VerifyMe, Inc.

Q4 2022 Earnings Conference Call


spk_0: the morning
spk_1: and welcome to the verify me year and twenty twenty two financial results conference call a protest spence will be in a listen only mode and should you need any assistance during the call police ago a conference specialist by pressing the starkey followed by zero after today's presentation they'll be an opportunity to ask questions to ask a question you may press star than one on your telephone keypad and to withdraw our question please press star than two please note that this event is being recorded today i would not lead to turn the conference an anti myers vice president investor relations please go ahead
spk_2: good morning everyone and thank you for joining us today for earnings call presentation on the call today we have scott greenberg interim ceo and executive chairman keith goldstein president and chief operating officer margaret because or is scioto and current call executive vice president sales and global strategy to give an update on our fourth quarter twenty twenty two results following our management presentation we will have a q and a session i would like to bring your attention to the note on forward looking statements on slide three today's presentation any answers to question include 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 look statements caption and on the risk factors of the company's annual report on form ten k and quarterly reports on form ten que i will now turn the call over to start greenberg first an opening remarks
spk_3: thank you nancy i'm trying for participating on the fourth quarter of two thousand and twenty two earnings call we believe the companies developing a you plan for unique platform both organically and through the acquisitions completed in two thousand and twenty three our goals go further integrate all acquisitions they have become his platform the fourth quarter of two thousand twenty two resolve and the up a do nice being pursued you'd leave us to a positive future outlook i believe the presentations today will demonstrate that the company's add an inflection point and for two thousand and twenty three the come before he has a positive adjusted he the the and increase revenue for the year with a strong balance sheet we believe that the verify me harry shipp interest code brand arm poet in both individually and the combined strategy for future growth i'm in addition i'd like to thank patrick white for his contributions i'm in the past have been the company ceo that being said i believe we have put together experience management fee and board of directors that's poised for success
spk_4: max why place
spk_3: just a little bit about the financial and equity snapshot i'm a spot price today is roughly about a dollar sixty and i shelled out there because nine point four million which gives us a market cap is closing in on fifty million dollars or cash balance on as of december thirty first two thousand and twenty two two or three can we four million and back socially consistent with i jus bound so or cash has been holding up and roughly staying equal in the six months or that is one point nine million as of december thirty one two thousand and twenty two and on a positive note i bet is normal a bank that with pnc bank on our reviews for fiscal twenty twenty two with ninety point six million and as you see a projection later on we should grow revenue both organically and through acquisitions by over forty percent in two thousand twenty three and are inside beneficial ownership is approximately seventy percent with that being said i'd now like the turn over the cool to keep goldstein
spk_5: great thank you scott for those of you who don't know me as then the chief operating officer or verify me for approximately four and a half years in the president and chief operating officer for just over a year it's a pleasure to it rather it's a pleasure to speak with you today about verify
spk_3: i ne
spk_2: scott mentioned we had erected fourth quarter with revenue coming in at nine point seven million the fourth quarter is historically the strongest quarter for parish if you the holidays shipments in addition or seals opportunity pipeline for the brand protection business continues to be robust and with the was mission of parish of last april we now have a strong sales opportunity pipeline in our information logistics business as well
spk_6: last month we acquired the assets of trust codes and new zealand based software as a service company trust codes is in the brand protections for his connecting a brand to the consumer with storytelling data transparency in visibility of the journey for each and every item in the supply
spk_2: hi jane
spk_5: we view the acquisition of trust codes a strategic for the company combining trust codes unit level trace ability solutions with parachutes information logistics platform we now have a unified software offering that allows us to provide end to end security interest in the supply chain from the point of a products manufacture all the way through to the proof of delivery altium more about the benefits from the trust codes acquisition when we moved to the next slide we entered into a five year extension on our agreement with a strategic partner hp indigo for anyone that may be new to verify me hp indigo manufacturers and cells offset quality digital printing presses we provide our covert figment to h b and
spk_2: ago they converted into an egg for the indigo presses which we market in sell his verify inc the five year extension with xp indigo also offers new financial incentives for them to promote all of our brand protection solutions
spk_5: we've added perry ship services to our social media marketing campaign
spk_2: as a first for the company in it's starting to gain traction
spk_5: with the addition of trust codes will begin promoting unified messaging around our ability to provide supply chain security interest we've also developed a mobile parish if app that will be rolling out to customers and queue to could call executive vice president of the company will provide more details on our
spk_3: sales and marketing initiatives in a few minutes
spk_2: lastly the company has demonstrated affective internal controls this is a great achievement for a company our size and puts us in a very strong position to build off of as we continue to grow the company organically and in organically next like please
