WFCF - Earnings call transcript Q4 2017 | Where Food Comes From, Inc.

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Operator

Greetings and welcome to Where Food Comes From Fourth Quarter and Full Year Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Jay Pfeiffer, Investor Relations. Thank you.

You may now begin.

Jay Pfeiffer

to year Food end welcome fourth From and and quarter earnings afternoon the Comes Where XXXX Good call.

on Executive potential not will provided measures over to not place projections basis current Chairman new EBITDA During we revenue performance, the by revenue, policy not to removing our specific on many to respect Principles. also products in EBITDA, our be our John wins, Listeners estimates wins. with the expenses, actual customer We a now provide reflect directly on new we do operations. as complement company. financial reliance growth about evaluating of John? earnings our Chief business and documents as will that turn call the factors that adjusted provides and of releases of core for is which and call, certain statements. operating it performance believes subject EBITDA non-GAAP the investors or and in and to and company’s and are are expectations, to Saunders, an impact us discussing you additional guidance tool provided EBITDA management believe expectations to news It Accounting should filed Officer. customer be making profitability, website our the and use and these I there to presentation risk. and course items forward-looking Generally acquisitions the future We with differ statements Today, benefit because future the of statements Statements accordance forward-looking with operating from more as that we undue could cause Accepted are our results about adjusted investors this a compare consistent well review encourage forward-looking opportunities, are strategy, will results our acceptance publicly to cash, based from services, market as materially statements. information

John Saunders

continued This report for were Revenue thanks from Food grew certification Core XX% of and on X% to to and contribution Comes Solutions, we IMI year morning, initial solid and joining million XX% business the from an pleased year-over-year a A total. and of in $X.X contributed based afternoon for our and Bee million XX% end ago. acquired of newly strength SureHarvest, our Global, business. Validus year million Good $XX.X increased Sterling in to Organic us. at revenue revenue about product sales verification or ICS $XX.X the growth XXXX, year for From. acquired Where units another grew

year SureHarvest income maintenance revenue license, broken last to full from statement Net and out $XXX,XXX two income segments: declined services. for a is As the support, $XXX,XXX in approximately software year. on consulting and reminder, our

took I the of important in the the amortization new will the complying note $XXX,XXX also I think in costs $XXX,XXX of revenue it’s hard to non-cash another which no out required out on were after And settle changes it out, ASC recognition year, as bite with turned for process, standard the our review net $XX,XXX was with that impact that point $XXX,XXX XXXX. down XXX XXX of versus profit and ASC part. included just the income. depreciation all

hours public public such on burden and disappointed many, money small many we following acquisition, in on think the and to net grew income, EBITDA is have Again, not of depreciation We staff adjusted news adjusted on good to The senior we an it onerous amortization that project ago. SureHarvest believe to puts the all versus XX% mention to focus that It to have a companies. doing all expend to is sharp an been million the $X.X along. picture by we Comes verification correctly the units meaningful and profit from From, way because the EBITDA undue of Food year million $X.X joining of our well active increase Remember all our diversity of we amount it of due because services overall a businesses. of their exclusively at as view M&A XXXX our lot very niche From, global going Food on more across the a focused our a prior food our – of on provides programs, each units our evolving to our trends level. have health operating mixes, operating Where as year Where a in corporate business. Comes eventful and for was tend

with for cross-selling force incorporate in and efforts, trustable growth of Now they this management last our to collaboratively work to is asked Key relationship units in years services all in to planning proud we this and success made exercises ensure integration objectives. our of very we has all strategic effort am has thank sales other do what this business way units. investment have worked collaborative the the operating for to several over are a the the I way which bundling tool take the facilitated transformed to of have to commend the our environment want business we opportunity everyone come work together I together. team meet and the challenge. entire

