UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
CURRENT REPORT
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Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| Item 2.02 | Results of Operations and Financial Condition |
Reference is made to the Where Food Comes From, Inc. (the “Company”) press release on May 2, 2024 and conference call transcript, attached hereto as Exhibits 99.1 and 99.2, respectively, and incorporated by reference herein (including, without limitation, the information set forth in the cautionary statement contained in the press release and conference call transcript), relating to the Company’s financial results for the three month period ended March 31, 2024.
| Item 9.01 | Financial Statements and Exhibits |
| (d) | Exhibits |
| Exhibit No. |
Description | ||
| 99.1 | Press Release issued and dated May 2, 2024 | ||
| 99.2 | Transcript for May 2, 2024 conference call | ||
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
WHERE FOOD COMES FROM, INC. (Registrant) | ||
| By: | /s/ Dannette Henning | |
| Date: May 2, 2024 | Dannette Henning | |
| Chief Financial Officer | ||
Exhibit 99.1
Where Food Comes From, Inc. Reports 2024 First Quarter Financial Results
First Quarter Highlights – 2024 vs. 2023
| ● | Verification and certification revenue up 17% to $4.4 million from $3.8 million | |
| ● | Product sales lower at $0.7 million vs. $1.0 million | |
| ● | Total revenue increased to $5.6 million from $5.3 million | |
| ● | Net income increased 47% to $178,000 from $121,000 | |
| ● | Diluted EPS increased to $0.03 from $0.02 | |
| ● | Adjusted EBITDA up 8% to $432,000 from $399,000 | |
| ● | Company bought back 116,072 shares of its common stock in Q1 at cost of $1.5 million |
CASTLE ROCK, Colo., May 02, 2024 (GLOBE NEWSWIRE) — Where Food Comes From, Inc. (WFCF) (Nasdaq: WFCF), the most trusted resource for independent, third-party verification of food production practices in North America, today announced financial results for its first quarter ended March 31, 2024.
“Despite the lingering impact of drought conditions resulting in smaller herd sizes, we reported solid first quarter results, highlighted by 17% growth in core verification revenue and 47% growth in net income year over year,” said John Saunders, chairman and CEO. “Our ability to continue delivering profitable growth in the face of persistent headwinds is a testament to the durability and resiliency of our business model, which is predicated on having the industry’s deepest solutions portfolio that helps to limit our downside when one or more market segment we serve comes under pressure. We continue to invest in new service offerings to further strengthen our solutions set as evidenced by our December purchase of Upcycled Certified®, a program addressing rapidly growing demand for upcycled food products. We also continued to return value to our shareholders in the form of stock repurchases, which totaled more than 116,000 shares in the first quarter, raising to nearly $11.0 million the total value returned to shareholders via buybacks and a special dividend over the past 13 quarters.”
First Quarter Results – 2024 vs. 2023
Total revenue in the first quarter ended March 31, 2024, increased 6% to $5.6 million from $5.3 million.
Revenue mix included:
| ● | Verification and certification services, up 17% to $4.4 million from $3.8 million. | |
| ● | Product revenue, down 25% to $0.7 million from $1.0 million. | |
| ● | Professional services revenue of $0.4 million vs. $0.5 million. |
Gross profit in the third quarter increased 9% to $2.3 million from $2.1 million.
Selling, general and administrative expense increased slightly to $2.1 million from $2.0 million.
Operating income was 68% higher at $261,000 vs. $155,000.
Net income increased 47% to $178,000, or $0.03 per diluted share, from $121,000, or $0.02 per diluted share.
Adjusted EBITDA in the first quarter increased 8% to $432,000 from $399,000.
Cash provided by operations in the first quarter increased 48% to $0.7 million from $0.5 million.
The Company bought back 116,072 shares of its common stock during the first quarter at a cost of $1.5 million.
Management will conduct a conference call today at 10:00 a.m. Mountain Time to discuss these financial results.
