WFCF Where Food Comes From Inc

 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 second quarter and six months ended June 30, 2024.

“Despite ongoing inflationary effects and cyclical herd contraction that have impacted our beef-related services, we continued to profitably grow our business for both the second quarter and year-to-date period,” said John Saunders, chairman and CEO. “Our ability to successfully navigate these temporary challenges is attributable to a versatile business model that incorporates the industry’s most diversified services portfolio. Over the first half of 2024 our new Upcycled Food Certification initiative has emerged as one of our fastest growing standards. We’ve also seen growing demand for our biosecurity offerings as we help to position customers and the industry to manage potential animal disease outbreaks.

“We are the recognized leader in advocating for transparency and safety in the food supply chain and now audit to nearly 60 different standards – far and away the most of any food certification body,” Saunders added.   “This diversification not only reduces our risk during challenging times for other service offerings, but it widens the moat around our business and positions us for accelerated growth once headwinds related to inflation and cyclical cattle trends subside.”

Second Quarter Results – 2024 vs. 2023Total revenue in the second quarter ended June 30, 2024, increased 4% to $6.4 million from $6.1 million.

Revenue mix:

• Verification and certification services, up 10% to $5.3 million from $4.8 million.
• Product revenue declined 13% to $0.8 million from $0.9 million.
• Professional services revenue of $0.3 million vs. $0.4 million.

Gross profit in the second quarter increased to $2.7 million from $2.5 million.

Selling, general and administrative expense increased to $2.1 million from $1.8 million, reflecting increased costs related to marketing, personnel and travel.

Operating income declined to $0.6 million from $0.7 million.

Net income declined 8% to $489,000, or $0.09 per diluted share, from $532,000, or $0.09 per diluted share.

Adjusted EBITDA in the second quarter was 8% lower at $0.8 million vs. $0.9 million.

The Company bought back 33,347 shares of its common stock in the second quarter at a cost of $389,000.

Six Month Results – 2024 vs. 2023Total revenue for the six months ended June 30, 2024, increased 5% to $12.0 million from $11.4 million in the prior year.

Revenue mix:

• Verification and certification services, up 13% to $9.7 million from $8.6 million.
• Product revenue, down 19% to $1.6 million from $1.9 million.
• Professional services revenue of $0.7 million compared to $0.9 million.

Gross profit at mid-year was $5.0 million, up 7% from $4.6 million a year ago.

Selling, general and administrative expense increased 8% to $4.1 million from $3.8 million due primarily to the aforementioned increases in marketing, personnel and travel expenses.

Operating income was essentially flat at $0.8 million.

Net income through six months increased slightly to $667,000, or $0.12 per diluted share, compared to net income of $653,000, or $0.11 per diluted share, in the prior year period.

Adjusted EBITDA was essentially flat at $1.3 million.

The Company generated $1.9 million in cash from operations through six months compared to $1.3 million in the same period last year.

The cash and cash equivalents balance at June 30, 2024, was $2.60 million vs. $2.64 million at December 31 year-end.

Through the first six months of 2024 the Company bought back 149,419 shares of its stock.

The Company will conduct a conference call today at 10:00 a.m. Mountain Time.

Call-in numbers for the conference call:Domestic Toll Free: 1-877-407-8289International: 1-201-689-8341Conference Code: 13748244

Phone replay:A telephone replay of the conference call will be available through August 22, 2024, as follows:Domestic Toll Free: 1-877-660-6853International: 1-201-612-7415Conference Code: 13748244

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 STATEMENTThis 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 and navigating challenges, ability to continue expanding on the solutions set, reducing risk through diversification, widening the competitive moat, accelerating growth when headwinds subside, 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 for 2024 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 SaundersChief Executive Officer303-895-3002

Jay PfeifferDirector, Investor Relations303-880-9000jpfeiffer@wherefoodcomesfrom.com

