VerifyMe Provides 2024 Outlook Update

Rhea-AI Summary

VerifyMe (NASDAQ: VRME) has updated its 2024 outlook following a strategic realignment by a major global carrier customer. This customer will discontinue subcontracting VerifyMe's Premium logistics services for one of its clients in June 2024. The service discontinuation is not due to quality issues but will impact a significant portion of Premium services revenue. Consequently, VerifyMe now anticipates mid-single digit revenue growth for 2024, down from previous double-digit expectations. Despite a reduction in the gross margin percentage, it is still expected to exceed 2023 levels. The company is actively seeking strategies to mitigate the gross margin impact on adjusted EBITDA. CEO Adam Stedham reiterated the company's commitment to its five-year growth plan, focused on initiatives outside the Premium services segment.

Positive

• VerifyMe expects to exceed its 2023 gross margin percentage in 2024.
• Company continues to focus on its five-year growth plan and other growth initiatives.
• No quality issues were cited for the discontinuation of Premium services.

Negative

• Discontinuation of Premium logistics services by a key global carrier customer.
• Expected revenue growth for 2024 reduced to mid-single digits from earlier double-digit projections.
• Gross margin percentage for 2024 will be reduced compared to prior estimates.
• A significant portion of Premium services revenue will be lost.

Insights

Financial Analyst

VerifyMe's updated 2024 outlook provides important insights into its financial trajectory. The termination of the Premium logistics service contract by a major global carrier is significant. This contract constituted a meaningful portion of VerifyMe's Premium services revenue, thus impacting their overall growth rate and gross margin.

With a reduction from expected double-digit revenue growth to mid-single digit growth, investors may need to reassess the company's growth potential in the short term. It's critical to note that the gross margin will still exceed the 2023 percentage, suggesting some operational resilience. However, the reduced margin needs to be carefully monitored, especially as it affects adjusted EBITDA.

In simpler terms, revenue and profit margins will not grow as fast as expected due to the loss of a significant contract. This change could impact the stock's short-term performance, as investors might be wary of the immediate financial impact. Long-term, the company remains committed to its strategic goals, which could still provide growth opportunities. Investors should keep a close eye on how VerifyMe navigates this setback and their efforts to mitigate the financial impact.

Market Research Analyst

From a market perspective, the loss of a key contract highlights the volatility in VerifyMe's business model, which heavily relies on large strategic partnerships. Investors should consider the risk of similar situations occurring with other major clients, which could further impact revenue stability.

The mid-single digit growth forecast and the focus on non-Premium services within the Precision Logistics segment indicate a shift in VerifyMe's strategic priorities. This could open new avenues for growth but also comes with inherent uncertainties. The company's ability to effectively pivot and capitalize on these new opportunities will be important for long-term success. Monitoring the market's reception to these strategic shifts will be important for retail investors.

LAKE MARY, Fla.,  May 23, 2024 /PRNewswire/ -- VerifyMe, Inc. (NASDAQ: VRME) together with its subsidiaries, Trust Codes Global Limited ("Trust Codes Global") and PeriShip Global LLC ("PeriShip Global"), (together "VerifyMe," "we," "our," or the "Company") provides brand owners time and temperature sensitive logistics, supply chain traceability,  authentication, anti-counterfeiting, and data-rich brand enhancement services, announced today an update on its 2024 outlook.

VerifyMe has been notified by its large global carrier customer that it will end subcontracting VerifyMe's Premium logistics service for one of its customers in June 2024.  Discontinuing this contract is not due to any issues relating to the quality of the services provided by VerifyMe's Precision Logistics segment, but due to a strategic realignment of offerings by our global carrier customer.  The change has no impact on Precision Logistics' Proactive services and is not expected to have an impact on the remaining Premium services within the Precision Logistics Segment. However, this discontinued contract with one customer represents a meaningful portion of the Premium services revenue.  As a result of this change, we are updating our 2024 revenue guidance.  We now anticipate the total VerifyMe 2024 revenue growth rate to be mid-single digit, as opposed to double digit growth.  In addition, we expect the gross margin percentage for 2024 will be reduced, but we still anticipate the 2024 gross margin percentage for VerifyMe will still exceed the 2023 gross margin percentage.  The Company is currently actively identifying strategies to reduce the impact of the gross margin reduction on adjusted EBITDA.

