Financial information provided by Financial Modeling Prep. Options data provided by Unusual Whales. Live transcripts provided by Quartr. Reported revenue and EPS data from Earnings powered by FinChat.io. All data is provided for informational purposes only, and is not intended for trading purposes or financial, investment, tax, legal, accounting or other advice.
So during the first quarter of twenty twenty five, our revenue decreased approximately 23% versus the first quarter last year. Now this decline in revenue was due to discontinuing the TrustCo's operation the customer in sourcing in 2024 and then some overall softening of customer shipments. The decline was most pronounced in our premium services which was down 47% versus the comparable quarter. Now as a reminder, these services have been down significantly in the last two quarters due to the previously announced in sourcing of a large client by our large airfreight partner. The negative comparison for this will continue into Q2 of twenty twenty five. However, we have reduced operating expenses by approximately 28% versus Q1 of twenty twenty four We're managing our costs in alignment with these revenues. In addition, we've improved the gross margin of our proactive service within our Precision Logistics segment, From an organic growth perspective, we believe this service line presents the best opportunity for growth. And we're pleased with the improvements in gross margin percentage. 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 value.
14m 30s
At the end of the first quarter, we had a cash balance of $5,700,000 We have no bank debt and we have a remaining convertible note of $800,000 but it's held by insiders and affiliates. So at this point, I'd like to discuss our initiatives for creating value for our shareholders. We continue to pursue efforts to expand our revenues with directly contracted peryship customers. Our strategy in this area includes three elements: The first element of the effort is optimizing our direct customer marketing and sales approach. We previously announced that we would pilot efforts for increased marketing as well as adding additional outside sales representatives. 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. So the second element of our organic growth strategy is developing relationships with additional freight carriers and third party logistics companies. Now as we've engaged with more customers that are contracting directly with Perryship, these customers have expressed a desire to leverage Peryship's value added services in combination with logistics and freight carriers that are in addition to the single airfreight partner that Perryship currently leverages.
16m 14s
Therefore, we've begun conversations with additional airfreight freight carriers and third party logistics companies. We don't know where these conversations may lead we will keep you updated as the conversations progress. Now the third element of our organic growth strategy is integrating with technology platforms that are related to e commerce shopping carts and shipping management software applications. We have projects underway currently to integrate our technology platform with the e commerce platforms of Shopify and WooCommerce and we're evaluating other e commerce and logistics related software platforms that are leveraged by potential peri ship customers. So at this point, I'd like to shift the conversation from organic growth efforts to our strategic growth efforts. As I mentioned earlier, the company has $5,700,000 of cash as of the end of the first quarter in twenty twenty five. 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 acquisitions. It's very difficult to predict the timing or probability of these types of activities With that said, we continue to believe that the strength of our balance sheet our anticipated annual cash flow from operations and the executive team's experience with creating value through acquisitions, positions the company to provide very meaningful shareholder returns from the current share price.
18m 7s
So at this point, I'll turn the call back over to Nancy she can review the financial details of the first quarter.
18m 16s
Thank you, Adam. The first quarter revenue was $4,500,000 versus the prior year of 5,800,000.0 a decrease of 1,300,000.0 The decrease is primarily due to the decrease demand across several of our proactive customers as well as one customer shift to their cold chain strategy. The discontinued contract with one customer in our premium services as has already been disclosed offset by an increase in remaining premium revenue. Gross profit decreased $800,000 to $1,500,000 in Q1 twenty twenty five versus $2,300,000 in Q1 twenty twenty four. As a percentage of revenue, gross margin was 33% in Q1 of twenty twenty five versus 39% in Q1 twenty twenty four. While the quarter 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. Operating expenses were $2,100,000 in Q1 of twenty twenty five, versus $2,900,000 in Q1 of twenty twenty four. This decrease in operating expenses offset the decrease in gross margin in the quarter. In addition to the reduction in operating costs, with the divestiture of Tresco's, the company also implemented cost cutting measures in Precision Logistics. Our net loss for the quarter was 600,000.0 or a loss of $05 per diluted share in both of 2025 and Q1 of twenty twenty four.
20m 1s
Although our adjusted EBITDA was lower in Q1 twenty twenty five, versus Q1 twenty twenty four, the company continues to take steps to develop efficiencies. On the last slide is our balance sheet. As of 03/31/2025. Our cash as of March 31 was 5,700,000.0 an increase of $2,900,000 from 2,800,000.0 on 12/31/2024. As noted on our As noted on our last call, in January, we entered in into an inducement letter agreement and approximately 1,500,000 warrants were exercised for net proceeds of 4,300,000.0 In consideration for the inducement letter agreement, a new unregistered warrant purchase up to 1,500,000.0 shares at a price of $4 were issued. With these proceeds, we retired all outstanding bank debt 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. As of 03/31/2025, we had $800,000 remaining on our convertible notes, There are no borrowings under our line of credit and we have $1,000,000 available to us.
