Part I - Financial Information [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Presents unaudited consolidated financial statements for Q1 2025, including balance sheets, operations, cash flows, equity, and detailed notes [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) Consolidated Balance Sheet Highlights (Amounts in thousands) | Metric | March 31, 2025 | December 31, 2024 | | :-------------------------------- | :------------- | :---------------- | | Total assets | $15,212 | $15,306 | | Total liabilities | $5,621 | $5,373 | | Total equity | $9,591 | $9,933 | | Cash and cash equivalents | $2,238 | $2,012 | | Total current assets | $5,727 | $5,545 | | Total current liabilities | $3,515 | $3,179 | - Total assets decreased slightly from **$15,306 thousand** at December 31, 2024, to **$15,212 thousand** at March 31, 2025[8](index=8&type=chunk) - Total equity decreased from **$9,933 thousand** at December 31, 2024, to **$9,591 thousand** at March 31, 2025[8](index=8&type=chunk) [Consolidated Statements of Operations](index=4&type=section&id=Consolidated%20Statements%20of%20Operations) Consolidated Statements of Operations Highlights (Three months ended March 31, Amounts in thousands, except per share amounts) | Metric | 2025 | 2024 | | :---------------------------------- | :--- | :--- | | Total revenues | $5,273 | $5,582 | | Gross profit | $2,195 | $2,329 | | Income from operations | $142 | $261 | | Net income | $31 | $178 | | Basic net income per share | $0.01 | $0.03 | | Diluted net income per share | $0.01 | $0.03 | - Total revenues decreased by **$309 thousand (5.5%)** from **$5,582 thousand** in 2024 to **$5,273 thousand** in 2025[11](index=11&type=chunk) - Net income significantly decreased from **$178 thousand** in 2024 to **$31 thousand** in 2025, an **82.6% reduction**[11](index=11&type=chunk) [Consolidated Statements of Cash Flows](index=5&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Consolidated Statements of Cash Flows Highlights (Three months ended March 31, Amounts in thousands) | Metric | 2025 | 2024 | | :------------------------------------ | :--- | :--- | | Net cash provided by operating activities | $632 | $700 | | Net cash used in investing activities | $(29) | $(24) | | Net cash used in financing activities | $(377) | $(1,435) | | Net change in cash | $226 | $(759) | | Cash at end of period | $2,238 | $1,882 | - Net cash provided by operating activities decreased from **$700 thousand** in 2024 to **$632 thousand** in 2025[13](index=13&type=chunk) - Net cash used in financing activities significantly decreased from **$1,435 thousand** in 2024 to **$377 thousand** in 2025, primarily due to lower stock repurchases[13](index=13&type=chunk) [Consolidated Statement of Equity](index=6&type=section&id=Consolidated%20Statement%20of%20Equity) Consolidated Statement of Equity Highlights (Amounts in thousands) | Metric | March 31, 2025 | December 31, 2024 | March 31, 2024 | | :-------------------------- | :------------- | :---------------- | :------------- | | Total Equity | $9,591 | $9,933 | $9,576 | | Treasury Stock | $(13,845) | $(13,462) | $(11,688) | | Retained Earnings | $12,038 | $12,007 | $9,919 | - Total equity decreased by **$342 thousand** from December 31, 2024, to March 31, 2025, primarily due to stock repurchases[16](index=16&type=chunk) - Treasury stock increased by **$383 thousand** from December 31, 2024, to March 31, 2025, reflecting common share repurchases[16](index=16&type=chunk) [Notes to the Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) [Note 1 - The Company and Basis of Presentation](index=7&type=section&id=Note%201%20-%20The%20Company%20and%20Basis%20of%20Presentation) - Where Food Comes From, Inc. (WFCF) is an independent, third-party food verification company conducting on-site and desk audits to verify claims about livestock, food, and agricultural products[19](index=19&type=chunk) - The company also provides professional consulting services and utilizes its Source Verified® labeling program to connect consumers to food sources[20](index=20&type=chunk) - The business experiences annual seasonal fluctuations, with significant verification and certification service revenue typically realized from late May through early October, coinciding with peak calf marketings and growing seasons[25](index=25&type=chunk)[79](index=79&type=chunk) - The cattle industry is in a contraction phase of its cycle, which began in 2014 and peaked in 2018-2019, impacting current and future supplies[26](index=26&type=chunk)[80](index=80&type=chunk) [Note 2 – Basic and Diluted Net Income per Share](index=8&type=section&id=Note%202%20%E2%80%93%20Basic%20and%20Diluted%20Net%20Income%20per%20Share) Weighted Average Common Shares Outstanding (Three months ended March 31, in thousands) | Metric | 2025 | 2024 | | :------------------------------ | :--- | :--- | | Basic weighted average shares | 5,212 | 5,480 | | Diluted weighted average shares | 5,230 | 5,500 | | Antidilutive securities | 17 | 17 | [Note 3 – Equity Investments](index=9&type=section&id=Note%203%20%E2%80%93%20Equity%20Investments) - The Company did not receive dividend income from Progressive Beef for the three months ended March 31, 2025, or 2024[34](index=34&type=chunk)[100](index=100&type=chunk) [Note 4 – Intangible and Other Assets](index=9&type=section&id=Note%204%20%E2%80%93%20Intangible%20and%20Other%20Assets) Intangible and Other Assets (Amounts in thousands) | Asset Category | March 31, 2025 | December 31, 2024 | | :----------------------------- | :------------- | :---------------- | | Tradenames and trademarks | $818 | $818 | | Customer relationships | $3,470 | $3,470 | | Less accumulated amortization | $(2,599) | $(2,497) | | Intangible and other assets, net | $1,713 | $1,810 | - Net intangible and other assets decreased from **$1,810 thousand** at December 31, 2024, to **$1,713 thousand** at March 31, 2025, primarily due to accumulated amortization[35](index=35&type=chunk) [Note 5 – Digital Assets](index=9&type=section&id=Note%205%20%E2%80%93%20Digital%20Assets) - Effective January 1, 2024, the Company early adopted ASU 2023-08, requiring digital assets to be measured at fair value with changes recognized in the Consolidated Statements of Income[36](index=36&type=chunk) Digital Asset Holdings (Amounts in thousands, except for quantity) | Asset | Quantity | Cost Basis | Fair Value (March 31, 2025) | Fair Value (December 31, 2024) | | :------ | :------- | :--------- | :-------------------------- | :----------------------------- | | Bitcoin | 7 | $178 | $578 | $654 | - The Company recorded an unrealized loss of approximately **$76 thousand** on digital assets for the three months ended March 31, 2025[36](index=36&type=chunk)[101](index=101&type=chunk) [Note 6 – Accrued Expenses and Other Current Liabilities](index=10&type=section&id=Note%206%20%E2%80%93%20Accrued%20Expenses%20and%20Other%20Current%20Liabilities) Accrued Expenses and Other Current Liabilities (Amounts in thousands) | Category | March 31, 2025 | December 31, 2024 | | :------------------------------ | :------------- | :---------------- | | Payroll related accruals | $549 | $408 | | Customer deposits | $173 | $57 | | Professional fees and other expenses | $123 | $118 | | Total | $871 | $611 | - Total accrued expenses and other current liabilities increased from **$611 thousand** at December 31, 2024, to **$871 thousand** at March 31, 2025, driven by increases in payroll related accruals and customer deposits[38](index=38&type=chunk) [Note 7 – Notes Payable](index=10&type=section&id=Note%207%20%E2%80%93%20Notes%20Payable) - The Company had a revolving line of credit (LOC) agreement which matured on April 12, 2025, providing **$75,080 thousand** in working capital[39](index=39&type=chunk)[90](index=90&type=chunk) - As of March 31, 2025, and December 31, 2024, there were no amounts outstanding under this LOC, and the effective interest rate was **9.0%**[39](index=39&type=chunk)[90](index=90&type=chunk) [Note 8 – Equity and Stock-Based Compensation](index=10&type=section&id=Note%208%20%E2%80%93%20Equity%20and%20Stock-Based%20Compensation) - Stock-based compensation expense recognized for the three months ended March 31, 2025, was **$0**, compared to **$11 thousand** for the same period in 2024[41](index=41&type=chunk) Stock Option Activity (March 31, 2025, amounts in thousands, except per share amounts) | Metric | Number of awards | Weighted avg. exercise price per share | | :---------------------- | :--------------- | :----------------------------- | | Outstanding, Dec 31, 2024 | 62,469 | $9.05 | | Exercised | (1,250) | $8.20 | | Outstanding, Mar 31, 2025 | 61,219 | $9.07 | | Exercisable, Mar 31, 2025 | 61,219 | $9.07 | - During March 2024, the Company purchased **80,201 shares** of its common stock from one shareholder for approximately **$1.0 million** in a privately negotiated transaction[46](index=46&type=chunk) [Note 9 – Income Taxes](index=11&type=section&id=Note%209%20%E2%80%93%20Income%20Taxes) - Income tax expense for the three months ended March 31, 2025, was approximately **$38 thousand**, a decrease from **$87 thousand** for the same period in 2024[48](index=48&type=chunk)[102](index=102&type=chunk) [Note 10 - Revenue Recognition](index=11&type=section&id=Note%2010%20-%20Revenue%20Recognition) Disaggregation of Revenue (Three months ended March 31, Amounts in thousands) | Revenue Category | 2025 | 2024 | | :---------------------------------- | :--- | :--- | | Verification and certification service revenue | $4,182 | $4,434 | | Product sales | $702 | $733 | | Professional services | $389 | $415 | | Total revenues | $5,273 | $5,582 | - Accounts receivable from contracts with customers, net, was approximately **$1.8 million** as of March 31, 2025, and December 31, 2024[53](index=53&type=chunk) - Deferred revenue from contracts with customers was approximately **$1.7 million** as of March 31, 2025, and December 31, 2024[53](index=53&type=chunk) [Note 11 – Leases](index=12&type=section&id=Note%2011%20%E2%80%93%20Leases) Total Net Lease Cost (Three months ended March 31, Amounts in thousands) | Lease Type | 2025 | 2024 | | :------------------------ | :--- | :--- | | Operating lease cost | $111 | $116 | | Finance lease cost | $5 | $5 | | Total net lease cost | $116 | $121 | Weighted Average Lease Terms and Discount Rates (March 31, 2025) | Lease Type | Remaining Lease Term (years) | Discount Rate | | :------------- | :--------------------------- | :------------ | | Operating leases | 6.2 | 5.8% | | Finance leases | 2.6 | 8.6% | - Maturities of operating lease liabilities total **$2,887 thousand**, with **$352 thousand** due in the remaining nine months of 2025[59](index=59&type=chunk) [Note 12 – Commitments and Contingencies](index=14&type=section&id=Note%2012%20%E2%80%93%20Commitments%20and%20Contingencies) - The Company may be involved in various legal actions in the ordinary course of business but is not aware of any significant legal actions at this time[60](index=60&type=chunk)[108](index=108&type=chunk) [Note 13 - Segments](index=14&type=section&id=Note%2013%20-%20Segments) - Effective January 2025, the Company underwent internal restructuring and