VerifyMe Reports Full Year and Fourth Quarter 2023 Financial Results
- None.
- None.
Insights
The year-over-year revenue growth of 29% reported by VerifyMe is a positive indicator of the company's expanding market presence. This uptick in revenue, from $19.6 million in 2022 to $25.3 million in 2023, suggests effective business strategies and possibly an increasing demand for the company's services. However, the decline in Q4 revenue from $9.7 million in Q4 2022 to $8.7 million in Q4 2023 raises questions about the sustainability of this growth, particularly as it indicates a significant reduction in large orders within the Authentication segment and a strategic shift away from low-margin customers in the Precision Logistics segment.
Notably, the improved gross profit margin, from 33% to 36%, reflects better cost management or a shift towards higher-margin services. The substantial decrease in net loss from $14.4 million to $3.4 million year-over-year is also noteworthy, as it may indicate a turnaround in the company's operational efficiency or the absence of large one-time expenses like the loss on the SPAC reported in 2022. Investors should consider the consistency of these improvements in operational efficiency when evaluating the company's future performance.
Furthermore, a positive Adjusted EBITDA of $1.1 million in Q4 2023 compared to $0.7 million in Q4 2022, alongside a modest positive net income, suggests operational profitability excluding non-recurring costs. However, the cash position of $3.1 million, while sufficient for short-term operations, may necessitate further scrutiny of the company's ability to fund long-term growth initiatives or withstand unforeseen financial challenges.
VerifyMe's focus on brand protection and logistics services is increasingly relevant in today's market, where supply chain integrity and anti-counterfeiting measures are critical for brand owners. The 29% annual revenue increase underscores the potential market appetite for such services. However, the quarterly revenue dip and the report that 56% of this reduction is due to a non-recurring large order in the Authentication segment might indicate over-reliance on a few large clients, which could pose risks to revenue stability.
The company's strategic decision to move away from low-margin customers, as evidenced by the 40% reduction in the Precision Logistics segment, suggests a pivot towards profitability over volume. This could be a wise move if the company can secure enough high-margin business to compensate for the reduced customer base. The increased gross profit margin aligns with this strategy and could be a sign of a stronger value proposition to its customers.
Adjusted EBITDA is a useful measure for stakeholders to assess the company's core operational performance by excluding non-cash expenses and one-time items. A year-over-year increase in Adjusted EBITDA indicates operational improvements, but the reliance on non-GAAP measures like Adjusted EBITDA and Adjusted EPS should be approached with caution, as they do not replace the importance of GAAP measures such as net income and cash flow from operations.
VerifyMe's service offerings in authentication and supply chain traceability place it at the intersection of legal compliance and technology. The 29% annual revenue growth may reflect an increased demand for services that help companies comply with regulatory requirements and protect against litigation risks associated with counterfeit goods. The legal landscape is increasingly complex and companies are seeking out solutions that VerifyMe provides.
While the financials suggest operational improvements, a legal perspective would emphasize the importance of understanding the regulatory environment that VerifyMe operates within. The reduction in revenue from large orders in the Authentication segment could also have legal implications if it reflects a changing regulatory environment or evolving industry standards that could impact future business. Moreover, the strategic decision to shift away from low-margin customers may reduce legal risks associated with less profitable or more litigious business segments.
From a legal standpoint, the use of non-GAAP financial measures like Adjusted EBITDA and Adjusted EPS can be acceptable, provided they are reconciled with GAAP measures and do not mislead investors. It's important for the company to ensure that these measures are used transparently and in compliance with regulations such as the SEC's guidelines on the use of non-GAAP financial measures.
