Q1 2025 VerifyMe Inc Earnings Call
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The day and welcome to VerifyMe's first quarter, 2025 Financial Lizzo's Conference Call.
All participants will be in listen only mode. Should you need assistance, please signal a comfort specialist by pressing the star key followed by zero.
After today's presentation there will be an opportunity to ask questions. To ask the question, you may press star then one unattached phone. To withdraw your question, please press star then two. Please note, this event is being recorded.
So now to turn the conference over to Nancy Meyers, Chief Financial Officer, please go ahead.
Nancy Meyers: Good morning, everyone, and thank you for joining us today for our earning a call presentation. On the call today, I am joined by Adam Stedham, CEO and President, who will give an operations and strategic updates. Following our management presentation, we will have a Q&A question.
Nancy Meyers: Today's presentation and the answer to questions includes 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.
Nancy Meyers: and on the risk factors of the company's annual report on Form 10K and quarterly reports on Form 10Q. I will now turn the call over to Adam Stedham to discuss the company's strategy.
Thank you, Nancy.
Nancy Meyers: So during the first quarter of 2025, our revenue decreased approximately 23% versus the first quarter last year.
Nancy Meyers: Now, this decline in revenue was due to discontinuing the trust codes operation, the customer in sourcing in 2024, and then some overall softening of customer shipment.
Nancy Meyers: The decline was most pronounced in our premium services which was down 47% versus the comparable quarter.
Nancy Meyers: Now as a reminder, these services have been down significantly in the last two quarters due to the previously announced insourcing of a large client by our large air freight partner.
Nancy Meyers: The negative comparison for this will continue in the Q2 of 2025.
However,
Nancy Meyers: We have reduced operating expenses by approximately 28% versus Q1 of 2024, we're managing our cost in alignment with these revenues.
Nancy Meyers: In addition, we've improved the gross margin of our proactive services within our precision logistics segment.
Nancy Meyers: From an organic growth perspective, we believe this service line presents the best opportunity for growth, and we're pleased with the improvements in growth margin percentage.
Nancy Meyers: So, while we're not immune to the current macroeconomic environment, the positive cash flow from this operating business coupled with our elevated cash level on the balance sheet provides a strong backdrop to create shareholder
Nancy Meyers: At the end of the first quarter, we had a cash balance of $5.7 million. We had no bank debt, and we have a remaining convertible note of 0.8 million, but it's held by insiders and affiliates.
Nancy Meyers: So, at this point, I'd like to discuss our initiatives for creating value for our shareholders.
Nancy Meyers: We continue to pursue efforts to expand our revenues with directly contracted pariship customers.
Our strategy in this area includes three elements.
Nancy Meyers: The first element of the effort is optimizing our direct customer marketing and sales approach.
Nancy Meyers: We previously announced that we would pilot efforts for increased marketing as well as adding additional outside sales representatives.
Nancy Meyers: So the marketing efforts are generating increased inbound lead activity and we expect to refine our business development approach around leveraging marketing efforts to generate inbound sales leads and then those will be handled by an inside sales team.
Nancy Meyers: The second element of our organic growth strategy is developing relationships with additional break carriers and third-party logistics companies.
Nancy Meyers: These customers have expressed the desire to leverage perishes value added services in combination with logistics and brake carriers that are in addition to the single air freight partner that perishes currently leverages.
Nancy Meyers: Therefore, we've begun conversations with additional air freight carriers and third-party logistics companies.
Nancy Meyers: We don't know where these conversations may lead, but we will keep you updated as the conversations for GRIFFS.
Nancy Meyers: as a third element of our organic road strategy is integrating with technology platforms that are related to e-commerce shopping carts and shipping management software applications.
Nancy Meyers: We have projects underway currently to integrate our technology platform with the e-commerce platforms of Shopify and WooCommerce.
Nancy Meyers: and were evaluating other e-commerce and logistics-related software platforms that are leveraged by potential peri-ship customers.
Nancy Meyers: So, at this point, I'd like to shift the conversation from organic growth efforts to our strategic growth efforts.
Nancy Meyers: As I mentioned earlier, the company has 5.7 million of cash as of the end of the first quarter in 2025.
Nancy Meyers: We do not anticipate requiring cash to support the annual operating and public company expenses of VerifyMe in 2025. So we continue to have conversations with both transformative and tuck-in potential
Nancy Meyers: It's very difficult to predict the timing or probability of these types of activities.
Nancy Meyers: and the executive team's experience with creating value-to-acquisitions, positions the company to provide very meaningful shareholder returns.
Nancy Meyers: from the current share price. So at this point, I'll turn the call back over to Nancy, so she can review the financial details of the first quarter.