Dial-in numbers for the conference call:
Domestic Toll Free: 1-877-407-8289
International: 1-201-689-8341
Conference Code: 13746431
Phone replay:
A telephone replay of the conference call will be available through May 16, 2024, as follows:
Domestic Toll Free: 1-877-660-6853
International: 1-201-612-7415
Conference Code: 13746431
About Where Food Comes From, Inc.
Where Food Comes From, Inc. is America’s trusted resource for third party verification of food production practices. Through proprietary technology and patented business processes, the Company estimates that it supports more than 17,500 farmers, ranchers, vineyards, wineries, processors, retailers, distributors, trade associations, consumer brands and restaurants with a wide variety of value-added services. Through its IMI Global, Validus Verification Services, SureHarvest, WFCF Organic, and Postelsia units, Where Food Comes From solutions are used to verify food claims, optimize production practices and enable food supply chains with analytics and data driven insights. In addition, the Company’s Where Food Comes From® retail and restaurant labeling program uses web-based customer education tools to connect consumers to the sources of the food they purchase, increasing meaningful consumer engagement for our clients.
*Note on non-GAAP Financial Measures
This press release and the accompanying tables include a discussion of EBITDA and Adjusted EBITDA, which are non-GAAP financial measures provided as a complement to the results provided in accordance with generally accepted accounting principles (“GAAP”). The term “EBITDA” refers to a financial measure that we define as earnings (net income or loss) plus or minus net interest plus taxes, depreciation and amortization. Adjusted EBITDA excludes from EBITDA stock-based compensation and, when appropriate, other items that management does not utilize in assessing WFCF’s operating performance (as further described in the attached financial schedules). None of these non-GAAP financial measures are recognized terms under GAAP and do not purport to be an alternative to net income as an indicator of operating performance or any other GAAP measure. We have reconciled Adjusted EBITDA to GAAP net income in the Consolidated Statements of Income table at the end of this release. We intend to continue to provide these non-GAAP financial measures as part of our future earnings discussions and, therefore, the inclusion of these non-GAAP financial measures will provide consistency in our financial reporting.
CAUTIONARY STATEMENT
This news release contains “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, based on current expectations, estimates and projections that are subject to risk. Forward-looking statements are inherently uncertain, and actual events could differ materially from the Company’s predictions. Important factors that could cause actual events to vary from predictions include those discussed in our SEC filings. Specifically, statements in this news release about industry leadership, expectations for offsetting industry headwinds, ability to continue expanding on the solutions set, widening the competitive moat and providing customers with convenience and price advantages, and demand for, and impact and efficacy of, the Company’s products and services on the marketplace are forward-looking statements that are subject to a variety of factors, including availability of capital, personnel and other resources; competition; governmental regulation of the agricultural industry; the market for beef and other commodities; and other factors. Financial results and the Company’s pace of stock buybacks are not necessarily indicative of future results. Readers should not place undue reliance on these forward-looking statements. The Company assumes no obligation to update its forward-looking statements to reflect new information or developments. For a more extensive discussion of the Company’s business, please refer to the Company’s SEC filings at www.sec.gov.
Company Contacts:
John Saunders
Chief Executive Officer
303-895-3002
Jay Pfeiffer
Director, Investor Relations
303-880-9000
jpfeiffer@wherefoodcomesfrom.com
Where Food Comes From, Inc.