- Cash of
$3.1 million $0.8 million $0.2 million - 2023 annual revenue of
$25.3 million $19.6 million 29% ; with fourth quarter revenue of$8.7 million $9.7 million - 2023 annual gross profit of
$9.0 million 36% , compared to$6.5 million 33% in 2022; Gross Profit of$3.1 million 36% in Q4 2023, compared to$2.8 million 29% in Q4 2022 - 2023 annual net loss of
$3.4 million $14.4 million $0.1 million $0.1 million - Adjusted EBITDA(1) of
$1.1 million $0.7 million
Key Financial Highlights for Q4 2023:
- Cash flow from operations was
$0.8 million - Quarterly consolidated revenue of
$8.7 million $9.7 million 56% of the reduction is attributable to a large order in the Authentication segment in 2022 that did not recur in 2023, approximately40% of the reduction was in the Precision Logistics segment due to reduced proactive shipments with low margin customers - Gross profit of
$3.1 million 36% in Q4 2023, compared to$2.8 million 29% in Q4 2022 - Net income of less than
$0.1 million $0.00 $0.1 million $0.01 - Adjusted net income per diluted share ("Adjusted EPS")(1) of
$0.02 $0.01 - Adjusted EBITDA(1) of
$1.1 million $0.7 million - Cash of
$3.1 million
(1) | Adjusted EBITDA and Adjusted EPS are non-GAAP financial measures. See "Use of Non-GAAP Financial Measures" below for information about these non-GAAP measures. A reconciliation to the most directly comparable GAAP measure, net loss, and net loss per diluted share, respectively, are included as a schedule to this release. | ||||||
Adam Stedham, VerifyMe's CEO and President stated, "I am pleased with our efficiency gains and margin improvements in Q4. We are enthusiastic about the strategy we articulated during the Investor Day, on February 6th. We have a strong balance sheet and 2023 was the company's first year with positive cash flow from operations. Despite the reduced Q4 revenue, the Authentication segment's pivot continues to progress. We are excited about our growth prospects in 2024 and believe the revenue growth will further increase our positive cash flow and create shareholder value."
Recent Business Highlights
- Manuka Health uses VerifyMe's traceability platform integrated with Amazon Transparency
- Announced Share Repurchase Plan and Reductions to Board Compensation Program
- Hosted Investor Day in February to provide an overview of strategic objectives, operating model and business development plans. A replay can be viewed on our website.
Financial Results for the Three Months Ended December 31, 2023:
Revenue in Q4 2023 was
Gross profit in Q4 2023 was
Operating income in Q4 2023, and Q4 2022, was
Our net income in Q4 2023 was less than
Adjusted EBITDA in Q4 2023 was
At December 31, 2023, VerifyMe had a
At December 31, 2023, VerifyMe had 10,453,315 shares issued and 10,123,964 shares outstanding.
Earnings Call
The Company has scheduled an earnings conference call and webcast for 11:00 a.m. ET on Thursday March 21, 2024. Prepared remarks regarding the company's financial and operational results will be followed by a question and answer period with VerifyMe's executive team. The conference call may be accessed via webcast at: https://event.choruscall.com/mediaframe/webcast.html?webcastid=M0oIhG8d or by calling +1 (844) 282-4569 within the US, or +1 (412) 317-5614 internationally, and requesting the "VerifyMe Call." The presentation slides broadcast via the webcast will also be available on the Investors section of the VerifyMe website the morning of the call. Participants must be logged in via telephone to submit a question to management during the call. Participants may optionally pre-register for the conference call and webcast at: https://dpregister.com/sreg/10186772/fbaf662250.
The webcast and presentation will be archived on the Investors section of VerifyMe's website and will remain available for 90 days.
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 regarding our segments and our sales pipeline and opportunities. The words "believe," "may," "will," "continues," 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 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 strategic partner for shipping services in our Precision Logistics segment, competition including by our key strategic partner, seasonal trends in our business, severe 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
Use of Non-GAAP Financial Measures
This press release includes both financial measures in accordance with
VerifyMe's management uses and relies on EBITDA and Adjusted EBITDA, which are non-GAAP financial measures. The Company believes that both management and shareholders benefit from referring to EBITDA and Adjusted EBITDA in planning, forecasting and analyzing future periods. Additionally, the Company believes Adjusted EBITDA is useful to investors to evaluate its results because it excludes certain items that are not directly related to the Company's core operating performance. In particular, with regard to our comparison of Adjusted EBITDA for the three and twelve months ended December 31, 2023, to the three and twelve months ended December 31, 2022, we believe is useful to investors than a comparison of net income (loss) in the corresponding periods, in understanding the results of operations. The Company's management uses these non-GAAP financial measures in evaluating its financial and operational decision making and as a means to evaluate period-to-period comparison. The Company's management recognizes that EBITDA and Adjusted EBITDA, as non-GAAP financial measures, have inherent limitations because of the described excluded items.
The Company defines EBITDA as net income (loss) before interest expense, extinguishment of debt, income tax expense (benefit), and depreciation and amortization. Adjusted EBITDA represents EBITDA plus non-cash stock compensation expense, severance expense, unrealized gain on equity investment, loss on equity investment, impairments, change in fair value of contingent consideration and one-time professional expenses for acquisitions. VerifyMe believes EBITDA and Adjusted EBITDA are important measures of VerifyMe's operating performance because they allow management, investors and analysts to evaluate and assess VerifyMe's core operating results from period-to-period after removing the impact of items of a non-operational nature that affect comparability.
