VerifyMe (VRME) Q2 2024 earnings summary

Executive summary

• Q2 2024 revenue was $5.4 million, flat or up slightly year-over-year, with gross profit rising 32% to $2.1 million and gross margin improving to 39% from 30% in Q2 2023.

• Net loss narrowed to $0.3 million ($0.03 per share) from $0.9 million ($0.09 per share) in Q2 2023, and adjusted EBITDA improved to $0.2 million, marking the fourth consecutive positive quarter.

• Precision Logistics contributed 98% of revenue, with growth in premium services offsetting declines in proactive services and Authentication segment timing delays.

• Management expects full-year 2024 revenue to be flat or slightly up versus 2023, with gross margin and adjusted EBITDA exceeding 2023 levels, and remains optimistic about 2025 due to regulatory drivers and new business opportunities.

• Progress continues toward formalizing a key relationship with Amazon, expected to be transformative for the Authentication segment.

Financial highlights

• Gross profit rose 32% to $2.1 million in Q2 2024 from $1.6 million in Q2 2023, with gross margin increasing to 39% from 30% year-over-year.

• Adjusted EBITDA improved by $0.6 million to $0.2 million in Q2 2024.

• Operating expenses were flat at $2.6 million year-over-year.

• Cash and equivalents at June 30, 2024, were $2.9 million, down from $3.1 million at year-end 2023.

• Six-month net loss was $899K, a significant improvement from $2.5M loss in the prior year period.

Outlook and guidance

• Full-year 2024 revenue is expected to be flat versus 2023, with gross margin and adjusted EBITDA anticipated to exceed 2023 levels.

• Management expects to maintain positive adjusted EBITDA for the full year 2024 and is confident about 2025 due to regulatory and business drivers.

• Q3 2024 adjusted EBITDA may be slightly negative due to a FedEx subcontract change, but H2 and full-year 2024 are expected to be positive.

• Company expects to be net cashflow neutral for 2024.

• Q4 gross margin percentage will be below Q3 due to seasonality.