Market Overview

Where Food Comes From, Inc. Reports 2019 Second Quarter and Six-Month Financial Results

Share:

Second Quarter Highlights – 2019 vs. 2018             

  • Revenue up 10% to $4.9 million from $4.4 million
     
  • Net income attributable to WFCF up 104% to $361,100 from $176,800
     
  • Adjusted EBITDA up 39% to $824,500 from $593,400

Six-Month Highlights – 2019 vs. 2018

  • Revenue up 10% to $8.8 million from $8.1 million
     
  • Net income attributable to WFCF up 3% to $218,000 from $212,300
     
  • Adjusted EBITDA down 4% to $906,300 million from $948,300 million
     
  • Company generates $­­­1.4 million in cash from operations, up 23% year over year

CASTLE ROCK, Colo., Aug. 13, 2019 (GLOBE NEWSWIRE) -- Where Food Comes From, Inc. (WFCF) (OTCQB:WFCF), the most trusted resource for independent, third-party verification of food production practices in North America, today announced its 2019 second quarter and six month financial results.

"We're pleased with our financial performance in the second quarter," said John Saunders, Chairman and CEO.  "All four operating segments delivered profitable growth in the quarter, with total net income more than doubling year over year and adjusted EBITDA up 39%.  We generated $1.4 million in net cash from operations through the first half of 2019, up 23% year over year. We also strengthened our balance sheet year to date, with working capital up 9% to $2.9 million, and cash, cash equivalents and investments up 44% to $2.9 million compared to 2018 year-end balances.

"We continue to add new customers across all business lines and remain aggressive in introducing and advancing new verification standards to address growing consumer demand for transparency in the agricultural supply chain," Saunders added.  "These activities include the recent launch of our new Black Angus Verified Beef program, which late in the second quarter saw initial throughput of calves verified to multiple standards under our bundling program.  We're also seeing good progress around our hemp initiative.  As exclusive provider of verification services for the US Hemp Authority™ Certified standard, we are working with an increasing number of growers and processors.  In addition, we are now actively engaging with manufacturers and retailers of hemp-based products who are seeking additional credibility through third-party verification.  Overall, we like our positioning as the most diverse provider of verification solutions to the food and agriculture industry and believe that macro trends continue to support our strategic objectives and set us up to extend our track record of profitable growth."

Second Quarter Results
Revenue in the second quarter of 2019 increased 10% to $4.9 million from $4.4 million in the same quarter last year.  All four of the Company's revenue streams generated year-over-year increases, including:

  • Verification and certification services, up 7% to $3.7 million from $3.5 million.
  • Product revenue, up 28% to $635,300 from $496,300.
  • Software license, maintenance, and support, up 14% to $299,900 from $263,300.
  • Software-related consulting services, up 23% to $209,800 from $170,900.         

Gross profit in the second quarter increased 4% year over year to $2.1 million from $2.0 million.  Gross margin declined to 42.7% from 45.3% year over year. The decrease was attributable to additional fixed labor costs related to acquisitions completed in the latter half of 2018.

Sales, general and administrative expense declined 5% in the second quarter to $1,685,200 from $1,770,500 in the same quarter last year.  The decline was due to lower year-over-year marketing expenditures, which offset a $56,000 increase in depreciation and amortization expense.

Operating income increased 67% in the second quarter to $403,200 from $241,300 in the same quarter last year.

Net income attributable to Where Food Comes From, Inc. in the second quarter increased 104% to $361,100, or $0.01 per share, from net income of $176,800, or $0.01 per share, in the same quarter last year.

Adjusted EBITDA in the second quarter increased 39% to $824,500 from $593,400 in the same quarter last year.

Six Month Results
Total revenue in the six-month period ended June 30, 2019, increased 10% to $8.8 million from $8.1 million in the prior year.  All four revenue streams showed year-over-year growth, including:

  • Verification and certification services, up 4% to $6.6 million from $6.3 million.
  • Product revenue, up 50% to $1.3 million from $850,000.
  • Software license, maintenance, and support, up 8% to $595,000 from $550,800.
  • Software-related consulting services, up 18% to $416,500 from $354,200.

Gross profit in the first half was flat at approximately $3.7 million. Gross margin was down year over year to 42.5% from 46.4% due largely to the impact of competitive pricing programs for volume ear tag purchasers as well as to assumption of additional fixed labor costs related to two acquisitions made in the second and third quarters of 2018.

Sales, general and administrative expense increased 5% year over year to $3.7 million from $3.5 million due primarily to higher expense incurred in the first quarter of 2019 related to year-end audit services and staff training programs and to an approximately $44,000 increase in depreciation and amortization year over year.

Operating income was down 62% year over year to $102,600 from $268,100.

Net income attributable to Where Food Comes From, Inc. increased 3% year over year to $218,000, or $0.01 per share, from $212,300, or $0.01 per share, in the same period last year.

Adjusted EBITDA declined 4% year over year to $906,300 from $948,300 due primarily to competitive pricing programs for volume ear tag purchasers, higher expenses incurred related to year-end audit services and staff training programs and an increase in depreciation and amortization associated with acquisitions made in the latter half of 2018.

The Company generated $1.4 million in net cash from operations through the first half of 2019, up 23% from $1.1 million in the first half of 2018.