Adjusted net loss per diluted Share ("Adjusted EPS"), which is a non-GAAP financial measure, is defined as loss per diluted share excluding severance expense, loss on equity investment, change in fair value of contingent consideration, gain on extinguishment of debt. impairments and one-time professional expenses for acquisitions. Management uses Adjusted EPS to assess total Company operating performance on a consistent basis. We believe that this non-GAAP financial measure, when considered together with our GAAP financial results, provides management and investors with an additional understanding of our business operating results, including underlying trends.
A reconciliation of EBITDA, Adjusted EBITDA and Adjusted EPS to the most comparable financial measure, net income (loss), and net income (loss) per diluted share, respectively, calculated in accordance with GAAP is included in a schedule to this press release. The Company believes that providing the non-GAAP financial measures, together with the reconciliation to GAAP, helps investors make comparisons between VerifyMe and other companies. In making any comparisons to other companies, investors need to be aware that companies use different non-GAAP measures to evaluate their financial performance. Investors should pay close attention to the specific definition being used and to the reconciliation between such measure and the corresponding GAAP measure provided by each company under applicable SEC rules as the presentation here may not be comparable to other similarly titled measures of other companies.
VerifyMe, Inc. Consolidated Balance Sheets (In thousands, except share data) | |||||||
December 31, 2023 | December 31, 2022 | ||||||
ASSETS | |||||||
CURRENT ASSETS | |||||||
Cash and cash equivalents including restricted cash | $ | 3,095 | $ | 3,411 | |||
Accounts receivable, net of allowance for credit loss reserve, December 31, 2023 and December 31, 2022, respectively | 3,017 | 4,448 | |||||
Unbilled revenue | 1,282 | 1,185 | |||||
Prepaid expenses and other current assets | 254 | 333 | |||||
Inventory | 38 | 81 | |||||
TOTAL CURRENT ASSETS | 7,686 | 9,458 | |||||
PROPERTY AND EQUIPMENT, NET | $ | 240 | $ | 292 | |||
RIGHT OF USE ASSET | 468 | 469 | |||||
INTANGIBLE ASSETS, NET | 6,927 | 6,545 | |||||
GOODWILL | 5,384 | 3,988 | |||||
TOTAL ASSETS | $ | 20,705 | $ | 20,752 | |||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
CURRENT LIABILITIES | |||||||
Term note, current | $ | 500 | $ | 500 | |||
Accounts payable | 3,310 | 3,912 | |||||
Other accrued expense | 988 | 902 | |||||
Lease liability- current | 170 | 115 | |||||
Contingent liability-current | 173 | - | |||||
TOTAL CURRENT LIABILITIES | 5,141 | 5,429 | |||||
LONG-TERM LIABILITIES | |||||||
Contingent liability, non-current | $ | 751 | $ | - | |||
Long-term lease liability | 307 | 359 | |||||
Long-term derivative liability | - | 3 | |||||
Term note | 875 | 1,375 | |||||
Convertible note – related party | 475 | - | |||||
Convertible note | 625 | - | |||||
TOTAL LIABILITIES | $ | 8,174 | $ | 7,166 | |||
STOCKHOLDERS' EQUITY | |||||||
Series A Convertible Preferred Stock, 0 shares issued and outstanding as of December 31, 2023 and December 31, 2022, respectively | - | - | |||||
Series B Convertible Preferred Stock, issued and outstanding as of December 31, 2023 and December 31, 2022, respectively | - | - | |||||
Common stock, shares issued, 10,123,964 and 8,951,035 shares outstanding as of December 31, 2023 and December 31, 2022, respectively | 10 | 10 | |||||
Additional paid in capital | 95,031 | 92,987 | |||||
Treasury stock as cost; 329,351 and 389,967 shares at December 31, 2023 and December 31, 2022, respectively | (659) | (949) | |||||
Accumulated deficit | (81,849) | (78,459) | |||||
Accumulated other comprehensive loss | (2) | (3) | |||||
STOCKHOLDERS' EQUITY | 12,531 | 13,586 | |||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 20,705 | $ | 20,752 | |||
