VerifyMe, Inc.

Good day and welcome to the VerifyMe year-end 2023 financial results conference call. Today, all participants will be in a listen-only mode. Should you need assistance during today's call, please signal for 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. If you would like to withdraw your question, please press star, then two. Please note that today's event is being recorded. I would now like to turn the conference over to Nancy Myers, CFO of VerifyMe. Please go ahead.

Thank you. 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 report 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. We recently had an extensive strategy call, so I anticipate this particular earnings call will be a little shorter than typical. During that strategy call, we stated that we expected to finish 2023 with more than $25 million in revenue. and better than breakeven adjusted EBITDA. We finished 2023 with $25.3 million in revenue and $0.4 million in adjusted EBITDA, which was supported by very healthy profits in Q4. And Nancy will discuss those more. During the strategy call, we also indicated we anticipate double-digit revenue growth in 2024. I reaffirmed the expectation for double-digit revenue growth in 2024 Now I do anticipate our H2 growth rate to exceed our H1 growth rate. The company had positive cash flow from operations in 2023. As for Q4, our ending total cash was 3.1 million. Our current maturities of long-term debt was 0.5 million and our total debt was 2.5 million. So as a result, we had cash net of debt of 0.6 million as compared to a negative 0.1 million at the end of September, 2023. So keep in mind this net cash position includes proceeds from convertible notes of 1.1 million and the company anticipates the majority of these notes will be converted as opposed to repaid with cash at maturity. So in summary, As a company, we're generating cash and we anticipate we will continue to generate cash throughout 2024. So at this point, I'd like to discuss our capital strategy a little bit. In Q4 of 2023, the company announced a share buyback program. Since putting that plan in place and entering a trading blackout, the share price has primarily traded above the short-term buyback that we established. We continue to have our announced buyback program in place, and we'll continue to evaluate our strategy around repurchasing shares. Throughout 2024, we'll monitor all available options to utilize our capital to maximize shareholder value. So at this point, let's shift the conversation to our two operating segments. During 2023, We primarily focused on creating the foundation for the company. We focused on operational efficiency and our go-to-market strategy for our Perryship business and precision logistics. We completed the TrustCodes acquisition for authentication segment, and we vertically integrated the TrustCodes technology stack with all of our existing customers. In addition, we defined a strategy to integrate this technology platform into commercial relationships across specific target industries. So the precision logistics segment, it completed 2023 with $24.7 million in revenue versus a pro forma fiscal 2022 revenue of $24 million. During 2023, We improved the gross margin significantly for precision logistics. Our Q1 2023 gross margin was 29%. And the average gross margin across quarters two, three, and four was 36%. Now, a small contributing factor to this improvement was the discontinued relationship with some lower margin customers. This did result in some impact on our Q4 2023 revenue in this segment. The precision logistics segment generated $8.6 million in revenue in Q4 2023. The net result for 2023 was the precision logistics segment experienced organic growth over our pro forma 2022 numbers, experienced a significant increase in gross margin dollars in 2023 versus 2024, including in Q4 2023 as compared to Q4 2022. So now let me shift to our authentication segment. The segment generated approximately $150,000 in revenue in Q4. We pointed out in our strategy call that the APAC portion of this segment had been experiencing challenges associated with difficult market conditions. We also discussed that we're seeing those conditions improve, and we anticipate they will contribute to our organic growth in 2024. This continues to be our feeling, our experience, and our expectation for 2024. In addition, we've added three sales associates to the team within this segment to accelerate our growth by increasing awareness of our industry-leading technology stack. During the strategy call where we discussed our technology, we stated that we now have all of our existing customers transitioned onto the TrustCodes technology platform. In addition, hopefully you saw our press release indicating that our technology platform is now integrated into Amazon's transparency program. We're excited by this recent development and We're pleased that Amazon's review of our platform has confirmed our belief about the significant value it delivers. In addition to that, we believe that we can provide meaningful support for Amazon's efforts to combat counterfeit products in the marketplace. This support will be good for Amazon, it's good for the brands sold in the Amazon marketplace, it's good for consumers, and it should be very good for VerifyMe shareholders. So I look forward to sharing more information about that relationship as it continues to develop. So at this point, I'll turn the call back over to Nancy Meyers, our CFO, and she'll provide a more detailed financial report.

