VerifyMe, Inc.

Good morning, everyone, and welcome to the Verify Me Third Quarter 2023 Financial Results Conference Call. All participants will be in a 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 and then one using a touch-tone telephone. To withdraw your questions, you may press star and two. Please also note today's event is being recorded. At this time, I'd like to turn the floor over to Nancy Meyers, CFO. Ma'am, please go ahead.

Thank you, and good morning, everyone, for joining us today for our earnings call presentation. On the call today, I am joined by Adam Stedham, 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 includes 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 report on the Form 10-K and quarterly reports on Form 10-Q. I will now turn the call over to Adam Stedham for some opening remarks.

Thanks, Nancy. Well, welcome everybody. I'm happy to have an opportunity to discuss our third quarter with you. I'm pleased with our organic revenue growth and gross margin improvement in the quarter. More importantly, I'm excited about the success we're having implementing our strategy. It's my second quarterly call since becoming the CEO of VerifyMe. During that first call, We described our new structure and strategy. In addition, we stated that we anticipated scheduling a more detailed explanation of our overall strategy to take advantage of the opportunity in front of us. Currently, we anticipate having that call towards the middle of January. So during the call today, I'll discuss the overall business outlook, our capital position, and then I'll provide an update on each of the operating segments. After that, Nancy will provide a more detailed third quarter financial overview. So as I look out for the business and as I think about the outlook of the business, I reiterate our expectations for 2023 revenues of approximately $26 million and a positive adjusted EBITDA. In addition, I expect double-digit organic growth in 2024. Now, we'll discuss those growth plans more during our strategy call in January. So at this point, I'll shift the conversation to discuss our capital position. As a company, we're focused on revenue growth, margin improvement, and cash flow generation. And I remind everyone that Q4 is our strongest cash flow quarter of the year. So since our last call, We completed a relatively small capital raise. That raise provided strength to our balance sheet at favorable terms for the company. But more importantly, it engaged insiders as well as outside investors that have a history of profitably investing with the new leadership of VerifyMe. In addition to the completion of that convert, we just completed the renewal of our line of credit facility with PNC Bank. At this point, I feel very confident we have sufficient access to capital to pursue all of our strategies. So now I'd like to discuss the segments a bit, and I'll shift to our precision logistics segment and discuss it in a bit more detail. Overall, the business is tracking with our plan. We expect to have organic growth in 2023, and we anticipate a higher growth rate in 2024. We've improved our margin profile with operating efficiency as well as pursuing higher value customers. So I'd like to talk about that a little bit more. One item I'd like for you to note about these higher value customers is that many of them don't experience the same revenue increase due to holiday shipments in Q4 that other customers may. Therefore, we're not anticipating as large of a Q4 uptick with those customers relative to Q3 as we experienced in 2022. So since our last call, I'm even more convinced about the meaningful growth opportunities associated with servicing the perishable market and the needs of the perishable delivery market. In addition, we have the ability to expand our relationship with the world's largest air freight company in a way that is beneficial for both companies' customers and shareholders. So we're very excited about the positioning, the advancement, and the continued opportunity inside of precision logistics. So let's shift the conversation a bit and talk about the authentication segment. Through three quarters, our 2023 revenues had been below expectations. Now, a significant contributing factor to this situation is reduced revenues with existing customers. But I want to point out that we have not lost any customers in this segment. So there are actually two underlying factors to the revenue decline with these customers. And I'd like to explain them a little bit more. So during 2022, we had customers place large orders for traceability products, and it's taken them longer to use up their inventory than they anticipated. We continue to have supplier relationships with these companies. And they've been working through their inventory throughout the year. So our insight into their current inventory levels gives us confidence regarding 2024 revenues. So in addition to that, the inventory situation with those existing customers, our APAC business has been impacted in 2023 by economic and weather conditions. Looking where we are now, I'm reassured that we're now seeing our volume forecast increasing in the region and we're winning new customers. So in summary, 2023, it's been a slow year for our existing authentication customer base. However, the customer base has remained solidly intact and we're seeing an upturn in pipeline and new customers. We've also launched our new strategy that we alluded to on our last call. And this involves a combination of a change in pricing strategy as well as sales strategy. We're experiencing a significant increase in our sales pipeline, and I look forward to updating you as this pipeline converts to backlog. So I'd like to wrap up by discussing how we believe our technology stack and strategy will allow us to expand our relationships and opportunities in the U.S. market. We purchased Trust Code's business in March. Since that time, we've focused on integrating their technology stack into our existing authentication customers and defining a clear food traceability strategy along with optimizing our eek strategy. We believe the current landscape of increased regulations as well as increasing counterfeit and diversion activity creates a compelling opportunity for this segment. Our technology's ability to identify fraud or abnormal behavior while tracing an item's journey from production through to the consumer's hands meets the needs of consumers, regulators, and the brands. The integration of our custom software, our patented technologies, and cloud environment positions us very well to solve the challenges that the marketplace is experiencing. As for the technology stack strategy itself, we've recently made announcements regarding our relationship with ANCOR, and we anticipate there will be other announcements in Q4. This newly integrated VerifyMe traceability cloud is founded on end-to-end GS1 traceability and machine learning detection of counterfeit and abnormal behaviors. The traceability platform is interoperable with major retailers' anti-counterfeit solutions. This interoperability will enable our customers to benefit from anti-counterfeit protections more easily, faster, and without requiring significant changes to their existing manufacturing and packaging processes. Our approach provides customers with an effective and efficient method to provide their consumers with traceability and compelling consumer engagement. So we're excited about the outlook for our authentication segment, very similar to our excitement of our outlook for the precision logistics segment. So at this point, I'll turn the call over to Nancy for some specific financial details about the third quarter.