spk_5: so now i'm going to speak about the benefits from the trust codes acquisition
spk_2: and as as i mentioned earlier the trust codes acquisition is strategic for the company in i'm going to spend a few minutes sharing the key benefits that we see resulting from it until the acquisition the cloud based brand protection solution that we sold was a white labeled solution from a third party it allowed us to build the verify me brand in go to market with a covert authentication solution with minimal in that investment we reached a point in our growth cycle where it made sense to have greater control and flexibility in the software development cycle the true
spk_7: just code solution is our own with our own software developers we can continually enhance it as a best in class offering in modify it for specific customer requirements it also reduces our product costs increases are margins and allows us to be more competitive
spk_2: when needed we consider it to be a proven highly skilled little platform having it over seven hundred million products marked in the field for more than five hundred companies with products scans and one hundred and forty one country's most of trust codes current customers are in the food and nutrition space which is a natural tie in to perish it's customer base in core competencies the software platform uses the same programming language in development tools as the parish ship solutions allowing for system interoperability and product development resource sharing lastly the acquisition gives us a foothold into australasia and a peek into china so to reiterate the combination of verify nice covert solutions trust codes unit level product trace ability and perry ships last mile information logistic solution allows us to provide into end supply chain security interest from the point of man
spk_5: you factoring all the way to the proof of delivery creating a truly unique software logistics offering
spk_3: i'll now turn it over the current go to discuss our initiatives to drive new business in revenue by market sector the scourge home and thank you keith and there's been a few minutes talking about some of the initiatives that we've embarked on a post acquisition ah some of the things we're going to do in the future that we believe gonna drive new business we are so enthusiastic about the recent acquisition that we've been marked on a total rebranding or including logo website messaging on that encompasses all the blended services and we believe that the acquisition builds out the brand in a way that we have not previously and we are looking at are selling prop positions to all aspects of the enterprise
spk_2: inclusive of perry ship verify me as well as trust coats are with embarked on a full scale digital marketing campaign the to include social media paid search email marketing content and content development in addition to our our sales efforts that we have and
spk_3: marked on originally on we believe that disco enhance our opportunity to inform the market and more into position us in a way that is unique to the space it l a gotten keith mentioned i we are in the info logistics business guy we we handle know product we manage the information associated with that and we believe that that value increases on a daily basis given that it's about data about data and about data on work for sure enough to be aligned with folks in our organization will understand that to understand the value of it and how to on translate that into i new opportunity and new revenues we also engage a third party lead generation organization to cast a wider net how given given the addition of our i'd our new organization we believe were positioned in a unique way and we wanted to make sure that die work were touching all the folks out there the could have shown need for our services and in the unique nature of of what we did i deliver from a logistics perspective like you mentioned the mobile app farm one of the most recent developments is putting our tools in the customers hand i'd we've always had a very
spk_2: rovers sky
spk_3: customer portal army believe we will translate that into a handheld device so they can understand the nature of their shipments i'm in the the status of all of their shipments in transit i'd without having to ah open air computer or team to reach out to us directly on the up selling opportunities that are presented as a result of the dress codes verify me perry ship collaboration on have opened up areas for us that we have heretofore not been able to address i'd they they they come to the table with the race tech skillset are we look forward to working with them with had the opportunity to engage with them already there in the states this week and uniquely we're meeting with a every single customer that currently does business with very ship and and verify me i'm because of their vast interest in the serialization aspects that trust coach brings to the table
spk_4: i'm were were enthusiastic we're excited and we look forward to the next year ahead
spk_5: next slide please
spk_3: this is a segment of our business a segment that shows not much change from previously on we believe that the on largest portion of that pie on will continue to grow we also believe that the health and personal care health and beauty however you choose to term it a job presents huge opportunities with regard to trust codes in the technology that they deliver a we expect that we are able to to grow the apparel business has resulted this acquisition which is a small snack segment of our business and we look forward to are pursuing that opportunity this week as i mentioned in the meetings that we have schedule and with that i will pass the baton
spk_5: and i appreciate your time and your interests
spk_3: thanks kurt i'm just have to quickly provide the twenty twenty three outlook
spk_5: i'm in a we are projecting revenue to be and twenty eight million are better for twenty twenty three which is slightly better than the games that we've previously provided we expect the gross margin to be consistent with twenty twenty
spk_8: two or better which was at thirty three percent and as scott had mentioned are we are projecting a positive adjusted ebitda and with that alternative presentation over to our cfl margaret his earliest to touch upon the financials in greater detail
