Where Food Comes From Q1 Profit Falls Amid Beef Market Headwinds

Shares of Where Food Comes From, Inc. WFCF have declined 13.5% since the company reported its earnings for the first quarter of 2025. This compares to the S&P 500 index’s 0.5% rise over the same time frame. Over the past month, the stock has declined 19.1% against the S&P 500’s 4.4% increase.

Earnings & Revenue Performance

For the first quarter ended March 31, 2025, WFCF reported total revenues of $5.27 million, marking a 5.5% decline from $5.58 million in the same period of 2024. The revenue contraction was largely due to a $252,000 drop in verification and certification services, which constitute about half of the company’s revenue mix. Net income for the quarter dropped significantly to $31,000, or 1 cent per diluted share, compared to $178,000, or 3 cents per diluted share, in the year-ago period. Gross profit came in at $2.2 million compared with $2.3 million last year, with the gross margin holding steady at 41.6%.

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

While overall revenues declined, product sales and professional services remained relatively flat year over year at $702,000 and $389,000, respectively. Selling, general and administrative (SG&A) expenses were essentially unchanged at $2.05 million, reflecting tight cost controls amid challenging market conditions. Operating income fell to $142,000 from $261,000 due to softer revenues and a $76,000 non-cash loss on digital assets tied to fair value adjustments in Bitcoin holdings.

Cash flow from operations totaled $632,000 for the quarter, down slightly from $700,000 in the prior year. The company repurchased 31,345 shares of common stock at a cost of $383,000, continuing a capital return strategy that has now exceeded 1.2 million shares since inception.

Management Commentary

CEO John Saunders acknowledged that the first quarter remained challenging, as cyclical herd reductions and prolonged drought conditions continued to suppress the company’s core beef verification revenues. Additionally, tariffs affecting U.S. beef exports to China and outbreaks of avian influenza constrained poultry and dairy verification activity.

Despite these pressures, Saunders emphasized the resilience of the company’s model. Gross margins remained stable due to disciplined cost management, and customer retention remained high — above 90% — even as ranchers found strong demand for cattle without verification services amid record-high beef prices.

Factors Influencing Headline Numbers

Revenue contraction in the beef segment was directly linked to industry-wide herd shrinkage and trade disruptions, notably the cessation of beef exports to China. These dynamics not only reduced cattle volumes but also delayed audits and associated revenue streams. High-mortality avian flu outbreaks hampered poultry-related verification services, although biosecurity consulting partially mitigated these effects.

Digital asset losses further dragged down bottom-line results. The company recorded a $76,000 unrealized loss on its Bitcoin holdings, a non-operational factor that contributed significantly to the year-over-year decline in net income.

Guidance

Saunders highlighted ongoing diversification as a buffer against sector-specific volatility. Specifically, the company is seeing strong momentum in its Upcycled Certified program — the fastest-growing verification standard in its portfolio — which grew certifications by 70% in 2024 and saw an additional 10% rise in the first quarter of 2025.

In tandem, WFCF’s fee-based labeling initiative gained traction with the addition of two major food retailers. One of these clients is expected to roll out labeling in 20 stores initially, with the potential to scale across more than 100 additional locations this year. These programs are expected to enhance consumer-facing brand visibility and create a new stream of licensing revenues.

Other Developments

The company completed an internal segment reorganization in January 2025, integrating professional consulting services under its core Verification and Certification segment. This change was designed to better align business functions and improve efficiency across its various service lines. Additionally, in April 2025, the company canceled 1,237,700 treasury shares, reallocating $13.8 million from treasury stock to additional paid-in capital and retained earnings.

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