Q1 2026 ReposiTrak Inc Earnings Call
Speaker #1: Greetings, and welcome to ReposiTrak Fiscal's first quarter 2026 earnings call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation.
Speaker #1: If anyone should require operator assistance during the conference, please press *0 on your telephone keypad. As a reminder, this conference is being recorded.
Speaker #1: It is now my pleasure to introduce your host, Jeff Stanlis, with FNKIR, Mr. Stanlis, you may begin, sir.
Speaker #2: Thank you, operator, and good afternoon, everyone. Thank you for joining us today for ReposiTrak's fiscal first quarter 2026 earnings call. Hosting the call today are Randy Fields, ReposiTrak's chairman and CEO, and John Merrill, ReposiTrak's CFO.
Speaker #2: Before we begin, I would like to remind everyone that this call could contain forward-looking statements about ReposiTrak within the meaning of the Private Securities Litigation Reform Act of 1995.
Speaker #2: Forward-looking statements are statements that are not subject to historical facts. Such forward-looking statements are based on current beliefs and expectations. ReposiTrak's remarks are subject to risks and uncertainties, and actual results may differ materially.
Speaker #2: Such risks are fully disclosed and discussed in the company's filings with the Securities and Exchange Commission. The information set forth herein should be considered in light of such risks.
Speaker #2: ReposiTrak does not assume any obligation to update information contained in this conference call. Shortly after the market closed today, the company issued a press release overviewing the financial results that we will discuss on today's call.
Speaker #2: Investors can visit the investor relations section of the company's website at repositrak.com to access this press release. With all that said, I would now like to turn the call over to John Merrill.
Speaker #2: John, the call is
Speaker #2: yours. Thanks, Jeff, and good afternoon,
Speaker #3: everyone. Fiscal 2026 started as a continuation of the success of fiscal 2025. We continue to execute on our business plan. Once again, the proof is in the numbers.
Speaker #3: Our strategy remains the same: grow annual recurring revenue between 10 to 20 percent and grow profitability even faster. Generating more cash to bolster our balance sheet and support our continuation of returning capital to shareholders.
Speaker #3: Simultaneously, without exception, we take superb care of the customer because when they are successful, they buy more from us. Let's get to the numbers.
Speaker #3: First fiscal quarter revenue increased 10 percent from 5.4 million dollars to 6 million dollars. Total operating expenses for the quarter increased 3 percent. This is largely due to investment in RTN, including Wizard onboarding tools, increased cybersecurity costs, database license fees, and other direct costs associated with development.
Speaker #3: FCNA costs were up 6 percent due to higher payroll costs associated with higher revenues, increased insurance premiums, and increases in employee benefit costs. We grew total revenue at approximately twice the rate of FCNA expenses and at three times the rate of total operating expense growth.
Speaker #3: Simultaneously, we delivered 356,000 dollars of revenue per employee on an annualized basis. Twice the rate of the 2024 Statista software industry average of 175,000 per employee.
Speaker #3: This is due to our lean nature, efficient operations, and our ongoing use and expansion of automation. It also reflects our methodical spending decisions based on return on investment and not hope.
Speaker #3: At the same time, we will never trade growth at the expense of delivering less than exquisite customer care. Income from operations was up 28 percent to 1.9 million dollars versus 1.5 million.
Speaker #3: Gap in income was 1.8 million dollars, up 13 percent versus 1.7 million dollars last year. The conversion of income from operations to gap in income was muted during the quarter due to higher income taxes.
Speaker #3: As previously communicated, the company is at the end of its benefit period from utilized and expiring net operating losses for both federal and state income tax.
Speaker #3: Historically, the company had net operating losses to offset income for income tax purposes resulting in effective tax rate of approximately 4 to 6 percent.
Speaker #3: Many of those NOLs have been used up or expired given our 30-plus quarters in a row of continued gap profitability. While bad problem to have, our NOLs to offset income for tax purposes have largely run out.