consolidation, resulting in a single reportable segment: Verification and Certification[61](index=61&type=chunk) - Professional consulting services, including data analysis and other reporting metrics, now report under the Verification and Certification Segment[61](index=61&type=chunk) - The Chief Operating Decision Maker (CEO) assesses performance based on net sales, gross profit, SG&A, and operating income for this single segment[62](index=62&type=chunk) [Note 14 – Supplemental Cash Flow Information](index=15&type=section&id=Note%2014%20%E2%80%93%20Supplemental%20Cash%20Flow%20Information) Cash Paid During the Year (Three months ended March 31, Amounts in thousands) | Expense | 2025 | 2024 | | :------------ | :--- | :--- | | Interest expense | $0 | $0 | | Income taxes | $17 | $0 | [Note 15 – Subsequent Events](index=15&type=section&id=Note%2015%20%E2%80%93%20Subsequent%20Events) - In April 2025, the Company canceled **1,237,700 shares** of outstanding common stock held as treasury shares, resulting in approximately **$13.8 million** being transferred from Treasury stock to Additional paid-in capital and Retained earnings[66](index=66&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=16&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2025 financial condition and results, covering business overview, ESG, seasonality, liquidity, and revenue/cost analysis [General Business Overview](index=16&type=section&id=General%20Business%20Overview) - Where Food Comes From, Inc. is a leading third-party verification resource for food production practices in North America, supporting over **17,500 farmers, ranchers, and other food industry participants**[68](index=68&type=chunk) - The company's principal business involves conducting on-site and desk audits to verify claims about livestock, aquaculture, crops, and other food products[68](index=68&type=chunk) - WFCF has expanded its portfolio to include verification and professional services for most food groups and over **50 programs**, achieving growth organically and through acquisitions[71](index=71&type=chunk) [Environmental, Social and Governance ("ESG") and Human Capital Resources](index=16&type=section&id=Environmental%2C%20Social%20and%20Governance%20%28%22ESG%22%29%20and%20Human%20Capital%20Resources) - The company emphasizes environmental and social responsibility, with an internal ESG Council that regularly reports to the Executive Team[72](index=72&type=chunk)[73](index=73&type=chunk) - As of March 31, 2025, WFCF had **101 total employees**, with **90 full-time**, and approximately **85%** of the workforce comprised of female and other minority employees[74](index=74&type=chunk) - WFCF is committed to a respectful workplace, promoting fairness, and providing career development opportunities through initiatives like internships and leadership training[75](index=75&type=chunk)[77](index=77&type=chunk) [Seasonality and Industry Cycles](index=17&type=section&id=Seasonality%20and%20Industry%20Cycles) - Significant portions of verification and certification service revenue are typically realized from late May through early October, aligning with peak calf marketings and growing seasons[79](index=79&type=chunk) - The cattle industry is cyclical, and the company is currently in a contraction phase of the cycle, which began in 2014 and peaked in 2018-2019[80](index=80&type=chunk) - Quarterly results are not necessarily indicative of full fiscal year results due to business seasonality and industry cyclicality[81](index=81&type=chunk) [Liquidity and Capital Resources](index=17&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity Snapshot (Amounts in thousands) | Metric | March 31, 2025 | December 31, 2024 | | :------------- | :------------- | :---------------- | | Cash and cash equivalents | $2,238 | $2,012 | | Working capital | $2,212 | $2,366 | Net Cash Flow Activities (Three months ended March 31, Amounts in thousands) | Activity | 2025 | 2024 | | :---------------------- | :--- | :--- | | Operating activities | $632 | $700 | | Investing activities | $(29) | $(24) | | Financing activities | $(377) | $(1,435) | - The company's growth has primarily been funded through cash flows from operations, and it continuously evaluates additional funding options[86](index=86&type=chunk) - The primary driver of operating cash flow is gross margin from third-party verification solutions, with a focus on revenue growth and long-term projects[87](index=87&type=chunk) [Results of Operations (Three months ended March 31, 2025 compared to the same period in fiscal year 2024)](index=19&type=section&id=Results%20of%20Operations%20%28Three%20months%20ended%20March%2031%2C%202025%20compared%20to%20the%20same%20period%20in%20fiscal%20year%202024%29) [Revenue Analysis](index=19&type=section&id=Revenue%20Analysis) Revenue Breakdown (Three months ended March 31, Amounts in thousands) | Revenue Category | 2025 | 2024 | Change ($) | Change (%) | | :---------------------------------- | :--- | :--- | :--------- | :--------- | | Verification and certification service revenue | $4,182 | $4,434 | $(252) | -5.7% | | Product sales | $702 | $733 | $(31) | -4.2% | | Professional services | $389 | $415 | $(26) | -6.3% | | Total revenues | $5,273 | $5,582 | $(309) | -5.5% | - Verification and certification service revenue decreased by **$0.3 million**, negatively impacted by revenue tied to price per head of cattle and delayed poultry audits due to Avian Influenza[93](index=93&type=chunk) - Product sales, primarily cattle identification ear tags, slightly decreased by **$31 thousand**[94](index=94&type=chunk) - Professional