VRME - Earnings call transcript Q2 2024

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Operator

Good day, and welcome to the VerifyMe Second Quarter 2024 Financial Results Conference Call. [Operator Instructions] Please note today's event is being recorded.

I'd now like 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 earnings call presentation.

I will by strategic give today, and Stedham, update. call who President, an the am Adam joined CEO On operations and

would questions statements under actual materially number company's turn of on statements factors, on Form projected Following a the due Stedham X. understood described Today's risk the forward-looking attention we will the that and those of presentation, the XX-K to Adam Slide statements. to the like annual for the on answers now from a It over and Form XX-Q. I session. I be to reports to forward-looking our caption opening including differ your some forward-looking on to those call results on and will factors quarterly note could presentation report remarks. bring include management Q&A have should

Adam Stedham

to gross Welcome, revenue gross had now Nancy. margin, I'm this is everyone. that EBITDA. margin is adjusted quarter positive is. Noteworthy flat the percentage adjusted you, significant with effectively XXXX is of Thank that we that profit or EBITDA XXXX, pleased consecutive although gross fourth QX in and improvement report

announced large that subcontracted anticipate HX that XXXX. anticipate and single over us adjusted previously to the positive was EBITDA. We be we change mid-single-digit for announced XXXX the we from but contract FedEx, QX EBITDA we in anticipate Given to adjusted revenue may previously negative a slightly full growth year

line gross address a and EBITDA HX drivers bit Precision which the XXXX. With fluctuations revenue will we that exceed XXXX in further our with existing profit, margin we now As gross the for percentage I'll in the be and progress evaluate Logistics, like XXXX, roughly adjusted will more in is segment revenue a within customer XXXX. minute. shipments said, authentication we the much believe anticipate

impacted our that unexpected However, in same not revenue repeat extent do impact to the confidence have to are XXXX. XXXX types items believe XXXX of the I in point like have continue likely to because that would or we to out in we results growth

of Now debt we flat flow continue will cash than better our XXXX for this sufficient of organic to net and We of net roughly our slightly have to current we to execute debt point slightly cash anticipate for year. last positive that growth be is current all plans. cash

continue we're evaluating strategy around We in in and shares shares. the announced repurchasing minimal thus our to have has company place buyback XXXX, repurchased far our

options shareholders' utilize We continue maximize to to all capital monitor our to available the value.

XXXX, segment X operating XXXX So let's revenue QX to Logistics is XXXX. Precision segments. above in conversation shift QX our The the QX just as

not FedEx X However, this is had shipping growth previously the contract. announced to is revenue contributor previously down marketplace the in XXXX in volumes expected. are second change is versus XXXX. the partial But One we to the experiencing the factor the

for So XXXX. XXXX, X% with HX are shipments HX versus our existing down customers

However, we've our proactive line increased XXXX HX in XXXX. service versus by X% our within customers

is in to in add to these our But to a customer which volume our in in we're base. customers. In pleased incremental the we and increase new the contribution reductions by the been will our now, strongest for growth new we're sales grow efforts. market revenues existing expanding contributed opportunity our by the contribution offset efforts interim far with of anticipate sales So with our has volumes year-over-year thus but existing time,

our XXXX. add last We additional continue in the Pennsylvania. we did our and between hire new expanded remainder represented expected as in and call. of adding Maine for our plan efforts customers we on X XXXX then focus region So to sales to announced, That's the we on

will and sales targeted guide lessons most our value And the force this for for company. for our believe geographic approach to expanding successes expansion continue year in the create XXXX. plans our plans will our a with learned geographic We from

is So now longer we're effort has element relationship and meaningful any to subsequent not long-term on and involved but opportunity critical the the time formalize the We've of bit. dedicating would and a length is let But anticipated. a with of process generation with significant the revenue to in our energy initiative progress plan a anticipated than shift We we believe associated authentication the very effort for that undermine to taken critical way this value. our the sooner relationship. made we segment Amazon. to me I realize shareholder process does deliver the this occur

for most Amazon importantly, customers' value Amazon, continue to VerifyMe significant to our creates with and opportunity believe We of customers shareholders. you, our mutual create consumers our to relationship and, brand

