranties and affirmative and negative covenants, including a covenant to maintain unrestricted cash and cash equivalents of at least $15,000 at all times. The Company was in compliance with the financial covenants at March 31, 2024.

The Term Loan accrues interest at a rate of Term SOFR plus 8.50% per annum, with a 3.00% floor for Term SOFR, payable quarterly. A default interest rate of an additional 3.00% per annum applies on all outstanding obligations after the occurrence and during the continuance of an event of default.

The Credit Agreement has a term of four years from the Closing Date, with a scheduled maturity date of December 13, 2027, and requires quarterly amortization payments of 2.50% of the principal amount, commencing in June 2024, with the outstanding balance of the Term Loan payable on the scheduled maturity date.

The Credit Agreement requires mandatory prepayments from the net cash proceeds received by the Credit Parties for among other things (i) certain asset sales, but only to the extent net cash proceeds therefrom exceed $10,000 in the aggregate, and (ii) insurance recoveries on loss of property that are not otherwise reinvested in other assets of the Credit Parties at a 10% prepayment premium. The Credit Agreement also requires prepayment of the Term Loan in full if $30,000 or more of aggregate principal amount of the 2026 Convertible Senior Notes are outstanding on August 14, 2026. The Company may elect to prepay the Term Loan, in whole or in part, in cash, subject to a make-whole premium during the first year of the Term Loan, a 14.0% prepayment premium during the second year of the Term Loan, and a 7.0% premium during the third year of the Term Loan. The Term Loan is not repayable with the Company’s common stock, $0.001 per share (the “Common Stock”) as was initially set forth in the Commitment Letter.

On the Closing Date, the Company issued warrants (the “Warrants”) to the Lenders (in such capacity, the “Warrant Holders”) to purchase up to 3,008,540 shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”) at an exercise price of $2.576 per share with a termination date of December 12, 2028. Refer to Note 6 for further details about the Warrants.

For the three months ended March 31, 2024, interest expense related to the Term Loan, including amortization of initial discounts and issuance costs, was $4,057. The effective annual interest rate was approximately 31.3%.

The scheduled principal payments on the Term Loan as of March 31, 2024 were as follows:


2024	$	5,813
2025		7,750
2026		7,750
2027		56,188
Total	$	77,500

Convertible Senior Notes

In November 2021, the Company issued, at par value, $201,250 aggregate principal amount of 1.75% convertible senior notes due 2026 (the “Convertible Notes”). The issuance included the full exercise of an option granted by the Company to the initial purchasers of the Convertible Notes to purchase an additional $26,250 aggregate principal amount of Convertible Notes. The Convertible Notes were issued pursuant to and are subject to the terms and conditions of an indenture, which is referred to as the Indenture, between the Company and U.S. Bank National Association, as trustee. The Convertible Notes were offered and sold in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. In December 2022, the Company repurchased $60,000 aggregate principal amount of the Convertible Notes at approximately 65% of par (the “2022 Repurchase Transaction”). In December 2023, the Company repurchased $50,000 aggregate principal amount of the Convertible Notes at approximately 75% of par (the “2023 Repurchase Transaction”). The Company has $91,250 in aggregate principal amount of the Convertible Notes outstanding as of March 31, 2024.

The Convertible Notes are senior, unsecured obligations of the Company and bear interest at a rate of 1.75% per year. Interest accrues from November 19, 2021 and is payable semi-annually in arrears on May 15 and November 15 of each year, beginning on May 15, 2022. The Convertible Notes will mature on November 15, 2026, unless earlier converted, redeemed, or repurchased in accordance with the terms of the Convertible Notes.

Holders of the Convertible Notes may convert all or any portion of their Convertible Notes at their option at any time prior to the close of business on the business day immediately preceding May 15, 2026, only under the following conditions: (1) during any calendar quarter commencing after the calendar quarter ending on March 31, 2022 (and only during such calendar quarter), if the last reported sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (2) during the five business day period after any five consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of Convertible Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Company’s common stock and the conversion rate for the Convertible Notes on each such trading day; (3) if the Company calls such Convertible Notes for redemption, at any time prior to the close of business on the second scheduled trading day immediately preceding the applicable redemption date; or (4) upon the occurrence of specified corporate events. On or after May 15, 2026, holders may convert all or any portion of their Convertible Notes at any time prior to the close of business on the second scheduled trading day immediately preceding the maturity date regardless of the foregoing conditions. Upon conversion, the Company will pay or deliver, as the case may be, cash, shares of its common stock or a combination of cash and shares of its common stock, at the Company’s election.

The conversion rate for the Convertible Notes initially is 27.2068 shares of the Company’s common stock per $1,000 principal amount of Convertible Notes (equivalent to an initial conversion price of approximately $36.76 per share of common stock). The conversion rate is

subject to adjustment in some events but will not be adjusted for any accrued and unpaid interest. In addition, following certain corporate events that occur prior to the maturity date or following the Company’s issuance of a notice of redemption, the Company will, in certain circumstances, increase the conversion rate for a holder who elects to convert its Convertible Notes in connection with such a corporate event or who elects to convert its Convertible Notes called (or deemed called) for redemption during the related redemption period, as the case may be.

The Company may not redeem the Convertible Notes prior to November 20, 2024. The Company may redeem for cash all or any portion of the Convertible Notes (subject to certain limitations), at its option, on or after November 20, 2024 if the last reported sale price of the Company’s common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption at a redemption price equal to 100% of the principal amount of the Convertible Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. No sinking fund is provided for the Convertible Notes.

If the Company undergoes a fundamental change prior to the maturity date, subject to certain conditions, holders may require the Company to repurchase for cash all or any portion of their Convertible Notes. The fundamental change repurchase price will be equal to 100% of the principal amount of the Convertible Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

The Convertible Notes are the Company’s senior unsecured obligations and rank senior in right of payment to all of the Company’s indebtedness that is expressly subordinated in right of payment to the Convertible Notes; equal in right of payment with all existing and future liabilities of the Company that are not so subordinated; effectively junior to any of secured indebtedness of the Company to the extent of the value of the assets securing such indebtedness; and structurally junior to all indebtedness and other liabilities (including trade payables) and any preferred equity of the Company’s current or future subsidiaries.

The net proceeds from the issuance of the Convertible Notes were approximately $194,945, after deducting debt issuance costs. The total debt issuance costs incurred and recorded by the Company amounted to $6,304, which were recorded as a reduction to the face amount of the Convertible Notes and are being amortized to interest expense using the effective interest method over the contractual term of the Convertible Notes. The Convertible Notes are recorded as a liability within convertible senior notes, non-current.

For the three months ended March 31, 2024 and 2023, interest expense related to the Convertible Notes and amortization of the issuance costs was $541 and $833, respectively. The effective annual interest rate for the three months ended March 31, 2024 and 2023 was approximately 2.42%. As of March 31, 2024, the if-converted value of the Convertible Notes did not exceed the outstanding principal amount. As of March 31, 2024, the total estimated fair value of the Convertible Notes was $32,765, which was determined based on a market approach using actual bids and offers of the Convertible Notes in an over-the-counter market during the period. The Company considers these assumptions to be Level 2 inputs in accordance with the fair value hierarchy described in Note 6.

Capped Calls

In connection with the 2022 pricing of the Convertible Notes, with the full exercise by the initial purchasers of their option to purchase additional Convertible Notes in November 2021, the Company used approximately $18,616 of the net proceeds from the issuance of the Convertible Notes to enter into privately negotiated capped call transactions, which are referred to as the capped calls, with various financial institutions.

The capped call transactions cover, subject to anti-dilution adjustments substantially similar to those applicable to the Convertible Notes, the number of shares of the Company’s common stock underlying the Convertible Notes. The capped call transactions are expected generally to reduce the potential dilution to the Company’s common stock upon conversion of the Convertible Notes and/or offset some or all of any cash payments the Company is required to make in excess of the principal amount of converted Convertible Notes, as the case may be, in the event that the market price per share of the Company’s common stock, as measured under the terms of the capped call transactions, is greater than the strike price of the capped call transactions, which initially corresponds to the conversion price of the Convertible Notes and is subject to anti-dilution adjustments substantially similar to those applicable to the conversion rate of the Convertible Notes. If, however, the market price per share of the Company’s common stock, as measured under the terms of the capped call transactions, exceeds the cap price of the capped call transactions, there would nevertheless be dilution and/or there would not be an offset of such potential cash payments, in each case, to the extent that such market price exceeds the cap price of the capped call transactions. The initial cap price of the capped calls is $48.55 per share of common stock, which represents a premium of 75% over the last reported sale price of the Company’s common stock of $27.74 per share on November 16, 2021, and is subject to certain customary adjustments under the terms of the capped calls; provided that the cap price will not be reduced to an amount less than the strike price of $35.76 per share.

The capped call transactions are separate transactions and are not part of the terms of the Convertible Notes. The capped calls met the criteria for classification as equity and, as such, are not remeasured each reporting period and are included as a reduction to additional paid-in-capital within stockholders’ equity.

In connection with the 2022 Repurchase Transaction, the Company entered into transactions to unwind a portion of the capped calls. As a result, the Company received $276 in net proceeds from the proceeds of the unwinding of the capped calls. In connection with the 2023 Repurchase Transaction, the Company entered into transactions to unwind a portion of the capped calls. The Company did not receive any proceeds from the unwinding of the capped calls in 2023.

Credit Facility

In August 2023, the Company entered into a three year credit agreement with Alterna Capital Solutions, LLC (“ACS”) pursuant to which the Company may borrow up to $30,000 (the “ACS Credit Facility”). Loans under the Credit Facility were secured by certain domestic receivables and other assets as determined by ACS. The ACS Credit Facility bore interest at the greater of Prime rate plus 1% or 9.5%, and minimum annual interest of $250 if no funds are drawn under the ACS Credit Facility in a given year. ACS was a senior secured creditor.

On December 12, 2023, in connection with the Company’s entry into the Credit Agreement (as defined above), the ACS Credit Facility and the related Commercial Guarantee, dated August 8, 2023, were terminated. Immediately prior to its termination, no amounts were outstanding under the Prior Credit Agreement. The Company did not incur any early termination penalties in connection with the termination of the ACS Credit Facility and related agreements.

