GlobeNewswire Inc | Feb 18, 2021 08:00AM EST

February 18, 2021

Full Year Highlights 2020 vs. 2019

-- Revenue down 3% to $20.1 million from $20.8 million due to pandemic impact on non-beef protein audit activity -- Gross margin increased to 44.5% from 43.7% -- Net income attributable to WFCF increased 3% to $1.4 million from $1.3 million -- Diluted EPS flat at $0.22 -- Adjusted EBITDA decreased to $3.0 million from $3.3 million -- Cash generated from operations decreased to $2.5 million from $2.9 million -- Cash, cash equivalents, short-term investments increased to $4.4 million from $2.9 million -- Working capital increased to $4.4 million from $3.1 million

Fourth Quarter Highlights 2020 vs. 2019

-- Revenue down slightly to $5.6 million from $5.7 million due to pandemic impact -- Gross margin of 44.2% compared to 48.0% -- Net income attributable to WFCF down slightly to $545,000 from $586,000 -- Diluted EPS flat at $0.09 -- Adjusted EBITDA decreased to $1.0 million from $1.3 million

CASTLE ROCK, Colo., Feb. 18, 2021 (GLOBE NEWSWIRE) -- Where Food Comes From, Inc. (WFCF) (OTCQB: WFCF), the most trusted resource for independent, third-party verification of food production practices in North America, today announced its 2020 fourth quarter and full year financial results.

Overall, we are very pleased with our financial results for 2020 considering the widespread impact COVID-19 restrictions had on our ability to gain access to a large number of customer sites, said John Saunders, chairman and CEO. Despite the resultant reduction in audit activity for pork, poultry, dairy and egg customers, our revenue declined only slightly year over year. We attribute this to our growing solutions portfolio that generates multiple revenue streams, and to continued growth of our new BeefCARE sustainability program. And thanks to our lean operating model and committed team members who embraced pandemic-driven process changes we implemented early in the year, we posted record net income of $1.4 million, or $0.22 per diluted share, for the full year. We generated $2.5 million in cash from operations and grew our working capital to $4.4 million from $3.1 million year over year. We also accelerated our share buyback program in 2020, using $1,037,000 of internally generated cash to retire 132,000 shares of stock.

We entered 2021 with a strong balance sheet, a growing customer base and a high degree of confidence in our ability to extend our profitable growth trajectory over the long term, Saunders added. Although we expect COVID-19 headwinds to persist at least through the second quarter of 2021 specifically, more delayed audits for many of our non-beef protein customers we anticipate a continuation of the positive macro trends around sustainability, food quality and transparency that are driving the growth of our industry. Our solutions are at the forefront of many of these trends and we are continually adding new standards and expanding food group coverage to help food producers, processors and retailers across the spectrum give consumers the confidence they are looking for in the foods they purchase.

Full Year Results 2020 vs. 2019Total revenue for the year ended December 31, 2020, decreased 3% to $20.1 million from $20.8 million in the prior year. The decline was due to lower audit activity for poultry, pork, dairy and egg customers due to COVID-19 restrictions, which was nearly offset by increased revenue from beef-related audits and associated tag sales.

Revenue mix included:

-- Verification and certification services, down 8% to $14.3 million from $15.6 million. -- Product revenue, up 17% to $3.9 million from $3.3 million. -- Software license, maintenance, and support (excluding intercompany sales), down 19% to $0.9 million from $1.1 million due to customer budget delays for planned software enhancements due to COVID-19 concerns. -- Software-related consulting services (excluding intercompany sales), up 30% to $1.1 million from $0.8 million due primarily to the acquisition of Postelsia during 2020.

Gross profit for the year decreased 2% to $8.9 million from $9.1 million. Gross margin increased to 44.5% from 43.7%.

Selling, general and administrative expense decreased 4% year over year to $7.2 million from $7.5 million.

Operating income increased 9% year over year to $1.7 million from $1.6 million.