spk_5: as far from
spk_2: fine recovering from and have a positive outlook for the have going on here
spk_9: are you for having you with nine point seven million an increase of eighty six prefer for the third quarter revenue growth
spk_2: forty nine are and in line with our physical stuff and product mix between proactive and premium revenue stream we had enough for a point one million four point one few come on now
spk_9: half of one i am in the fourth quarter
spk_2: next frightening is of point seven hundred fourth quarter an increase of point nine million are approximately five hundred percent when compared to the third quarter a jacket
spk_10: a point two million i've been a fourth quarter showing the strong performance our first quarter nor performing in comparison however we do expect a positive outlook for fiscal year twenty twenty three as mentioned previously
spk_2: at five three
spk_10: the knife nice
spk_2: haven't tried gross profit and twenty five year with the acquisition of the parish up are starting on april twenty second twenty twenty two year we expect a chain or improve our gross profit margin for the fiscal year twenty twenty three
spk_8: that find please
spk_2: fine fine for like three point four million
spk_10: i'm from nine point four minutes
spk_5: fine twenty one from the acquisition of repairing should business in april twenty trying few we required for cash outlay of kind of point five million and a repayment of that and que three or four point nine million
spk_2: or cash has remained steady if you look in comparison to september ascot previously mentioned as president haven't we have happened for four million ten point four million of intangible assets and good wasn't related to the acquisition of cancer and a four year term north can see have one point nine million we also have a one million dollar rehoming line of credit was pnc of which no one has been withdrawn as of december thirty first find funny
spk_1: yeah we can try to believe that we have sufficient cash to cover operations for the foreseeable future as a brit business starts to generate cash we believe the acquisition of the trust cause assets into on twenty twenty three allows us to provide a comprehensive solution to our customers that will improve our results we continue to be the didn't organically for always looking for opportunities to increase our shareholders value with that i'd like to thank you for your participation and open afford any questions you may have we will now begin the question and answer session to ask a question he may stoller than one on your telephone keypad if you're using a speakerphone pick up your hand sick of her crossing the keys to withdraw your question please post star than two
spk_5: at this time will pass just momentarily to assemble our roster and i first question you come from jack vander ark with maxim group please go ahead
spk_3: okay i great wine guy they appreciate the update i'm taking a for my collection i'm got you know good good if you just can't finish a twenty point you with that you have shrunk fourth quarter revenue i'm obviously the bulk of that would perish yep i'm gonna dig in a pretty the preliminary now nicer thought the core verify me desert
spk_5: the seem to be a fifty percent or to the header your fifty percent year over year growth guide
spk_3: figure out how do you how do you hear you gave new guy and for twenty twenty three twenty million for revenue added added that factor in how do we factor in the core verify the deficit itself at that fifty percent clip in your mind or and any comments of be helpful yes i mean on the positive and the verify new businesses to fold one is the incremental gross profit arm is typically be sixty percent so as we improve verify me on that it has high margin business we do expect the verify new business again grow in excess of fifty percent and that was taken into consideration for our ability to raise the guidance from in excess of twenty five million to in excess of twenty eight million dollars so be the answer to question is good news the answer is yes and why
spk_5: you feel positive is you could see all the additions we've made our to the technology and the features of the technology and the mobile apps to generate additional revenue on this is the things that the company never had before and where it with style eating make a significant progress in those areas so we are optimistic for both verified the technology parish of technology and trust codes are all have organic revenue growth in two thousand and twenty three
spk_3: okay great in and you know it's it since the parish of acquisition day close in april and just gone circling bacteria your new guide for twenty twenty three twenty million at least i get sick of how to get a better sense of what you expect for a true or a net revenue growth going forward
spk_11: and i know not provide point twenty four guided by any means but you know if you're sort of a normalized growth rate you think the on twenty twenty three once the dust has settled the integration well in that the the yeah that's what i'd call it an inflection year we expected growth the sheer but in order to get into continue
spk_3: one significant growth which we believe we will ah we have to succeed on what what we're doing we have to execute i believe will execute and the growth rate will continue on but this is gonna be the and flexi and my skin in that respect the we feel comfortable that we will have country
spk_5: you'd revenue growth organic growth significant growth and and beyond two thousand twenty three
spk_3: okay great and then maybe just one more offer me no hop back in the queue fled i'm just got ya to see took over as interim ceo ah after patrick white and other patrick why did a great job having as get to i get to this point so i'm kudos to him for that yeah i'm just maybe an update on your on your euro years ceo you see your search process or ah what what you're kind of expecting are looking for
spk_1: well right now what we wanted a have the team focus on is executing on and we believed we have all the arm
spk_3: key people in place to execute we did was not like any distractions from achieving our goals and two thousand and twenty three so since i was already executive chairman arm we all believed that the best approach i'm currently would be for me to continue on as and term ceo so i don't believe so does does does any russian and making changes oh you know we we will evaluate that but the number one goal is to not disrupt the company and i believe the way we or reorganized the management is everybody has a clear focus
