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DATE
Wednesday, Aug. 13, 2025 at 11 a.m. ET
CALL PARTICIPANTS
Chief Executive Officer — Adam Stedham
Chief Financial Officer — Jennifer Corla
TAKEAWAYS
Revenue-- $4.5 million in revenue for fiscal Q2 2025 (period ended June 30, 2025), a decrease of $900,000 compared to fiscal Q2 2024, primarily due to discontinued contracts in premium and proactive services.
Gross profit-- $1.6 million gross profit for fiscal Q2 2025, down $500,000 from fiscal Q2 2024; gross margin declined to 35% from 39%, mainly due to the loss of a customer in higher-margin premium services and discontinued services with two customers in proactive services.
Operating expenses-- $1.9 million for fiscal Q2 2025, down from $2.6 million in fiscal Q2 2024, attributed to cost controls and the divestiture of TrustCodes.
Net loss-- $290,000 net loss for fiscal Q2 2025, or $0.02 per diluted share, lower than the $350,000 net loss, or $0.03 per diluted share, in fiscal Q2 2024.
Adjusted EBITDA-- Adjusted EBITDA was $300,000 for fiscal Q2 2025, up from $200,000 in fiscal Q2 2024, reflecting continued cost reductions and operational efficiencies.
Operating cash flow-- $700,000 cash from operations generated in fiscal Q2 2025, compared to $400,000 in fiscal Q2 2024.
Period-end cash-- $6.1 million cash balance as of June 30, 2025, up from $2.8 million at Dec. 31, 2024.
Share repurchases-- 201,000 shares bought back for $153,000 in fiscal Q2 2025, with $330,000 remaining under the program.
Authentication revenue-- Authentication revenue totaled $27,000 for fiscal Q2 2025.
Interest income strategy-- Entered into a $2 million loan with Zen Credit Ventures on Aug. 8, 2025, expected to improve annualized interest income from approximately 4% of total available cash to greater than 8%.
Carrier integration-- The company established relationships with two freight carriers that handle the majority of non-U.S. Postal Service partial shipments in the United States; integration with the new carrier is expected to take several months and will not impact results until 2026.
Technology platform integration-- Completed integration with e-commerce shopping carts and shipping management software; focus is shifting to additional carrier systems.
Line of credit-- $1 million remains available, with no amounts currently drawn.
SUMMARY
Management ofVerifyMe(VRME 9.18%) emphasized that capital allocation is currently focused on strategic acquisitions and increasing interest earnings, rather than incremental operating investment. The company is prioritizing the expansion of directly contracted PeriShip customers as a primary driver for future organic growth, supported by increased marketing and business development activity. Management confirmed that it is not dependent on cash reserves for operational needs and expects continued positive cash flow from ongoing activities.
CEO Adam Stedham said, "We're advancing our strategy for developing directly contracted PeriShip customers, identifying it as the best path to sustainable organic growth."
Management anticipates that revenue and operational impacts from the new freight carrier will not be material until 2026 due to technology integration timelines and shipping seasonality.
Management stated, "We're looking to deploy that in other ways to create value, including continued diligence in evaluating both tuck-in and transformative acquisitions, without pressure to act quickly."
The current capital structure provides flexibility, as the company does not depend on borrowings and reports ample access to capital to pursue any strategic options it desires.
INDUSTRY GLOSSARY
PeriShip:VerifyMe's logistics platform offering shipping management and data services, especially for time- and temperature-sensitive products.
Proactive services: Segment atVerifyMeproviding logistics oversight and value-added supply chain solutions aimed at loss prevention and process efficiency.
Premium services: Higher-margin segment specializing in advanced authentication and tracking for high-value shipments.
Authentication revenue: Income derived fromVerifyMesolutions verifying product authenticity, such as VerifyInk or tamper-evident labels.
Tuck-in acquisition: Strategic acquisition of a smaller company or business unit to complement existing operations, typically for scale or capability enhancement.
Full Conference Call Transcript
Adam Stedham: Thank you, Jennifer. I am very pleased with the progress we've made in 2025. Our primary organic focus is on PeriShip. I realized that during 2025, PeriShip revenue decreased approximately 14% versus the second quarter last year. With that said, the major contributing factor was the previously announced large customers' losses back in 2024. Outside of those historical customers, new customer sales and expanded revenues with specific existing customers have offset some overall softening of the partial shipment market. I'd also like to point out that VerifyMe, Inc. has reduced our operating expenses by approximately 27% versus 2024.
