Where Food Comes From Inc Stock

Greetings, and welcome to the Where Food Comes From Second Quarter 2026 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the call over to your host, Mr. Jay Pfeiffer, Investor Relations. Thank you, sir. You may begin.

Good morning, and welcome to the Where Food Comes From 2026 Second Quarter Earnings Call. Joining me on the call today are CEO, John Saunders; President and Chief Strategy Officer, Leann Saunders; and CFO, 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 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 news releases and website for more information.

I'll now turn the call over to John Saunders.

Hello, and thanks for joining the call today. This morning, Where Food Comes From reported another quarter of revenue growth and solid profitability in spite of continued pressure on our flagship beef business due to fewer cattle moving through the system and record high beef prices.

Once again, the reason we have been able to grow profitably in the face of persistent headwinds lies in the size and diversity of our solutions portfolio, which is constantly expanding as we introduce new standards and certifications across the food spectrum. Today, Where Food Comes From is far and away the most diverse provider of food claims verification and certification. The growth of our service offerings over the years has been driven by a combination of M&A transactions and internal development in response to consumer preferences and industry trends. Some of these solutions were developed in collaboration with customers across the food supply chain who share our passion for giving consumers maximum transparency in how their food is raised.

We now audit to more than 50 standards in categories as diverse as animal proteins, wine grapes and upcycled foods. We are the leading certifier of popular food claims ranging from animal welfare and sustainable practices to non-GMO, gluten-free and organic.

Our CARE Certified program is the protein industry's most advanced tool for certifying animal care and environmental stewardship. Our new RaiseWell Certified program verifies animal welfare and natural practices and provides traceability from the farm through processing.

In the first quarter of this year, Whole Foods Market became the first retailer to adopt RaiseWell. This adoption was for their beef supply and has led to strong early results with more than 270,000 head of cattle now enrolled by ranchers who provide beef to Whole Foods.

RaiseWell was developed to address all animal proteins, and we are now working to expand the program to include chicken, turkey, pork, lamb and eggs. By the way, both CARE and RaiseWell are figuring prominently into our service bundling strategy, particularly in conjunction with our organic services. And this provides our customers with cost and time savings while enhancing our revenue and gross margins.

We are also sewing seeds on other new initiatives that we believe will grow over time and further strengthen our reputation as a one-stop shop for verifications and certifications across an ever larger spectrum. For example, we have recently partnered with the Potato Sustainability Alliance to provide on-farm audits that verify and benchmark sustainability metrics around environmental stewardship, including reducing GHG emissions, optimizing water management and minimizing food waste as well as improving soil health, supporting biodiversity and promoting responsible use of pesticides.

As another example, in May, we helped USAgrichar become the first biochar producer in Colorado to achieve USDA certification for its product. Biochar is a stable carbon-rich material produced by heating organic biomass in a low oxygen environment. The resulting product support soil health through improved water retention and nutrient efficiency and has the added benefit of long-term carbon sequestration.

In Colorado, similar to other Western states in this new age of drought and forest fires, biochar production has the added bonus of improving forest health and reducing wildfire risk because the raw material is often dead forest firewood. So again, we are laser-focused on expanding our portfolio with solutions that address consumer demands and help our customers differentiate their products. The size and scope of our portfolio is the cornerstone of the moat we have built for our business.

Turning now to the second quarter financial results. Total revenue in the second quarter increased slightly to $6.6 million on the strength of verification and certification revenue of $5.4 million versus $5.3 million in Q2 last year. Gross profit increased 9% year-over-year to $2.7 million from $2.5 million, with gross margins rising to 40.6% compared to 37.5% in the second quarter last year. These improvements were attributable to cost efficiencies achieved in all 3 of our business segments.

Operating income in Q2 increased 21% year-over-year to $665,000 from $549,000. Net income was $413,000 or $0.08 per share compared to net income of $562,000 or $0.11 per share in the same quarter last year. I want to emphasize that the lower net income was mostly due to the noncash impact of fair market value of digital assets that amounted to a $240,000 negative swing in the second quarter year-over-year.