spk_1: as an agenda and the bullets the weather listlessness way to approach it
spk_12: understood how can that if i'm eating grass on the increase outlook and asked strong results are back in the queue thank you or next question will come from like to ski was starting to research please go ahead
spk_13: morning
spk_14: question or so
spk_2: what's what i haven't i haven't seen as and if i missed it
spk_5: can can you give it i understand that pair ship was part of the business obviously
spk_2: you know in the previous queue for but did bit parish up actually grow in que four versus the previous que for or to work at it is trying
spk_3: margaret so pernicious
spk_12: generally the first full year percent or team and more it was in the prior year and not related to the some business that was last no family and last stocks or something sue for actually mean study because we have a record que for ah
spk_3: and i and it was anything it was all
spk_15: a higher percentage of the told a rather in south last year to fourteen to roughly thirty three percent we were expecting the same kind has a percentage this this year by the it's a landed at thirty seven percent susan songs you for
spk_2: not what happened but yeah what happened as so so so looking at it
spk_5: q for on was relatively flat compare to to for last year
spk_3: all about that was in for the nine seven getting aid of give me the number so can yeah my review the number for que for in the prior year apparently shop
spk_12: yes so that the number was around nine point five million other
spk_16: and then go a point nine million
spk_17: so basically looking at a year in a way that added a lot of accounts and even though was down
spk_3: what was slightly the same from last year on the prospects look good so we expect to have an organic growth again a lot a counselor added you saw all the new things we put into place so where were optimistic that perishable store having organic growth
spk_12: sack on the are back on their own domain sorry i'm him as hard with nine nine or nine five for free the year ago puke
spk_3: sorry i it'll get garbled nine nine average i think she said night nine point five out noted grow up front i didn't grow that point nine it a point
spk_12: moreover our our overall revenue grew by the parish cribs of verify the business so we did have organic revenue growth in the fourth quarter both primarily attributable to use growth of the verify me technology sure if if you look at you are you get have a flight which i appreciate that sort of the revenue by markets
spk_3: actor for the quarter when when you sort of think about what that's going to look like of the next one year old the next three years how how will that will that shift i'm assuming may be a bigger percentage of health care but i just wonder if you could sort of well i think the percentages will switch slightly but it'll be on an increase in revenue base which means that that youth it's growing so i would say overall that trust codes bring the same to a lot of of things like baby formula years and and those type of products are also looking the lady don't stand off pharmaceutical saw i i would say a while we have other industries the food and beverage and the healthcare should go up as percentages what they're such a big percentage now that dow dow dow rub those be slightly bigger on a much larger hopefully much larger ram and utah's script scheme
spk_12: and it is in shifting to eyes the actual queue for result was with or whether any unusual item either positive or negative that that would have impacted up here ship
spk_3: margins or revenue in a quarter or anything unusual as i think about how to miles and years well built the one thing that does happen is enough hi revenue quarter
spk_18: we have what's called a premium and pro active and the premium business does not have pass throughs the pro active dance and basically in the fourth quarter arm a lot of the revenue is shipped for christmas on and dump higher percentages pro lack of soldiers
spk_12: due to the mix of product line in queue for not do that any change in our in our gross margin of our deliverables
spk_19: but that that will that will repeat at least textures cure for that would that would probably where people also gives us the only thing that said change the margins there was nothing unusual and it other than the the mix of business offset by obviously the high margin business that was in the verified
spk_1: you for as well which which raised over or march and arm but there's there's nothing unusual on nov one time adjustments or adjustments that impacted the business and kids who are other than normal product mix is there like the last and last question i promise is there is are likely to be positive adjusted ebitda quarter beyond next year's fourth quarter you that likely to find a quarter in there to to show positive well be the answer the answer is if you're if you look at que three and cute to and and and the you know kids read and cute too
spk_3: oh and you adjuster for growth they were they were close to be positive than swell right i emailing negative three hundred thousand i believe what i soda soda gulf from negative three hundred thousand two pauses of quarter is obviously not added a question is is actually proud the question at all okay all right thank thank you so much appreciate it i thank you again if you have a question you may for star the want to join the queue at this time we was momentarily to assemble a roster or next question will come from a daniel or with a private investor please go ahead yeah i'm just so you know where way around it will remain to to questions are trying to so try to get you through those questions for go ahead okay so what do you got into an operating margin ah we we didn't guide operating margins are lonely that is we guided overall alarm adjusted ebitda for the year and and basically her as a positive on we did say that we expected are gross margin to be the same or better than the prior year so we expect our overall gross margin to increase we expect our operating profit obviously be adjusted either the deposit of but as a downward the value for operating margin we did not give guidance on that me what cost reductions can use your facts waiting given the brand the new brand think that you're proposing you're obviously changing the business model teachings business likes it is the current sales force of verify me which are you recording not particularly and candidly not having produced much in last several years is that a source of we dedicating capital to that weekend the for higher expected growth given the new brand proposition and marketing
