Exclusives

Veritone’s acquisitions of Wazee Digital and Performance Bridge Media (PBM) will help the company as it continues to expand its presence in new vertical markets beyond the media and entertainment (M&E) sector, according to Chad Steelberg, Veritone CEO and chairman.

“Adding the Performance Bridge and Wazee team members, customers and technology are important steps in Veritone’s strategy,” he said Aug. 14 on an earnings call for Veritone’s second quarter (ended June 30).

Asked by an analyst during the Q&A how Veritone may be able to leverage Wazee Digital’s asset management platform specifically beyond M&E, Steelberg said: “Their core product, we believe, has extensibility into other verticals, in addition to government alone. We’re not going to talk more about that [now]. But it is not a single point solution that’s hardwired to the media and entertainment industry and we see it as a broader opportunity for the company.”

The acquisitions will impact Veritone’s operating expenses in the current quarter, according to CFO Pete Collins. “Overall, operating expenses are in pretty good shape,” he said during the Q&A, adding: “We do have an increase in our stock-based compensation this quarter. That’s in the neighborhood of $1.9 million to $2.2 million. But beyond that… there aren’t any other significant items, apart from the M&A work, where we will have additional headcount for the quarter and then we’ll also have obviously transaction costs associated with those acquisitions.”

The company will provide more details on the acquisitions during an investor call Aug. 20 at 4:30 pm ET, Steelberg said.

Veritone said Aug. 13 that it signed an agreement to buy Wazee Digital, a provider of cloud-native video management and licensing services that enable rights holders to monetize and enrich their content, for $15 million. Separately, Veritone said its Veritone One subsidiary signed an agreement to purchase Binghamton, N.Y.-based podcast agency PBM for $6 million, plus a contingent earn-out of up to $5 million.

That acquisition will expand Veritone’s market share to more than 25% of all U.S.-based podcast ad revenue, it said.

“Q2 was a solid quarter with several highlights, triple digit year-on-year growth” in Software-as-a-Service (SaaS) revenue, “total customers, total accounts, third-party cognitive engines added, and hours of video and audio files processed within” Veritone’s aiWARE artificial intelligence (AI) operating system, Steelberg said on the call.

“The AI industry, as we know, is still in its early days,” he also said, adding: “The largest and perhaps the earliest vertical to deploy AI for business value is the media and entertainment industry. Their business model, of course, is based on the creation and monetization of unstructured data. This space is where we have been the longest and, as such, it has shown the greatest and most consistent net revenue growth.” Revenue in that vertical grew more than 250% for Veritone in Q2 on a trailing 12-month basis, he said.

The M&E sector is “getting more sophisticated with how they use AI,” he said, adding that, at first, companies in that space “took advantage of aiWARE’s AI-driven processing speeds and ability to quickly find and validate ads that ran for their advertising customers.” Today, M&E customers are also using the information “to train on-air talent and select talent and content for enhanced ratings and ad revenues,” he said.

Each quarter, Veritone is “adding more cognitive engines and our operating system is literally getting smarter, enabling us to provide our customers with richer and more accurate analysis than any single point solution provider,” he said. The company has also “now taken these capabilities and built go-to-market models addressing the legal, compliance and government markets,” he noted.

While the M&E space has “crossed the chasm in AI adoption, these other vertical are plotting their arrival and are in the education phase,” he told analysts, adding: “To further our competitive advantage, we are building our arsenal of readiness for them. Specifically, we’re expanding our tech capabilities geared to their markets, sales channels and ecosystems of tech partners. In the first quarter, we experienced a lift-off in the legal market, with a meaningful revenue contribution.”

As Veritone pointed out on its Q1 earnings call, “the bulk of our legal revenue came from a single project, which required transcription of over 1 million phone calls,” he said. Veritone is “continuing to execute our strategy to generate more sales in this market [and], this quarter, we brought to the legal market our capability of translation in addition to transcription, which is a meaningful expansion of the services we offer to this market,” he said, adding: “As with the media and entertainment space, growth will come, but will not always be consistent.”

The government vertical “remains in the early days as well” for Veritone, he said, adding: “We have several proof-of-concepts underway, one of which has resulted in investigators matching multiple facial images recorded at crime scenes to a known individual in a library of over 40,000 individuals. While this is a great example of our early efforts in the government vertical, the key revenue contributing verticals for us this year will continue to be media and entertainment and legal and compliance and we will expect government to ramp up its net revenues in 2019.”

There were a “record 86 customers” on Veritone’s AI platform business at the end of Q2, up from 70 at the end of Q1 and 38 at the end of Q2 last year, Collins said. Veritone, meanwhile, had 625 accounts on the platform at the end of Q2, up from 591 at the end of Q1 and 169 at the end of Q2 last year, he said.

The number of third-party active cognitive engines on the platform grew to 214 from 184 at the end of Q1 and 69 at the end of Q2 last year, he told analysts. Veritone processed 2.7 million total hours of video and audio files on the platform in Q2, compared with 0.4 million hours in Q2 last year, he also said, adding the “total hours processed this quarter nearly matched the amount we processed over all of 2017.”

Veritone expects to end the third quarter with nine new customers, about 30 new accounts and about 20 new active third-party cognitive engines on the platform, having processed about 2.7 million hours of video and audio files, he projected.

Veritone’s Q2 revenue grew 2% to $4.2 million in Q2, while SaaS licensing revenue from the aiWARE operating system soared 147% to $900,000, the company said.