In time in XXXX period addition our same APAC will important continue relationships, business, trends revenues We as for controls to we our anticipate forward authentication and to for our full for goes HX to the and future. strategic other ink the in year exceed and see positive these that on our XXXX the near sales. Amazon regulatory events updating look you on revenues I relationship,

to financial So back CFO, turn the Nancy report. at over I'd to to our provide this like a Meyers, call point, more detailed

Nancy Meyers

Adam. you, Thank

XXXX Gross XXXX. $X.X The of or QX the XX% both million profit $X.X prior increased year second million was in flat million $X.X $X.X Precision in and our effectively remained versus in Logistics versus authentication to $X.X quarter million. QX revenue Revenue segments. million

in a versus service shift increased and to As our the in well customer in reflect segment in Precision continues XXXX gross profit year-over-year revenue, to XX% offerings in the has as of improvements margin mix XXXX. as increase process percentage Logistics made. gross XX% The company

gross margin We to percentage be year at change full the margins associated revenue. Overall, from $X.X effectively will 'XX million. seasonality year were QX to anticipate be flat gross due XXXX. of result FedEx, margin QX our full anticipate expenses a gross XXXX the subcontracts As below to announced operating our we exceed HX our HX and to X below significant proactive with year-over-year previously

to share a per of loss loss million by in quarter million or of $X.XX Our $X of loss share. a $X.X $X.X QX diluted loss $X.XX a improved or a net versus loss diluted XXXX per million for of the

for $X.X second XXXX. $X.X million adjusted to Our of EBITDA the by increased positive quarter million

On the of as last XX, June slide our XXXX. balance sheet is

cash XX million, on as from of June $X.X $X.X of million is XX, million December $X.X a Our decrease XXXX.

XXXX, unbilled X year-end X million at the of repayment During of Precision months cash Due to use Logistics included first debt $X.X our of are seasonality the AR, interest. payable in our of the accounts segment, other to quarters. our higher revenue compared and and

have XX, on us. With available turn I June credit, to million of loan to of million borrowings under that, $X.X like XXXX, on to There no $X would we call $X.X back are line million have our As the note. and our our convertible we Adam. remaining and

Adam Stedham

you, Nancy. Thank

be company now headwinds that to with focused I've desire. and forward. addition, So the shipping growth. of we be shied some on we've been had about for slower pivoting the to volumes. With marketplace I hard transformation from partial in authentication And and company continues adoption away moving continue not from a to The year, the said, traceability for we than work services of

We formalized. have that strategy sales are a hold key healthy balance firm sheet, being taking and that a relationships is

it's is Our the ever stronger than growing positioning marketplace been. in

questions. the at point, and answer So happy call turn over any let's to this

Operator

first today's Group. question And Jack Maxim Aarde Instructions] comes Vander with [Operator from

Jack Vander Aarde

since see loss. guidance, know a like your I good adjusted had congrats, quarter third be a Nancy, EBITDA to consecutive quarter slight taken It a of and am bit, you've EBITDA positive but it lower you loss it could the fourth little aware a the I be comments. Adam over. Great. to Okay. it's could sounds -- loss,

comments supposed that see understand So following and get your the that, Any it's for really on but expectations good to I'd perspective conference. to I year. your the just and GSX had? your you Adam, be like to takeaways experience positive

Adam Stedham

great So question.

was So quite definitely, it interesting.

takeaway us much this is it as to impacted it's -- big and year, impacting the be X think same others. seems I

the terms Act, shift are If were things of many many the many for regulations have cautiously XXXX the happen. are Food others. so around don't beginning year. of many conference Modernization because why adoption, things across election things you the everybody is adoption things intelligent industry have taking the more look slower this than to from of companies at to codes, They expected. going what's out these know of there seems much and until the to slow. thinks the barcodes an It Safety of full They are the XXXX sessions of There like in

and growth a companies this the which slowed adoption. wait the are Therefore, the of it see revenue taking many year, to the So has some of marketplace. suppliers slowed

at that the thought said, you the deadlines overall no really important. With was delay. if -- indication are lot not look there's going landscape, there's of to a I So that really that

these XXXX and requirements planning as of XXXX. about that the customers they're are to plan into having us on budgeting optimism So January doing and place Many speak, we for of gives going their strategic XXXX.

