Where Food Comes From Inc (WFCF) 2024 Q2 法說會逐字稿

Greetings, and welcome to the Where Food Comes From second-quarter earnings call. (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.

您好，歡迎參加「食品來自哪裡」第二季財報電話會議。（操作員指示）謹此提醒，本次會議正在錄製中。現在我很高興向您介紹主持人，投資者關係部門的 Jay Pfeiffer。謝謝你，傑伊。你可以開始了。

Good morning, and welcome to the Where Food Comes From 2024 second-quarter earnings call. Joining me on the call today are CEO, John Saunders; President, Leann Saunders; and Chief Financial Officer, Dannette Henning.

早安，歡迎參加 2024 年第二季財報電話會議。今天和我一起參加電話會議的是執行長約翰桑德斯 (John Saunders)；主席，利恩桑德斯；和財務長丹內特·亨寧。

During this call, we'll make forward-looking statements based on current expectations, estimates, and projections that are subject to risk. Statements about current, future financial performance, growth strategy, customers, business opportunities, market acceptance of our business, products and services, and potential acquisitions are forward-looking statements.

在本次電話會議中，我們將根據目前存在風險的預期、估計和預測做出前瞻性陳述。有關當前和未來財務業績、成長策略、客戶、商機、市場對我們業務、產品和服務的接受度以及潛在收購的陳述均為前瞻性陳述。

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.

聽眾不應過度依賴這些陳述，因為有許多因素可能導致實際結果與我們的前瞻性陳述有重大差異。我們鼓勵您查看我們公開提交的文件以及我們的新聞稿和網站以獲取更多資訊。

Today, we'll also discuss adjusted EBITDA, a non-GAAP financial measure provided as a complement to 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.

今天，我們還將討論調整後的 EBITDA，這是一種非 GAAP 財務指標，作為 GAAP 業績的補充。請參閱今天的收益報告，以了解有關非公認會計原則措施的重要揭露。我現在將把電話轉給約翰·桑德斯。

Good morning, and thanks for joining the call today. Total revenue in the second quarter increased 4% to $6.4 million from $6.1 million. That included a 10% increase in verification and certification services, which grew to $5.3 million from $4.8 million year over year. Product revenue declined 13% to $0.8 million from $0.9 million, reflecting a trend that began last year when the impact of cyclical cattle trends resulting in smaller herd sizes began manifesting in lower volumes of RFID tag sales.

早安，感謝您今天加入通話。第二季總營收從 610 萬美元成長 4% 至 640 萬美元。其中驗證和認證服務增加了 10%，從去年同期的 480 萬美元增加到 530 萬美元。產品收入從 90 萬美元下降 13% 至 80 萬美元，反映了去年開始的趨勢，當時週期性養牛趨勢導致牛群規模縮小，導致 RFID 標籤銷售下降。

Professional services revenue also declined to $0.3 million from $0.4 million year over year. Gross profit in the second quarter increased to $2.7 million from $2.5 million. Selling, general, and administrative expense increased to $2.1 million from $1.8 million, reflecting increased costs related to marketing, personnel, and travel.

專業服務收入也從去年同期的 40 萬美元下降至 30 萬美元。第二季毛利從 250 萬美元增至 270 萬美元。銷售、一般和管理費用從 180 萬美元增加到 210 萬美元，反映出與行銷、人員和差旅相關的成本增加。

On the subject of personnel costs, we continue to navigate a tight competitive labor market that is impacting us at both the gross profit and SG&A levels. The higher SG&A more than offset improved gross profit and resulted in a decline in operating income to $0.6 million from $0.7 million. That, in turn, led to an 8% decline in net income to $489,000 from $532,000. Diluted EPS remained at $0.09 a share.

在人員成本方面，我們持續應對競爭激烈的勞動市場，這對我們的毛利和銷售管理費用水準都有影響。較高的 SG&A 抵消了毛利的提高，並導致營業收入從 70 萬美元下降至 60 萬美元。這反過來導致淨利潤下降 8%，從 532,000 美元降至 489,000 美元。稀釋後每股收益維持在每股 0.09 美元。

Adjusted EBITDA in the second quarter was at 8% lower to $0.8 million versus $0.9 million. And finally, we continued our share buyback program in the second quarter, repurchasing 33,347 shares of stock at a cost of $389,000.

