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VI

VerifyMe, Inc. (VRME)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 revenue was $5.03M (-7% YoY) with gross margin of 41% (+600 bps YoY); Adjusted EBITDA improved to $0.8M while GAAP net loss was ($3.36)M driven by a $3.9M impairment; cash was $4.0M and operating cash flow was $0.2M .
  • Against Wall Street consensus, Q3 revenue beat by ~$0.34M and S&P’s “Primary EPS” recorded a positive $0.05 vs a -$0.03 estimate; note this conflicts with GAAP loss per share of ($0.26) due to one-time impairments and methodology differences; treat as a significant beat on normalized EPS but a GAAP EPS miss given the impairment *.
  • Management flagged near‑term headwinds from proactive shipping partner transition: expect Q4 2025 and Q1 2026 revenue to decline vs prior year, while gross margin % should stay consistent; 2026 guidance to be provided next call .
  • Strategic catalysts: new partnership with the other major U.S. parcel carrier, improved rate negotiations supporting margin, and active M&A discussions; the company received the first interest payment on its $2.0M short‑term note in November .

What Went Well and What Went Wrong

What Went Well

  • Gross margin expanded to 41% (from 35% YoY), with the CFO attributing gains to improved negotiated rates with a primary supplier and noting the third consecutive quarter of improved gross profit .
  • Adjusted EBITDA rose to $0.8M (from $0.2M YoY) as operating costs fell and efficiencies improved; management emphasized continued focus on margin and OpEx discipline .
  • Liquidity intact: $4.0M cash and $5.7M working capital; the company also received its first quarterly interest payment on a $2.0M short‑term promissory note, enhancing non‑operating cash generation .

What Went Wrong

  • Revenue declined 7% YoY to $5.03M, primarily due to ~$0.8M of discontinued services for two proactive customers (partially offset by new/existing customer growth in Precision Logistics) .
  • A one‑time, non‑cash impairment charge of $3.9M (Precision Logistics goodwill/intangibles) drove GAAP net loss of ($3.36)M and GAAP EPS of ($0.26) .
  • Transition headwinds: management expects Q4 2025 and Q1 2026 revenue to decline vs prior year due to proactive shipping partner change and peak‑season capacity constraints delaying some customer migrations .

Financial Results

Quarterly P&L and Key Metrics (USD Millions, except per‑share and %)

MetricQ1 2025Q2 2025Q3 2025
Revenue ($M)$4.46 $4.52 $5.03
Gross Profit ($M)$1.49 $1.59 $2.07
Gross Margin (%)33% 35% 41%
Operating Income ($M)($0.59) ($0.32) ($3.43)
Net Income ($M)($0.57) ($0.29) ($3.36)
Diluted EPS ($)($0.05) ($0.02) ($0.26)
Adjusted EBITDA ($M)$0.00 $0.27 $0.83
Cash and Equivalents ($M)$5.71 $6.07 $4.01
Working Capital ($M)$6.0 $6.0 $5.7

Estimate Comparison (S&P Global)

MetricQ1 2025 EstimateQ1 2025 ActualQ2 2025 EstimateQ2 2025 ActualQ3 2025 EstimateQ3 2025 Actual
Revenue ($)$5,091,500*$4,455,000*$4,141,000*$4,520,000*$4,696,000*$5,033,000*
Primary EPS ($)($0.07)*($0.0486)*($0.075)*($0.0192)*($0.03)*$0.04873*
Revenue - # of Estimates2*—2*—2*—
Primary EPS - # of Estimates2*—2*—2*—

Values retrieved from S&P Global.
Note: S&P’s “Primary EPS” actual for Q3 2025 (+$0.0487) conflicts with company‑reported GAAP loss per share ($0.26) due to one‑time impairment and methodology differences; interpret as a beat on normalized EPS, but a GAAP EPS miss given the impairment *.

Segment and Driver Breakdown (YoY deltas; Q3 2025)

SegmentQ3 2025 ShareYoY Change ($K)Commentary
Precision Logistics (Total)99% of revenue —Segment drove the quarter; margin uptick from rate negotiations and efficiencies
Proactive (within Precision Logistics)—Down $253K Down due to $767K decline from two discontinued customers, partially offset by new/existing customer growth
Premium (within Precision Logistics)—Down $77K Down due to $217K decline from discontinued services, partially offset elsewhere
Authentication—Down $72K Decline due to divested operations (TrustCodes)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue trajectoryQ4 2025Not provided “Expect Q4 2025 revenue to decline vs prior year” due to proactive partner transition Lowered
Revenue trajectoryQ1 2026Not provided “Expect Q1 2026 revenue to decline vs prior year” due to transition timing/peak-season constraints Lowered
Gross Margin %Near termSeasonal improvement indicated previously (Q3 vs Q3’24) “Expect gross margin % to remain consistent with current performance” Maintained
Full‑year cash flowFY 2025Positive ops cash flow expected “Expect to remain cash flow positive for full year 2025” Maintained
2026 outlookFY 2026No guidance Will provide guidance next earnings call Update forthcoming
DividendsOngoingNone disclosedNone disclosedUnchanged