Thank you, Adam. For today's call, I will touch on the financial highlights for the fiscal year and the fourth quarter. Fiscal 2023 revenue increased by 29% to 25.3 versus prior year of 19.6 million due to the acquisition of Perryship in April of 2022. On a pro forma basis, our precision logistics revenue increased by 0.6 million in 23 versus 2022. During the fourth quarter, revenue decreased in our precision logistics segment by $0.3 million from $8.9 million to $8.6 million due to the discontinued relationship with some lower margin customers in our proactive service revenue partially offset by an increase in our premium service revenue. Revenue on our authentication segment decreased from $1.4 million to $0.7 million for the fiscal year and from 0.8 million to 0.1 million in Q4 2023 due to a large order in Q4 2022 that did not recur in 2023. However, we continue to work with this customer and anticipate additional orders in 2024. Growth profits increased 2.5 million to 9 million in fiscal 2023 versus 6.5 million in fiscal 2022. As a percentage of revenue, gross profit increased to 36% versus 33% in 2022. For the fourth quarter, even with the revenue decrease, our gross margin increased by 0.3 million to 3.1 million in Q4 2023 versus 2.8 million in Q4 of 2022. The year-over-year increase is mainly due to the shift in customer mix and service offerings in our precision logistics segment, as well as process improvements the company has made. You can expect some variability of gross margin in the precision logistics segment as shifts in customer mix and service offerings occur. General and administrative expenses for the fiscal year increased by $2.2 million from $10.6 million versus $8.4 million in 2022. For the fourth quarter, general and administrative expenses increased by $0.5 million to $2.7 million in 2023 versus $2.2 million in 2022. The increases relate primarily to the acquisition of Perryship Global in April of 2022, Trust Codes Global in March of 2023, severance expense for the year of 0.6 million, and additional stock compensation. Sales and marketing expenses for the fiscal year decreased to 1.6 million versus 1.7 million in 2022. And for the fourth quarter, they decreased by 0.2 million to 0.3 million versus 0.5 in 2022. The decrease is primarily related to a reduction in employees and consultants, partially offset by additional travel expenses in the authentication segment. Our net income for the quarter was less than $0.1 million versus $0.1 million in 2022. However, our results for 2023 included $0.1 million of loss on equity investment and $0.2 million of impairments of long-lived assets. In Q2, we discussed our efforts to optimize overhead expenses to improve adjusted EBITDA going forward. And as a result, our adjusted EBITDA increased by 1.2 million to positive 0.4 million for the fiscal year 2023 versus a loss of 0.8 million for fiscal year 2022. And increased by 0.4 million for the fourth quarter of 2023 to 1.1 million compared to 0.7 million for the fourth quarter of 2022. 2023 also resulted in our first fiscal year with cash provided by operation activity of 0.2 million for the year and 0.8 million for Q4 2023. On the last slide is our balance sheet as of December 31st, 2023. Our cash as of December 31st is 3.1 million a decrease of 0.3 million from the 3.4 million we had on December 31st, 2022. However, through the 12 months of 2023, we had a capital raise of 1.1 million through the sale of convertible notes, repaid 0.5 million on our loan, paid severance expense of 0.4 million, and the acquisition of trust codes of 0.6 million. As of December 31st, 2023, we have no borrowings under our line of credit and have $1 million available to us. With that, I would like to turn the call back to Adam.

Thank you, Nancy. I don't want to repeat the information we recently covered in our strategy presentation, but suffice it to say we're optimistic about the new developments we're seeing in both our authentication and precision logistics segments. I'm confident our strategy of integrating our authentication platform into the go-to-market strategy of key industry leaders will generate value. In addition, I believe our precision logistics business is transforming into an efficient operation with a clear value proposition and a clear target market. So I'll simply conclude by saying I'm excited. I'm excited by the opportunity the company has and our shareholders have in 2024. We're a company with cash to fund our operations. We generate cash. And we have a proven tech stack that solves real problems that face consumers and companies in today's environment. So I look forward to sharing more information with you as the year unfolds. But at this point, we'll open up the call for questions.