NOTE 6. FINANCIAL INSTRUMENTS

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy is based on three levels of inputs that may be used to measure fair value. Level 1 and Level 2 are considered observable and Level 3 is considered unobservable, as follows:

•

Level 1—quoted prices (unadjusted) in active markets for identical assets or liabilities;

•

Level 2—inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; or

•

Level 3—unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Cash and Cash Equivalents

The Company’s money market funds are categorized as Level 1 within the fair value hierarchy. As of March 31, 2024, the Company’s cash and cash equivalents were as follows:


			Gross				Cash and
			Unrealized		Fair		Cash
	Cost		Losses		Value		Equivalents
Cash	$	90,733	$	—	$	90,733	$	90,733
Total	$	90,733	$	—	$	90,733	$	90,733

As of December 31, 2023, the Company’s cash and cash equivalents balances were as follows:


			Gross				Cash and
			Unrealized		Fair		Cash
	Cost		Losses		Value		Equivalents
Cash	$	79,439	$	—	$	79,439	$	79,439
Total	$	79,439	$	—	$	79,439	$	79,439

Contingent Consideration

On September 14, 2021, the Company acquired 100% of PandoLogic, Ltd. (“PandoLogic”), a company incorporated under the laws of the state of Israel, pursuant to an Agreement and Plan of Merger, dated as of July 21, 2021 (the “PandoLogic Merger Agreement”). The total purchase consideration for PandoLogic included up to $65,000 in contingent consideration based on achieving certain contingent consideration tied to financial performance of PandoLogic in fiscal 2021 and 2022, which amount will be paid in a combination of cash and common stock (the “PandoLogic Contingent Consideration”).

All of the Company’s contingent consideration liabilities are categorized as Level 3 within the fair value hierarchy, except when the amount of the payout is determined to be fixed. Contingent consideration for the PandoLogic acquisition was valued at the time of acquisition using Monte Carlo simulation models. These models incorporate contractual terms and assumptions regarding financial forecasts for PandoLogic, discount rates, and volatility of forecasted revenue. The value of the Company’s contingent consideration would increase if a lower discount rate was used and would decrease if a higher discount rate was used. Similarly, a higher revenue volatility assumption would increase the value of the contingent consideration, and a lower revenue volatility assumption would decrease the value of the contingent consideration. Contingent consideration for the March 2022 Acquisition (as defined below) was valued at the time of acquisition using a simple probability of achievement model, with the probability of achievement based on management’s forecasted outcomes for 2022 and 2023 fiscal year results for the acquired entity. The development and determination of the unobservable inputs for Level 3 fair value measurements and fair value calculations are the responsibility of the Company’s management with the assistance of a third-party valuation specialist when deemed necessary.

In September 2022, the Company and PandoLogic entered into an amendment to the PandoLogic Merger Agreement. This amendment provides that the PandoLogic Contingent Consideration would be no less than $10,825, irrespective of the actual financial performance of PandoLogic for the PandoLogic Contingent Consideration period. All of the PandoLogic Contingent Consideration was paid during the year ended December 31, 2023 in a combination of cash consideration and stock consideration, with the number of shares paid equal to that stock consideration portion of the contingent consideration amount divided by a price per share of $20.53 in accordance with the terms of the PandoLogic Merger Agreement.

On March 1, 2022, the Company acquired 100% of an influencer-based management company (the “March 2022 Acquisition”). As part of the consideration, the seller was eligible to receive up to $4,500 in cash (the “March 2022 Acquisition Contingent Consideration”). In July 2023, the Company entered into an agreement amending the March 2022 Acquisition Contingent Consideration (the “March 2022 Acquisition Amendment”). The March 2022 Acquisition Amendment provides that the March 2022 Acquisition Contingent Consideration was reduced to $3,500 and payment of the March 2022 Acquisition Contingent Consideration amount is now tied to employment status of the seller through December 31, 2025, irrespective of the actual financial performance of the acquired company. As the amount became fixed under the March 2022 Acquisition Amendment, the Company determined that the March 2022 Acquisition Contingent Consideration amount should no longer be categorized as Level 3 within the fair value hierarchy at the time of the amendment.

As of December 31, 2023, the Company’s contingent consideration liabilities current and non-current balances were as follows:


	Fair Value as of		Changes in		Amount Paid			Fair Value as of
	January 1, 2023		Fair Value		To Date			December 31, 2023
Level 3:
Contingent consideration, current	$	8,067	$	1,651	$	(8,718	)	$	1,000
Contingent consideration, non-current		—		633		—			633
Total	$	8,067	$	2,284	$	(8,718	)	$	1,633

Stock Warrants

On the Closing Date of the Term Loan, the Company issued warrants to the Lenders (in such capacity, the “Warrant Holders”) to purchase up to 3,008,540 shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”). During the three months ended March 31, 2024, 349,657 of these warrants were net settled in exchange for 206,957 shares of Common Stock. As of March 31, 2024, the Warrant Holders held warrants to purchase 2,658,883 shares of Common Stock.

All of the Company’s outstanding stock warrants are categorized as Level 3 within the fair value hierarchy. Stock warrants are equity classified and have been recorded at their fair value, on their issuance date of December 13, 2023, using either a probability weighted expected return model, the Monte Carlo simulation model or the Black-Scholes option-pricing model. These models incorporate contractual terms, maturity, risk-free interest rates and volatility. The value of the Company’s stock warrants would increase if a higher risk-free interest rate was used and would decrease if a lower risk-free interest rate was used. Similarly, a higher volatility assumption would increase the value of the stock warrants, and a lower volatility assumption would decrease the value of the stock warrants. The development and determination of the unobservable inputs for Level 3 fair value measurements and fair value calculations are the responsibility of the Company’s management with the assistance of a third-party valuation specialist.

Investments

The Company holds a strategic investment in a technology company that was determined to not have a readily determinable fair value. This investment is carried at a cost of $2,750 on the Company’s condensed consolidated balance sheets within other assets as of March 31, 2024 and December 31, 2023 and is categorized as Level 3 within the fair value hierarchy.

As part of the Energy Divestiture, the Company acquired a strategic investment in GridBeyond that was determined not to have a readily determinable fair value. This investment is carried at a cost equal to its initial estimated fair value of $2,021 on the Company’s condensed consolidated balance sheets within other assets as of March 31, 2024 and December 31, 2023, with that initial estimated fair value based on third party valuation at the time of this transaction and is categorized as Level 3 within the fair value hierarchy. See Note 13 involving the sale of the Company’s investment in GridBeyond subsequent to March 31, 2024.

Because these investments do not have readily determinable fair values, the Company has elected to measure these investments under ASC 321, Investments – Equity Securities, at cost minus impairments, if any, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments. No impairment was recorded for the three months ended March 31, 2024. The Company re-measures its investments if there is an observable transaction in a class of security similar to the Company’s investments and there were no such re-measurements for the three months ended March 31, 2024.

NOTE 7. GOODWILL AND INTANGIBLE ASSETS, NET

Goodwill

The carrying amount of goodwill was $79,828 as of March 31, 2024 and $80,247 as of December 31, 2023.


	Goodwill
Balance at December 31, 2023	$	80,247
Foreign currency translation/other		(419	)
Balance at March 31, 2024	$	79,828

Intangible Assets

The following table sets forth the Company’s finite-lived intangible assets resulting from business acquisitions and other purchases, which continue to be amortized:


			March 31, 2024							December 31, 2023
	Weighted Average Remaining Useful Life (in years)		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Software and technology		0.0	$	3,582	$	(3,582	)	$	—	$	3,582	$	(3,582	)	$	—
Licensed technology		0.0		500		(500	)		—		500		(500	)		—
Developed technology		1.5		44,100		(26,830	)		17,270		44,100		(24,601	)		19,499
Customer and supplier relationships		3.7		99,000		(39,977	)		59,023		99,000		(36,323	)		62,677
Noncompete agreements		0.0		800		(800	)		—		800		(800	)		—
Trademarks and trade names		2.8		2,300		(1,150	)		1,150		2,300		(1,053	)		1,247
Total		3.0	$	150,282	$	(72,839	)	$	77,443	$	150,282	$	(66,859	)	$	83,423

The following table presents future amortization of the Company’s finite-lived intangible assets as of March 31, 2024:


2024 (nine months)	$	17,973
2025		21,427
2026		16,569
2027		13,541
2028		7,870
Thereafter		63
Total	$	77,443

NOTE 8. CONSOLIDATED FINANCIAL STATEMENTS DETAILS

Consolidated Balance Sheets Details

Cash and cash equivalents

As of March 31, 2024 and December 31, 2023, the Company had cash and cash equivalents of $90,733 and $79,439, respectively, including $73,300 and $44,481, respectively, of cash received from advertising customers for future payments to vendors.

Accounts Receivable, Net and Allowance for Credit Losses

Accounts receivable consisted of the following:


	As of
	March 31, 2024			December 31, 2023
Accounts receivable — Managed Services(1)	$	25,748		$	38,477
Accounts receivable — Software Products & Services(2)		18,635			26,246
Accounts receivable — Other		2,120			5,723
		46,503			70,446
Less: allowance for expected credit losses		(754	)		(1,180	)
Accounts receivable, net	$	45,749		$	69,266

(1)

Accounts receivable – Managed Services reflects the amounts due from the Company’s advertising customers.

(2)

Accounts receivable – Software Products & Services reflects the amounts due from the Company’s Veritone Hire solutions customers.

Allowance for Credit Losses Accounting

The Company maintains an allowance for expected credit losses to record accounts receivable at their net realizable value. Inherent in the assessment of the allowance for credit losses are certain judgments and estimates relating to, among other things, the Company’s customers’ access to capital, customers’ willingness and ability to pay, general economic conditions and the ongoing relationship with customers. The Company calculates the expected credit losses on a pool basis for those receivables that have similar risk characteristics aligned with the types of accounts receivable listed in the accounts receivable table above. Allowances have been recorded for receivables believed to be uncollectible, including amounts for the resolution of potential credit and other collection issues. The allowance for expected credit losses is determined by analyzing the Company’s historical write-offs and the current aging of receivables. Adjustments to the allowance may be required in future periods depending on how issues considered such as the financial condition of customers and the general economic climate may change or if the financial condition of the Company’s customers were to deteriorate resulting in an impairment of their ability to make payments. The Company has not historically had material write-offs due to uncollectible accounts receivable.