Net income attributable to Where Food Comes From, Inc. increased 3% year over year to $1.4 million, or $0.22 per diluted share, from $1.3 million, or $0.22 per diluted share, in the prior year.

Adjusted EBITDA declined to $3.0 million from $3.3 million last year.

The Company generated $2.5 million in net cash from operations in 2020, down from $2.9 million last year.

The cash, cash equivalents and short-term investments balance on December 31, 2020, increased 51% to $4.4 million from $2.9 million at 2019 year-end. The Company had $4.4 million in working capital on December 31, 2020, up 39% from $3.1 million at 2019 year-end.

Fourth Quarter Results 2020 vs. 2019

Revenue in the fourth quarter ended December 31, 2020, was down slightly year-over-year to $5.6 million from $5.7 million. Again, the decline reflected a significant decrease in non-beef protein audit revenue partially offset but an increase in beef-related revenue.

Revenue mix included:

-- Verification and certification services, down 5% to $4.0 million from $4.3 million. -- Product revenue, up 4% to $976,000 from $938,000. -- Software license, maintenance, and support (excluding intercompany sales), down slightly to $242,000 from $245,000. -- Software-related consulting services (excluding intercompany sales), up 12% to $297,000 from $266,000.

Gross profit in the fourth quarter was $2.5 million compared to $2.7 million in 2019. Gross margin decreased to 44.3% from 48.0%.

Selling, general and administrative expense decreased 3% in the fourth quarter to $1.8 million from $1.9 million in the same quarter last year.

Operating income decreased to $616,000 from $836,000 in the same quarter last year.

Net income attributable to Where Food Comes From, Inc. was $545,000, or $0.09 per diluted share, compared to net income of $586,000, or $0.09 per diluted share, in the same quarter last year.

Adjusted EBITDA in the fourth quarter decreased 27% to $1.0 million from $1.3 million in the same quarter last year.

The Company will conduct a conference call today at 10:00 a.m. Mountain Time.

Call-in numbers for the conference call:Domestic Toll Free: 1-877-407-8289International: 1-201-689-8341Conference Code: 13712011

Phone replay:A telephone replay of the conference call will be available through March 4, 2021, as follows:Domestic Toll Free: 1-877-660-6853International: 1-201-612-7415Conference Code: 13712011

About Where Food Comes From, Inc.Where Food Comes From, Inc. is Americas trusted resource for third party verification of food production practices.Through proprietary technology and patented business processes,the Company supports more than 15,000 farmers, ranchers, vineyards, wineries, processors, retailers, distributors, trade associations, consumer brands and restaurants with a wide variety of value-added services.Through its IMI Global, Validus Verification Services, SureHarvest, WFCF Organic (previously known as International Certification Services), Postelsia and Sterling Solutions units, Where Food Comes From solutions are used to verify food claims, optimize production practices and enable food supply chains with analytics and data driven insights.In addition, the Companys Where Food Comes From retail and restaurant labeling program uses web-based customer education tools to connect consumers to the sources of the food they purchase, increasing meaningful consumer engagement for our clients.

*Note on non-GAAP Financial Measures This press release and the accompanying tables include a discussion of EBITDA and Adjusted EBITDA, which are non-GAAP financial measures provided as a complement to the results provided in accordance with generally accepted accounting principles ("GAAP"). The term "EBITDA" refers to a financial measure that we define as earnings (net income or loss) plus or minus net interest plus taxes, depreciation and amortization. Adjusted EBITDA excludes from EBITDA stock-based compensation and, when appropriate, other items that management does not utilize in assessing WFCFs operating performance (as further described in the attached financial schedules). None of these non-GAAP financial measures are recognized terms under GAAP and do not purport to be an alternative to net income as an indicator of operating performance or any other GAAP measure. We have reconciled Adjusted EBITDA to GAAP net income in the Consolidated Statements of Income table at the end of this release. We intend to continue to provide these non-GAAP financial measures as part of our future earnings discussions and, therefore, the inclusion of these non-GAAP financial measures will provide consistency in our financial reporting.