Additionally, the year over -- the year-ago second quarter included $50,000 in dividend income related to our ownership interest in Progressive Beef that was divested last year. So we believe our operating income up 21% year-over-year remains the most accurate measure of our profitability in the quarter.

6-month results. Total revenue increased 1% to $12 million from $11.8 million. Verification and certification revenue grew by 3% to $9.8 million from $9.5 million. Operating income through midyear increased to $963,000 from $691,000. Net income through the first 6 months of 2026 was $505,000 or $0.10 per share compared to net income of $593,000 or $0.11 per share in the same period last year. The company generated $1.5 million in cash from operations year-to-date and closed the second quarter with $3.4 million in cash and cash equivalents, up from $3.2 million at 2025 year-end.

Due to our consistent ability to generate strong cash flows in combination with our belief that our own stock represents a good investment at current levels, we continued our aggressive buybacks in the second quarter, repurchasing approximately 65,000 shares and raising year-to-date buybacks to nearly 89,500 shares. Since the inception of our stock repurchase program in 2019, Where Food Comes From has returned more than $17.2 million in value to stockholders.

One final topic I want to address is M&A. As you know, over the past 14 years, we've averaged 1 acquisition per year, adding products, services, standards, customers, new talent and accretive revenue streams to our business. We successfully integrated each of these transactions into our business and are pleased to say that each has added value.

The industry we compete in is still in its early innings and changing dynamics due to geopolitical and regulatory events, evolving consumer demands and other factors are giving rise to new opportunities. As a result, after a roughly 3-year pause since our last transaction, we are renewing our focus on M&A as a means of accelerating growth, strengthening our business and building shareholder value. As always, a key criterion in this process is whether a given transaction would be immediately or at least near term accretive to our overall business. To be clear, we are now just beginning to reengage in this process, and I'm not indicating any transactions are imminent. I just want to let you know we are dusting off the playbook and renewing our focus in this area.

With that in mind, Where Food Comes From will file a shelf registration statement in the next day or so to be better positioned as a company for potential M&A activity. Shelf registrations provide companies with maximum financial flexibility and much quicker time to market to access capital growth. They are particularly effective in executing opportunistic M&A transactions. Shelf registrations are becoming more common for companies of all sizes and are considered to be good corporate governance. As an aside, in the first half of 2026, once in May and once more in July, we had 2 occasions where our stock traded over $20 per share. With that in mind, it makes even more sense to have a shelf that could add value to the company and its stockholders during periods of extreme volatility.

So with that, I'll open the call to questions. Operator?

[Operator Instructions] Our first question comes from the line of Terry Thompson, private investor.

Congratulations on another consistent quarter. Did anybody have any idea of what caused those 2 price spikes up to over $20 this last year?

I'll let Jay answer that one.

Yes, that's the million-dollar question. And the short answer is no. We've worked with NASDAQ and their market surveillance department, and we've talked to investors and unfortunately, we just can't pinpoint it. It's somebody that felt from the speculative side of things, all we can deduce is somebody that felt that they want to own the stock and they're willing to bid it up to own it. So that's the good news. We just don't know who it is.

Okay. I kind of figured that would be the answer, but I had to ask. Again, thanks to all and nice to hear from you all.

Our next question comes from the line of Chris Brown with [Technical Difficulty] Financial.

I really had 2 quick questions. The first one is with respect to the headlines out in the food world with respect to Cyclospora and earlier the screwworm issue, kind of, what you guys are doing to take advantage of a renewed focus on food safety?

Second would be if you'd ever consider breaking out the non-beef certification business from the beef to allow investors to understand a little bit better the growth in the non-beef area and understand how patient we need to be to wait for beef to rebound?

Great questions, Chris. I'm going to let Leann answer the first one.

