Q4 2023 VerifyMe Inc Earnings Call

Participants

Nancy Meyers; CFO; VerifyMe Inc

Adam Stedham; CEO; VerifyMe Inc

Mike Petusky; Analyst; Barrington Research

Jack Vander Aarde; Analyst; Maxim Group

Fred Brucker

Jeff Porter; Analyst; Porter Capital

Richard Greulich; Analyst; REG Capital Advisors

Daniel Orlo; Analyst; Shield Street

Presentation

Operator

Good day, and welcome to the VerifyMe year end 2023 financial results conference call. (Operator Instructions) Please note that today's event is being recorded.
I would now like to turn the conference over to Nancy Meyers, CFO of VerifyMe. Please go ahead.

Nancy Meyers

Thank you. Good morning, everyone, and thank you for joining us today. For our earnings call presentation, on the call today, I'm joined by Adam Stedham, CEO and President, who will give an operations and strategic update. Following our management presentation. We will have a Q&A session. I would like to bring your attention to the note on forward-looking statements on slide 3.
Today's presentation and the answers to questions include forward looking statements. It should be understood that actual results could differ materially from those projected due to a number of factors, including those described under the forward-looking statements caption and on the risk factors of the Company's annual report on Form 10-K and quarterly reports on Form 10-Q.
I will now turn the call over to Adam Stedham for some opening remarks.

Adam Stedham

Thank you, Nancy. And welcome, everyone. We recently had an extensive strategy call, so I anticipate this particular earnings call will be a little shorter than typical. During that strategy call, we stated that we expected to finish 2023 with more than $25 million in revenue and better than breakeven adjusted EBITDA. We finished 2023 with $25.3 million in revenue and $0.4 million in adjusted EBITDA, which was supported by very healthy profits in Q4 and Nancy will discuss those more.
During the strategy call, we also indicated, we anticipate double digit revenue growth in 2024. I reaffirm the expectation for double-digit revenue growth in 2020. For now, I do anticipate our age to growth rate to exceed our H1 growth rate as the company had positive cash flow from operations in 2023. As for Q4, our ending total cash was $3.1 million.
Our current maturities of long-term debt was $0.5 million and our total debt was $2.5 million. So as a result, we had cash net of debt of $0.6 million as compared to a negative $0.1 million at the end of September 2023. To keep in mind, this net cash position includes proceeds from convertible notes of $1.1 million and the company anticipate the majority of these notes will be converted as opposed to repaid with cash at maturity.
So in summary, as a company, we're generating cash and we anticipate we will continue to generate cash throughout 2024. So at this point, I'd like to discuss our capital strategy a little bit in Q4 2023, the company announced a share buyback program. Since putting that plan in place and entering a trading blackout, the share price has primarily traded above the short term buyback price that we established. We continue to have our announced buyback program in place, and we'll continue to evaluate our strategy around repurchasing shares throughout 2024. We'll monitor all available options to utilize our capital to maximize shareholder value.
So at this point, let's shift the conversation to our two operating segments. During 2023, we primarily focused on creating the foundation for the company. We focused on operational efficiency and our go-to market strategy for our perishable business and precision logistics. We completed the trust codes acquisition for authentication segment, and we vertically integrated the tenant, the trust codes technology stack with all of our existing customers.
In addition, we defined a strategy to integrate this technology platform into commercial relationships across specific targeted industries. So the precision Logistics segment, it completed 2023 with $24.7 million in revenue versus a pro forma fiscal 2022 revenue of $24 million. During 2023, we improved the gross margins significantly for precision logistics.
Our Q1 2023 gross margin was 29%, and the average gross margin across quarters two, three and four was 36%. Now a small contributing factor to this improvement was the discontinued relationship with some lower-margin customers. This did result in some impact on our Q4 2023 revenue in this segment.
The precision Logistics segment generated $8.6 million in revenue in Q4 2023. The net result for 2023 was the precision Logistics segment experienced organic growth over our pro forma 2022 numbers experienced a significant increase in gross margin dollars in 2023 versus 2024, including in Q4 2023 as compared to Q4 2022.
So now let me shift to our authentication segment. The segment generated approximately $150,000 in revenue in Q4. As we pointed out in our strategy call that the A-Pac portion of this segment had been experiencing challenges associated with difficult market conditions we also discussed that we're seeing those conditions improve, and we anticipate they will contribute to our organic growth in 2024.
This continues to be our feeling our experience and our expectation for 2024. In addition, we've added three sales associates to the team within this segment to accelerate our growth by increasing awareness of our industry leading technology stack during our technologies or the strategy call where we discuss our technology.
We stated that we now have all of our existing customers transitioned on to the trust codes, technology platform in addition, hopefully, you saw our press release indicating that our technology platform is now integrated into Amazon's transparency program. We're excited by this recent development, and we're pleased that Amazon's review of our platform has confirmed our belief about the significant value it delivers. In addition to that, we believe that we can provide meaningful support for Amazon's efforts to combat counterfeit products in the marketplace.
This support will be good for Amazon. It's good for the brands sold in the Amazon marketplace. It's good for consumers, and it should be very good for verify me shareholders. So I look forward to sharing more information about that relationship as it continues to develop.
So at this point, I'll turn the call back over to Nancy Meyers, our CFO, and she'll provide a more detailed financial report.