第二季調整後 EBITDA 下降 8%，從 90 萬美元降至 80 萬美元。最後，我們在第二季繼續實施股票回購計劃，以 389,000 美元的成本回購了 33,347 股股票。

Turning to six-month results, total revenue through six months increased 5% to $12 million from $11.4 million in the prior year. Revenue mix included verification and certification services, up 13% to $9.7 million from $8.6 million; product revenue, down 19% to $1.6 million from $1.9 million; and professional services revenue of $0.7 million compared to $0.9 million. Gross profit at midyear was $5 million, up 7% from $4.6 million a year ago.

就六個月的業績而言，六個月的總收入從上一年的 1,140 萬美元增長了 5%，達到 1,200 萬美元。收入組合包括驗證和認證服務，從 860 萬美元成長 13% 至 970 萬美元；產品收入從 190 萬美元下降 19% 至 160 萬美元；專業服務收入為 70 萬美元，而專業服務收入為 90 萬美元。年中毛利為 500 萬美元，比一年前的 460 萬美元成長 7%。

Due to reasons previously mentioned, SG&A expense increased 8% to $4.1 million from $3.8 million. Operating income was essentially flat at $0.8 million. Net income through six months increased slightly to $667,000 or $0.12 per diluted share compared to net income of $653,000 or $0.11 per diluted share in the prior year period.

由於前面提到的原因，SG&A 費用增加了 8%，從 380 萬美元增加到 410 萬美元。營業收入基本持平，為 80 萬美元。六個月淨利潤小幅增加至 667,000 美元，即稀釋後每股 0.12 美元，去年同期淨利潤為 653,000 美元，即稀釋後每股 0.11 美元。

Adjusted EBITDA was essentially flat at $1.3 million. The company generated $1.9 million in cash from operations through six months compared to $1.3 million in the same period last year. Our cash and cash equivalents balance at midyear was $2.6 million, which was down just slightly from December 31 year-end cash balance.

調整後 EBITDA 基本持平，為 130 萬美元。該公司六個月的營運現金為 190 萬美元，而去年同期為 130 萬美元。年中時我們的現金和現金等價物餘額為 260 萬美元，比 12 月 31 日年末現金餘額略有下降。

Through the first six months of 2024, we bought back 149,419 shares of total stock, a total that included 69,218 shares as part of our ongoing buyback program and another 80,201 shares in a single private purchase. We continue to believe that buybacks at these price levels are a good investment for the company and a great way to return value to our stockholders on a regular basis.

截至 2024 年前六個月，我們回購了 149,419 股總股票，其中包括作為我們持續回購計畫一部分的 69,218 股，以及單次私人購買中的另外 80,201 股。我們仍然相信，以這樣的價格水準進行回購對公司來說是一項很好的投資，也是定期向股東回報價值的好方法。

Given the ongoing headwinds in our beef business in the form of smaller herd sizes, we are overall pleased with our financial results for both the quarter and six-month period. We are consistently growing our top line and doing so in a profitable manner while generating strong cash flows.

鑑於我們的牛肉業務持續面臨牛群規模較小的不利因素，我們對本季和六個月期間的財務表現總體感到滿意。我們不斷增加收入，並以獲利的方式實現這一目標，同時產生強勁的現金流。

Years ago, we committed to building the industry's most comprehensive solutions portfolio as a means of better serving our customers with a one-stop shop approach that simplifies their vendor structure and affords them favorable pricing through our bundling program. At the same time, our broad solution set gives us multiple revenue streams that have enabled us to grow overall revenue when one or more of our business lines comes under pressure. In this case, our beef business, which traditionally has dominated our revenue mix, is facing temporary challenges that underscore the value of our diversified model.

多年前，我們致力於建立業界最全面的解決方案組合，作為透過一站式服務更好地服務客戶的一種手段，簡化他們的供應商結構，並透過我們的捆綁計劃為他們提供優惠的價格。同時，我們廣泛的解決方案集為我們提供了多種收入來源，使我們能夠在一個或多個業務線面臨壓力時增加整體收入。在這種情況下，傳統上在我們的收入組合中占主導地位的牛肉業務面臨著暫時的挑戰，這凸顯了我們多元化模式的價值。

Today, I'd like to highlight two specific examples of how we continue to advance this strategy. The first is Upcycled Certified, which, as you may know, is the standard we acquired in Q4 last year after serving as the exclusive certification body since the program's inception in 2021.