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following:


	As of
	March 31, 2024		December 31, 2023
Prepaid assets	$	6,153	$	5,538
Other receivables		1,473		1,805
Trade credits earned through barter transactions, current		6,724		6,427
Other current assets		1,494		687
Prepaid expenses and other current assets	$	15,844	$	14,457

Other Assets

Other assets consisted of the following:


	As of
	March 31, 2024		December 31, 2023
Trade credits earned through barter transactions, non-current	$	10,339	$	10,682
Investments		4,771		4,771
Other non-current assets		4,797		4,398
Other assets	$	19,907	$	19,851

Property, Equipment and Improvements, Net

Property, equipment and improvements, net consisted of the following:


	As of
	March 31, 2024			December 31, 2023
Property and equipment	$	6,631		$	6,796
Internal use software development costs placed in service		9,298			8,226
Leasehold improvements		1,629			1,639
		17,558			16,661
Less: accumulated depreciation		(8,393	)		(8,005	)
Property, equipment and improvements, net	$	9,165		$	8,656

Depreciation expense was $1,511 and $478 for the three months ended March 31, 2024 and 2023, respectively. Of the $6,631 in property and equipment as of March 31, 2024, $1,839 consisted of work in progress not yet placed in service for internal use software development costs. Depreciation of internal use software development costs was $695 and $282 for the three months ended March 31, 2024 and 2023, respectively.

Accounts Payable

Accounts payable consisted of the following:


	As of
	March 31, 2024		December 31, 2023
Accounts payable — Managed Services(1)	$	18,179	$	11,797
Accounts payable — Other		18,409		20,959
Accounts payable	$	36,588	$	32,756

(1)

Accounts payable – Managed Services reflects the amounts due to media vendors for advertisements placed on behalf of the Company’s advertising clients.

Other Accrued Liabilities

Other accrued liabilities consisted of the following:


	As of
	March 31, 2024		December 31, 2023
Accrued compensation	$	4,625	$	4,615
Taxes payable		4,713		5,425
Current portion of operating lease liabilities		2,239		2,348
Accrued trade payables		13,640		13,749
Other		1,058		958
Other accrued liabilities	$	26,275	$	27,095

Contract Liabilities

Contract liabilities consist of deferred revenue. Deferred revenue represents billings under non-cancelable contracts before the related product or service is transferred to the customer. The portion of deferred revenue that is anticipated to be recognized as revenue during the succeeding twelve-month period is recorded as deferred revenue within the Company's condensed consolidated balance sheets. Deferred revenue was comprised of the following:


	Three Months Ended March 31,
	2024
Deferred revenue beginning balance	$	12,813
Less: revenue recognized		5,742
Additions to deferred revenue		6,344
Ending balance of deferred revenue	$	13,415

Consolidated Statements of Operations and Comprehensive Loss Details

Revenue

Revenue for the periods presented were comprised of the following:


	Three Months Ended March 31,
	2024		2023
Commercial Enterprise	$	30,119	$	28,868
Public Sector		1,517		1,395
Total revenue	$	31,636	$	30,263

The Company serves two customer groups: (1) Commercial Enterprise, which consists of customers in the commercial sector, including media and entertainment customers, advertising customers, content licensing customers and Veritone Hire customers (inclusive of Broadbean customers); and (2) Public Sector, which consists of customers in the government and regulated industries sectors, including state, local and federal government, legal, and compliance customers, and which we previously referred to as Government & Regulated Industries.

Software Products & Services consists of revenues generated from the Company’s aiWARE platform and Veritone Hire solutions’ talent acquisition solutions (inclusive of Broadbean), any related support and maintenance services, and any related professional services associated with the deployment and / or implementation of such solutions.

Managed Services consists of revenues generated from content licensing customers and advertising agency customers and related services.

The table below illustrates the presentation of our revenues based on the above definitions:


VERITONE, INC.
REVENUE DETAIL (UNAUDITED)
(in thousands)

	Three Months Ended March 31, 2024						Three Months Ended March 31, 2023
	Commercial		Public				Commercial		Public
	Enterprise		Sector		Total		Enterprise		Sector		Total
Total Software Products & Services	$	13,703	$	1,517	$	15,220	$	12,732	$	1,395	$	14,127

Managed Services
Advertising		10,975		—		10,975		10,535		—		10,535
Licensing		5,441		—		5,441		5,601		—		5,601
Total Managed Services		16,416		—		16,416		16,136		—		16,136

Total Revenue	$	30,119	$	1,517	$	31,636	$	28,868	$	1,395	$	30,263

Other Income (Expense), Net

Other income (expense), net for the periods presented was comprised of the following:


	Three Months Ended March 31,
	2024			2023
Interest expense, net	$	(3,990	)	$	(805	)
Other		(413	)		1,160
Other income (expense), net	$	(4,403	)	$	355

Other in the table above consists of foreign exchange loss of $413 for the three months ended March 31, 2024 and foreign exchange gain of $1,160 for the three months ended March 31, 2023.

Provision for Income Taxes

In accordance with ASC 740-270, Income Taxes, the provision or benefit from income taxes for interim periods is determined using an estimate of the Company’s annual effective tax rate, adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter, the Company updates the estimate of the annual effective tax rate, and if the estimated tax rate changes, the Company records a cumulative adjustment. A separate estimated annual effective tax rate is applied for jurisdictions where an entity anticipates an ordinary loss or has an ordinary loss for the year to date for which no tax benefit can be recognized.

The Company’s effective tax rate for the three months ended March 31, 2024 and 2023 was 4.0% and 1.2%, respectively. The difference between the effective tax rate and the U.S. federal statutory rate of 21% is primarily due to a valuation allowance established on the Company’s domestic federal and state net deferred tax assets, as well as the impact of foreign operations subject to tax in foreign jurisdictions.

As of March 31, 2024, the Company continues to provide a valuation allowance against federal and state deferred tax assets that are not expected to be realizable. The Company continues to evaluate the realizability of deferred tax assets and the related valuation allowance. If the Company’s assessment of the deferred tax assets or the corresponding valuation allowance were to change, the Company would record the related adjustment to income during the period in which the determination is made.

As a result of the Broadbean acquisition, the Company expects to be subject to taxation in France and Australia, in addition to already being subject to taxation in the United States, Israel, and the United Kingdom. The United States, Israel, and the United Kingdom comprise the majority of the Company’s operations. In general, the U.S. federal statute of limitations is three years. However, the Internal Revenue Service

may still adjust a tax loss or credit carryover in the year the tax loss or credit carryover is utilized. As such, the Company’s U.S. federal tax returns and state tax returns are open for examination since inception. The Israeli statute of limitations period is generally four years commencing at the end of the year in which the return was filed. The UK statute of limitations period is typically twelve months following the date on which the return is filed. The Company is not currently under examination from income tax authorities in the jurisdictions in which the Company does business.

NOTE 11. STOCK PLANS

Stock-Based Compensation

During the three months ended March 31, 2024 and 2023, the Company granted options to purchase an aggregate of 0 and 226,966 shares of its common stock that are subject to time-based vesting conditions, respectively.

The Company valued these stock options using the Black-Scholes Merton option pricing model. The assumptions used to compute the grant date fair values of the stock options granted during the three months ended March 31, 2024 and 2023 are set forth in the table below:


	Three Months Ended March 31,
	2024	2023
Expected term (in years)	N/A	6.8
Expected volatility	N/A	91%
Risk-free interest rate	N/A	3.6%

The assumptions used in calculating the fair values of purchase rights granted under the ESPP during the three months ended March 31, 2024 and 2023 are set forth in the table below:


	Three Months Ended March 31,
	2024	2023
Expected term (in years)	0.5 - 2.0	0.5 - 2.0
Expected volatility	105% - 115%	71% - 101%
Risk-free interest rate	4.7% - 5.2%	0.1% - 4.8%

The Company’s stock-based compensation expense by type of award and by operating expense grouping are presented below:


	Three Months Ended March 31,
	2024			2023
Stock-based compensation expense by type of award:
Restricted stock units	$	830		$	2,168
Performance-based stock units		—			328
Stock options		622			971
Employee stock purchase plan		156			450
Total stock-based compensation expense	$	1,608		$	3,917

Stock-based compensation expense by operating expense grouping:
Cost of revenue	$	(1	)	$	20
Sales and marketing		176			176
Research and development		532			1,542
General and administrative		901			2,179
Total stock-based compensation expense	$	1,608		$	3,917

Stock-based compensation capitalized for internal-use software was $118 and $134 for the three months ended March 31, 2024 and 2023, respectively.

Equity Award Activity Under Stock Plans

Performance Stock Units

In connection with the Steel Holdings Consulting Agreement (as defined and further described in Note 12), on January 11, 2023, the Compensation Committee of the Board (the “Compensation Committee”) approved a grant of 118,460 performance stock units (the “Steel Holdings Consulting PSUs”) that were to vest upon the achievement of certain performance milestones. During the year ended December 31, 2023, certain performance milestones were achieved resulting in the vesting of 19,743 shares of the Steel Holdings Consulting PSUs on April 22, 2023 and 39,486 shares on November 15, 2023.

In January 2024, the Company entered into an amended and restated independent contractor services agreement with Steel Holdings, LLC (the “Amended Consulting Agreement”), which supersedes and replaces the Steel Holdings Consulting Agreement. Under the Amended Consulting Agreement, all equity grants that were made, other than vested Steel Holdings PSUs but including unvested Steel Holdings PSUs, or contemplated under the Steel Holdings Consulting Agreement were terminated as of the effective date of the Amended Consulting Agreement and no further performance stock units will be issued under the Amended Consulting Agreement.