On February 6, 2024, the Company presented a five-year outlook for the Company.  This outlook is primarily based upon the growth initiatives unrelated to Premium services within the Precision Logistics Segment.  Adam Stedham, CEO and President of VerifyMe stated, "although the timing of this event is unfortunate for VerifyMe in achieving our 2024 goals, we continue to be making strong progress on our defined strategy, and I continue to focus on fully executing our five-year plan."

About VerifyMe, Inc.
VerifyMe, Inc. (NASDAQ: VRME), together with its subsidiaries, PeriShip Global and Trust Codes Global, is a traceability and customer support services provider using specialized software and process technology. The company operates a Precision Logistics Segment and an Authentication Segment to provide specialized logistics for time-and-temperature sensitive products, as well as item level traceability, anti-diversion and anti-counterfeit protection, brand protection and enhancement technology solutions. VerifyMe serves customers worldwide. To learn more, visit https://www.verifyme.com.

Cautionary Note Regarding Forward-Looking Statements 
This release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The words "anticipate," "can," "will," "expect," and similar expressions, as they relate to us, are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. Important factors that could cause actual results to differ from those in the forward-looking statements include whether the expected negative impact to revenue or gross margin due to the loss of the customer referenced above are granter than we currently anticipate, our customers and brands seek to use our product serialization on their products when utilizing Amazon Transparency, whether our competitors also collaborate with Amazon Transparency to develop competing products, our engagement in future acquisitions or strategic partnerships that increase our capital requirements or cause us to incur debt or assume contingent liabilities, the successful integration of our acquisitions (including the assets of PeriShip Global and Trust Codes Global), our reliance on one key global carrier for shipping services in our Precision Logistics segment, our global carrier partner developing technologies that compete with the services offered by our Precision Logistics segment, seasonal trends in our business, sever climate conditions, the highly competitive nature of the industry in which we operate, our brand image and corporate reputation, impairments related to our goodwill and other intangible assets, economic and other factors such as recessions, downturns in the economy, inflation, global uncertainty and instability, the effects of pandemics, changes in United States social, political, and regulatory conditions and/or a disruption of financial markets, reduced freight volumes due to economic conditions, reduced discretionary spending in a recessionary environment, global supply-chain delays or shortages, fluctuations in labor costs, raw materials, and changes in the availability of key suppliers, our history of losses, our ability to use our net operating losses to offset future taxable income, the confusion of our name brand with other brands, the ability of our technology to work as anticipated and to successfully provide analytics logistics management, our ability to manage our growth effectively, the small number of customers that account for our revenue, our ability to successfully develop and expand our sales and marketing capabilities, risks related to doing business outside of the U.S., intellectual property litigation, our ability to successfully develop, implement, maintain, upgrade, enhance, and protect our information technology systems, our reliance on third-party information technology service providers, our ability to respond to evolving laws related to information technology such as privacy laws, risks related to deriving revenue from some clients in the cannabis industry, our ability to retain key management personnel, our ability to work with partners in selling our technologies to businesses, production difficulties, our inability to enter into contracts and arrangements with future partners, our ability to acquire new customers, issues which may affect the reluctance of large companies to change their purchasing of products, acceptance of our technologies and the efficiency of our authenticators in the field, our ability to comply with the continued listing standards of the Nasdaq Capital Market, and our ability to timely pay amounts due and comply with the covenants under our debt facilities. These risk factors and uncertainties include those more fully described in VerifyMe's Annual Report and Quarterly Reports filed with the Securities and Exchange Commission, including under the heading entitled "Risk Factors." Should one or more of these risks or uncertainties materialize, or should any of our underlying assumptions prove incorrect, actual results may vary materially from those currently anticipated. Any forward-looking statement made by us herein speaks only as of the date on which it is made. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.

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SOURCE VerifyMe, Inc.

FAQ

Why did VerifyMe lower its 2024 revenue growth expectations?

VerifyMe lowered its 2024 revenue growth expectations due to the discontinuation of Premium logistics services by a major global carrier customer.

How will the discontinuation of Premium services affect VerifyMe's revenue?

The discontinuation of Premium services will reduce VerifyMe's expected revenue growth to mid-single digits for 2024.

Will VerifyMe's gross margin percentage change in 2024?

Yes, VerifyMe anticipates a reduction in its gross margin percentage for 2024, though it will still exceed the 2023 level.

When will the discontinuation of VerifyMe's Premium logistics services take effect?

The discontinuation will take effect in June 2024.

What are VerifyMe's plans following the loss of Premium services revenue?

VerifyMe is actively identifying strategies to mitigate the impact on gross margin and adjusted EBITDA, and continues to focus on its five-year growth plan.