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 hopefully, if we can drive the revenue there, and it becomes a greater percentage of our revenue mix, we could really see the gross margin expand going forward?
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 this 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 integration we have, we provide more functionality and capability than the average consumer realizes that they want, particularly in the U.S. market, so I don’t think there’s any gaps at this point. But as the market evolves, we’ll continually 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/logistics company as a value-added technology company in the authentication I think that’s got a lot of sizzle to it, and 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: The next question comes from Richard Greulich with REG Capital Advisors.
Richard Greulich: A couple of quick questions and then a couple of comments. 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 if 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 far.
Richard Greulich: Okay. Number two, while I know you wisely didn’t want to rehash everything you did just 1.5 months ago. For those investors who didn’t watch that, I would just point out that you had said during that presentation that kind of a 5-year outlook, you thought $50 million to $60 million in revenues and 15% to 20% adjusted EBITDA margin. I assume in the last 6 weeks, that sort of far out thinking hasn’t really changed much.
Adam Stedham: No, it hasn’t changed. And it really, no. And the thing I would say is — just as we talked about with gross margin, if you — it’s very difficult to predict our product mix 5 years from now, but the EBITDA margins will could be significantly higher or the same or even lower depending upon our product mix and the amount of the revenue that’s associated with authentication versus Precision Logistics. So we haven’t changed our 5-year outlook at this point.
Richard Greulich: Yes. So the implication I’m getting when you’re discussing gross margin earlier that if you achieve what you think you’d like to be able to do, that adjusted EBITDA margin would be higher.
Adam Stedham: Yes, if we if our authentication business grows, more rapidly than we currently have modeled in our 5-year plan, it would definitely change our EBITDA percentage in an upward direction.
Richard Greulich: Yes. Third, you had mentioned that your sweet spot is that 5 million units per year, distribution, those kind of customers might yield an ARR of about 50,000 a year for VerifyMe. But as I recall, during the presentation that 50,000 annual ARR was kind of a low end of sort of what could be accomplished with customers with more than $5 million.
Adam Stedham: Completely agree. It can be a low end, and you’re looking at — but when we’re looking at averages, we think that, that’s a reasonable average for people to think about in model. But you’re exactly right. I mean really, our product — our product is ideally suited for customers that 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: And just — this is just my comment is I very much appreciate the way you’re approaching the share repurchase alternative for use of capital. Far too many companies just go out and start buying stock without having a disciplined way of approaching what price they’re willing to pay for. My true sense is I think the overall market is very widely 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, an opportunity to repurchase your stock at a really attractive price. So I appreciate the way you’re kind of shepherding your cash in that regard.