Speaker #3: initiatives to mitigate our effective tax We're exploring tax credits and other rate; however, I believe it is fair to say our tax rate will be higher than 6 percent going forward.
Speaker #3: Gap in income to common shareholders increased 13 percent to 1.8 million dollars from 1.6 million dollars. Earnings per share for the quarter was 10 cents per share basic and 9 based on 18.2 million basic shares outstanding and cents per diluted.
Speaker #3: 19.1 million shares diluted. This results in a This is year-over-year EPS growth of 13 percent income taxes. Cash from operations was when factoring in the accrual for higher 1.5 million dollars, down from 1.9 million dollars in the year-ago quarter due to the conversion of deferred revenue to booked revenue.
Speaker #3: to 28.8 million dollars from 28.6 million dollars at June 30. And the company continues to have zero bank Total cash increased continued financial performance will double the debt.
Speaker #3: size of the company over the next several years. Historically, our business model results reflect double-digit revenue growth 80 plus percent gross margins and roughly 30 percent I remain confident that our net margins, and strong cash generation.
Speaker #3: In accordance with our capital allocation strategy, the board continues to target returning 50 percent of annual free cash flow to shareholders. Since inception, the result has been three increases in the cash dividend.
Speaker #3: At the same time, we continue to redeem the preferred stock and repurchase common shares without any bank debt. We are experiencing growth in all lines of business.
Speaker #3: While traditional sales of one service to solve one problem continues to grow, our cross-selling initiatives are delivering accelerated momentum. Again, our strategy has not changed.
Speaker #3: First and foremost, take exceptional care of the customer and execute perfectly. Next, grow recurring revenue, increase profitability, use cash to buy back common stock, redeem the preferred, and do it with no bank debt.
Speaker #3: At the same time, return capital to shareholders through an increasing cash dividend. Finally, we have and will continue to build cash on the balance sheet, close to 29 million dollars as of September 30, 2025.
Speaker #3: Turning to our capital allocation plan, since inception of the capital allocation plan, the company has paid off over 6 million dollars of bank debt.
Speaker #3: As of September 30, 2025, the company has zero bank debt and zero need for additional capital. We maintain that confidence given our financial health, which is precisely why we terminated our 12 million dollar line of credit some quarters ago.
Speaker #3: Since inception, the company has redeemed approximately 572,000 shares of preferred stock at the stated redemption price of 10 dollars and 70 cents per share for a total of 6.1 million dollars.
Speaker #3: There remains 266,000 preferred shares to redeem for a total of 2.8 million dollars. At the current rate of redemption of 750,000 dollars a quarter, I maintain our goal to redeem all of the remaining preferred shares issued and outstanding on or before December of 2026.
Speaker #3: During the first quarter of fiscal 2026, the company also repurchased 8,715 common shares for a total of 150,000 dollars or an average of 17 dollars and 21 cents per share.
Speaker #3: approximately 7.8 million dollars remaining of The company has the 21 million dollar total common share buyback authorization as approved by the board of directors as of September 30, 2025.
Speaker #3: The company holds no treasury stock. Common shares are repurchased and simultaneously canceled. Since inception, we have paid out over $5.7 million in cash dividends to shareholders and raised the common stock dividend three times by 10 percent each time since December 2023.
Speaker #3: From time to time, the Board will evaluate our capital allocation strategy, making appropriate adjustments based on the approach most beneficial to all shareholders at that time.
Speaker #3: Our goal is to continue to return 50 percent of annual cash from operations to shareholders, putting the other half in the bank. In a moment, Randy will talk about our strategy to modernize the software code we utilize.
Speaker #3: This initiative aligns with our existing capital allocation strategy of taking half the cash from operations and putting it in the bank, with the other half allocated to redeem the preferred, buy back common shares, pay off debt, increase the dividend, and consider M&A opportunities.
Speaker #3: In other words, if M&A opportunities we come across don't make financial sense or don't fit with our long-term development strategy, then let's build it, not buy it.
Speaker #3: We are exceptional at building things. The logical question is: what will it cost, and is it a distraction? First, we do not anticipate a meaningful increase in our cash expenses related to this initiative.
