Q4 2024 VerifyMe Inc Earnings Call
Speaker Change: Good morning everyone and welcome to the VerifyMe 4th quarter, 2024 Financial Results Conference call.
Speaker Change: All participants will be in a listen only mode. Should you need assistance, please signal comfort specialist by pressing the star key followed by zero.
Speaker Change: After today's presentation, we have an opportunity to ask questions. Ask a question. You may press star and then one using a touchdown telephone. So, withdraw your questions. You may press star and two.
Please also note, today's event is being recorded.
Speaker Change: At this time I'd like to turn the floor over to Nancy Meyers, CFO . Ma'am, please go ahead.
Speaker Change: Good morning everyone, and thank you for joining us today for our earnings call presentation. On the call today, I am 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.
Speaker Change: I would like to bring your attention to the note on forward looking statements on slide three.
Today's presentation and the answers to questions include forward-looking statements.
Speaker Change: 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 statement's caption and on the risk factors of the company's annual report on form 10-T and quarterly reports on Form 10-Q .
Speaker Change: I will now turn the call of Adam Stedham for some opening remarks.
Thank you, Nancy.
So 2024 was a significant year for VerifyMe.
Speaker Change: during the year. We invested significant time, energy, and resources into the code portion of our authentication segment.
Speaker Change: As we discussed on our last earnings call, these investments did not yield the returns we desired, and the investment in time and resources dragged on overall company growth.
Speaker Change: So, our annual revenue for 2024 was 4% below the revenue in 2023. However, we did experience year-over-year improvements in gross profit.
Speaker Change: Gross Margin, and Adjusted Evido. In addition, the company grew our total cash net of debt in 2024.
Speaker Change: So during our last earnings call, the company shared that we're taking steps to reduce investments in areas that are not providing the desired returns, and we're diligently working on strategic investments to deliver shareholder value.
Speaker Change: During January of 2025, we further expanded our capabilities in this area by completing a $4.7 million warrants-inducing capital raise and retiring the company's bank debt.
Speaker Change: In addition, our convertible debt reduced from 1.1 million to 800,000.
Speaker Change: The remaining holders of convertible notes are all affiliates and members of the board of directors.
Shoe.
Speaker Change: After adding further to verifying these options to generate additional capital and liquidity, we've also filed a $15.8 million dollar at the market sales offering to be used at our discretion.
Speaker Change: So as a result of all of these steps, the company is sufficiently capitalized to pursue strategies aimed at rewarding the shareholders.
Speaker Change: We continue to actively work with bankers and advisors evaluating multiple options and defining our plans.
Speaker Change: So, let me shift the conversation to our existing operations. So, first I'd like to discuss our precision logistics segment.
Speaker Change: It's important to note, the peryship business in this segment is a positive cash generating business that provides a valuable service to the marketplace and we're continuing to optimize our sales strategy.
Speaker Change: In 2024, we increased the number of proactive customers by 6% over 2023.
Speaker Change: However, the shipments by existing customers in the proactive service line were down 6% in 24 versus the previous year.
So we've hired additional sales resources in 24.
Speaker Change: and we're also piloting various marketing strategies to optimize our approach to marketing and sales. So we believe that we'll define the optimum sales strategy for this business.
Speaker Change: So, at this point, I'd like to mention our authentication segment.
Speaker Change: The company divested the Trust Coast Global Business on December 8, 2024. During 2024, this business had an operating loss of $1.2 million, excluding impairment.
Our authentication segment also includes our ink business.
Speaker Change: We're continuing to review our strategy for the Inc. business, but it's important to consider that this portion of the company represents less than 1% of overall company revenues.
Speaker Change: So overall, I feel that we've taken the steps to position the company to create value for shareholders going forward. So at this point, I'd like to turn the call back over to Nancy Meyers, our CFO , and
Thank you, Adam.
Nancy Meyers: The fourth quarter revenue was $7.7 million versus the prior year of $8.7 million, a decrease of $1 million.
Nancy Meyers: The decrease in our precision logistics statement primarily relates to a discontinued contract with one customer in our premium services, as has already been disclosed.