Thank you. We will now begin the question and answer session. As a reminder, to ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw it, please press star then 2. At this time, we will pause momentarily to assemble our roster. Today's first question comes from Mike Petoskey with Barrington Research. Please go ahead.

Hey, good morning. How are you doing, Mike? Hey, great. Appreciate the comments. So, Adam, I guess on your comment about the second half being likely stronger, I'm assuming that you still expect some growth in the first half. Is that a fair assumption that it's not? Yes. really swung towards the second half, so you do expect like at least mid-single-digit growth, something along those lines in first half?

Yes, we expect, yes, we definitely expect organic growth in the first half and second half. We just feel we'll have, if you could, our H2 versus H2 will show more growth than our H1 versus H1, but there'll be growth in both halves.

I guess I'm trying to understand because I sort of expected that you would really, as I was thinking, not just at 24 but over time, I've sort of been under the impression that more of the leverage would sort of come on sort of G&A and maybe some of the expense items rather than gross margin. Now I'm wondering, well, is gross margin, is there a chance gross margin actually expands going forward? Because I really assumed as precision logistics, became a bigger part of the business, that most likely that would continue to, you know, decline at least slightly. Can you just sort of speak to how you see this playing out both in 24 and over the sort of the timeframe of your longer-term plan? Thanks.

Sure, no problem. So the gross margin improvement's primarily been an effort of managing pricing and as well as driving efficiency into the business. There's been no leverage that's contributed to the gross margin improvement. I completely agree with you that we should be able to generate leverage as revenue grows on the G&A side. We haven't experienced the revenue growth to this point over 2023. that enabled that. But going forward, I would absolutely expect that our revenue can scale without the proportional scaling of our G&A. So G&A as a percentage of revenue should be able to go down.

Is there any chance that number as an absolute number can go down in 24 or will that show some level of growth, meaning G&A?

I don't see it going down in 2024.

This one's for Nancy. The number, I think I heard, 0.7 million for fiscal 23 for authentication, and that would equate to, what, 24.6 for the precision logistics? Easy for me to say. Is that right? 24.6?

Yes.

Okay. And do you by any chance have the number Precision Logistics for 22, including the time they weren't a part of you guys, like pre-acquisition? Do you have that full year number by any chance handy?

Yeah, that was $24 million.

Okay. So the business did grow a bit. All right. Terrific. All right. That's all I've got for right now. Thanks, guys. Appreciate it.

Great. Appreciate it, bud.

The next question comes from Jack Vanderaard with Maxim Group. Please proceed.

Hey, Jack. Okay, great. Hey, Adam. Great. Thanks for taking my questions, and congrats on a strong finish to the year. You definitely hit on all your points, I think, from the investor day as well. So no real surprises, all good stuff. I guess I'll follow up with a question just on – You know, I had a question about the revenue guidance, obviously, but I think that was kind of covered. Gross margin, I just want to touch on this again as well. So, you know, the fourth quarter, you had a very, very strong record third quarter gross margin, obviously. And I was expecting the fourth quarter gross margin to come down, but it held up. It was much stronger than I thought as well. And it doesn't really seem to be like it was mixed driven by the authentication segment yet. So just... Is this kind of, do you have a sense of like a floor? I mean, that's impossible. There's always outliers that can happen. But do you have a sense of a gross margin floor on any given quarter going forward?

I mean, I think that our current gross margin is a sustainable gross margin going forward. It, depending, as you pointed out, as our authentication business begins to grow and it runs at a substantially higher gross margin than our precision logistics business, the gross margin could go up. The larger the percentage of our revenue mix that would be associated with authentication, that would have an upward impact on our gross margins. So I do think that we're at a sustainable level. I don't see it retracting from here. We are going to, when we announce Q1, We're going to make some changes to how we calculate gross margin. We could show all of that, and we'll explain all that on the Q1 call. But that will give you even more insight into how we can drive efficiency and maintain the gross margins. But we don't think that this is a one-off. We think we're at a sustainable level that could go up with product mix.