Nancy Meyers

Thank you, Adam, for today's call. I will touch on the financial highlights for the fiscal year and the fourth quarter fiscal 2023 revenue increased by 29% to $25.3 million versus prior year of $19.6 million due to the acquisition of Perisher in April of 2022. On a pro forma basis, our precision logistic revenue increased by $0.6 million in '23 versus 2022.
During the fourth quarter, revenue decreased in our precision Logistics segment by $0.3 million from $8.9 million to $8.6 million due to the discontinued relationship with some lower margin customers in our proactive service revenue, partially offset by an increase in our premium service revenue.
Revenue on the authentication segment decreased from $1.4 million to $0.7 million for the fiscal year and from $0.8 million to $0.1 million in Q4 2023 due to a large order in Q4 2022 that did not recur in 2023. However, we continue to work with this customer and anticipate additional orders in 2024.
Gross profit increased $2.5 million to $9 million in fiscal 2023 versus $6.5 million in fiscal 2022. As a percentage of revenue, gross profit increased to 36% versus 33% in 2022. For the fourth quarter, even with the revenue decrease, our gross margin increased by $0.3 million to $3.1 million in Q4 2023 versus $2.8 million in Q4 of 2022.
The year-over-year increase is mainly due to the shift in customer mix and service offerings in our precision Logistics segment as well as process improvements the company has made. You can expect some variability of gross margin in precision logistics segments as shifting customer mix and service offerings occur.
General and administrative expenses for the fiscal year increased by $2.2 million from $10.6 million to versus $8.4 million in 2022. For the fourth quarter, general and administrative expenses increased by $0.5 million to $2.7 million in 2023 versus $2.2 million in 2022. The increases relate primarily to the acquisition of Perisher global in April of 2022 TrustCo's global in March of 2023.
Severance expense for the year of $0.6 million and additional stock compensation. Sales and marketing expenses for the fiscal year decreased to $1.6 million versus $1.7 million in 2022. And for the fourth quarter, they decreased by $0.2 million to $0.3 million versus $0.5 million in 2022. The decrease is primarily related related to a reduction in employee and consultant price partially offset by additional travel expenses in the communications segment.
Our net income for the quarter was less than $0.1 million versus $0.1 million in 2022. However, our results for 2023 included $0.1 million of loss on equity investments and $0.2 million of impairments of long-lived assets.
In Q2, we discussed our efforts to optimize overhead expenses to improve adjusted EBITDA going forward. And as a result, our adjusted EBITDA increased by $1.2 million to positive $0.4 million for the fiscal year 2023 versus a loss of $0.8 million for fiscal year 2022 and increased by $0.4 million for the fourth quarter of 2023 to $1.1 million compared to $0.7 million for the fourth quarter of 2022. 2023 also resulted in our first fiscal year with cash provided by operation activities of $0.2 million for the year end $0.8 million for Q4 2023.
On the last slide is our balance sheet. As of December 31, 2023, our cash as of December 31 was $3.1 million, a decrease of $0.3 million from the $3.4 million we had on December 31, 2022. However, through the 12 months of 2023, we had a capital raise of $1.1 million through the sale of convertible notes, we paid $0.5 million on our low paid severance expense of $0.4 million and the acquisition of track because of $0.6 million as of December 31, 2023. We have no borrowings under our line of credit and have $1 million available to us. With that, I would like to turn the call back to Adam.