On March 16, 2023, the Compensation Committee approved a grant of 170,402 target performance stock units to be granted to the Company’s named executive officers (the “Senior Executive PSUs”). The awards had a grant date of March 31, 2023 and were to vest based on the achievement of revenue and non-GAAP net income targets (each equally weighted) for 2023, which achievement shall then be modified (up to a 20% increase or decrease) based on the Company’s relative total stockholder return over a three-year performance period (the “TSR Modifier”), as compared with the S&P Software and Services Select Industry Index. Based on the Company’s performance, the Company’s named executive officers were to earn from 0% to 200% of the target number of shares of the Senior Executive PSUs. The Senior Executive PSUs, to the extent earned, were to vest on the date the Board certifies the TSR Modifier for the three-year performance period ending December 31, 2025 and the number of Senior Executive PSUs that were to vest as of such certification, all of which was to occur within 90 days of the end of the performance period ending December 31, 2025. Compensation costs recognized on the Senior Executive PSUs were to be adjusted, as applicable, for performance above or below the target specified in the award. On April 8, 2024, the Compensation Committee determined that, as of December 31, 2023, the revenue and non-GAAP net income targets were not achieved and the Senior Executive PSUs were forfeited.

The Company’s performance stock unit activity for the three months ended March 31, 2024 was as follows:


				Weighted
				Average Grant
	Shares			Date Fair Value
Unvested at December 31, 2023		229,633		$	5.86
Forfeited		(59,231	)	$	5.94
Unvested at March 31, 2024		170,402		$	5.86

Restricted Stock Units

The Company’s restricted stock unit activity for the three months ended March 31, 2024 was as follows:


				Weighted
				Average Grant
	Shares			Date Fair Value
Unvested at December 31, 2023		1,949,514		$	5.40
Granted		3,000		$	3.88
Forfeited		(186,560	)	$	6.73
Vested		(153,085	)	$	7.30
Unvested at March 31, 2024		1,612,869		$	5.01

As of March 31, 2024, total unrecognized compensation cost related to restricted stock units was $5,729, which is expected to be recognized over a weighted average period of 2.1 years.

Performance-Based Stock Options

The activity during the three months ended March 31, 2024 related to stock options that are subject to performance-based vesting conditions tied to the achievement of stock price goals by the Company was as follows:


				Weighted-Average
							Remaining	Aggregate
					Exercise		Contractual	Intrinsic
	Options				Price		Term	Value
Unvested at December 31, 2023		3,671,310			$	11.29
Expired		(21,840	)		$	5.78
Outstanding at March 31, 2024		3,649,470			$	11.32	6.2 years	$	1
Exercisable at March 31, 2024		3,649,470			$	11.32	6.2 years	$	1

The aggregate intrinsic value of the options exercised during the three months ended March 31, 2024 and 2023 was $0 and $5, respectively. No performance-based stock options were granted during the three months ended March 31, 2024 and 2023 and no performance-based stock options vested during the three months ended March 31, 2024.

Stock Options

The activity during the three months ended March 31, 2024 related to all other stock options was as follows:


				Weighted-Average
							Remaining	Aggregate
					Exercise		Contractual	Intrinsic
	Options				Price		Term	Value
Outstanding at December 31, 2023		5,506,374			$	13.81
Exercised		(17,521	)		$	2.85
Forfeited		(153,353	)		$	8.86
Expired		(78,939	)		$	10.28
Outstanding at March 31, 2024		5,256,561			$	14.04	4.1 years	$	1,120
Exercisable at March 31, 2024		4,799,140			$	14.10	3.7 years	$	1,041

No stock options were granted during three months ended March 31, 2024. The weighted average grant date fair value of stock options granted during the three months ended March 31, 2023 was $4.21 per share. The aggregate intrinsic value of the stock options exercised during the three months ended March 31, 2024 and 2023 was $30 and $10, respectively. The total grant date fair value of stock options vested during the three months ended March 31, 2024 and 2023 was $1,080 and $1,584, respectively. At March 31, 2024, total unrecognized compensation expense related to stock options was $4,194 and is expected to be recognized over a weighted average period of 2.1 years.

The aggregate intrinsic values in the tables above represent the difference between the fair market value of the Company’s common stock and the average option exercise price of in-the-money options, multiplied by the number of such stock options.

Employee Stock Purchase Plan

As of March 31, 2024 and December 31, 2023, employee payroll deductions accrued under the ESPP totaled $160 and $357, respectively. During the three months ended March 31, 2024, a total of 119,954 shares of common stock were purchased under the ESPP.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read together with and is qualified in its entirety by reference to the condensed consolidated financial statements and related notes that are included elsewhere in this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed under “Risk Factors,” set forth in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2023, and any updates thereto set forth in this Quarterly Report on Form 10-Q and our other filings with the Securities and Exchange Commission (“SEC”), including future SEC filings. See “Cautionary Note Regarding Forward-Looking Statements.”

Veritone, Inc., collectively with our subsidiaries, referred to as “Veritone,” “Company,” “we,” “our,” and “us,” is a provider of Artificial Intelligence (“AI”) solutions, powered by our proprietary AI operating system, aiWARE™, to deliver differentiated products and solutions to our Commercial Enterprise and Public Sector (which we previously referred to as Government & Regulated Industries) customers. Our Software Products & Services consist of revenues generated from Commercial Enterprise and Public Sector customers using our aiWARE platform and Veritone Hire solutions, any related support and maintenance services, and any related professional services associated with the deployment and/or implementation of such solutions. Our Managed Services consist of revenues generated from Commercial Enterprise customers using our content licensing services, advertising agency, influencer management and related services.

During the three months ended March 31, 2024, we generated revenue of $31.6 million as compared to $30.3 million during the three months ended March 31, 2023. Our Software Products & Services revenue was $15.2 million and $14.1 million during the three months ended March 31, 2024 and 2023, respectively, and represented 48% and 47% of our consolidated revenue for the three months ended March 31, 2024 and 2023, respectively. The $1.1 million increase in Software Products & Services revenue, or 7.8% year over year, was driven by the Q2 2023 acquisition of Broadbean, which generated $8.5 million in revenue in Q1 2024. Our Managed Services revenue was $16.4 million and $16.1 million during the three months ended March 31, 2024 and 2023, respectively, and represented 52% and 53% of our consolidated revenue for the three months ended March 31, 2024 and 2023, respectively. No customer represented more than 10% of our consolidated revenue during the three months ended March 31, 2024 and one customer represented approximately 18% of our consolidated revenue during the three months ended March 31, 2023.

Appointment of Ryan Steelberg as Chairman. Ryan Steelberg, our Chief Executive Officer, was appointed Chairman of the Board, effective January 22, 2024, replacing Chad Steelberg who resigned as Chairman of the Board on the same date. Chad Steelberg continues to serve as a member of our Board.

Operational Realignment and Restructuring. During the three months ended March 31, 2024, we enacted certain operational and restructuring initiatives (the “Q1 2024 Restructuring”), the result of which was an approximate 13% reduction in our global workforce. As a result of the Q1 2024 Restructuring, we expect to reduce our annualized operating expenses by over $13.0 million. We incurred $2.0 million in one-time severance and transition expenses in connection with the Q1 2024 Restructuring, of which $1.3 million was paid as of March 31, 2024.

During the three months ended March 31, 2024 and 2023, we derived our revenue primarily through our Commercial Enterprise customers, and secondarily, through our Public Sector customers.

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. 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. 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. 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 public sector industries and content creation and distribution across the global media and entertainment industry.

We believe there are significant near and long-term revenue and growth opportunities from our Software Products & Services. In June 2023, we completed the acquisition of Broadbean, a leader in subscription-based talent acquisition software-as-a-service which has approximately 3,000 subscription-based customers based throughout the world, integrated with over 100 applicant tracking systems (“ATS”) and has direct access to over 2,500 job boards globally. The acquisition of Broadbean was strategic to our growth across our hiring applications, as we plan in the near term to offer our existing product offerings to Broadbean’s 3,000 customers, including programmatic advertising capabilities. Over the long term, we plan to utilize our AI capabilities to analyze complex data sets through direct access to these ATS, including future integration with aiWARE. In Public Sector 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. However, many enterprise-level opportunities with Public Sector 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. Software Products & Services revenue increased by 7.7% during the three months ended March 31, 2024 as compared to the prior year period due to the addition of Broadbean in the second quarter of 2023, partially offset by lower consumption across our legacy Veritone Hire customer base. During the three months ended March 31, 2024, our largest customer represented less than 10% of our consolidated revenue as compared to 18% during the three months ended March 31, 2023.

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, namely of our Veritone Hire solutions and Managed Services.

As of March 31, 2024, our total Software Products & Services customers declined to 3,384, which was a decrease of 10.3% as compared to the end of the first quarter of 2023 on a pro forma basis, giving effect to the acquisition of Broadbean as if it occurred on January 1, 2022. The decrease in customers was largely driven by planned migration of legacy CareerBuilder customers off the Broadbean software platform, which did not have a significant impact on our financial results in 2023 or for the three months ended March 31, 2024. While we anticipate these trends to continue in the second quarter of 2024, we expect the overall impact will be insignificant to our financial results in 2024. To continue our effort to grow our customer base and overall revenue, we have been investing aggressively in existing customers and acquiring new customers. In addition, in February 2024, we announced certain cost reduction and restructuring initiatives, the results of which was a reduction in our global workforce of approximately 13%. Since the first quarter of 2023, we have been actively realigning and restructuring our organization, which, as of March 31, 2024, is expected to result in over $37.0 million of net annualized strategic cost reductions, which includes expected cost reductions from our Q1 2024 Restructuring. 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 term as compared to the trailing twelve months; however, these increased investments were partially offset by our 2023 and 2024 cost-reduction initiatives.

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. Further and with the recently announced iDEMs launch, we now offer a suite of aiWARE applications to address the growing issue of unstructured digital data management faced by public safety and federal government sectors today. In addition, we recently announced that we achieved Amazon Web Services (“AWS”) Advanced Tier Services status, advancing the deployment of our AI solutions and capabilities across the AWS platform, and we have historically integrated aiWARE across many platforms, including Alteryx, Snowflake and the NVIDIA® CUDA® GPU-based platform, enabling dramatic increases in aiWARE’s processing speed and providing a wide range of new use cases for our technology. We are in the process of developing and marketing more specific use cases for these and future integrations, which we believe will open up new markets for our products and accelerate our long-term revenue growth opportunities.

Our non-GAAP gross margin is impacted significantly by the mix of our Software Products & Services and our Managed Services revenue in any given period because our Managed Services revenue typically has a lower overall non-GAAP gross margin than our Software Products & Services revenue. Our non-GAAP gross profit (see “Non-GAAP Financial Measures” below) is also dependent upon our ability to grow our revenue by expanding our customer base and increasing business with existing customers, and to manage our costs by negotiating favorable economic terms with cloud computing providers such as AWS and Microsoft Azure. While we are focused on continuing to improve our non-GAAP gross profit, our ability to attract and retain customers to grow our revenue will be highly dependent on our ability to implement and continually improve upon our technology and services and improve our technology infrastructure and operations as we experience increased network capacity constraints due to our growth.

