Q4 2023 VerifyMe Inc Earnings Call

Operator: Good day and welcome to the VerifyMe year-end 2023 Financial Results Conference, and today all participants will be in a listen-only mode. Should you need assistance during today's call, please signal for a conference specialist by pressing the star key followed by After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on your telephone keypad.

Good day and welcome to the verify my year end 2023 Financial result conference call today, all participants will be in a listen only mode should you need assistance joined today's call. Please signal for a contract specialists by pressing the star key followed by zero.

After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on your telephone keypad.

Operator: If you would like to withdraw your question, please press star, then two. Please note that today's event is being recorded. I would now like to turn the conference over to Nancy Meyers, CFO of VerifyMe. Thank you.

If you would like to withdraw your question. Please press Star then two.

Please note that today's event is being recorded I would now like to turn the conference over to Nancy Meyers CFO of their fund me. Please go ahead.

Nancy L. Meyers: Good morning, everyone, and thank you for joining us today for our earnings call presentation. On the call today, I'm joined by Adam Stedham, CEO, and President, who will give an operations and strategic update. Following our management presentation, we will have a Q&A session. I would like to bring your attention to the note on forward-looking statements on slide 16. Today's presentation and the answers to questions include forward-looking statements. It should be understood that actual results could differ materially from those projected due to a number of factors, including those described under the forward-looking statements caption and in the risk factors of the company's annual report on Form 10-K and quarterly reports on Form 10-Q. I will now turn the call over to Adam Stedham for some opening remarks. Thank you, Nancy, and welcome everyone.

Nancy L. Meyers: Thank you good morning, everyone and thank you for joining us today for our earnings call presentation.

Nancy L. Meyers: On the call today, I'm joined by Adam <unk>, CEO, and President, who will give an operational and strategic update.

Speaker Change: Following our management presentation, we will have a Q&A session.

Nancy L. Meyers: I would like to bring your attention to the note on forward looking statements on slide three today.

Nancy L. Meyers: Todays presentation and answers to questions include forward looking statements. It should be understood that actual results could differ materially from those projected due to a number of factors, including those described under the forward looking statements caption and on the risk factors of the company's annual report on form 10.

Nancy L. Meyers: K and quarterly reports on Form 10-Q, I will now turn the call over to Adam set them first in the opening remarks.

Adam: Thank you Nancy and welcome everyone.

Adam H. Stedham: We recently had an extensive strategy call, so I anticipate this particular earnings call will be a little shorter than typical. During that strategy call, we stated that we expected to finish 2023 with more than $25 million in revenue and better than break-even adjusted EBITDA. We finished 2023 with $25.3 million in revenue and $0.4 million in adjusted EBITDA, which was supported by very healthy profits in Q4. And Nancy will discuss those more.

Adam: We recently had an extensive strategy call. So I anticipate this particular earnings call will be a little shorter than typical during that strategy call. We stated that we expected to finish 2023 with more than $25 million of revenue and better than breakeven adjusted EBITDA.

Adam: We finished 20 twenty-three with $25 3 million in revenue and point 4 million and adjusted EBITDA, which was supported by very healthy profits in Q4, and Nancy will discuss those more.

Adam H. Stedham: Now, during the strategy call, we also indicated we anticipate double-digit revenue growth in 2024. I reaffirmed the expectation for double-digit revenue growth in 2024. Now, I do anticipate our H2 growth rate to exceed our H1 growth rate. The company will have positive cash flow from operations in 2023. As for Q4, our ending total cash was $3.1 million. Our current maturities of long-term debt were $0.5 million, and our total debt was

Adam: And during the strategy call. We also indicated we anticipate double digit revenue growth in 2024, I reaffirmed the expectations for double digit revenue growth in 2024, now I do anticipate our H two growth rate to exceed our H one growth rate.

Adam: The company had positive cash flow from operations in 2023 as for Q4, our ending total cash was $3 1 million.

Adam: Our current maturities of long term debt was <unk> 5 million and our total debt was $2 5 million. So as a result, we had cash net of debt a point 6 million as compared to a negative point 1 million at the end of September 2023.

Adam H. Stedham: So as a result, we had cash net of debt of $0.6 million as compared to a negative $0.1 million at the end of September 2023. But keep in mind, this net cash position includes proceeds from convertible notes of $1.1 million, and the company anticipates the majority of these notes will be converted as opposed to repaid with cash at maturity. So in summary, as a company, we're generating cash, and we anticipate we will continue to generate cash throughout 2024. So at this point, I'd like to discuss our capital strategy a little bit. In Q4 of 2023, the company announced a share buyback program. Since putting that plan in place and entering a trading blackout, the share price has primarily traded above the short-term buyback price that we established.

Keep in mind. This net cash position includes proceeds from convertible notes of $1 1 million and the company anticipate the majority of these notes will be converted as opposed to repaid with cash at maturity. So.

Adam: In summary, as a company, we're generating cash and we anticipate we will continue to generate cash throughout 2024.

Speaker Change: So at this point I'd like to discuss our capital strategy a little bit.

Speaker Change: In Q4 of 2023, the company announced a share buyback program.

Speaker Change: Putting that plan in place and entering the trading blackout the share price has primarily traded above the short term buyback price that we established we continue to have our announced buyback program in place and we will continue to evaluate our strategy around repurchasing shares.

Adam H. Stedham: We continue to have our announced buyback program in place, and we'll continue to evaluate our strategy around repurchasing shares. Throughout 2024, we'll monitor all available options to utilize our capital to maximize shareholder value. So at this point, let's shift the conversation to our two operating centers.

Speaker Change: Throughout 'twenty 'twenty four will monitor all available options to utilize our capital to maximize shareholder value.

Speaker Change: Throughout 'twenty 'twenty four will monitor all available options to utilize our capital to maximize shareholder value.

Speaker Change: So at this point, let's shift the conversation to our two operating segments.

Adam H. Stedham: During 2023, we primarily focused on creating the foundation for the company. We focused on operational efficiency and our go-to-market strategy for our parry ship business and precision logistics. We completed the TrustCodes acquisition for our authentication segment, and we vertically integrated the TrustCodes technology stack with all of our existing customers.

Speaker Change: During 2023 we primarily focused on creating the foundation for the company, we focused on operational efficiency and our go to market strategy for our parachute business in precision logistics.

Speaker Change: We completed the trust goes acquisition for authentication segment, and we vertically integrated the Tet, the trustco technology stack with all of our existing customers.

Adam H. Stedham: In addition, we defined a strategy to integrate this technology platform into commercial relationships across specific target industries. For example, the precision logistics segment completed 2023 with $24.7 million in revenue versus a pro forma fiscal 2022 revenue of $24 million. During 2023, we improved the gross margin significantly for precision logistics. Our Q1 2023 gross margin was 29%, and the average gross margin across quarters two, three, and four was 36%. Now, a small contributing factor to this improvement was the discontinued relationship with some lower-margin customers. This did result in some impact on our Q4 2023 revenue in this segment. The precision logistics segment generated $8.6 million in revenue in Q4 2023. The net result for 2023 was a precision logistics segment experienced organic growth over our pro forma 2022 numbers, and experienced a significant increase in gross margin dollars in 2023 versus 2024, including in Q4 2023 as compared to Q4 2022. So now, let me shift to our authentication segment. The segment generated approximately $150,000 in revenue in Q4. We pointed out in our strategy call that the APAC portion of this segment had been experiencing challenges associated with difficult market conditions.

Speaker Change: In addition, we defined our strategy to integrate this technology platform into commercial relationships across specific targeted industries.

Speaker Change: So the precision logistics segment. It completed 20 twenty-three with $24 7 million in revenue versus a pro forma fiscal 2022 revenue of 24 million.

Speaker Change: During 2023 we improved the gross margin significantly for precision and logistics.

Speaker Change: Our Q1, 2023 gross margin was 29%.

Speaker Change: And the average gross margin across quarters, two three and four was 36%.

Speaker Change: Now a small contributing factor to this improvement was the discontinued relationship with some lower margin customers.

Speaker Change: This did result in some impact on our Q4 2023 revenue in this segment.

