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Where Food Comes From Q2 Earnings Rise Y/Y Despite Margin Pressures
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Shares of Where Food Comes From, Inc. (WFCF - Free Report) have declined 0.8% since reporting results for the second quarter of 2025. This compares with the S&P 500 index’s 0.7% growth over the same period. Over the past month, the stock has fallen 6.7%, underperforming the S&P 500’s 2.3% rally.
For the quarter ended June 30, 2025, total revenues rose 3% year over year to $6.6 million, driven by modest growth in verification and certification services and an increase in product sales. Verification and certification revenues moved up to $5.33 million from $5.25 million, while product sales advanced 17.7% to $964,000 from $819,000. Professional services revenues, however, fell to $266,000 from $324,000.
Net income increased 15% year over year to $562,000, or 11 cents per diluted share, from $489,000, or 9 cents per share, aided by a $172,000 gain in the fair market value of digital assets. Gross profit declined to $2.5 million from $2.7 million, reflecting higher labor and hardware costs.
Where Food Comes From Inc. Price, Consensus and EPS Surprise
Hardware sales were a bright spot in the quarter, climbing 18% to $1 million from $800,000 in the prior-year period. This growth was fueled by customer demand for higher-priced, value-added identification tags, including ultra-high-frequency tags with greater read accuracy and range, and tissue sampling units for genetic analysis. Despite reduced cattle herd sizes dampening demand for basic tags, these premium products more than offset the decline. The gross margin narrowed to 38.4% from 42.3% a year earlier due to higher compensation expenses in a competitive labor market and increased hardware costs.
Management Commentary
CEO John Saunders highlighted the resilience of the company’s diversified verification services portfolio, which includes more than 50 individual standards. He pointed to growing momentum in programs such as CARE Certified and Upcycled, which helped offset weakness in beef verification stemming from smaller cattle herds.
Saunders also emphasized the expansion of the retail labeling program, with two major new retailers now offering CARE Certified beef products across stores from Hawaii to the East Coast. This rollout is expected to reach more than 110 locations by the year-end and expand further in 2026. Management highlighted continued investment in artificial intelligence tools designed to boost operational efficiency and elevate customer experiences, anticipating that these initiatives will enhance long-term profitability.
Factors Influencing the Headline Numbers
Modest revenue growth came despite cyclical headwinds in the cattle industry, which is in a contraction phase that began in 2014 and has been prolonged by drought conditions and reduced pasture availability. Management indicated that beef verification activity remains subdued, but diversification into other food categories and premium hardware offerings provided a buffer.
On the cost side, higher wages due to a tight labor market and inflationary pressures on hardware prices weighed on margins. A non-operating boost came from gains on digital assets, which contributed to the year-over-year rise in net income.
Management View
The company expressed confidence in its growth initiatives, particularly the retail labeling expansion, AI integration and ongoing share repurchases. The sale of its interest in Progressive Beef was highlighted as a move that will bolster the balance sheet, enhance financial flexibility and support capital return programs.
Other Developments
On July 22, 2025, WFCF sold its 10% interest in Progressive Beef for $1.8 million in cash and the return of 12,585 shares of its common stock. Originally acquired in 2018 for approximately $1 million in cash and stock, the investment generated $1.6 million in dividends over the holding period. The transaction will be recorded as an $800,000 gain on the sale of investment, with $1 million applied to write off the asset from the balance sheet.
Progressive Beef will remain a customer, with its audits generating about $176,000 annually for WFCF over the past three years. The company also repurchased 55,826 shares in the first half of 2025, bringing the cumulative total removed from the market since 2019 through buybacks and private purchases to more than 1.24 million shares. Over six years, these capital returns, along with a previous special dividend, have totaled $14.6 million distributed to shareholders.
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Where Food Comes From Q2 Earnings Rise Y/Y Despite Margin Pressures
Shares of Where Food Comes From, Inc. (WFCF - Free Report) have declined 0.8% since reporting results for the second quarter of 2025. This compares with the S&P 500 index’s 0.7% growth over the same period. Over the past month, the stock has fallen 6.7%, underperforming the S&P 500’s 2.3% rally.
For the quarter ended June 30, 2025, total revenues rose 3% year over year to $6.6 million, driven by modest growth in verification and certification services and an increase in product sales. Verification and certification revenues moved up to $5.33 million from $5.25 million, while product sales advanced 17.7% to $964,000 from $819,000. Professional services revenues, however, fell to $266,000 from $324,000.
Net income increased 15% year over year to $562,000, or 11 cents per diluted share, from $489,000, or 9 cents per share, aided by a $172,000 gain in the fair market value of digital assets. Gross profit declined to $2.5 million from $2.7 million, reflecting higher labor and hardware costs.
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
Other Key Business Metrics
Hardware sales were a bright spot in the quarter, climbing 18% to $1 million from $800,000 in the prior-year period. This growth was fueled by customer demand for higher-priced, value-added identification tags, including ultra-high-frequency tags with greater read accuracy and range, and tissue sampling units for genetic analysis. Despite reduced cattle herd sizes dampening demand for basic tags, these premium products more than offset the decline. The gross margin narrowed to 38.4% from 42.3% a year earlier due to higher compensation expenses in a competitive labor market and increased hardware costs.
Management Commentary
CEO John Saunders highlighted the resilience of the company’s diversified verification services portfolio, which includes more than 50 individual standards. He pointed to growing momentum in programs such as CARE Certified and Upcycled, which helped offset weakness in beef verification stemming from smaller cattle herds.
Saunders also emphasized the expansion of the retail labeling program, with two major new retailers now offering CARE Certified beef products across stores from Hawaii to the East Coast. This rollout is expected to reach more than 110 locations by the year-end and expand further in 2026. Management highlighted continued investment in artificial intelligence tools designed to boost operational efficiency and elevate customer experiences, anticipating that these initiatives will enhance long-term profitability.
Factors Influencing the Headline Numbers
Modest revenue growth came despite cyclical headwinds in the cattle industry, which is in a contraction phase that began in 2014 and has been prolonged by drought conditions and reduced pasture availability. Management indicated that beef verification activity remains subdued, but diversification into other food categories and premium hardware offerings provided a buffer.
On the cost side, higher wages due to a tight labor market and inflationary pressures on hardware prices weighed on margins. A non-operating boost came from gains on digital assets, which contributed to the year-over-year rise in net income.
Management View
The company expressed confidence in its growth initiatives, particularly the retail labeling expansion, AI integration and ongoing share repurchases. The sale of its interest in Progressive Beef was highlighted as a move that will bolster the balance sheet, enhance financial flexibility and support capital return programs.
Other Developments
On July 22, 2025, WFCF sold its 10% interest in Progressive Beef for $1.8 million in cash and the return of 12,585 shares of its common stock. Originally acquired in 2018 for approximately $1 million in cash and stock, the investment generated $1.6 million in dividends over the holding period. The transaction will be recorded as an $800,000 gain on the sale of investment, with $1 million applied to write off the asset from the balance sheet.
Progressive Beef will remain a customer, with its audits generating about $176,000 annually for WFCF over the past three years. The company also repurchased 55,826 shares in the first half of 2025, bringing the cumulative total removed from the market since 2019 through buybacks and private purchases to more than 1.24 million shares. Over six years, these capital returns, along with a previous special dividend, have totaled $14.6 million distributed to shareholders.