Speaker #3: Instead, we will reallocate annual capital expenditures, which may result in increases in depreciation and amortization down the road, and modest short-term adjustments to our research and development costs. However, we believe the overall impact is negligible.
Speaker #3: Meaning, as we have done in the past, we expect to reallocate existing developer resources to transition the core of our development environment to take advantage of newer capabilities, including expanding our use of artificial intelligence (AI), with little distraction.
Speaker #3: I will let Randy provide more color on the technical components; however, in my financial view, our strong cash generation, solid balance sheet, and the continued growth from all lines of business mean that we are well-positioned to undertake this task.
Speaker #3: The time is right, and we believe this is an appropriate use of our capital and consistent with our capital allocation strategy. Once complete, we believe the advanced modernization of our platform will position ReposiTrak for the next phase of profitable growth.
Speaker #3: So all I have today, thanks everyone for your time at this point. I'll pass the call over to Randy. Randy.
Speaker #2: Thanks, John. As John said, the results speak for themselves. We continue to grow revenue, expand our operating margins, net margins, earnings per share, and generate substantial cash.
Speaker #2: This has been and is the plan. Over the past two years, our prime focus has been on traceability. The result is that we've established ReposiTrak and the ReposiTrak Traceability Network, or RTN as we call it, as the dominant player in the industry.
Speaker #2: We have some key competitive advantages in the area, and I think over time those advantages will create an even bigger moat between us and any alternatives that might arise.
Speaker #2: But what I find particularly exciting is how effectively we have leveraged our presence and traceability, both at the top and the bottom of the value chain.
Speaker #2: To grow and leverage all of our lines of business with, frankly, minimal additional cost. We're not just the traceability company; we are a food safety company with a business model that should lead to even greater dominance in the future.
Speaker #2: The traceability solution for our customers and emerging industry food safety requirements has pushed us to develop and use much more automation. This automation focus, in turn, is helping our entire business.
Speaker #2: We've been using automation and AI, as you know, for years. So what we've done is simply add more and more of those to our base capabilities.
Speaker #2: Traceability requires each step in the supply chain to provide clean and accurate data, and then hand that data off to the next participant in the supply chain.
Speaker #2: fact: did you know that on average the But here's a stunning initial data we receive from either retailers, suppliers, down to greenhouses, all the way down, up and down, has a 70 percent error rate before we're involved?
Speaker #2: Think about that for a minute. Garbage in, garbage out. This fact explains why we are ultimately so important to the industry. We take data, identify errors, clean up that 70% error rate, standardize it, automate its collection and transmission, and make sure that each step in the value chain can read it, integrate it, and send it upstream.
Speaker #2: The errors usually happen at the data handoff step. A label won't fix this. A label won't even identify an error. Our systems, however, identify and increasingly actually correct the errors automatically.
Speaker #2: This fact also explains why our focus is increasingly on smaller suppliers, as these market participants have the most need for our error correction capabilities.
Speaker #2: This is good news and bad news. It means that the problem we solve in providing clean data to the traceability world is critical, but there's an awful lot of work to get it right.
Speaker #2: Smaller farmers, suppliers, etc., typically don't maintain robust data records or have sufficient IT support; frankly, they often have no support at all. Therefore, error detection and correction is an essential step in the process.
Speaker #2: Thankfully, error correction is ideally suited for the ReposiTrak capabilities. We're using proprietary automation and AI to both identify and correct the errors. We are seeing encouraging results from this automation initiative, and just as with our onboarding wizard, we'll continuously improve it.
Speaker #2: In fact, the more we scale, the better our automation is getting. It's really in our DNA. The sheer number of individual touchpoints and data handoffs requires significant automation.
Speaker #2: The form of these wizards is to efficiently process the inflow. We've talked about the wizards for several quarters now. We continue to iterate and improve their functionality.
Speaker #2: But there are many other areas of our work that could use that kind of automation. As John mentioned, we're embarking on a multi-year initiative to update our development environment.