Nancy Meyers: Thank you, Adam. The first quarter revenue was 4.5 million versus the prior year of 5.8 million, a decrease of 1.3 million. The decrease is primarily due to the decrease in demand across several of our proactive customers, as well as one customer shift to their coal chain strategy.
Nancy Meyers: This continued contract with one customer and our premium services, as has already been disclosed, all set by an increase in remaining premium revenue.
Nancy Meyers: Gross profit decreased $0.8 million to $1.5 million in Q1 2025 versus $2.3 million in Q1 2024.
Nancy Meyers: As a percentage of revenue growth margin was 33% in Q1 of 2025 versus 39% in Q1 2024.
Nancy Meyers: While the Porter did result in a decrease in year-over-year gross profit percentage, the loss of the one customer in the premium services was partially mitigated by improvements in proactive services.
Nancy Meyers: Operating expenses were 2.1 million in Q1 of 2025 versus 2.9 million in Q1 of 2024.
Nancy Meyers: This decrease in operating expenses offsets the decrease in growth margin in the quarter. In addition to the reduction in operating costs with the divestiture of trespos, the company also implemented cost-cutting measures in precision logistics.
Nancy Meyers: Our net loss for the quarter was 0.6 million or loss of 5 cents per diluted share in both Q1 of 2025 and Q1 of 2024.
Nancy Meyers: Although our subsidy was lower in Q1 2025 versus Q1 2024, the company continues to take steps to develop efficiencies.
Nancy Meyers: On the last slide is our balance sheet, as of March 31, 2025.
Nancy Meyers: Our cash as of March 31st was $5.7 million, an increase of $2.9 million from $2.8 million on December 31st, 2024.
Nancy Meyers: As noted on our last call in January , we entered into an inducement letter agreement and approximately 1.5 million warrants were exercised for net proceeds of 4.3 million.
Nancy Meyers: In consideration for the inducement letter agreement, a new unregistered warrant purchased up to approximately $1.5 million shares at a price of $4.00 were issued.
Nancy Meyers: With these proceeds, we retired all outstanding bank debts. In addition, we have converted approximately a third of our convertible notes, and the only remaining convertible notes are held by insiders and affiliated parties.
Adam Stedham: As of March 31, 2025, we had 0.8 million remaining on our convertible note. There are no borrowings under our line of credit, and we have 1 million available to us. With that, I would like to turn the call back to Adam.
Thank you, Nancy.
Adam Stedham: So at this point, I'd like to share that Nancy Meyers has decided she intends to retire from full-time work this summer. The entire board of directors, including myself, St. Nancy, for all she's done for VerifyMe.
Adam Stedham: We anticipate we will have a new vice president finance on board next week.
Speaker Change: Jennifer Colo will fill this role and we expect she will become CFO VerifyMe after a transition period with Nancy.
Speaker Change: After her retirement from full-time work, we anticipate we will continue to have a part-time relationship with Nancy for a period of time.
Speaker Change: So I've known both Nancy and Jennifer for many years and the two of them have actually successfully worked together for many years. So I'm confident that the company is very well positioned for a seamless transition and ongoing success.
Speaker Change: To add on to that, after four years at VerifyMe, I've made the decision to retire. This journey has been truly rewarding and I am proud of the progress we've made.
Speaker Change: As I prepare for this transition, I am committed to ensuring a seamless handover. I will be working closely with Adam and Jennifer to provide guidance and continuity.
Speaker Change: VerifyMe remains in a strong financial position, and I have full confidence in the team's ability to build on our progress. While I look forward to this next chapter, I am grateful for the support and collaboration I've experienced here.
At this point, we will open the call for questions.
Thank you.
Speaker Change: To ask a question, you may press star then one on your text on phone. If you're using a speaker phone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two.
Speaker Change: The first question comes from Michael Petusky with Barrington Research. Please go ahead.
Speaker Change: Hey, good morning everyone and
Michael Pachewski: Hey, great. Congratulations, Nancy, on the upcoming retirement. So, a couple questions. I guess Adam, you sort of laid out organic growth opportunities and then touched a little bit upon.
The fact that you're bound on cheap positions with guys to potentially do something externally. I'm just curious in terms of your capital allocation priorities, I mean...
Michael Pachewski: How do you sort of look at that as you move forward? Is there one of those organics, bullets that's the most important extra? Could you just sort of talk about that a little bit?
Michael Pachewski: Absolutely. So what we've seen from an organic perspective, I'll tell you about that a little bit, really, any investments we're making are funded by the business so they're not going to require capital per say from the cash we have on hand, although they would subtract from the cash generator from operations. So we do think that there's minimal investment involved in them. And really, if you look at where the company
Michael Pachewski: Prioritized a lot of its time. The company was founded. The company being peryship was founded.