Adam Stedham

Thank you, Nancy. I don't want to repeat the information we recently covered in our strategy presentation, but suffice it to say we're optimistic about the new developments we're seeing in both our authentication and precision logistics segments. I'm confident our strategy of integrating our authentication platform into the go-to-market strategy of key industry leaders will generate value. In addition, I believe our precision logistics business is transforming into an efficient operation with a clear value proposition and a clear target market.
So I'll simply conclude by saying I'm excited and excited by the opportunity the company has and our shareholders have in 2024, where a company with cash to fund our operations. We generate cash and we have a proven tech stack that solves real problems that face consumers and companies in today's environment. So I look forward to sharing more information with you as the year unfolds. But at this point, it will open up the call for questions.

Question and Answer Session

Operator

Thank you. We will now begin the question-and-answer session. (Operator Instructions)
Mike Petusky, Barrington Research.

Mike Petusky

Hey, good morning. I appreciate you don't mind a great appreciate the comments so far. I guess, on your comment likely stronger, I'm assuming that you still expect some growth in the first half as that fair assumption that it's not, yes, really swung towards the second half. So you have you do expect like at least mid-single digit growth on something along those lines?

Adam Stedham

Yes, we expect, yes, we definitely expect organic growth in the first half and second half. We just feel we'll have, if you could, our H2 versus H2 will show more growth than our H1 versus H1, but there will be growth in both halves.

Mike Petusky

And I guess I'm trying to understand because I sort of expected that you would really as I was thinking, not just '24 but over time, I've sort of been under the impression that more of the leverage would sort of come sort of G&A and maybe maybe some of the expense side rather than gross margin. I'm wondering what is gross margin? Is there a chance gross margin actually expand going forward?
Because I really assumed AS as precision logistics came a bigger part business that most likely that would continue to decline at least flat. Just sort of speak to how you see this playing out playing out both in '24 and over the sort of the timeframe? Thanks.

Adam Stedham

And so the gross margin improvements primarily been a an effort of managing pricing and as well as driving efficiency into that business. It really hasn't there's been no leverage that's contributed to the gross margin improvement. I completely agree with you that that we should be able to generate leverage as revenue grows.
On the G&A side, we haven't experienced the revenue growth to this point over 2023 that that enabled that. But going forward, I would absolutely expect that our revenue can scale without the proportional scaling of our G&A. So G&A as a percentage of revenue should be able to go down.

Mike Petusky

Is there any chance that number as a absolute number can go down in '24 or will that will somewhat Am I right?

Adam Stedham

I don't see it going down in 2024.

Mike Petusky

And then this one's for Nancy. The number I think I heard $0.7 million for fiscal '23 for authentication and that four s for precision logistics, easy for me to say per home. Is that right, 46?

Nancy Meyers

Yes

Mike Petusky

And do you by any chance have the number precision logistics for '22, including the time they want apart like pre-acquisition Do you have that full year number by any chance handy?
Yes, that was $24 million business did All right, terrific.
All right. That's all I've got for right now.

Adam Stedham

Thanks. Appreciate it.

Operator

Jack Vander Aarde, Maxim Group.

Jack Vander Aarde

They get Okay. Hey, Adam, great. Thanks for taking my questions and congrats on a strong finish to the year. You definitely hit on all your points, I think from the from the Investor Day as well. So no real surprises, all of good stuff. I guess I'll follow-up with a question. Just on I had a question about the revenue guidance, obviously, but I think that was kind of covered on gross margin.
I just want to touch on this again as well. So yes, the fourth quarter, you had us very, very strong record third quarter gross margin. Obviously, I was expecting the Q4 gross margin to come down, but it held up well as a much stronger than I thought as well. It doesn't really seem to be like it was mix driven by the authentication segment yet. So just is this kind of you give a sense for I mean, that's impossible. There's always outliers that can happen, but give a sense of the gross margin for on any given quarter going forward.