Okay, great. No, that's, that's, that's helpful color. Um, and let's see, I guess I'll switch gears here. Um, precision logistics segment itself in terms of revenue mix, um, and the actual kind of types of revenue or customer, um, relationships you have, um, you know, it, it makes sense with the fourth quarter kind of down year over year, just given that that particular customer that was, um, a proactive services customer. I think that proactive services was about 80% of your historical mix. Do you have any sort of goal as to like what you expect just from that mix or end goal as you exit 2024? Just to get an idea of like the pace at which you'll be focusing more on these premium customers.

No, we don't really have a goal. The go-to-market strategy of these two lines of business is very different. one, we are supporting the largest air freight company in the world in their efforts to service their customers. And so the growth of that business is tied to their go-to-market strategy. The other, it's more direct selling into the marketplace for us. That would be the proactive business. So we don't really have a target mix because the two go-to-market strategies operate somewhat independent of each other, and it's not a situation where we allocate specific resources to get a specific mix.

Got you. That makes sense. And then just maybe one more question for me. I think you mentioned you hired three sales associates in the authentication segment. Can you provide an update on your overall headcount plans and sales and marketing headcount strategy and goals in 2024 and kind of just where we are in your plan?

Thanks. So we've hired three sales associates. Two of them are in the U.S. One is in New Zealand for the AMZ area. And so we continue to As we're seeing market conditions improve across the APEC region, we wanted to add capacity to take advantage of those more favorable conditions. The main marketplace and the largest marketplace in the world for what we do is the U.S., so that's why we added two resources in the U.S. I could see us before the end of the year continuing to add to that. We believe that... We believe that the business operates in a way that it's going to reach a tipping point. And this isn't a business that is just slow, strategic year-over-year growth. This is a business that is going to reach a tipping point and have quite the inflection. And so we want to make sure that we have the sales capacity available that's trained and ready to address the market as it becomes more and more receptive to what we do.

Understood. Well, again, congrats on the strong finish and look forward to Q1. Thanks.

All right. Thank you.

The next question comes from Fred Brecker, a private investor. Please proceed.

Hi, Adam.

Hi, Fred. How are you?

Fine. Thank you. I'd like to add my congratulations on your huge improvement over the past. Can you help me understand the significance of your recent press release on Manuka and Amazon and how this will impact the future?

Sure, absolutely. So first off, I would say, and thanks for the question, Brett, So first off, I'd say we're excited and we're pleased to support our customers as well as Amazon's efforts to combat counterfeits. So currently, Fred, there are over 33,000 brands that participate in Amazon Transparency, and that's been growing at a rate of about 50% a year over the last three years. If you look at our platform, it's ideally targeted at customers who want to protect their brand in an online and offline environment. And our sweet spot are brands that sell more than 5 million units per year in total. Now that would include their sales in the Amazon marketplace as well as other distribution channels. So if you look at all of that, We estimate that each new brand that adopts our platform for traceability and Amazon transparency participation would generate an average of about $50,000 a year annual recurring revenue for verify me. So as you start to apply the math and you start to look at, at the impact it would have as if we're successful, and we believe we will be successful at adding these brands. it could have a very significant impact on our run rate ARR going forward. So I look forward to providing more updates on our sales efforts, but hopefully that can give you a feel for why we think it's significant.

Do you develop these brands as far as acquiring their business, or do the salesmen do that, or does it come from Amazon, or how do you acquire these? Right, so...

So our salespeople that we've hired are selling directly. We were just at a trade show this last week doing that. In addition, we work with Amazon, and there's a certain segment of the marketplace that Amazon and Verify Me are discussing targeting that it's very specific that that marketplace would be ideally suited for what we do. So it'll be a combination of everything you said.

