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VI

VerifyMe, Inc. (VRME)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 revenue declined 16% year over year to $4.52M with gross margin of 35%, while net loss improved to $(0.29)M and diluted EPS to $(0.02); Adjusted EBITDA rose to $0.27M, reflecting cost controls despite premium-service contraction .
  • Sequentially, Q1→Q2 2025 saw revenue up modestly (Q1 $4.46M to Q2 $4.52M), gross margin improving (33%→35%), and operating expenses reduced (Q1 $2.08M→Q2 $1.91M), supporting EBITDA stabilization .
  • Management highlighted positive cash generation in Q2 ($0.7M from operations) and a new partnership with the other major US parcel carrier; e-commerce integrations were completed, setting the stage for organic revenue growth in 2026 and a higher margin profile .
  • No formal financial guidance was issued; commentary points to continued positive cash flow in 2025 and margin improvement due to mix and seasonality. The firm entered a 9‑month $2M promissory note at 16% interest to enhance treasury yield, and continues evaluating tuck‑in/transformative M&A .

What Went Well and What Went Wrong

  • What Went Well:

    • Adjusted EBITDA improved to $0.27M (vs $0.15M YoY) and operating expenses fell; CEO noted “positive cash generation in Q2 2025, and our new partnership with the other major parcel carrier” .
    • Completed integrations with e‑commerce shopping carts; operating costs reduced ~27% YoY, supporting margin resilience in Proactive services .
    • CFO expects “continued positive cash flow from operations in 2025,” citing $0.7M cash from operations in Q2 and stronger interest income actions .

  • What Went Wrong:

    • Revenue decreased YoY primarily due to a discontinued premium-services contract ($0.6M impact) and two Proactive customers churn; gross margin compressed to 35% from 39% YoY .
    • Authentication revenue shrank sharply post-divestiture; authentication revenue was $27K in Q2 (Q&A disclosure) and segment now represents a de minimis share .
    • Nasdaq minimum bid price deficiency notice increases listing risk through Sep 30, 2025; vendor concentration remained high (one vendor at 99% of transport costs) .

Financial Results

MetricQ2 2024Q4 2024Q1 2025Q2 2025
Revenue ($USD Millions)$5.352 $7.661 $4.455 $4.520
Gross Profit ($USD Millions)$2.090 $2.417 $1.490 $1.591
Gross Margin (%)39% 32% 33% 35%
Net Loss ($USD Millions)$(0.346) $(0.501) $(0.571) $(0.291)
Diluted EPS ($USD)$(0.03) $(0.05) $(0.05) $(0.02)
Adjusted EBITDA ($USD Millions, Non‑GAAP)$0.153 $0.509 $0.000 $0.270

Consensus vs Actual (Q2 2025)

MetricConsensusActual
Revenue ($USD Millions)N/A (limited coverage)$4.520
EPS ($USD)N/A (limited coverage)$(0.02)

Segment Revenue Breakdown

Segment / ServiceQ2 2024Q2 2025
Precision Logistics – Proactive ($USD Millions)$3.945 $3.829
Precision Logistics – Premium ($USD Millions)$1.299 $0.664
Authentication – Brand Protection ($USD Millions)$0.108 $0.027
Total ($USD Millions)$5.352 $4.520

KPIs and Operating Metrics

KPIQ1 2025Q2 2025
Cash and Cash Equivalents ($USD Millions)$5.707 $6.067
Cash from Operations ($USD Millions)—$0.7
Working Capital ($USD Millions)$6.0 $6.0
Accounts Receivable ($USD Millions)$0.955 $1.100
Unbilled Revenue ($USD Millions)$0.641 $0.324
Total Operating Expenses ($USD Millions)$2.083 $1.913
Shares Repurchased (Q2) / $ Spent201,486 / $0.153M —
Remaining Repurchase Authorization ($USD Millions)$0.330 —
Convertible Notes Outstanding ($USD Millions)$0.800 $0.750

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Gross Profit %Q3 2025 seasonalityNone“We expect the gross profit percentage to increase compared to Q3 and 2024” Directionally positive
Cash from OperationsFY 2025None“We expect to have continued positive cash flow from operations in 2025” New commentary
Organic RevenueFY 2026None“Setting the stage for organic revenue growth in 2026…higher margin profile” New commentary
Operating CostsFY 2025NoneOperating costs reduced ~27% YoY; continued discipline Maintained cost controls
Treasury YieldQ3 2025NoneEntered $2M 9‑month loan at 16% rate to boost interest income New initiative
Carrier Strategy2025–2026Single carrierAdded second major carrier; integration takes months; impact pushed to 2026 Strategic expansion