Speaker Change: The precision and logistics segment generated $8 6 million in revenue in Q4 2023.

So the net result for 2023 was the precision logistics segment experienced organic growth over our pro forma 2022 numbers experienced a significant increase in gross margin dollars in 2023 versus 2024, including in Q4, 2023 as compared to Q.

Speaker Change: For 2022.

Speaker Change: So now let me shift to our authentication segment.

Speaker Change: The segment generated approximately $150000 in revenue in Q4.

We pointed out in our strategy call that the APAC portion of this segment has been experiencing challenges associated with difficult market conditions. We also discussed that we're seeing those conditions improve and we anticipate they will contribute to our organic growth in 2024.

Adam H. Stedham: We also discussed that we're seeing those conditions improve, and we anticipate they will contribute to our organic growth in 2024. This continues to be our feeling, our experience, and our expectation for 2024. In addition, we've added three sales associates to the team within this segment to accelerate our growth by increasing awareness of our industry-leading technology stack. During the strategy call where we discussed our technology, we stated that we now have all of our existing customers transitioned onto TrustCode's technology platform. In addition, hopefully, you saw our press release indicating that our technology platform is now integrated into Amazon's transparency program. We're excited by this recent development, and we're pleased that Amazon's review of our platform has confirmed our belief about the significant value it delivers. In addition to that, we believe that we can provide meaningful support for Amazon's efforts to combat counterfeit products in the marketplace. This support will be good for Amazon. It's good for the brands sold in the Amazon marketplace.

This continues to be our feeling our experience and our expectation for 2024.

Speaker Change: In addition, we've added three sales associates to the team within this segment to accelerate our growth by increasing awareness of our industry, leading technology stack.

Speaker Change: During our technology or the strategy call, where we discussed our technology. We stated that we now have all of our existing customers transitioned onto the trust codes technology platform.

Speaker Change: In addition, hopefully you saw our press release, indicating that our technology platform is now integrated into Amazon's transparency program.

Speaker Change: We're excited by this recent development and we're pleased that Amazon to review of our platform has confirmed our belief about the significant value it delivers.

Speaker Change: In addition to that we believe that we can provide meaningful support for Amazon's efforts took about counterfeit products in the marketplace.

Speaker Change: This support will be good for Amazon, It's good for the brand sold in the Amazon marketplace. It's good for consumers and it should be very good for verified me shareholders. So I look forward to sharing more information about that relationship as it continues to develop so at this point I'll turn the call back over to Nancy Meyer.

Nancy L. Meyers: It's good for consumers, and it should be very good for VerifyMe shareholders. So I look forward to sharing more information about that relationship as it continues to develop. At this point, I'll turn the call back over to Nancy Meyers, our CFO, and she'll provide a more detailed financial report. Thank you, Adam.

Nancy L. Meyers: Our CFO and she'll provide a more detailed financial report.

Nancy L. Meyers: Thank you Adam.

Nancy L. Meyers: Today's call I will start that.

Nancy L. Meyers: Financial highlights for the fiscal year and the fourth quarter.

Nancy L. Meyers: For today's call, I will touch on the financial highlights for the fiscal year and the fourth quarter. Fiscal 2023 revenue increased by 29% to 25.3 versus the prior year of 19.6 million due to the acquisition of Perryship in April of 2022. On a pro forma basis, our precision logistics revenue increased by 0.6 million in 23 versus 2022. However, during the fourth quarter, revenue decreased in our precision logistics segment by $0.3 million from $8.9 million to $8.6 million due to the discontinued relationship with some lower margin customers in our ProActive Service revenue, partially offset by an increase in our premium service revenue.

Nancy L. Meyers: Fiscal 2023 revenue increased by 29% to 25.3 versus prior year of nine 6 million.

Nancy L. Meyers: Through the acquisition of Paris, yet in April of 'twenty two.

Nancy L. Meyers: On a pro forma basis, our principles are logistics revenue increased by six.

Nancy L. Meyers: Six nine in 'twenty, three 'twenty 'twenty four.

Nancy L. Meyers: During the fourth quarter revenue decrease in our precision logistics family airplane 398.98 million.

Nancy L. Meyers: Due to the discontinued relationship with some lower margin customers.

Nancy L. Meyers: Proactive service revenue, partially offset by an increase in our premium and service revenue.

Nancy L. Meyers: Revenue on our penetration segment decreased from one 4 million did you have one 7 million for the fiscal year and from 0.8.

Nancy L. Meyers: <unk> 1 million in Q4 2023 did for a large order in Q4 2022 that did not recur in 2023. However, we continue to work with this customer and anticipate additional orders in 2024.

Nancy L. Meyers: Revenue on our authentication segment decreased from $1.4 million to $0.7 million for the fiscal year and from $0.8 million to $0.1 million in Q4 2023 due to a large order in Q4 2022 that did not recur in 2023. However, we continue to work with this customer and anticipate additional orders in 2024. Growth profit increased $2.5 million to $9 million in fiscal 2023 versus $6.5 million in fiscal 2022. As a percentage of revenue, growth profit increased to 36% versus 33% in 2022. For the fourth quarter, even with the revenue decrease, our gross margin increased by $0.3 million to $3.1 million in Q4 2023 versus $2.8 million in Q4 2022. The year-over-year increase is mainly due to the shift in customer mix and service offerings in our precision logistics segment, as well as process improvements the company has made. You can expect some variability of growth margin in the precision logistics segment as shifts in customer mix and service offerings occur. General and administrative expenses for the fiscal year increased by $2.2 million from $10.6 million to versus $8.4 million in 2022.

Nancy L. Meyers: Gross profit increased $2 5 million to $9 million in 2023 versus $6 5 million in fiscal 2022 as a percentage of revenue gross profit increased to 36% versus 33% in 'twenty 'twenty Hill.

Nancy L. Meyers: For the fourth quarter, even with the revenue decreased our gross margin increased $5 3 million or $3 1 million.

Nancy L. Meyers: Q4, 2023 versus $2 8 million in Q4 of 'twenty 'twenty tail.

Nancy L. Meyers: The year over year increase is mainly due to the shift in customer mix and service offering and our precision logistics segment.

Nancy L. Meyers: Well, it's process improvement the company has made.

Nancy L. Meyers: You can expect some variability in gross margin and the precision logistics segment of shifting customer mix and service offerings a car.

Nancy L. Meyers: General and administrative expenses for the fiscal year increased by $2 2 million from $10 6 million two versus $8 4 million in 2020 two.

Nancy L. Meyers: Fourth quarter General and administrative expenses increased by nearly <unk> 5 million to $2 7 million in 2023 versus $2 2 million in 2020 two.

Nancy L. Meyers: The increases relate primarily to the acquisition of Paris Deployable in April of 2022.

Nancy L. Meyers: Cuz wearable in March of 'twenty to 'twenty, three severance expense for the year.

Nancy L. Meyers: <unk> 6 million and additional stock compensation.

Nancy L. Meyers: Sales and marketing expenses for the fiscal year a decrease.

Nancy L. Meyers: One 6 million versus 1.7 million or 2022 for the fourth quarter. They decreased by <unk> 2 million to 3 million personal 0.5 and 2022.

Nancy L. Meyers: The decrease is primarily related to a reduction in employee and consultant price, partially offset by additional travel expenses and yet beneficial pregnant.

Nancy L. Meyers: For the fourth quarter, general and administrative expenses increased by $0.5 million to $2.7 million in 2023 versus $2.2 million in 2022. The increases relate primarily to the acquisition of Perry Ships Global in April of 2022, Trust Codes Global in March of 2023, Severance Expense for the year of, and $2.6 million in additional stock compensation. Sales and marketing expenses for the fiscal year decreased to $1.6 million versus $1.7 million in 2022. And for the fourth quarter, they decreased by $0.2 million to $0.3 million versus $0.5 million in 2022. The decrease is primarily related to a reduction in employees and consultants, partially offset by additional travel expenses in the authentication segment.

Nancy L. Meyers: Our net income for the quarter was less than 1.1 million versus <unk> 1 million in 2022. However, our results for 2023 included <unk> 1 million of loss on equity investment and <unk> 2 million of impairment of long lived asset.

