VerifyMe, Inc.

Welcome to the Verify Me Second Quarter 2023 Financial Results Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note that this event is being recorded. I would now like to turn the conference over to Nancy Meyers, Chief Financial Officer. Please go ahead.

Good morning, everyone, and thank you for joining us today for our earnings call presentation. On the call today, I'm joined by Adam Sedum, CEO and President, who will give an operations and strategic update. Following our management presentation, we will have a Q&A session. I would like to bring your attention to the note on forward-looking statements on slide three. Today's presentation and the answers to questions 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-looking statements caption and on the risk factors of the company's annual reports on Form 10-K and quarterly reports on Form 10-Q. I will now turn the call over to Adam Stedham for some opening remarks.

Thank you, Nancy, and welcome, everyone. In the last month and a half since becoming CEO, I've worked with the VerifyMe leadership team to refine and clarify the strategy across our business segments. We announced in July we've streamlined our company into two business segments, the authentication and precision logistics segments. This is intended to accelerate growth by leveraging our technology, expanding our marketing capability, and optimizing overhead expenses. These segments fit together to enable our mission of ensuring real products are in the right place, in the right condition, at the right time. I'm excited to share our strategy with you, but first let me discuss Q2 a little bit. Nancy will give specific details, but I want to provide an overall context. During the quarter, our revenues came in slightly below our expectations, partly due to the timing of customer orders and the temporary impact of the business due to the acquisition, integration, and reorganization. In addition, within our precision logistics business, we're seeing an emerging shift in service mix from our proactive services to our premium services. As a reminder, our premium services generate significantly lower revenues since they only incorporate the service component of our offering, but they don't include the freight charges. Therefore, they have a much higher gross margin. Our proactive services do include the associated freight charges and freight component of the service. As a result of this, We anticipate our overall business will achieve revenues of $26 million in 2023, and we continue to anticipate positive adjusted EBITDA for the year. Our revenues could exceed this level, but this is my first call with all of you, and I want to set expectations correctly. Obviously, to achieve this revenue, we'll need to experience significant increases in revenue in H-2. This will be driven by both increases associated with normal seasonality of our business, as well as the contributions from our unfolding strategy. So, at this point, I'd like to take a minute to explain why I'm excited by and confident in that strategy. In April of 2022, the company announced the acquisition of Paraship, a non-asset logistics business specializing in logistics for time and temperature-controlled shipping using proprietary predictive analytics software. In March of 2023, the company announced the acquisition of Trust Codes Limited, a company specializing in unique item-level codes for brand protection, data intelligence, and brand enhancement technology, with specific expertise in the agriculture, food, and beverage industry. These acquisitions have contributed to our year-over-year revenue growth, but more importantly, they position the company to execute our strategy going forward. At this point in time, over three-fourths of the customers in each of VerifyMe's operating segments are within the agriculture, food, and beverage industry verticals. which have a growing need for our customers or our company's solutions. The traceability of products in these verticals is a growing requirement in the U.S. market and around the world due to the digitization of supply chains and increasing regulatory requirements, such as the Food Safety Modernization Act. This act focuses on reducing contamination and ensuring rapid response to areas of concern and higher risk food categories. The company's ability to meet these requirements along the entire supply chain provide our customers with proven solutions to meet these requirements. In addition, these technology offerings create marketing and sales synergy between our precision logistics segment and our authentication segment, which will further the potential for our organic growth. So at this point, I'd like to discuss each of our segments a little bit more. First, I'll begin with our precision logistics segment. I'm beginning with this segment because it may feel newer and less familiar for many of you. We continue to benefit from the strong customer relationships that Pariship has built over the years. The precision logistics segment provides customers with specific technologies and services that are designed to meet the needs of products that have specific time and temperature requirements. The growing market of small and medium-sized companies selling perishable products that have these distribution requirements provides a significant opportunity for our business. Our service includes both pre and post shipment offerings across web portal access, weather monitoring, temperature control, full customer support, and last mile resolution. Now, I appreciate that the non-asset logistics business is very competitive. I've met with and spoken to our customers, and I hear them articulate how our specific combination of services enables them to address the challenges they face tracking and shipping their specific products. I believe our combination of services and the relationships we enjoy provide a differentiation that will enable us to experience growth rates that exceed the industry. Currently, the segment has 5% year-over-year organic pro forma growth, and we expect this to increase. In addition, we're optimistic about the opportunities for cross-selling and integrating services across both our segments, particularly within agriculture, food, and beverage customers. Now, I'd like to shift the conversation a little bit and begin to speak about our authentication segment. In many ways, this segment represents the historical VerifyMe company. With that said, the services have been transformed by the acquisition of Trust Codes, and I'm eager to share the details of this transformation. The segment focuses on providing customers with traceability, brand protection, and brand enhancement services. The Trust Code GS1 validated technology platform provides customers with end-to-end traceability, which is a key strategic and regulatory imperative for food and agriculture enterprises. Some of you may not be familiar with GS1, although you probably encounter barcodes based upon the GS1 standard daily. For context, a pack of Wrigley's gum in Ohio in 1974 became the first scanned and barcoded product. The organization that sparked that transformation we now know as GS1. So GS1 standards are the most widely used supply chain standards in the world used in retail, such as the UPC barcode, and in healthcare and supply chain. This is relevant because Trust Codes is one of very few platforms to be validated by GS1 as complying with global GS1 standards. Now, many organizations claim to offer GS1 compliance, but very few have been validated by GS1. And this is an important credibility factor and differentiator for our authentication customers. Now, Trust Codes has nearly a decade of demonstrated agriculture, food, and beverage traceability technology and services. This traceability enables customers to meet current and evolving traceability requirements. The segment's brand protection services build upon our traceability offerings by including anti-counterfeit and anti-diversion technologies. These technologies enable companies to use unique per item QR codes, as well as covert markings. Our systems can track and identify authenticated codes, as well as identify fake websites that are used to validate fake QR codes on product packaging. This combination enables brand owners to take swift action to protect their brand from counterfeits, ensuring product safety for their customers, as well as identifying paths used for diversion. Through the segment's brand enhancement services, we harness the expertise of brand protection and traceability to provide a means for our customers to effectively engage with their consumers in a contextual manner. The unique per-item QR codes provide an avenue for the brand to personalize the way they educate, engage, and delight their customers with further capabilities such as controlled product loyalty, cross-selling, and gamification. Furthermore, they can utilize a data-driven approach to further educate their consumers on efforts in the area of sustainability and environmental practices. So this combination of services in our authentication segment supports our existing customers as well as capturing new opportunities by enabling the customers to meet evolving regulatory requirements and consumer expectations in the marketplace. As our collaboration discussions continue and our product integration testing continues, We're optimistic that this will lead to growing revenues in H2 of 2023 and meaningful revenues opportunities for us in 2024. So, at this point, I'd like to turn the call over to Nancy, our CFO, to review our second quarter financial details.