21m 22s
With that, I would like to turn the call back to Adam.
21m 26s
Thank you, Nancy. 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, We anticipate we will have a new Vice President of Finance onboard next week Jennifer Cola will fill this role, and we expect she will become CFO of VerifyMe after a transition period with Nancy. 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. 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 So I'm confident that the company is very well positioned for a seamless transition and ongoing success.
22m 25s
Just 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. 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. 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'm grateful for the support and collaboration I've experienced here. At this point, we will open the call for questions.
23m 7s
Thank you. The first question comes from Michael Petusky with Barrington Research. Please go ahead.
23m 31s
Hey, good morning everyone Hey, Michael. How are you? Hey, great. Congratulations, Nancy, on the upcoming retirement. So yes, a couple of questions. I guess, Adam, you sort of laid out organic growth opportunities and then touched a little bit upon the fact that your balance sheet positions you guys to potentially do something externally. I'm just curious in terms of your capital allocation priorities, mean, how do you sort of look at that as you move forward? I mean, is there one of those organics bullets that's the most important external. I mean could you just sort of talk about that a little bit?
24m 19s
Absolutely. So what we've seen from an organic perspective, if I talk 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 se from the cash we have on hand. Although they would subtract from the cash generated from operations. So we do think that there's minimal investment involved in them. And really, you look at where the company has prioritized a lot of its time, the company was founded the company being Perryship was founded and built on a very critical relationship with the largest airfreight company in the entire world. And we continue to have a wonderful relationship with them. With that, said, we can't ignore the fact that there's 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 is around integrating with the e commerce marketplace And because many times when you check out in an e commerce environment, you choose your shipping selection at that point of service. And so we will be a provided shipping option at point of service for many of the shippers and companies that are deciding to move forward with an e commerce strategy.
25m 51s
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 freight service or that freight service. So we plan to have relationships with all of the freight services. 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. 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 where we're investing heavily is to unlock that potential. And keep in mind, a large percentage of our customers already use multiple freight providers and they're only able to leverage our service for part of that. 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. On the other side, on the strategic growth side, one of our challenges as a company is our size. We're a very small company to operate in the public equity environment.
27m 15s
So we so there are opportunities for tuck in acquisitions that we think could be beneficial to shareholders and create value 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 our size in a public equity environment. Does that answer the question for you, Michael?
27m 46s
Just in terms of external growth, I mean, you expect that any external growth you guys looked at would in any way be sort of connected to the logistics business or could it be something relatively different or adjacent to logistics? [indiscernible] both. We have not excluded We haven't excluded either. And the reason we say that is because think one of the major vehicles that we have for creating shareholder value over the long term is the combination of the cash 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 both in the logistics space and potentially in a space outside of logistics if the opportunity was strong enough. Now 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 viewing it.
29m 7s
Okay, great. Just a couple in these may be more oriented towards Nancy, but they may not 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?
29m 25s
Yes. That was $26,000,000 I'm sorry, 26,000. $26,000,000 I almost fell out of my chair. Thank you.
29m 42s
Yes. So I okay.
29m 43s
So this is sort of related, and this will be the last question. I'll let other people get on. But just in terms of sort of modeling this business out, through the rest of the year, I mean, we look at sort of revenue comps somewhat similar in Q2 and maybe improving to something close to down 10% in the second half or something to that effect? And then I'm just curious also about OpEx. Obviously, you guys have done a really good job very quickly, it seems like. In reducing that figure. I mean, that decent baseline figure to model going forward? Or were there onetime aspects to that that result? Thanks.
30m 28s
So in terms of revenue, we really are giving guidance this year. With that said, we will continue to have a very challenging comparison in Q2 because of the one customer we had previously announced last year. And so we will have a challenging comparison in Q2. 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 As part of that, we anticipate the revenue subcontracted to the airfreight carrier, our premium side will continue to shrink as a percentage of our overall [indiscernible] So that's where so we expect that to happen. Our OpEx is in a good place One of the things that we we've we believe that we've really unlocked is we understand the scalability of this business and we believe that as revenues declined, unfortunately, for not, but as revenues declined, we were able to successfully scale costs associated with that. And we think that we've implemented process improvements that as we scale revenue back up, the costs won't necessarily scale back up with it. So So I think I would model kind of expenses relatively flat with where they are right now.
32m 8s
Revenue to be a difficult comparison next quarter and then hopefully start to be a more favorable comparison in the second half of the year.
32m 19s
I just sorry, I have to just ask one final question based on that last sentence. I mean, you wouldn't expect positive revenue comps in the second half, would you?
32m 33s
Not or [indiscernible] Okay. All right. Very good. Thanks, guys. Appreciate it.
32m 45s
The next question comes from Jack Landauer. With Maxim Group. Please go ahead.