Adam Stedham

I mean, I think that our current gross margins as sustainable gross margin going forward is, depending as you pointed out, as our authentication business begins to grow and it runs at a substantially higher gross margin than our precision logistics business. The gross margin could go up the larger the percentage of our revenue mix that would be associated with authentication that would have an upward impact on our gross margin.
So I do think that we're at a sustainable level. I don't see it retracting from here, and we are going to we are going to when we announced q. one, we're going to make some changes to how we calculate gross margin. We think we could show all of that and we'll explain all that on the Q1 call, but that will give you even more insight into how we can drive efficiency and maintain that gross margins. But we don't think that this is a one-off. We think we're at a sustainable level that could go up with product mix.

Jack Vander Aarde

Okay. Great. No, that's helpful color. And see, I guess I'll switch gears here on precision Logistics segment itself in terms of revenue mix on the actual 10s, kind of types of revenue or customer relationships you have and it makes sense at the fourth quarter kind of down year over year, just given that particular customer that was down our proactive services customer, I think that proactive services was about 80% of your historical mix.
Do you have any sort of goal as to like what you expect just and that mixture and goal as we exit 2024, just to get an idea of like the pace at which we'll be focusing more on these premium customers now that we don't really have a goal that the go-to-market strategy of these two lines of business is very different from one.

Adam Stedham

We are supporting our the largest airfreight company in the world in their efforts to service their customers. And so the growth of that business is tied to their go-to market strategy, the other, it's more direct selling into the marketplace for us that would be the proactive business. So we don't really have a target mix because of the two go-to-market strategies operate somewhat independent of each other, and it's not a situation where we allocate specific resources to get a specific mix.

Jack Vander Aarde

Got you. That makes sense. And then just maybe one for one more question for me on I think you mentioned you hired three sales associates in the US Education segment.

Adam Stedham

(inaudible)

Jack Vander Aarde

Can you provide just enough, can you just provide an update on your overall headcount plans and sales and marketing headcount strategy and goals in 2024 and kind of where we are in the in your plan? Thanks.

Adam Stedham

And so so we've hired three sales associates, two of them are in the U.S. One, and he's in New Zealand for the ANZ area. And so we continue to as we're seeing market conditions improve in the across the A-Pac region. We wanted to add capacity to take advantage of those more favorable conditions. The main marketplace in the largest marketplace in the world for what we do is the US.
So that's why we added to resources in the US. I could see us before the end of the year continuing to add to that we believe that and we believe that that business operates in a way that it's going to reach a tipping point. And this isn't a business that is just slows to slow strategic year-over-year growth. This is a business that is going to reach a tipping point and have quite the inflection.
And so we want to make sure that we have the sales capacity available. It's trained and ready to address the market as it becomes more and more receptive to what we do.

Jack Vander Aarde

Understood. Well, again, congrats on the strong finish and look forward to a Q1. Thanks.

Adam Stedham

Thank you.

Operator

Fred Brucker, private investor.

Fred Brucker

I am hopefully totally fine. Thank you. I'd like to add my congratulations on your huge improvement over the past. And can you help me understand the significance of your recent press release on I mean Nucor and Amazon and how this will impact the future?

Adam Stedham

Absolutely. So first off, I would say and thanks for the question, Brad. So first off, I'd say we're excited and we're pleased to support our customers as well as Amazon's efforts to combat counterfeits. So currently, Fred, there are over 33,000 brands that participate in the Amazon transparency, and that's been growing at a rate of about 50% a year over the last three years. If you look at our platform, it's ideally targeted at customers who want to protect their brands in an online and offline environment.
And our sweet spot are brands that sell more than 5 million units per year in total. And that would include their sales in the Amazon marketplace as well as other distribution channels. So if you look at all of that, we estimate that each new brand that adopts our platform for traceability and Amazon transparency participation would generate an average of about $50,000 a year annual recurring revenue for verify me.
So as you start to apply the math and you start to look at it, the impact it would have is if we're successful and we believe we will be successful at adding these brands. It could have a very significant impact on our run rate ARR going forward. So I look forward to providing more updates on our sales efforts. But hopefully that can give you a feel for why we think it's significant.

Fred Brucker

You develop the needs of these brands as far as acquiring their business or their salesmen do that? Or does it come from Amazon? Or how do you how do you acquire the?

Adam Stedham

So, Fred, why so So we our salespeople that we've hired will be are selling directly. And we were just at a tradeshow this last week doing that. In addition that we work with Amazon and there's a certain segment of the marketplace, the Amazon and verify me are discussing targeting this at its very specific fit. That marketplace would be ideally suited for what we do. So it will be a combination of everything you said.