We believe our operating results and performance are, and will continue to be, driven by various factors that affect our industry. Our ability to attract, grow and retain customers for our aiWARE platform is highly sensitive to rapidly changing technology and is dependent on our ability to maintain the attractiveness of our platform, content and services to our customers. Our future revenue and operating growth will

rely heavily on our ability to grow and retain our Software Products & Services customer base, continue to develop and deploy quality and innovative AI-driven applications and enterprise-level offerings, provide unique and attractive content and advertising services to our customers, continue to grow in newer markets such as Public Sector, expand aiWARE into larger and more expansive enterprise engagements and manage our corporate overhead costs. 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. 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. 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. Conversely, we have pursued and may continue to pursue opportunistic sales of certain business operations that are not strategic to us long-term, such as the divestiture of our energy group in the second quarter of 2023.

For the three months ended March 31, 2024, our total revenues were $31.6 million as compared to $30.3 million for the three months ended March 31, 2023, an increase of 4.3%. For the three months ended March 31, 2024, our total loss from operations was $21.9 million as compared to $23.6 million for the three months ended March 31, 2023, a decrease of 7.1%. For the three months ended March 31, 2024, our non-GAAP gross margin (calculated as described in “Non-GAAP Financial Measures” below) increased to approximately 77.7% as compared to 77.5% for the three months ended March 31, 2023, driven in large part by the mix of revenue as compared to the prior year period. Our non-GAAP gross margin is impacted significantly by the mix of our Software Products & Services and our Managed Services revenue in any given period because our Managed Services revenue typically has a lower overall non-GAAP gross margin than our Software Products & Services revenue. Our non-GAAP gross profit (see “Non-GAAP Financial Measures” below) is also dependent upon our ability to grow our revenue by expanding our customer base and increasing business with existing customers, and to manage our costs by negotiating favorable economic terms with cloud computing providers such as AWS and Microsoft Azure. While we are focused on continuing to improve our non-GAAP gross profit, our ability to attract and retain customers to grow our revenue will be highly dependent on our ability to implement and continually improve upon our technology and services and improve our technology infrastructure and operations as we experience increased network capacity constraints due to our growth.

During the three months ended March 31, 2024, we reported a net loss of $25.2 million as compared to a net loss of $23.0 million during the three months ended March 31, 2023. During the three months ended March 31, 2024, we reported a non-GAAP net loss of $7.6 million as compared to a non-GAAP net loss of $9.6 million during the three months ended March 31, 2023. To continue to grow our revenue, we will continue to make targeted investments in people, namely software engineers and sales personnel. Historically, we have also made investments in our corporate infrastructure, including new ERP and workforce systems to help us better manage the scale and growth of our business. However, considering the current challenging macro-economic environment, we have made and are continuing to make significant cost reductions to our operating structure to better streamline our business and prioritization around our growth and corresponding investments. These cost reduction initiatives began in the latter half of 2022 and will continue through 2024, and include reductions in workforce and certain legacy operating costs, as well as the integration of past acquisitions. As a result of these initiatives, we believe we will be able to accelerate our pathway toward long term profitability.

During the three months ended March 31, 2023, substantially all of our revenue was derived from customers located in the United States. With the June 2023 acquisition of Broadbean, we expanded our customer base throughout Europe and Asia Pacific. In the three months ended March 31, 2024, 32.9% of our consolidated revenue was from customers outside of the U.S., as compared to less than 10% during the three months ended March 31, 2023. 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. In the long term, we plan to expand our business further internationally in places such as Europe, Asia Pacific and Latin America, and as a result, we expect to continue to incur significant incremental upfront expenses associated with these expansion opportunities.

Global economic and business activities continue to face uncertainty as a result of macroeconomic and geopolitical factors, 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. In particular, business operations at our Herzliya office location where we do development work on our Veritone Hire solutions products have been, and may continue to be, impacted by the war in Israel. A small portion of our Israel-based employees, and a number of their family members, have been conscripted into military service. 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. 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.

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. These adverse economic conditions could also result in reductions in sales of our applications, longer sales cycles, reductions in contract duration and value, slower adoption of new technologies and increased price competition. In addition, economic recessions have historically resulted in overall reductions in spending on software and technology solutions as well as pressure from customers and potential customers for extended billing terms. 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. 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. We have assessed the potential credit deterioration of our customers due to changes in the macroeconomic environment and have determined that no additional allowance for credit losses was necessary due to credit deterioration as of March 31, 2024. The most significant risks to our business and results of operations are discussed in Part I, Item 1A (Risk Factors) of our Annual Report on Form 10-K for the year ended December 31, 2023, and Part II, Item 1A (Risk Factors) of this Quarterly Report on Form 10-Q.

In evaluating our cash flows and financial performance, we use certain non-GAAP financial measures, including Pro Forma Software Revenue, non-GAAP gross profit, non-GAAP gross margin, non-GAAP net income (loss), and non-GAAP net income (loss) per share. We also provide certain key performance indicators (“KPIs”), including Total Software Products & Services Customers, Annual Recurring Revenue, Annual Recurring Revenue (SaaS), Annual Recurring Revenue (Consumption), Total New Bookings and Gross Revenue Retention.

“Pro Forma” information provided in this quarterly report on Form 10-Q represents our historical information combined with the historical information of Broadbean (as defined below) for the applicable period on a pro forma basis as if we had acquired Broadbean on January 1, 2022.

Pro Forma Software Revenue represents Software Products & Services revenue on a Pro Forma basis. 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. 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. The results for non-GAAP net income (loss), are presented below for the three months ended March 31, 2024 and 2023. 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. In addition, we have provided supplemental non-GAAP measures of gross profit, operating expenses, loss from operations, other (expense) income, net, and loss before income taxes, excluding the items excluded from non-GAAP net loss as noted above, and reconciling such non-GAAP measures to the most directly comparable GAAP measures.

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

(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.

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

(3) Contribution of business held for sale relates to the net loss for the periods presented for our energy group that we divested during the second quarter of 2023.

(4) Variable consultant performance bonus expense represents the bonus payments paid to Mr. Chad Steelberg as a result of his achievement of the performance goals pursuant to his consulting agreement with us.

For the three months ended March 31, 2024, our total loss from operations decreased to $21.8 million compared to $23.6 million in the three months ended March 31, 2023. 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 condensed consolidated financial statements for three months ended March 31, 2024 and 2023.

(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.

(2) Contribution of business held for sale relates to the net loss for the periods presented for our energy group that we divested during Q2 2023.

(3) Variable consultant performance bonus expense represents the bonus payments paid to Mr. Chad Steelberg as a result of his achievement of the performance goals pursuant to his consulting agreement with us.

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 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 supplemental financial information for our Managed Services includes: (i) average billings per active Managed Services client, and (ii) revenue.

The following table sets forth the results for each of our Software Products & Services supplemental financial information.

(1) All of the supplemental financial information for this period is presented on a Pro Forma basis inclusive of Broadbean.

(2) “Pro Forma Software Revenue” is a non-GAAP measure that represents Software Products & Services revenue on a Pro Forma basis.

(3) “Total Software Products & Services Customers” includes Software Products & Services customers as of the end of each respective quarter set forth above with net revenues in excess of $10 and also excludes any customers categorized by us as trial or pilot status. 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. Total Software Products & Services Customers is not comparable to Ending Software Customers. Total Software Products & Services Customers includes customers based on revenues in the last month of the quarter rather than on a trailing twelve-month basis. Total Software Products & Services Customers includes customers based on revenues in the last month of the quarter rather than on a trailing twelve-month basis and excludes any customers that are on trial or pilot status with us rather than including customers with active contracts. Management uses Total Software Products & Services Customers and we believe Total Software Products & Services Customers are useful to investors because it more accurately reflects our total customers for our Software Products & Services customers inclusive of Broadbean.

(4) “Annual Recurring Revenue (SaaS)” represents an annualized calculation of monthly recurring revenue during the last month of the applicable quarter for all Total Software Products & Services customers, in each case on a Pro Forma basis. 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). Annual Recurring Revenue (SaaS) includes only subscription-based SaaS revenue, is not averaged among active customers and uses a calculation of recurring revenue as described above instead of annual revenue. Management uses “Annual Recurring Revenue (SaaS)” and we believe Annual Recurring Revenue (SaaS) 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.

(5) “Annual Recurring Revenue (Consumption)” represents the trailing twelve months of all non-recurring and/or consumption-based revenue for all active Total Software Products & Services customers, in each case, on a Pro Forma basis. 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. Annual Recurring Revenue (Consumption) includes only non-recurring and/or consumption-based revenue, is not averaged among active customers and uses a calculation of recurring revenue as described above instead of annual revenue. 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.

(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.

(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. 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. 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. 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.

(1) “Pro Forma Software Revenue” includes historical Software Products & Services Revenue from the past eight (8) fiscal quarters of each of Veritone, Inc. and Broadbean and presents such revenue on a combined pro forma basis treating Broadbean as owned by Veritone, Inc. since January 1, 2022.

(2) “Pro Forma Annual Recurring Revenue” represents an annualized calculation of the monthly recurring revenue in the last period of the calculated quarter, combined with the trailing twelve month calculation for all non-recurring and/or consumption based revenue for all active customers.

The following table sets forth the results for each of the key performance indicators for Managed Services.

(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.

(2) Managed Services revenue and metrics exclude content licensing and media services and Table Rock Management.

We have experienced and may continue to experience volatility in revenue from our Managed Services due to a number of factors, including: (i) the timing of new large customer agreements; (ii) loss of customers who choose to replace our services with new providers or by bringing their advertising placement in-house; (iii) customers who experience reductions in their advertising budgets due to issues with their own businesses; and (iv) the seasonality of the campaigns for certain large 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 following tables set forth our results of operations for the three months ended March 31, 2024 and 2023, 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.