32m 50s
Okay, great.
32m 51s
Congrats on hey, and congrats to Nancy on the upcoming retirement. Adam, good to see you guys balance your expenses pretty well in this current environment. I'll leave it at that. Adam, last quarter, you talked about how shipments from existing precision logistics customers were down about 6%, I think, for the full year. But you did add a bunch of new customers. I think new customers were up 6%.
33m 20s
And it was going to take some time probably to see the benefits from those new adds, especially when the shipments are down Are you can you maybe just two things there. Can you maybe talk about your new customers added in the first quarter or the first half of this year so far? 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 adds.
33m 50s
So I think that the new cut we have added new customers. The new customer adds in the first quarter has slowed down. From last year. And overall, we're not experiencing a significant loss of customers but we've seen an overall softening of across our customer base 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 are seeing an some level of softening. And so even the new customers we added last year are seeing a softening from what they projected. So we are successfully adding customers. But at this point, the addition the additional volume from the new customers is not is offsetting the softening of the installed customer base.
35m 12s
Got it. That makes a lot of sense. Okay. I appreciate the color there. And then on the strategic front, I know there's only so much you can say and I would love to know more, but there's a lot of moving parts behind the scenes for sure. Can you maybe just provide the latest public update on the inks business that you guys do have in that technology and if that's just clarify, is that part of the strategic discussions Anything you could share there would be helpful.
35m 42s
So So we have we have had a conversation with with a company that is in a different vertical inside of the ink world. And we look at our current ink business and we do think that if somehow we were able to make an acquisition that was synergistic with that, to where you would have ink products that were purchased by the same customer 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. In 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 in Precision Logistics is much higher. If you look at the overwhelming majority of our revenue is in Precision Logistics. So we're looking at both. And we're looking at potential opportunities that exist outside of Inc, Any Counterfeit or Precision Logistics. We're really trying to keep a very, very open and patient mind towards what is the opportunity to best leverage 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.
37m 31s
So we're trying to rest that.
37m 35s
Understood.
37m 36s
Understood.
37m 37s
I appreciate the color there. That's actually that's helpful what you can provide. And I guess I guess just looking around, how do you feel since you last talked to us back in February, I know some there's some strategic probably changes, with FedEx and Amazon around that time that was announced. 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 with where you're at. You have a lot more cash on the balance sheet, obviously, so you're in a good seems like you're in a stronger financial position.
38m 10s
Obviously, the macro has been challenging. How do you feel overall about your the opportunity going forward for VerifyMe relative to a few months ago? Thanks.
38m 20s
I feel good about the opportunity. I think whenever you're dealing with a company our size, if you're being completely realistic and objective, have to look at things from two situations. What's the downside risk and what's the upside opportunity? 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. Net So now the key is how do we maximize the upside opportunity. What's happening particularly in the logistics space 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 in the two plus three. DHL made a major acquisition in The U. S. You're seeing changes with UPS. You're seeing changes with FedEx. You're changing seeing changes with USPS, you're seeing changes with Amazon. So all of these changes are creating a marketplace that's receptive to looking at new ideas and to looking at approaches to meet the specific needs of their business. And so that's the vertical we fit 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 either because they wanted a different freight partner than we were aligned to or they had entered into some other agreement and they just weren't really open to looking at things, in a different way.
40m 13s
So what we're finding right now is although there is some chaos in the marketplace by all of the changes happening, it's actually creating an environment where potential customers are very receptive to conversations to help them react to everything that is happening in the market. 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.
40m 49s
Okay. Fantastic. I appreciate the color, Adam.
40m 52s
Thanks.
40m 56s
This concludes our question and answer session. I would like to turn the conference back over to Adam Sutter for any closing remarks. Please go ahead.
41m 4s
Thank you very much, and thanks, everyone, for joining. So this is our first quarter. We look forward to having a call and updating you on the next call, hopefully, 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. Jen Cola 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.
41m 44s
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Key Insights
Q1 2025 revenue was $4.5M, down 23% YoY, primarily due to discontinued operations and customer insourcing; premium services revenue declined 47% YoY.
Gross margin decreased to 33% from 39% YoY; gross profit was $1.5M (down $800K YoY), but operating expenses were reduced by 28% to $2.1M, offsetting some margin pressure.
Net loss for the quarter was $600K ($0.05 per diluted share), consistent with Q1 2024; adjusted EBITDA was lower YoY, but cost efficiencies and process improvements were implemented.
Cash balance as of March 31, 2025, was $5.7M (up from $2.8M at year-end), with no bank debt and only $800K in convertible notes remaining (held by insiders/affiliates); $1M remains available on the line of credit.
Management expects continued revenue headwinds in Q2 due to prior customer loss, with potential improvement in the second half of the year; operating expenses are expected to remain flat, and strategic/tuck-in acquisitions are being considered to drive shareholder value.