Chris, so I'll attempt to answer it. We feel like we've positioned ourselves as well as we possibly could in the instance of an animal disease issue like screwworm. I think the challenge with screwworm, in particular, is that it's caused by flies. So we -- as we talk to people in the industry, it's hard to electronically identify flies, right? So there's mitigation things that are happening with the USDA. But I think where we've been well positioned is -- we have an ongoing relationship with CattleTrace, which CattleTrace is a nonprofit organization that's been really working on voluntary methods of animal identification and traceability. And we work with them very closely. In fact, we administer their activity.

And then also just in the world of biosecurity, we've been doing biosecurity audits and building out what are called secure beef supply plans now for a number of years for locations, which is becoming more and more important as you look at state animal health officials deciding when cattle can and cannot move. And all of our programs on the beef side require an electronic identification means. All of that becomes part of the solution in the event of an animal disease. So I think we've positioned ourselves well to be at the topic of conversation and have had multiple conversations actually with the USDA on the front -- on that front, particularly.

When it comes to food safety, similarly, across our platforms, across all of our divisions, we -- our Validus Verifications division has a program called Safe Quality Food. And so we are a leader -- that division is a leader in SQF audits on farm. And that is becoming the mechanism for large organizations like a Walmart, for example, that are starting to say they want their supply chains to have those SQF audits in place, which are food safety protocols.

And specifically, in the case of Cyclospora, I think what we've talked about many times in the past is that we do not verify food safety relative to specifically a lot of leafy greens and lower-value vegetables, primarily because there is a lot of risk relative to it. And I think that what we're seeing right now is obviously something that's going to impact our business in the sense that there will continue to be a focus on the food safety issue specifically.

Relative to the beef question, that's a great point to mention, Chris, and we've talked about the long-term future of the cattle industry in the U.S. I think one of the things that we believe very strongly, and you're seeing it with RaiseWell specifically, is our ability to meet the needs of a company like Whole Foods across all of the proteins that they sell. So the one danger in us divesting of any particular species or product is our inability to continue to provide that type of full range complementary service to, again, a company like Whole Foods or Walmart.

I appreciate that. My question is more just breaking out your results from the businesses, but I understand your answer.

Okay. I didn't understand that. I'll -- Dan, do you want to take a shot at that one?

If you need me to explain, it's more just if we can see clearly your growth in some of those other businesses versus your -- what you've historically called the cyclical beef business? It might help investors understand all the investments and growth you're getting away from beef.

Yes. Chris, this is Jay. Sorry, we -- everybody misunderstood your question, but I think we're on it now. But just to clarify, you're asking, can we break out what percentage of our revenue is beef versus non-beef-related verification certification activity?

Yes, it's more just to allow investors to understand these other areas you've been investing in away from what's been a very cyclical beef category. That's exactly right. And you guys probably know better than us. So that was more of an open-ended question for you to consider.

Understood. Sorry for the misunderstanding. No, that's a great comment. I think that is -- we will definitely take that under consideration. We can definitely do it. It's just how we do it. Yes. And just so it's clear, beef is roughly 50% of our revenue, Chris.

Ladies and gentlemen, that concludes our question-and-answer session. I'll turn the floor back to Mr. Saunders for final comments.

Once again, thank you all for your time and your commitment. Have a great day, and we'll talk to you in 3 months.

Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.

Greetings. Welcome to Where Food Comes From First Quarter 2026 Earnings Call. [Operator Instructions] Please note this conference is being recorded.

I will now turn the conference over to Jay Pfeiffer, Investor Relations. Thank you. You may begin.

Good morning, and welcome to the Where Food Comes From 2026 First Quarter Earnings Call. Joining me on the call today are CEO, John 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 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.

I'll now turn the call over to John Saunders. John, please go ahead.

Hello, and thank you for joining the call today. This morning, in our first quarter results news release, we were pleased to announce year-over-year growth and a return to profitability. Verification and certification revenue increased 6% in the quarter to $4.4 million from $4.2 million, while product sales edged up slightly to $713,000 from $702,000. Total revenue increased nearly 2% year-over-year to $5.4 million. This growth, which we achieved despite persistent headwinds around tariffs and a smaller herd size was driven by steady new customer wins based on increasing demand for a range of certifications we provide.