Okay. Thank you, and congratulations again.

Thank you.

Our next question comes from Jeff Porter with Porter Capital Management. Please proceed.

Adam, great going. Good quarter. Just got one question. I'm sort of thinking out loud here as we're trying to develop the authentication business, and you mentioned you hired three salespeople. I'm just wondering – Are there potentially strategic partners out there that have pretty big sales and marketing reach that touch our prospective customers that we might be able to do some kind of joint venture with or get them to sort of white label our product and really turbocharge our growth in that area? Does that make sense from a strategic point of view?

It does make sense, and it also accurately describes part of our go-to-market strategy. So if you look at it, when we talk about integrating our platform into industry-leading brands, what we're saying is that there's a movement. There's a U.S. movement, a global movement towards smart packaging. So we are – We are working with one of the largest canning companies in the world, and as they're looking to integrate our tech stack into their product that they sell to their customers to where they can have smart cans that allow them to provide consumers the information they want in this ever-growing digital world. We're working with the largest packaging company in the world about integrating there. We've already talked about Amazon Marketplace. We're working with the leading producer of equipment for leafy greens and infant nutrition packaging. So exactly what you're saying is exactly what we're doing. We're working with these companies. Think about the model of we want to have have our technology inside, verify me inside. So as they go to market with smart packaging, our tech will be inside of it, empowering the back end of what they're trying to do. So that's exactly what we're trying to do.

And I would imagine that the gross margins on that type of business are orders of magnitude above where our gross margins are now. Is it more like a software gross margin?

Yes.

Okay, so hopefully if we can drive the revenue there and it becomes a greater percentage of our revenue mix, we could really see the gross margin expand going forward.

Absolutely. I think that our current gross margin is sustainable and it represents – It represents the ongoing run rate gross margin of the company given our proportion of revenue that's authentication and precision logistics. If the percentage of revenue for authentication goes up relative to precision logistics, just mathematically it will naturally drive the gross margin up. You're exactly right.

And last question, in terms of our technology stack, are there any – not holes in it, but are there any additional things that customers are saying, you know, geez, if you could add this feature, you know, that would really enhance the value proposition? Or do you think that our technology development is pretty much where we need to be?

Right now, I think our technology stack is ahead of the market. I think that we, that our, the level of GS1 integration we have We provide more functionality and capability than the average consumer realizes that they want, particularly in the U.S. market. So I don't think there's any gaps at this point. But as the market evolves, we'll continually develop the technology.

That's very exciting going forward because I think from an investor viewpoint, you know, the way the company – can be viewed as rather than a freight forwarder slash logistics company as a value-added technology company in the authentication, I think that's got a lot of sizzle to it and would be very attractive to investors because of the potential growth. So great going, and I'll look forward to following your progress.

Great. Thank you very much.

The next question comes from Richard Grulich with REG Capital Advisors. Please proceed.

Thank you. Hello, Adam and Nancy. A couple quick questions and then a couple of comments. First of all, the question, you had spoken during the investor day and you kind of alluded to it again today, but you're trying to achieve higher integration with FedEx, working with some of the sales forces there. Has that actually started yet?

No, it has not actually started at this point. We're continuing to work with them around models. This is a very, if you look at the press releases, and this isn't related to FedEx alone, if you look at FedEx UPS, if you look at the major freight companies, They're forecasting a challenging year in 2024, and so there's a lot of attention put on that. We continue to believe in the strategy, but it hasn't had a lot of progress thus far. Okay.

Number two, while I know you wisely didn't want to rehash everything you did just a month and a half ago, for those investors who didn't watch that, I would just point out that you had said during that conversation presentation that kind of a five-year outlook, you thought 50 to 60 million in revenues and 15 to 20% adjusted EBITDA margin. I assume in the last six weeks that sort of far out thinking hasn't really changed much.

No, it hasn't changed. And it really, no. And the thing I would say is that just as we talked about with gross margin, It's very difficult to predict our product mix five years from now, but the EBITDA margins can be significantly higher or the same or even lower depending upon our product mix and the amount of the revenue that's associated with authentication versus precision logistics. We haven't changed our five-year outlook at this point.

