Q4 2026 ReposiTrak Inc Earnings Call

September 28, 2026

Speaker #1: Greetings and welcome to the ReposiTrak Fiscal Fourth 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.

Operator: Greetings, and welcome to the ReposiTrak Fiscal Q4 2026 Earnings Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Jeff Stanlis of FNK IR. Please go ahead.

Operator: Greetings, and welcome to the ReposiTrak Fiscal Q4 2026 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Jeff Stanlis of FNK IR. Please go ahead.

Speaker #1: If anyone should require operator assistance, please press star (*) or zero (0) on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Jeff Stanlis of FNKIR.

Speaker #1: Please go ahead.

Speaker #2: Thank you, operator, and good afternoon, everyone. Thank you for joining us today for ReposiTrak's fiscal fourth quarter 2026 earnings conference call. Hosting the call today are Randy Fields, ReposiTrak's Chairman and CEO, and John Merrill, ReposiTrak's CFO.

Jeff Stanlis: Thank you, operator, and good afternoon, everyone. Thank you for joining us today for ReposiTrak's fiscal Q4 2026 earnings conference call. Hosting the call today are Randy Fields, ReposiTrak's Chairman and CEO, and John Merrill, ReposiTrak's CFO. 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. 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. Such risks are fully 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. ReposiTrak does not assume any obligation to update the information contained on this conference call.

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 based on historical facts. Such forward-looking statements are made 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 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 the information contained on this conference call. Shortly after the market closed today, the company issued a press release overviewing the financial results we will discuss on today’s call.

Jeff Stanlis: Shortly after the market closed today, the company issued a press release overviewing the financial results we will discuss on today's call. 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. John, the call is yours.

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 yours.

Speaker #3: Thanks, Jeff, and good afternoon, everyone. Our strong results for fiscal 2026 demonstrate continued execution against our stated strategy, with continued shift of our revenue mix towards highly predictable, recurring SaaS revenue.

John Merrill: Thanks, Jeff, and good afternoon, everyone. Our strong results for fiscal 2026 demonstrate continued execution against our stated strategy. We've continued to shift our revenue mix towards highly predictable recurring SaaS revenue. We continue to grow this revenue while simultaneously improving our operating cost structure. During the fiscal year, total revenue grew 3%, recurring revenue grew 4%, while total operating expenses declined 6%. As part of our ongoing strategy, we deliberately de-emphasized certain high-touch, low-margin revenue streams, focusing instead on opportunities with the greatest growth potential and profitability. This moderated our revenue growth while contributing to an improved operating margin profile. The result is clear operating leverage, higher GAAP net income, higher earnings per share, solid cash generation, and the continued return of capital to shareholders.

Speaker #3: We continued to grow revenue while simultaneously improving our operating cost structure. During the fiscal year, total revenue grew 3%, recurring revenue grew 4%, while total operating expenses declined 6%.

Speaker #3: As part of our ongoing strategy, we deliberately de-emphasized certain high-touch, low-margin revenue streams, focusing instead on opportunities with the greatest growth potential and profitability.

Speaker #3: This moderated our revenue growth while contributing to an improved operating margin profile. The result is clear operating leverage, higher GAAP net income, higher earnings per share, solid cash generation, and the continued return of capital to shareholders.

Speaker #3: At the same time, we are investing in the long-term infrastructure of our business—both organically, through the refresh of our technology stack and continued investment in our traceability solution, and through a collaborative relationship and investment in Spar Group, which supports our newest initiative, Touchless Merchandising.

John Merrill: At the same time, we are investing in the long-term infrastructure of our business, both organically through the refresh of our technology stack and continued investment in our traceability solution, and through our collaborative relationship and investment in SPAR Group, which supports our newest initiative, Touchless Merchandising. Randy will discuss Touchless Merchandising in his prepared comments shortly. We view this initiative as a natural extension of our broader platform strategy across traceability, compliance, risk management, and supply chain solutions. I will focus my comments today on the financial results and our capital allocation priorities. Let's get to the numbers. For the full fiscal year, total revenue increased 3%, from $22.6 million to $23.3 million. Total operating expenses for the fiscal year were $15.4 million versus $16.4 million last year, a decrease of 6%.

Speaker #3: Randy will discuss Touchless Merchandising and its prepared comment shortly. We view this initiative as a natural extension of our broader platform strategy—across traceability, compliance, risk management, and supply chain solutions.

Speaker #3: I will focus my comments today on the financial results and our capital allocation priorities. Let's get to the numbers. For the full fiscal year, total revenue increased 3%, from $22.6 million to $23.3 million.

Speaker #3: Total operating expenses for the fiscal year were $15.4 million, versus $16.4 million last year, a decrease of 6%. These results demonstrate the operating leverage in our business model as we continue to scale our SaaS platform and improve automation.