Nancy L. Meyers: In Q2, we discussed our efforts to optimize overhead expenses to improve adjusted EBITDA going forward and as a result, our adjusted EBITDA increased by $1 2 million to positive point 4 million for the fiscal year 2023 person to a loss of <unk> 8 million for fiscal year.

Nancy L. Meyers: 2022.

Nancy L. Meyers: And increased by <unk> 4 million for the fourth quarter of 2023 to $1 1 million compared to <unk> 7 million for the fourth quarter of 2022.

Nancy L. Meyers: 2023 also presented them in our first fiscal year with cash provided by operation activities.

Nancy L. Meyers: Our net income for the quarter was less than $0.1 million versus $0.1 million in 2022. However, our results for 2023 included $0.1 million of loss on equity investment and $0.2 million of impairment of long-lived assets. In Q2, we discussed our efforts to optimize overhead expenses to improve adjusted EBITDA going forward. And as a result, our adjusted EBITDA increased by $1.2 million to positive $0.4 million for the fiscal year 2023 versus a loss of $0.8 million for fiscal year 2022, and increased by 0.4 million for the fourth quarter of 2023 to 1.1 million compared to 0.7 million for the fourth quarter of 2022. 2023 also resulted in our first fiscal year with cash provided by operating activities of $0.2 million for the year and $0.8 million for Q4 2023.

Point 2 million for the year end point 8 million Q4 2023.

Nancy L. Meyers: On the last slide is our balance sheet as of December 31st 2023.

Nancy L. Meyers: Our cash as of December 31st is $3 1 million a decrease of <unk> 3 million from the $3 4 million, we had on December 31st 2022.

Nancy L. Meyers: However, through the 12 months of 2023, we had a capital raise of $1 1 million. There was a sale of a convertible note.

Nancy L. Meyers: We paid <unk> 5 million on our low paid severance expense of <unk> 4 million and the acquisition of trust.

Nancy L. Meyers: One 6 million.

As of December 31st 2023, we have no borrowings under our line of credit and have 1 million available to us.

Nancy L. Meyers: With that I would like to turn the call back to Adam.

Adam: Thank you Nancy.

I don't want to repeat the information we recently covered in our strategy presentation, but suffice it to say we're optimistic about the new developments, we're seeing in both of our authentication and precision logistics segment.

I'm confident our strategy of integrating our authentication platform into the go to market strategy, a key industry leaders will generate value.

In addition, I believe our precision logistics business is transforming into an efficient operation with a clear value proposition and a clear target market.

Nancy L. Meyers: On the last slide is our balance sheet as of December 31st, 2023. Our cash as of December 31st is $3.1 million, a decrease of $0.3 million from the $3.4 million we had on December 31st, 2022. However, through the 12 months of 2023, we had a capital raise of $1.1 million through the sale of convertible notes, repaid $0.5 million on our loan, paid severance expenses of $0.4 million, and acquired trust codes of $0.6 million. As of December 31st, 2023, we have no borrowings under our line of credit and have $1 million available to us. With that, I would like to turn the call back to Adam. Thank you, Nancy.

Adam: I'll simply conclude by saying I'm excited I'm excited by the opportunity the company has and our shareholders have in 'twenty 'twenty four we're a company with cash to fund our operations, we generate cash and we have a proven tech stack that solves real problems that face consumers.

Adam: And companies in today's environment. So I look forward to sharing more information with you as the year unfolds, but at this point, we'll open up the call for questions.

Adam: Okay.

Thank you we will now begin the question and answer session. As a reminder to ask a question you May Press Star then one on your telephone keypad. If you were using a speaker phone. Please pick up your handset before pressing the keys.

Adam: If at any time. Your question has been addressed and you would like to Detroit. Please press Star then two.

Adam: This time, we will pause momentarily to assemble our roster.

Adam H. Stedham: I don't want to repeat the information we recently covered in our strategy presentation, but suffice it to say we're optimistic about the new developments we're seeing in both our authentication and precision logistics segments. I'm confident our strategy of integrating our authentication platform into the go-to-market strategies of key industry leaders will generate value. In addition, I believe our precision logistics business is transforming into an efficient operation with a clear value proposition and a clear target market.

Adam: Yeah.

Adam: Today's first question comes from Mike Pitofsky with Barrington Research. Please go ahead.

Michael John Petusky: Hey, good morning, I appreciate how are you doing Mike.

Michael John Petusky: I appreciate the comments so Adam I guess on your comment about the second half being.

Michael John Petusky: Likely stronger Imus.

Michael John Petusky: Assuming that you still expect some growth in the first half is that a fair assumption that it's not yes.

Michael John Petusky: Really swung toward the second half.

Michael John Petusky: You do expect like at least mid single digit growth on something along those lines in the first half.

Michael John Petusky: Yes, we expect yes, we definitely expect organic growth in the first half and second half.

Michael John Petusky: We just feel will have.

Michael John Petusky: Our H two versus age two will will show more growth in our H, one versus H, one, but there'll be growth in both halves.

Speaker Change: Helpful. And then I guess I'm trying to understand because I sort of expected that you would really as I was thinking not just the 24, but over time.

Adam H. Stedham: So I'll simply conclude by saying I'm excited. I'm excited by the opportunity the company has and our shareholders have in 2024. We're a company with cash to fund our operations. We generate cash. And we have a proven tech stack that solves real problems that face consumers and companies in today's environment. So I look forward to sharing more information with you as the year unfolds. But at this point, we'll open up the call for questions. Thank you. We will now begin the question and answer session. As a reminder, to ask a question, you may press star and then one on your telephone. If you are using a speakerphone, please pick up your handset before pressing the key.

Speaker Change: I've been under the impression that more of the leverage would sort of come on.

Speaker Change: Sort of G&A and and maybe some of the expense items rather than gross margin I'm wondering why gross margin is there a chance gross margin actually expand going forward, because I really assumed as as precision logistics became a bigger part of the.

Speaker Change: Business that most likely that would continue to decline at least slightly can you can you just sort of speak to how you see this playing out playing out both in 'twenty four.

Speaker Change: Over the sort of the timeframe of your longer term plan things sure no problem. So the gross margin improvement has primarily been a an effort.

Managing pricing.

Speaker Change: And as well as driving efficiency into the business. It really has been theres been no leverage that's contributed to the gross margin improvement.

Speaker Change: I completely agree with you that that we should be able to generate leverage as revenue grows on the G&A side, we have an experienced the revenue growth to this point over 2023, the that enabled that but going forward I would absolutely.

Operator: If at any time your question has been addressed and you would like to withdraw it, please press star, then two. At this time, we will pause momentarily to assemble our rosters. Today's first question comes from Mike Petusky with Barrington Research. Please go ahead. How are you doing, Mike?

That our revenue can scale without the proportional scaling up our G&A. So G&A as a percentage of revenue should be able to go down is there any chance that number as a absolute number can go down in 'twenty, four or will that will that show some some level of growth in G&A.

Adam H. Stedham: So, uh... I guess on your... and many more, and Farrah Lund. Yes. Yes, we expect, yes, we definitely expect organic growth in the first half and second half. We just feel we'll have, if you could, our H2 versus H2 will show more growth than our H1 versus H1, but there'll be growth in both halves. I'm trying to understand more and more of the leverage. Spence and the rest of the audience.

Speaker Change: I I I don't see it going down in 2024.

Speaker Change: And then this one is for Nancy the number I think I heard a point 7 million for fiscal 'twenty three for authentication and that would equate to what 24 six for the.

Speaker Change: Precision logistics easy for me to say.

Speaker Change: Hum.

Nancy: Is that right 24 six.

Nancy: Yes.

Nancy: And do you do you by any chance have the number precision logistics for 'twenty two I'm.

Nancy: I'm, sorry for 'twenty, two including the time they werent a part of you guys like pre acquisition do you have that full year number by any chance handy, yeah that was $24 million.

Adam H. Stedham: Going forward, because I really assumed the role of and Peter Park. Business, and more, out both. Over and out.

Nancy: Okay. Okay. So the business did grow.

