Where Food Comes From, Inc. (WFCF) (Nasdaq: WFCF), the most trusted
resource for independent, third-party verification of food
production practices in North America, today announced financial
results for its first quarter ended March 31, 2021.
“We are pleased to report solid growth and improved
profitability in the first quarter despite continuing headwinds
related to Covid-19,” said John Saunders, chairman and CEO. “Our
verification and certification activity is still well below
pre-pandemic levels due to restricted access to pork, poultry, egg
and dairy customer sites. We are hopeful those restrictions will
lessen in the second half of 2021 and our audit activity with these
customer segments will begin returning to normal.
“In the meantime, our beef verification business continues to
accelerate, driven in part by growing customer interest in our CARE
Certified program, which supports ranchers, farmers and processors
in their efforts to create continuously improving sustainable
practices,” Saunders added. “Late in the first quarter we were
proud to announce that the Heinen’s grocery chain became the first
retailer to implement WFCF CARE Certified across its beef, pork and
poultry products.”
Saunders added, “Our recent up-listing to Nasdaq was another
important milestone in the evolution of our Company. Overall, I’m
extremely proud of our team’s performance under trying
circumstances over the past five quarters. We continue to execute
on our long-term strategy to be the preeminent provider of
third-party verifications in the agricultural industry.”
First Quarter ResultsRevenue in the first
quarter increased 14% to $4.4 million from $3.9 million in the
first quarter last year. Revenue components included:
- Verification and certification services, up 16% to $3.3 million
from $2.8 million.
- Product sales, essentially flat year over year at
$724,000.
- Software license, maintenance and support (excluding
intercompany sales*) essentially flat at $141,000 from
$143,000.
- Software-related consulting services (excluding intercompany
sales*), up 29% to $312,000 from $241,000.
*(Under segment accounting rules, the Company must reflect the
impact of intercompany sales in its software sales and consulting
revenue segment. Intercompany sales include the provision by the
Company’s SureHarvest subsidiary of software and services to Where
Food Comes From, Inc. to support Company-wide technology
initiatives not directly related to SureHarvest. For more
information, refer to the Results of Operations section of the
Company’s Form 10-Q.)
Gross profit (excluding intercompany sales*) increased 16% year
over year to $1.9 million from $1.6 million due to the increased
revenue base. Gross margin increased to 41.9% from
41.2% year over year.
Sales, general and administrative expenses in the first quarter
were down 10% year over year to $1.8 million from $2.0 million due
to a reduction in marketing costs.
Net income in the first quarter, inclusive of $1.0 million in
PPP loan forgiveness, was $1.2 million, or $0.19 per share,
compared to a net loss of $0.2 million, or $0.04 per share, in the
same quarter last year.
Adjusted EBITDA in the first quarter was $348,000 versus an
adjusted EBITDA loss of $44,000 in the first quarter last year.
The Company generated approximately $1.2 million in net cash
from operations in the first quarter, up from $0.9 million in the
same quarter last year.
Cash and cash equivalents at March 31, 2021, were up 14% to $5.0
million from $4.4 million at 2020 year end.
Conference CallThe Company will conduct a
conference call today at 10:00 a.m. Mountain Time.
Call-in numbers for the conference
call:Domestic Toll Free: 1-877-407-8289International:
1-201-689-8341Conference Code: 13719270
Phone replay:A telephone replay
of the conference call will be available through May 20, 2021, as
follows:Domestic Toll Free: 1-877-660-6853International:
1-201-612-7415Conference Code: 13719270
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, Validus Verification
Services, SureHarvest, WFCF Organic (previously known as A Bee
Organic), International Certification Services and Postelsia 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 STATEMENTThis 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; and
expectations for a lessening of customer visit restrictions in 2021
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 first quarter 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.