今天，我想重點介紹兩個具體例子，說明我們如何繼續推動這項策略。第一個是Upcycled Certified，如您所知，這是我們自2021年該計劃啟動以來作為獨家認證機構，並於去年第四季度獲得的標準。

Upcycled food, which is the use of nutritional food ingredients that would otherwise go to waste -- for those of you that are old enough to remember, we call them leftovers -- is an up and coming national consumer trend. And we're pleased to announce that Upcycled Certified has recently emerged as one of the fastest-growing certification standards in our portfolio. Given the early momentum of this trend and the compelling economic environmental arguments in favor of it, we think our Upcycled business has the potential to become a very meaningful contributor to growth over the long term.

升級再造食品，即使用原本會被浪費的營養食品成分（對於那些年齡足夠大的人來說，我們稱之為剩菜）是一種新興的全國消費趨勢。我們很高興地宣布，升級回收認證最近已成為我們產品組合中成長最快的認證標準之一。鑑於這一趨勢的早期勢頭以及支持它的令人信服的經濟環境論據，我們認為我們的升級再造業務有潛力成為長期成長的非常有意義的貢獻者。

What began as a modest program that attracted smaller niche players has blossomed into an international program that includes major food producers and retailers. In July, Walmart rolled out a new line of upcycled sauces as a continuation of its bettergoods product launch in April, Walmart's largest private-label food brand launched in 20 years.

最初是一個吸引較小利基市場參與者的溫和計劃，現已發展成為一個包括主要食品生產商和零售商的國際計劃。7 月，沃爾瑪推出了新的升級再造醬料系列，作為 4 月推出的 bettergoods 產品的延續，這是沃爾瑪 20 年來推出的最大自有品牌食品品牌。

So we think the upcycle trend to have its best growth ahead of it, and here are a few data points to support that. First, an estimated 40% of food grown annually in the US goes unsold or uneaten. ReFED, a leading waste research organization, estimates that 80 million tons of food that is wasted annually in the US with a financial loss of $310 billion.

因此，我們認為上行週期趨勢將迎來最佳成長，以下是一些數據點來支持這一點。首先，據估計美國每年種植的糧食有 40% 沒有售出或未被食用。領先的廢棄物研究組織 ReFED 估計，美國每年浪費 8,000 萬噸食物，造成的經濟損失達 3,100 億美元。

A future Market Insights report estimates the value of the upcycled food industry to be more than $46 billion and growing. Over the last three years, upcycling consistently topped food trend lists, including Food Tank, Kroger, Forbes, and Whole Foods Market.

未來的 Market Insights 報告估計，升級再造食品產業的價值將超過 460 億美元，並且還在持續成長中。在過去三年中，升級再造一直位居食品趨勢榜首，包括 Food Tank、Kroger、Forbes 和 Whole Foods Market。

And Innova Market Insights survey showed 62% of consumers are willing to pay more for a product that fights food waste. A Hartman Group survey showed 70% of consumers had increased intent to buy Upcycled Certified foods when the seal was displayed on packaging. And finally, according to Project Drawdown, decreasing food waste is the number one solution to reducing the need for land and resources used to produce food, as well as the greenhouse gases released in the process.

Innova Market Insights 調查顯示，62% 的消費者願意為消除食物浪費的產品支付更多費用。Hartman Group 的一項調查顯示，當包裝上顯示密封條時，70% 的消費者購買升級再造認證食品的意願增加。最後，根據“縮減項目”，減少食物浪費是減少用於生產食物的土地和資源需求以及在此過程中釋放的溫室氣體的首要解決方案。

The second example of emerging revenue streams for us is our biosecurity business. Over the years, our work in building traceability systems and conducting on-ranch animal welfare audits has made biosecurity services a logical next step serving -- service offering for us. Whether it's avian influenza, swine flu, foot and mouth disease, mad cow disease, E. coli, or even COVID-type issues involving farm, ranch, and dairy workers, the agricultural industry in the US are constantly working to prevent potentially catastrophic outbreaks that disrupt the operations and supply chains and put the public at risk.

