Shares of Where Food Comes From, Inc. WFCF have slipped 1.9% since reporting earnings for the fourth quarter of 2024. This compares to the S&P 500 index’s 2.2% decline over the same time frame. Over the past month, the stock has lost 9% against the S&P 500’s 21.3% growth.
Earnings Overview
Where Food Comes From reported fourth-quarter 2024 diluted earnings per share of 18 cents, up 28.6% from 14 cents in the year-ago quarter, driven by a $345,000 gain in the fair market value of bitcoin holdings.
The company’s total quarterly revenues of $6.7 million are flat compared with the year-ago quarter. Gross profit for the quarter declined 7% year over year to $2.8 million in the reported quarter from $3 million in the year-ago quarter.
Where Food Comes From Inc. Price, Consensus and EPS Surprise
Where Food Comes From Inc. price-consensus-eps-surprise-chart | Where Food Comes From Inc. Quote
Q4 Segmental Performance
Verification and certification services revenues, which make up the majority of WFCF’s business, declined 2% to $5.4 million in the fourth quarter of 2024 from $5.5 million in the year-ago quarter. The company attributed this decline to lower volumes in its beef-related source and age verification business, which has been impacted by cyclical herd contractions in the cattle industry.
Product sales, which include items related to verification programs, increased 6% year over year to $922,000 from $871,000. This growth was driven by rising demand for bundled verification solutions, as well as the company’s expansion into programs such as CARE Certified and Upcycled Certified.
Professional services revenues decreased year over year to $360,000 from $391,000, reflecting reduced demand for consulting and advisory services.
Key Business Metrics
The company reported a stable gross margin for the fourth quarter of 2024 despite shifts in revenue composition. Selling, general and administrative (SG&A) expenses declined year over year to $2 million from $2.1 million, with the company attributing the rise to higher marketing expenditure, personnel costs and technology investments.
Cash flow from operations stood at $2.7 million in 2024 compared with $2.8 million in 2023. Cash and cash equivalents declined year over year to $2 million from $2.6 million.
The company repurchased 273,057 shares in 2024 for $3.3 million, or $11.97 per share. Since the inception of its stock buyback program, WFCF has repurchased 1.2 million shares, returning $13.9 million to shareholders through buybacks, private purchases and a special dividend over the past 21 quarters.
Management Commentary
CEO John Saunders acknowledged the impacts of cyclical herd contractions on the company’s beef-related verification business, leading to declines in source and age verifications, and related hardware sales. However, he highlighted the strong performance of newer service offerings, such as the CARE Certified and Upcycled programs, with the latter seeing a 17% year-over-year revenue increase in 2024.
The company also reported growth in organic certifications, poultry and dairy industry verifications, and compliance audits related to California Proposition 12.
Management emphasized ongoing investments in marketing and technology, including new hires, to strengthen its technology platform. While SG&A expenses increased, Saunders positioned the expenditure as strategic to supporting growth.
Factors Influencing Results
The decline in revenues from beef-related verification services was attributed to external factors affecting the cattle industry, particularly herd size reductions. Management expects this to be a temporary issue and noted that demand for other verification programs has helped offset some of the losses.
Additionally, net income benefited from the company’s bitcoin investment, which resulted in a fair market value gain of $345,000 as of Dec. 31, 2024. WFCF initially invested $178,000 in bitcoin at an average purchase price of $25,400 per unit, with prices reaching $93,400 by the year-end.
Other Developments
WFCF continued its share repurchase program, buying back 57,018 shares in the fourth quarter. The company has been committed to reducing its share float while maintaining investments in expanding service offerings.
Management reiterated its long-term strategy of expanding verification services through organic growth and strategic acquisitions.
Outlook
Looking ahead, WFCF expects continued demand for its growing portfolio of verification programs. Management emphasized the company’s unique positioning in the food verification space and its ability to bundle multiple certifications to reduce compliance costs for customers. Although challenges in the beef verification business remain concerning, the company is confident in the long-term growth potential of its diversified service offerings.
WFCF’s strategy includes further share buybacks and investments in its technology platform to support expected customer growth. Management also signaled an openness to potential acquisitions that could enhance the company’s market position.
While near-term headwinds persist in certain segments, WFCF’s expansion into new verification categories and ongoing shareholder return initiatives provide a framework for long-term value creation.
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This article originally published on Zacks Investment Research (zacks.com).