Where Food Comes From, Inc.
Statements of Operations (Unaudited)
				Three months ended June 30,								Six months ended June 30,
(Amounts in thousands, except per share amounts)					2024				2023				2024				2023
Revenues:
	Verification and certification service revenue			$	5,252			$	4,779			$	9,686			$	8,585
	Product sales				819				938				1,552				1,909
	Professional services				324				409				739				899
		Total revenues			6,395				6,126				11,977				11,393
Costs of revenues:
	Costs of verification and certification services				3,028				2,736				5,543				4,932
	Costs of products				469				555				903				1,123
	Costs of professional services				240				329				544				689
		Total costs of revenues			3,737				3,620				6,990				6,744
	Gross profit				2,658				2,506				4,987				4,649
Selling, general and administrative expenses					2,075				1,833				4,143				3,821
Income from operations					583				673				844				828
Other income/(expense):
	Dividend income from Progressive Beef				100				50				100				100
	Gain on disposal of assets				-				5				-				5
	Loss on foreign currency exchange				(2	)			(2	)			(4	)			(4	)
	Other income, net				7				11				14				20
	Interest expense				(1	)			(1	)			(2	)			(2	)
Income before income taxes					687				736				952				947
Income tax expense					198				204				285				294
	Net income			$	489			$	532			$	667			$	653
Per share - net income:
	Basic			$	0.09			$	0.09			$	0.12			$	0.12
	Diluted			$	0.09			$	0.09			$	0.12			$	0.11
Weighted average number of common shares outstanding:
	Basic				5,371				5,670				5,426				5,693
	Diluted				5,388				5,735				5,444				5,760

Where Food Comes From, Inc.
Calculation of Adjusted EBITDA*
(Unaudited)
				Three months ended June 30,						Six months ended June 30,
(Amounts in thousands)					2024			2023			2024			2023
Net income				$	489		$	532		$	667		$	653
Adjustments to EBITDA:
	Interest expense				1			1			2			2
	Income tax expense				198			204			285			294
	Depreciation and amortization				156			163			311			335
EBITDA*					844			900			1,265			1,284
Adjustments:
	Stock-based compensation				-			17			11			32
	Cost of acquisitions				-			-			-			-
ADJUSTED EBITDA*				$	844		$	917		$	1,276		$	1,316

*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
				June 30,				December 31,
(Amounts in thousands, except per share amounts)					2024				2022
Assets				(Unaudited)				(Audited)
Current assets:
	Cash and cash equivalents			$	2,600			$	2,641
	Accounts receivable, net of allowance				2,221				2,128
	Inventory				1,164				1,109
	Prepaid expenses and other current assets				1,048				335
		Total current assets			7,033				6,213
Property and equipment, net					791				844
Right-of-use assets, net					2,220				2,296
Equity investments					1,191				1,191
Intangible and other assets, net					2,127				2,303
Goodwill, net					2,946				2,946
Deferred tax assets, net					477				493
Total assets				$	16,785			$	16,286
Liabilities and Equity
Current liabilities:
	Accounts payable			$	695			$	567
	Accrued expenses and other current liabilities				1,353				615
	Deferred revenue				2,338				1,485
	Current portion of finance lease obligations				14				14
	Current portion of operating lease obligations				329				298
		Total current liabilities			4,729				2,979
Finance lease obligations, net of current portion					33				41
Operating lease obligation, net of current portion					2,337				2,447
Total liabilities					7,099				5,467
Commitments and contingencies
Equity:
	Preferred stock, $0.001 par value; 5,000 shares authorized;
		none issued or outstanding			-				-
	Common stock, $0.001 par value; 95,000 shares authorized;
		6,446 (2024) and 6,516 (2023) shares issued, and
		5,363 (2024) and 5,503 (2023) shares outstanding			7				7
	Additional paid-in-capital				11,348				12,290
	Treasury stock of 1,083 (2024) and 1,014 (2023) shares				(12,077	)			(11,219	)
	Retained earnings				10,408				9,741
Total equity					9,686				10,819
Total liabilities and stockholders' equity				$	16,785			$	16,286