We're managing our cost in alignment with revenues, and we're maximizing the gross margin of our proactive services within our Precision Logistics segment. Our positive adjusted EBITDA in Q2 2025 is an improvement over Q2 2024. So we're taking the steps that are required to ensure we have sufficient resources to invest in our strategies for both organic and strategic growth. During our previous call, I discussed our organic growth initiatives for creating value for our shareholders. Our primary focus is expanding revenues with directly contracted PeriShip customers. These efforts are delivering very positive results. We're pleased with the new customers we're adding in 2025.
Our marketing efforts continue to generate increased inbound lead activity, and we believe our business development and marketing approach will be a significant component to meaningful organic revenue growth in 2026. Now, the second element of the organic growth strategy we discussed was developing relationships with additional freight carriers and third-party logistics companies. We're pleased to announce that we now have a relationship with the two freight carriers that handle the overwhelming majority of the non-US Postal Service Partial Shipments in the United States. Historically, our single carrier strategy created an environment in which PeriShip did not have the ability to service meaningful portions of the potential target market for our services.
The process of integrating our technology and services with our additional freight carrier will take a couple of months. But the addition of a second carrier further reinforces the confidence we have in organic revenue growth in 2026. We had also previously announced that we were integrating with technology platforms related to e-commerce shopping carts and shipping management software applications. We've completed those projects and those integrations that we discussed on our last call, and our technology team is now shifting their focus to technology integrations and upgrades with our shipping carrier relationship. At this point, I'd like to shift the conversation from organic growth efforts to our strategic growth efforts.
As I mentioned earlier, the company had $6.1 million of cash at the end of 2025, and we do not require cash to support annual operating or public company expenses. We continue to evaluate transformative and tuck-in acquisitions. However, it's difficult to predict the timing or probability of these activities. Therefore, while we're diligently evaluating these strategic options, we want to realize more benefits from the strength of our balance sheet. Therefore, we've adopted a treasury strategy that will allow the company to realize better interest income and cash generation from our strong balance sheet.
This strategy involves loaning a portion of our available cash to Zen Credit Ventures in exchange for a nine-month promissory note at a more favorable interest rate than our current high-yield savings account. We anticipate this strategy should improve our annualized interest income from approximately 4% of total available cash to greater than 8%. We don't believe this strategy will have any impact on our ability to pursue strategic options for the company. We continue to have availability under our line of credit with our bank and a good relationship with our bankers. We feel we have plenty of access to capital to pursue any strategic options we desire.
At this point, I'd like to turn the call back over to Jennifer Corla, and she'll review the financial details of the quarter.
Jennifer Corla: Thank you, Adam. The second quarter revenue was $4.5 million versus the prior year of $5.4 million, a decrease of $900,000. This decrease is primarily due to a previously disclosed discontinued contract in our premium services and discontinued services with two customers in our proactive services, partially offset by increased revenues from new and existing customers in our Precision Logistics segment. Gross profit decreased by $500,000 to $1.6 million in Q2 2025 compared to $2.1 million in Q2 2024. As a percentage of revenue, gross margin was 35% in Q2 2025 versus 39% in Q2 2024.
While the quarter resulted in a decrease in year-over-year gross profit percentage, the loss of the one customer in our higher-margin premium services was partially offset by margin improvements in our proactive services. We expect the gross profit percentage to increase compared to Q3 2024, factoring in the seasonal variation in our Precision Logistics segment. Operating expenses were $1.9 million in Q2 2025, compared to $2.6 million in Q2 2024. In addition to a reduction in operating costs resulting from the divestiture of TrustCodes in December 2024, the company also implemented cost-cutting measures in the Precision Logistics segment.
Our net loss for the quarter was $290,000 or a loss of $0.02 per diluted share in Q2 2025 compared to a net loss of $350,000 or $0.03 per diluted share in Q2 2024. We purchased 201,000 shares of company stock during Q2 2025 at a cost of $153,000, with $330,000 remaining under the share repurchase program. Our adjusted EBITDA improved to $300,000 in Q2 2025 compared to $200,000 in Q2 2024 as a result of our continued efforts to reduce costs and develop operational efficiencies. On the last slide is our balance sheet as of 06/30/2025. Our cash balance as of 06/30/2025 was $6.1 million, an increase of $3.3 million from a balance of $2.8 million on 12/31/2024.
During Q2 2025, we generated $700,000 cash from operations, compared to $400,000 in Q2 2024. We expect to have continued positive cash flow from operations in 2025. On 08/08/2025, to improve our rate of return on our available cash balance, we entered into a $2 million short-term loan agreement and promissory note in exchange for regular quarterly interest payments at an annual interest rate of
Adam Stedham: percent.
Jennifer Corla: We also continue to have $1 million available under our line of credit and have no borrowings outstanding. With that, I'd like to turn the call back to Adam.