我們新興收入來源的第二個例子是我們的生物安全業務。多年來，我們在建立可追溯系統和進行牧場動物福利審計方面的工作使生物安全服務成為我們合乎邏輯的下一步服務——為我們提供服務。無論是禽流感、豬流感、口蹄疫、瘋牛症、大腸桿菌，甚至是涉及農場、牧場和乳製品工人的新冠病毒問題，美國農業產業都在不斷努力，防止潛在的災難性疫情爆發。鏈並使公眾面臨風險。

Where Food Comes From has a massive amount of expertise in this area, and we have developed a variety of programs and standards to reduce risks of infectious disease transmission among livestock workers and customers. For example, our secured food supply plans help beef, dairy, pork, poultry, and ag operations prepare before an outbreak to limit exposure of animals and accelerate reentry into commercial operations after an outbreak.

食品來自哪裡在這一領域擁有大量專業知識，我們制定了各種計劃和標準，以降低畜牧工人和顧客之間傳染病傳播的風險。例如，我們的安全食品供應計劃幫助牛肉、乳製品、豬肉、家禽和農業企業在疫情爆發前做好準備，以限制動物的暴露並在疫情爆發後加速重新進入商業運營。

Our on-farm security reviews verify site-specific compliance to a stringent set of on-farm biosecurity procedures. And our SQF, Safe Quality Food, on-farm audit program is a rigorous food safety program, designed to meet industry, customer, and regulatory requirements from the farm to retail stores.

我們的農場安全審查可驗證特定地點是否符合嚴格的農場生物安全程序。我們的 SQF（安全品質食品）農場審核計劃是一項嚴格的食品安全計劃，旨在滿足從農場到零售商店的行業、客戶和監管要求。

These are just three of eight programs that address the risks associated with animal disease outbreak. In the aggregate, they serve to protect our customers and strengthen their relationships with the USDA and state-level animal health officials in order to build resilience into the agricultural community and protect the consumers. So hopefully, that gives you a little insight into how our strategy of constantly expanding our product and services portfolio is strengthening our business.

這些只是解決與動物疾病爆發相關的風險的八個計劃中的三個。總的來說，它們旨在保護我們的客戶並加強與美國農業部和州級動物衛生官員的關係，以增強農業社區的抵禦能力並保護消費者。希望這能讓您了解我們不斷擴展產品和服務組合的策略如何增強我們的業務。

At the same time, I want to emphasize that our beef verification remains a core strength for us, and we fully expect it to bounce back as herd sizes normalize. When that happens, we believe we will be well positioned to accelerate revenue and profits. And with that, I'll thank you all again for joining the call today and open the call to questions. Operator.

同時，我想強調，我們的牛肉驗證仍然是我們的核心優勢，我們完全期望隨著牛群規模正常化，它會反彈。當這種情況發生時，我們相信我們將處於有利地位，可以加速收入和利潤的成長。在此，我要再次感謝大家今天加入電話會議並開始提問。操作員。

(Operator Instructions) Chris Brown, Oake Financial.

（操作員指示）Chris Brown，Oake Financial。

Thank you very much. Back in -- I think it was about the end of 2022, you talked about the USDA's intention to mandate RFID tags associated with the ADT program. It's my understanding that the final rule passed this spring and implementation is happening this fall.

非常感謝。回到——我想大約是在 2022 年底，您談到了美國農業部打算強制使用與 ADT 計劃相關的 RFID 標籤。據我了解，最終規則於今年春天通過，並將於今年秋天實施。

I was wondering -- three kind of general questions, how it's impacting your business to date? What you're kind of doing internally to take advantage or adapt to that new environment? And then kind of how you see it playing out over the next year or so? Thank you.

我想知道三種一般性問題，迄今為止它對您的業務有何影響？為了利用或適應新環境，你在內部做了什麼？那麼您如何看待未來一年左右的情況呢？謝謝。

Great question. You're correct. The final rule came into play this spring and this fall is when the implementation will begin. We've already seen a lot of the impacts of this, Chris. Some of them have been related to the transition of existing customers to use what we call 840 identification devices, which are compliant on a country code and compliant with ADT. So we've had a strong migration of a lot of our customers to the 840 tags, as we call them.

很好的問題。你是對的。最終規則於今年春天生效，今年秋天將開始實施。克里斯，我們已經看到了它的許多影響。其中一些與現有客戶過渡到使用我們所說的 840 識別設備有關，這些設備符合國家/地區代碼並符合 ADT。因此，我們的許多客戶都大力遷移到我們所謂的 840 標籤。

So probably, the only real impact that we've seen so far, and this has been compounding with our -- with the smaller herd sizes, is that there's been a great deal of subsidizing of tags to the industry. So either through animal health officials or through other government or state affiliations, producers are able to get tags for free.