Speaker Change: Mhm, Alright terrific Alright, that's all I've got for right now thanks, guys I appreciate it great appreciate it bye.

Adam H. Stedham: So the gross margin improvement has primarily been an effort to manage pricing and as well as driving efficiency into the business. But it really hasn't – there's been no leverage that's contributed to the gross margin improvement. I completely agree with you that we should be able to generate leverage as revenue grows on the G&A side. However, we haven't experienced the revenue growth to this point in 2023 that would enable that. But going forward, I would absolutely expect that our revenue can scale without the proportional scaling of our G&A. So G&A as a percentage of revenue should be able to go down. Are there any chance that number will be a, Um... I don't see it going down in 2024. The number I think I heard was 7.

Speaker Change: Okay.

Speaker Change: The next question comes from Jack Vander <unk> with Maxim Group. Please proceed.

Jack Vander Aarde: Hey, Jack Okay great.

Jack Vander Aarde: Hey, Adam Great. Thanks for thanks for taking my questions and congrats on a strong finish to the year.

Jack Vander Aarde: You definitely hit on all your points of things from me from the Investor day as well so no real surprises all good stuff.

Jack Vander Aarde: I guess I'll follow up with a question just on I.

Jack Vander Aarde: I had a question about the revenue guidance, obviously, but I think that was kind of covered.

Gross margin I just wanted to touch on this again as well so you know the fourth quart.

Jack Vander Aarde: Very very strong record third quarter gross margin obviously.

Jack Vander Aarde: Was expecting the fourth quarter gross margin to come down, but it held up all it was a much stronger than I thought as well.

Adam H. Stedham: Hmm. Is that right? Yes. Do you by any chance have the number? 22, and 22, including the time they, Park. Preacquisition. Do you have that folio?

Jack Vander Aarde: It doesn't really seem to be Ikea was mix driven by the authentication.

Jack Vander Aarde: Education segment, yet so just.

Speaker Change: Is this kind of do you have a sense of the Gulf War, that's impossible Theres always outliers that can happen, but do you have a sense of a gross margin floor on any given quarter going forward.

Adam H. Stedham: Yeah, that was $24 million and more. That's all I've got. Great, appreciate it, bud. The next question comes from Jack VanderAard with Maxim Group. Please proceed. Hey, Jack.

Jack Vander Aarde: Okay, great. Hey Adam, great. Thanks for taking my questions, and congrats on a strong finish to the year. You definitely hit on all your points, I think, from the investor day as well. So no real surprises, all good stuff.

Speaker Change: I think that our current gross margin is a sustainable gross margin going forward.

Speaker Change: It is depending as you pointed out.

Speaker Change: As our authentication business begins to grow and it runs at a substantially higher gross margin than our precision logistics business.

Jack Vander Aarde: I guess I'll follow up with a question just on, you know, I had a question about the revenue guidance, obviously, but I think that was kind of covered. Gross margin, I just want to touch on this again as well. Well, so, you know, in the fourth quarter, you had a very, very strong record third quarter gross margin, obviously. And I was expecting the fourth quarter gross margin to come down, but it held up. It was much stronger than I thought as well.

Speaker Change: The gross margin could go up but the larger the percentage of our revenue mix that would be associated with authentication that would have an upward impact on our gross margins. So I do think that we're at a sustainable level I don't see it retracting drum here.

Speaker Change: We are going to are we are going to when we announced Q1, we're going to make some changes to how we calculate gross margin. We think we could show all of that and we'll explain all that on the Q1 call, but that will give you even more insight into how we can drive efficiency.

Adam H. Stedham: And it doesn't really seem to be like it was mixed driven by the authentication segment yet. So just is this kind of, do you have a sense of like a four? I mean, that's impossible.

Speaker Change: Maintain the gross margins, but.

Speaker Change: We we don't think that this is a one off we think we're at a sustainable level that could go up with product mix.

Speaker Change: Okay great.

Adam H. Stedham: There are always outliers that can happen, but do you have a sense of a gross margin of four on any? Given quarter going forward? I mean, I think that our current gross margin is a sustainable gross margin going forward. It depends, as you pointed out, as our authentication business begins to grow and it runs at a substantially higher gross margin than our precision logistics business, the gross margin could go up. The larger the percentage of our revenue mix that would be associated with authentication, that would have an upward impact on our gross margin. So I do think that we're at a sustainable level. I don't see it regressing from here.

Speaker Change: That's helpful color.

Speaker Change: Let's see I guess I'll switch gears here.

Speaker Change: Precision logistics segment itself in terms of revenue mix.

Speaker Change: And the actual.

Speaker Change: Kind of types of revenue or customer relationships you have.

Speaker Change: It makes sense that the fourth quarter kind of down year over year, just given that that particular customer that was.

Speaker Change:

Speaker Change: Our proactive services customer I think that proactive services was about 80% of your your historical mix do you have any sort of goal as to like what you expect just isn't that mixture and golar as you exit 2024, just just to get an idea of like the pace at which you'll be focusing more on these premium customers no. We didn't we.

Adam H. Stedham: We are going to we are going to when we announce Q1, we're going to make some changes to how we calculate gross margin. We can, we could show all of that, and we'll explain all of that on the Q1 call. But that will give you even more insight into how we can drive efficiency and maintain gross margins. But we don't think that this is a one-off.

Speaker Change: Don't really have a goal that they go to market strategy.

Speaker Change: Of these two lines of businesses is very different one we are supporting our the largest airfreight company in the world in their efforts to service their customers and so the growth of that business is tied to their go to market strategy.

Speaker Change: The other is more direct selling into the marketplace.

Speaker Change: For us that would be the proactive business. So we don't really have a target mix because the two go to market strategies operate somewhat independent of each other and it's not a situation, where we allocate specific resources to get a specific mix.

Jack Vander Aarde: We think we're at a sustainable level that could go up with the product mix. Okay, great. No, that's helpful, Culler.

Speaker Change: Got you that makes sense.

Adam H. Stedham: And let's see, I guess I'll switch gears here. Precision logistics' segment itself, in terms of revenue mix and the actual kind of types of revenue or customer relationships you have, it makes sense with the fourth quarter kind of down year over year, just given that that particular customer that was, and many more. A proactive services customer. I think that proactive services were about 80% of your historical mix. Do you have any sort of goal as to like what you expect just from that mixer and goals as you exit 2024? Just to get an idea of the pace at which you'll be focusing more on these premium customers. No, we don't really have a goal.

And then just maybe one for one more question from me.

Speaker Change: Thank you mentioned you hired three sales associates and the authentication segment.

Speaker Change: Can you provide just enough can you just provide an update on your overall head count plans and in sales and marketing head count strategy and goals.

Speaker Change: In 2024, and kind of just where we are in the in your plan. Thanks.

Speaker Change: So so we've hired three sales associates to two of them are in the U S. One.

Speaker Change: <unk> is in New Zealand for the ANZ area and so we continue to as we're seeing market conditions approve in the across the APAC region. We wanted to add capacity to take advantage of those more favorable conditions, the main marketplace and the largest marketplace in the world.

Speaker Change: For what we do is the U S. So that's why we added to resources in the U S.

Speaker Change: I could see before the end of the year continuing to add to that.

Speaker Change: We believe that.

Speaker Change:

Speaker Change: We believe that the business operates in a way that it's going to reach a tipping point and this isn't a business that is just slows to slow strategic year over year growth. This is a business that that is going to reach a tipping point and half inflection.

Adam H. Stedham: The go-to-market strategy of these two lines of business is very different. For one, we are supporting the largest air freight company in the world in their efforts to serve their customers. And so the growth of that business is tied to their go-to-market strategy. The other, it's more direct selling into the marketplace for us. That would be the proactive business. So we don't really have a target mix because the two go-to-market strategies operate somewhat independently of each other. And it's not a situation where we allocate specific resources to get a specific mix.

Speaker Change: And so we want to make sure that we have the sales capacity available that's trained and ready to address the market as it becomes more and more receptive to what we do.

Speaker Change: Understood well again, congrats on a strong finish in the law.

Speaker Change: I look forward to our Q1, thanks, alright. Thank you.

Speaker Change: Okay.