John Merrill: These results demonstrate the operating leverage in our business model as we continue to scale our SaaS platform and improve automation. Operating margin expanded to approximately 33.7% from 27.5% last year, an increase of approximately 620 basis points. Income from operations was up 26% for the fiscal year to $7.8 million versus $6.2 million. GAAP net income increased 8%, from $7 million to $7.6 million. As previously communicated, the company is nearing the end of the benefit period associated with its historical federal and state net operating losses, or NOLs. Our effective tax rate for fiscal 2026 was approximately 21% for federal, 3% for state. As those historical tax benefits diminish, we expect our overall effective tax rate may increase subject to available state and federal tax credits and other tax attributes.

Speaker #3: Operating margin expanded to approximately 33.7% from 27.5% last year, an increase of approximately 620 basis points. Income from operations was up 26% for the fiscal year to $7.8 million, versus $6.2 million.

Speaker #3: Gap net income increased 8%, from $7 million to $7.6 million. As previously communicated, the company is nearing the end of the benefit period associated with its historical federal and state net operating losses, or NOLs.

Speaker #3: Our effective tax rate for fiscal 2026 was approximately 21% for federal and 3% for state. As those historical tax benefits diminish, we expect our overall effective tax rate may increase, subject to available state and federal tax credits and other tax attributes.

Speaker #3: GAAP net income to common shareholders increased 12%, from $6.6 million in fiscal 2025 to $7.4 million in fiscal 2026, despite an income tax provision of approximately $2 million compared with approximately $700,000 last year—an increase of approximately 190%.

John Merrill: GAAP net income to common shareholders increased 12%, from $6.6 million in fiscal 2025 to $7.4 million in fiscal 2026, despite an income tax provision of approximately $2 million, compared with approximately $700,000 last year, an increase of approximately 190%. Fiscal 2026 earnings per share were $0.41 basic and $0.39 diluted, based on approximately 18.3 million weighted average basic shares and 19 million weighted average diluted shares, respectively. Diluted earnings per share increased 13% to $0.39, compared with $0.35 for fiscal 2025. Turning to the Q4 numbers. Q4 fiscal 2026 revenue was down 3% year over year at $5.6 million. As a reminder, the H2 of last year included an accelerated pace of traceability activity as the FDA's original 20 January 2026, compliance date approached.

Speaker #3: Fiscal 2026 earnings per share were $41 basic and $39 diluted, based on approximately 18.3 million weighted average basic shares and 19 million weighted average diluted shares, respectively.

Speaker #3: Diluted earnings per share increased 13% to $39, compared with $35 for fiscal 2025. Turning to the fourth quarter numbers: fourth fiscal quarter 2026 revenue was down 3% year-over-year at $5.6 million.

Speaker #3: As a reminder, the second half of last year included an accelerated pace of traceability activity as the FDA's original January 20, 2026, compliance date approached.

Speaker #3: As previously communicated, the FDA has extended the compliance date to July 20, 2028, and Congress has directed the FDA not to enforce the Food Traceability Rule before that date.

John Merrill: As previously communicated, the FDA has extended the compliance date to 20 July 2028, and Congress has directed FDA not to enforce the Food Traceability Rule before that date. We believe customer activity could increase as the industry prepares for that new deadline date. Total operating expenses for the quarter were down 11% to $3.7 million from $4.2 million, reflecting continued cost discipline and operating efficiencies. Cost of services was down 12%, due partially to capitalized software costs as we significantly enhanced our software stack. Sales and marketing was down 11%. G&A expense was up 3% due to higher benefit costs and other employee costs. Depreciation and amortization declined 75%, primarily because intangible and hard assets became fully amortized or depreciated. Income from operations was up 19% to $1.9 million versus $1.6 million.

Speaker #3: We believe customer activity could increase as the industry prepares for that new deadline date. Total operating expenses for the quarter were down 11%, to $3.7 million from $4.2 million, reflecting continued cost discipline and operating efficiencies.

Speaker #3: Cost of services was down 12%, due partially to capitalized software costs as we significantly enhanced our software stack. Sales and marketing was down 11%.

Speaker #3: G&A expense was up 3% due to higher benefit costs and other employee costs. Depreciation and amortization declined 75%, primarily because intangible and hard assets became fully amortized or depreciated.

Speaker #3: Income from operations was up 19% to $1.9 million versus $1.6 million. GAAP net income for the fourth fiscal quarter of 2026 was $2.1 million, up 16% versus $1.8 million last year.