Three Months Ended March 31, 2024 Compared with Three Months Ended March 31, 2023

Commercial Enterprise Software Products & Services revenue increased $1.0 million, or 7.6%, in the three months ended March 31, 2024 compared to the corresponding prior year period, primarily due to the addition of Broadbean in the second quarter of 2023, partially offset by decreased revenue from consumption-based customers, including Amazon. Commercial Enterprise Managed Services increased $0.3 million, or 1.7%, in the three months ended March 31, 2024 compared to the corresponding prior year period, primarily due to increases in advertising revenue driven by the current advertising economic environment.

Public Sector Software Products & Services revenue increased $0.1 million or 8.7% in the three months ended March 31, 2024 compared to the corresponding prior year period, primarily due to organic growth in software revenues from public safety and federal customers, offset slightly by the divestiture of our energy group in the second quarter of 2023. In some cases, Public Sector Software Products & Services revenue from customers in certain markets, particularly our government customers, can involve project-based and be impacted by the timing of such projects. As such, we expect that our revenue from these markets could fluctuate significantly from period to period.

Cost of Revenue. Cost of revenue increased by $0.2 million in the three months ended March 31, 2024 compared to the corresponding prior year period, primarily due to the increase in revenue. As a percentage of revenue, cost of revenue remained flat at approximately 22%

Sales and Marketing. Sales and marketing expenses decreased by $0.9 million in the three months ended March 31, 2024 compared to the corresponding prior year period, primarily due to cost reduction initiatives announced in the first quarter of 2023 and reduced advertising spend, partially offset by increased sales and marketing expense as a result of the acquisition of Broadbean in June 2023. As a percentage of revenue, sales and marketing expenses decreased to 37% from 42% during the three months ended March 31, 2024 and 2023, respectively.

Research and Development. Research and development expenses decreased by $2.3 million, or 20.1%, in the three months ended March 31, 2024 compared with the corresponding prior year period, principally due to a $3.2 million decrease in personnel-related costs due to various cost reduction initiatives executed over the trailing twelve months, partially offset by $0.2 million in one-time severance and transition expenses, a $0.5 million increase in research and development costs from the acquisition of Broadbean in June 2023, and a $0.3 million increase in capitalized costs for internal use software. As a percentage of revenue, research and development expenses decreased to 29% from 38% during the three months ended March 31, 2024 and 2023, respectively.

General and Administrative. General and administrative expenses increased by $2.0 million, or 11.6% in the three months ended March 31, 2024 compared with the corresponding prior year period, principally due to the addition of $3.0 million in costs resulting from the June 2023 Broadbean acquisition, partially offset by expense reductions in stock based compensation and personnel related costs. As a percentage of revenue, general and administrative expenses increased to 61% from 57% in the three months ended March 31, 2024 and 2023, respectively.

Amortization Expense. Amortization expense increased in the three months ended March 31, 2024 compared with the corresponding prior year period due to the addition of amortization expense related to our June 2023 acquisition of Broadbean.

Other income (expense), net for the three months ended March 31, 2024 of ($4.4) million increased $4.8 million from $0.4 million during the three months ended March 31, 2023. The $4.8 million increase was largely due to a $3.2 million increase in net interest expense driven from the December 2023 Term Loan, which included $1.3 million of non-cash amortization expense associated with the initial discount and issuance costs of the debt. The remaining $1.4 million increase was largely driven by changes in foreign exchange.

For the three months ended March 31, 2024, our total loss from operations decreased to $21.9 million compared to $23.6 million in the corresponding prior year period. As noted above, our non-GAAP gross profit is calculated as our revenue less our cost of revenue, as follows:

The increase in non-GAAP gross profit and non-GAAP gross margin in the three months ended March 31, 2024 compared with the corresponding prior year period was primarily due to an increase in revenue compared to the corresponding prior year period.

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 $90.7 million as of March 31, 2024, compared with total cash and cash equivalents of $79.4 million as of December 31, 2023. The increase in our cash and cash equivalents as of March 31, 2024 as compared with December 31, 2023 was primarily due to cash provided by operating activities of $15.9 million during the three months ended March 31, 2024.

In December 2023, we and certain of our subsidiaries, as guarantors, entered into the Credit Agreement with certain lenders and Wilmington Savings Fund Society, FSB, as administrative agent and collateral agent. The Credit Agreement provides for a $77.5 million senior secured Term Loan, which was fully drawn by us on closing of the Term Loan. Based on our liquidity position as of March 31, 2024 and our current forecast of operating results and cash flows, absent any other action, management determined that we will need additional liquidity to continue our operations for the foreseeable future, including over the next twelve months. In the near term and to meet our obligations as they come due, we expect to capture cost synergies from our past acquisitions coupled with expected cost savings from additional planned cost reduction measures through optimization of the Company's operational structure. 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.

A summary of cash flows from our operating, investing and financing activities is shown in the table below.

Our operating activities generated cash of $15.9 million in the three months ended March 31, 2024, due primarily to the net working capital impact of $31.1 million, primarily due to net cash inflow from changes in accounts receivable of $23.3 million, client advances of $12.8 million, and accounts payable of $3.8 million, partially offset by net cash outflows due to the timing of accrued media payments of $9.0 million and prepaid expenses and other current assets of $1.3 million. Cash generated by operating activities in the three months ended March 31, 2024 was partially offset by our net loss of $25.2 million, adjusted by $9.8 million in non-cash expenses, including $7.5 million in depreciation and amortization, $1.6 million in stock-based compensation expense and $1.3 million of amortized debt issuance costs.

Our operating activities used cash of $33.8 million in the three months ended March 31, 2023, due primarily to our net loss of $23.0 million, adjusted by $10.6 million in non-cash expenses, including $5.9 million in depreciation and amortization and $3.9 million in stock-based compensation expense, as well as the net working decrease of $21.4 million, primarily due to decreases in accrued media payments of $19.7 million and client advances of $15.6 million from our Managed Services, partially offset by decreases in expenditures billable to clients of $9.3 million.

Our investing activities for the three months ended March 31, 2024 used cash of $1.9 million driven by capital expenditures.

Our investing activities for the three months ended March 31, 2023 used cash of $2.9 million primarily for $1.5 million in deferred consideration paid for our acquisition in March 2022 of an influencer-based management company, pursuant to a securities purchase agreement, and $1.4 million in capital expenditures.

Our financing activities for the three months ended March 31, 2024 used cash of $2.7 million, driven primarily by $1.8 million in deferred consideration paid related to the 2022 acquisitions and $1.0 million for the payment of contingent consideration.

Our financing activities for the three months ended March 31, 2023 used cash of $8.0 million, consisting of $7.8 million to pay the 2022 earnout for PandoLogic and $0.9 million to pay taxes related to the net share settlement of equity awards, partially offset by $0.6 million in proceeds received from the exercise of stock options and purchases of shares under our ESPP.

As of March 31, 2024, our debt obligations are comprised of our Term Loan and 2026 Convertible Notes. As of March 31, 2024, we have $77.5 million principal amount outstanding under our Term Loan that matures in December 2027 and $91.2 million aggregate principal amount outstanding of our 2026 Convertible Senior Notes that mature in November 2026.

As of March 31, 2024, we have future cash requirements to pay $1.0 million in purchase consideration commitments related to the VocaliD acquisition that will be paid in 2024. We have no other present agreements or commitments with respect to any material acquisitions of businesses or technologies or any other material capital expenditures.

As of March 31, 2024, we have recorded $2.0 million of gross liability for uncertain tax positions, including interest and penalties. Based upon the information available and possible outcomes, we cannot reasonably estimate the amount and period in which the liability might be paid.

The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions about future events that affect amounts reported in our condensed consolidated financial statements and related notes, as well as the related disclosure of contingent assets and liabilities at the date of the financial statements. Management evaluates its accounting policies, estimates and judgments on an on-going basis. Management bases its estimates and judgments on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions and conditions.

Our critical accounting estimates reflecting management’s estimates and judgments are described in our Annual Report on Form 10-K for the year ended December 31, 2023. We have reviewed recently adopted accounting pronouncements and determined that the adoption of such pronouncements is not expected to have a material impact, if any, on our condensed consolidated financial statements. Accordingly, there have been no material changes to critical accounting policies and estimates as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023.

As a smaller reporting company, we are not required to provide the information required by Item 305 of Regulation S-K.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of March 31, 2024. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives of ensuring that information we are required to disclose in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to enable timely decisions regarding required disclosures, and is recorded, processed, summarized, and reported within the time periods specified in the rules and forms promulgated by the SEC. Our management recognizes that any disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and there is no assurance that our disclosure controls and procedures will operate effectively under all circumstances. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of March 31, 2024, our disclosure controls and procedures were not effective at the reasonable assurance level due to the following material weaknesses in internal control over financial reporting.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

During the preparation of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, management identified material weaknesses in internal control over financial reporting relating to:

Related to these findings, management concluded that during the year ended December 31, 2023, the Company did not maintain appropriately designed entity-level controls impacting the control environment or monitoring controls to prevent or detect material misstatements to the consolidated financial statements. Specifically, these deficiencies were attributed to (i) a lack of a sufficient number of qualified resources to perform control activities and (ii) insufficient risk assessment and monitoring activities as a result of untimely or ineffective identification of internal control risks to properly design, test, implement and assess effective internal controls over financial reporting.

In order to remediate the material weaknesses, management is taking remediation actions including: (i) engaging an outside firm to assist with the remediation actions in March 2024; (ii) developing a more robust plan and risk assessment around the proper design, testing and assessment of internal controls over financial reporting in April 2024; (iii) 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; (iv) developing and maintaining documentation of underlying ITGCs to promote knowledge transfer upon personnel and function changes; (v) implementing an IT management review and testing plan to monitor ITGCs with a specific focus on systems supporting our financial reporting processes and (vi) hiring and training staff on proper accounting for foreign exchange translation and transactions when consolidating foreign subsidiaries. Management has also hired additional staff to oversee the implementation and testing of these remediation actions. To further remediate the existing material weakness identified herein, the management team, including the Chief Executive Officer and Chief Financial Officer, have reaffirmed and re-emphasized the importance of

internal controls, control consciousness and a strong control environment. We are committed to maintaining a strong control environment and believe that these remediation efforts represent continued improvement in our control environment. We also expect to continue to review, optimize and enhance our financial reporting controls and procedures. A material weakness will not be considered remediated until the applicable remediated control operates for a sufficient period of time and management has concluded, through testing, that this enhanced control is operating effectively.