And for all the challenges on the beef side, I'm happy to report that many of our new customers are for beef-related services. A highlight on the beef side has been the RaiseWell program that we launched in the first quarter of 2026. RaiseWell offers brands, high-end retailers and food service operators a great way to attract consumers seeking premium protein products that have been verified back to the source of origin as having been responsibly raised, meaning they have not been given antibiotics or added hormones and have complied with rigorous animal care requirements throughout the life of the animal.

The RaiseWell launch has gone very well thus far. We secured Whole Foods market as the first major retailer to adopt the program for its beef supply, and we are generating meaningful revenue now. RaiseWell is also available for other proteins, including pork, Bison, lamb, poultry, eggs and dairy. In terms of product sales, we are experiencing lower volumes in line with fewer head of cattle being put through the system and temporary tag subsidies offered to ranchers. Despite that, our product revenue was slightly higher year-over-year, reflecting increased demand for premium tags that offer more features that our ranchers are looking for.

As we mentioned last quarter, the cattle industry is going through an unusual period of disruption due to a confluence of many factors. But with this disruption comes many opportunities. One of those is a potential opportunity to demonstrate our unique capabilities in response to an animal disease outbreak. As you know, the Mexican cattle industry is experiencing an outbreak of what is known as New World screwworm. This outbreak has been steadily moving north and now involves several Mexican states border in Texas. [Technical Difficulty]

I think we're having an issue with John's line. John, can you hear me? Okay. Just give me a moment. We'll try to reconnect.

[indiscernible] reconnect with John, if not, I can pick it up [indiscernible]

I apologize. John Saunders is traveling internationally, and we believe we've lost connection with him. I'm Dannette Henning, the CFO. I'm going to go ahead and take over where he kind of left off. And -- here we go.

So picking back up on where the Mexican cattle industry was experiencing an outbreak of what is known as New World screwworm. The outbreak has been steadily moving north and now involved a couple of Mexican states bordering Texas. The USDA is working hard to prevent the cross-border spread, but should a spread occur, we are ideally positioned to help manage the response. Our IMI Global unit maintains the most advanced animal traceability system. And with our growing partnership with CattleTrace, the producer-led private industry database, we can quickly deploy a system that enables contact, tracing and allow animal health officials to identify livestock and locations that may have been exposed to disease.

In the meantime, we are seeing solid growth in a number of non-beef business lines. Verifications for pork, dairy and egg operations all extended their growth momentum in the first quarter. Certification activity for organic, non-GMO, gluten-free, and upcycled also showed gains. And again, we continue to leverage our extensive solutions portfolio to our advantage through bundling incentives that save our customers time and money.

In closing, we remain optimistic about our ability to profitably grow our business over the long term and accordingly plan to continue our stock repurchase program. We bought back 24,469 shares of our common stock during the first quarter at a cost of $293,000. Total buybacks since planned inception, including private purchases are 1,399,121 shares at a cost of approximately $15.5 million.

And with that, I'll thank you again for joining the call today and open the call for questions. Operator?

[Operator Instructions] There are no questions at this time. I would like to turn the conference back over to John for some closing remarks.

Well, thank you all very much. I'm sorry. Thank you, Dannette, very much for finishing for me. I apologize to all of you for the technical difficulty. I want to say welcome to all the new shareholders, and we will make you very proud and look forward to talking to you in 3 months. Take care, everyone.

Thank you. This will conclude today's conference. You may disconnect at this time, and thank you for your participation.

Greetings, and welcome to the Where Food Comes From 2025 Year-End Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jay Pfeiffer, Investor Relations. Thank you. You may begin.

Good morning, and welcome to the Where Food Comes From 2025 Fourth Quarter and Full Year 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 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. I'll now turn the call over to John Saunders.

Hello, and thank you for joining the call today. This morning, we announced 2025 financial results that included total revenue of $24.9 million and net income of $1.5 million or $0.30 per share. Once again, the steady growth we're achieving in new customer wins and non-beef-related revenue streams was offset by the impact smaller herd sizes and tariffs are having on our beef-related verification activity.