CAUTIONARY STATEMENTThis news release contains "forward-looking statements" within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, based on current expectations, estimates and projections that are subject to risk. Forward-looking statements are inherently uncertain, and actual events could differ materially from the Companys predictions. Important factors that could cause actual events to vary from predictions include those discussed in our SEC filings. Specifically, statements in this news release about industry leadership and demand for, and impact and efficacy of, the Companys products and services on the marketplace; ability to continue posting positive financial results; expectations for pandemic headwinds to subside; expectations for continued profitable growth and a continuation of macro trends that are driving industry growth; ability to continue adding new standards and food group coverage; and potential continuation of the share buyback program are forward-looking statements that are subject to a variety of factors, including availability of capital, personnel and other resources; competition; governmental regulation of the agricultural industry; the market for beef and other commodities; and other factors. Financial results for 2020 are not necessarily indicative of future results. Readers should not place undue reliance on these forward-looking statements. The Company assumes no obligation to update its forward-looking statements to reflect new information or developments. For a more extensive discussion of the Companys business, please refer to the Companys SEC filings at www.sec.gov.

Company Contacts:

John SaundersChief Executive Officer303-895-3002

Jay PfeifferPfeiffer High Investor Relations, Inc.303-880-9000

Where Food Comes From, Inc.Statements of Income (Unaudited) Three months Year endedDecember 31, endedDecember 31,(Amounts inthousands, except per 2020 2019 2020 2019share amounts)Revenues: Verification and certification $ 4,036 $ 4,250 $ 14,254 $ 15,564 service revenue Product sales 976 938 3,859 3,300 Software license, maintenance and 242 245 867 1,067 support services revenue Software-related consulting service 297 266 1,096 843 revenue Total revenues 5,551 5,699 20,076 20,774 Costs of revenues: Costs of verification and 2,124 2,112 7,407 8,444 certification services Costs of products 639 611 2,508 2,149 Costs of software license, 127 146 520 615 maintenance and support services Costs of software-related 205 92 713 487 consulting services Total costs of 3,095 2,961 11,148 11,695 revenues Gross profit 2,456 2,738 8,928 9,079 Selling, general andadministrative 1,840 1,902 7,241 7,527 expensesIncome from 616 836 1,687 1,552 operationsOther expense (income): Dividend income from Progressive (60 ) (30 ) (150 ) (120 ) Beef Impairment of - 198 - 198 goodwill Other income, net (1 ) (1 ) (7 ) (10 ) Loss / (Gain) on foreign currency 1 - 2 - exchange Gain on sale of 1 (8 ) (18 ) (9 ) assets Interest expense 4 1 13 10 Income before income 671 676 1,847 1,483 taxesIncome tax expense 126 230 462 460 Net income 545 446 1,385 1,023 Net loss attributableto non-controlling - 140 - 322 interest Net income attributable to $ 545 $ 586 $ 1,385 $ 1,345 Where Food Comes From, Inc. Per share - net incomeattributable to Where Food Comes From, Inc.: Basic $ 0.09 $ 0.10 $ 0.23 $ 0.22 Diluted $ 0.09 $ 0.09 $ 0.22 $ 0.22 * less than $0.01 per shareWeighted averagenumber of common shares outstanding: Basic 6,118 6,191 6,118 6,213 Diluted 6,232 6,231 6,221 6,257