a a overview what's very thought interesting and was I -- industry. So was that in insightful of the it happening

Jack Vander Aarde

as that I Investor circle just getting you time appreciate like you like over optimistic numbers? of you I back of plan those margins just outlined your of to do without feel kind Great. If for Okay. CAGR you adjusted into feel over very color. and kind do feel flat certain percent. XXXX. those you you How as maybe of X-year growth your way a despite about XX% up do still could well No, a kind about to maybe about head it's do that XXXX track sound on a target X think I XX-plus years. at still? targets too you're EBITDA Day, And growth And specific, marching how XXXX? --

Adam Stedham

significant barcodes. that modernization in the food assuming feel safety in a society do of about terms the that of in move doesn't environment I that, to assuming good and marketplace change, terms shift the So have and regulatory forward continues

and subcontracted knew working the work us going time, not to our on from if that that were indicated at to was an internally. continue some We've look you to segment, Precision grow. that period over being If of Logistics on was we solution FedEx year look they this of AI you X-year the

as those reductions the us. It base long-term goes so those X-year growth The to in, it's of the we shipments through This to sales throughout hit cycles, over growth excited pipeline, normal than they've to And upon on year, base. We had. as salespeople had we've faster business. that return, anticipated proactive incremental very existing about coming continue and from year our and of that period. feel anticipated, side. with anticipate kick But our about period wouldn't be were customer time ebbs economic the the our we a we the us offset but that X-year were the flows didn't good continuing existing this they excited continue grow see by dependent hired customer we

believe we very side there that the to this Logistics significant aren't to confidence continue are strong there to feel precision drive on going as regulatory we as that's the have well. authentication So business, long as there changes drivers

Jack Vander Aarde

Okay. X those Great. but Very existing X% of much just just just have were in I Did are because appreciate correct? -- it. XX -- from customers customers, year-over-year, XH more the X% point, correctly year-over-year. And shipments may I up parcel hear missed to new Is there. from down shipments color clarify from for kind that

Adam Stedham

Not exactly.

done mixed we're up I shipment Our kind on X% so year-over-year. volumes all this just differently, it the are Maybe volumes, down you. have of shipment clear, I but should

customers up Our is X%. total new

So of we've number added significant a customers.

other the volumes number with hand, and year-over-year I'm total existing on one comparing on year-over-year. the the I'm customers comparing customers of So hand,

Jack Vander Aarde

have and much there. glad appreciate the growth update cash the Very to sufficient Well, Makes continue I you clarity it. Got to organic hear sense. objectives. appreciate

Operator

Petusky question Barrington And comes next Research. John from with Michael our today

Michael Petusky

normal I'm that Adam, Or the impact any did the June? Or there in get some through business that sort from quarter business? did did was curious, actually of any FedEx Premium as continue -- into quarter? so of the

Adam Stedham

into did. the X/X quarter It transitioned. is the transitioned did midway It when between It come through it and quarter.

Michael Petusky

by any there impact chance? Is Okay. that any quantification of

Adam Stedham

we've don't quantification I out that. put publicly any on think

Michael Petusky

been just sort business And comments, additional Okay. Does premium your that remains. business just this, All and curious, for be then I'm that at 'XX or that did your overreading remaining the confidence transition, I there's on right. And curious, of will believe, but you've are FedEx, totally 'XX. giving indicate not? hey, any 'XX, I your continue sense I'm foreseeable that, comments premium future but around don't may