因此，到目前為止，我們所看到的唯一真正的影響，以及與我們較小的牛群規模相結合的影響，可能是對該行業進行了大量的標籤補貼。因此，無論是透過動物衛生官員還是透過其他政府或州附屬機構，生產者都可以免費獲得標籤。

As you, I'm sure, have seen, in lieu of or in spite of the fact that the ruling has come into place, our tag revenue continues to stay flat or to decline a little bit. And that is relative to two things, as we talked about. One is the decline in the herd sizes, but also, that the government is giving quite a few tags away to producers, which is why you also see our verification revenue continuing to increase.

我確信，正如您所看到的，儘管裁決已經生效，或者儘管裁決已經生效，我們的標籤收入仍然保持不變或略有下降。正如我們所討論的，這與兩件事有關。一是牛群規模的下降，而且政府向生產者贈送了相當多的標籤，這就是為什麼你也看到我們的驗證收入持續增加。

So the way that we've been adjusting to it, Chris, is we've been preparing for a wave of free tags that were going to go into the industry, where we're actually charging those ranchers and farmers for those tags. They were going to have an opportunity to get those tags for free.

因此，克里斯，我們一直在調整的方式是，我們一直在為即將進入該行業的一波免費標籤做準備，我們實際上向牧場主和農民收取這些標籤的費用。他們將有機會免費獲得這些標籤。

So what we're allowing our producers to do is to bring those tags into our system for a fee, and we're maintaining those tags in the system. It does create more work for us, so we've had to adapt some of our technology to make sure that it was easy for producers to get their tags if they weren't coming directly from us into the system.

因此，我們允許生產者做的就是付費將這些標籤帶入我們的系統，並且我們在系統中維護這些標籤。它確實為我們創造了更多的工作，因此我們必須調整我們的一些技術，以確保生產者可以輕鬆獲得他們的標籤（如果他們不是直接從我們進入系統）。

The way it affects us long term, I believe, is most of the programs like does it happen with the organic program several decades ago, where there was a lot of opportunity for government-subsidized funding that would go to states or counties or universities, where they could implement their own organic certification program. And over the years, what we've seen is a consolidation in almost all those programs that were funded initially, are no longer funded.

我相信，它對我們長期影響的方式是大多數項目，就像幾十年前的有機項目一樣，那裡有很多機會獲得政府補貼的資金，這些資金將流向州、縣或大學，他們可以在那裡實施自己的有機認證計劃。多年來，我們看到幾乎所有最初資助的項目都進行了整合，現在不再資助。

So I think our belief is that there will be a point when this funding dries up. And these producers that have come into the program and now are required to use electronic identification tags will have to go somewhere to get them.

所以我認為我們的信念是，這筆資金將會在某個時刻耗盡。這些已經加入該計劃並且現在被要求使用電子識別標籤的生產商將不得不去某個地方獲取它們。

So it's going to be -- it will probably be at least a three- to five-year process of all of these new producers, which are converting to electronic tags, which is, again, great for us because that gives us more opportunity. More producers are able to become part of our verification programs while we're losing out on some of that tag revenue.

因此，所有這些新生產商可能至少需要三到五年的時間，這些生產商正在轉向電子標籤，這對我們來說又是一件好事，因為這給了我們更多的機會。更多的生產商能夠成為我們驗證計劃的一部分，而我們卻損失了一些標籤收入。

So all in all, the program has been, I think, a good success, and it's gone in line with the way that we thought. And we have a whole bunch of new producers that are really excited about getting involved. So it's been an overall positive, but it is something that we have to -- and we've had to prepare for for quite a while.

總而言之，我認為該計劃非常成功，並且符合我們的想法。我們有一大批新的製作人，他們非常樂意參與其中。所以這總體上是積極的，但這是我們必須要做的事情——而且我們必須準備很長一段時間。

Thank you. There are no further questions at this time. I'd like to turn the floor back over to John for any closing remarks.

謝謝。目前沒有其他問題。我想把發言權交還給約翰，讓他發表結束語。

Once again, I want to thank you for your time and your support, and we look forward to talking to you in three months. Have a great day.

我想再次感謝您的時間和支持，我們期待在三個月內與您交談。祝你有美好的一天。

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

今天的電話會議到此結束。此時您可以斷開線路。感謝您的參與。