Fourth quarter revenue was particularly impacted by the unexpected closing of a packing plant that has been an important contributor to our NHTC Natural and EU export certification programs. That closing had a significant impact on our prior internal projections management and the Board used to formulate discretionary bonuses for the year. Accordingly, executive management determined to return their bonus compensation to the company. As a result, the income statement in our first quarter 10-Q will benefit from a reduction to compensation expense in the selling, general and administrative category.

As we've been discussing on our earnings call over the past couple of years, herd sizes have been steadily shrinking due to drought, increasing production costs and other factors. And today, the U.S. cattle supply is at a 70-year low. The shrinking supply in turn, has led to record beef high prices. And in this environment, some ranchers have opted to reduce their investment in certain verifications that we provide, and this is impacting both our verification and tag sales.

There are indications that the herd contradiction phase of the cattle cycle is at or near a bottom and the industry should begin rebuilding the cattle supply over the next couple of years. In preparation for this recovery, we have been expanding our services portfolio with new certifications and working on other protein programs that we believe will position us for accelerated growth as the recovery gains momentum.

I want to highlight a few of these initiatives to give you an idea of why we remain confident in the future of Where Food Comes From as both a growth company and as the food verification industry leader. Last month, we announced the launch of RaiseWell Certified, an innovative new standard for animal care verified natural raising practices and transparent fully traceable supply chains. The program is designed for brands, high-end retailers and food service operators that want to differentiate their products on integrity, quality and certified production practices.

RaiseWell requires animals to be responsibly raised at every stage of life with rigorous animal care requirements, no antibiotics or added hormones and verified as a source of origin, all with the aim of creating traceability throughout supply chains that retailers and consumers can trust. We are rolling out RaiseWell in stages beginning with beef and expanding over time to poultry, eggs, dairy and pork.

We followed up that news last week with an announcement that Whole Foods Market became the first major retailer to adopt the RaiseWell program. Whole Foods is widely recognized as a pioneer in advancing farm animal welfare, so its adoption of RaiseWell is an important endorsement for the program that we believe will lead to adoption by other leading retailers as time goes on.

RaiseWell Certified seamlessly integrates with our CARE Certified standard, giving producers and retailers the option to bundle claims and create a unified audit-ready package that can include pasture raised, outdoor access, grass-fed and other verified livestock raising attributes.

Another promising initiative on the beef side of things is a new collaboration with global automotive leather supplier, Pangea. In concert with Walmart and Prime Pursuits to introduce CARE Certified's sustainable leather to U.S. automotive brands, this first-of-its-kind program entitled Transparency in Motion leverages data-driven verifiable practices to confirm exactly how its materials are raised, cared for and processed, making Pangea the first leather provider in North America to achieve traceability at this level. By becoming CARE Certified, ranchers can not only enhance the value of their herds, but also connect with consumers who increasingly prioritize sustainable practices and ethical sourcing.

I want to touch on one other beef-centric initiative that we continue to advance slowly but surely, and that involves animal disease traceability. I'll remind you that the United States is the only major cattle-producing country that does not have a mandatory traceability program, so that is essential to managing and containing an animal disease outbreak. We have invested significant time and resources over the years to position ourselves as an integral player in what we believe is the inevitable adoption of a formal ADT program in the U.S.

Our IMI Global unit is far and away the most experienced player in this space, having the technology, systems and procedures already in place and in practice that can quickly be brought to bear in a comprehensive national animal disease traceability program.

We are now working closely with U.S. CattleTrace, a producer-led private industry database to strengthen cattle traceability and support a secure U.S. beef supply. Unlike traditional point-to-point traceability systems, U.S. CattleTrace enables contact tracing, allowing animal health officials to identify animals and locations that may have been exposed during disease event. This capability is critical for responding to highly contagious diseases such as foot and mouth disease.

