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Where Food Comes From, Inc. (WFCF)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 revenue increased 3% year over year to $6.56M, with verification/certification up slightly and product sales up 18%, while professional services declined; diluted EPS was $0.11 versus $0.09 last year .
  • Gross margin compressed due to higher compensation costs in a tight labor market and increased hardware costs; net income benefited from a $172K fair value gain on digital assets .
  • Management highlighted growth in CARE Certified and Upcycled programs, value‑added hardware tags, and expansion of retail labeling to more than 100 stores by year‑end; continued AI investments aim to drive operational efficiency .
  • Subsequent event: sale of 10% interest in Progressive Beef for $1.8M cash plus return of 12,585 WFCF shares, strengthening the balance sheet and supporting buybacks .

What Went Well and What Went Wrong

What Went Well

  • “Our core verification and certification revenue increased nearly 2%… attributable to strong demand for other verification services, notably our CARE Certified and UpCycled programs” .
  • Hardware sales rose 18% YoY to roughly $1.0M, driven by higher‑priced, value‑added tags (UHF, TSUs, combo sets) offsetting lower basic tag volumes .
  • Retail labeling program expanded: two major retailers now feature CARE Certified beef across stores from Hawaii to the East Coast, with staged rollouts expected to exceed 100 locations by year‑end .

What Went Wrong

  • Gross profit fell to $2.46M from $2.66M as margins were negatively impacted by higher compensation and hardware costs, reflecting labor market tightness and input cost inflation .
  • Professional services revenue declined to $266K from $324K YoY, weighing on the revenue mix .
  • Beef verification activity remained pressured by smaller cattle herds (and earlier noted Q1 headwinds from tariffs curtailing beef exports to China and avian influenza disruptions in poultry/dairy) .

Financial Results

Core P&L (USD)

MetricQ2 2024Q1 2025Q2 2025
Revenues ($)$6,395,000 $5,273,000 $6,562,000
Gross Profit ($)$2,658,000 $2,195,000 $2,460,000
Gross Profit Margin %41.6%*41.6% 37.5%*
Operating Income ($)$583,000 $142,000 $549,000
Net Income ($)$489,000 $31,000 $562,000
Diluted EPS ($)$0.09 $0.01 $0.11
Net Income Margin %7.65%*0.59%*8.56%*

Values marked with * retrieved from S&P Global.

Segment Revenue Breakdown (USD)

SegmentQ2 2024Q1 2025Q2 2025
Verification & Certification$5,252,000 $4,182,000 $5,332,000
Product Sales$819,000 $702,000 $964,000
Professional Services$324,000 $389,000 $266,000
Total Revenue$6,395,000 $5,273,000 $6,562,000

KPIs and Balance Sheet Highlights

KPIQ2 2024Q1 2025Q2 2025
Hardware Sales (approx., USD)$0.80M —$1.00M
Digital Assets FMV Gain (USD)——$172,000
Stock Buybacks (Shares)—31,345 24,481
YTD Buybacks (Shares)—31,345 55,826
Cash & Cash Equivalents (USD)—$2,238,000 $3,201,000
Deferred Revenue (USD)—$1,744,000 $2,371,000
Cash from Operations YTD (USD)—$0.6M $1.8M

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Retail labeling rollout (locations)FY 2025N/A>110 locations by year-end Raised
Share repurchasesOngoingN/AContinued buybacks; 24,481 shares in Q2; 55,826 YTD Maintained
AI/technology investmentsOngoingN/AContinued buildout of AI tools and technical talent Maintained

Company did not issue formal numerical guidance for revenue, margins, OpEx, OI&E, or tax rate in the Q2 materials reviewed .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024, Q1 2025)Current Period (Q2 2025)Trend
AI/technology initiativesAdded technical talent; platform enhancement noted in 2024 narrative Continued AI buildout to improve efficiency and CX; scaling benefits emphasized Accelerating investment
Beef herd/macroCyclical herd contraction pressured beef in 2024 ; tariffs curtailed exports to China; avian influenza disruptions in Q1 Smaller herds continue to reduce beef verification activity Persistent headwind
Product performance (tags)Hardware sales pressured by lower volumes (Q4 narrative) Value‑added tags (UHF, TSUs, combo sets) drove 18% YoY growth; mix shift offset basic tag declines Positive mix shift
Retail/labeling programTwo major retailers added in Q1; boost to licensing visibility Expansion to >100 stores by year‑end; broader geography (HI to East Coast) Scaling rollout
Digital assets/other incomeBitcoin FMV gain aided Q4 EPS Digital asset FMV gain of $172K aided Q2 net income Volatile tailwind
Capital allocationSignificant buybacks in Q4 Continued buybacks; subsequent monetization of Progressive Beef to strengthen balance sheet Ongoing return of capital

Management Commentary

  • “Our core verification and certification revenue increased nearly 2%… notably our CARE Certified and UpCycled programs… a strategy that enables us to compensate for downturns in other segments” .
  • “Hardware sales… increased year over year by 18% to $1.0 million… growing demand for higher priced, value‑added tags… combo sets… UHF… TSUs” .
  • “Expansion of the retail labeling program… expected to include more than 100 retail locations by year‑end… reinforcing transparency and trust in the food supply chain” .
  • “Gross margins were negatively impacted by increased compensation expense… and increased costs of hardware” .
  • “Sold [our] 10% interest in Progressive Beef for $1.8 million in cash and the return of 12,585 shares… strengthening [the] balance sheet… support [the] stock buyback program” .

Q&A Highlights

  • Talent attraction/retention: Management detailed efforts via college recruitment, brand draw, internal education and an open‑door culture; continued investment in technical capabilities to drive growth .
  • No additional analyst themes were recorded beyond the single question .

Estimates Context

  • S&P Global consensus for Q2 2025 EPS and revenue was unavailable; no coverage data appeared for EPS or revenue estimates, so no beat/miss assessment versus Street [GetEstimates].
    Values retrieved from S&P Global.

Key Takeaways for Investors

  • Diversified verification portfolio (CARE Certified, Upcycled) is offsetting beef verification headwinds and supporting low‑single‑digit revenue growth .
  • Margin pressure from labor and hardware costs is the primary earnings headwind; focus on AI‑enabled efficiency could mitigate over time .
  • Hardware mix shift to value‑added tags is a tangible growth driver and supports higher ASPs despite lower basic tag volumes .
  • Retail labeling expansion (>100 locations expected by year‑end) should boost licensing revenue and brand awareness, potentially expanding verification demand .
  • Balance sheet strengthened via $1.8M Progressive Beef monetization and higher cash ($3.2M at quarter‑end), creating flexibility for continued buybacks and growth initiatives .
  • Digital asset fair value gains are a non‑operating tailwind to net income; results are sensitive to market movements and should be normalized in analysis .
  • Near‑term trading: watch for updates on retailer rollout pace and hardware demand momentum; medium‑term thesis hinges on scaling diversified standards, AI productivity, and normalization in beef verification volumes .