Earnings Call Themes & Trends

TopicQ1 2025 (May)Q2 2025 (Aug)Q3 2025 (Nov)Trend
Shipping partner strategyExploring additional carriers; Shopify/WooCommerce integrations underway Announced relationship with second major carrier; integrations to take months; peak-season change reluctance Transition away from FedEx for proactive; new partner in place; near-term revenue headwinds expected Transition drives near-term revenue pressure; positions for broader TAM in 2026
Gross margin & ratesProactive margin improvements Proactive margin improved despite premium loss; seasonal uplift expected Gross margin 41% on negotiated rates; 3rd consecutive quarter of improvement Improving margins despite revenue volatility
M&A / capital allocationBalance sheet strong; exploring tuck‑in/transformative options Preference to deploy capital externally; disciplined ROI focus Active discussions; bolt‑ons must be immediately accretive; transformative deals attractive Ongoing; potential catalyst
E‑commerce integrationsShopify/WooCommerce; broader logistics software evaluation Completed integrations; shifting tech focus to carrier integrations Completing shopping cart integrations; leveraging partnerships Execution on integrations to aid customer onboarding
Authentication segmentMinimal revenue; divestiture of TrustCodes impacts segment Authentication revenue ~$27K in Q2 Down $72K YoY due to divestiture De‑emphasized; logistics is core

Management Commentary

  • CEO: “We are pleased with 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: “Gross margin increased to 41% in Q3 2025 from 35% in Q3 2024… primarily attributable to improvements in negotiated rates with a primary supplier… third consecutive quarter of improved gross profit.”
  • CEO: “We anticipate this [transition] will have a material impact on Q4 2025 and Q1 2026 revenues… we believe our new shipping partner relationship positions the company in a far better position long term.”
  • CFO: “We recognized a one-time non-cash impairment expense of $3.9 million during Q3 2025… excluding this impairment, our operating expenses were $1.7 million in Q3 2025 vs $2.5 million in Q3 2024.”

Q&A Highlights

  • Proactive revenue transition sizing: management declined to quantify last year’s Q4 proactive revenue and noted migration is a “sliding scale” with some customers delaying changes until post‑peak season; ~7–10 days of Q3 shipping time were negatively impacted by the transition .
  • M&A criteria: bolt‑on deals must be “virtually immediately accretive”; transformative deals are desirable given sub‑scale size; elevated legal/professional costs reflect ongoing discussions .
  • OpEx improvement detail: ~$500K of Q3’24 OpEx was associated with TrustCodes, aiding YoY OpEx reductions after divestiture .
  • Capital deployment: received first quarterly interest from the $2.0M short‑term promissory note; balance sheet strong with no bank debt; aim to remain cash flow positive in 2025–2026 .

Estimates Context

  • Q3 2025: Revenue beat ($5.03M actual vs $4.70M estimate); S&P “Primary EPS” actual $0.05 vs ($0.03) estimate — a large beat on normalized EPS; however, company GAAP EPS was ($0.26), reflecting a $3.9M impairment; expect consensus to reconcile methodology and one‑time adjustments post‑print *.
  • Prior quarters: Q1 missed revenue, beat EPS; Q2 beat both revenue and EPS on S&P methodology; limited coverage (two estimates) suggests fragile consensus inputs and higher revision sensitivity*.

Values retrieved from S&P Global.

Financial Results Detail and Cross‑References

Additional Q3 Detail

  • Precision Logistics accounted for 99% of Q3 revenue; gross margin expansion driven by decreased costs in Precision Logistics; operating loss mainly from $3.9M goodwill/intangible impairments .
  • Cash $4.0M, working capital $5.7M; cash provided by operations $0.2M in Q3 .

Prior Quarter Snapshots

  • Q2 2025: Revenue $4.52M; gross margin 35%; Adjusted EBITDA $0.27M; cash $6.07M; working capital $6.0M; ops cash flow $0.7M .
  • Q1 2025: Revenue $4.46M; gross margin 33%; Adjusted EBITDA $0.00M; cash $5.71M; working capital $6.0M .

Key Takeaways for Investors

  • Near‑term revenue risk: management explicitly expects Q4 2025 and Q1 2026 declines vs prior year due to the proactive shipping partner transition and peak‑season constraints; monitor customer migration pace and churn vs additions .
  • Margin resilience: despite revenue pressure, gross margin has improved for three consecutive quarters on rate negotiations and efficiencies; management expects margin % to remain consistent near term .
  • Adjusted profitability and cash discipline: Adjusted EBITDA and operating cash generation improved; liquidity remains adequate with $4.0M cash and $5.7M working capital; non‑operating interest income adds support .
  • Estimates implications: Q3 revenue beat should support upward revisions; EPS discrepancy (S&P Primary EPS positive vs GAAP negative) likely resolves via normalization adjustments; expect consensus to focus on adjusted metrics while acknowledging one‑time impairment *.
  • Strategic optionality: active M&A discussions and a broader carrier ecosystem (two major parcel carriers) expand TAM for 2026; bolt‑on deals must be accretive; transformative opportunities could address sub‑scale challenges .
  • Execution watch‑items: timing of customer migrations post‑holiday season, retention of top 5% proactive customers (60% of proactive revenue), and maintenance of new shipping partner relationship .
  • Next catalyst: 2026 guidance at the next call, plus updates on transition progress and any M&A developments .

Appendix: Reference Press Releases (Q3 Context)

  • Services update: effective Sept 24, 2025, proactive FedEx shipping discontinued; new shipping partner introduced; top 5% customers represent >60% of proactive revenue; change does not impact premium services to FedEx customers .
  • Earnings call logistics scheduling PR (Nov 10, 2025) .