Contact:
Jay PfeifferPfeiffer High Investor Relations,
Inc.303-880-9000jay@pfeifferhigh.com
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Where Food Comes From, Inc. |
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Statements of Income (Unaudited) |
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Three months endedMarch 31, |
(Amounts in thousands, except per share amounts) |
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2021 |
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|
2020 |
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Revenues: |
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|
|
|
Verification and certification service revenue |
$ |
3,263 |
|
|
$ |
2,803 |
|
|
Product sales |
|
724 |
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|
|
725 |
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Software license, maintenance and support services revenue |
|
141 |
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|
|
143 |
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Software-related consulting service revenue |
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312 |
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|
|
241 |
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Total revenues |
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4,440 |
|
|
|
3,912 |
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Costs of revenues: |
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|
|
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Costs of verification and certification services |
|
1,793 |
|
|
|
1,534 |
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Costs of products |
|
457 |
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|
|
502 |
|
|
Costs of software license, maintenance and support services |
|
100 |
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|
|
146 |
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Costs of software-related consulting services |
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228 |
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|
120 |
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Total costs of revenues |
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2,578 |
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|
|
2,302 |
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Gross profit |
|
1,862 |
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|
1,610 |
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Selling, general and administrative expenses |
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1,773 |
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|
1,964 |
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Income (loss) from operations |
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89 |
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(354 |
) |
Other income (expense): |
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Dividend income from Progressive Beef |
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30 |
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30 |
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Other income, net |
|
1 |
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2 |
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Loan forgiveness from Paycheck Protection Program |
|
1,037 |
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|
|
- |
|
|
Gain on sale of assets |
|
9 |
|
|
|
- |
|
|
(Loss) gain on foreign currency exchange |
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(2 |
) |
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3 |
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Interest expense |
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(3 |
) |
|
|
(2 |
) |
Income (loss) before income taxes |
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1,161 |
|
|
|
(321 |
) |
Income tax expense (benefit) |
|
11 |
|
|
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(80 |
) |
Net income (loss) |
$ |
1,150 |
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|
$ |
(241 |
) |
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Per share - net income (loss): |
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|
Basic |
$ |
0.19 |
|
|
$ |
(0.04 |
) |
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Diluted |
$ |
0.19 |
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|
$ |
(0.04 |
) |
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Weighted average number of common shares outstanding: |
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Basic |
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6,136 |
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6,237 |
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Diluted |
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6,231 |
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6,237 |
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Where Food Comes From, Inc. |
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Calculation of Adjusted EBITDA* |
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(Unaudited) |
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Three months endedMarch 31, |
(Amounts in thousands) |
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2021 |
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2020 |
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Net income (loss) |
$ |
1,150 |
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|
$ |
(241 |
) |
Adjustments to EBITDA: |
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Interest expense |
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(3 |
) |
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(2 |
) |
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Income tax benefit (expense) |
|
11 |
|
|
|
(80 |
) |
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Depreciation and amortization |
|
202 |
|
|
|
233 |
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EBITDA* |
|
1,360 |
|
|
|
(90 |
) |
Adjustments: |
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|
|
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Loan forgiveness |
|
(1,037 |
) |
|
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- |
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Stock-based compensation |
|
25 |
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31 |
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Cost of acquisitions |
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- |
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15 |
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ADJUSTED EBITDA* |
$ |
348 |
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|
$ |
(44 |
) |
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*Use of Non-GAAP Financial Measures: Non-GAAP
results are presented only as a supplement to the financial
statements and for use within management's discussion and analysis
based on U.S. generally accepted accounting principles (GAAP). The
non-GAAP financial information is provided to enhance the reader's
understanding of the Company's financial performance, but non-GAAP
measures should not be considered in isolation or as a substitute
for financial measures calculated in accordance with GAAP.
Reconciliations of the most directly comparable GAAP measures to
non-GAAP measures are provided herein.
All of the items included in the reconciliation
from net income to EBITDA and from EBITDA to Adjusted EBITDA are
either (i) non-cash items (e.g., depreciation, amortization of
purchased intangibles, stock-based compensation, etc.) or (ii)
items that management does not consider to be useful in assessing
the Company's ongoing operating performance (e.g., M&A costs,
income taxes, gain on sale of investments, loss on disposal of
assets, etc.). In the case of the non-cash items, management
believes that investors can better assess the Company's operating
performance if the measures are presented without such items
because, unlike cash expenses, these adjustments do not affect the
Company's ability to generate free cash flow or invest in its
business.