Speaker #2: Over the years, we've built a robust library of modules, these functional, if you will, building blocks that can be reused in applications.
Speaker #2: Each of these functional building blocks, as we call them, has been tested and validated over time. Since we have only one development environment and platform, that results in tremendous leverage in terms of our speed and economics.
Speaker #2: I'm not exaggerating when I say in a typical year, with thousands and thousands of users and an find no more than a handful of immense code base, we typically bugs.
Speaker #2: we have nearly no And fact, in the last seven years, we've downtime in our data centers. had less than one In second, seriously, one mentioned, we're in the early stages of in our data centers.
Speaker #2: redoing our base systems, and it'll second of unscheduled downtime us. There are As John creating an opportunity for us to modernize the backend environment on which these building blocks have been built.
Speaker #2: Modernization will make it faster, easier, and less expensive for us to develop and deploy new applications and functionality in the future. Newer foundational technologies—you might ask, why are we undertaking this?
Speaker #2: Well, first, the better than they've ever been this when our current systems work so available tools today are much capabilities, but today's tools can be partially developed with AI, streamlining development timelines and before.
Speaker #2: the core creating some very exciting downstream then embed AI analytics at capabilities. Secondly, this initiative will make us ultimately much more productive. Why? With what we know today, there are many costs and processes, and we can also Not just in terms of do where human intervention points in the processing of information that we might be required or these new tools further expanding our revenue per employee.
Speaker #2: Using advanced revenues and support a larger number of customers without materially adding to our development team or support technologies, we believe we'll be able to scale staff.
Speaker #2: capabilities into our base-level we're going to be able to embed AI they are today. This is going to be a multi-year project, but we believe it has the potential to drive automation capabilities even further than significant efficiencies and create incremental value for our customers and our shareholders and perhaps even open some new markets.
Speaker #2: We are increasingly being seen as the de facto choice to address the ever-changing food industry's need for compliance, And then third, daily. As it relates to traceability, we The revenue from traceability traceability, and supply chain work.
Speaker #2: This is excellent for us. It's significantly increases the addressable doing. While traceability is top market, not just for traceability, of mind, our focus is in growing all our business lines.
Speaker #2: of referrals. This is Meanwhile, we're generating increased number way. A supplier interesting and important. benefits significantly from Think about it this having its ingredients supplier in the ReposiTrak traceability network, the RTN.
Speaker #2: As this ensures that but for, frankly, everything that we're raw ingredients moving into its workstream are properly supplier benefits from having its distributors and wholesalers upstream participate in the network.
Speaker #2: between handoffs makes moving One common system data upstream or downstream tracked. easier as the completed products move toward retail shelves. Long-term, this is how we will In a similar way, that evolve and it's certainly offers some incredible opportunities for us.
Speaker #2: As I mentioned earlier, we've built all of our major solutions, traceability, supply chain, compliance on a single platform. This is and has always been a key and intentional differentiator.
Speaker #2: The common platform creates incredible financial and operational efficiencies. If a customer is using the RTN, he's already done the hard work of connecting. Data has been collected, synchronized, scrubbed, and mapped.
Speaker #2: As a result, expanding into compliance or supply chain, becomes relatively easy. others of our services, such as Cross-selling, therefore, is an area of focus for lines.
Speaker #2: In summary, we continue to do what we said we would do across all the revenue. We are delivering the growth and increased profitability we expected.
Speaker #2: In fact, once again, our profitability increased at about twice the pace of our revenue. Demonstrating the inherent leverage we have methodically built into the business model.
Speaker #2: Even with the impact of taxes, common share purchases, preferred share redemptions, cash dividends, cash reserves, and maintaining a fortress, we continue to grow our As. Encouraged by the progress to date, we really just started to take advantage of the numerous opportunities we see in front of us.
Speaker #2: We are a key player. We're facilitating food industry, the US food regulatory trends, retailer priorities, and frankly, pain points in the whole supply chain.
