Artificial selection

Veritone: well positioned in the artificial intelligence market (NASDAQ: VERI)

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Investment thesis

Veritone, Inc. (NASDAQ:VERI) is a buy because it has an EV/Gross Earnings ratio of 5.22 with a solid, multi-purpose product and a strong customer/partner network to take advantage of a huge, sustainable, and high-growth market. Additionally, Veritone is approaching positive profit levels.


1. Overview of Veritone and its industry

2. Stock market performance

3. Competitive Analysis

4. Growth

5. Margins

6. Risks

7. Evaluation

8. Conclusion

Introducing Veritone

Veritone offers artificial intelligence (AI) computing solutions. He creates and maintains the aiWARE platform, an AI operating system that includes transcription, language translation, face detection and recognition, object detection and recognition.

The company also relies on aiWARE to provide media advertising agency services, including media planning and strategy, media buying and placement, campaign messaging, clearance verification and assignment. , and personalized analytics directly to advertisers.

Its aiWARE platform is offered primarily through a software-as-a-service (“SaaS”) delivery model and can be deployed in a number of environments and configurations.


According to Gartner, more than 80% of new data generated in the world today is unstructured, and this number is growing at a rate of 30-60% each year (2020 Strategic Roadmap for Storage, July 1, 2020). This poses substantial challenges for businesses and governments around the world, including how to develop systematic ways to deal with the growing volume of unstructured data. AI is a very effective solution to these complex challenges, whether

  1. a local police department trying to quickly solve crimes through the analysis of video evidence,
  2. a media company searching years of TV archives for specific images and video content,
  3. or the US military trying to analyze massive volumes of satellite and other aerial imagery.

Due to these factors, the AI-as-a-service market is expected to reach USD 43.29 billion at a CAGR of 25.8% by 2030 according to Future of Market Research.

Veritone addresses this market with aiWARE. AiWARE orchestrates AI models to reveal insights from large amounts of structured and unstructured data. aiWARE offers features that mimic human cognitive functions such as perception, prediction, problem solving, and optimization, allowing users to quickly, efficiently, and cost-effectively transform unstructured data into structured data, and analyze and optimize data to drive business processes and information.

Recent customer acquisitions and major wins are quite impressive, indicating that Veritone and its products are respected in the industry.

Major recent Veritone business successes

Key recent business successes (Investor Presentation)

Veritone says its AI operating system is an open ecosystem made up of a large number of proprietary and third-party AI models that customers can access from a single integrated platform. The advantage of this wide range of uses is its potential use in many industries and therefore the ability to quickly profit from a growing trend. Veritone says the platform’s potential large-scale use isn’t very visible to other industry players.


Veritone is part of the AI-based solutions market. I selected several companies that have exposure to this market to create an industry proxy. Throughout this article, I will use this group to compare Veritone statistics.

Selection of companies exposed to the AI-based solutions market:

Company Name


Market capitalization

Palantir Technologies Inc.


23.12B, Inc.



Fundamental analysis

I have divided fundamental analysis into two parts, growth (revenue) analysis and margin analysis.

Recent growth

Veritone’s growth performance in recent years:


Revenue Growth (Quarterly YoY)

Revenue Growth (TTM YoY)

Revenue growth rate (3 years)












Source: Seeking Alpha, income statement and results

The growth in turnover is explained both by organic growth but also by the acquisition of PandoLogic. According to the 2020 annual report, pro forma (organic) growth was over 40% in 2020 compared to 2019, while the last quarter saw a 50% increase in organic revenue growth compared to the quarter of previous year, according to the most recent earnings call.

PandoLogic uses artificial intelligence (AI) to help organizations hire at scale for mass market and hard-to-find employees faster and more efficiently.

Future growth

I expect Veritone’s growth rate to be high in the coming years. As AI can be used in almost any industry, Veritone is well positioned to take advantage of the market opportunity through the applicability of its software to my use cases. Additionally, according to its latest earnings call, Veritone continues to invest heavily in new engineers, operational support and sales to support its growth.