There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the quarter ended March 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Management recognizes that a control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud or error, if any, have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. We currently are not a party to any legal proceedings, the adverse outcome of which, in management’s opinion, individually or in the aggregate, would have a material adverse effect on our results of operations, financial position or cash flows. Regardless of the outcome, any litigation could have an adverse impact on us due to defense and settlement costs, diversion of management resources and other factors.

Our Annual Report on Form 10-K for the year ended December 31, 2023 contains a discussion of the material risks associated with our business. Other than as set forth below, there have been no material changes to the risks described in such Annual Report on Form 10-K.

The security or operation of our platform, networks, computer systems or data, or those of third parties upon which we rely, may be breached or otherwise disrupted, and any such breach or other disruption could have an adverse effect on our business and reputation.

In the ordinary course of business, we process proprietary, confidential, and sensitive data, including proprietary and confidential business data, trade secrets, intellectual property, sensitive third-party data, business plans, transactions, financial information, and biometric data (collectively, sensitive information). Certain data privacy and security obligations may require us to implement and maintain specific security measures or industry-standard or reasonable security measures to protect our information technology systems and sensitive information. In particular, the data processed and stored in our platform, networks, and computer systems by customers in the government market may contain highly sensitive data that is subject to protection under government regulations, and we are obligated to comply with stringent requirements related to the security of such data, such as FedRAMP and Criminal Justice Information Services (“CJIS”) security requirements.

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. Some actors now engage and are expected to continue to engage in cyber-attacks, including without limitation, nation-state actors for geopolitical reasons and in conjunction with military conflicts and defense activities. During times of war and other major conflicts, we, the third parties upon which we rely, and our customers may be vulnerable to a heightened risk of these attacks, including retaliatory cyber-attacks, that could materially disrupt our systems and operations, supply chain, and ability to produce, sell and distribute our services. For example, we have operations and third parties upon which we rely to support our business located in unstable regions and regions experiencing (or expected to experience) geopolitical or other conflicts, including in the Middle East, where businesses have experienced an increase in cyberattacks in relation to the Israel/Hamas conflict.

In addition, our network, computer system or platform may be subject to a variety of evolving threats, including but not limited to computer malware (including as a result of advanced persistent threat intrusions), viruses, worms and computer hacking, fraudulent use attempts, phishing and other social engineering attacks (including through deep fakes, which may be increasingly more difficult to identify as fake), denial-of-service attacks, credential stuffing attacks, credential harvesting, personnel misconduct or error, ransomware attacks, supply-chain attacks, adware, attacks enhanced or facilitated by AI, and other similar threats, all of which have become more prevalent in our industry. 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. Extortion payments may alleviate the negative impact of a ransomware attack, but we may be unwilling or unable to make such payments due to, for example, applicable laws or regulations prohibiting such payments. Our data and information systems may also fail for reasons other than malicious activity, including but not limited to software bugs, server malfunctions, software or hardware failures, loss of data or other information technology assets, telecommunications failures, earthquakes, fires, and floods.

Remote work has become more common and has increased risks to our platform, network, computer systems, and data, as more of our employees utilize network connections, computers and devices outside our premises or network, including working at home, while in transit and in public locations. 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. Furthermore, we may discover security issues that were not found during due diligence, and it may be difficult to integrate companies into our information technology environment and security program.

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. For instance, we were recently made aware of an article posted by a security researcher which identified a temporary vulnerability related to two Azure environments related to a limited number of government customers. This vulnerability was not present in our commercial environment, which operates on a different system. The vulnerability was remediated in March 2024, but we have notified our potentially affected customers and are currently investigating the matter.

While we have implemented security measures designed to protect against security incidents, there can be no assurance that these measures will be effective. We take steps designed to detect, mitigate and remediate vulnerabilities in our information systems (such as our hardware and/or software, including that of third parties upon which we rely). 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 not be detected until after a security incident has occurred. Further, we may experience delays in developing and deploying remedial measures and patches designed to address identified vulnerabilities. Even if we have issued or otherwise made patches or information for vulnerabilities in our software applications, products or services, our customers may be unwilling or unable to deploy such patches and use such information effectively and in a timely manner. These vulnerabilities could be exploited and result in a security incident.

Applicable data privacy and security obligations may require us to notify relevant stakeholders of security incidents. Such disclosures are costly, and the disclosure or the failure to comply with such requirements could lead to adverse consequences. An actual or perceived security breach of our platform, network or computer systems, or those of our technology service providers or third party vendors, could result in adverse consequences such as the loss of business, financial losses, reputational damage, negative publicity, government enforcement actions (for example, regulatory investigations, orders, fines, penalties, audits, and inspections), additional reporting requirements and/or oversight, litigation (including class claims), indemnity obligations, damages for contract breach, civil and criminal penalties (including for violation of applicable laws, regulations or contractual obligations), restrictions on processing sensitive data (including personal data), diversion of management attention, interruptions in our operations (including availability of data), significant costs, fees and other monetary payments for remediation, and other similar harms.

Our contracts may not contain limitations of liability, and even where they do, there can be no assurance that limitations of liability in our contracts are sufficient to protect us from liabilities, damages, or claims related to our data privacy and security obligations. We cannot be sure that our insurance coverage will be adequate or sufficient to protect us from or to mitigate liabilities arising out of our privacy and security practices, that such coverage will continue to be available on commercially reasonable terms or at all, or that such coverage will pay future claims.

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 experience security breaches or cyber-attacks or fail to comply with security requirements related to our secure government cloud environment, we may lose our ability to obtain or maintain a FedRAMP certification, which could result in the loss of business from customers in the government market. 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. However, software such as ours can contain errors, defects, security vulnerabilities or software bugs that are difficult to detect and correct, particularly when such vulnerabilities are first introduced or when new versions or enhancements of our product are released. Additionally, even if we are able to develop a patch or other fix to address such vulnerabilities, such fix may be difficult to push out to our customers or otherwise be delayed. Furthermore, our business depends upon the appropriate and successful implementation of our platform and services by our customers. If our customers fail to use our platform or services according to our specifications, our customers may suffer a security incident on their own systems or other adverse consequences. Even if such an incident is unrelated to our security practices, it could result in our incurring significant economic and operational costs in investigating, remediating, and implementing additional measures to further protect our customers from their own vulnerabilities, and could result in reputational harm. 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. Additionally, our sensitive information or sensitive information of our customers could be leaked, disclosed, or revealed as a result of or in connection with the use of generative AI technologies by our employees, personnel, or vendors.

During the three months ended March 31, 2024, we issued 206,957 shares of Common Stock to certain Warrant Holders upon the exercise of 349,657 warrants held by them. Each warrant was cashless exercised at a strike price of $2.5760. The shares of Common Stock issued upon exercise of these warrants were issued in reliance on an exemption from registration provided by Section 3(a)(9) of the Securities Act. Each of the Warrant Holders represented that they were acquiring the warrants and, upon any exercise thereof, will acquire shares of Common Stock issuable upon such exercise, for its own account and not with a view to distribution or resale in violation of the Securities Act or any applicable state securities law.

† The Company has omitted portions of the referenced exhibit pursuant to Item 601(a)(5) of Regulation S-K under the Securities Act. The Company agrees to furnish supplementally a copy of all omitted exhibits, schedules and annexes to the Securities and Exchange Commission upon request.

+ The certifications furnished as Exhibit 32.1 accompany this Quarterly Report on Form 10-Q pursuant to 18 U.S.C. Subsection 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and shall not be deemed “filed” by the Registrant for purposes of Section 18 of the Exchange Act and are not to be incorporated by reference into any of the Registrant's filings under the Securities Act, irrespective of any general incorporation language contained in any such filing.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, par value $0.001 per share	VERI	The NASDAQ Stock Market LLC


Cautionary Note Regarding Forward-Looking Statements		1
PART I.	FINANCIAL INFORMATION	2
Item 1.	Financial Statements (Unaudited)	2
	Condensed Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023	2
	Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three Months Ended March 31, 2024 and 2023	3
	Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2024 and 2023	4
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2024 and 2023	5
	Notes to the Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37
Item 4.	Controls and Procedures	37
PART II.	OTHER INFORMATION	39
Item 1.	Legal Proceedings	39
Item 1A.	Risk Factors	39
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40
Item 3.	Defaults Upon Senior Securities	40
Item 4.	Mine Safety Disclosures	41
Item 5.	Other Information	41
Item 6.	Exhibits	42
Signatures		43


	As of
	March 31, 2024			December 31, 2023
ASSETS
Cash and cash equivalents	$	90,733		$	79,439
Accounts receivable, net		45,749			69,266
Expenditures billable to clients		20,043			19,608
Prepaid expenses and other current assets		15,844			14,457
Total current assets		172,369			182,770
Property, equipment and improvements, net		9,165			8,656
Intangible assets, net		77,443			83,423
Goodwill		79,828			80,247
Long-term restricted cash		929			867
Other assets		19,907			19,851
Total assets	$	359,641		$	375,814
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable	$	36,588		$	32,756
Accrued media payments		84,848			93,896
Client advances		28,295			15,452
Deferred revenue		13,415			12,813
Senior Secured Term Loan, current portion		7,750			5,813
Contingent consideration, current		500			1,000
Other accrued liabilities		26,275			27,095
Total current liabilities		197,671			188,825
Convertible senior notes, non-current		89,717			89,572
Senior Secured Term Loan, non-current		44,407			45,012
Contingent consideration, non-current		450			633
Other non-current liabilities		12,531			13,625
Total liabilities		344,776			337,667
Commitments and contingencies (Note 9)
Stockholders' equity
Common stock, par value $0.001 per share; 75,000,000 shares authorized; 37,629,461 and 37,186,348 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively		38			38
Additional paid-in capital		469,712			468,015
Accumulated deficit		(455,094	)		(429,896	)
Accumulated other comprehensive income (loss)		209			(10	)
Total stockholders' equity		14,865			38,147
Total liabilities and stockholders' equity	$	359,641		$	375,814