conduct and a of reopen were China traceability XXXX export I to to contacting their reopened double units the they The continuing special and field and after setting B&C been beyond, imports of XXXX closed a In necessary really got the Sterling would We source the to beef XX business appropriate China half verification producers and a digit quarter year second and feel wait already and leader occurred were stage begin a to in opportunity consistently outbreak. remember timing for cavern the to to Global producers in us on and spring verifications. company. individual to you having thought due was requires our growth busy our China. very are our years at to for focus missed have as audits it knowledge give working until for market and well it U.S. to be are of recapping beef when are its qualify a be XXXX the minute building second we year then they growing beginning the interesting process. the the after are at the and Things what the in spring forced in of Because to IMI good involved for Solutions age source season, rate and the many on. began audits, the very age so for

activity even to year. reason stronger be For and that to and we expect this age accelerate source

consumer have evaluate beef the available largest confirm still producers producers to year almost the addition, growing the had a with is fastest In but premiums beef second massive Chinese that and demand world’s consumer. for base, in America

U.S. Cargill, Canadian We side of the beef the have additional recently long-term ours the on got pilot in from a program. Where Comes some customer for as From, beef good sustainability Canada Food acceleration named news its auditing second

we the following firm a XXXX. recall pilot as conducted similar in that the manager were the of When sustainability Canada initially Canadian back a they their auditor the for program had based in launched exclusive year, auditing You project Cargill sole verifications. McDonald’s by

to option decision. adding played producers decided a is are exploring more McDonald’s of thought a value to to sustainability stay here bundle spearheading Canadian So, leaders and response provide growing good offer as is mind, a on and this than in get in second their an producers. to in picture blue-chip the With us. that we us verification bodes this additional like gratified we very type were to for opportunities view consumer audits more to by role when our trend Cargill and auditor we improved then that that industry Cargill The one ability chance are to there well big that believe demand when is programs

undertaken areas bundled in of is industry animal add they is continued jointly remarks. running been of relationships my projects sustainability also provide around bundled mentioned seeing organic, Costco dairy. in strengthened poultry with subsidiary welfare, capacity welfare customers. animal Recent field customers a way Validus Validus ICS the legacy the pork, dairy solid They demand strong organic Likewise, cooperative collaborating welfare new and ICS at by Our and ongoing and dairy emphasizing to areas. for sourced. our going on worker example expand and are Validus the audits. also non-GMO and products these with ICS is increasingly subsidiary and great and in earlier and specialty is to biosecurity The the I growth, in effort are and audits large the

for Next of or look we [indiscernible] products. visit the Costco general lines time, organic milk our

specialty with its on our million first of pleased We number SureHarvest designed has the our roughly for performance The solutions, Coast. in completed transaction, line with the growers on revenue to increase are unit is in been integration high West also year company initiatives working full the in a which valued concentrated exciting generated expectations. products revenue on $X.X and the sustainability of for

even to These hydroponic, by initiative For It Board example, raise even are truffles gases opposed haven’t, and worth I The that are weight is with negative. projects of XXX be around are wine in our opportunities they almond or any production. surprise I products chefs and small I helping with from the as manage Bee small continues profile in other work Bee world. finally carbon almond brought ranging mostly customers, competitors and the dogs for in-ground believes right high-priced industry’s provider. we pursuing are they and ruded its know crops. solutions in niche have implications with is to subsidiary diverse specialty around relatively our gourmet the involved such terms grapes SureHarvest potentially stone of Almond carbon and production of, in demand avocados honey Serbian us our on And and working the by Granted, don’t mushrooms California heard as gold greenhouse certifications white neutral by as A Board Organic wild pigs. chaga the most to closely from Siberian their products complete us in XXXX carbon that fruit compelling. truffles, A think aquaponic, footprint on to this have premium products can of now business initiatives. is organic The interesting

is and of subject differentiating an Comes undervalued many chain. a and asking It Our about that Food board minute you business. unparalleled spend probably a portfolio strength want I are asset to Where a our block In on services of From. that’s closing, of for truly is

our hype Given at technology the would meant what the until around my preference role be determined it in exactly about all we not to talk business. this project, have

company persist engaged I it chain is very to to and this questions Let on an about benefit in traceability so asked will block any discuss seem in the remarks. high, my prepared be from candidate decided process the ideal likelihood would Obviously, I be to have technology.