Fred Brucker

Thank you and congratulations.

Adam Stedham

Thank you.

Operator

Jeff Porter, Porter Capital Management.

Jeff Porter

Adam, great guns the quarter. I'm just got one question there. I'm sort of thinking out loud here as we're trying to develop the authentication business.
And you mentioned you hired three salespeople. I'm just wondering, are there potentially strategic partners out there that have pretty big sales and marketing reach that touch our prospective customers that we might be able to do some kind of joint venture with or get them to sort of white label. Our product and really turbocharge our growth in that area. That is that, that makes sense from a strategic point of view, it does make sense.

Adam Stedham

And it also accurately describes part of our go-to-market strategy. So if you look at it, when we talk about integrating our platforms in two industry leading brands, what we're saying is there's a movement. There's a US movement a global movement towards smart packaging.
So we are we are working with one of the largest scanning companies in the world, and they're looking to integrate our tech stack into their product that they sell to their customers to where they can have smart cans that allow them to provide consumers the information they want in this ever-growing digital world. We're working with the largest packaging company in the world about integrating there. We've already talked about Amazon Marketplace.
We're working with the leading producer of equipment for leafy greens and Infant Nutrition on packaging So exactly what you're saying is exactly what we're doing. We're working with these companies think about think about the model we want to have have our technology inside verify me inside so as they go to market with smart packaging, our tech will be nimble inside of it and powering the back end of what they're trying to do. So that's exactly what we're trying to do.

Jeff Porter

And I would imagine that the gross margins on that type of business are orders of magnitude above where our gross margins are now. Is it more like a software gross margin?

Adam Stedham

Yes.

Jeff Porter

Okay. So you hopefully if we can drive the revenue there and it becomes a greater percentage of our revenue mix, we could we could really see the gross margin expansion going ahead.

Adam Stedham

Absolutely. I think I think that our current gross margin is sustainable and it represents it represents the ongoing run rate gross margin of the company given our proportion of revenue that's authentication and precision logistics. If the percentage of revenue for authentication goes up relative to precision logistics, just mathematically, it will naturally drive the gross margin up? You're exactly right.

Jeff Porter

And last question, in terms of our technology stack, are there any not holes in it, but are there any additional things that customers are saying?
Geez, if you could add this feature that would really enhance the value proposition? Or do you think that our technology development is pretty much where we need to be?

Adam Stedham

Right now I think our technology stack is ahead of the market. I think that we that our the level of GS1, com integration, we have we provide more functionality and capability and the average consumer realizes that they want to, particularly in the US market. So I don't think there's any gaps at this point. But as the market evolves, we'll continue to develop the technology.

Jeff Porter

That's very exciting going forward because I think from an investor viewpoint, the way the company can be viewed is rather than a freight forwarder slash logistics company as a value added technology company in the authentication. I think that's that's got a lot of sizzle to it would be very attractive to investors because of the potential growth. So great going, and I'll look forward to following your progress.

Adam Stedham

Great. Thank you very much.

Operator

Richard Greulich, REG Capital Advisors.

Richard Greulich

Well, thank you. Hello, Adam and Nancy, a couple couple of quick questions and then a couple of comments on. First of all, the question you had spoken during the Investor Day and you kind of alluded to it again today, but you're trying to achieve higher integration with FedEx working with some of the sales forces there. Has that actually started?

Adam Stedham

No, no, it has not actually started at this point, we're continuing to work with them around models. And this is this is a very if you look at the press releases and this isn't related to FedEx alone, if you look at FedEx UPS, if you look at the major freight companies, they're forecasting a challenging year in 2024. And so there's a lot of attention put on that we continue to believe in the strategy, but it hasn't had a lot of progress thus forward thus far.

Richard Greulich

Okay. Number two, why I know you wisely didn't want to rehash everything you did just a month and a half ago for those investors who didn't watch that.
I would just point out that you had said during the presentation that sort of a five year outlook, you thought $50 million to $60 million in revenues in 15% to 20% adjusted EBITDA margin. I assume in the last six weeks that sort of far out thinking hasn't really changed much?