services revenue, which is predominantly project-based, decreased by less than **$26 thousand**[95](index=95&type=chunk) [Costs of Revenue Analysis](index=20&type=section&id=Costs%20of%20Revenue%20Analysis) Costs of Revenue (Three months ended March 31, Amounts in thousands) | Cost Category | 2025 | % of Revenue (2025) | 2024 | % of Revenue (2024) | | :---------------------------------- | :--- | :------------------ | :--- | :------------------ | | Costs of verification and certification services | $2,395 | 57.3% | $2,515 | 56.7% | | Costs of products | $428 | 61.0% | $434 | 59.2% | | Costs of professional services | $255 | 65.5% | $304 | 73.3% | | Total costs of revenues | $3,078 | 58.4% | $3,253 | 58.3% | - Costs of verification and certification services increased as a percentage of revenue (**57.3%** in 2025 vs. **56.7%** in 2024) primarily due to increases in compensation-related costs from a tight labor market[96](index=96&type=chunk) - Costs of products increased as a percentage of revenue (**61.0%** in 2025 vs. **59.2%** in 2024) mainly due to inflationary increases in product costs[97](index=97&type=chunk) [Selling, General and Administrative Expenses](index=20&type=section&id=Selling%2C%20General%20and%20Administrative%20Expenses) Other Operating Expenses (Three months ended March 31, Amounts in thousands) | Expense Category | 2025 | 2024 | | :-------------------------- | :--- | :--- | | Salaries and benefits | $903 | $846 | | Rent and lease expense | $161 | $167 | | Software and technology | $207 | $206 | | Legal and professional expenses | $165 | $196 | | Tradeshows and marketing | $127 | $202 | | Conferences and training | $66 | $24 | | Investor relations | $37 | $41 | | Other expenses | $214 | $231 | | Total Other operating expenses | $1,880 | $1,913 | - Total other operating expenses remained relatively stable at approximately **$1.9 million** for both periods[99](index=99&type=chunk) - An increase in salaries and benefits due to a tight labor market was offset by savings in marketing and tradeshow costs[99](index=99&type=chunk) [Other Income / Expenses](index=20&type=section&id=Other%20Income%20%2F%20Expenses) - The Company recorded an unrealized loss of approximately **$76 thousand** on digital assets for the quarter ended March 31, 2025[101](index=101&type=chunk) [Income Tax Expense](index=21&type=section&id=Income%20Tax%20Expense) - Income tax expense for the three months ended March 31, 2025, was approximately **$38 thousand**, down from **$87 thousand** in the prior year[102](index=102&type=chunk) [Net Income and Per Share Information](index=21&type=section&id=Net%20Income%20and%20Per%20Share%20Information) Net Income and EPS (Three months ended March 31, Amounts in thousands, except per share amounts) | Metric | 2025 | 2024 | | :-------------------------- | :--- | :--- | | Net income | $31 | $178 | | Basic common share | $0.01 | $0.03 | | Diluted common share | $0.01 | $0.03 | - Net income attributable to WFCF shareholders decreased significantly to **$31 thousand ($0.01 per basic and diluted common share)** for the three months ended March 31, 2025, compared to **$0.2 million ($0.03 per share)** in 2024[103](index=103&type=chunk) [Item 4. Controls and Procedures](index=21&type=section&id=Item%204.%20Controls%20and%20Procedures) Management evaluates disclosure controls and internal control over financial reporting, concluding on effectiveness with no material changes [Evaluation of Disclosure Controls and Procedures](index=21&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) - Management, including principal executive and financial officers, concluded that the company's disclosure controls and procedures were effective as of March 31, 2025[104](index=104&type=chunk) [Internal Control Over Financial Reporting](index=21&type=section&id=Internal%20Control%20Over%20Financial%20Reporting) - There have been no material changes in the Company's internal control over financial reporting during the most recent fiscal quarter[106](index=106&type=chunk) Part II - Other Information [Item 1. Legal Proceedings](index=22&type=section&id=Item%201.%20Legal%20Proceedings) The company addresses its involvement in legal actions, confirming no significant legal proceedings are currently known - The Company is not aware of any significant legal actions, administrative proceedings, or claims at this time[108](index=108&type=chunk) [Item 1A. Risk Factors](index=22&type=section&id=Item%201A.%20Risk%20Factors) References detailed risk factors from the 2024 Form 10-K and highlights ongoing economic impacts from external factors - The Company's business is subject to risks identified in Item 1A of its 2024 Annual Report on Form 10-K[109](index=109&type=chunk) - As of March 31, 2025, ongoing economic impacts from tariffs, pandemics, the inflationary environment, and weather-related risks may continue to affect the Company, though the long-term financial impact is not estimable[109](index=109&type=chunk) [Item 2. Issuer Purchases of Equity Securities](index=22&type=section&id=Item%202.%20Issuer%20Purchases%20of%20Equity%20Securities) Details the company's common stock repurchase activities under its Stock Buyback Plan for the first quarter of 2025 - The Board of Directors approved a plan on September 30, 2019, to buy back up to **2.5 million additional shares** of common stock[110](index=110&type=chunk) Issuer Purchases of Equity Securities (Three months ended March 31, 2025, Amounts in thousands) | Month | Number of Shares Purchased | Cost of Shares | Average Cost per Share | | :------------------ | :------------------------- | :------------- | :--------------------- | | January 2025 | 9,590 | $123 | $12.86 | | February 2025 | 12,101 | $150 | $12.36 | | March 2025 | 9,654 | $110 | $11.42 | | Total | 31,345 | $383 | - | [Item 6. Exhibits](index=23&type=section&id=Item%206.%20Exhibits) Lists all exhibits filed as part of the Form 10-Q, including certifications and XBRL documents - Exhibits include CEO and CFO certifications (Sections 302 and 906 of Sarbanes-Oxley Act) and Inline XBRL documents[111](index=111&type=chunk)