The next question comes from Fred broker a private Investor. Please proceed.

Speaker Change: Hi, Adam Hi, Fred how are you fine. Thank you I'd like to add my congratulations on your huge improvement over the past.

Adam H. Stedham: Gotcha. That makes sense. And then, just maybe, one more question for me. I think you mentioned you hired three sales associates in the authentication segment. Correct. Can you please provide just an update on your overall headcount plans and sales and marketing headcount strategy and goals for 2024 and kind of just where we are in your plan? Thanks. So we've hired three sales associates. Two of them are in the U.S., and one is in New Zealand for the ANZ area.

Fred: Can you.

Fred: Me I understand the significance.

Fred: Have your recent press release on May.

Adam: <unk> and Amazon sure and how this will impact the future sure absolutely. So first off I would say and thanks for the question Brett. So first off I'd say, we're excited and we're pleased to support our customers as well as Amazon's efforts to combat counterfeit.

Adam: So currently Fred there are over 33000 brands that participate in the Amazon transparency and that's been growing at a rate of about 50% a year over the last three years. If you look at our platform. It's ideally targeted at customers who want to protect their brand.

Adam H. Stedham: And so we continue to, as we're seeing market conditions improve across the APEC region, we wanted to add capacity to take advantage of those more favorable conditions. The main marketplace and the largest marketplace in the world for what we do is the U.S., so that's why we added two resources in the U.S.

Adam: In an online and offline environments and our sweet spot are brands that sell more than 5 million units per year. In total now that would include their sales in the Amazon marketplace as well as other distribution channels. So.

Adam H. Stedham: I could see us before the end of the year continuing to add to that. We believe that the business operates in a way that it's going to reach a tipping point. And this isn't a business that is just slow-spinning. Slow, strategic year-over-year growth.

Adam: So if you look at all of that we estimate that each new brand that adopts our platform for traceability and Amazon transparency participation would generate an average of about $50000 a year annual recurring revenue.

Jack Vander Aarde: This is a business that is going to reach a tipping point and have quite an inflection. And so we want to make sure that we have the sales capacity available that's trained and ready to address the market as it becomes more and more receptive to what we do. Okay. Well, again, congrats on a strong finish and look forward to Q1.

Adam: Verify me so as you start to apply the math and you start to look at it the impact. It would have is if we're successful and we believe we will be successful at adding these brands. It could have a very significant impact on our run rate <unk> going forward. So I look forward to providing more.

Adam H. Stedham: Thanks. All right. Thank you. The next question comes from Fred Breaker, a private investor. Please proceed. Hi Adam. Hi Fred. How are you?

Adam: More updates on our sales efforts, but hopefully that can give you a feel for why we think it's significant.

Do you develop.

Adam: These branch.

Adam: As far as just.

Alfred Breaker: Fine, thank you. I'd like to add my congratulations on your huge improvement over the past. Um, and you helped me understand the significance of your recent press release about Manuka and Amazon and how this will impact the future. Sure, absolutely.

Adam: Acquiring their business or is it a salesman do that or is it come from Amazon or how do you how do you quantity so.

Adam: So we are salespeople that we've hired will be our selling directly we were just at a trade show this.

Adam H. Stedham: So first off, I would say, and thanks for the question, Fred. First off, I would say we're excited and we're pleased to support our customers as well as Amazon's efforts to combat counterfeits. So currently, Fred, there are over 33,000 brands that participate in Amazon Transparency, and that's been growing at a rate of about 50% a year over the last three years.

Adam: This last week doing that in addition that we work with Amazon and there's a certain segment of the marketplace. The Amazon and verify me or are discussing targeting that said, it's very specific that that marketplace would be ideally suited for what.

Adam: We do so it'll be a combination of everything you said.

Speaker Change: Okay. Thank you and congratulations again, thank you.

Speaker Change: Yeah.

Adam H. Stedham: If you look at our platform, it's ideally targeted at customers who want to protect their brand in an online and offline environment, and our sweet spot is brands that sell more than 5 million units per year in total. Now, that would include their sales in the Amazon marketplace as well as other distribution channels. So if you look at all of that, we estimate that each new brand that adopts our platform for traceability and Amazon transparency participation would generate an average of about $50,000 a year in annual recurring revenue.

Speaker Change: Our next question comes from Jeff <unk> with <unk> Capital Management. Please proceed.

Jeff: Adam Great going good quarter, just got one question.

Jeff: Yeah, I'm sort of thinking out loud here is we're trying to develop the authentication business. You mentioned you hired three salespeople I'm I'm just wondering.

Jeff: Are there potentially strategic partners out there that have a pretty big sales and marketing reach that touch our prospective customers that we might be able to.

Jeff: Do some kind of joint venture with or get them to sort of white label, our product in and really turbocharge our growth in that area is that is it does it makes sense from a strategic point of view.

Adam H. Stedham: So as you start to apply the math and you start to look at the impact it would have if we're successful, and we believe we will be successful at adding these brands, it could have a very significant impact on our run rate ARR going forward. So I look forward to providing more updates on our sales efforts, but hopefully that can give you a feel for why we think it's significant. Do you develop and a lot of these brands and the rest of the staff. Amazon. So, right, so...

Speaker Change: It does makes sense and it also accurately describes part of our go to market strategy. So if you look at it when we talk about integrating our platform.

Speaker Change: Two industry, leading brands, what we're saying is that there's a movement theres a U S movement, a global movement towards smart packaging. So we are we are working with one of the largest canning companies in the world and as they're looking to integrate our tech stack and.

Adam H. Stedham: So we, our salespeople that we've hired will be selling directly. We were just at a trade show this last week doing that. In addition, we work with Amazon, and there's a certain segment of the marketplace that Amazon and VerifyMe are discussing targeting. It's very specific that that marketplace would be ideally suited for what we do. So it'll be a combination of everything you've talked about. Thank you and congratulations.

Speaker Change: To their product that they sell to their customers to where they can have smart can that allow them to provide consumers. The information. They want in this ever growing digital world, We're working with the largest packaging company in the world about integrating them.

Speaker Change: We've already talked about Amazon marketplace.

Speaker Change: We're working with the leading producer of of equipment for leafy Greens in infant nutrition packaging, so exactly what you're saying is exactly what we're doing we're working with these companies think about think about the the motto we want to have have.

Alfred Breaker: Thank you. Our next question comes from Jeff Porter with Porter Capital Management. Please proceed. Adam, great job. Good quarter. I just got one question. What's up, Jeff?

Jeff Porter: Yep. Are there potentially strategic partners out there that have pretty big sales and marketing reach that touch our prospective customers that we might be able to do some kind of joint venture with or get them to sort of white label our product and really turbocharge our growth in that area? Does that make sense from a strategic point of view? It does make sense, and it also accurately describes part of our go-to-market strategy. So if you look at it, when we talk about integrating our platform into industry-leading brands, what we're saying is that there is a movement. There is a U.S. movement, and a global movement toward smart packaging.

Speaker Change: Our technology inside verify me inside so as they go to market with smart packaging, our tech will be embark inside of it and powering the back end of what they're trying to do so that's exactly what we're trying to do.

Speaker Change: And I would imagine that the gross margins on that type of business are.

Speaker Change: Orders of magnitude above where our gross margins are now.

Speaker Change: Is this more like a software gross margin yeah.

Speaker Change: Okay. So you.

Speaker Change: Hopefully if we can drive some revenue there.

And it becomes a greater percentage of our revenue mix, we could we could really see the gross margin expands.

Speaker Change: Oh, absolutely I think it is I think that our current gross margin is sustainable and it represents.

Adam H. Stedham: So we are working with one of the largest canning companies in the world, and they're looking to integrate our tech stack into their product that they sell to their customers so they can have smart cans that allow them to provide consumers with the information they want in this ever-growing digital world. We're working with the largest packaging company in the world about integrating there. And we've already talked about Amazon Marketplace. We work with leading companies. We're a leading producer of equipment for leafy greens and infant nutrition packaging.

Speaker Change: It represents the ongoing run rate gross margin of the company given our proportion of revenue that's up on vacation and precision logistics, if the percentage of revenue for authentication goes up relative to precision logistics just mathematically it wasn't that.