John Merrill: GAAP net income for the Q4 fiscal quarter of 2026 was $2.1 million, up 16% versus $1.8 million last year. Keep in mind, this also considers an almost 200% increase in income tax expense. GAAP net income to common shareholders increased 19% to $2.1 million from $1.7 million. Earnings per share for the quarter were $0.11 per basic and diluted share, based on approximately 18.2 million weighted average basic shares and 19 million weighted average diluted shares. Diluted earnings per share increased approximately 20% year over year despite the higher income tax burden. Turning to capital allocation and liquidity. We ended fiscal 2026 with $27.3 million in cash, plus our $3 million note receivable from SPAR Group as of 30 June 2026. For fiscal 2026, we generated approximately $8.3 million of cash from operations compared with $8.4 million last year.

Speaker #3: Keep in mind, this also considers an almost 200% increase in income tax expense. GAAP net income to common shareholders increased 19% to $2.1 million, from $1.7 million.

Speaker #3: Earnings per share for the quarter were $0.11 per basic and diluted share, based on approximately 18.2 million weighted average basic shares and 19.0 million weighted average diluted shares.

Speaker #3: Diluted earnings per share increased approximately 20% year-over-year, despite the higher income tax burden. Turning to capital allocation and liquidity: we ended fiscal 2026 with $27.3 million in cash, plus our $3 million note receivable from Spar Group as of June 30, 2026.

Speaker #3: For fiscal 2026, we generated approximately $8.3 million of cash from operations, compared with $8.4 million last year. Our strong balance sheet, continued profitability, and cash generation provide meaningful financial flexibility.

John Merrill: Our strong balance sheet, continued profitability, and cash generation provides meaningful financial flexibility. The company continues to have zero bank debt. During fiscal 2026, the company repurchased and canceled approximately 144,000 common shares for an average price of $12.50 per share for a total of approximately $1.8 million. Since inception of the buyback program, we have repurchased and canceled approximately 2.3 million common shares for approximately $15.2 million at an average price of $6.60 per share. As of 30 June 2026, approximately $6 million remained under the $21 million total common share repurchase authorization. The company holds no treasury stock. Shares are simply repurchased and subsequently canceled. During the year, we redeemed 175,000 preferred shares at the stated redemption price of $10.70 per share for a total of approximately $1.9 million.

Speaker #3: The company continues to have zero bank debt. During fiscal 2026, the company repurchased and canceled approximately 144,000 common shares, at an average price of $12.50 per share, for a total of approximately $1.8 million.

Speaker #3: Since inception of the buyback program, we have repurchased and canceled approximately 2.3 million common shares for approximately $15.2 million, at an average price of $6.60 per share.

Speaker #3: As of June 30, 2026, approximately $6 million remained under the $21 million total common share repurchase authorization. The company holds no treasury stock; shares are simply repurchased and subsequently canceled.

Speaker #3: During the year, we redeemed 175,000 preferred shares at the stated redemption price of $10.70 per share, for a total of approximately $1.9 million. Since inception, the company has redeemed approximately 677,000 preferred shares at the stated redemption price of $10.70 per share, for a total of approximately $7.3 million.

John Merrill: Since inception, the company has redeemed approximately 677,000 preferred shares at the stated redemption price of $10.70 per share for a total of approximately $7.3 million. We have approximately 161,000 preferred shares remaining, representing approximately $1.7 million at the stated redemption price. Our current goal remains to redeem all remaining preferred shares outstanding on or before December 2026, subject to business conditions, liquidity requirements, and the board's ongoing evaluation of our capital allocation priorities. On 18 June 2026, the board declared a quarterly dividend of $0.02 per share, $0.08 per share annually to shareholders of record on 30 June 2026. The cash dividends were paid to shareholders of record on or about 14 August 2026. Again, on 15 September 2026, the board declared a September quarterly dividend of $0.02 to shareholders of record on 30 September 2026.

Speaker #3: We have approximately 161,000 preferred shares remaining, representing approximately $1.7 million at the stated redemption price. Our current goal remains to redeem all remaining preferred shares outstanding on or before December 2026, subject to business conditions, liquidity requirements, and the board's ongoing evaluation of our capital allocation priorities.

Speaker #3: On June 18, 2026, the Board declared a quarterly dividend of $0.02 per share, or $0.08 per share annually, to shareholders of record on June 30, 2026.

Speaker #3: Cash dividends were paid to shareholders of record on or about August 14, 2026. Again, on September 15, 2026, the board declared a September quarterly dividend of $0.02 to shareholders of record on September 30, 2026.

Speaker #3: It is anticipated that cash dividends will be paid to September 2026 shareholders on or about November 14, 2026. As previously communicated, all declared dividends will be paid within 45 days of each fiscal quarter end.