	Three Months Ended March 31,
	2024			2023
Revenue	$	31,636		$	30,263
Operating expenses:
Cost of revenue		7,046			6,809
Sales and marketing		11,804			12,690
Research and development		9,215			11,527
General and administrative		19,420			17,397
Amortization		5,991			5,429
Total operating expenses		53,476			53,852
Loss from operations		(21,840	)		(23,589	)
Other income (expense), net		(4,403	)		355
Loss before provision for income taxes		(26,243	)		(23,234	)
(Benefit from) provision for income taxes		(1,045	)		(271	)
Net loss	$	(25,198	)	$	(22,963	)
Net loss per share:
Basic and diluted	$	(0.67	)	$	(0.63	)
Weighted average shares outstanding:
Basic and diluted		37,353,228			36,587,946
Comprehensive loss:
Net loss	$	(25,198	)	$	(22,963	)
Foreign currency translation (loss) gain, net of income taxes		219			(766	)
Total comprehensive loss	$	(24,979	)	$	(23,729	)


	Three Months Ended March 31,
	2024			2023
Cash flows from operating activities:
Net loss	$	(25,198	)	$	(22,963	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		7,502			5,907
Provision for credit losses		234			(72	)
Stock-based compensation expense		1,608			3,917
Change in fair value of contingent consideration		—			651
Change in deferred taxes		(1,336	)		(311	)
Amortization of debt issuance costs		1,323			215
Amortization of right-of-use assets		251			300
Imputed non-cash interest income		(107	)		(22	)
Changes in assets and liabilities:
Accounts receivable		23,283			2,002
Expenditures billable to clients		(435	)		9,304
Prepaid expenses and other assets		(1,280	)		631
Other assets		318			234
Accounts payable		3,832			1,277
Deferred revenue		602			—
Accrued media payments		(9,048	)		(19,657	)
Client advances		12,843			(15,630	)
Other accrued liabilities		1,297			2,211
Other liabilities		242			(1,779	)
Net cash provided by (used in) operating activities		15,931			(33,785	)
Cash flows from investing activities:
Capital expenditures		(1,901	)		(1,447	)
Acquisitions, net of cash acquired		—			(1,500	)
Net cash used in investing activities		(1,901	)		(2,947	)
Cash flows from financing activities:
Payment of contingent consideration		(1,000	)		(7,772	)
Taxes paid related to net share settlement of equity awards		—			(852	)
Proceeds from issuances of stock under employee stock plans, net		126			643
Settlement of deferred consideration for acquisitions		(1,800	)		—
Net cash used in financing activities		(2,674	)		(7,981	)
Net increase (decrease) in cash and cash equivalents and restricted cash		11,356			(44,713	)
Cash and cash equivalents and restricted cash, beginning of period		80,306			185,282
Cash and cash equivalents and restricted cash, end of period	$	91,662		$	140,569
Supplemental Disclosure of Cash Flow Information
Non-cash investing and financing activities:
Fair value of shares issued for acquisition of businesses and earn-out consideration		—			756
Stock-based compensation capitalized for software development		118			134
Lease liabilities arising from right-of-use assets		—			499


Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☒
		Emerging growth company	☐


	Three Months Ended March 31, 2024
												Accumulated
						Additional						Other
	Common Stock					Paid-in			Accumulated			Comprehensive
	Shares			Amount		Capital			Deficit			Income (Loss)			Total
Balance as of December 31, 2023		37,186,348		$	38	$	468,015		$	(429,896	)	$	(10	)	$	38,147
Common stock issued under employee stock plans		297,460			—		218			—			—			218
Common stock withheld for employee taxes and other		(61,304	)		—		(247	)		—			—			(247	)
Common stock issued in connection with warrant exercises		206,957			—		—			—			—			—
Stock-based compensation expense		—			—		1,726			—			—			1,726
Net loss		—			—		—			(25,198	)		—			(25,198	)
Other comprehensive gain		—			—		—			—			219			219
Balance as of March 31, 2024		37,629,461		$	38	$	469,712		$	(455,094	)	$	209		$	14,865


	Three Months Ended March 31, 2023
												Accumulated
						Additional						Other
	Common Stock					Paid-in			Accumulated			Comprehensive
	Shares			Amount		Capital			Deficit			Loss			Total
Balance as of December 31, 2022		36,321,222		$	36	$	451,162		$	(371,271	)	$	(76	)	$	79,851
Common stock issued under employee stock plans		466,906			1		642			—			—			643
Common stock withheld for employee taxes		(131,116	)		—		(852	)		—			—			(852	)
Common stock issued as part of contingent consideration		135,800			—		756			—			—			756
Stock-based compensation expense		—			—		4,051			—			—			4,051
Net loss		—			—		—			(22,963	)		—			(22,963	)
Other comprehensive loss		—			—		—			—			(766	)		(766	)
Balance as of March 31, 2023		36,792,812			37		455,759			(394,234	)		(842	)		60,720


Years ended December 31,
2024 (nine months)	$	2,185
2025		671
2026		206
Total future minimum lease payments, including short-term leases		3,062
Less: future minimum lease payments for short-term leases		(36	)
Less: imputed interest		(186	)
Present value of future minimum lease payments, excluding short-term leases	$	2,840
Less: current portion of operating lease liabilities		(2,239	)
Non-current portion of operating lease liabilities		601

Years ended December 31,	Sublease Income
2024 (nine months)		931
Total sublease income	$	931


(in thousands)
	Three Months Ended March 31,
	2024									2023
	Core Operations(1)			Corporate(2)			Total			Core Operations(1)			Corporate(2)			Total
Net loss	$	(10,992	)	$	(14,206	)		(25,198	)	$	(12,570	)	$	(10,393	)	$	(22,963	)
(Benefit from) provision for income taxes		(1,045	)		—			(1,045	)		(504	)		233			(271	)
Depreciation and amortization		7,409			93			7,502			5,754			153			5,907
Stock-based compensation expense		1,040			568			1,608			2,335			1,582			3,917
Change in fair value of contingent consideration		—			—			—			—			651			651
Acquisition compensation expense		—			317			317			—			—			—
Interest expense, net		—			3,991			3,991			9			796			805
Foreign currency impact		—			413			413			(1,146	)		(15	)		(1,161	)
Acquisition and due diligence costs		140			801			941			—			805			805
Contribution of business held for sale (3)		3			—			3			917			—			917
Variable consultant performance bonus expense (4)		—			—			—			394			—			394
Severance and executive transition costs		2,267			1,583			3,850			1,027			417			1,444
Non-GAAP Net Income (Loss)	$	(1,178	)	$	(6,440	)	$	(7,618	)	$	(3,784	)	$	(5,771	)	$	(9,555	)


(dollars in thousands)	Three Months Ended March 31,
	2024			2023
Revenue	$	31,636		$	30,263
Cost of revenue		7,046			6,809
Non-GAAP gross profit		24,590			23,454
Non-GAAP gross margin		77.7	%		77.5	%


	Quarter Ended
		Sept 30,		Dec 31,		Mar 31,		Jun 30,		Sept 30,		Dec 31,		Mar 31,
		2022 (1)		2022 (1)		2023 (1)		2023 (1)		2023		2023		2024
Pro Forma Software Revenue (in 000's) (2)		$	28,603	$	35,612	$	22,423	$	20,859	$	20,361	$	19,824	$	15,220
Total Software Products & Services Customers (3)			3,787		3,824		3,773		3,705		3,536		3,459		3,384
Annual Recurring Revenue (SaaS) (in 000's) (4)		$	43,925	$	46,248	$	45,453	$	47,720	$	47,756	$	49,159	$	48,602
Annual Recurring Revenue (Consumption) (in 000's) (5)		$	85,091	$	71,754	$	67,242	$	60,229	$	41,543	$	30,967	$	23,510
Total New Bookings (in 000's) (6)		$	23,793	$	26,342	$	22,794	$	8,388	$	15,501	$	17,457	$	12,964
Gross Revenue Retention (7)		>90%		>90%		>90%		>90%		>90%		>90%		>90%


	Trailing Twelve Months Ended
		Sept 30,		Dec 31,		Mar 31,		Jun 30,			Sept 30,			Dec 31,			Mar 31,
		2022		2022		2023		2023			2023			2023			2024
Software Products & Services Revenue (in 000’s)		$	97,581	$	84,578	$	80,538	$	76,252		$	75,801		$	68,401		$	69,494
Broadbean Revenue (in 000’s) (1)			30,136		29,047		30,999		32,399			33,499			33,931			34,292
Broadbean Revenue included in Software Products & Services Revenue (in 000’s)			—		—		—		(1,716	)		(10,455	)		(19,117	)		(27,634	)
Pro Forma Software Revenue (in 000’s)		$	127,717	$	113,625	$	111,537	$	106,935		$	98,845		$	83,215		$	76,152
Managed Services Revenue (in 000’s)			63,406		65,150		65,046		63,064			61,452			59,159			59,439
Total Pro Forma Revenue (in 000’s)		$	191,123	$	178,775	$	176,583	$	169,999		$	160,297		$	142,374		$	135,591

Pro Forma Total Number of Customers			3,787		3,824		3,773		3,705			3,536			3,460			3,384
Pro Forma Annual Recurring Revenue (in 000’s) (2)		$	129,016	$	118,002	$	112,695	$	107,949		$	98,549		$	82,127		$	72,112


Exhibit No.		Description of Exhibit

2.1†		Securities and Asset Purchase Agreement, dated as of May 27, 2023, by and among Veritone, Inc., Veritone UK Ltd., CareerBuilder, LLC, CareerBuilder International Holding B.V. and CareerBuilder France Holding, LLC (incorporated by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed on May 31, 2023).

3.1		Third Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on May 23, 2017).

3.2		Amended and Restated Bylaws of the Registrant (incorporated by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K filed on May 23, 2017).

10.1*†		Amended and Restated Independent Contractor Services Agreement, dated January 23, 2024, between Veritone, Inc. and Steel Holdings, LLC (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on January 23, 2024).

31.1		Certification pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act.

31.2		Certification pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act.

32.1+		Certifications pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Exchange Act and 18 U.S.C. Section 1350.

101.INS		Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH		Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents.

104		The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, has been formatted in Inline XBRL.


	Veritone, Inc.

May 10, 2024	By:	/s/ Michael L. Zemetra
		Michael L. Zemetra
		Executive Vice President, Chief Financial Officer and Treasurer
		(Principal Financial and Accounting Officer)