VerifyMe, Inc.

Hello and welcome to the Verify May 3rd Quarter 2024 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, and to withdraw from the queue, please press star then two. As a reminder, this conference is being recorded. I would now like to hand the call over to Nancy Meyers. 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 Stedham, CEO and President, who will give an operations and strategic update. Following our management presentation, we'll 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. I'm pleased with our gross margin, gross profit, and adjusted EBITDA improvement in 2024 versus 2023. These gains have been the result of diligent efforts by the leadership team, and I'm pleased with their results. In particular, I'm pleased to report in our precision logistics segment, So we have seen revenue growth during the third quarter in our proactive services that has come very close to offsetting the loss of the premium customer previously disclosed. Our total year-to-date net cash is slightly down at the end of Q3, but we anticipate that we'll be net cash flow neutral for 2024. Looking at 2024 as a whole, We anticipate our 2024 revenue will be slightly below 2023 revenue. And I'm disappointed by the lack of revenue growth. A meaningful contributing factor is the FedEx insourcing of services provided to one of Pariship's premium customers. As just mentioned, we're seeing the results of our expanded sales efforts but the loss of that contract will still drag on the full year results. Now, a larger drag on overall expected revenue growth this year comes from our authentication segment, which despite robust growth expectations at the start of this year, it has been grown in 2024. Now, this has led us to do a thorough analysis of our competitive positioning in this area. Now, VerifyMe has been focused on anti-counterfeit efforts for many years. Historically, these efforts were highly dependent upon technology partner strategies, which have presented many exciting opportunities, but which ultimately generated limited shareholder value. The partnerships that have created some value for shareholders have been in the distribution partnerships supporting our ink capabilities. Now, in 2023, as a way to reduce our reliance on third-party technology providers in the code business, we acquired TrustCodes. This transaction was completed with minimal cash, and during 2023, we integrated TrustCodes technology into our business. In addition, throughout 2023 and 2024, we focused on developing potential sales and distribution partners created by the Trust Codes acquisition. Now, coming into 2024, we anticipated significant growth of our authentication segment due to leveraging our sales and distribution partnerships and completing our services provider agreement with Amazon Transparency. Disappointingly, organic growth has not materialized for this segment in 2024. We've come to realize that traceability through serialized codes and supporting cloud technology is a very complex sale for customers in the U.S. market. We've also discovered that our authentication segment lacks the size and scope to compete effectively in the enterprise customer market. And then lastly, Due to various marketplace dynamics and our company's size and positioning, we do not believe the Amazon transparency arrangement presents the tailwinds for the authentication segment that we had previously believed it would. So, as we evaluate the current situation, I think we also need to consider that pursuing this vertically integrated code strategy requires approximately a million dollars per year of cash investment by the company in 2024, again in 2025, and continued cash investments into 2026. So, and I want to help put that required investment into perspective. A million dollars is approximately 8 percent of the entire market cap of the company, and our code services represent about 1% of our annual revenues. So as a result, we've been working with multiple advisors to critically assess what are our various options. And we've concluded that a renewed focus on our ink product, which currently represents about 23% of our authentication revenue, or the pursuit of other strategic opportunities related to areas of company or board expertise will provide a better return for our shareholders than continuing to invest in the vertically integrated code strategy. So as a result of this, we'll likely exit that portion of the authentication segment, which would also end our current relationship with Amazon transparency prior to the end of 2024 by discontinuing the operation or divesting of the business. Now, when I introduced myself to you just over a year ago, I said we believed that our Perryship business presents a strong cash flow business, and we believed we could create value through organic and strategic initiatives. We continue to believe this is the case. While the decision to change course on the authentication business is likely to be a surprise to you, I want you to know that we have not made this decision lightly. At the very core of our strategy and efforts is to drive to create shareholder value. We now strongly believe that we'll be able to best create this value by investing in areas outside of the codes portion of our authentication segment. We've engaged with bankers and advisors in seeking alternatives, and at this point, we're very optimistic about the opportunities that we see. I'd like to shift the conversation a bit to discuss precision logistics. We've increased the number of proactive services year-to-date customers in this segment by 6% over 2023. We also have continued to see increases in proposal activity in precision logistics since increasing the size of our sales teams. Now, despite our total shipments for existing customers and proactive services being down 4% year-to-date, we're pleased by the shifting trajectory of these volumes. We expect that Q4 of this year will continue to face headwinds, but we believe our execution and differentiation positions us to navigate the situation well. We believe we're well positioned to benefit from the wins once the overall perishable shipments market shifts. So at this point, I'll turn the call over to Nancy for detailed review of the third quarter financials.