Financial Data and Key Metrics Changes - The company reported an approximate 6% year-over-year decline in total revenue for Q1 2025, primarily due to a decrease in the Verification and Certification Services segment, which saw revenue drop by $252,000 compared to Q1 last year [4] - Net income for the quarter was $31,000 or $0.01 per diluted share, down from $178,000 or $0.03 per diluted share in the same quarter last year, with more than half of the decline attributed to a $76,000 non-cash charge on digital assets [6] - Gross margins remained stable at 41.6%, attributed to disciplined cost management, with SG&A expenses flat year-over-year at $2,100,000 [6] Business Line Data and Key Metrics Changes - The beef verification business, which represents roughly 50% of the revenue mix, was significantly impacted by fewer cattle moving through the system due to cyclical herd size reduction and severe drought conditions [4] - The upcycled certified program, the world's first and largest certification standard for upcycled food, is the fastest-growing service offering, with total certifications growing 70% year-over-year in 2024 and 10% growth in Q1 2025 [9] - The fee-based retail labeling program for protein products is expanding, with new partnerships with two prominent retailers to display Care certified labeling, potentially increasing visibility and brand enhancement [10][11] Market Data and Key Metrics Changes - The global food market for upcycling is currently valued at $46 billion and is expected to grow to nearly $75 billion by 2029, indicating a significant market opportunity [8] - The company noted disruptions in poultry and dairy cow verification businesses due to avian influenza outbreaks, impacting customer operations [5] Company Strategy and Development Direction - The company views the current herd size reduction as a cyclical and temporary situation, expecting a rebound in the future [5] - The focus on upcycled certified products aligns with global trends to reduce food waste and lower carbon footprints, appealing to environmentally conscious consumers [8] - The CARES certified program aims to meet growing consumer expectations for responsibly sourced products, enhancing the company's licensing revenue stream [11] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the headwinds faced in the first quarter but expressed satisfaction with the adjusted bottom line given the challenges [6] - The CEO highlighted that despite the decline in certain verification activities, there is growth in other business aspects, particularly in biosecurity services and upcycled certifications [6][8] Other Important Information - The company continues to buy back shares, purchasing a total of 376,000 shares at a cost of $383,000 during the first quarter [7] - The company has faced challenges in communicating its digital asset investments due to media policies, which may affect investor perception [7][8] Q&A Session Summary Question: What are the expectations regarding the herd size reduction? - Management views the herd size reduction as cyclical and expects it to swing back in the future [5] Question: How is the company addressing the disruptions in poultry verification? - The company is experiencing disruptions due to avian influenza but is offsetting some impacts with increased demand for biosecurity services [5][6] Question: What is the growth outlook for the upcycled certified program? - The upcycled certified program is the fastest-growing service, with significant growth expected as it aligns with global trends in sustainability [9][8]

Financial Data and Key Metrics Changes - The company reported an approximate 6% year-over-year decline in total revenue for Q1 2025, primarily due to a decrease in the Verification and Certification Services segment, which saw revenue drop by $252,000 compared to Q1 2024 [4] - Net income for the quarter was $31,000 or $0.01 per diluted share, down from $178,000 or $0.03 per diluted share in the same quarter last year, with more than half of the decline attributed to a $76,000 non-cash charge on digital assets [6] Business Line Data and Key Metrics Changes - The Verification and Certification Services segment, which represents roughly 50% of total revenue, was significantly impacted by fewer cattle moving through the system due to cyclical herd size reduction and severe drought conditions [4] - Despite the challenges, gross margins remained stable at 41.6%, attributed to disciplined cost management [6] - The Upcycled Certified program, the fastest-growing service offering, saw total certifications grow 70% year-over-year in 2024 and 10% growth in Q1 2025 [10] Market Data and Key Metrics Changes - The global food market for upcycling is currently valued at $46 billion and is expected to grow to nearly $75 billion by 2029, indicating a significant market opportunity [10] - The company is experiencing increased demand for biosecurity services due to disease outbreaks affecting poultry operations [6] Company Strategy and Development Direction - The company is focusing on