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4’24, Q1’25)Current Period (Q2’25)Trend
Additional Freight CarrierExploring relationships; e‑commerce point‑of‑sale integration plans Relationship added; integration underway; peak season delays changes; materialization expected in 2026 Progressing
E‑commerce IntegrationsProjects with Shopify/WooCommerce underway Integrations completed; tech focus shifts to carrier integrations Completed/shift to next
Macro/Shipment SoftnessSoftening shipments across customers; cautious modeling for H1’25 Mix shift continues; margin improved in Proactive; seasonality to aid Q3 Mixed but stabilizing
Capital Allocation/M&AWarrant inducement; ATM in place; evaluating tuck‑in/transformative M&A $2M loan at 16% to enhance yield; continued M&A evaluation Active capital deployment
Nasdaq Listing Risk—Minimum bid deficiency; compliance window to Sep 30, 2025 Ongoing risk
Segment Mix (Premium→Proactive)Premium down; Proactive customers up; proactive margin improvements Premium reduced; Proactive margin increased YoY Shift to Proactive

Management Commentary

  • CEO: “We are pleased with our…positive cash generation in Q2 2025, and our new partnership with the other major parcel carrier in the US…setting the stage for organic revenue growth in 2026, accompanied by a higher margin profile and continued cash generation” .
  • CFO: “Operating expenses were $1.9M in Q2 2025 vs $2.6M in Q2 2024…net loss for the quarter was $290K or $0.02 per diluted share…Adjusted EBITDA improved to $300K” .
  • CEO on carrier timing: “It’s going to take a couple of months to integrate…shippers are very reluctant to make changes during peak season…start to materialize more noticeably in 2026” .
  • CFO on cash flow: “We generated $700K cash from operations…We expect to have continued positive cash flow from operations in 2025” .
  • Treasury strategy: “Loaning a portion of our available cash…nine month promissory note…improve our annualized interest income…to greater than 8%” .

Q&A Highlights

  • Authentication revenue was $27K in the quarter (confirming minimal contribution post-divestiture) .
  • Second carrier integration will take months; impact deferred beyond peak season, with more noticeable contribution beginning in 2026 .
  • Capital allocation: management prioritizes deploying surplus capital into high‑ROI strategic options, balancing organic initiatives with potential M&A; treasury note at 16% annual interest enhances yield near term .
  • Revenue modeling: management reiterated difficult YoY comparisons in Q2 due to prior premium customer loss; focus remains on Proactive growth and cost discipline .

Estimates Context

  • Wall Street consensus for Q2 2025 (revenue/EPS) was unavailable (limited coverage). Actual results are shown above .
  • Forward consensus (S&P Global) and recent actuals:
MetricQ3 2025Q4 2025Q1 2026
Revenue Consensus Mean ($USD)4,696,000*3,447,000*2,228,000*
Primary EPS Consensus Mean ($USD)-0.03*0.01*-0.03*
EBITDA Consensus Mean ($USD)135,500*265,000*-211,000*
Primary EPS – # of Estimates2*1*1*
Revenue – # of Estimates2*1*1*

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Mix shift: premium-service losses continue to weigh on revenue and margin; Proactive margins improved and, alongside cost reductions, supported EBITDA and lower net loss .
  • Near‑term catalysts: second major carrier integration (timing post‑peak, benefits in 2026), completed e‑commerce integrations, and ongoing M&A evaluation could improve scale and margins .
  • Liquidity and yield: cash rose to $6.07M; 16% short‑term loan boosts interest income; share repurchases (201,486 shares, $153K) continue with $330K remaining authorization .
  • Watch seasonality: management expects gross profit % to benefit from Q3 seasonal mix in Precision Logistics; monitor Q3 margin trajectory .
  • Risk monitoring: Nasdaq bid-price deficiency through Sep 30, 2025 and vendor concentration (99% transport costs with one partner) remain key risks; diversification via second carrier is strategically important .
  • Trading implication: limited sell-side coverage creates asymmetric information; improving cash flow, cost discipline, and strategic initiatives can drive re-rating if execution on carrier and M&A materializes .
  • Medium-term thesis: scaling Proactive direct business, broadening carrier relationships, and disciplined capital allocation (including potential accretive acquisitions) underpin a path to higher margins and sustainable cash generation .