Growth estimates by analysts in percentage:


2022 turnover

2023 turnover

Results 2022

Results 2023















Source: Seeking Alpha analyst estimates

Analysts expect a very high rate for 2022, which could be caused by the expectation of a new acquisition. The management itself indicates an expected organic growth rate of 40% in 2022, which is equivalent to the organic growth rate of 2020 compared to 2019. I think around 30-40% is a good expected growth rate. Analysts are expecting a growth rate of 24.2% in 2023, which I think is somewhat pessimistic for the reasons mentioned earlier. I estimate it at more than 30% at least.


I calculated several key margins for Veritone and its industry. The first number in the cells of the following table refers to Veritone, while the number in parentheses refers to the industry median.

Accounting item as % of revenue: Veritone (mid segment):

Accounting item

last 4 quarters





Gross profit

80.8 (76.5)

80.8 (76.8)

72.9 (71.5)

65.2 (67.1)

76.0 (72.2)

Exploitation charges

139.1 (125.0)

139.1 (106.6)

155.5 (148.0)

194.2 (125.6)

305.2 (176.9)

Normalized EBITDA

-50.5 (-49.3)

-50.5 (-30.5)

-71.2 (-75.1)

-117.1 (-56.5)

-216.2 (-101.0)

Normalized income

-61.2 (-50.8)

-61.2 (-32.1)

-82.7 (-75.6)

-125.1 (-57.2)

-226.4 (-103.3)

Veritone has managed to grow its gross margin impressively over the years through the introduction of new products with higher gross margin, including the addition of PandoLogic. Due to the fact that the industry is very young and the competition is high, all companies seem to invest significantly in its operational departments, which leads to huge losses.

The PandoLogic transaction dented the profitability margin with non-cash one-time expenses, change in fair value contingent consideration and non-cash stock-based compensation expenses, which amounted to nearly $80 million USD. However, Veritone’s profitability is getting better and better. Management expects next quarter to achieve positive non-GAAP net profit margin above 10%

Risk analysis

Before I get into stock valuation, I’ll touch on the risks of owning Veritone.

Main risk measures:


52W Beta, daily

Correl Market

Debt Equity %





Industry median




Source: Yahoo Finance Quotes and Seeking Alpha

Veritone has a beta of 2.4, which shows that it is very sensitive to market movements. The market correlation is quite low, indicating good additional diversification for a portfolio.

The huge leverage ratio of 242.1% is the result of a $200 million convertible debt financing at the end of 2020. As a result, Veritone has over $250 million of cash in its account. banking. Thus, it might not pose as much of a risk on its own. Something investors should keep in mind is that management expects its fully diluted share count to be around 46 million shares (now 35 million), largely due to the as-if-converted accounting associated with our convertible debt offering.

Other risks are related to the industry; The market for AI-based software applications is relatively new and the assessment of market size and scope is subject to a number of risks and uncertainties.


Veritone’s price has halved since its convertible debt offering in November 2021. While such an offering obviously dilutes the stock, the company now has plenty of cash needed to invest in future growth and is much cheaper, so I don’t see it as a negative. The stock barely recovered after this situation.

I calculated several key current valuation metrics.

Main evaluation measures:


Business Value/Revenue

Enterprise value/EBITDA

Enterprise value/gross profit

PS before

EP before










5:35 p.m.








With the price going down, Veritone is now cheaper than its peers. It also has the lowest PE ratio for next year, indicating that analysts are expecting strong earnings. The reduced price could be caused by the market’s lower expectations for revenue growth in 2023. It had a higher (organic) growth rate in 2020 in a few quarters and I expected a rate of high growth continues, so I disagree with the analysts. A general problem in the industry could be the large loss margin. As it is a very new and young industry, I believe there is no other way but to invest a lot. I’m not too worried about this near-term loss, as Veritone should achieve a decent non-GAAP net margin in the next quarter.


Veritone has an EV to gross profit ratio of 5.22 and has a strong, multi-use product and strong customer/partner network to capitalize on a huge, sustainable and high-growth market. Moreover, as profitability seems to be approaching, I believe that the company could achieve very good margins in the future and that its business model is robust. For these reasons, I believe that at current valuation levels, Veritone is a buy.