So the implication I'm getting when you were discussing gross margin earlier, that if you achieve what you think you'd like to be able to do, that adjusted EBITDA margin would be higher.

Yes. If we... If our authentication business grows more rapidly than we currently have modeled in our five-year plan, it would definitely change our EBITDA percentage in an upward direction.

Yeah. Third, you had mentioned that, you know, your sweet spot is that 5 million units per year distribution. Those kind of customers might yield everything. an ARR of about 50,000 a year for VerifyMe. But as I recall during the presentation, that 50,000 annual ARR was kind of a low end of sort of what could be accomplished for customers with more than 5 million units.

Completely agree. It can be a low end. And you're looking at But when we're looking at averages, we think that that's a reasonable average for people to think about and model. But you're exactly right. Really, our product is ideally suited for customers that go from 5 million to 100 million units a year. If you have 100 million units a year, then that's a very different ARR for that customer than 5 million.

Thank you. Now, this is just my comment is I very much appreciate the way you're approaching the share repurpose alternative for use of capital. You know, far too many companies just go out and start buying stock without having a disciplined way of approaching what price they're willing to pay for it. My two cents is I think the overall market is very wildly overvalued, which is why I look at companies like you. during periods of time where you're not overvalued. But a simple regression to the mean of the overall market valuation may give you an opportunity, even though your company will be doing well, an opportunity to repurchase your stock at a really attractive price. So I appreciate the way you're kind of shepherding your cash in that regard. Thank you. Thank you.

Again, if you do have a question, please press star, then one. The next question comes from Daniel Orlow with Shield Street. Please proceed.

Hi, thanks for taking the call. How are you? Good, thanks. You know, I think everything was pretty much covered at this point. I'm trying to get a sense of How do you think about the pipeline? You know, how lumpy is it? Does it end up becoming, you know, like how far are some of these conversations along so that you can have greater clarity over the course of the year? And then in the context of that, just to reflect on the prior question, in terms of share repurchase, you know, how does that then come back and reinforce your ideas around capital management and what is the appropriate price for the shares? I mean, if you were to look out and say, well, you really were going to be running 50 to 60 million revenue and you know, five years out, then in theory you should be buying back every share you could today. Obviously that's not necessarily the, the, the balance of risk that you want to maintain. Right. But there will be data points along the way that we're going to better inform that decision to reenter the market. I'm just trying to understand how you're thinking about that tension in the context of your pipeline in terms of the trade-offs between gross margin. And then the second question is a little bit more EPS-oriented, but let me just stay with that starting point.

Great. So let me answer from a pipeline perspective. So on the authentication side, there's two stages to this pipeline. Stage one is you have to have your technology stack or your technology platform tested, integrated with. You have to come up with the go-to-market strategy and the integration of your technology platform into your partners who are going to then take it with some sort of smart packaging or Amazon Transparency or these many programs designed to – enable consumers to have confidence and knowledge. So we're very far along on that. We feel very comfortable. We've had press releases around Amcor. We've now had this press release that relates to Amazon Transparency. So we feel very good about where we are from a go-to-market and from a pipeline perspective of integration of our platform into the large providers who are going to take it to the marketplace. So step two is to make sure that we have the business development and the sales resources to then support those customers and to help them close the sales. So that's where we are now. We're seeing pipeline, we're seeing opportunities develop, and so we feel very comfortable with that. That's on the authentication side. On the precision logistics side, I think we've talked about that earlier. And really what we're focused on for precision logistics from a pipeline perspective, heavily focused right now on understanding the proactive customer and the value proposition that they have. And really, we believe that our current pipeline is well below where it could be to drive more growth on the proactive side of the business. So we're working hard to get our pipeline to increase the pipeline on the proactive side as i say that that ties back to our capital structure we're very focused on uh if as opportunities unfold and as i as i indicated i believe that we have a company that that is a tipping point type of of company and when the marketplace is fully ready and fully realizes the value that our service and our platform provides, we need to have sufficient capital and resources to respond accordingly not to miss out. So we're continually, if we found that we want to be able to evaluate if we find ourselves in a situation Would we be better off buying 200,000 shares or hiring three salespeople? Which would provide the most shareholder value? So that's how we're looking at it. And right now we have in our mind that there's certain no-brainer prices that we would buy our shares and we think that they just grossly miss the mark on what our real value is. But outside of that, it's more of a strategic, rationalized looking at the multiple options for using our capital, what's likely to give the best shareholder value.

