Where Food Comes From (NASDAQ:WFCF) released second-quarter financial results and hosted an earnings call on Thursday. Read the complete transcript below.

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Access the full call at https://www.wherefoodcomesfrom.com/investor-relations

Summary

Where Food Comes From reported a slight increase in total revenue to $6.6 million for Q2 2026, with verification and certification revenue growing to $5.4 million.

Gross profit rose by 9% year over year, with gross margins improving to 40.6%, attributed to cost efficiencies across all business segments.

Operating income increased by 21% year over year; however, net income declined due to non-cash impacts related to digital assets.

The company is expanding its Raswell Certified Program, which has been adopted by Whole Foods Market, and plans to extend it to other animal proteins.

New initiatives include partnerships with the Potato Sustainability Alliance and certification achievements with US AgriChar.

The company plans to reengage in M&A activities to accelerate growth and strengthen its business, with a shelf registration to facilitate potential transactions.

Stock repurchase program continued with 65,000 shares bought back in Q2, indicating confidence in the company's value.

A strategic focus on expanding the service portfolio is aimed at addressing consumer demands and building a competitive moat.

Full Transcript

OPERATOR (Operator)

Greetings, and welcome to the Where Food Comes From second quarter 2026 earnings call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star-0 on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the call over to your host, Mr. Jay Slifer. Thank you, sir.

You may begin.

Jay Slifer, Investor Relations

Good morning, and welcome to the Where Food Comes From 2026 second quarter earnings call. Joining me on the call today are CEO John Saunders, President and Chief Strategy Officer Leigh Ann Saunders, and CFO 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 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. I'll now turn the call over to John Saunders.

John Saunders, CEO

Hello, and thanks for joining the call today. This morning, Where Food Comes From reported another quarter of revenue growth and solid profitability in spite of continued pressure on our flagship beef business due to fewer cattle moving through the system and record-high beef prices once again. The reason we have been able to grow profitably in the face of persistent headwinds lies in the size and diversity of our solutions portfolio, which is constantly expanding as we introduce new standards and certifications across the food spectrum.

Today, Where Food Comes From is far and away the most diverse provider of food claims verification and certification. The growth of our service offerings over the years has been driven by a combination of M&A transactions and internal development in response to consumer preferences and industry trends. Some of these solutions were developed in collaboration with customers across the food supply chain who share a passion for giving consumers maximum transparency in how their food is raised.

We now audit to more than 50 standards and categories as diverse as animal proteins, wine, grapes, and upcycled foods. We are the leading certifier of popular food claims ranging from animal welfare and sustainable practices to non-GMO, gluten-free, and organic. Our CARE Certified Program is the protein industry's most advanced tool for certifying animal care and environmental stewardship. Our new Raswell Certified Program verifies animal welfare and natural practices and provides traceability from the farm through processing.

In the first quarter of this year, Whole Foods Market became the first retailer to adopt Raswell. This adoption was for their beef supply and has led to strong early results, with more than 270,000 head of cattle now enrolled by ranchers who provide beef to Whole Foods. Raswell was developed to address all animal proteins, and we are now working to expand the program to include chicken, turkey, pork, lamb, and eggs. By the way, both CARE and Raswell are figuring prominently into our service bundling strategy, particularly in conjunction with our organic services, and this provides our customers with cost and time savings while enhancing our revenue and gross margins. We are also sowing seeds on other new initiatives that we believe will grow over time and further strengthen our reputation as a one-stop shop for verifications and certifications across an ever-larger spectrum. For example, we have recently partnered with the Potato Sustainability Alliance to provide on-farm audits that verify and benchmark sustainability metrics around environmental stewardship, including reducing GHG emissions, optimizing water management, and minimizing food waste, as well as improving soil health, supporting biodiversity, and promoting responsible use of pesticides.

As another example, in May we helped US AgriChar become the first biochar producer in Colorado to achieve USDA certification for its product. Biochar is a stable, carbon-rich material produced by heating organic biomass in a low-oxygen environment. The resulting product supports soil health through improved water retention and nutrient efficiency, and has the added benefit of long-term carbon sequestration. In Colorado, similar to other western states in this new age of drought and forest fires, biochar production has the added bonus of improving forest health and reducing wildfire risk because the raw material is often dead forest firewood.

So again, we are laser-focused on expanding our portfolio with solutions that address consumer demands and help our customers differentiate their products. The size and scope of our portfolio is the cornerstone of the moat we have built for our business. Turning now to the second quarter financial results, total revenue in the second quarter increased slightly to $6.6 million on the strength of verification and certification revenue of $5.4 million versus $5.3 million in Q2 last year.