Speaker Change: Truly drive the gross margin up you're exactly right Mhm and last question in terms of our technology stack.

Speaker Change: Are there any.

Speaker Change: Not holes in it but are there any additional things that customers are saying.

Adam H. Stedham: So exactly what you're saying is exactly what we're doing. We're working with these companies. Think about the model of where we want to have our technology inside, VerifyMe inside.

Speaker Change: You know geez, if you could add this feature.

Speaker Change: That would really enhance the value proposition or do you think that our our technology development is pretty much where we need to be.

Adam H. Stedham: So as they go to market with smart packaging, our tech will be inside of it, empowering the back end of what they're trying to do. So that's exactly what we're trying to do. And I would imagine that the gross margins on that type of business are orders of magnitude above where our gross margins are now. Is it more like a software gross margin? Yes.

Speaker Change: Right now I think our technology stack is ahead of the market I think that we that our the level of G. S. One.

Speaker Change: On integration, we have we provide more functionality and capability than the average consumer realizes that they want it particularly in the U S market. So I I don't think there's any gaps at this point, but as the market.

Jeff Porter: Okay, so hopefully, if we can drive revenue there and it becomes a greater percentage of our revenue mix, we could really see the gross margin expand. Absolutely. I think that our current gross margin is sustainable, and it represents the ongoing run rate gross margin of the company given our proportion of revenue that's for authentication and precision logistics. If the percentage of revenue for authentication goes up relative to precision logistics, just mathematically, it will naturally drive the gross margin up. You're exactly right.

Speaker Change: The board will continually develop the technology.

Speaker Change: That's very exciting going forward, because I think from an investor viewpoint.

Speaker Change: The way the company it can be viewed is it rather than a freight forwarder slash logistics company.

Adam H. Stedham: And last question, in terms of our technology stack, are there any... Not holes in it, but are there any additional things that customers are saying, you know, geez, if you could add this feature, you know, that would really enhance the value proposition? Or do you think that our technology development is pretty much where we need to be? Right now, I think that the level of GS1 integration we have provides more functionality and capability than the average consumer realizes that they want, particularly in the U.S. market. So I don't think there are any gaps at this point.

Speaker Change: As a value added you know technology company and the authentication.

I think that's that's got a lot of sizzle to it and it would be very attractive to investors because of the potential growth so great going and Oh look forward phone your progress.

Great. Thank you very much.

The next question comes from Richard Greulich, with our EG capital Advisors. Please proceed.

Richard Greulich: Thank you Hello, Adam and Nancy.

Richard Greulich: Couple of a couple of quick questions and then a couple of comments first of all the question.

Jeff Porter: But as the market evolves, we'll continually develop the technology. It's very exciting going forward because, from an investor viewpoint, the way the company can be viewed is rather than a freight forwarder slash logistics company as a value-added technology company in the authentication realm. I think that's got a lot of sizzle to it and would be very attractive to investors because of potential growth. So, great going, and I'll look forward to following your progress.

Richard Greulich: You had spoken during the Investor day, and you kind of alluded to it again today, but you're trying to achieve higher integration with Fedex working with some of the sales forces there has that actually started.

Richard Greulich: No no. It has not actually started at this point, we're continuing to work with them around models. If this is this is a a very if you look at the press releases and this isn't related to the Fedex alone. If you look at Fedex U P M.

Adam H. Stedham: Great. Thank you very much. The next question comes from Richard Greulich with REG Capital Advisors. Please proceed. Thank you. Hello Adam and Nancy.

Richard Greulich: If you look at the major break company, they're forecasting a challenging year and 2024.

Richard Greulich: And so there's a lot of attention put on that we continue to believe in the strategy, but it hasn't had a lot of progress thus far were thus far.

Richard E. Greulich: A couple quick questions and then a couple comments. First of all, you spoke during investor day and you kind of alluded to it again today, but you're trying to achieve higher integration with FedEx, working with some of the sales forces there. Has that actually started? Um, No, it has not actually started at this point.

Richard Greulich: Okay.

Richard Greulich: Number two I know you.

Richard Greulich: Wisely didn't want to rehash everything you did just a month and a half ago for those investors, who didn't wash that I would just pointed out that you had said during the presentation that kind of a five year outlook, he thought $50 million to $60 million in revenues and 15% to 20% adjusted EBITDA margin.

Adam H. Stedham: We're continuing to work with them on models. If you look at the press releases, and this isn't related to FedEx alone, if you look at FedEx, UPS, if you look at the major freight companies, they're forecasting a challenging year in 2024. And so there's a lot of attention put on that.

Richard Greulich: I assume in the last six weeks that sort of far out thinking hasnt really changed much.

Speaker Change: No it hasn't changed.

Speaker Change: And it really.

Speaker Change:

Speaker Change: No and the thing I would say is just as we talked about with gross margin.

Adam H. Stedham: We continue to believe in the strategy, but it hasn't made a lot of progress thus far. Number two, while I know you wisely didn't want to rehash everything you did just a month and a half ago, for those investors who didn't watch that, I would just point out that you had said during that presentation that for a five-year outlook, you thought $50 to $60 million in revenues and 15% to 20% adjusted EBITDA margin. I assume in the last six weeks, that sort of far out thinking hasn't really changed much. No, it hasn't changed.

Speaker Change: If you it's very difficult to predict our product mix five years from now, but the the EBITDA margins will could be significantly higher.

Speaker Change: Or the same or even lower depending upon our product mix and the amount of the revenue that's associated with authentication versus precision logistics.

Speaker Change: So we haven't changed our five year outlook.

Speaker Change: What's the point.

Speaker Change: So the implication I'm getting when you were discussing gross margin earlier that if you achieve what you think you'd like to be able to do.

Speaker Change: Adjusted EBITDA margin would be higher.

Speaker Change: But if.

Speaker Change: Yes, if if we.

Speaker Change: Therefore, our authentication business grows more rapidly than we currently have modeled in our five year plan. It would definitely change our EBITDA percentage in an upward direction.

Adam H. Stedham: And it really... No. And the thing I would say is that, just as we talked about with gross margin, it's very difficult to predict our product mix five years from now, but the EBITDA margins can be significantly higher or the same or even lower, depending upon our product mix and the amount of the revenue that's associated with authentication versus precision logistics. We haven't changed our five-year outlook at this point. So the implication I'm getting when you were discussing gross margin earlier that if you achieve what you think you'd like to be able to do, that adjusted EBITDA margin would be higher. That if Yes, if our authentication business grows more rapidly than we currently have modeled in our five-year plan, it would definitely change our EBITDA percentage in an upward direction.

Speaker Change: Yeah third Yeah, you had mentioned that you know your sweet spot is that.

5 million units per year.

Distribution those kinds.

Speaker Change: Customers might yield.

Speaker Change: They are about 50000, a year for verify me.

Speaker Change: But is that is that recall during the presentation that 50000 annual Arab was kind of a low end of sort of what could be quite could be accomplished with customers.

Speaker Change: With more than $5 million.

Speaker Change: Completely agree.

Speaker Change: It it can be a low end and and you're looking at but where we're more looking at averages. We think that that that's a reasonable average for people to think about and model, but youre exactly right I mean really our product our product is ideally suited for customers that then.

Speaker Change: Go from 5 million to 100 million units a year.

Adam H. Stedham: Yeah, third, you mentioned that your sweet spot is that 5 million units per year. Distribution, those kind of customers might yield an ARR of about 50,000 a year for VerifyMe. But as I recall during the presentation, that 50,000 annual ARR was kind of the low end of sorts of what could be accomplished for customers with more than 5 million. Completely agree. It can be a low end. And you're looking at, but when we're looking at averages, we think that that's a reasonable average for people to think about and model. But you're exactly right.

Speaker Change: If you're if you have 100 million units a year then that's a very good friend.

Speaker Change: For that customer then $5 million.

Speaker Change: Thank you.

Speaker Change: This is just my comment is.

I very much appreciate the way you are approaching.

Speaker Change: Share repurchase.

Speaker Change: Alternative for use of capital.

