Where Food Comes From, Inc. (WFCF)·Q3 2025 Earnings Summary

Executive Summary

• Durable quarter with mixed top-line but strong bottom-line optics: revenue declined 1% YoY to $7.02M as beef verification softness persisted, but net income rose to $1.15M ($0.22) aided by a $0.95M gain on sale of Progressive Beef and a $48K digital asset gain .
• Verification/certification revenue grew 1% to $5.56M as pork, dairy, eggs, Organic, non-GMO, Gluten Free and Upcycled offset beef; hardware revenue declined to $1.20M on lower tag volumes despite mix shift to value-added tags .
• Operating discipline intact: gross profit $2.69M (≈38.3% GM, stable vs Q2), SG&A down slightly YoY; no debt and cash rose to $4.76M; 60,721 shares repurchased in Q3 (116,547 YTD) .
• Stock reaction catalysts: one-time gain boosting EPS, ongoing buybacks, retail labeling traction, and new Pangea/Walmart/Prime Pursuits traceability collaboration announced post-quarter; watch for herd rebuild timing and trade/tariff dynamics .

What Went Well and What Went Wrong

• What Went Well

  • Diversification working: Verification/certification grew despite beef headwinds; growth in pork, dairy, eggs, and certifications (Organic, non-GMO, Gluten Free, Upcycled) .
  • Profitability resilience: Operating income $575K; net income $1.15M; gross margins “fairly stable” and SG&A down slightly YoY on cost control .
  • Strategic momentum: Inclusion in TIME “America’s Growth Leaders 2026” (ranked 74th) and expanding retail labeling program traction noted by management .

• What Went Wrong

  • Beef exposure: Smaller herd sizes, tariffs, and trade issues (China demand drop, EU restrictions) continue to pressure core beef verification and hardware tags .
  • Hardware revenue down: Product sales fell to $1.20M from $1.33M YoY on lower tag volumes, partially offset by value-added tags .
  • Quality of earnings: Q3 EPS benefitted from a $946K gain on sale and $48K digital asset mark; ex-gains, underlying profitability is lower (pre-tax $1.63M less ~$0.99M of gains ≈ $0.63M PBT) .

Financial Results

Revenue, EPS, margins by quarter (oldest → newest)

Observations:

• Revenue: -1% YoY (Q3’25 vs Q3’24; $7.02M vs $7.11M) and +7% QoQ (vs Q2’25; $7.02M vs $6.56M) as diversification offset beef cyclicality .
• Gross margin: Stable sequentially (38.3% vs 37.5% in Q2) but below Q1 seasonally; wage inflation and hardware costs cited .
• EPS: Up YoY/QQ driven by one-time gain on sale ($946K) and digital asset gain ($48K) .

Segment revenue mix

KPIs and other items

Guidance Changes

No formal numerical guidance provided for revenue, margins, OpEx, tax rate, or segments in Q3 materials. Management reiterated diversification growth vectors and highlighted pipeline innovations (including labeling and other services), but no quantified outlook was issued .

Earnings Call Themes & Trends

Management Commentary

• “Our revenue trends continue to reflect the impact of tariffs and cyclical herd size reductions… Those declines have been largely offset by steady growth in new customer wins and increased demand for other verification and certification services.” — John Saunders, CEO
• “Gross margins [are] relatively stable despite a challenging macro environment and persistent wage inflation… Net income of $1.1 million in the third quarter included a $946,000 gain on the sale of our Progressive Beef interest.” — John Saunders
• “Verifications for pork, dairy and egg operations all increased year over year… Organic, non-GMO, Gluten Free, and Upcycled all showed gains.”
• “We have no debt… Progressive Beef stock sale generated cash proceeds of $1.8 [million] and the return of 12,585 shares… We retired an additional 60,721 shares in Q3…”
• “We’ve got probably 6 or 7 new AI initiatives… looking at ways to either be more efficient… or be better at getting in front of customers… we really started to invest in SEO.”

Q&A Highlights

• Herd rebuild timing and product revenue: Management sees cattle prices supportive but cited Mexico border closure and screwworm issues; expects another year before supply meaningfully increases; trade uncertainties (China/EU) add variability .
• Growth vectors beyond beef: Momentum in dairy/poultry and strengthening Organic regulations; exclusive Upcycled certification positions WFCF uniquely with CPGs; labeling program traction .
• Capital allocation and strategy: Company views itself as a growth business; willing to invest in acquisitions/technology; balance sheet clean with no debt; continued buybacks .

Estimates Context

• Wall Street consensus: S&P Global (Capital IQ) did not show published Q3 2025 EPS or revenue consensus for WFCF at the time of this analysis; therefore, no beat/miss determination versus consensus is available. Values retrieved from S&P Global.

Where estimates may need adjustment:

• Given the outsized contribution from a $946K gain on sale and a $48K digital asset gain, any forward EPS models should normalize these non-operating items; core demand growth across diversified standards (CARE, Organic, non-GMO, Upcycled) and retail labeling traction support maintaining service revenue assumptions, while beef and hardware volume recovery should be modeled conservatively pending herd rebuild/trade clarity .

Key Takeaways for Investors

• Quality of earnings: Q3 EPS strength benefited from a one-time asset sale and digital asset mark; adjust models to core trends (service growth, stable GM, disciplined SG&A) .
• Diversification mitigates beef cycle: Growth in pork/dairy/eggs and certifications (Organic, Upcycled, non-GMO, Gluten Free) is offsetting beef verification softness; retention >90% stabilizes revenue base .
• Hardware visibility mixed: Hardware revenue down YoY on lower tag volumes; pricing/mix shift to value-added tags acts as partial offset—model gradual recovery with herd rebuild .
• Balance sheet and buybacks: No debt, cash up to $4.76M, continued repurchases (60.7K in Q3; 116.5K YTD) and share cancellations from Progressive Beef transaction support per-share value .
• Near-term catalysts: Retail labeling expansion, exclusive Upcycled certification momentum, and Pangea/Walmart/Prime Pursuits supply-chain traceability collaboration could elevate visibility and demand .
• Risk watchlist: Beef herd rebuild timing, Mexico border/screwworm constraints, tariffs/trade (China/EU), wage inflation and hardware cost pressures remain key variables .
• Thesis: A resilient, asset-light verifier with diversified standards and improving operating leverage; treat one-time gains as non-recurring and focus on recurring service growth and label/retail expansion .

Additional Items and Cross-References

• Progressive Beef divestiture details: $1.8M cash proceeds and 12,585 shares returned/cancelled; $946K gain recognized in Q3 .
• TIME recognition (ranked 74th): Third-party validation of growth/financial resilience .
• Post-quarter partnership: “Transparency in Motion” with Pangea, Walmart and Prime Pursuits to trace hides from ranch to finished interior using WFCF certifications (CARE) .