ReposiTrak(TRAK) - 2026 Q2 - Quarterly Report

Revenue Performance - Revenue for the three months ended December 31, 2025, was $5,856,811, representing a 7% increase from $5,490,908 in the same period of 2024, driven by growth in recurring subscription revenue across all business lines [84]. - Revenue for the six months ended December 31, 2025, was $11,828,278, an 8% increase from $10,932,050 in 2024, driven by growth in recurring subscription revenue across all business lines [94]. Cost Management - Cost of services and product support decreased by 15% to $853,744 from $1,002,556, primarily due to capitalizing certain development costs related to enhancements and new software programs [86]. - Cost of services and product support decreased by 8% to $1,707,896 for the six months ended December 31, 2025, down from $1,861,775 in 2024, due to capitalized development costs [96]. - Depreciation and amortization expenses decreased by 27% to $223,930 from $304,712, as certain leased assets became fully amortized [90]. - Depreciation and amortization expense decreased by 20% to $467,676 for the six months ended December 31, 2025, down from $584,923 in 2024, due to certain leased assets becoming fully amortized [100]. Expenses Overview - Sales and marketing expenses increased by 3% to $1,494,342 from $1,455,036, attributed to higher sales commissions and marketing investments related to FSMA 204 traceability awareness [87]. - Sales and marketing expenses increased by 4% to $3,101,811 for the six months ended December 31, 2025, compared to $2,984,136 in 2024, primarily due to higher sales commissions and marketing investments [97]. - General and administrative expenses rose by 7% to $1,467,862 from $1,376,553, mainly due to increased employee benefit costs and higher insurance premiums [89]. - General and administrative expenses rose by 6% to $2,840,089 for the six months ended December 31, 2025, from $2,669,104 in 2024, attributed to higher employee benefit costs and insurance [98]. Cash Flow and Liquidity - Net cash provided by operating activities decreased by 29% to $3,776,672 for the six months ended December 31, 2025, compared to $5,328,630 in 2024, primarily due to an increase in accounts receivable [107]. - Cash and cash equivalents increased to $28,706,493 as of December 31, 2025, from $28,568,805 as of June 30, 2025, reflecting higher revenue and cash receipts from customers [106]. - Cash and cash equivalents amounted to $28,706,493 with an average interest rate of 4.57% as of December 31, 2025 [141]. - The Company maintains over $22 million in cash, resulting in a current ratio of over 6:1 as of March 31, 2023 [115]. - Management anticipates continued increases in cash flow from operations and working capital in future periods [117]. Dividends and Stock - The company declared a quarterly cash dividend of $0.02 per share, representing an annual yield of approximately 0.65% based on the closing prices on December 31, 2025 [77]. - The quarterly cash dividend was increased by 10% to $0.0165 per share starting December 2023, with another 10% increase to $0.01815 per share announced for September 2024 [117]. - Preferred dividends decreased by 48% to $105,368 for the six months ended December 31, 2025, from $203,498 in 2024, due to the redemption and retirement of Preferred Stock [102]. - A total of 641,865 shares of Preferred Stock have been redeemed at a price of $10.70 per share, totaling $6,867,956, with $2.10 million of Series B Preferred remaining to be redeemed [118]. Regulatory Compliance and Opportunities - The ReposiTrak Traceability Network is positioned to provide end-to-end traceability, connecting thousands of suppliers and retailers, addressing the growing demand for compliance with FSMA 204 [82]. - The compliance deadline for FSMA 204 was extended to July 20, 2028, indicating a significant opportunity for the company to support clients in meeting regulatory requirements [81]. - The company continues to focus on recurring subscription revenue, deemphasizing non-recurring transactional revenue to enhance long-term financial stability [85]. Debt and Obligations - The Company had zero bank debt as of December 31, 2025, and chose not to renew the Revolving Credit Agreement due to a strong financial position [116]. - The balance of the revolving credit facility was zero as of March 31, 2024, following an amendment that increased liquidity requirements [115]. - Total contractual obligations as of December 31, 2025, include lease payments of $425,262, net of imputed interest [120]. - The effective annual percentage rate (APR) for capital leases is fixed at 4.55%, with total lease obligations costing less than $400,000 [140]. - Net cash used in financing activities increased by 47% to $3,618,646 for the six months ended December 31, 2025, compared to $2,459,963 in 2024, due to increased stock buybacks and continued redemption of Preferred Stock [110].