Veritone Inc., the high-flying Costa Mesa company trying to make a name for itself in artificial intelligence, reported third-quarter results that brought it back somewhat closer to Earth.
In its second earnings release since its initial public offering, the company reported revenue of $3.7 million, 60% higher than $2.3 million a year ago, but missing the $4.5 million estimate of four analysts surveyed by Yahoo Finance. Its net revenue was also lower than the $4 million reported in the second quarter. The company posted a net loss of $1.31 in the recent quarter, while analysts projected a 59-cent loss.
“They are a long way from making money,” said Mark Copeland, the Newport Beach-based senior partner at Signature Estate & Investments Advisors LLC, which has $7 billion assets under management.
“We’re looking for companies that are making money.”
Veritone shares declined 21% to $28.90 in the trading session after the release. The company, which went public at $15 a share in May, had reached almost $75 in September. By the close of the trading session on Nov. 9, the shares traded at $25.60.
AI Bound
Veritone, which has received favorable coverage from publications like Barron’s, has soared on expectations that its artificial intelligence technology will create a new industry in media ad analysis.
However, the AI unit, also known as software-as-a-service, reported third-quarter sales had risen to $400,000. Roth Capital Partners LLC Senior Technology Analyst Brian Alger had forecast sales in the segment would balloon to $1.1 million in the third quarter and $2.6 million in the fourth quarter. Sameet Sinha, an analyst for B. Riley FBR, had forecast $700,000 in third-quarter AI sales.
“We are downgrading from Buy to Sell as traction in the focus SaaS business (AI) is not meaningful,” Sinha wrote in a report to investors. He lowered his target price from $18 to $15.
The company’s media agency, which provides most of the sales, reported $3.3 million in revenue, also below Sinha’s estimate of $4.5 million.
Veritone Chief Executive Chad Steelberg said the third quarter provided momentum with year-over-year growth in its key metrics.
“We are very encouraged by the prospects of our business and we expect to continue to deliver on the metrics that will drive long-term business value for our company and our stockholders,” he said in a statement.
The company said the third quarter brought $2.6 million in total contract value of new bookings, compared with $151,000 in the second quarter. The company hired 17 employees in the third quarter for a total of 176.
Stock Options
The company said the quarter’s loss of $19.4 million included an $8.9 million expense for the vesting of “performance-based” stock options issued to Steelberg. The performance benchmark kicked in because the company’s market capitalization topped $400 million for five straight days in September, Steelberg said on a conference call.
He said the stock options should cost about $2.7 million in the fourth quarter.
The company didn’t make a fourth-quarter revenue forecast.
Sinha predicted $4.4 million.
Copeland said he would like to see an artificial intelligence leader emerge from Orange County. Veritone is in the right business, he said, but still has much to prove to investors.
“Smart ad AI is exactly where investors are looking,” Copeland said. “You’d like to see more results than just buzz words before you invest money. We try not to be too early.”