Where Food Comes From, Inc.Calculation of Adjusted EBITDA*(Unaudited) Three months endedDecember Year endedDecember 31, 31,(Amounts in 2020 2019 2020 2019thousands) Net incomeattributable to $ 545 $ 586 $ 1,385 $ 1,345Where Food ComesFrom, Inc.Adjustments to EBITDA: Interest 4 1 13 10 expense Income tax 126 230 462 460 expense Depreciation and 263 295 997 1,097 amortizationEBITDA* 938 1,112 2,857 2,912Adjustments: Impairment of - 198 - 198 Goodwill Stock-based 41 33 121 162 compensation Cost of - - 15 - acquisitionsADJUSTED EBITDA* $ 979 $ 1,343 $ 2,993 $ 3,272 *Use of Non-GAAP Financial Measures: Non-GAAP results are presented only as asupplement to the financial statements and for use within management'sdiscussion and analysis based on U.S. generally accepted accounting principles(GAAP). The non-GAAP financial information is provided to enhance the reader'sunderstanding of the Company's financial performance, but non-GAAP measuresshould not be considered in isolation or as a substitute for financial measurescalculated in accordance with GAAP. Reconciliations of the most directlycomparable GAAP measures to non-GAAP measures are provided herein.

All of the items included in the reconciliation from net income to EBITDA andfrom EBITDA to Adjusted EBITDA are either (i) non-cash items (e.g.,depreciation, amortization of purchased intangibles, stock-based compensation,etc.) or (ii) items that management does not consider to be useful in assessingthe Company's ongoing operating performance (e.g., M&A costs, income taxes,gain on sale of investments, loss on disposal of assets, etc.). In the case ofthe non-cash items, management believes that investors can better assess theCompany's operating performance if the measures are presented without suchitems because, unlike cash expenses, these adjustments do not affect theCompany's ability to generate free cash flow or invest in its business.

We use, and we believe investors benefit from the presentation of, EBITDA andAdjusted EBITDA in evaluating our operating performance because it provides usand our investors with an additional tool to compare our operating performanceon a consistent basis by removing the impact of certain items that managementbelieves do not directly reflect our core operations. We believe that EBITDA isuseful to investors and other external users of our financial statements inevaluating our operating performance because EBITDA is widely used by investorsto measure a company's operating performance without regard to items such asinterest expense, taxes, and depreciation and amortization, which can varysubstantially from company to company depending upon accounting methods andbook value of assets, capital structure and the method by which assets wereacquired.

Because not all companies use identical calculations, the Company'spresentation of non-GAAP financial measures may not be comparable to othersimilarly titled measures of other companies. However, these measures can stillbe useful in evaluating the Company's performance against its peer companiesbecause management believes the measures provide users with valuable insightinto key components of GAAP financial disclosures.

Where Food Comes From, Inc.Balance Sheets December 31, December 31,(Amounts in thousands, except per share amounts) 2020 2019Assets Current assets: Cash and cash equivalents $ 4,374 $ 2,638 Accounts receivable, net of allowance 2,508 2,515 Short-term investments in certificates of - 258 deposit Prepaid expenses and other current assets 592 450 Total current assets 7,474 5,861 Property and equipment, net 1,616 1,545 Operating lease right-of-use assets 3,030 3,268 Investment in Progressive Beef 991 991 Intangible and other assets, net 2,948 3,248 Goodwill, net 2,946 2,946 Deferred tax assets, net 443 378 Total assets $ 19,448 $ 18,237 Liabilities and Equity Current liabilities: Accounts payable $ 649 $ 1,023 Accrued expenses and other current liabilities 599 674 Deferred revenue 1,132 797 Current portion of long term debt 463 - Current portion of finance lease obligations 13 8 Current portion of operating lease obligations 268 239 Total current liabilities 3,124 2,741 Long term debt, net of current portion 572 - Finance lease obligations, net of current portion 31 21 Operating lease obligation, net of current portion 3,257 3,526 Total liabilities 6,984 6,288 Commitments and contingencies Equity: Preferred stock, $0.001 par value; 5,000 shares authorized; none issued or outstanding - - Common stock, $0.001 par value; 95,000 shares authorized; 6,479 (2020) and 6,451 (2019) shares issued, and 6,118 (2020) and 6,245 (2019) shares 6 6 outstanding Additional paid-in-capital 11,612 11,445 Treasury stock of 338 (2020) and 206 (2019) (2,702 ) (1,665 ) shares Retained earnings 3,548 2,163 Total equity 12,464 11,949 Total liabilities and stockholders' equity $ 19,448 $ 18,237