Adam Stedham

are I'll what We're FedEx mutual strategy pleased have what can answer with FedEx, so contracts us, that with directly, very to about the gives renewal What existing renewal our with strategies aware us when has with 'XX. come we come and at with with the FedEx but I customers up customers up in and very transparent the us answer combination they're when I say with and indirectly. -- for shared that's looking really for relationship those confidence we're about their can't try of

Michael Petusky

the maybe a it is only think whatever remain we're right? that of that is, there couple right, talking X, of X I premium, of about couple up million remaining that make contracts, a

Adam Stedham

yes. Right. [indiscernible]. There's only a small It's number,

Michael Petusky

Okay.

mean, your can up sort So ask modeling? comment? longer-term for contracts how that in we 'XX? do I Is come just those of read I start sort should to essentially of

Adam Stedham

how that's it. From Yes, a it. perspective, how I would that's think modeling would about about think I

Michael Petusky

Okay.

And so assume may fair? modeling if couple dollar a intuitively assume was then that I million Is prudent out to here. X years of would multiple be that 'XX it drag of in kind

Adam Stedham

And less X to that, that -- exercise that's I it's I the thing from components, X.X about, remember to right Strategy Day, hard -- you now, it's back the perspective, would now. to predict much we other revenue. X I types world that you hard modeling there's fair believe X the if a think need in From think from years model. a of to -- months think there's way now,

basis, So business at at part way most a premium this we're there's force small actually traditional revenue, premium experiencing premium as selling customers us direct our was the revenue, gross us, our for a And margin the which where there small that's effectively but subcontracting on had very very that there's growth basis, that's point. it's Strategy has of FedEx; we the well, then FedEx is when area selling the elevated this revenue and sales subcontracted because Day. business percentage and our on But is and a out percentage part a we're where is of it's structured. new a of it's proactive

paid So a have higher like with have because doesn't means, us with we directly the it contract cost much what handle as it. handle the associated the direct they of value-added and And move shipping They with customer top on operates servicing reminder, have the a shipping. by premium. it's gross In get a services premium sit so contract of that that just that costs to we much through don't us. at shipping to -- incremental margin FedEx a all a

be agree that's So over where -- call. is and leg the to and It's of our quarter time. Hopefully, I'll because I be I do going the of model have in the able to although our is more growing the think, next to way. the we to stool, premium, to premium, time, going us, that direct you to it over completely down that give next FedEx we should the guide data forward, hope guidance for third enough XXXX, able have early we subcontracting that, be meaningful on go over premium don't you XXXX that and too a by direct tell, ramp-up but

Michael Petusky

is like is XX% direct premium? Adam, it quarter. premium business direct can I ask mean of of much that. What on premium? a quick remaining just the percentage question what I How a percentage,

Adam Stedham

number, I call, is and -- it going don't want particularly I accurate I this to into because don't something exact have want give to modeling. I you're to not know an that don't put you on

we'll your number that model. it So you Does get is worth? into -- you that that can so to incorporate

Michael Petusky

it's I no, it's Absolutely. fair mean the majority? not say, to

Adam Stedham

and smaller the the you Absolutely. percentage get so right. But have both to to side Right, we'll It's analysts, on Correct. we'll it it. get it modeling. right? Correct. of for you both Just of it

Michael Petusky

the that fair it's X-year mean, but necessarily mean, are I I -- you your question those the is follow-up is comfortable say an just on not Day. Or -- sort Investor Adam, of would earlier would saying longer-term out be mean you that's it aspirational, to now targets. affirmed put commentary And I know analyst as targets that or fair? on take I is at affirmation guys the last that the not targets. that question, of a it don't then, you... I you've

Adam Stedham

that's fair. think I

for in and gains essence, efficiency our on think, we're track margin I our improvement.

the significantly desired for obviously, changed achieving of of this year subcontracting a track the that in our not that. With period model, we're we X-year to this achieve by over on are time, that not had FedEx year. We said, we're strategy revenue all

back up the So in does bit little a things it model.

but think had model trajectory don't year that starting materializing is right anticipated. we shifting point model a So that I gains necessarily is the the aren't the revenue bit of this of of because the to the moving the as

