Where Food Comes From, Inc. (WFCF) has reported a successful first quarter for 2024, with verification services revenue experiencing significant growth, which more than offset the lower product sales in the beef sector. The company’s net income saw a notable increase of 47% compared to the same quarter of the previous year.
Despite the challenges faced in the beef business due to cyclical cattle trends, drought effects, and reduced herd sizes, the company remains optimistic about the future, citing the strength of its diversified business model and the potential of its Upcycled Certified Program.
Key Takeaways
- Verification services revenue grew by 17% to $4.4 million, while product sales decreased by 25%.
- Gross profit rose by 9% year-over-year, and operating income increased by 68%.
- Net income for the first quarter was up by 47% to $178,000 or $0.03 per diluted share.
- The company repurchased 116,072 shares at a cost of $1.5 million.
- Upcycled Certified Program is seen as a promising area for growth, with a 110% increase in certified products.
Company Outlook
- Headwinds in the beef business are expected to continue throughout 2024, with hopes of improvement in the following year.
- Upcycled Certified Program is rapidly growing and is anticipated to become a significant part of revenue diversification.
Bearish Highlights
- Persistent challenges in the beef sector due to smaller herd sizes and the impact of drought conditions.
- Product revenue has declined, reflecting the ongoing issues in the beef business.
Bullish Highlights
- Strong growth in verification services indicates a robust demand for the company’s core offerings.
- The company’s diversified business model provides resilience against sector-specific challenges.
Misses
- No Progressive Beef dividend was received in the third quarter due to timing; however, the relationship with Progressive Beef remains strong.
Q&A Highlights
- The management expressed gratitude for the continued support and participation of stakeholders and looks forward to future discussions.
Where Food Comes From, Inc. has demonstrated its ability to navigate industry headwinds effectively, leveraging its diversified services to maintain profitability and growth. The company’s strategic investments in technology and acquisitions, such as the Upcycled Certified Program, highlight its commitment to innovation and sustainability. With a strong foundation and forward-looking initiatives, Where Food Comes From, Inc. is positioned for continued success in the evolving food certification industry.
InvestingPro Insights
Where Food Comes From, Inc. (WFCF) has shown a robust performance in the first quarter of 2024, as reflected in the company’s net income and revenue growth. To provide a deeper understanding of the company’s financial health and investment potential, here are key insights based on real-time data from InvestingPro:
InvestingPro Data:
- The company’s market capitalization stands at $65.81 million, indicating its size in the market.
- A Price/Earnings (P/E) ratio of 29.36 suggests that investors are willing to pay a higher price for earnings, possibly due to expectations of future growth.
- With a Price/Book (P/B) ratio of 6.8 as of the last twelve months ending Q1 2024, the stock is trading at a premium relative to its book value, which could be indicative of the market’s positive valuation of the company’s assets and growth prospects.
InvestingPro Tips:
- Where Food Comes From, Inc. has been aggressively buying back shares, a sign that management may believe the shares are undervalued and is confident in the company’s future prospects.
- The stock is trading at a low P/E ratio relative to near-term earnings growth, which could appeal to value investors looking for growth at a reasonable price.
For investors seeking further analysis and additional InvestingPro Tips, there are 7 more tips available at These tips could provide valuable insights for making informed investment decisions. Remember to use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
Full transcript – Where Food Comes Fro (WFCF) Q1 2024:
Operator: Greetings and welcome to the Where Food Comes From First Quarter Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jay Pfeiffer, Investor Relations. Thank you, Jay. You may begin.
Jay Pfeiffer: 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 Danette 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 to complement the 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 we’re 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 for 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 improvements starting early next year. The solid growth and 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 producers, 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 multinational 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 revenue 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 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 million, with the increase partially reflecting marketing spend. Operating income was 68% higher at $261,000 versus $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 that was strictly a timing issue as the $50,000 dividend was booked in early April. Progressive Beef Business and our relationship with Progressive Beef remain 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 million the total value we’ve returned to our stockholders over the past 13 quarters when factoring in buybacks in 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 the 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 as 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 diversify 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 22nd 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 inquisitive 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 turn the call back over to the operator for questions.
Operator: Q – Unidentified Analyst A – John Saunders
John Saunders: Well, once again, we’d like to thank you for all your support and your participation, and we’ll talk to you again in three months. Take care.
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