VerifyMe, Inc. Q1 FY2024 earnings call

• Q1 2024 saw year-over-year revenue increase, improved gross profit, gross margin, and adjusted EBITDA, with third consecutive quarter of positive adjusted EBITDA. - Precision Logistics focused on operational efficiency and expanding customer base in specific regions between Maine and Pennsylvania, adding sales representatives. - Authentication segment focused on pipeline expansion, new integration with Amazon transparency, APAC growth, and ink sales from conferences. - No net debt, $2.8 million cash, $2.4 million debt as of Q1 2024, with announced buyback program and minimal share repurchases in 2024.

Precision Logistics generated $5.6 million in revenue in Q1 2024, up 4% from $5.4 million in Q1 2023. It has a focus on life sciences and high-value products, which are more resilient. Almost 3% more customers in Q1 2024 vs Q1 2023, but same customer shipping volumes down ~2%. Authentication segment generated $150,000 in revenue in Q1 2024, down from $250,000 in Q1 2023. APAC business had 5% revenue growth in Q1. The segment anticipates quarterly revenue growth to increase meaningfully, with opportunities from Amazon integration, APAC business, and ink sales from conferences like Dscoop and GS1.

• Anticipate H2 2024 growth rate to exceed H1. - Expect positive cash flow for 2024. - Target double-digit top line growth in both segments. - Sales pipeline increasing, with additional sales resources added in May and expected in June to drive growth.

• Timing of working capital items led to cash flow not converting efficiently from adjusted EBITDA in Q1. - Potential pricing pressure in the industry due to softer overall partial shipping volumes. - Longer sales cycles than expected in the Authentication segment for pipeline conversion.

Q: What was the percentage revenue growth or negative comp in each of the segments for the quarter?

A: Precision Logistics increased by 4%, Authentication was down from $0.2 million to $0.1 million.

Q: Are there parts of the business holding up or growing better than others in the difficult macro environment?

A: Strong concentration in life sciences and high-value, more affluent-end consumer products are more resilient; slower in general marketplace products like baked goods and less expensive items.

Q: With hopes for double-digit top line growth in both segments, is that still an aspirational goal?

A: Do feel comfortable, adding sales resources to hit the revenue growth target, expecting double-digit growth in both segments and overall.

Q: Expectations of Trust Codes business versus ink business from conferences?

A: Expect growth in ink and codes segments, but sales cycles are longer than expected, pipeline building but conversion not yet fully realized.

Q: Thoughts on gross margin potential with ramping Authentication sales?

A: Gross margin could be impacted by pricing pressure; if pricing pressure, may see erosion, but offsetting below gross margin costs could maintain bottom line; also, segment mix shift could affect overall gross margin.