Veritone, Inc.VERI
Veritone, Inc. Fair Value Disclosure
Fair Value Measurements
The Company applies the provisions of FASB ASC Topic 820, Fair Value Measurement (“ASC 820”), for its financial and non-financial assets and liabilities. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 establishes a fair value hierarchy, which prioritizes the inputs used in measuring fair value into three broad levels as follows:
•Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity can access at the measurement date.
•Level 2 inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability, and inputs that are derived principally from or corroborated by observable market data by correlation or other means.
•Level 3 inputs are unobservable inputs for the asset or liability.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents. Cash and cash equivalents are comprised primarily of domestic and foreign bank accounts and money market funds. These cash and cash equivalents are valued based on Level 1 inputs which consist of quoted prices in active markets. To reduce its credit risk, the Company monitors the credit standing of the financial institutions that hold the Company’s cash and cash equivalents. As of December 31, 2025 and 2024, the Company’s cash and cash equivalents approximated their estimated fair value. As such, there are no unrealized gains or losses related to the Company’s cash and cash equivalents.
Purchase Consideration
On March 1, 2022, the Company completed its acquisition of 100% of an influencer-based management company (the “March 2022 Acquisition”). As part of the consideration, the seller may receive contingent consideration (the “March 2022 Acquisition Contingent Compensation”) of up to $4,500 in cash. In July 2023, the Company entered into an amendment the March 2022 Acquisition securities purchase agreement (the “March 2022 Acquisition Contingent Compensation Amendment”) which provides that the March 2022 Acquisition Contingent Compensation was reduced to $3,500 and payment of the March 2022 Acquisition Contingent Compensation 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 Contingent Compensation Amendment, the Company determined that the March 2022 Acquisition Contingent Compensation should no longer be categorized as Level 3 within the fair value hierarchy at the time of the amendment and was moved to Level 1 within the fair value hierarchy.
Veritone One Earnout Receivable
The Company made an accounting policy election to record the earnout receivable related to the Veritone One divestiture at fair value at inception, and it is categorized as Level 3 within the fair value hierarchy. The earnout receivable is recorded within other assets in the Company’s consolidated balance sheets as of December 31, 2025 and 2024. The earnout receivable for the Veritone One divestiture has been recorded at its fair value using a Monte Carlo simulation pricing model due to the variability of estimating future revenues associated with the Company’s earnout. These models incorporate contractual terms and assumptions regarding financial forecasts for Veritone One, discount rates, and volatility of forecasted revenue. The value of the Veritone One earnout receivable would decrease if a lower discount rate was used and would increase if a higher discount rate was used. Similarly, a higher revenue volatility assumption would increase the value of the Veritone One earnout receivable, and a lower revenue volatility assumption would decrease the value of the Veritone One earnout receivable. 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.
The following table sets forth the significant assumptions utilized to determine the fair value of the earnout receivable related to the sale of Veritone One as of December 31, 2025 and 2024:
| December 31, 2025 | December 31, 2024 | |||||||||||||
| Internal rate of return | — | % | 23.0 | % | ||||||||||
| Risk-free rate | — | % | 4.9 | % | ||||||||||
| Revenue volatility | — | % | 10.0 | % | ||||||||||
The following table presents a summary of the change in the fair value of the earnout receivable, which was primarily driven by Veritone One not meeting the revenue targets associated with the earnout in order to collect the receivable. The earnout receivable is included in Other assets within the Company's consolidated balance sheets as of December 31, 2024:
| Veritone One Earnout Receivable | ||||||||
| Fair value as of December 31, 2024 | $ | 7,667 | ||||||
| Change in fair value included in Other expense (income), net | (7,667) | |||||||
| Fair value as of December 31, 2025 | $ | — | ||||||
Stock Warrants
On the Closing Date of the Term Loan, the Company issued Term Loan Warrants to the Lenders to purchase up to 3,008,540 shares of the Company’s common stock at an exercise price of $2.576 per share. During the year ended December 31, 2024, 499,857 of these warrants were net settled in exchange for 298,110 shares of the Company’s common stock. No warrants were net settled during the year ended December 31, 2025. As of December 31, 2025, the Lenders held warrants to purchase 2,508,683 shares of Common Stock.
In addition, the Company has 145,945 common stock warrants with an exercise price of $13.61 which expire with various dates in 2027 which were issued in 2017.
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 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 consolidated balance sheets within other assets as of December 31, 2025 and 2024 and is categorized as Level 3 within the fair value hierarchy.
In June 2023, the Company acquired a strategic investment in GridBeyond that did not have a readily determinable fair value. This investment was carried at a cost equal to its initial estimated fair value of $2,021 on the Company’s consolidated balance sheets within other assets as of June 30, 2023, with that initial estimated fair value based on third party valuation at the time of the transaction and was categorized as Level 3 within the fair value hierarchy. In April 2024, the Company sold its investment in GridBeyond for $1,800 in cash, resulting in a loss on sale of $172 and a foreign exchange loss of $49, recorded in other expense (income), net during the year ended December 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 years ended December 31, 2025 and 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 years ended December 31, 2025 and 2024.
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.