expanding its Upcycled Certified program and fee-based retail labeling program for protein products, targeting mass market and high-end regional retailers [10][11] - The CARES certified program aims to meet growing consumer expectations for responsibly sourced products, enhancing visibility and brand recognition among retail consumers [12] Management's Comments on Operating Environment and Future Outlook - Management views the herd size reduction as a cyclical issue that is expected to reverse in the future, despite current challenges [5] - The company remains optimistic about customer retention rates, which are in the high 90% range, despite the disruptions in verification activities [5] Other Important Information - The company continues to buy back shares, having repurchased 376,000 shares at a cost of $383,000 during the first quarter [7] - The company has faced challenges in communicating its digital asset performance due to media policies, which have affected the visibility of its financial news [8][9] Q&A Session Summary Question: What are the impacts of the current cattle market on the business? - Management noted that the decline in cattle movement is due to cyclical herd size reduction and drought conditions, but they expect this to be temporary [4][5] Question: How is the company addressing the challenges in poultry verification? - The company is seeing increased demand for biosecurity services as a response to avian influenza outbreaks affecting poultry operations [6] Question: What is the growth outlook for the Upcycled Certified program? - The Upcycled Certified program is experiencing significant growth, with a 70% increase in certifications year-over-year and continued expansion expected [10]

Core Insights - Where Food Comes From, Inc. (WFCF) reported a decline in total revenue for the first quarter of 2025, with total revenue at $5.3 million compared to $5.6 million in the same period of 2024 [5][7] - The beef verification business, which constitutes about half of the company's revenue, is facing challenges due to smaller herd sizes and high beef prices, alongside a halt in beef exports to China due to tariffs [3][4] - Despite these challenges, the company has maintained gross margin stability at 41.6% and overall profitability through disciplined cost management [3][6] Financial Performance - Verification and certification services revenue decreased to $4.2 million from $4.4 million, while product sales remained flat at $0.7 million [7][8] - Gross profit for the quarter was $2.2 million, down from $2.3 million, with selling, general, and administrative expenses remaining flat at $2.1 million [6][12] - Net income fell to $31,000, or $0.01 per diluted share, compared to $178,000, or $0.03 per diluted share in the previous year [6][11] Strategic Developments - The company has added two major food retailers to its labeling program, which is expected to enhance licensing revenue and visibility among consumers [4] - The Upcycled Certified® program is noted as the fastest-growing verification standard, reflecting increasing consumer demand for upcycled food products [4] - The company continues to repurchase shares, having bought back 31,345 shares at a cost of $383,000 during the first quarter, totaling over 1.2 million shares since the inception of the buyback program [5][6]

Core Insights - Where Food Comes From, Inc. (WFCF) will release its 2025 first quarter financial results on May 8, 2025, before market opens and will hold a conference call at 10:00 a.m. Mountain Time [1] - The company is recognized as a trusted resource for independent, third-party verification of food production practices in North America [1][2] Company Overview - Where Food Comes From, Inc. supports over 17,500 stakeholders in the food industry, including farmers, ranchers, processors, retailers, and restaurants, through various value-added services [2] - The company utilizes proprietary technology and patented business processes to verify food claims, optimize production practices, and enhance food supply chains with analytics and data-driven insights [2] - The Where Food Comes From® labeling program aims to connect consumers with the sources of their food, fostering meaningful engagement for clients [2]

Financial Performance - Total revenue for 2024 increased by 2% to $25.7 million compared to $25.1 million in 2023[9] - Net income for 2024 was $2.1 million, or $0.40 per diluted share, down slightly from $2.2 million, or $0.39 per diluted share in 2023[11] - Verification and certification services revenue for the full year rose by 6% to $20.6 million from $19.4 million[15] - Gross profit for the full year increased slightly to $10.6 million from $10.5 million[10] - Cash generated from operations in 2024 was $2.7 million, compared to $2.8 million in 2023[12] - In Q4 2024, total revenue was flat at $6.7 million, with verification and certification revenue at $5.4 million, down from $5.5 million in Q4 2023[4][6] - Gross profit in Q4 2024 declined by 7% to $2.8 million from $3.0 million in Q4 2023[5] Expenses and Shareholder Returns - Selling, general and administrative expenses for 2024 increased to $8.4 million from $7.8 million, primarily due to higher marketing and personnel costs[11] - The company repurchased a total of 273,057 shares for $3.3 million in 2024, with a total of $13.9 million returned to shareholders since the buyback program began[3] Future Outlook - The company expects to continue utilizing solid cash flows to reduce share float while investing in new programs and services to strengthen its beef business[3]