Gross profit increased 9% year over year to $2.7 million from $2.5 million, with gross margins rising to 40.6% compared to 37.5% in the second quarter last year. These improvements were attributable to cost efficiencies achieved in all three of our business segments. Operating income in Q2 increased 21% year over year to $665,000 from $549,000. Net income was $413,000, or $0.08 per share, compared to net income of $562,000, or $0.11 per share, in the same quarter last year.

I want to emphasize that the lower net income was mostly due to the non-cash impact of fair market value of digital assets. That amounted to a $240,000 negative swing in the second quarter year over year. Additionally, the year-ago second quarter included $50,000 in dividend income related to our ownership interest in Progressive Beef that was divested last year. So we believe our operating income, up 21% year over year, remains the most accurate measure of our profitability.

In the quarter and six-month results, total revenue increased 1% to $12 million from $11.8 million. Verification and certification revenue grew by 3% to $9.8 million from $9.5 million. Operating income through mid-year increased to $963,000 from June. Net income through the first six months of 2026 was $505,000, or $0.10 per share, compared to net income of $593,000, or $0.11 per share, in the same period last year. The company generated $1.5 million in cash from operations year to date and closed the second quarter with $3.4 million in cash and cash equivalents, up from $3.2 million at 2025 year end.

Due to our consistent ability to generate strong cash flows, in combination with our belief that our own stock represents a good investment at current levels, we continued our aggressive buybacks in the second quarter, repurchasing approximately 65,000 shares and raising year-to-date buybacks to nearly 89,500 shares. Since the inception of our stock repurchase program in 2019, Where Food Comes From has returned more than $17.2 million in value to stockholders.

One final topic I want to address is M&A. As you know, over the past 14 years we've averaged one acquisition per year, adding products, services, standards, customers, new talent, and accretive revenue streams to our business. We successfully integrated each of these transactions into our business and are pleased to say that each has added value. The industry we compete in is still in its early innings, and changing dynamics due to geopolitical and regulatory events, evolving consumer demands, and other factors are giving rise to new opportunities.

As a result, after a roughly three-year pause since our last transaction, we are renewing our focus on M&A as a means of accelerating growth, strengthening our business, and building shareholder value. As always, a key criterion in this process is whether a given transaction would be immediately or at least near-term accretive to our overall business. To be clear, we are now just beginning to reengage in this process, and I'm not indicating any transactions are imminent.

I just want to let you know we are dusting off the playbook and renewing our focus in this area. With that in mind, Where Food Comes From will file a shelf registration statement in the next day or so to be better positioned as a company for potential M&A activity. Shelf registrations provide companies with maximum financial flexibility and much quicker time-to-market to access capital for growth. They are particularly effective in executing opportunistic M&A transactions.

Shelf registrations are becoming more common for companies of all sizes and are considered to be good corporate governance. As an aside, in the first half of 2026, once in May and once more in July, we had two occasions where our stock traded over $20 per share. With that in mind, it makes even more sense to have a shelf that could add value to the company and its stockholders during periods of extreme volatility. So with that, I'll open the call to questions.

OPERATOR (Operator)

Thank you. If you'd like to ask a question, please press star-1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star-2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. We do ask that you each keep to one question and one follow-up. Thank you. Our first question comes from the line of Terry Thompson, private investor.

Please proceed with your question.

Terry Thompson, Private Investor

Hello to all, and congratulations on another consistent quarter. Does anybody have any idea what caused those two price spikes up to over $20 this last year?

John Saunders, CEO

I'll let Jay answer that one.

Jay Slifer, Investor Relations

Yeah. Hey, Terry, how are you doing?

Terry Thompson, Private Investor

Pretty well, man. Good to hear from you.

Jay Slifer, Investor Relations

Good. Yeah. That's the million-dollar question. And the short answer is no. We've worked with Nasdaq and their market surveillance department and we talked to investors, and unfortunately we just can't pinpoint it. It's somebody that felt, from the speculative side of things, all we can deduce is somebody felt that they wanted to own the stock and they were willing to bid it up to own it. So that's the good news. We just don't know who it is.

Terry Thompson, Private Investor

Okay, fair enough. I kind of figured that would be the answer, but I had to ask again. Thanks to all and nice to hear from you all.

Jay Slifer, Investor Relations

Thank you. Excellent.