We use, and we believe investors benefit from
the presentation of, EBITDA and Adjusted EBITDA in evaluating our
operating performance because it provides us and our investors with
an additional tool to compare our operating performance on a
consistent basis by removing the impact of certain items that
management believes do not directly reflect our core operations. We
believe that EBITDA is useful to investors and other external users
of our financial statements in evaluating our operating performance
because EBITDA is widely used by investors to measure a company's
operating performance without regard to items such as interest
expense, taxes, and depreciation and amortization, which can vary
substantially from company to company depending upon accounting
methods and book value of assets, capital structure and the method
by which assets were acquired.
Because not all companies use identical
calculations, the Company's presentation of non-GAAP financial
measures may not be comparable to other similarly titled measures
of other companies. However, these measures can still be useful in
evaluating the Company's performance against its peer companies
because management believes the measures provide users with
valuable insight into key components of GAAP financial
disclosures.
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Where Food Comes From, Inc. |
Balance Sheets (Unaudited) |
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March 31, |
|
December 31, |
(Amounts in thousands) |
|
2021 |
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|
2020 |
|
Assets |
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|
Current assets: |
|
|
|
|
Cash and cash equivalents |
$ |
4,996 |
|
|
$ |
4,374 |
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Accounts receivable, net of allowance |
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1,866 |
|
|
|
2,508 |
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Prepaid expenses and other current assets |
|
973 |
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|
|
592 |
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|
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Total current assets |
|
7,835 |
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|
|
7,474 |
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Property and equipment, net |
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1,689 |
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|
|
1,616 |
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Operating lease right-of-use assets, net |
|
2,960 |
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|
3,030 |
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Investment in Progressive Beef |
|
991 |
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|
991 |
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Intangible and other assets, net |
|
2,858 |
|
|
|
2,948 |
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Goodwill, net |
|
2,946 |
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|
2,946 |
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Deferred tax assets, net |
|
409 |
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|
443 |
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Total assets |
$ |
19,688 |
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$ |
19,448 |
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Liabilities and Equity |
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Current liabilities: |
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|
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Accounts payable |
$ |
675 |
|
|
$ |
649 |
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Accrued expenses and other current liabilities |
|
908 |
|
|
|
599 |
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Deferred revenue |
|
1,335 |
|
|
|
1,132 |
|
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Current portion of long term debt |
|
- |
|
|
|
463 |
|
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Current portion of finance lease obligations |
|
12 |
|
|
|
13 |
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Current portion of operating lease obligations |
|
275 |
|
|
|
268 |
|
|
|
Total current liabilities |
|
3,205 |
|
|
|
3,124 |
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Long term debt, net of current portion |
|
- |
|
|
|
572 |
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Finance lease obligations, net of current portion |
|
29 |
|
|
|
31 |
|
Operating lease obligation, net of current portion |
|
3,186 |
|
|
|
3,257 |
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Total liabilities |
|
6,420 |
|
|
|
6,984 |
|
Commitments and contingencies |
|
|
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Equity: |
|
|
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Preferred stock, $0.001 par value; 5,000 shares authorized; |
|
|
|
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none issued or outstanding |
|
- |
|
|
|
- |
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Common stock, $0.001 par value; 95,000 shares authorized; |
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6,475 (2021) and 6,456 (2020) shares issued, and |
|
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6,107 (2021) and 6,118 (2020) shares outstanding |
|
6 |
|
|
|
6 |
|
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Additional paid-in-capital |
|
11,677 |
|
|
|
11,612 |
|
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Treasury stock of 367 (2021) and 338 (2020) shares |
|
(3,113 |
) |
|
|
(2,702 |
) |
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Retained earnings |
|
4,698 |
|
|
|
3,548 |
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Total equity |
|
13,268 |
|
|
|
12,464 |
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Total liabilities and stockholders' equity |
$ |
19,688 |
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$ |
19,448 |
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