VerifyMe, Inc. Consolidated Statements of Operations (Unaudited) (In thousands, except share data) | |||||||||||||||
Three months ended | Year Ended | ||||||||||||||
December 31, 2023 | December 30, 2022 | December 31, 2023 | December 31, 2022 | ||||||||||||
NET REVENUE | $ | 8,713 | $ | 9,703 | $ | 25,313 | $ | 19,576 | |||||||
COST OF REVENUE | 5,576 | 6,878 | 16,310 | 13,088 | |||||||||||
GROSS PROFIT | 3,137 | 2,825 | 9,003 | 6,488 | |||||||||||
OPERATING EXPENSES | |||||||||||||||
General and administrative (a) | 2,734 | 2,215 | 10,586 | 8,428 | |||||||||||
Research and development | 84 | 16 | 107 | 89 | |||||||||||
Sales and marketing (a) | 250 | 494 | 1,638 | 1,718 | |||||||||||
Total Operating expenses | 3,068 | 2,725 | 12,331 | 10,235 | |||||||||||
INCOME (LOSS) BEFORE OTHER (EXPENSE) INCOME | 69 | 100 | (3,328) | (3,747) | |||||||||||
OTHER (EXPENSE) INCOME | |||||||||||||||
Interest expenses, net | (34) | (34) | (161) | (88) | |||||||||||
Loss on equity investment | (100) | 27 | (100) | (10,932) | |||||||||||
Unrealized (loss) gain on equity investment | 2 | 12 | - | 12 | |||||||||||
Change in fair value of contingent consideration | 65 | - | 201 | - | |||||||||||
Other income (expense), net | - | 3 | (2) | 31 | |||||||||||
Gain on extinguishment of debt | - | - | 326 | ||||||||||||
TOTAL OTHER (EXPENSE) INCOME, NET | (67) | 8 | (62) | (10,651) | |||||||||||
NET INCOME (LOSS) | $ | 2 | $ | 108 | $ | (3,390) | $ | (14,398) | |||||||
EARNINGS (LOSS) PER SHARE: | |||||||||||||||
BASIC | 0.00 | 0.01 | (0.35) | (1.70) | |||||||||||
DILUTED | 0.00 | 0.01 | (0.35) | (1.70) | |||||||||||
WEIGHTED AVERAGE COMMON SHARE OUTSTANDING | |||||||||||||||
BASIC | 9,912,505 | 9,158,580 | 9,766,469 | 8,466,075 | |||||||||||
DILUTED | 9,912,505 | 9,540,600 | 9,766,469 | 8,466,075 | |||||||||||
(a) | Includes share-based compensation of |
VerifyMe, Inc. Consolidated EBITDA and Adjusted EBITDA Reconciliation Table (Unaudited) | |||||||||||||||
Three months ended | Year ended | ||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||
Net Income (Loss) (GAAP) | $ | 2 | $ | 108 | $ | (3,390) | $ | (14,398) | |||||||
Interest expense, net | 34 | 34 | 161 | 88 | |||||||||||
Gain on extinguishment of debt | - | - | - | (326) | |||||||||||
Amortization and depreciation | 299 | 266 | 1,134 | 770 | |||||||||||
Total EBITDA (Non-GAAP) | 335 | 408 | (2,095) | (13,866) | |||||||||||
Adjustments: | |||||||||||||||
Stock based compensation | 154 | 22 | 200 | 145 | |||||||||||
Fair value of restricted stock and restricted stock units issued in exchange for services | 422 | 351 | 1,354 | 1,323 | |||||||||||
Severance expense | 11 | - | 590 | - | |||||||||||
Loss (gain) on equity investment | 100 | (27) | 100 | 10,932 | |||||||||||
Change in fair value of contingent consideration | (65) | - | (201) | - | |||||||||||
Unrealized gain on equity investment | (2) | (12) | - | (12) | |||||||||||
Impairments | 156 | - | 190 | - | |||||||||||
One-time professional expenses for acquisitions | - | - | 278 | 661 | |||||||||||
Total Adjusted EBITDA (Non-GAAP) | $ | 1,111 | $ | 742 | $ | 416 | $ | (817) | |||||||
VerifyMe, Inc. Consolidated EPS and Adjusted EPS Reconciliation Table | |||||||||||||||
Three months ended | Year ended | ||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||
Income (Loss) per share (GAAP) | $ | - | $ | 0.01 | $ | (0.35) | $ | (1.70) | |||||||
Severance expense, per share | - | - | 0.06 | - | |||||||||||
Loss on equity investment, per share | 0.01 | - | 0.01 | 1.29 | |||||||||||
Change in fair value of contingent consideration, per share | (0.01) | - | (0.02) | - | |||||||||||
Gain on extinguishment of debt, per share | - | - | - | (0.04) | |||||||||||
Impairments | 0.02 | - | 0.02 | - | |||||||||||
One-time professional expenses for acquisitions, per share | - | - | 0.03 | 0.08 | |||||||||||
Total Adjusted EPS (Non-GAAP) | $ | 0.02 | $ | 0.01 | $ | (0.25) | $ | (0.37) | |||||||
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SOURCE VerifyMe, Inc.
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