Statements of Income (Unaudited)
| Three months ended March 31, | ||||||||
| (Amounts in thousands, except per share amounts) | 2024 | 2023 | ||||||
| Revenues: | ||||||||
| Verification and certification service revenue | $ | 4,434 | $ | 3,806 | ||||
| Product sales | 733 | 971 | ||||||
| Professional services | 415 | 490 | ||||||
| Total revenues | 5,582 | 5,267 | ||||||
| Costs of revenues: | ||||||||
| Costs of verification and certification services | 2,515 | 2,196 | ||||||
| Costs of products | 434 | 568 | ||||||
| Costs of professional services | 304 | 360 | ||||||
| Total costs of revenues | 3,253 | 3,124 | ||||||
| Gross profit | 2,329 | 2,143 | ||||||
| Selling, general and administrative expenses | 2,068 | 1,988 | ||||||
| Income from operations | 261 | 155 | ||||||
| Other income/(expense): | ||||||||
| Dividend income from Progressive Beef | - | 50 | ||||||
| Loss on foreign currency exchange | (2 | ) | (2 | ) | ||||
| Other income, net | 7 | 9 | ||||||
| Interest expense | (1 | ) | (1 | ) | ||||
| Income before income taxes | 265 | 211 | ||||||
| Income tax expense | 87 | 90 | ||||||
| Net income | $ | 178 | $ | 121 | ||||
| Per share - net income: | ||||||||
| Basic | $ | 0.03 | $ | 0.02 | ||||
| Diluted | $ | 0.03 | $ | 0.02 | ||||
| Weighted average number of common shares outstanding: | ||||||||
| Basic | 5,480 | 5,730 | ||||||
| Diluted | 5,500 | 5,799 | ||||||
Where Food Comes From, Inc.
Calculation of Adjusted EBITDA*
(Unaudited)
| Three months ended March 31, | ||||||||
| (Amounts in thousands) | 2024 | 2023 | ||||||
| Net income | $ | 178 | $ | 121 | ||||
| Adjustments to EBITDA: | ||||||||
| Interest expense | 1 | 1 | ||||||
| Income tax expense | 87 | 90 | ||||||
| Depreciation and amortization | 155 | 172 | ||||||
| EBITDA* | 421 | 384 | ||||||
| Adjustments: | ||||||||
| Stock-based compensation | 11 | 15 | ||||||
| ADJUSTED EBITDA* | $ | 432 | $ | 399 | ||||
*Use of Non-GAAP Financial Measures: Non-GAAP results are presented only as a supplement to the financial statements and for use within management’s discussion and analysis based on U.S. generally accepted accounting principles (GAAP). The non-GAAP financial information is provided to enhance the reader’s understanding of the Company’s financial performance, but non-GAAP measures should not be considered in isolation or as a substitute for financial measures calculated in accordance with GAAP. Reconciliations of the most directly comparable GAAP measures to non-GAAP measures are provided herein.
All of the items included in the reconciliation from net income to EBITDA and from EBITDA to Adjusted EBITDA are either (i) non-cash items (e.g., depreciation, amortization of purchased intangibles, stock-based compensation, etc.) or (ii) items that management does not consider to be useful in assessing the Company’s ongoing operating performance (e.g., M&A costs, income taxes, gain on sale of investments, loss on disposal of assets, etc.). In the case of the non-cash items, management believes that investors can better assess the Company’s operating performance if the measures are presented without such items because, unlike cash expenses, these adjustments do not affect the Company’s ability to generate free cash flow or invest in its business.
We use, and we believe investors benefit from the presentation of, EBITDA and Adjusted EBITDA in evaluating our operating performance because it provides us and our investors with an additional tool to compare our operating performance on a consistent basis by removing the impact of certain items that management believes do not directly reflect our core operations. We believe that EBITDA is useful to investors and other external users of our financial statements in evaluating our operating performance because EBITDA is widely used by investors to measure a company’s operating performance without regard to items such as interest expense, taxes, and depreciation and amortization, which can vary substantially from company to company depending upon accounting methods and book value of assets, capital structure and the method by which assets were acquired.
Because not all companies use identical calculations, the Company’s presentation of non-GAAP financial measures may not be comparable to other similarly titled measures of other companies. However, these measures can still be useful in evaluating the Company’s performance against its peer companies because management believes the measures provide users with valuable insight into key components of GAAP financial disclosures.
Where Food Comes From, Inc.