The cash, cash equivalents, and short- and long-term investments balance at June 30, 2019, increased to $2.9 million from $2.0 million at 2018 year-end.  The Company had $2.9 million in working capital at June 30, 2019, up from $2.7 million at 2018 year-end.

Conference Call
The Company will conduct a conference call today at 10:00 a.m. Mountain Time.

Call-in numbers for the conference call:
Domestic Toll Free: 1-877-407-8289
International: 1-201-689-8341
Conference Code: 13693018

Phone replay:
A telephone replay of the conference call will be available through August 27, 2019, as follows:
Domestic Toll Free: 1-877-660-6853
International: 1-201-612-7415
Conference Code: 13693018

About Where Food Comes From, Inc.
Where Food Comes From, Inc. is America's trusted resource for third party verification of food production practices.  Through proprietary technology and patented business processes, the Company supports more than 15,000 farmers, ranchers, vineyards, wineries, processors, retailers, distributors, trade associations, consumer brands and restaurants with a wide variety of value-added services. Through its IMI Global, International Certification Services, Validus Verification Services, SureHarvest, A Bee Organic and Sterling Solutions units, Where Food Comes From solutions are used to verify food claims, optimize production practices and enable food supply chains with analytics and data driven insights. In addition, the Company's Where Food Comes From® retail and restaurant labeling program uses web-based customer education tools to connect consumers to the sources of the food they purchase, increasing meaningful consumer engagement for our clients. 

*Note on non-GAAP Financial Measures
This press release and the accompanying tables include a discussion of EBITDA and Adjusted EBITDA, which are non-GAAP financial measures provided as a complement to the results provided in accordance with generally accepted accounting principles ("GAAP"). The term "EBITDA" refers to a financial measure that we define as earnings (net income or loss) plus or minus net interest plus taxes, depreciation and amortization. Adjusted EBITDA excludes from EBITDA stock-based compensation and, when appropriate, other items that management does not utilize in assessing WFCF's operating performance (as further described in the attached financial schedules). None of these non-GAAP financial measures are recognized terms under GAAP and do not purport to be an alternative to net income as an indicator of operating performance or any other GAAP measure. We have reconciled Adjusted EBITDA to GAAP net income in the Consolidated Statements of Income table at the end of this release.  We intend to continue to provide these non-GAAP financial measures as part of our future earnings discussions and, therefore, the inclusion of these non-GAAP financial measures will provide consistency in our financial reporting.

CAUTIONARY STATEMENT
This news release contains "forward-looking statements" within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, based on current expectations, estimates and projections that are subject to risk.  Forward-looking statements are inherently uncertain, and actual events could differ materially from the Company's predictions.  Important factors that could cause actual events to vary from predictions include those discussed in our SEC filings.  Specifically, statements in this news release about industry leadership and demand for, and impact and efficacy of, the Company's products and services on the marketplace; ability to continue posting positive financial results; expectations to extend the Company's track record of profitable growth; and ability to continue introducing and advancing verification standards are forward-looking statements that are subject to a variety of factors, including availability of capital, personnel and other resources; competition; governmental regulation of the agricultural industry; the market for beef and other commodities; and other factors.  Financial results for the second quarter and six-month period are not necessarily indicative of future results.  Readers should not place undue reliance on these forward-looking statements.  The Company assumes no obligation to update its forward-looking statements to reflect new information or developments.  For a more extensive discussion of the Company's business, please refer to the Company's SEC filings at www.sec.gov.

Company Contacts:

John Saunders
Chief Executive Officer
303-895-3002

Jay Pfeiffer
Pfeiffer High Investor Relations, Inc.
303-880-9000
Where Food Comes From, Inc.
Statements of Income (Unaudited)

Where Food Comes From, Inc.              
Statements of Income (unaudited)              
                     
        Three months ended
June 30,
  Six months ended
June 30,
         2019     2018     2019     2018 
Revenues:              
  Verification and certification service revenue $  3,743,241   $   3,507,757   $   6,554,935   $   6,303,951
  Product sales   635,333     496,312     1,276,391     850,206
  Software license, maintenance and support services revenue   299,934     263,316     594,963     550,760
  Software-related consulting service revenue   209,751     170,923     416,510     354,193
    Total revenues   4,888,259     4,438,308     8,842,799     8,059,110
Costs of revenues:              
  Costs of verification and certification services   2,097,274     1,850,555     3,659,364     3,301,164
  Costs of products   398,073     319,970     841,258     545,945
  Costs of software license, maintenance and support services   161,610     168,511     315,613     305,945
  Costs of software-related consulting services   142,900     87,546     272,436     163,007
    Total costs of revenues   2,799,857     2,426,582     5,088,671     4,316,061
  Gross profit   2,088,402     2,011,726     3,754,128     3,743,049
Selling, general and administrative expenses    1,685,188     1,770,468     3,651,527     3,474,942
Income from operations   403,214     241,258     102,601     268,107
Other expense (income):              
  Dividend income from Progressive Beef   (30,000)     -      (60,000)     - 
  Other income, net   (2,471)     (5,122)     (5,167)     (8,040)
  Gain on sale of assets   -      -      (1,000)     - 
  Interest expense   2,142     1,315     5,189     2,394
Income before income taxes   433,543     245,065     163,579     273,753
Income tax expense    129,089     80,000     46,089     88,000
  Net income    304,454     165,065  
View Comments and Join the Discussion!
 
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com