Where Food Comes From Q4 2024 Earnings Report

Where Food Comes From EPS Results

• Actual EPS: $0.13
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Where Food Comes From Revenue Results

• Actual Revenue: $6.66 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Where Food Comes From Announcement Details

• Quarter: Q4 2024
• Date: 2/20/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, February 20, 2025
• Conference Call Time: 12:00PM ET

Where Food Comes From (NASDAQ:WFCF), together with its subsidiaries, operates as a third-party food verification company in North America. The company operates through Verification and Certification, and Professional Services segments. It conducts on-site and desk audits to verify that claims being made about livestock, food, other specialty crops, and agricultural and aquaculture products are accurate, as well as offers Where Food Comes From Source Verified retail and restaurant labeling program, which connects consumers directly to the source of the food they purchase through product labeling, and web-based information sharing and education. It also offers professional services and technology solutions; verification solutions; and consulting services, as well as sells hardware. The company serves beef and pork packers, organic producers and processors, and specialty retail chains. The company was formerly known as Integrated Management Information, Inc. and changed its name to Where Food Comes From, Inc. in December 2012. Where Food Comes From, Inc. was founded in 1996 and is based in Castle Rock, Colorado.

Where Food Comes From Q4 2024 Earnings Call Transcript

Key Takeaways

• Despite flat Q4 revenue of $6.7 million year-over-year, net income rose to $0.18 per diluted share thanks to increased dividend income and a $345K fair-value gain on Bitcoin holdings.
• Full-year revenue climbed 2% to $25.7 million, with cyclical declines in beef source-and-age services offset by strong growth in non-beef offerings such as upcycled certified (17% y/y) and CARE certified programs.
• SG&A expenses grew by $530K due to wage inflation, stepped-up marketing, and strategic technical hires, resulting in a slight dip in net income to $0.40 per diluted share.
• The company repurchased 273,057 shares for $3.3 million in 2024 (totaling $13.9 million over 21 quarters) and plans to continue share buybacks while investing in new service expansion.
• Its investment in a robust technology platform and status as an authorized certification body for over 50 standards creates a significant moat and positions it as a go-to provider in food traceability and verification.

Presentation

[Operator]

Greetings. Welcome to Where Food Comes From twenty twenty four Year End Earnings Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded.

[Operator]

It is now my pleasure to introduce Jay Pfeiffer, Investor Relations Director. Please go ahead, sir.

[Jay Pfeiffer, Manager of Investor Relations at Where Food Comes From]

Good morning, and welcome to the

[Jay Pfeiffer, Manager of Investor Relations at Where Food Comes From]

Where Food Comes From twenty twenty four year end earnings call. Joining me on the call today are CEO, John Saunders President, Leanne Saunders and Chief Financial Officer, Danette Henning. During this call, we'll make forward looking statements based on current expectations, estimates and projections that are subject to risk. Statements about current and future financial performance, growth strategy, customers, business opportunities, market acceptance of our products and services and potential acquisitions are forward looking statements. Listeners should not place undue reliance on these statements as there are many factors that could cause actual results to differ materially from our forward looking statements.

[Jay Pfeiffer, Manager of Investor Relations at Where Food Comes From]

We encourage you to review our publicly filed documents as well as our news releases and website for more information. I'll now turn the call over to John Saunders.

[John Saunders, CEO & Chairman of The Board at Where Food Comes From]

Good morning, and thanks for joining the call today. Total revenue in the fourth quarter was basically flat at $6,700,000 year over year. Verification and Certification Services revenue was down slightly at $5,400,000 versus $5,500,000 Product revenue increased 6% to $922,000 from $871,000 and professional services revenue was $360,000 versus $391,000 dollars Gross profit in the fourth quarter declined 7% to $2,800,000 from $3,000,000 SG and A expense decreased slightly to $2,000,000 from $2,100,000 Net income increased to $961,000 or $0.18 per diluted share from $776,000 or $0.14 per diluted share. In addition to an $80,000 or 47% increase in Progressive Beef dividend income, Net income benefited from a $345,000 gain in the fair market value of Bitcoin holdings. As you may recall, we invested $178,000 in Bitcoin a few years ago when units were trading in the $25,000 range.

[John Saunders, CEO & Chairman of The Board at Where Food Comes From]

At December 31, year end, Bitcoin was trading at more than three times that level in the $93,000 range and thus the gain in fair market value. Onto our full year results. Total revenue for the year increased 2% to $25,700,000 from twenty five point one million dollars a year ago. That total included verification and certification services up 6% to $20,600,000 from $19,400,000 dollars product revenue of $3,800,000 down 5% from $4,000,000 and professional services revenue of $1,400,000 versus $1,700,000 By now, you know that our traditional beef related source and age business has been hard hit by cyclical herd size reductions over the past couple of years, and that is what's responsible for the slowing growth in our top line. We believe the decline in beef source and age verifications and related hardware sales is is a temporary cyclical occurrence.