to have from with looking expert in in it an interesting work Because would lot on XXXX project also chain’s block business. the business months at inquiries senior are model, of potential block a chain management into throughout several incorporation our we of exploratory We evaluate space. our been they getting players retain to some

For decades, technology our Where relevant types to Food Comes industry. has pioneered all of From

the clearly believe with We to but the the deeper to and that block our trust consumers, connection to doing to in we and on purpose. important are relationships day and are based end on stays structured in in our verifying a and customer to intentional what We between requires more mind, keep what plans ensure a partners drive producers boots at is the verification value for potential in marketplace a deep we product do activity has elevate and for line of and ground the the do benefits that the process. partners this our understanding of process. is chain It producer understand mission

we part business, Operator? So, chain And it that just be expect apart. to playing up happy take with that, a to a ends block being am of questions. I our

Operator

question. Please Private Instructions] Our with first your [Operator Investor. question Thompson, a Terry line proceed comes of the from

Terry Thompson

the having that your hi China, concerns the Yes, anticipated question effect effect against on and business? Hello. all Chinese imports having tariffs beef do or you reciprocating My recent against American any at anticipate John. any active on

John Saunders

That’s anticipated question. a great that I one.

one significant a any are at is one the those potential recent the and being of of beef of and response, for ones. We taking most though looking it as it type risk

and be occur. and we will are an of and of it look So, ready yes, and analysis does like that considering have moving impact if we ahead the what are done when would we something we

Terry Thompson

retaliate think it do Okay. imports? beef it against will you likely other might their Do American be low food, be you less feel something that on list to as that since is opposed

John Saunders

to little will color I let add Leann more that. a bit

Leann Saunders

Terry. Hi,

Terry Thompson

Hi, Leann.

Leann Saunders

you? are How

Terry Thompson

I am good.

Leann Saunders

and we I are for it’s mean, yet know are Terry. us the the positive implications, exports think beef obviously U.S. yet to for – I pork

a is potential it target. So

know it we but are maintain that market we we that for I will already of today today to because the win they find got we are don’t However kind really verifying that we get governments are we story, we access, open, of that that, which success both with place a requirements the was right are I hard access to it think have the know way expanded now. hopeful in stand it’s hopeful a

Terry Thompson

weeks it so better time, I are appreciate look you course, know than here to about or I everybody six Of your informed forward much guess. seeing on I I, I nobody mean knew but in

John Saunders

Thanks Ken.

Operator

line with a of Johnson, from question. Our Paul Please next the your Investor. comes proceed Private question

Paul Johnson

afternoon, you filed your kind you particular decided that? to us of we trading color a of prearranged Good you is January great, have shares any stock in questions, I few made X.X are early order able on a million information all, offer which to to plan – filing Yes. first where terminate sell

John Saunders

Sure.

just have X there implying think And sold the I had years the that is we was is and we great. are plan have – shares. that and you and what the felt XX,XXX that future we think think about too it’s place stock I value I for about our personally of

us, in a business that positive hold as on that stock but on to were of kind the the things we seeing was it we are to for we much as going could. So, no-brainer based

Paul Johnson

Okay, great.

done acquisitions are fair and part you to the The great an them ones know that lot side a made argument maybe other stronger I done we make given team second like and that a and anymore? job is have and a we more the feeling have maybe have other sales that and the discussed is here and go plan need strategy get why what in the of it on profitability taken we read like lot on I question with mean the we investors is have on I game is profitable I whole okay, the areas focus have feel is of and the to interesting, sort there what we with different company acquisition, do the another certainly of with can’t been that be a or growing I has more before huge management first, to however we digest

