Where Food Comes From Reports Steady Q2 Growth

Where Food Comes From, Inc. Reports Q2 2024 Financial Results

Where Food Comes From, Inc. (WFCF), a reputable entity in the verification of food production practices, has released its financial results for the second quarter of 2024.

The company experienced a 4% increase in total revenue, reaching $6.4 million, up from $6.1 million during the same quarter last year. This growth was largely fueled by a 10% rise in revenue from verification and certification services.

Despite encountering challenges such as cyclical cattle trends and a competitive labor market, WFCF remained profitable and actively continued its share buyback program.

Key Takeaways:

• Total revenue increased 4% to $6.4 million year-over-year.
• Revenue from verification and certification services rose by 10%.
• Product revenue saw a 13% decline due to reduced herd sizes affecting RFID tag sales.
• Gross profit increased to $2.7 million from $2.5 million.
• Operating income decreased to $0.6 million, while net income dropped by 8%.
• Diluted earnings per share stayed steady at $0.09.
• Adjusted EBITDA fell by 8% to $0.8 million.
• The company repurchased 33,347 shares at a cost of $389,000.

Company Outlook:

• WFCF’s diverse business model, with various revenue streams, helps mitigate pressures from any single segment.
• Upcycled Certified and biosecurity services are anticipated to drive significant growth.
• Despite current challenges, beef verification remains a core strength, with expectations for recovery as herd sizes normalize.

Bearish Highlights:

• Both product and professional services revenues experienced declines.
• Increased selling, general, and administrative expenses impacted net income.
• A competitive labor market is continuing to exert pressure on gross profit and SG&A levels.

Bullish Highlights:

• Significant growth was noted in verification and certification services.
• Gross profit improved compared to the same quarter last year.
• The company generated $1.9 million in cash from operations in the first half of the year, compared to $1.3 million in the previous year.

Misses:

• Declines in operating income and net income were attributed to rising costs.
• Adjusted EBITDA fell by 8% in the second quarter.

Q&A Highlights:

• The USDA’s mandate requiring RFID tags for the ADT program has affected the business, presenting both opportunities and challenges.
• WFCF is adapting by allowing producers to use government-supplied tags in their system for a fee.
• The company predicts long-term benefits from the mandate as government funding for free tags is expected to decline.

In summary, Where Food Comes From, Inc. demonstrated resilience in its Q2 financials despite industry challenges. The company’s strategy to diversify its services and focus on emerging trends such as upcycled foods and biosecurity appears to be yielding positive results.

As WFCF continues to navigate the cyclical downturn in cattle herd sizes and rising operational costs, its commitment to innovation and strategic investments—like share buybacks—suggests confidence in its long-term growth potential. Stakeholders can expect further developments as the company prepares to adapt to new USDA mandates and the evolving RFID tag market.