Adam Stedham: Thank you, Jennifer. As I started the call, I'm pleased with the progress in 2025. We're advancing our strategy for developing directly contracted PeriShip customers. I believe this strategy presents the company with the best opportunity for sustainable organic growth. In addition, we continue to have a disciplined approach to managing our cost margins and evaluating strategic opportunities. The combination of the strength of our balance sheet, anticipated annual cash flow, and our executive team's experience with creating value through acquisitions positions the company to provide meaningful shareholder returns for our current share price. So at this point, I think we'll turn the call over for questions and answers. Thank you. We will now begin the question and answer session.
Your first question today will come from Michael Petusky with Barrington Research. Please go ahead.
Michael Petusky: Hey, good morning. A couple of quick ones for Jennifer and then I have one or two for you as well, Adam. Jennifer, do you have the authentication revenue in the quarter?
Jennifer Corla: Yes. It was, I'm sorry, $27,000.
Michael Petusky: Okay. And then do you have the growth excluding the impact of the lost business on PeriShip? Like, if you excluded the impact of the business that was lost in '24, do you sort of, you know, have a number in terms of this growth rate for that business?
Adam Stedham: It's hard to answer that in that way because if you look at, you know, we had the customer that was insourced by our shipping partner. We had the customer we discussed that had a chain outsourced their cold chain strategy. So between the two, I think for one, we could mathematically answer it, but I think it would give an answer. But I think the puts and takes, you know, we single-digit percentage one way or the other after those puts and takes.
Michael Petusky: Okay. And then, in terms of the other carrier, you seem to suggest the impact would be at least a couple of months out before that would start to show up. I mean, do you expect this relationship to be material over the next few quarters, or is that going to be a slow build?
Jennifer Corla: I wouldn't expect it
Adam Stedham: to happen in the next, I wouldn't expect it to have anything to happen soon because as I said, it's going to take a couple of months to integrate with their technology. In addition to that, historically speaking, shippers are very reluctant to make changes during peak season. The overall shipping marketplace becomes strained between Thanksgiving and Christmas. And so companies, e-commerce companies, or companies that do a lot of shipping, they're aware of this, so they don't make a lot of changes. That would also create an environment where you wouldn't get a lot of changes there. So the build will be pushed further back, starting to materialize more noticeably in 2026.
The thing I would point out to you, though, is that if you look at the overall marketplace, the new carrier handles a much larger percentage of the marketplace than our existing partner does for the specific types of parcel shipments that we service, and that's why we're pretty excited about it.
Michael Petusky: Okay. And then, I guess, just last question, Adam, and I'll let others get on here. You know, obviously, good quarter in terms of sort of expense management, the cash generation, the cash build, all of it's great. You've got this cash balance, which is the healthiest it's been that I can remember, at least in recent memory. And so I'm just curious, in terms of your capital allocation priorities, I mean, would number one be internal investment in PeriShip? Would it be adding on some other business via M&A? How are you thinking about utilizing that balance sheet to create shareholder value over the next few years?
Adam Stedham: Great question. Great question. So the focus of 2025 really has been on transforming PeriShip and getting it to where it has a highly efficient, highly scalable model that can grow from there. We made that pivot as we pivoted out of with the divestiture that we had at the end of 2024. So that's where we're focusing this year. Through that, we continue to generate cash through the warrant induced earlier in the year. We continue to generate cash flow from operations. So that money, though, is the capital that we're making available. We're really not thinking that back into the operating business. We're looking to deploy that in other ways to create value.
Now we've evaluated potential acquisitions that are in the same space, and we've looked at other strategic alternatives to put the capital to work. To be quite frank, we're just trying to be very, very diligent and make sure whatever we do, we get it right, and it provides a very meaningful return to the shareholders. So without a doubt, we plan on deploying the capital in a way that would provide strategic advantage to our shareholders. But it's not burning a hole in our pocket either, and we want to make sure we get it done right. Did that answer the question?
I feel like I may not have directly answered it, but I wanted to give you the color of what we're trying to do.
Michael Petusky: No. I mean, my takeaway from your answer is essentially you'd like to find an asset or assets externally if you can find something you think has a good ROI.
Adam Stedham: Absolutely. I would very much. We've said from the beginning when I first came on board, the plan has been to create shareholder value through a combination of organic and strategic growth, and I continue to be diligently focused on strategic growth. The right opportunity just hasn't materialized yet.
Michael Petusky: Alright. Fair enough.
Jennifer Corla: Thanks.
Adam Stedham: Appreciate it.
Operator: This will conclude our question and answer session. I would like to turn the conference back over to management for any closing remarks.
Adam Stedham: Thank you. Well, I appreciate everybody joining the call today. I look forward to our next call and keeping everybody updated on the progress with our additional freight carrier. And, again, thank you.
Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.