Speaker #2: By offering an affordable, effective, and efficient set of solutions. We maintain an elegant, sustainably profitable business model. And I'm business. We're aligned with certainly excited for the future.
Speaker #2: We really have as we say frequently, just begun. So with that, I'd now like to open the call for questions. We will now conduct a question and answer session.
Speaker #2: If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will Operator? Thank you. indicate your line is in a question queue.
Speaker #2: You may press star two to remove participants using speaker equipment, it may be yourself from the queue. For necessary to pick up your handset before pressing the star keys.
Speaker #2: Once again, that's star one at this time. One moment while we hold for our first question. The first question comes from Thomas Forte with Maxim Group.
Speaker #2: Please proceed.
Speaker #3: Great. Randy, John, thanks for taking my questions. Congrats on the at once. I'd appreciate your answers. So how, if at quarter. I'm going to ask two questions all, were you impacted by the government shutdown?
Speaker #3: That's my first question. And then my second question is, one quarter later, do you still believe your buy ingredient addressable market? And if so, how could that impact your future operating efforts are increasing your total
Speaker #1: Let me take a stab at
Speaker #1: it. The the industry that we're shutdown does impact because the FDA isn't in, meaning the food industry, results? part of it, a large working lots of pieces.
Speaker #1: amount of that SNAP money, as you probably have figured out, goes through the grocery stores. Because The SNAP remembers of all the trade attention on what's happening to associations, there's an enormous amount of SNAP.
Speaker #1: So it does impact the industry. It's just one more of those things between tariffs, inflation, importation restrictions, blah, blah, blah. That caused the industry to be a little bit more cautious than it might otherwise be.
Speaker #1: The impact isn't question, we think it's substantial, but it has some level of foundational, meaning impact. if you are in In terms of the second the place of having to create traceability records for your customers, you have to gather the information from your suppliers.
Speaker #1: And those suppliers have to gather information from their suppliers. And so on and so forth. That's why the entire chain is, in fact, connected.
Speaker #1: opportunity because for us, and we talked a lot It's also the about the problem of errors, here's how it works. If you imagine a farm passing information to its packing house, growing some vegetable, passes on to the packing house going to pass it on to its distributor, and then what's going to happen is it gets worse from there.
Speaker #1: incorrect data for The distributor passes it on to the next step, and so on and so forth. So errors in the supply chain for traceability create an enormous problem in correcting the errors.
Speaker #1: They don't show up in one place. They typically show up in four, five, or six places. And each of those is a business. So we believe we could be traceability, that packing house is now different entity, a different wrong, but I don't think so.
Speaker #1: That years from now, the real problem in traceability is going to be data integrity. And it's really our sweet spot. We are extremely good at the detection and correction of data errors.
Speaker #1: John, do you want to add anything to that? Because it is a major part of our strategy going forward.
Speaker #4: No, I think I had that in my remarks, which was I think where we are financially, cash generation, revenue, the time is now to do these things.
Speaker #4: It will not have—well, it will have a negligible impact on our expenses. We merely will reallocate our capital, CapEx spending, as we've announced before.
Speaker #4: We've already expanded in the two data centers. That's behind us. So, as far as the financial wherewithal, now is the time to do that.
Speaker #4: I think it's the right decision. We evaluate M&A opportunities pretty much weekly. And I think we're in a good spot now to build it versus buy it because we're good at building things.
Speaker #4: That would be my response to where we're going in the next two years.
Speaker #1: It's substantially expands our market, is the truth of it. But it does it because at each level, you want the participants ahead of you in the supply chain, meaning your suppliers, to participate as well.
Speaker #1: So, we're pretty excited about it, and it seems to be working so far.
Speaker #2: Thank you. At this time, I would like to turn the call back to Mr. Randy Fields for closing comments.
Speaker #1: Thank you, operator. Thanks, everybody, for taking some time this afternoon to chat with us. You know how to reach us if you have additional questions.
Speaker #1: We're happy to make ourselves available. Thanks a lot.
Speaker #4: Thank you.
Speaker #2: Thank you. This does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a great day.