spk_2: well as if you look at it a few things happen and one it's we now have the management team or on trust codes in the next and you know that they have a sales and marketing person on the thing to realize i enter and i tried saying this before that we believe each brand is still unproven and ah that being said then we have the overall strategy of the three brands are more we are doing is where i'm chris now on a hire revenue basically using some of that incremental profit to do things and as curtain keep the
spk_3: scott's improving the product so lot of what we've done as improving the product and as far as sales and marketing arm was spending a lot more time at trade shows free and are producing the product the just add a seafood showers wow ah but old a will we're rely on or
spk_5: distributed across the world arm one a lottery sales people also helping out with trust co at the verify me division as helping out with trust call so we reallocate the time to get him involved with with other projects but overall when that reducing the sales expense go
spk_3: going into two thousand twenty three we think sales and marketing on our increase revenue faces unemployed it until an aspect of been successful next year
spk_1: picture just as a half question them as a corollary to that is out to be a self sufficient salesforce and with that relationship developed you think more aggressively over the course of the year i mean how the chp unfolding on legacy
spk_3: as a leg length each hey keith you want to take i want sure so ah you know with with the new agreement with hp you are now incentives that did not exist before for for their solution architects in their sales teams to to more pro actively promote the refine the solution so that's gonna be happening also in own not to and overplayed the impacts of cause it
spk_20: it is you know with that said it still had a significant impact on the business and now that everything is completely opened up in a we are starting to go to global trade shows with each and indigo around the world so you know those two things i think will help to to grow and sperm additional sales
spk_3: through the each the indigo you know global sales team and solution architects panky case is on the facts danielle i'm not a a why don't we switched to the next caller at this point so they or either one could participate or next question come from response a dps please go ahead oh hello folks are good morning think i like my coffee ah so what can i do as an individual investor arm i know that there is in of link can i talk up the company strictly verify me on a lot of these other companies but what can i do as an individual to help from know make this thing grow ah them it's fantastic when i first learned about a from norman armed fantastic product or just surprised with things nice thing has been scooped up by every country in the world ah i think it's great but the like a said i'm one individual and on the union air conditioning company here in washington dc marketplace and you know in this thing squeeze into a doll onto a dollar bill and we go after the government in terms of putting your mark our hundred dollar bill armed with what can i do to help out increase sales power out of here thanks first thanks for question i think the first thing is we have to help ourselves and and we have to execute ourselves and i understand it's been a long history in a long road
spk_1: but if you look that where we are today
spk_21: the product is is much bormann hands with much more features than it was two or three years ago three years ago while there was a lot of holt and in and the in and prospects for do not really needed these features in order to be successful in need of it all the things we've put together now and that's why you're seeing the the revenue growth i know it's not up to the level that was promise as many years ago
spk_22: but i think now you have a nice developing company ah with with with solid sound that would have solid foundation on when you say help you know any introductions to customers as fl the highest levels ah relationships or share
spk_3: hold have relationships anybody has that we could have the ability to get a meeting set up to demonstrate what we have would be greatly appreciated okay thank you very much of a good deck thank you thank you i'm moderate moderator next question is or next question will come from just porter with porter capital please go ahead he goes out could you give us a sense of
spk_1: employee compensation structure
spk_3: sort of what percentage of of of compensation is is in options are restricted stock units and and and how those just overtime just like get a sense of you know are we are point together for the same team here and and
spk_21: or the employees motivated to help get stuck by said
spk_1: thank you jeff i'm one of the things that we've put in place
spk_23: in the last year a to was a similar approach that we had in my former company i'm gp strategies which is basically the one lines the stockholders on with the executive team and employees of the confidence so on the board of directors have historically taken all the
spk_3: compensation in restricted stock of the company on and have not pulled out of every type of significant cancer working capital so the board is aligned and with the investors a second plan that we put in place and for and the executive seen including myself is that people get are restricted stock grants but the stock is not resting all the time the vet stock is address when the price had certain levels for a period of time this is what we used it as much warmer comp
spk_1: donate and basically in order to earn your shares the company has to fruit so the shareholders and the employees of our ally last year of the executive team

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