IMI Global serves as the administrator for U.S. CattleTrace. We provide the technical infrastructure and operational expertise needed to manage traceability securely while ensuring producers retain control, governance remains producer-driven and data privacy is protected. Together, we are engaging with U.S. government representatives and entities to explore ways to advance and formalize an ADT solution.

The cattle industry is going through a period of disruption unlike any other in our lifetime. As discussed, this has presented challenges so far that we are navigating successfully. But at the same time, it is creating opportunities for us to leverage our positioning and know-how to play a lead role in reshaping the industry as it begins the rebuilding process. Hopefully, some of this will give you a feel for why we're so optimistic on the long-term prospects for our beef-related business.

In the meantime, for our non-beef-related business lines continue to grow and prosper. For the past 10 years, we've been building out a highly diverse and dynamic solutions portfolio, adding new customers for new services, generating new revenue streams and reducing our reliance on the beef industry. Verifications for pork, dairy and egg operations all increased year-over-year, and our CARE Certified program continued to attract new customers in a variety of proteins. Similarly, certification activity for organic, non-GMO, gluten-free and upcycled all show gains.

In addition, we continue to benefit from a unique ability to bundle services, a competitive advantage that saves our customers' time and money, contributes to revenue growth and at the same time, helps us strengthen our margins. Given the growth of our solutions portfolio and customer base and our optimism about our business overall prospects, we believe our shares remain an excellent value at these levels, and we expect to continue repurchasing stock in 2026.

In 2025, we repurchased 183,016 shares, raising total share buybacks and private purchases since planned inception to 1,374,652 shares, totaling $15.2 million in value returned to shareholders. And with that, thank you again for joining the call today, and I'll open up the call to questions. Operator?

[Operator Instructions]

And it appears that there are no questions at this time. Therefore, I would like to turn the floor back to CEO, John Saunders, for closing remarks.

Thank you all again for the time today, and we'll talk to you again in 3 months.

And this concludes today's conference, and you may disconnect your lines at this time. Thank you, and have a great day.

Greetings, and welcome to the Where Food Comes From Third Quarter Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It's now my pleasure to introduce Jay Pfeiffer of Investor Relations. Please go ahead.

Good morning, and welcome to the Where Food Comes From 2025 Third Quarter Earnings Call. Joining me on the call today are John Saunders, CEO; Leann Saunders, President; 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 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 forward-looking statements. We encourage you to review our publicly filed documents as well as our news releases and website for more information.

I'll now turn the call over to John Saunders.

Hello, and thanks for joining the call today. In our earnings release this morning, we again reported strength in a wide range of service offerings that essentially offset the continued impact that the smaller herd sizes are having on our core beef-related verification activity. We also reported solid bottom line results in spite of the modest revenue decline, an accomplishment that underscores the resiliency of our business and our successful efforts to align expenses with revenue run rates as we navigate a challenging macro environment on top of some industry-specific headwinds.

Total revenue in the third quarter was $7 million, a decline of just $92,000 over the same quarter last year. Revenue in our verification and certification segment grew by 1% to $5.6 million based on increased activity across our portfolio, which includes by far the industry's most comprehensive set of solutions. Verifications for pork, dairy and egg operations all increased year-over-year, and our CARE certified program continued to attract new customers in a variety of proteins. Similarly, certification activity for organic, non-GMO, gluten-free and Upcycled all showed gains.

In addition, we continue to benefit from a unique ability to bundle services, an advantage that saves our customers' time and money, contributes to revenue growth and at the same time, helps on the gross margin side. Finally, customer retention rates well above the 90% level have also played a big role in revenue stability. Hardware sales declined to $1.2 million from $1.3 million year-over-year with lower tag volumes due to herd shrinkage and tag subsidies being partially offset by growing demand for value-added tags that we sell at higher price points.

Gross margins remained fairly stable year-over-year and SG&A expense actually declined slightly in the third quarter, reflecting careful management of fixed costs and lower marketing and trade show expenses that largely offset higher compensation costs. That led to operating income of $575,000 compared to $608,000 in the year ago third quarter. Net income grew to $1.1 million or $0.22 per share in the third quarter compared to net income of $500,000 or $0.09 per share a year ago. The increase included a $946,000 gain on the sale of our Progressive Beef ownership and a $48,000 gain on digital assets.