Fair enough. Fair enough. Look, it's not a crystal ball. You have to sort of feel your way. Is it appropriate to think about EPS on a not as a guidance basis, but on a range basis at this point. If we're thinking about sort of double digits, so that would be anywhere from 2.5 to some higher number of incremental revenue at the current sort of gross margin, is that the right way to think about it through the share count? Is that the right way to think about like what –

Are you saying for one-year modeling, five-year modeling, what time frame are you at?

I'm trying to think about actually for two-and-a-half-year modeling, actually. But I don't think if you're at a tipping point, it happens when it happens over the course of the year. I don't think anybody can be that level of clarity. Nobody really has. But I am trying to understand if you're thinking about organic growth out for $50 million, you have to be at a certain range of steady state compounding, and therefore, you know, out two years, out two and a half years, is this trading at some sort of discount to some range of expected EPS? So, you know, out two years, could we say that it's an incremental $5 million and a 35% margin, and therefore it's trading at X? I'm just trying to understand how – part of what we're talking about here is – and this isn't directed at you at all. It's just sort of if the stock is intrinsically undervalued, then it's undervalued probably on a revenue basis. It's trading, you know, half of revenues. So what does it take to get it to trade at revenues? And, you know, well, in the earnings. So how does that unfold in your mind? And part of the way of doing that in my mind is to say, well, Is there a framework for, as you framed on Investor Day, of expecting positive cash flow contribution throughout the year? Then we can talk a little bit about EPS. Maybe not this year because we're still in the tipping point stage, but in an out year we might be able to talk about it.

I absolutely agree. So I get where you're going and I don't really have a model for you, nothing that we've shared publicly or that I'd be prepared to share here. What I would say is this is the reality of where I think we are and a lot of software companies are, technology companies, something called technology, not a software company, but is there's a certain level of organic growth that you need to be able to demonstrate consistently over a period of time, and then you start to get credit for your ARR, and people start to look forward and they start to model forward the layering effect of your ARR based upon your organic growth rate. given that we don't have the track record of organic growth, we're not getting any benefit of that in our share price calculation. And so I do believe that throughout what I think will happen is throughout this year, if we deliver the organic growth, we think we will. And then we follow that up with 2025 organic growth. I don't think the share price is really going to be tied back to EPS. I think it'll be tied back to a perception around modeling the organic growth and the layering of the ARR and what that will ultimately then translate to from an EPS perspective. So that's how I think it will unfold. But I don't know. I don't have a crystal ball, but, I mean, that's just my best.

No, no, no. I appreciate your just being forthright with that. I mean, it's hard to set expectations when all you've done right now is just rebuild the company in a lot of ways. So bringing it to the tipping point should be congratulations for that. But always curious how you're looking down the road.

I understand completely. All right.

Thanks for your time. Thank you.

At this time, we are showing no further questionnaires in the queue, and this does conclude our question and answer session. I would now like to turn the conference back over to Adam Stedham for any closing remarks.

Thank you. Well, thank you, everybody, for attending. This is an interesting time of year because closing out a year takes a little longer than closing out a quarter, so it's not too far away. We'll be on another call with you, and I look forward to that and Give me more of an update that answers some of these questions around what do we think is the value of our latest press release, any updates on that, as well as continued progress of the business in Q1. So thanks, everyone, for attending, and look forward to talking to you again.

The conference has now concluded. Thank you for attending today's presentation, and you may now disconnect.