Speaker Change: Far too many companies just go out and start buying stock without having a oh disciplined way of approaching what price they're willing to pay for it Mike.

Speaker Change: My two cents is I think the overall market is very wildly overvalued, which is why I look at companies like you during periods of time, where you're not over valued but you know given.

Adam H. Stedham: And really, our product is ideally suited for customers that go from 5 million to 100 million units a year. If you have 100 million units a year, then that's a very different ARR for that customer than 5 million. Thank you. And just, this is just a micro comment: I very much appreciate the way you're approaching the share repurpose. Alternative use of capital.

Speaker Change: Simple regression to the mean of the overall market valuation may give you an opportunity even though your company will be doing well and opportunity to repurchase your stock at a really attractive price. So I. Appreciate the way you are kind of shepherding your cash with it in that regard.

Speaker Change: Thank you.

Speaker Change: Yes.

Thank you.

Speaker Change: Again, if you do have a question. Please press Star then one.

Speaker Change: The next question comes from Daniel.

Richard E. Greulich: You know, far too many companies just go out and start buying stock without having a disciplined way of approaching what price they're willing to pay for it. I mean, my two cents is that I think the overall market is wildly overvalued, which is why I look at companies like you during periods of time when you're not overvalued. But, you know, a simple regression to the mean of the overall market valuation may give you an opportunity, even though your company will be doing well, an opportunity to repurchase your stock at a really attractive price. So I appreciate the way you're kind of shepherding your cash in that regard. Thank you. Again, if you do have a question, please press star, then the next question comes from Daniel Orlow on Shield Street. Please proceed. Thanks for taking the call. Hi Dan. How are you?

Daniel: With huge street. Please proceed.

Daniel: Hi, Thanks for taking the call.

Daniel: Thanks.

I think everything was pretty much covered at this point I'm trying to get a sense of.

Daniel: How you think about the pipeline you know how lumpy is it does it end up becoming.

Speaker Change: You know Mike.

Speaker Change: How for some of these conversations along with Japan.

Speaker Change: Greater clarity over the course of the year and then.

Speaker Change: In the context of that just to reflect on the prior question in terms of share repurchase.

Speaker Change: No how does that then come back and reinforce your ideas around capital management.

Speaker Change: What is the appropriate price for the shares I mean, if you were to <unk>.

Speaker Change: Look out and say well you really were going to be.

Speaker Change: Running 50 to 60 million revenue in.

Speaker Change: Five years out then.

Speaker Change: In theory, you should be buying back ever sure you could debate, obviously, that's not necessarily for the balance of risks that you want to maintain.

Speaker Change: Right, but there will be data points, along the way that we're going to better inform that decision to reenter the market.

Daniel Orlow: Good, thanks. I think everything was pretty much covered at this point. I'm trying to get a sense of what you think about the pipeline. You know, how lumpy is it?

Speaker Change: Hum.

I'm just trying to understand how you're thinking about that tension in the context of your pipeline in terms of the the tradeoffs between gross margin and then the second question is a little bit more EPS oriented, but let me just stay with that starting point.

Adam H. Stedham: Do you end up becoming, you know, like how far are some of these conversations along so that you can have greater clarity over the course of the year? And then, in the context of that, just to reflect on the prior question, in terms of share repurchase, how does that then come back and reinforce your ideas around capital management? What is the appropriate price for the shares? I mean, if you were to look out and say, well, you really were going to be running 50 to 60 million in revenue five years out, and, in theory, you should be buying back every share you could today. Obviously, that's not necessarily the balance of risk that you want to maintain. Right. But there will be data points along the way that will better inform that decision to reenter the market. Absolutely. I'm just trying to understand how you're thinking about that tension in the context of your pipeline in terms of the tradeoffs between gross margins. And then the second question is a little bit more EPS-oriented, but let me just stay with that starting point.

Speaker Change: Great. So so let me answer so from a pipeline perspective, so on the authentication side, there's two stages to this pipeline.

Speaker Change: Stage. One is you have to had your technology stack or your technology platform.

Speaker Change: Tested integrated with you have to come up with the go to market strategy and the integration of your technology platform into your partners, who are going to then take it with some sort of smart packaging or Amazon transparency or are these mini programs designed.

Speaker Change: Two two.

Speaker Change: Enable consumers to have confidence and knowledge. So we're very far along on that we feel very comfortable we've had press releases around amcor. We've now had this press release that relates to Amazon transparency. So we feel very good about where we are from a go to market from a pipe.

Speaker Change: Line perspective, our integration of our platform into the large providers, who are going to take it to the marketplace.

Speaker Change: Step two is to make sure that we had the business development and the sales resources to then support those customers and to help them close the sale. So that's where we are now are we're.

Adam H. Stedham: Great. So, let me answer from a pipeline perspective. So, on the authentication side, there are two stages to this pipeline. Stage one is you have to have your technology stack or your technology platform tested and integrated. You have to come up with the go-to-market strategy and the integration of your technology platform into your partners, who are going to then take it with some sort of smart packaging or Amazon transparency or these many programs designed to enable consumers to have confidence and knowledge. So we're very far along on that. We feel very comfortable.

Speaker Change: We're seeing pipeline, we're seeing opportunities develop and so we feel very comfortable with that that's on the authentication side.

Speaker Change: On the precision logistics side, I think we've talked about that earlier and really what we're focused offer precision logistics from a pipeline perspective heavily focused right now on the on understanding the proactive customer and the value proposition that they have and really we.

Speaker Change: Believe that our current pipeline is well below where it could be to drive more growth on the proactive side of the business that we're working hard to get our pipes to increase the pipeline on the proactive side.

Adam H. Stedham: We've had press releases around Amazon. Amcor, we've now had this press release that relates to Amazon transparency. So we feel very good about where we are from a go-to-market and pipeline perspective of integration of our platform into the large providers who are going to take it to the marketplace. So step two is to make sure that we have the business development and the sales resources to then support those customers and to help them close the sale. So that's where we are now. We're seeing the pipeline. We're seeing opportunities develop, and so we feel very comfortable with that. That's on the authentication side.

Speaker Change: As I say that that ties back to our capital structure, we're very focused on it as opportunities unfold and as I as I indicated I believe that we have a company that that is a tipping point type of of company and win.

Speaker Change: The marketplace is fully ready and fully realize the value that our service and our platform provides we need to have sufficient capital and resources to respond accordingly, not to Miss out. So we're continually we if we found that we want.

Adam H. Stedham: On the precision logistics side, I think we've talked about that earlier. And really, what we're focused on for precision logistics from a pipeline perspective, we are heavily focused right now on understanding the proactive customer and the value proposition that they have. And really, we believe that our current pipeline is well below where it could be to drive more growth on the proactive side of the business. So we're working hard to increase the pipeline on the proactive side.

Speaker Change: To be able to evaluate if we find ourselves in a situation or would we be better off buying 200000 shares or hiring three salespeople would we be which would provide the most shareholder value. So that's how we're looking at it and right now we.

Speaker Change: We have in our mind, there's certain no brainer prices. The two that we would buy our shares and we think that there. They just grossly mis the mark on what our real value is but outside of that it's more of a strategic rationale why.

Adam H. Stedham: As I say that, that ties back to our capital structure. We're very focused on it as opportunities unfold. And as I indicated, I believe that we have a company that is a tipping point type of company when the marketplace is fully ready and fully prepared. Realizing the value that our service and our platform provides, we need to have sufficient capital and resources to respond accordingly, not to miss out. So we're continually, if we find that we want to be able to evaluate, if we find ourselves in a situation, would we be better off buying 200,000 shares or hiring three salespeople? Would we be, you know, which would provide the most shareholder value?

Speaker Change: Looking at the multiple options for using our capital what's likely to give the best shareholder value.

Speaker Change: Fair enough fair enough look at sort of a crystal ball you have to sort of feel your way.

Speaker Change: Is it appropriate to think about E. P S.

Guidance basis for them on a range basis at this point, if we're thinking about sort of double digits. So.

Speaker Change: That would be anywhere from 2.5 to some higher number of incremental revenue at some.