Core Viewpoint - Where Food Comes From, Inc. (WFCF) reported a mixed performance in Q4 2024, with earnings growth driven by bitcoin investments, but overall revenues remained flat, reflecting challenges in its beef-related verification services [1][2][10]. Earnings Overview - WFCF's diluted earnings per share for Q4 2024 were 18 cents, a 28.6% increase from 14 cents in the same quarter last year, primarily due to a $345,000 gain in bitcoin holdings [2][11]. - Total quarterly revenues were $6.7 million, unchanged from the previous year, while gross profit decreased by 7% to $2.8 million from $3 million [2]. Segmental Performance - Revenues from verification and certification services, which constitute the majority of WFCF's business, fell by 2% to $5.4 million, attributed to lower volumes in beef-related source and age verification due to cyclical herd contractions [3][10]. - Product sales increased by 6% year over year to $922,000, driven by demand for bundled verification solutions and new programs like CARE Certified and Upcycled Certified [4]. - Professional services revenues decreased to $360,000 from $391,000, indicating reduced demand for consulting services [4]. Key Business Metrics - The company maintained a stable gross margin despite changes in revenue composition. SG&A expenses decreased to $2 million from $2.1 million, attributed to higher marketing and personnel costs [5]. - Cash flow from operations was $2.7 million in 2024, slightly down from $2.8 million in 2023, while cash and cash equivalents fell to $2 million from $2.6 million [6]. Management Commentary - CEO John Saunders noted the impact of herd contractions on beef-related verification services but highlighted strong performance in newer offerings like CARE Certified and Upcycled, with the latter seeing a 17% revenue increase [7]. - Management emphasized ongoing investments in marketing and technology to support growth, despite an increase in SG&A expenses [8]. Factors Influencing Results - The decline in beef-related verification revenues was linked to external factors in the cattle industry, but management expects this to be temporary, with demand for other verification programs helping to offset losses [10]. - The company's net income benefited from a fair market value gain of $345,000 from its bitcoin investment, which had an initial investment of $178,000 [11]. Other Developments - WFCF continued its share repurchase program, buying back 57,018 shares in Q4, and has repurchased a total of 1.2 million shares since the program's inception [12]. - Management reiterated its long-term strategy of expanding verification services through organic growth and strategic acquisitions [12]. Outlook - WFCF anticipates continued demand for its verification programs and aims to leverage its unique positioning in the food verification space [13]. - The company plans further share buybacks and investments in technology to support expected customer growth, while remaining open to potential acquisitions [14].

Financial Data and Key Metrics Changes - Total revenue in Q4 2024 was flat at $6.7 million year-over-year [6] - Gross profit in Q4 declined 7% to $2.8 million from $3 million [7] - Net income increased to $961,000 or $0.18 per diluted share from $776,000 or $0.14 per diluted share [7] - Full year total revenue increased 2% to $25.7 million from $25.1 million [9] - Net income for the year was down slightly to $2.1 million or $0.40 per diluted share versus $2.2 million or $0.39 per diluted share in 2023 [15] Business Line Data and Key Metrics Changes - Verification and certification services revenue was down slightly at $5.4 million versus $5.5 million [6] - Product revenue increased 6% to $922,000 from $871,000 [6] - Professional services revenue was $360,000 versus $391,000 [6] - Full year verification and certification services revenue was up 6% to $20.6 million from $19.4 million [9] - Product revenue for the full year was down 5% to $3.8 million from $4 million [10] Market Data and Key Metrics Changes - The traditional beef-related source and age business has been impacted by cyclical herd size reductions [10] - Rising demand in other service offerings has offset lower source and age activities [11] - The Upcycled Certified program saw a 17% year-over-year increase in 2024, becoming the fastest-growing service [13] Company Strategy and Development Direction - The company is focused on enhancing its technology platform and expanding its services portfolio [14][20] - Plans to continue investing in new programs and services to strengthen the beef business and accelerate growth in other offerings [17] - The company aims to leverage its position as a provider for producers, CPGs, distributors, and retailers [22] Management Comments on Operating Environment and Future Outlook - Management believes the decline in beef source and age verifications is a temporary cyclical occurrence [11] - The company is supported by consumer trends around food safety, traceability, and claims verification [21] - Management expressed confidence in the potential for strong growth in individual standards and new offerings [23] Other Important Information - The company repurchased a total of 273,057 shares for $3.3 million or approximately $11.97 per share [16] - Total value returned to stockholders via buybacks and dividends over the past 21 quarters totaled $13.9 million [17] - The company celebrated its 30th anniversary, highlighting its evolution and growth in the industry [18] Q&A Session Summary - No specific questions or answers were documented in the provided content.