Balance Sheets (Unaudited)
| March 31, | December 31, | |||||||
| (Amounts in thousands, except per share amounts) | 2024 | 2023 | ||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 1,882 | $ | 2,641 | ||||
| Accounts receivable, net of allowance | 2,075 | 2,128 | ||||||
| Inventory | 1,119 | 1,109 | ||||||
| Prepaid expenses and other current assets | 375 | 335 | ||||||
| Total current assets | 5,451 | 6,213 | ||||||
| Property and equipment, net | 806 | 844 | ||||||
| Right-of-use assets, net | 2,295 | 2,296 | ||||||
| Equity investments | 1,191 | 1,191 | ||||||
| Intangible and other assets, net | 2,222 | 2,303 | ||||||
| Goodwill, net | 2,946 | 2,946 | ||||||
| Deferred tax assets, net | 482 | 493 | ||||||
| Total assets | $ | 15,393 | $ | 16,286 | ||||
| Liabilities and Equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 677 | $ | 567 | ||||
| Accrued expenses and other current liabilities | 889 | 615 | ||||||
| Deferred revenue | 1,457 | 1,485 | ||||||
| Current portion of finance lease obligations | 14 | 14 | ||||||
| Current portion of operating lease obligations | 321 | 298 | ||||||
| Total current liabilities | 3,358 | 2,979 | ||||||
| Finance lease obligations, net of current portion | 37 | 41 | ||||||
| Operating lease obligation, net of current portion | 2,422 | 2,447 | ||||||
| Total liabilities | 5,817 | 5,467 | ||||||
| Commitments and contingencies | ||||||||
| Equity: | ||||||||
| Common stock | 7 | 7 | ||||||
| Additional paid-in-capital | 11,338 | 12,290 | ||||||
| Treasury stock | (11,688 | ) | (11,219 | ) | ||||
| Retained earnings | 9,919 | 9,741 | ||||||
| Total equity | 9,576 | 10,819 | ||||||
| Total liabilities and stockholders’ equity | $ | 15,393 | $ | 16,286 | ||||
Exhibit 99.2
Where Food Comes From, Inc.
2024 First Quarter Conference Call
Call date: Thursday May 2, 2024
Call time: 10:00 a.m. Mountain Time
Jay Pfeiffer – Investor Relations
Good morning and welcome to the Where Food Comes From 2024 first quarter earnings call.
Joining me on the call today are CEO John Saunders, President Leann Saunders, and Chief Financial Officer Dannette 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. 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.
John Saunders
Good morning and thanks for joining the call today.
This morning, we released our first quarter financial results and were pleased to report that the renewed momentum we generated in the fourth quarter 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 improvement 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. 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 producer 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, multi-national 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.
Drilling down on our numbers for the quarter:
| ● | Verification and certification services grew 17% to $4.4 million from $3.8 million. |
| ● | Product revenue, reflecting smaller herd sizes and fewer source and age verifications, was down 25% to $0.7 million from $1.0 million. |
| ● | Gross profit increased 9% to $2.3 million from $2.1 million year over year. |
| ● | Selling, general and administrative expense increased only slightly to $2.1 million from $2.0 million, with the increase partially reflecting marketing spend. |
| ● | Operating income was 68% higher at $261,000 vs. $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 third quarter. This was strictly a timing issue as the $50,000 dividend was booked in early April. Progressive Beef’s business – and our relationship with Progressive Beef – remains solid. |
| ● | Adjusted EBITDA in the first quarter increased 8% to $432,000 from $399,000. |
| ● | Cash provided by operations in the first quarter increased 48% to $0.7 million from $0.5 million. |
The Company bought back 116,072 shares of its common stock during the first quarter at a cost of $1.5 million. That brings to nearly $11.0 million dollars 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.
To date, we have closed more than a dozen small acquisitions, all of which are contributing to our success and to the widening moat 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, a 110% increase over 484 products just a few months ago. The top three 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 is 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 diversifier of 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 Upcycled Certified and check out some statistics that support that thesis.
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 acquisitive 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 thank you again for joining the call today and open the call to questions. Operator…
Operator
This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.