Nancy Meyers: In addition, with Thanksgiving arriving later than usual this year, there were fewer days from Black Friday to December 31st, making this the short of peak season since 2019.
Nancy Meyers: The growth in the authentication statement did not materialize in 2024, and as Adam mentioned we divested a trust code's global business on December 8, 2024.
Nancy Meyers: Growth profit decreased 0.5 million to 2.4 million in Q4 2024 versus 2.9 million in Q4 2023.
Nancy Meyers: and the percentage of revenue gross margin was 32% in Q4 2024 versus 33% in Q4 of 2023.
Nancy Meyers: While the Porter did result in a decrease in year-over-year growth profit percentage, the loss of the one customer in the premium services was partially mitigated by other process improvements made.
Nancy Meyers: During our last earning call, we stated that we anticipated our full year 2024 gross margin to exceed full year 2023, even though we expected Q4 gross margin percentage to be below Q3 due to the seasonality associated with our proactive revenue.
Nancy Meyers: Our full year growth margin was 36% compared to 32% in 2023.
Nancy Meyers: Operating expenses were 2.8 million in Q4 of 24, and in Q4 of 2023, Segment Management and Technology expenses decreased 0.1 million for the Porter, however this was offset by an increase in sales and marketing spend.
Nancy Meyers: Our net loss for the quarter was 0.5 million, or a loss of 5 cents per diluted share. Compare to net income of less than 0.1 million in the fourth quarter of 2023. Again, the main driver is the loss of one customer in our premium services.
Nancy Meyers: Although our destiny that was lower in Q4 of 2024 versus Q4 of 2023
Nancy Meyers: It was positive for the sixth quarter in a row and improved to $1 million for the year 2024 versus $0.4 million for the year 2023.
Nancy Meyers: On the last slide is our balance sheet as of December 31, 2024.
Nancy Meyers: Our cash as of December 31st was $2.8 million, a decrease of $0.3 million from $3.1 million on December 31st, 2023.
Nancy Meyers: During the year, our use of cash included 0.6 million in repayment of debt and interest.
Nancy Meyers: Through the deceiving reality of our precision logistics segment, our AR unbuild revenue and accounts payable are higher at year end compared to the other three quarters.
Nancy Meyers: As of December 31, 2024, we had .9 million remaining on our mode and 1.1 million on our convertible note.
Nancy Meyers: There are no bombs under our line of credit and we have 1 million available to us.
Richard Greulich, Adam Stedham, Michael Petusky
Nancy Meyers: In January , we entered into an inducement letter agreement and approximately 1.5 million for extra 5 to 4.7 million. In consideration for the agreement, a new unregistered warrant for approximately 1.5 million at a price of $4.00 with an issued.
Speaker Change: As Adam mentioned, with the proceeds from this transaction, we pay down the remaining debt on our term loan and in addition, we have converted about a third of the convertible notes.
Speaker Change: With that, I would like to turn the call back to Adam.
Adam Stedham: So thank you Nancy. Before we open the call for questions, I'd really like to review the current situation for the company.
Adam Stedham: So the company operates a cash flow positive business that provides a differentiated service for shippers of time and temperature sensitive goods.
Adam Stedham: We're increasing our efforts to identify and pursue avenues for expansion of our precision
Adam Stedham: We have a strong balance sheet in 46 cents per share of cash on hand. Also, the company has access to additional low-cost capital to pursue avenues for meaningful shareholder value
Adam Stedham: So overall, I'm pleased by the foundation we've created to move the company forward and and reward our shareholders.
Adam Stedham: So at this point, let's open the call up for questions and answers.
Speaker Change: Ladies and gentlemen, at this time we'll be in the question and answer session to ask a question you may press star and then one on your touch to your telephones. If you are using a speaker phone, we do ask that you please pick up the handset prior to pressing the keys to ensure the best sound quality.
So with your all your questions, you may press star and two.
Speaker Change: Again, that is star and then one to join the question queue.
We'll pause materially to assemble the roster.