OPERATOR (Operator)

Thank you. Once again, it's star-1 to join the question queue. Our next question comes from the line of Chris Brown with Oak Financial. Please proceed with your question.

Chris Brown, Oak Financial

Thank you. I really had two quick questions. The first one is with respect to the headlines out in the food world with respect to cyclospora and, earlier, the screwworm issue—kind of what you guys are doing to take advantage of our renewed focus on food safety. Second would be if you'd ever consider breaking out the non-beef certification business from the beef to allow investors to understand a little bit better the growth in the non-beef area and understand how patient we need to be to wait for beef to rebound.

John Saunders, CEO

Great questions, Chris. I'm going to let Leann answer the first one.

Leann Saunders, President and Chief Strategy Officer

Hi, Chris. So I'll attempt to answer it. We feel like we've positioned ourselves as well as we possibly could in the instance of an animal disease issue like screwworm. I think the challenge with screwworm in particular is that it's caused by flies. So as we talk to people in industry, it's hard to electronically identify flies, right? So there's mitigation things that are happening with the USDA. But I think where we've been well positioned is we have an ongoing relationship with CattleTrace, which CattleTrace is a nonprofit organization that's been really working on voluntary methods of animal identification and traceability.

And we work with them very closely. In fact, we administer their activity. And then also just in the world of biosecurity, we've been doing biosecurity audits and building out what are called Secure Beef Supply plans now for a number of years for locations, which is becoming more and more important as you look at state animal health officials deciding when cattle can and cannot move. And all of our programs on the beef side require an electronic identification means.

All of that becomes part of the solution in the event of an animal disease. So I think we've positioned ourselves well to be at the topic of conversation and have had multiple conversations actually with the USDA on that front. Particularly when it comes to food safety, similarly across our platforms, across all of our divisions, our Validus Verification division has a program called Safe Quality Food, and so we are a leader—that division is a leader—in SQF audits on farm.

And that is becoming the mechanism for large organizations like a Walmart, for example, that are starting to say they want their supply chains to have those SQF audits in place, which are food safety protocols. And specifically in the case of cyclospora, I think what we've talked about many times in the past is that we do not verify food safety relative to specifically a lot of lettuces, leafy greens, and lower-valued vegetables, primarily because there is a lot of risk relative to it.

And I think that what we're seeing right now is obviously something that's going to impact our business in the sense that there will continue to be a focus on the food safety issues. Specifically relative to the beef question, that's a great point to mention, Chris. And we talked about the long-term future of the cattle industry in the U.S. I think one of the things that we believe very strongly—and you're seeing with Raswell specifically—is our ability to meet the needs of a company like Whole Foods across all of the proteins that they sell.

So the one danger in us divesting of any particular species or product is our inability to continue to provide that type of full-range complementary service to, again, a company like Whole Foods or Walmart.

Chris Brown, Oak Financial

I appreciate that, thank you. My question is more just breaking out your results from the businesses, but I understand your answer. Thank you guys very much.

OPERATOR (Operator)

Thank you.

John Saunders, CEO

I didn't understand that. Danette, you want to take a shot at that one?

Chris Brown, Oak Financial

Can you—meaning to explain—it's more just if we can see clearer your growth in some of those other businesses versus your, what you historically call the cyclical beef business. It might help investors understand all the investments in growth you're getting away from beef.

Jay Slifer, Investor Relations

Chris, this is Jay. Sorry, everybody misunderstood your question, but I think we're on it now. Just to clarify, you're asking can we break out what percentage of our revenue is beef versus non-beef related verification and certification activity?

Chris Brown, Oak Financial

Yeah, it's more just to allow investors to understand these other areas you've been investing in away from what's been a very cyclical beef category. That's exactly right. And you guys probably know better than us. So that was more of an open-ended question for you to consider.

Jay Slifer, Investor Relations

Understood. Sorry for the misunderstanding. No, that's a great comment. I think that is—we will definitely take that under consideration. We can definitely do it. It's just how we do it.

John Saunders, CEO

And just so it's clear, beef is roughly 50% of our revenue, Chris.

Chris Brown, Oak Financial

Got it. Thank you guys. Appreciate it. Keep up the good work.

OPERATOR (Operator)

Thank you. Ladies and gentlemen, that concludes our question and answer session. I'll turn the floor back to Mr. Saunders for final comments.

John Saunders, CEO

Once again, thank you all for your time and your commitment. Have a great day, and we'll talk to you in three months.

OPERATOR (Operator)

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

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.