John Saunders

Yes. That’s a fair question.

looked that at know the have I a we we of that an when we think have potential analysis present than dozen the about if is you X And less as ago. was that. was third of on targets M&A amounts themselves. earlier did years of so results three companies, today opportunities I calls, And only have but evaluated, we been present it thus these done any way the themselves far don’t they have

– Hopefully believe through we acquisition to going become the come that’s profitability, process, they impact they that’s will go it road. opportunities we available. look as but as at something those continue down I So won’t that to

and are the possibly continue against. focused building the we most commodities standards the with we we to that company to We and – with point can are the this really that us compete most to is able best difficult address on at hurdles audit but expand to that the

Paul Johnson

is I your bit you from saying getting you businesses? stopping having that more you if to that breadth sales a product Are in understand offering more existing just not your you little are saying better, to want will

John Saunders

work bundle for larger audits to continue of customer, see Every completely. we to customers the with them. opportunities we Yes, that majority

one in we because when most target, a our large audits they it’s are different likely for conducting identify of So, customers a area.

Costco So, are not look levels. specific just and on a customers, two that are being is continue mentioned wide there multiple at a as them they they of range of to suppliers their we audits and DanoneWave commodity, that I are done

continuing audits, do conducting represent what potential So us look are a a to or entities at are market everyday those acquisition. we for they

Paul Johnson

who – other the you Costco, is the mentioned one? Who are

John Saunders

called it’s they Danone, now WhiteWave. acquired DanoneWave,

Paul Johnson

the various help it, Got all Thank you. see if seems if That important, is product the reasonable bundling can That’s lines? helpful. then okay. that

John Saunders

Yes. small organic, specifically you continue – if also relatively And though we organic we player take in to market. just it’s verification we if that are even grow the

That’s get math So, as a we look mass. consolidate to of we to critical it’s way we really momentum continue get at acquisitions, entirety basically and what to a this then lot point critical the come of of then are now. will the to just meal supervise for covering are we times and the trying you that store covering to us to that plate be are the for are and work grocery we we extenuate the the back the to providing brand the really that and of services able beyond platform extend premier if to and a

Paul Johnson

enough. fair Okay,

last just explain well, I in for block the terms I the question of in something understand about not because what have it’s you So would industry sort the block can very chain, chain? your is be layman’s opportunity

John Saunders

mechanisms great centralized on incorporating that from question. has to I information year chain trying to out comes having very for those And think is. the storing it’s at X other a its what database. decentralized a the database, Block last very quarter some a level hand, I been plus one That’s that requires We, spending opportunity X. so distinct two figure exactly have

when branches. important different we those thousands of verifications other the different companies those we different is and think conduct conduct that or of brands thing to all of verifications technology. I Almost brands that’s know hundreds for have

store any doing we how purely way what provide for information don’t we the or they they they them audit are So, it, it. we that are really guidance don’t their doing – on

seems chain, that vastness and everyday, that really new a involved. the chain, there once with block extrapolate have of it like represents are the I what article block that you is if just started of what about become aware somebody think chain is we parties a block number of new So,

its McDonald’s would would groups true for where than that something the that because and or of critical it’s some to that think block I will concept that’s maybe mass Food From I others chains all it’s anticipation a different introduce own there company that that only think Comes I incorporate at get provide So, solution are broader much and think chain, way again Where like a block to developing, these be comprehensive. a

Paul Johnson

helpful Thank all you. the That’s and appreciate information. I

John Saunders

bet. You

Operator

comes [Operator Private Instructions] a question with proceed next Our line from Rogala, Investor. question. Daniel Please the of your

Daniel Rogala

Hi, thanks for my taking call.

John Saunders

You bet.

