Core Viewpoint - Shares of Where Food Comes From, Inc. (WFCF) have experienced a decline of 3.9% following the release of its fiscal first-quarter 2026 results, which is slightly worse than the S&P 500 Index's 3.2% decline during the same period, indicating cautious investor sentiment despite improved profitability [1] Earnings & Revenue Performance - In the third quarter of 2025, WFCF's revenues decreased to $7 million from $7.1 million year-over-year, with verification and certification services showing modest growth, while product and professional services revenues declined [2] - Verification and certification revenues rose to $5.6 million from $5.5 million, while product sales fell to $1.2 million from $1.3 million, and professional services revenues decreased to $257,000 from $292,000 [2] - Net income improved significantly to $1.1 million from $0.5 million, with diluted EPS increasing to 22 cents from 9 cents, largely due to a $946,000 gain from the sale of the company's Progressive Beef interest [2] Other Key Business Metrics - Gross profit was reported at $2.7 million, slightly down from $2.8 million the previous year, impacted by rising compensation, insurance, and hardware costs [3] - Selling, general and administrative expenses decreased marginally to $2.1 million from $2.2 million, attributed to lower marketing and trade-show spending [3] Year-to-Date Performance - For the first nine months of 2025, total revenues were $18.9 million compared to $19.1 million a year ago, while net income rose to $1.7 million from $1.2 million [4] - Cash generated from operations was $2.3 million, down from $2.8 million, but cash and equivalents more than doubled to $4.8 million, supported by the Progressive Beef sale [4] - Stock buyback activity was strong, with 116,547 shares repurchased in the first nine months of 2025 [4] Management Commentary - Management noted that demand for verification and certification services has largely offset ongoing weakness in beef-related activities due to tariffs and cyclical herd shrinkage [5] - Year-over-year growth was highlighted in pork, dairy, and egg verification, along with increased adoption of non-GMO, gluten-free, organic, and Upcycled certifications [5] - Customer retention remained above 90%, and bundling multiple verification services for clients provided additional benefits [5] Business Resilience - The business is becoming increasingly insulated from cattle-cycle volatility due to an expanding and diversified standards portfolio [6] - Gross margins have remained stable despite wage inflation and other cost pressures, reflecting improved efficiencies and disciplined cost management [6] Factors Influencing Revenue - The slight revenue decline was primarily due to challenges in beef-related verification and lower hardware sales linked to smaller North American cattle herds [7] - Drought conditions, trade dynamics, and the U.S.-Mexico border closure related to the screwworm issue have limited herd rebuilding efforts [7] Profitability Drivers - The significant increase in net income was driven by the $946,000 gain from the Progressive Beef divestiture, along with a $48,000 gain on digital assets and stable gross margins [8] - Operating income saw a slight dip due to modest revenue decline, but net income increased sharply due to non-operating gains [8] Future Outlook - Management indicated that beef-related revenues may remain constrained in the near term, with meaningful herd recovery potentially a year away or more [9] - Growth in non-beef certifications, including organic, dairy, poultry, and Upcycled programs, is expected to support revenue stability [9] Strategic Developments - The company completed the sale of its Progressive Beef ownership, generating $1.8 million in cash and returning 12,585 shares for cancellation, which frees up capital for reinvestment and ongoing share repurchases [11] - Total buybacks since the program's inception have exceeded 1.3 million shares, representing over $14 million returned to shareholders [11]

Financial Data and Key Metrics Changes - Total revenue in Q3 2025 was $7 million, a decline of $92,000 compared to the same quarter last year [3] - Revenue in the verification and certification segment grew by 1% to $5.6 million, driven by increased activity across the portfolio [3] - Net income increased to $1.1 million or $0.22 per share, compared to $500,000 or $0.09 per share a year ago [5] - Operating income was $575,000, down from $608,000 in the previous year [5] - Cash and cash equivalents rose to $4.8 million from $2 million at the end of 2024, with no debt reported [6] Business Line Data and Key Metrics Changes - Hardware sales declined to $1.2 million from $1.3 million year over year, attributed to lower tag volumes due to herd shrinkage [4] - Customer retention rates remained well above 90%, contributing to revenue stability [4] - The Care Certified program and certification activities for organic, non-GMO, gluten-free, and upcycled products all showed gains [4] Market Data and Key Metrics Changes - The company reported strength in various service offerings, which offset the impact of smaller herd sizes on core beef-related verification activities [3] - The company was ranked 74th in Time Magazine's America's Growth Leaders 2026, highlighting its position among innovative public companies [8] Company Strategy and Development Direction - The company aims to remain at the forefront of the trend for verified sourcing, addressing consumer demand for transparency in food origins [8] - There is a focus on innovation with new services expected to become meaningful revenue streams, including a labeling program that has gained traction [9] - The company is exploring new growth areas and technologies, including AI initiatives to improve efficiency and customer service [25] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges such as tariffs, inflationary pressures, and smaller herd sizes impacting verification and hardware revenue [5] - There is cautious optimism regarding a potential build-up in cattle herds, although challenges remain due to border issues and drought conditions [12][13] - The company is positioned as a growth company, actively seeking opportunities to invest in new companies and technologies [25] Other Important Information - The sale of Progressive Beef generated cash proceeds of $1.8 million, contributing to a stronger balance sheet [6] - The company has returned over $14 million in value to shareholders through stock buybacks since the program's inception [6] Q&A Session Summary Question: When will product revenue see a material pickup relative to herd size growth? - Management indicated that cattle prices are starting to support herd rebuilding, but challenges remain due to border closures and other issues [12][13] Question: What other businesses and programs are expected to grow in the next year or two? - Management highlighted growth in dairy, poultry, and organic certification, as well as the unique position in upcycled certification [20] Question: How does the company view its capital structure and future growth? - Management confirmed the company is a growth-oriented entity, looking for opportunities to invest and expand while maintaining a strong balance sheet [25]