Where Food Comes From's Q3 2025: Contradictions Emerge on Beef Herd Growth, Market Demand, Growth Strategy, and Cattle Supply Recovery

Date of Call: November 11, 2025

Financials Results

• Revenue: $7.0M, down $0.092M YOY (decline of $92,000 vs same quarter prior year)
• EPS: $0.22 per share, up from $0.09 per share in the prior-year quarter

Business Commentary:

* Revenue and Profitability Stability: - Where Food Comes From reported total revenue of $7 million for Q3, with a decline of just $92,000 over the same quarter last year. - This stability was achieved due to increased activity in the verification and certification segment, which grew by 1% to $5.6 million, and strong customer retention rates above 90%.

• Operational Management and Efficiency:
• The company's operating income was $575,000, compared to $608,000 in the year-ago third quarter, with net income growing to $1.1 million or $0.22 per share.

• These results were driven by careful management of fixed costs, lower marketing and trade show expenses, and a focus on aligning expenses with revenue run rates.

• Balance Sheet Strength and Shareholder Returns:

• Where Food Comes From had cash and cash equivalents of $4.8 million at the end of Q3, with no debt.
• The company has returned more than $14 million in value to shareholders through its stock buyback program since its inception, retiring over 1.3 million shares.

• Diversification and Expansion in Verification Services:
• The company's verification and certification segment showed growth, with increases in pork, dairy, and egg operations, as well as expansions in organic, non-GMO, gluten-free, and upcycled certifications.
• This growth is attributed to the company's ability to bundle services, save customers time and money, and its lead role in the trend of verified sourcing.

Sentiment Analysis:

Overall Tone: Positive

• Management highlighted resilience despite modest revenue decline, reporting net income of $1.1M ($0.22/share) vs $0.5M ($0.09/share) prior year, stable gross margins, reduced SG&A, cash of $4.8M (up from $2.0M), no debt, and continued share buybacks and strategic investments; CEO noted inclusion in Time Magazine’s Growth Leaders list.

Q&A:

• Question from James Ford (First Ballantine): Hey, John. Thanks for taking my call. 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 price as high enough to get the demand up there in a year or two? Thank you.
  Response: Cattle prices are improving and some rebuilding has begun, but border closures, screw worm issues, drought and generational turnover mean herd recovery will be slow—management expects roughly another year before supply starts to increase materially.

• Question from Chris Brown (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 two? 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, etc. How do you think about the balance sheet, the build-up of cash, and what you do with it? Thank you.
  Response: Company is focused on growth outside beef—dairy, poultry (broilers & eggs), organic and exclusive upcycled certification—and investing in tech/AI and SEO; balance sheet is strong (no debt, higher cash post-Progressive Beef sale) and management views the firm as a patient growth company willing to deploy cash for strategic acquisitions while continuing capital returns when appropriate.

Contradiction Point 1

Beef Herd Growth and Market Demand

It involves expectations regarding the growth of the beef herd and market demand, which are crucial for forecasting company revenue and strategic planning.

When do you expect to see a significant increase in product revenue as herd size grows? Are beef and cattle futures prices high enough to drive demand within a year or two? - James Ford (First Ballantine)

2025Q3: 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. - John Saunders(CEO)

Can you provide an update on the beef market, including demand trends and supply chain developments? - Arak Kayam (Private Investor)

2025Q2: We are still much lower than the peak of 2017. And I think by the end of 2026, we’re probably going to be back very close to that peak we were in 2017. - John Saunders(CEO)

Contradiction Point 2

Company Growth Strategy

It addresses the company's growth strategy and its approach to capital allocation, which are important for investor understanding and expectations.

Are you positioning as a growth company or a stable cash-generating business? How do you balance past dividends, cash reserves, and capital allocation strategy? - Chris Brown (Private Investor)

2025Q3: 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. - Jay Pfeiffer(Investor Relations)

Are there any plans to increase the dividend? - Arak Kayam (Private Investor)

2025Q2: We are not in a position to pay a dividend at this point because we have a lot of opportunities to invest in growth. - Dannette Boyd Henning(CFO)

Contradiction Point 3

Herd Size and Revenue Growth

It involves expectations regarding the growth of herd size and its impact on product revenue, which are critical for future financial performance and investor expectations.

When will product revenue see a significant increase as herd sizes grow? Are beef and cattle futures prices high enough to stimulate demand within the next one to two years? - James Ford (First Ballantine)

2025Q3: 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 the screw worm 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. - John Saunders(CEO)

Could you provide an overview of Q1 2025 financial performance? - John Saunders (Where Food Comes From)

2025Q1: The company experienced a 6% year-over-year decline in total revenue for the first quarter. The decline was mainly due to a drop in the verification and certification services segment, which saw $252,000 less revenue compared to the previous year. This was attributed to fewer cattle moving through the system because of cyclical herd size reduction and severe drought conditions in cattle-producing regions. - John Saunders(CEO)

Contradiction Point 4

Cattle Supply and Market Recovery

It involves expectations regarding the cattle supply and market recovery, which directly impact revenue forecasts and investor confidence.

When do you expect to see a significant increase in product revenue as herd size grows? Will beef and cattle futures prices be high enough to drive demand growth in the next 1-2 years? - James Ford (First Ballantine)

2025Q3: 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. - John Saunders(CEO)

What are your assumptions for cattle on feed numbers and the slaughter schedule? - Vivek Arya (Bank of America Securities)

2024Q3: The border between Mexico and the United States continues to remain closed, which has historically been a major cattle supply source for the United States. - Danette Henning(CFO)