Where Food Comes From Q2 2025 Earnings Call Transcript

Quartr
Provided by Quartr
August 7, 2025

Key Takeaways

  • Positive Sentiment: Core verification and certification revenue rose 2%, hardware sales jumped 18%, driving a 3% increase in total Q2 revenue to $6.6 M year-over-year.
  • Positive Sentiment: Net income grew 15% to $562 K ($0.11 per share), boosted by a $172 K gain in the fair market value of digital assets.
  • Negative Sentiment: Gross margins were pressured by higher compensation costs in a tight labor market and increased hardware expenses.
  • Positive Sentiment: Sale of the 10% Progressive Beef stake generated $1.8 M cash proceeds and strengthened cash reserves to $3.2 M, enhancing financial flexibility for growth initiatives.
  • Positive Sentiment: Expanded retail labeling program added two major retailers featuring Care Certified beef, targeting over 100 store rollouts by year-end to boost brand visibility and licensing revenue.
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Earnings Conference Call
Where Food Comes From Q2 2025
00:00 / 00:00

There are 3 speakers on the call.

Operator

Greetings, and welcome to the Where Food Comes From Second Quarter twenty twenty five 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. I'd now like to turn the call over to your host, Mr.

Operator

Jay Feffer, Director of Investor Relations. Please go ahead.

Speaker 1

Good morning, and welcome to the Where Food Comes From twenty twenty five second quarter 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 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 forward looking statements.

Speaker 1

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.

Speaker 2

Hello, and thanks for joining the call today. This morning, we reported improved second quarter financial results. Our core verification and certification revenue increased nearly 2% despite continued pressure on beef verifications associated with smaller herd sizes. The increase in verification revenue was attributable to strong demand for other verification services, notably our care certified and upcycled programs, which continue to build momentum. This growth underscores the strength of a business model that's based on providing the broader range of verification services in the industry, a strategy that enables us to compensate for downturns in other segments of our business.

Speaker 2

We now verify customer compliance to more than 50 individual standards, and our unique ability to bundle these services results in cost savings and convenience for those customers and a differential competitive marketing advantage for our business. Hardware sales in the second quarter also increased year over year by 18% to $1,000,000 from $800,000 in Q2 last year. Although we are selling fewer basic tags due to small herds and government tax subsidies, growing demand for higher priced value added tags is more than compensating. Some of these tags options include combo sets that offer a blend of visual and electronic identification. These tags are also customizable in various ways to enable personalized ID systems and other advantages over standard tags.

Speaker 2

Ultra high frequency tags that operate up to nine sixty megahertz, offering improved accuracy, longer read range and faster read speeds, all of which combined to improve data management and compliance with USDA standards. Also, tissue sampling units or PSUs, these are tags that are used to extract DNA samples for genetic analysis. The combination of higher verification and tag revenue led to a 3% increase in total revenue to $6,600,000 from $6,400,000 year over year. So again, due to our deep solutions portfolio, we're showing some resiliency in the face of cyclical headwinds. Gross margins in the second quarter were negatively impacted by higher compensation costs related to a persistent tight labor market and rising costs of hardware.

Speaker 2

Net income in Q2 increased 15% to $562,000 or $0.11 per share from $489,000 or $09 per share in the year ago second quarter. That increase included $172,000 gain in fair market value of digital assets. Our balance sheet remains strong. We closed the fourth quarter with cash and cash equivalents of $3,200,000 up from $2,000,000 at year end. That balance further increased on July 22 with the sale of our 10% interest in Progressive Beef, the transaction we reported in SEC filings last week.

Speaker 2

Sales proceeds were $1,800,000 in cash and the return of 12,585 shares of our common stock valued at $138,000 at closing on the twenty second. The $1,800,000 in proceeds will be booked $800,000 as a gain on sale of investment and $1,000,000 to write off the asset on the balance sheet. The 12,585 shares have been canceled and removed from our total issued and outstanding shares. We purchased our Progressive Beef interest in 2018 for approximately 1,000,000 cash and stock. So this has been a very profitable investment for us.

Speaker 2

In addition, we received 1,600,000.0 of Progressive Beef dividends over the past six plus years. Still given the current state of the beef industry and the evolution of our services mix, management and the board determined to monetize the investment. This transaction immediately strengthens our balance sheet, providing greater financial flexibility to pursue other growth initiatives and support our stock buyback program. Meanwhile, we maintain a strong working relationship with Progressive Beef and we will continue to conduct audits for the Progressive Beef standard. Those audits have generated an average of approximately $176,000 in annual revenue over the past three years.

Speaker 2

One of the highlights of the second quarter was the expansion of our retail labeling program through the addition of two major retailers now featuring Pear certified beef products in stores spanning from Hawaii to the East Coast. These customers join a growing movement of retailers responding to consumer demand for responsibly produced food and further expand the availability of beef that meets rigorous sustainability standards through the participation in Care Certified. These are staged rollouts that are expected to include more than 100 retail locations by year end with the potential to add additional stores for both customers in 2026. Certain beef products will also display Where Food Comes From source verified and non hormone treated labeling, reinforcing transparency and trust in the food supply chain. So in addition to adding to our licensing revenue stream, these new customer programs significantly raise awareness of where food comes from and its services among tens of thousands of new retail customers.

Speaker 2

Another Q2 highlight is our progress in integrating artificial intelligence tools into our business to improve efficiency and enhance customer experiences. We have added technical talent to build AI capabilities that support myriad tasks across our business and deliver time and cost savings to our customers. These investments will help us scale our business more rapidly and efficiently and will pay for themselves many times over as we move forward. And on the subject of investments, we continue to repurchase our own shares in the second quarter, taking another 24,481 shares out of the float at an average price of $10.25 per share. Year to date, we have repurchased a total of 55,826 shares of stock, raising to more than 1,200,000.0 the total number of shares taken off the market through buybacks and private purchases since 2019.

Speaker 2

These buybacks, combined with the special dividend, represent $14,600,000 in value returned to shareholders over the past six years. And with that, I'll again thank you for joining the call today and open the call to questions. Melissa?

Operator

Thank you. You. Our first question comes from the line of Arak Kayyam, Private Investor. I

Speaker 2

was just wondering what kind of initiatives or programs you have in place to not only attract top talent but retain as well. You. Janet, you wanna take a shot at that or Leanne?

Operator

Yes. I can. This is Janet. Hey. Thank you for the question too.

Operator

You know, we work closely with our HR. HR reaches out to different college universities. We also advertise positions and try to recruit various candidates that direction. We also just have a well recognized name and brand that a lot of recruits come directly to us because they really want to work work at our company because of what we stand for. We have internal continuing education, and we definitely encourage we've got an open door policy where we encourage other people to communicate within themselves so that they can learn from one another.

Operator

So, Mina, do you have anything else to add? No. I thought that was good unless there's a follow-up question to that.

Speaker 2

Nope. That was all. Thank you very much. Appreciate it.

Operator

Thank you. Yeah. Thank you. Thank you. Once again, as a reminder, it's star one to join the question queue.

Operator

We'll pause just a moment to allow for any other questions.

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