I think it's important to highlight some of these profitability metrics in light of headwinds we're encountering in the forms of tariffs and inflationary pressures, including significant wage inflation and smaller herd sizes, which impact both verification and hardware revenue and profitability levels.

Our balance sheet remains strong and clean. We closed the quarter with cash and cash equivalents of $4.8 million, up from $2 million at 2024 year-end. We have no debt. The Progressive Beef stock sale, which closed in the third quarter, generated cash proceeds of $1.8 million and the return of 12,585 shares of our common stock, which was another 150,000 returned to shareholders or which have been canceled and removed from our total issued and outstanding stock.

Turning to stock buybacks. We retired an additional 60,721 shares in Q3 through our buyback program that was initiated in 2018, raising our year-to-date buybacks to 116,547 shares and our total buyback since planned inception to more than 1.3 million shares, representing more than $14 million in value returned to stockholders over the past 7 years.

Earlier this week, we announced our inclusion in Time Magazine's America's Growth Leaders 2026 ranking. Where Food Comes From was ranked 74th among more than 4,000 public companies in the United States. This ranking places Where Food Comes From among the most innovative and dynamic publicly held companies in America. The list was led by NVIDIA and included names like Tesla, Palantir, CrowdStrike, Broadcom, and Alphabet. You can find a link to the story in the November 11 press release posted on our website. As one of the smallest companies in the top 100 list, we view our inclusion as validation of the growing importance of verified sourcing in the world today. Consumer demand for transparency into food origins, ethics and safety has never been more relevant. And we are playing a lead role in the megatrend that involves all participants in the supply chain, ranchers, growers, distributors, retailers and consumers.

Our ability to remain at the forefront of this megatrend is based on a customer-focused approach that gives ranchers and growers the tools they need to address evolving demands of retailers and consumers in real time. We are constantly innovating with new services that are often years in development but are ultimately expected to become meaningful revenue streams. A case in point is our labeling program, which has been in place for more than 10 years and is now beginning to gain traction as forward-thinking retailers recognize its value in attracting and maintaining customers.

We have other innovative new services in the pipeline that will further expand our market-leading portfolio and benefit both customers and consumers, and we hope to be announcing one of them in the very near future. And with that, I'll thank you again for joining the call today and open the call to questions. Operator?

[Operator Instructions] And the first question comes from the line of James Ford with First Ballantyne.

I had a quick question with regard to the herd size and product revenue long term. When do you think you'll see a material pickup in product revenue relative to herd size growing? Is the beef and cattle futures prices high enough to get the demand up there in a year or 2?

Thanks for the question, James, I'll take the first stab, and then I'll let Leann answer from her perspective as well. I do think that the cattle prices have started to reach the level where there is some building back in the herd, but we're still faced with issues relative to primarily the border being closed with Mexico and that none of those cattle are able to come into Texas, Oklahoma. So that's typically a big part of our beef supply. And with this screwworm issue, I think we're just really struggling to see how it's going to be a short-term solution to this problem. So yes, I think in certain areas, we're starting to see a build back, but it's going to take a lot of time. Leann?

Yes, I agree with everything. I think it's a very predictable cattle cycle. I think we're dealing with some issues that are unique relative to supply, just a lot of generational turnover in the cattle industry, which is a challenge. And then you also have continued drought in some areas, which are restricting those locations from building back. So we anticipate -- I mean, we're probably going to see maybe another year and then start to go up again in supply, which is very typical. But again, we're kind of in new waters here a bit. So just waiting to see and not try to predict as much as we typically have there.

Yes. And maybe one final point with that. I think one of the things that we're encouraged about, although it was politically a very hot topic over the last couple of weeks, is that it appears that this administration is starting to look at utilizing public lands more than it has been over the last, obviously, 4 years. But I think that's something that's going to probably incentivize younger ranchers or ranchers and farmers that are looking to grow their herds that, that incentive hasn't really been there for a while. So we're encouraged by that, that there seems to be more financing available and just land that's available for use if you're wanting to raise livestock.