Adam Stedham

No, it hasn't changed and not really on now. And the thing I would say is that just as we talked about with gross margin, if you it's very difficult to predict our product mix five years from now. But the the EBITDA margins will be significantly higher or the same or even lower, depending upon our product mix for the amount of the revenue that's associated with authentication versus precision logistics.
So let me have a shot. We haven't changed our five-year outlook at this point. It's just

Richard Greulich

so the implication on getting when you were discussing gross margin earlier that if you achieve what you think you'd like to be able to do and that adjusted EBITDA margin would be higher

Adam Stedham

That if yes, if we come April are our authentication business grows more rapidly than we currently have modeled in our five year plan, it would definitely change our EBITDA percentage in an upward direction.

Richard Greulich

Yes. Sir, you had mentioned that your sweet spot is that 5 million units per year distribution and those kind of customers might yield an ARR of about 50,000 a year for verifying me. But as I recall during the presentation, that 50,000 annual ARR was kind of a low end of sort of what could be or could be accomplished with customers with more than 5 million.

Adam Stedham

And I completely agree it can be a low end and you're looking at, but we're more looking at averages. We think that that's a reasonable average for people to think about and model. But you're exactly right. And really our product our product is ideally suited for customers that you go from 5 million to 100 million units a year. If you're if you have 100 million units a year, then that's a very different ARR for that customer than 5 million.

Richard Greulich

Thank you on that, just to Mike comment is I very much appreciate the way you're approaching the share repurchase alternative for use of capital. You know, far too many companies just go out and start buying stock without having a and a disciplined way of approaching what price they're willing to pay for.
My $0.02 is I think the overall market is very wildly overvalued, which is why I look at companies like you during periods of time where you're not overvalued, but give a simple regression to the mean of the overall market valuation may give you an opportunity, even though your company will be doing well, it's an opportunity to repurchase your stock at a really attractive price. I appreciate the way you're kind of shepherding your cash within that regard.

Adam Stedham

Thank you.

Richard Greulich

Thank you.

Operator

[Daniel Orlo, Shield Street].

Daniel Orlo

I am Dave for taking the call manpower on the (multiple speakers) Thanks. I think everything was pretty much covered at this point of trying to get a sense of how you think about the pipeline know, how lumpy is it? Does it end up becoming like how far are some of these conversations along so that you can have greater clarity over the course of the year.
And then in the context of that, just to reflect on the prior question in terms of share repurchase, no, how does that then come back and reinforce your ideas around capital management and what is the appropriate price for the shares? I mean, if you were to look out and say, well, you really were going to be running $50 million to $60 million of revenue five years out. And in theory, you should be buying back every share you could today. Obviously, that's not necessarily the balance of risk that you want to maintain, right? But there will be data points along the way that are going to better inform that decision to reenter the market.
(multiple speakers) And I'm just trying to understand how you're thinking about that tension in the context of your pipeline in terms of the trade-offs between gross margins and then the second question is a little bit more EPS oriented billings stayed with that starting point?

Adam Stedham

Great. So so let me answer from a pipeline perspective. So on the authentication side, there's two stages to this pipeline stage. One is you have to have your technology stack or your technology platform has the integrated where you have to come up with the go-to-market strategy and the integration of your technology platform into your partners who are going to then take it with some sort of smart packaging or on Amazon transparency?
Or are these mini programs designed to enable consumers to have confidence and knowledge. So we're very far along on that. We feel very comfortable we've had press releases around Amcor. We've now had this press release that relates to Amazon transparency. So we feel very good about where we are from a go-to-market and from a pipeline perspective, integration of our platform into the large providers who are going to take it to the marketplace.
Step two is to make sure that we have the business development and the sales resources to then support those customers and to help them close the sales. So that's where we are now. We're seeing pipeline, we're seeing opportunities develop, and so we feel very comfortable with that. That's on the authentication side.
On the precision logistics side, I think we've talked about that earlier and really what we're focused on for precision logistics from a pipeline perspective, heavily focused right now on on understanding the proactive customer and the value proposition that they have. And really, we believe that our current pipeline is well below where it could be to drive more growth on the proactive side of the business.
So we're working hard to get our pipes to increase the pipeline on the proactive side, as I say that, that ties back to our capital structure. We're very focused on it as opportunities unfold. And as I as I indicated, I believe that we have a company that that is a tipping point type of company and when the marketplace is fully ready and fully realizes the value that our service and our platform provides.
We need to have sufficient capital and resources to respond accordingly, not to miss out. So we're continually we if we found that we want to be able to evaluate. If we find ourselves in a situation, our would we be better off buying 200,000 shares or hiring three salespeople would we be, which would provide the most shareholder value. So that's how we're looking at it.
And right now, we have in our mind, there's certain no-brainer prices that we would buy our shares. And we think that they just grossly miss the mark on what our real value is. But outside of that, it's more of a strategic rationalize looking at the multiple options for using our capital, what's likely to give the best shareholder value.

