Where Food Comes From Q1 2024 Earnings Report

Where Food Comes From EPS Results

• Actual EPS: $0.03
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Where Food Comes From Revenue Results

• Actual Revenue: $5.58 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Where Food Comes From Announcement Details

• Quarter: Q1 2024
• Date: 5/2/2024
• Time: N/A
• Conference Call Date: Thursday, May 2, 2024
• 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 Q1 2024 Earnings Call Transcript

[Operator]

a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jay Pfeiffer, Investor Relations.

[Operator]

Thank you, Jay. You may begin.

[Speaker 1]

Good morning, and welcome to the Where Food Comes From 2024 Q1 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 will 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.

[Speaker 1]

We encourage you to review our publicly filed documents as well as our news releases and website for more information. Today, we'll also discuss adjusted EBITDA, a non GAAP financial measure provided as a complement to GAAP results. Please refer to today's earnings release for important disclosures regarding non GAAP measures. I'll now turn the call over to John Saunders.

[Speaker 2]

Good morning and thanks for joining the call today. This morning we released our Q1 financial results and we're pleased to report that the renewed momentum we generated in the Q4 has carried into 2024. Once again, our core verification services revenue more than offset lower product sales resulting from persistent headwinds in our beef business due to cyclical cattle trends, lingering drought effects and smaller herd sizes. As we've said before, these headwinds are likely to persist to some extent throughout 2024, but we're hopeful to see improvements starting early next year. The solid growth in verification services coupled with careful management of our cost structure also led to improved profitability year over year.

[Speaker 2]

Our ability to continue delivering profitable growth in spite of ongoing challenges in our beef business reflects the strength and advantages of our unique business model. We are far and away the most diversified provider of food claims certifications in the United States. We provide thousands of producers, customers with best in class solutions to differentiate and add value to their products. These customers range from small family farms and ranches to large multinational CPGs. In turn, they respond to increasing consumer demand for products that are certified to any number of standards ranging from non GMO, organic and gluten free to a growing number of sustainable related certifications.

[Speaker 2]

Drilling down on our numbers for the quarter. Verification and certification services revenue grew 17 percent to $4,400,000 from 3,800,000 dollars Product revenue reflecting smaller herd sizes and fewer source and age verifications was down 25% to $700,000 from 1,000,000 dollars Gross profit increased 9 percent to $2,300,000 from $2,100,000 year over year. Selling, general and administrative expense increased only slightly to $2,100,000 from $2,000,000 with the increase partially reflecting marketing spend. Operating income was 68% higher at $261,000 versus $155,000 Net income in the first quarter was up 47% to $178,000 or $0.03 per diluted share from $121,000 or $0.02 per diluted share in the same quarter last year. You may have noticed that we did not receive a Progressive Beef dividend in the 3rd quarter.

[Speaker 2]

That was strictly a timing issue as the $50,000 dividend was booked in early April. Progressive Beef Business and our relationship with Progressive Beef remained solid. Adjusted EBITDA in the Q1 increased 8% to $432,000 from $399,000 Cash provided by operations in the Q1 increased 48% to $700,000 from $500,000 The company bought back 116,072 shares of its common stock during the Q1 at a cost of $1,500,000 That brings to nearly $11,000,000 the total value we've returned to our stockholders over the past 13 quarters when factoring in buybacks and the special dividend. In addition to our commitment to value creation for stockholders and other stakeholders, we remain focused on our business priorities of delivering affordable, effective solutions to our customers through innovative and strategic investments in technology and complementary businesses. We believe this multi pronged approach will continue to drive our industry leadership now and into the future.

[Speaker 2]

To date, we have closed more than a dozen small acquisitions, all of which are contributing to our success and to the widening mode around our business. The most recent example is our Q4 acquisition of the Upcycled certified program from the Upcycled Food Association. I know we mentioned this on our last call, but we recently updated investors with news that upcycling is among the fastest growing certifications for us and the certification industry at large. Upcycled certified provides consumers a tangible solution to shop sustainably and avoid food waste. Today, there are roughly 100 companies with 531 products certified to the standard, 110% increase over the 484 products just a few months ago.

[Speaker 2]

The top 3 certification categories are snack foods, pet foods and beverages. Products like these are responsible for diverting an average of 390,000 tons of food waste annually in 14 countries since the program's launch in 2021. We view upcycled certified as one of the most exciting and promising sustainability trends we've seen in a long time, and we think it can become a meaningful component and diversify our revenue mix over time. There are compelling reasons, both financial and environmental that support our optimism that upcycling is in the early stages of a longer term growth trend. If you haven't done so already, go back and look at our April 22 press release on Upcycling certified and check out some statistics that support that thesis.

[Speaker 2]

In closing, I want to reiterate that we believe ours is a resilient, durable and sustainable business model, one that would be very difficult to replicate and one that is in the early innings of a long term growth trend. We are consistently strengthening our market position with new revenue streams through organic and inquisitive growth initiatives in order to meet the evolving needs of our customers. So we are very excited about the future of our business. And as always, we appreciate our stockholders, customers and other stakeholders for their loyalty and support. And with that, I'll turn the call back over to the operator for questions.

[Operator]

Thank you. We will now be conducting a question and answer session. There are no questions at this time. I'd like to hand the floor back over to management for any closing comments.

[Speaker 2]

Once again, we'd like to thank you for all your support and your participation, and we'll talk to you again in 3 months. Take care.