Michael Pachewski: and built on a very critical relationship with the largest air freight company in the entire world. And we continue to have a wonderful relationship with them, with, as Sted, we can't ignore the fact that
Michael Pachewski: There are substantial opportunities in the marketplace that we've never been able to take advantage of because they would be contingent upon relationships with other providers.
So, our major focus right now.
Adam Stedham
Michael Pachewski: at Point of Service for many of these shippers and companies that are deciding to move forward with an e-commerce strategy. So that's critical to interface there. And if you're going to interface there, these companies, they already have priorities around whether they want to use this great service or that great service. So we plan to have relationships with all of the freight services.
Michael Pachewski: So that we're not pushing someone to one freight provider or another, but we will enable our customers to make whatever decision they want from a freight perspective and then leverage our service.
Michael Pachewski: So in the past, we needed to have them choose us for freight and service going forward. We plan to be in a situation where they can leverage our service regardless of their freight decision. So that's what we're investing heavily is to unlock that potential and keep in mind a large percentage of our customers already use multiple freight providers.
Michael Pachewski: and they're only able to leverage our service for part of that and they would like to be able to leverage our service for more. So that's why we're focused there and we're investing on building that out.
Michael Pachewski: One of our challenges as a company is our side. We are a very small company to operate in the public equity environment.
So there are opportunities for tuck-in.
Michael Pachewski: Acquisitions that we think could be beneficial to shareholders and create value.
Michael Pachewski: But we're also aware that something more transformative could create potentially more value because it would help rectify the challenge of being a company hour-size in a public equity environment.
Did that answer the question for you, Michael?
Michael Pachewski: Just in terms of external growth, I mean would you expect that any external growth you guys looked at would in any way be sort of connected to the logistics business or or could it be something relatively different or adjacent to logistics?
We
Both, we have not excluded.
We haven't excluded either.
Michael Pachewski: and the reason we say that is because we think one of the major vehicles that we have for creating shareholder value over the long term is the combination of the cash on hand, the strength of the balance sheet, and then the ATM, assuming that we make successful acquisitions that generate shareholder value and the stock gets to a price point that enables the ATM to deliver more shareholder value. So we understand that we have an opportunity to create value.
you both.
in the Logistics Space and potentially in...
Michael Pachewski: a space outside of logistics if the opportunity was strong enough. Now that probably the hurdle rate or the hurdle for something outside of logistics would be higher than something inside of logistics, but that's how we're doing it.
Speaker Change: Okay, great. Just a couple of these may be more oriented towards Nancy, but they may not. I'll take the answers wherever I can get them. Do you have the, I know it's tiny, but do you have the revenue generation for the authentication business in the quarter by any chance?
Yeah, that was 26 million.
26,000
Speaker Change: 26 million, I will sell out of my chair. Okay. Okay. Thank you.
Speaker Change: You know, in Q2 and maybe improving to something closer to, you know, down 10% in the second half or something to that effect. And then I'm just curious also about op-ax. Obviously, you guys have done a really good job very quickly. It seems like in reducing that figure. I mean, is that a decent baseline figure to model going forward or where they're one time?
Aspects to that, to that result. Thanks.
So we will have a challenging comparison in Q2.
Speaker Change: and then after that we think that the comparison becomes a little easier. A major part of what we're trying to do is we're trying to really focus on our proactive revenue. That's the direct customer revenue.
Speaker Change: As part of that, we anticipate the revenue subcontracted to the air freight carrier our premium side will continue to shrink as a percentage of our overall revenue.
Speaker Change: and we think that we've implemented process improvements as we scale revenue back up, the costs won't necessarily scale back up with it.
Speaker Change: So I think I was model kind of expensive, relatively flat with where they are right now, revenue to be a difficult comparison next quarter, and then hopefully start to be a more favorable comparison the second half of the year.
Speaker Change: I have to ask one final question based on that last sentence. You wouldn't expect positive revenue comps in the second half, would you?
Um...
Not organically no.
Okay, all right, very good. Thanks, guys. Appreciate it.
Speaker Change: The next question comes from Jack Aarde, with Max and Goop, please go ahead.
Speaker Change: Okay, great, congrats on, hey Adam, congrats to Nancy on the upcoming retirement. Adam, good to see you guys' balance or expense is pretty well in this.
this current environment. I'll leave it at that.
Speaker Change: Last quarter, you talked about how shipments from existing Precision Logistics customers were
We're down about 6% I think for the full year.
Speaker Change: But you did add a bunch of new customers. I think new customers were up 6%.
Speaker Change: and we're going to take some time probably to see the benefits from those new customers, especially when the shipments are down. Can you maybe just do things there? Can you maybe talk about your new customers added in the first quarter or the first half of this here so far?