Daniel Orlo

Fair enough. Fair enough. There's the kids have a crystal ball you have to sort of really weigh is it appropriate to think about it, EPS on a guidance basis point on a range basis at this point, if we're thinking about sort of double digit. So that would be anywhere from 2.5 to some higher number of incremental revenue at some at the current sort of gross margin.
Is that the right way to think about it ex through the share count. Is that the right way to think about like what overall you're looking at?

Adam Stedham

Do you think as you wanted it for one-year modeling, five-year modeling? What would timing?

Daniel Orlo

Yeah, I'm trying to think about actually for 2.5, you're modeling it shortly, but I'm not and I don't think if you're at a tipping point that it happens when it happens over the course of the year, I don't think anybody can be is that that level of clarity nobody reference, but I am trying to understand if you're thinking about organic growth out for $50 million. You have to be at a certain range of steady state compounding.
We have therefore note out two years out 2.5 years is this trading at some sort of discount to some range of expectation of expected EPS? So out two years, could we say that it's an incremental $5 million and 35% margin and therefore, it's trading at X and China, understand how they're just part of part of what we're talking about here is the lack of M&A. And this isn't directly view at all it just sort of if the stock is intrinsically undervalued and undervalued, probably on the on a revenue basis, it's trading well, half of revenues.
so what does it take to get it straight up revenues and you will see in the earnings. So how does that unfold in your mind? And part of the way of doing that in my mind is to say, Well, is there a framework for you framed on Investor Day of expecting positive cash flow contribution throughout the year? Then we can talk a little bit about EPS. They maybe not this year because it might still were on the tipping point stage. But then an out year, we might be able to talk about it.

Adam Stedham

Absolutely Grace's. So I get where you're going on. And I don't really have a model for you, nothing that we've shared that publicly or that I'd be prepared to share here. So what I guess what I would say this is this is the reality of where I think we are and a lot of software. Some companies are technology companies selling cloud technology not a software company, but is there is a certain level of organic growth that you need to be able to demonstrate consistently over a period of time for?
And then you start to get credit for your ARR and people start to look forward and they start to model forward the layering effect of your ARR based upon your organic growth rate given that we don't have the track record of organic growth. We are not getting any benefit of that in our share price calculation. And so I do believe that throughout what I think will happen is throughout this year.
If we deliver the organic growth, we think we will. And then we follow that up with 2025 organic growth this year, I don't think the share price is really going to be tied back to EPS. I think it will be tied back to a perception around modeling the organic growth in the layering of the ARR and what that will ultimately then translate to from an EPS perspective. So that's how I think it will unfold. But I don't know. I don't have a crystal ball. But I mean that's just my best mirror.

Daniel Orlo

Appreciate. I appreciate you're just being forthright with that. I mean, it's hard to set expectations when it's all you've done that right now is just rebuild the company in a lot of ways. So we are bringing it to the tipping point should be congratulations for that. But I was curious how you're looking down the road.

Adam Stedham

Understand completely.

Daniel Orlo

Thanks for your time.

Adam Stedham

Thank you.

Operator

At this time, we are showing no further questioners in the queue. And this does conclude our question and answer session. I would now like to turn the conference back over to Adam Stedham for any closing remarks.

Adam Stedham

Thank you, but thank you, everybody, for attending. This is an interesting time of year because closing out a year takes a little longer than closing out a quarter. So not -- it's not too far away. We'll be on another call with you and I look forward to that and giving you more of an update on the answers some of these questions around what do we think is the value of our latest press release any updates on that as well as continued progress of the business in Q1. So thanks, everyone, for attending and look forward to talk to you again.

Operator

The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.