Daniel Rogala

Okay, great.

was a So question payment release in that? little share the bonus a for just that about press you if margins quarter, on detail impacted could gross the you talked more wondering my

John Saunders

Sure. group small work a so the imagine especially in XXXX in really place, us accomplished the effort. relatively have here people, reward at X Yes, combination on for last for very, years a XXXX bonus been hard can just team so and opportunity if very have that the was we a it of years of we that have we that rate to growth the we and you this look by X over lean had use done was long of

Daniel Rogala

Okay.

kind was built structural So, that’s into it’s management decision? not like of specific metrics a just a bonus it

John Saunders

over XXXX of that was XXXX. results strong everything very structured, do had we based the have the yes, is we and much Well, that course on but it

Daniel Rogala

impact because Okay. And was of adjusted stock? so is versus the EBITDA anything within was that it cash there bonus, then a cash I assume

John Saunders

am quite that. I I sorry, catch didn’t

Daniel Rogala

it back adjusted guys it a I bonus, it stock-based I Sure. negative on had you and assume compensation. like out impact was I because still EBITDA said looks a cash think

was what any I there cash stock guess So, versus whether was to for I curious the stock any reasoning bonus? consideration was doing just

John Saunders

that to I the we again, in stock employees, company, on use at this stock are incentivize that Well, protective we saw as degree, do modeling one-time. and opportunity but everything we we just to once options stock we think as incentivize, so do very we and are do shareholders to management are to a large as try an the the

Daniel Rogala

just would from Okay. you I all am subsidiaries it’s then contribute? one growth sure that. like to operating want to so make XXXX release, to point does the And profitable just I press other interpreting to that continued appreciate subsidiaries and that since expect all if be mean right, you I contributed profitable operating just bullet in or

John Saunders

managed accurate. that of is so all Yes, we profitability, operating units our yes

be We those to are managing so profitable, units independently operating themselves. by

Daniel Rogala

And that includes Perfect. SureHarvest?

John Saunders

Yes.

Daniel Rogala

into of more great. then acquisitions? and just potentially food fraudulent handful organic about and has Okay, there other think guys you And opinion I that EU on from have and of back verification your been one claims, queue, for look especially what if jump I to will is in I curious headwinds, a international at the am so guys started

John Saunders

are sensitive we of to lot Yes, [indiscernible] with spent issues. those have questions. we time specific on it engaging Good very a and

the verification we system And improvement better the to audit that is so of in place to everybody process that that is clear, standards all itself. the have the

cure So, those time system whatever from pertinent. will we issues that fraud international is question arise very believe The perspective, problems. a over

in looked saturated. Europe honestly areas, have relatively We is other

So, Europe. right as not kind of about on other the I of opportunities. they now, we focus, that’s parts it’s looked not our rather have but at would are talk where world

Daniel Rogala

little about one a in, practices, can what business great. more from their just sneak perspective? you that a does you around Okay, I role withdrew so maybe in outlook USDA organic think the comment If can poultry that’s livestock bit

Leann Saunders

So right on now, they top currently hold. out, it’s that

period received changes that comment comments on to think of the and those public based on decided put I the they some they hold.

easy for kind bundle with would existing our and falls existing programs So, things but through in some of yet to holding whether some go It out. of it’s that incorporated, unclear currently be it’s us not. our pattern we that right welfare that into not animal to other where pieces a will see and programs, or now are

Daniel Rogala

much so Okay. guys another you Thank congratulations and on year. successful

John Saunders

you. Thank

Operator

for turn to end John the session. the remarks. of would now call the we Ladies closing like reached and to gentlemen, question-and-answer have over I

John Saunders

time call, and thank had so we participation for Once the your again great have you much like the questions. very a looks for great it

moved is are that again you positive, We we your a XXXX. excited in support to we very stuff can months. Thanks we of than as appreciate so we of forward and to to everybody. There couple more be continued into look imagine all talking really

Operator

This concludes today’s conference.

you at your your may participation. You time. this Thank lines for disconnect

Where Food Comes From (WFCF) 27 Mar 182017 Q4 Earnings call transcript