Last evening, Veritone (VERI) priced its offering at the expected mid-point of $15 per share after doubling the size of the offering to 2.5 million shares from 1.25 million. After the adjustment, the company is expected to raise $37.50 million in proceeds.
Based in Newport Beach, CA, Veritone is a technology company, whose artificial intelligence platform analyzes unstructured audio and video in conjunction with structured data to extract insights from vast amounts of information.
Veritone's operating system relies on artificial intelligence processes that mimic cognitive functions like perception, reasoning, prediction, and problem solving. Data is extracted from unstructured audio and video through methods that include transcription, face detection, face recognition, object recognition, sentiment analysis, language translation, audio/video fingerprinting, geolocation, optical character recognition, metadata extraction, and media format transcoding.
These approaches allow the company to transform unstructured data into structured data. Results are stored in a searchable archive with an online index of audio, video, and structured data. This allows users to analyze data in near real-time.
Access to the company's database is licensed to customers through a Software-as-a-Service model. The company's platform is scalable and based on open architecture, enabling swift addition of new cognitive engines.
Citing Gartner figures, the company points out that 80.0% of the world's data is unstructured and cannot be easily searched or accessed. Unstructured data grows at an exponential pace and 90% of the world's data has been created within the past two years. The total amount of digital data created worldwide is expected to double every two years, according to International Data Corporation.
International Data Corporation expects that global revenue from the market for cognitive systems and artificial intelligence will grow to $47 billion in 2020 from $8 billion in 2016. Veritone believes to have an inside track to benefit from growth in this area.
The company's success will depend on the quality of its algorithms and its deep learning engine, which is designed to discern repeating patterns in massive sets of data without specific instructions of what to look for. Veritone's artificial intelligence network links more than 45 cognitive engines from vendors like Google, IBM, Microsoft, Nuance, and Hewlett-Packard. Veritone also has some cognitive engines that were developed in-house.
The company does not favor any particular cloud storage provider and believes that the flexibility to deploy its system to different platforms serves as a competitive advantage.
The company intends to use the proceeds from this offering for working capital or other general corporate purposes that could include funding of the company's growth strategies. These strategies are aimed at expanding the company's platform and technologies and to broaden its sales and marketing capabilities for the SaaS licensing business.
A portion of net proceeds may be used to acquire or invest in complementary businesses, services, technologies, or IP rights.
The company may invest the net proceeds in investment grade, short-term interest-bearing obligations.
In 2016, Veritone's revenue declined 39.2% year-over-year to $7.33 million. The company saw its general and administrative expenses nearly double in 2016 to $14.94 million from $7.99 million in 2015. This resulted in a loss of $26.98 million in 2016 after a loss of $6.21 million in 2015. On a per share basis, the company recorded a loss of $14.59 per share after a loss of $6.73 per share one year ago.
Veritone used $26.76 million for operating activities in 2016 after generating $2.40 million from operating activities in 2015. Gross margin declined to 82.3% in 2016 from 86.6% in 2015.
The company has never paid a cash dividend on its shares and has no current plans to change its dividend policy.