The other thing on the demand side is a little bit of things unknown relative to trade negotiations. I mean China became our biggest export market for beef prior to now they're not purchasing U.S. beef products. So again, it's like we have all these factors relative to trade agreements happening at the same time. So it's challenging to predict. So we kind of waiting to see on that as well and some increased restrictions from the EU, which are problematic.

The next question comes from the line of Chris Brown from [private] investor.

Following up on that question, under the assumption that kind of the beef verification is kind of stable and not growing particularly fast in the next year or so, what are the other businesses and programs that you're most excited about that you think will be kind of growers in the next year or 2?

And then the second question is kind of a little bit capital structure. Are you thinking of yourselves as a growth company? Or can we think about more of kind of a stable cash-generating business going forward? I know you've done some dividends in the past, et cetera. How do you think about the balance sheet, the buildup of cash and what you do with it?

Two great questions, Chris. Thank you. The first one, I think in the script and we talk about it, there are a number of factors right now, which are driving primarily our dairy, our poultry, that being both broilers and egg laying hens. But in addition to that, the organic certification, there's been some recent strengthening of the regulations relative to organic, which has expanded the number of customers that are eligible or required to participate.

And then again, we are the exclusive supplier of the Upcycled certification. So that really puts us in a unique spot when we look at CPG companies that are trying to address consumer demand. So you've seen like let's call it the Fairlife Protein 42, all these new protein drinks that are shelf stable, Chris. I don't know if you're familiar with those or not. But people involved in exercise, weight lifting, any of that type of stuff are really looking to get as much protein as they can. And it's kind of the old new that has dairy and milk, especially this new kind of milk, this hyper-energized is something that they're looking for. So obviously, they're wanting to do that.

So I think what we're really doing is looking at consumer trends and then trying to match our business with that, understanding that the beef industry is a long-term play for us. And we still are the -- we basically control the disease traceability, the verification systems through our Beef Passport system. So we're not giving up on that. We're understanding that it's a marathon, not a sprint. But this is also giving us a big opportunity to really look at those other markets and to grow them, which thankfully are continuing to grow really rapidly and our Validus and our Where Food Comes From organic division have been doing great work and really expanding and getting more efficient, and we're much better at customer intake and processing. So anyway, we've got a lot to be excited about that's different than beef. So believe me, we're working on that hard.

The second question, I think, with our sale of Progressive Beef, it gave us an opportunity to really to get, I think, even better capitalized. We are constantly looking at new opportunities and new growth areas, new companies. I've mentioned before several times that the closer we can get to consumers, I think that's the direction that we want to move and just continue to look at technology. We've got probably 6 or 7 new AI initiatives that we're working on within the company, just looking at ways to either be more efficient or to be better at customer service or be better at getting in front of customers. And one thing we've spent a lot of time on, we haven't talked about, but if you go to whatever your search engine is today and type in third-party verification, Where Food Comes From is now going to be placed on the first page, I think, in all circumstances. So that wasn't on accident.

About a year ago, we really started to invest in SEO and to be better at getting in front of consumers and understand -- and meeting them where they're at and understanding what they're wanting to talk about. So I think we've done a really good job there. If there's opportunities for us to invest in new companies, and it's something that we can finance ourselves, Chris, believe me, we're going to do it. And that's -- so we are absolutely a growth company. We're a patient company, but we're happy where we are with our balance sheet. We're happy we have no debt, but we'll be more than willing to use capital to grow if we see the right opportunity.

I've been a shareholder for probably 7, 8 years, and you guys have always been great stewards of capital.

[Operator Instructions] There are no further questions at this time. I'd like to turn the call back to John Saunders for closing remarks.

Thanks again, everyone. Appreciate the questions, and we'll talk to you soon. Take care.

This concludes today's conference. You may disconnect your lines at this time, and thank you for your participation.