Speaker Change: In our first question today, it comes from Michael Petusky from Berrington Research. Please go ahead with your question
Michael Tatusky: Hey, good morning. Yeah, I think good morning. Yeah, I think could you help me in terms of your expected share count for Q1, just to sort of level set.
Michael Tatusky: Yeah, so it'll be about 12 and a half million.
Speaker Change: and then in terms of Adam, I would assume in terms of logistics, I Q1 , trends, I would assume that probably...
Michael Tatusky: Soft, just sort of from a macro perspective and I'm assuming, you know, in terms of, you know, company specifics and any commentary around what you're getting back there.
Michael Tatusky: Sure, sure. I think that there's a couple of factors to it. It is...
Michael Tatusky: First off, the previously announced loss of the one customer will continue to be a drag on comparatives in Q1 and Q2, that event happened at the end of Q2 last year. So from that perspective on the premium side, that will continue to be a drag. We have had some growth in our direct premium business, but that's...
not large enough to offset that one large customer.
Michael Tatusky: The business is relatively stable, not even relatively, it's very stable. With that said, overall market conditions do seem to be down a little bit. The total number of shipments are down a bit as we pointed out.
We try to give our-
Michael Tatusky: Effectively a same-store sales number for you, so last year we did see that down slightly, that trend continues to be prevalent. We are adding more customers, and so hopefully that's balancing out the increase in number of customers and the reduction of shipping with existing customers.
Speaker Change: Okay, then really the last area I just want to touch on it doesn't appear to me that you guys have really provided any guidance around what you expect in 25 any comment on on that and
You know, and any help that you could give on that.
Speaker Change: No, we haven't given any guidance, and we don't plan on giving guidance, so I think overall I would look at the business and assume it's relatively stable, we are very stable.
Speaker Change: Other than the one customer that we lost last year, on top of that, we made significant efforts last year to line our cost with the changes that were associated with the loss of that customer. So at this point, we've aligned cost with revenue, with that customer, and now we're continuing to look to optimize our sale, which should lead to new customers and continue to add our proactive customer base.
Speaker Change: In combination with the fact that much of our 2025 will be based upon how effectively we deploy the resources that we have available to us, which is difficult.
Speaker Change: to predict the timing of anything like that. The money is not burning a hole in our pocket. We are adamant about diligently working very hard to identify options that can provide meaningful shareholder return with minimal risk.
Speaker Change: and so it's hard to predict the timing of those types of events and that's why overall that's why we're not giving guidance for the year.
Speaker Change: Can I just sort of ask a part B to that last question and then I'll get off here. The fourth quarter came in softer than I had.
I expect that I expected you guys to be able to mitigate more of that set-act loss than you ended up doing.
Speaker Change: Is it reasonable to model to the pastoral aftest that, hey, sort of that low double digit decline on the top line really should be sort of assumed at least through the first half.
given the way that comes.
Pumps Roll through due to that law.
Speaker Change: So I don't think, I think that's a very reasonable modeling assumption given all the factors. As we said, we live in a somewhat unpredictable world right now and then share some
Speaker Change: Yeah, there's some very exciting things happening and then there's some things that are not exciting happening in the world, but from a modeling perspective, I think that's a smart move on your part.
Okay, very good. Thanks.
Not a problem.
Speaker Change: And once again, if you would like to ask a question, please press star and men 1 to withdraw your questions, you may press star and
2.
Speaker Change: and that a star and then one to join the question, Q. [inaudible]
Speaker Change: And ladies and gentlemen, at this time in showing no additional questions, I'd like to turn the floor back over to management for any closing remarks.
Speaker Change: Perfect, thank you. So, appreciate everybody joining the call. As we said, 2024 was quite the transition year for the company, and I think we've successfully navigated that transition. The company has set a strong foundation for growth, and we look forward to continuing to communicate with you throughout 2025. So, thank you.
Richard Greulich, Adam Stedham, Michael Petusky
Speaker Change: And with that, we'll be concluding today's conference call and presentation. We do thank you for joining. You may now disconnect your lines.