Revenue and Income - Verification and certification service revenue for the year ended December 31, 2024 increased approximately $1.1 million, or 5.9%, compared to 2023[126] - Product sales for the year ended December 31, 2024 decreased approximately $0.2 million, or 5.0%, compared to 2023, attributed to a decline in beef cow herd size[128] - Total revenues for the year ended December 31, 2024 were $25.746 million, compared to $25.135 million in 2023[124] - Net income for the year ended December 31, 2024, was approximately $2.1 million or $0.40 per share, a slight decrease from $2.2 million or $0.39 per share in 2023[137] - Dividend income from Progressive Beef, LLC for the year ended December 31, 2024 was $400,000, compared to $320,000 in 2023[134] Costs and Expenses - Costs of revenues for the verification and certification segment for the year ended December 31, 2024 were approximately $14.2 million compared to approximately $13.3 million in 2023[129] - Gross margin for the verification and certification segment for the year ended December 31, 2024 decreased to 41.9% compared to 43.4% in 2023[129] - Selling, general and administrative expenses for the verification and certification segment for the year ended December 31, 2024 increased approximately $0.7 million compared to 2023[130] - Professional services revenue for the year ended December 31, 2024 decreased approximately $0.3 million compared to 2023[131] - Gross margin for the professional services segment improved to 26.5% from 21.3% in 2023[132] Cash Flow and Working Capital - Cash and cash equivalents as of December 31, 2024, were approximately $2.0 million, down from $2.6 million in 2023; working capital decreased from approximately $3.2 million to $2.4 million[138] - Net cash provided by operating activities in 2024 was approximately $2.7 million, compared to $2.8 million in 2023, primarily due to a decline in gross margins in the Verification and Certification Segment[139] - Net cash used in investing activities during 2024 was approximately $0.2 million, a decrease from $0.6 million in 2023, with $0.2 million allocated for the acquisition of Blue Trace in 2023[140] - Net cash used in financing activities was approximately $3.2 million in 2024, down from $3.9 million in 2023, mainly for share repurchases[141] Deferred Revenue and Credit Facilities - Deferred revenue as of December 31, 2024, was approximately $1.7 million, up from $1.4 million in 2023, primarily related to annual certification for third-party audits[154] - The company has a revolving line of credit agreement providing for $75,080 in working capital, with an effective interest rate of 9.0% as of December 31, 2024[147] Industry and Market Conditions - The company is currently in a contraction phase of the cattle industry cycle, which began in 2014, with significant impacts expected from drought and pasture conditions[157] - The company plans to focus on diversification in product offerings and potential acquisitions to capitalize on growing consumer demand[146] Goodwill and Intangible Assets - As of December 31, 2024, the company had approximately $2.9 million of goodwill, with no impairment losses recognized during the year[171] - The company acquired trademarks/tradenames in the Validus acquisition, which were determined to no longer have an indefinite life and will now be amortized over their remaining useful life[181] - The excess of the purchase price over the fair value of net assets acquired in business combinations is recorded as goodwill[186] Accounting Policies and Valuation - The company implemented ASU 2023-08 effective January 1, 2024, requiring digital assets to be measured at fair value with changes recognized in net income each reporting period[184] - Digital assets were previously held as indefinite-lived intangible assets and were recorded at cost, net of impairment losses, as of December 31, 2023[185] - Business combinations are part of the company's growth strategy, with the purchase price allocated to tangible and intangible assets based on estimated fair values at the date of purchase[186] - The company uses various recognized valuation methods, including present value modeling, to determine the fair values of assets acquired and liabilities assumed in business combinations[187] - ROU assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term[177] - The company has ownership and control over its digital assets, which are included in non-current assets on the balance sheet[182] - Indefinite-lived intangible assets are tested for impairment annually, or more frequently if circumstances indicate potential impairment[180] - The company evaluates the remaining useful life of intangible assets not being amortized each reporting period[179]

Core Insights - Where Food Comes From, Inc. (WFCF) reported a 2% increase in total revenue for 2024, reaching $25.7 million compared to $25.1 million in 2023, despite challenges in the beef sector due to herd contraction [4][9] - The company achieved a net income of $2.1 million, or $0.40 per diluted share, slightly down from $2.2 million, or $0.39 per diluted share in the previous year [10] - The company continued its stock buyback program, repurchasing 273,057 shares at a cost of $3.3 million, contributing to a total of $13.9 million returned to shareholders since the program's inception [5][11] Fourth Quarter Highlights - Total revenue for the fourth quarter was flat at $6.7 million, with verification and certification revenue slightly down to $5.4 million from $5.5 million [6][7] - Net income for the fourth quarter increased to $961,000, or $0.18 per diluted share, compared to $776,000, or $0.14 per diluted share in the same quarter of 2023, aided by a $345,000 gain in the fair market value of bitcoin [8][10] - Gross profit in the fourth quarter declined by 7% to $2.8 million from $3.0 million [8] Full Year Highlights - Gross profit for the full year increased slightly to $10.6 million from $10.5 million, while selling, general and administrative expenses rose to $8.4 million from $7.8 million [10] - Cash generated from operations was $2.7 million in 2024, down from $2.8 million in 2023 [10] - The company reported a decrease in cash and cash equivalents to $2.0 million at year-end 2024, compared to $2.6 million at the end of 2023 [19] Revenue Breakdown - Verification and certification services revenue for the full year increased by 6% to $20.6 million from $19.4 million, while product sales decreased by 5% to $3.8 million from $4.0 million [14] - Professional services revenue for the full year was down 19% to $1.4 million from $1.7 million [14]