Speaker Change: and then also do you expect to, how are those customers that were added last year? Do you still have a lot of them? Are they ramping up? Are they kind of even keeled? Would love to just get a follow-up on those customer ads?
Speaker Change: and the first quarter has flown down from last year. And overall, we're not experiencing a significant loss of customers, but we've seen an overall softening of...
Speaker Change: What we believe, and I'll just give you what we believe, so if you look at the majority of our revenue in the proactive side, our direct customer revenue, is tied to e-commerce. E-commerce is tied in many ways to consumer confidence. People have to buy products online to have them shipped, and so many of our customers
Speaker Change: Some level of softening and so even the new customers we added last year are seeing a softening from what they projected.
Speaker Change: So, we are successfully adding customers, but at this point, the additional volume from the new customers is not offsetting the softening of the install customer base.
Speaker Change: Got it, that makes a lot of sense. Okay, I appreciate the color there.
and then...
Speaker Change: You know, on the strategic front, I know there's only so much you can say and I would love to know more, but, you know, there's a lot of moving parts behind the scenes for sure. Can you maybe just provide the latest public update on the Inx business that you guys do have in that technology and if that's...
Speaker Change: Just clarified, is that part of the strategic discussions? Anything you could share there would be helpful.
So, so we have...
Speaker Change: We have had a conversation with a company that is in a different...
Vertical inside of the ink world.
And we look at our current ink business.
Speaker Change: and we do think that if somehow we were able to make an acquisition that was synergistic with that to where you would have multiple ink products that were purchased by the same customer.
Speaker Change: that could create value. So we're very aware of that and we're open to that approach. That particular conversation I mentioned has not resulted.
Speaker Change: and anything meaningful going forward, but we're aware of that. With that said, I think the value that could be created synergistically by an acquisition of precision logistics is much higher if you look at the overwhelming majority of our revenue within precision logistics.
Speaker Change: We're trying to keep a very, very open and patient mind towards what is the opportunity that that's leveraged.
Speaker Change: The assets that we have available to create shareholder value from our current share price, which we think doesn't really represent the real value of the company at this point, so we're trying to rectify that.
Speaker Change: Understood. Understood. I appreciate the color there. That's actually that's helpful for what you can't provide and I guess
Speaker Change: How do you feel today relative to where you were three months ago or so in terms of the level of visibility and just kind of overall comfort where you're at? You have a lot more cash on the balance sheet obviously. You're going to good.
Speaker Change: I think that you're in a stronger financial position. Obviously the macro has been challenging. How do you feel overall about the opportunity going forward to VerifyMe relative to a few months ago? Thanks.
Speaker Change: If you're being completely realistic and objective, you have to look at things from two situations.
What's the downside risk and what's the upside of opportunity?
Speaker Change: So I feel extremely comfortable from a downside risk perspective. I think the strength of the balance sheet, the strength of the business that we have, it puts us in a very comfortable situation there. So now the key is how do we maximize the upside opportunity?
What's happening, particularly in the logistics space?
Speaker Change: I think is actually favorable for us if we are able to figure out how to take advantage of it. You're seeing tremendous change. You're seeing significant changes.
Speaker Change: and this 2 plus 3 and a DHL made a major acquisition in the U.S.
Speaker Change: You're seeing changes with UPS, you're seeing changes with FedEx, you're seeing changes with USPS, you're seeing changes with Amazon.
Speaker Change: So all of these changes are creating a marketplace that's receptive to looking at new ideas and receptive to looking at approaches to meet the specific needs of their business.
Speaker Change: and so that's the vertical we've been in. We have a specific client that we meet a specific need for and historically at times they've been unreceptive to a conversation to us.
Speaker Change: Either because they wanted a different freight partner than we were allowing to or they had entered into some other agreement and they just weren't really open to looking at things in a different way. So what we're finding right now is although there is some chaos in the marketplace by all of the changes happening.
Speaker Change: to help them react to everything that is happening in the markets. So all in all, I feel very favorable to where we are. I feel extremely comfortable with any downside risk, and I'm very optimistic about the upside potential.
Okay, fantastic. I appreciate the color Adam. Thanks.
Speaker Change: This concludes our question and answer session. I would like to turn the conference back over to Adam Stedham for any closing remarks. Please go ahead.
Thank you very much, and thanks everyone for joining.
Speaker Change: So, this is our first score. We look forward to having a call and updating you.
Speaker Change: on the next call, hopefully, particularly on the strategic side. Over the next couple of quarters we'll be able to give some updates on that. Once again, I would like to thank Nancy for all that she's done for us.
Speaker Change: Jen Kola is actually sitting in the room with us listening to this call, so I look forward to you all being able to hear from her on the next call. So thanks again and look forward to our next call.