Adam H. Stedham: So that's how we're looking at it. And right now, we have in our mind that there are certain no-brainer prices at which we would buy our shares. And we think that they just grossly miss the mark on what our real value is.

Speaker Change: At the current sort of gross margin.

Speaker Change: Right way to think about it ex <unk>.

Speaker Change: The share count is that the right way to think about like what.

Speaker Change: Or where are you looking at or you think because you wanted it for one year modeling five year modeling what what timeframe.

Adam H. Stedham: But outside of that, it's more of a strategic, rationalized, looking at the multiple options for using our capital, what's likely to give the best shareholder value. Fair enough. Fair enough. Look, it's not a crystal ball. You have to sort of feel your way.

Trying to think about actually for two and a half your modelling directionally.

Speaker Change: Yeah, I'm not I don't think.

Speaker Change: If you're at a tipping point if it happens when it happens over the course of the year I don't think anybody can be.

Daniel Orlow: Is it appropriate to think about EPS on a guidance basis, but on a range basis at this point, if we're thinking about sort of double digits? That would be anywhere from 2.5 to some higher number of incremental revenue at some point, at the current gross margin? Is that the right way to think about it through the share count? Is that the right way to think about what you are looking at, are you thinking for one year modeling, five year modeling, what time frame are you at? I'm trying to think about actually modeling for two and a half years. I don't think if you're at a tipping point, it happens when it happens over the course of the year. I don't think anybody can reach that level of clarity; nobody really has.

Speaker Change: But that level of clarity nobody rouse.

Speaker Change: But I am trying to understand if you're thinking about organic growth without for 50 million you have to be at a certain range of steady state compounding.

Speaker Change: Therefore, no out two years out two and a half years, whereas this trading at some sort of discount to.

Speaker Change: Some range of expertise.

Back to the P S.

So you know our two years could we say that it's an incremental $5 million.

Speaker Change: And a 35%.

Speaker Change: Margin and therefore, its trading at X I'm, just trying to understand how the.

Speaker Change: What part of it part of what we're talking about here as to why.

Speaker Change: This isn't directly you at all just sort of if the stock is intrinsically undervalued then it's undervalued probably on the on a revenue basis, it's trailing world half from revenues.

Speaker Change:

Speaker Change: So it doesn't take together trade revenues.

Adam H. Stedham: But I am trying to understand if you're thinking about organic growth out for $50 million, you have to be at a certain range of, and many more, some range of expected DPS. Out two years, could we say that it's an incremental $5 million and 35%? Margin and their forage trading at X. I'm just trying to understand how to – part of what we're talking about here is – and this isn't directed at you at all. It's just sort of if the stock is intrinsically undervalued, then it's probably undervalued on a revenue basis.

Speaker Change: What will the earnings so how does that unfolded your mind and part of the way of doing that in my mind is to say well is there a framework for as you framed on Investor day, I'm expecting positive cash flow contribution throughout the year.

We can talk a little bit about the EPS.

Speaker Change:

Speaker Change: Maybe not this year because of my installed.

Speaker Change: It's a pretty important stage, but in that out year, we might be able to talk about it I absolutely agree.

Speaker Change: So I I get where you're going and I don't really have a model for nothing that we've shared that publicly.

Daniel Orlow: It's trading, you know, half of revenues. Um, so what does it take to get it to trade at revenues? and, you know, well, in earnings. So how does that unfold in your mind? And part of the way of doing that in my mind is to say, well, is there a framework for, as you outlined on Investor Day, of expecting positive cash flow contribution throughout the year? Well, then, you know, we can talk a little bit about EPS. Unknown Attendee, Jack Aarde, Nancy Meyers, Alfred Breaker, VerifyMe, and maybe not this year because we're still on the tipping points page, but in another year, we might be able to talk about it. I absolutely agree. So I get where you're going, and I don't really have a model for you, nothing that we've shared publicly or that I'd be prepared to share here.

Speaker Change: Publicly of ore that I'd be prepared to share here.

Speaker Change: Yeah, what I would say is this this is the reality of where I think we are and a lot of of software.

Speaker Change: Companies are technology company somebody called technology, not a software company, but.

Speaker Change: Is.

There's a certain level of organic growth that you need to be able to demonstrate consistently over a period of time.

Speaker Change: And then you start to get credit for your E. R R and people start to.

Speaker Change: Look forward and they start to model forward. The layering effect of your a or are based upon your organic growth rate given that we don't have the track record of organic growth, we're not getting any benefit of that in our share price calculation and so I do believe that throughout.

Daniel Orlow: What I would say is this is the reality of where I think we are and a lot of software companies are technology companies. Somebody calls it technology, not a software company, but it is. There's a certain level of organic growth that you need to be able to demonstrate consistently over a period of time. And then you start to get credit for your ARR, and people start to look forward, and they start to model the layering effect of your ARR based upon your organic growth rate. But given that we don't have the track record of organic growth, we're not getting any benefit of that in our share price calculation.

Speaker Change: What I think will happen is throughout this year, if we deliver the organic growth. We think we will and then we followed that up with 2025 organic growth. This year I don't think the share price is really going to be tied back to E. P. S. I think it'll be tied back to a perception around modeling the organic growth in the.

Speaker Change: A layering of the E. R R and what that will ultimately then translate to from an EPS perspective, so that that's how I think it will unfold, but I don't know I don't have a crystal ball, but I mean, that's just my best.

Speaker Change: No I appreciate that I appreciate you're just being forthright with that I mean, it's hard to set expectations. When it's all you've done right. Now is just just rebuild the company and a lot of ways. So you bring it to the tipping point should be congratulations for that.

Adam H. Stedham: And so I do believe that throughout this year, if we deliver the organic growth we think we will, and then we will follow that up with 2025. I don't think the share price is really going to be tied back to EPS. I think it'll be close. To a perception around modeling the organic growth in the layering of the ARR and what that will ultimately translate to from an EPS perspective.

Speaker Change: But was curious how youre looking down the road.

Stan: Stan completely.

Speaker Change: Alright, thanks for your time.

Speaker Change: Thank you.

Speaker Change: At this time, we're showing no further questioners in the queue and this does conclude our question and answer session.

Speaker Change: Now I'd like to turn the conference back over to Adam set them for any closing remarks.

Adam: Thank you well. Thank you everybody for attending this is an interesting time of year, because closing out a year. It takes a little longer than closing out a quarter. So not it's not too far away will be on another call with you and I look forward to that and giving you more of an update on the <unk>.

Adam H. Stedham: So that's how I think it will unfold. But I don't know. I don't have a crystal ball, but I mean, that's just my best. No, no, no. I appreciate that. I appreciate your just being forthright with that. I mean, it's hard to set expectations when all you've done right now is just rebuild the company in a lot of ways.

Adam: Answers some of these questions around what do we think is the value of our latest press release any updates on that as well as continued progress of the business in Q1.

Speaker Change: So thanks, everyone for attending and look forward to talking to you again.

Daniel Orlow: So, you know, very, very important. And bringing it to the tipping point should be, you know, congratulations for that. But always curious about how you're looking down the road.

Speaker Change: Yeah.

Speaker Change: The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.

Speaker Change: Okay.

Speaker Change: [music].

Operator: Thanks for your time. Thank you. At this time, we are showing no further questionnaires in the queue, and this does conclude our question and answer session. I would now like to turn the conference back over to Adam Stedham for any closing remarks. Thank you. Well, thank you, everybody, for attending. This is an interesting time of year because closing out a year takes a little longer than closing out a quarter, so it's not too far away.

Adam H. Stedham: We'll be on another call with you, and I look forward to that. And give me more of an update that answers some of these questions around what we think is the value of our latest press release, any updates on that, as well as the continued progress of the business in Q1. So thanks, everyone, for attending, and I look forward to talking to you again. This conference has now concluded. Thank you for attending today's presentation, and you may now disconnect, and more, and the rest, and more. Thanks for watching! and more, and the rest. Thank you for watching! Thank you, and the rest of you. Thank you for watching!

Speaker Change: Yeah.

[noise].

Speaker Change: Yeah.

Okay.

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Speaker Change: Okay.

Okay.

Speaker Change: [music].