[John Saunders, CEO & Chairman of The Board at Where Food Comes From]

And fortunately, in the meantime, we are experiencing rising demand in a number of other service offerings that has more than offset the lower than source and age activities. For example, we are seeing good growth in our CARE certified program in beef and other proteins. And as announced last month, our upcycled certified program has become our fastest growing service with a 17% year over year increase in 2024. We're also seeing updates in organic certifications, California Prop 12 related audits in poultry and ag laying hens, on farm security and worker care audits in the dairy industry. And finally, we continue to benefit from more customers taking advantage of our bundling capabilities made possible by our expanding services portfolio, the largest and most diverse in the industry.

[John Saunders, CEO & Chairman of The Board at Where Food Comes From]

Gross profit for the full year was up slightly to $10,600,000 from $10,500,000 and our gross margins remained generally stable year over year. The big impact for profitability came in SG and A expenses, which grew by 530,000 year over year. I want to provide some context around that increase because a significant amount of this additional expense was allocated to areas that enhance our ability to execute on our growth plans. Although some of the increase was due to wage inflation in a very competitive job market, The bulk of the increase was due to stepped up marketing activities and some strategic hires of technical personnel who are strengthening our technology platform and tools to ensure we can manage the expected customer growth in both the short and long term. Net income from the year was down slightly to $2,100,000 or $0.4 per diluted share versus net income of $2,200,000 or $0.39 per diluted share in 2023.

[John Saunders, CEO & Chairman of The Board at Where Food Comes From]

The company generated $2,700,000 in cash from operations in 2024 versus $2,800,000 in 2023. We entered 2025 with cash and cash equivalents of $2,000,000 and working capital of $2,400,000 Turning now to our efforts to return value to stockholders. For the full year, including stock buybacks and private purchase transactions, the company repurchased a total of 273,057 shares or of its stock for $3,300,000 or approximately $11.97 per share. Aggregate buybacks since planned inception twenty one quarters ago, including private purchases, totaled 1,191,636 shares at a purchase price of $13,000,000 or approximately $10.92 per share. Our pay for buybacks from private purchases has accelerated with 73% of that total coming in the last three years.

[John Saunders, CEO & Chairman of The Board at Where Food Comes From]

And finally, total value returned to stockholders via buybacks, private purchases and a special dividend over the past twenty one quarters totaled $13,900,000 We expect to continue taking advantage of solid cash flows to further reduce our float, while at the same time investing in new programs and services designed to strengthen our beef business and accelerate the growth of other service offerings. We look forward to providing more specifics on these initiatives in the coming months. In closing, we are now celebrating our thirtieth year anniversary in business. Our evolution has been steady, deliberate and very gratifying. In the following stage, we identified a need in the cattle industry for traceability and began developing software to fill that need.

[John Saunders, CEO & Chairman of The Board at Where Food Comes From]

In our next phase of growth, we made a bet that consumer demand for transparency would extend to other areas of the food supply chain, and we began building out our verification services portfolio to address other food groups and the growing trend of food claims labeling. We also rapidly grew our cattle business and established our IMI Global unit as the undisputed leader in cattle traceability and claims verification in North America. We invested heavily in a technology platform capable of managing a diverse services portfolio and ultimately the much larger business that we expect to become. And we accomplished all of this through a combination of ground up organic initiatives and strategic acquisitions. That whole process took years to accomplish due to regulatory and myriad other issues.

[John Saunders, CEO & Chairman of The Board at Where Food Comes From]

Becoming an authorized certification body for a single standard, for example, can take up to three years to complete and begin generating a return on financial and human capital. That's why, as of today, we have a large moat around our business and a business that would be very difficult to replicate. Additionally, we are supported by consumer tailwinds around food safety, food traceability and food claims verification. We believe we are uniquely positioned as the go to provider for producers, CPGs, distributors and retailers. As a result of these years of innovation and investment, we now audit to more than 50 different standards, far and away the most of any food verification businesses.

[John Saunders, CEO & Chairman of The Board at Where Food Comes From]

And we can bundle any number of verifications to lower compliance cost prices for our customers and food prices for consumers in general. We believe virtually all of these individual standards, including a number of new offerings we have in the works, have the potential for strong growth in the coming years, and that bodes well for our stockholders. And with that, I'll thank you again for joining the call today, and I'll open up the call to questions. Operator?

[Operator]

There are no questions today. I would like to turn the conference back over for closing comments.

[John Saunders, CEO & Chairman of The Board at Where Food Comes From]

Well, once again, we thank you for your support and look forward to talking to you in a couple of months. Have a great day.

[Operator]

Thank you. This will conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.

Participants

Executives

• Jay Pfeiffer, Manager of Investor Relations
• John Saunders, CEO & Chairman of The Board