Where Food Comes From, Inc. (NASDAQ:WFCF) Q2 2022 Earnings Conference Call August 11, 2022 12:00 PM ET
Company Participants
Jay Pfeiffer – Manager, IR
John Saunders – CEO
Leann Saunders – President
Dannette Henning – CFO
Conference Call Participants
Operator
Greetings. Welcome to Where Food Comes From’s Second Quarter Earnings Call. At this time, all participants will be in listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions]. Please note this conference is being recorded.
At this time, I’ll turn the call over to Jay Pfeiffer, Investor Relations. Jay, you may now begin.
Jay Pfeiffer
Good morning, and welcome to the Where Food Comes From 2022 second quarter earnings call. Joining me on the call today are CEO, John Saunders; President, Leann Saunders; and Chief Financial Officer, Dannette Henning.
During this call, we’ll make forward-looking statements based on current expectations, estimates and projections that are subject to risk. Statements about current and future 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.
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.
John Saunders
Good morning, and thanks for joining the call today.
This morning, we released our second quarter financial results before the market opened and we were pleased to report another quarter of profitable growth.
Revenue in the second quarter grew 4% to $5.3 million from $5.1 million in the same quarter last year. Verification and certification services revenue was up 7% year-over-year to $4 million from $3.7 million. Tag sales declined 9% to $900,000 from $1 million and software and related consulting services was flat at approximately $500,000 in the quarter.
The decline in tag sales was due primarily to persistent drought conditions that have caused cattle ranchers to reduce their herd sizes that in turn results in fewer cattle’s being born which translates into lower tag sales.
For the six-month period revenue increased 20% year-over-year to $11.5 million from $9.6 million that included verification and certification services up 11% to $7.7 million from $7 million and tag sales up 12% to $1.9 million from $1.7 million, software and consulting revenue nearly doubled to $1.9 million. The increase in verification and certification revenue resulted as usual from a combination of strong demand from our beef exports and the appeal domestic producers of our bundling capabilities that both save and make them money and reduce the time they have to invest in the audit process.
As in the first quarter, we also saw renewed momentum in port, poultry and dairy and egg audits, as producers continued to open their facilities to outside visitation in the aftermath of the COVID shutdowns. The increase in tag sales year-to-date was based on a strong first quarter performance that was more than compensated for the second quarter decline. Going forward, we view the drought impact as in — as transition — transitory, and expect to have a decent year in that category.
The increase in software and related consulting revenue year-to-date was attributable to the large project, our Postelsia division completed for a Japanese trade entity in the first quarter. To recap that in Q1, we executed on a $850,000 contract to promote Japanese seafood in the United States.
We’ve been telling you for several years now about the potential to build new revenue streams around seafood. So we are very pleased to convert this opportunity and believe there will be others like it down the road.
Another exciting opportunity in the seafood space is the FishCARE program, we rolled out in July with the announcement that Reverence provisions has become the first aquaculture producer approved for this new standard. Reverence is a high profile North American trout farming, processing and distribution company. And they should be an outstanding Reverence customer for us as we look forward to bring on new customers in the future. FishCARE is the latest addition to our care certified suite of sustainability solutions. Joining our beef, dairy, pork and poultry standards in comprising the industry’s most comprehensive set of offerings for what is rapidly becoming a mega trend in the agricultural industry.
If you have a few minutes after the call, go to wherefoodcomesfromcare.com and have a look at what we’re doing with the CARE program. That site also hosts our Where Food Comes From story bit video series that provides some very cool perspectives on the producers we work with and why they value our services.
Turning now to our bottom line. Q2 net income was up 11% to $222,000 or $0.04 per share while Q2 adjusted EBITDA was up 7% to $570,000. Six-month net income was $700,000 or $0.12 per share, which was down compared to the prior year because remember last year we booked a little over $1 million into our other income for our PPP loan forgiveness. On an apples-to-apples basis, backing out PPP forgiveness, our six-month net income would’ve more than doubled prior year levels.
Adjusted EBITDA through six months increased 66% to $1.5 million from $9.9 million last year.
The company generated $2.3 million in net cash from operations in the first half of 2022, up 40% from $1.6 million a year ago. And at June 30, our cash and cash equivalents balance had increased 18% to $6.4 million from $5.4 million at 2021 year-end.
One final note, the company bought back 60,500 shares of stock in the second quarter, bringing to 94,050 the total number of shares we’ve bought back in 2022. That total already exceeds the 81,000 shares we bought back in all of 2021.
So thanks again for joining the call today. Operator, please open the call to questions.
Question-and-Answer Session
Operator
Thank you. At this time, I’ll hand it back to management for further remarks.
John Saunders
Thank you all for joining the call today. We’ll talk to you in a couple months. Take care.
Operator
Thank you. This will conclude today’s conference. You may disconnect your lines at this time. Thank you for your participation.
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