Michael Petusky

one last in. squeeze Let me one

of a I how can I get in terms Or thinking to is hopeful where time you're terms you you sort that want report of are year-end? and by guess the and In authentication that? year-end but are trying do I relationship with you guys you that this drag, by what to mean, understand or the formalizing about of you Amazon, --

Adam Stedham

Yes, I -- we it by would would I definitely now. by mean, year-end, -- anticipated I am have we quite transparently

but -- just not more that expected. that taking it's we doesn't because It it's it's than mean it's And just but -- valuable. time -- complicated complicated. it's So means more

So without a year-end, would I anticipate by that. doubt,

Michael Petusky

the it Is the kind run of I of that that you is the magnitude? current relationship essentially bigger rate feel this like than of business? mean is

Adam Stedham

rate run the the business business? of or overall authentication The

Michael Petusky

authentication the No, business.

Adam Stedham

Absolutely.

it it materializes be. if effectively, should that think I

very the value that it's I certain to of a I provide provide can the a transformative for what business. we to that relationship nature subset we're transforms what able the think believe consumers. of relationship and

it business. -- of So for changes game the it's the side absolutely that

Nancy Meyers

direct just premium XX%. to about number, give the Mike, you And running it's

Operator

of today Our next [Operator Porter from Jeff Capital Management. comes Porter question Instructions]

Jeff Porter

we're And there? are business? Adam, us you with Amazon you competitive relationship. the seeing perspective elaborate can wondering in that if that others for advantage a competing I'm gives What

Adam Stedham

not very it. competing that the business, for could know we happen and If of there were well were others that

that is about based With we we is belief the the this. very want is believe on that on far. now, that that. to had That's are conversations upon only thus the I X who our belief we've be So what right said, and working current and facts transparent

the So we don't will that's be that belief. We believe forever. X our current only

customers -- I in our would announced one believe. naive, already the we our that's I a was by demonstrated one. be concept us actually But one think right what confidence integrated that by necessarily us And of of as by we've only as previously gives customers, with now, live. going the but are of and of proof not

So confidence the that's overall. us gives sense of what

Jeff Porter

you to the this would on prospectively could And margins what speak Great. business be?

Adam Stedham

Not will margins our overall. from in exactly. of much The line margins our authentication won't be actual existing. roughly margin with go-to-market strategy. tremendously And depends upon vary the It the

label that label So just customer buy want same margin and property lower on integrated gross that can't codes wants markup associated that an then with that's if there's extremely high we you on have a codes. label If a put intellectual the on with codes, they demand because the we margins. can codes margin the you they

to mix with that will will So label we predict go between it's the go difficult for non-label brands us the the and with. product don't exactly because know or consumers

if of now. that, authentication the could generates assume gross we business, will that upon authentication right it what intact based So of traditional model follow stay you would the then margins the pattern

Operator

like to the over conference this session. company And concludes question-and-answer I'd any remarks. turn back to closing for our the

Adam Stedham

Thank much for you very that.

on those Precision the been track But growth been many from key side, in strategy small, And here. sales us to give that of in really part then perspective, do an -- been of tremendous changes upon optimism we to as that it's will from relationships, it's on that Logistics side realize our materialize, me a dealing efforts, we're and efficiency we're headwinds expect business to very to dependent of track relationships very is realize the a that grow in be incremental have counterbalanced that to year. we're we with about those meaningful on will the those we're the sales there's this over So some formalizing time. And a track an and for by leverage. And I subscale going delays on believe It's do and perspective, authentication subscale from to a we're year the the leverage allow Nonetheless, business. that that very perspective I result business delayed a are none we as educational sitting way. sales been in need but leverage. relationships on our said, believe continues

between on So forward as there updates I ideally now then we look updates next the giving call. speaking, to then anticipate And will and be well.

very you thank much. So

Operator

concludes This conference We you. today's thank all presentation. Thank you call. for today's attending

disconnect and wonderful have may You your a now day. lines,

VerifyMe (VRME) 13 Aug 242024 Q2 Earnings call transcript