John Merrill: It is anticipated that cash dividends will be paid to September 2026 shareholders on or about 14 November 2026. As previously communicated, all declared dividends will be paid within 45 days of each fiscal quarter end. From time to time, the board will evaluate our capital allocation strategy and make adjustments based on business conditions in the approach it believes is most favorable for the company and its shareholders at that time. Our continued capital allocation objective is to return approximately 50% of annual cash from operations to shareholders while retaining the balance to strengthen the balance sheet and fund future operations. In summary, our strategy has not changed. First and foremost, take exceptional care of the customer and execute flawlessly.

Speaker #3: From time to time, the Board will evaluate our capital allocation strategy and make adjustments based on business conditions and the approach it believes is most favorable for the company and its shareholders at that time.

Speaker #3: Our continued capital allocation objective is to return approximately 50% of annual cash from operations to shareholders, while retaining the balance to strengthen the balance sheet and fund future operations.

Speaker #3: In summary, our strategy has not changed. First and foremost, take exceptional care of the customer and execute flawlessly. Next, grow recurring revenue. Increase profitability faster than revenue.

John Merrill: Next, grow recurring revenue, increase profitability faster than revenue, use cash to repurchase common stock and redeem the preferred shares, maintain a debt-free balance sheet, and return capital to shareholders through our cash dividend. That's all I have today. Thanks everyone for your time. At this point, I'll pass the call over to Randy. Randy?

Speaker #3: Use cash to repurchase common stock and redeem the preferred shares. Maintain a debt-free balance sheet and return capital to shareholders through our cash dividend.

Speaker #3: That's 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. ReposiTrak is continuing to expand its strategic position as the go-to vendor for food safety and on-shelf availability for the retail food industry.

Randy Fields: Thanks, John. ReposiTrak is continuing to expand its strategic position as the go-to vendor for food safety and on-shelf availability for the retail food industry. From compliance to supply chain to traceability, we've set the standard for highly automated, incredibly accurate, remarkably simple, and very affordable solutions. Each of our businesses performed well during the quarter, in spite of the fact that we put a great deal of focus on a new, very large supply chain opportunity, Touchless Retailing. This particular supply chain initiative is an important one, because we believe it's not only a great market opportunity for us, but critically, it solves a set of issues that our customers all experience. As technology gets better and problems are more easily identified, the bottleneck isn't knowing what needs to be done, but rather actually getting it done. In other words, having the people to actually fix the problems.

Speaker #2: From compliance to supply chain to traceability, we've set the standard for highly automated, incredibly accurate, remarkably simple, and very affordable solutions. Each of our businesses performed well during the quarter, in spite of the fact that we put a great deal of focus on a new, very large supply chain opportunity.

Speaker #2: Touchless retailing: this particular supply chain initiative is an important one because we believe it's not only a great market opportunity for us, but critically, it solves a set of issues that our customers all experience.

Speaker #2: As technology gets better and problems are more easily identified, the bottleneck isn't knowing what needs to be done, but rather actually getting it done.

Speaker #2: In other words, having the people to actually fix the problems. Those problems are especially acute in the direct-store delivery segment of the retail food industry, and that's where we're focused.

Randy Fields: Those problems are especially acute in the direct store delivery segment of the retail food industry, and that's where we're focused. Remember, the idea behind the entire concept of direct store delivery, which is now more than 30% of grocery sales, was that the retailer would not have to provide labor to keep the product on the shelf. The DSD vendor would take that on with their own people or with third parties. In short, the retailer provided the shelf, and the vendor provided the people to take care of the shelf. That promise is not being kept. Right now, merchandising cost and quality are major pain points for both suppliers and for retailers. Suppliers pay merchandisers to keep shelves stocked, but the work is expensive, and frankly, it's not done very well. Over the years, the cost of merchandising has gone up. DSD suppliers have done the obvious.

Speaker #2: Remember, the idea behind the entire concept of direct-store delivery—which is now more than 30% of grocery sales—was that the retailer would not have to provide labor to keep the product on the shelf.

Speaker #2: The DSD vendor would take that on with their own people or with third parties. In short, the retailer provided the shelf, and the vendor provided the people to take care of the shelf.

Speaker #2: That promise is not being kept. Right now, merchandising cost and quality are major pain points for both suppliers and retailers. Suppliers pay merchandisers to keep shelves stocked, but the work is expensive and, frankly, it's not done very well.

Speaker #2: Over the years, the cost of merchandising has gone up. DSD suppliers have done the obvious: they cut the frequency of touching the merchandise. That, in turn, has resulted in more out-of-stocks and lower sales.

Randy Fields: They cut the frequency of touching the merchandise. That, in turn, has resulted in more out of stocks and lower sales. Simple. Just like you would expect. The industry is in a spiral, and we think Touchless Retail, as we call it, may be an important part of the ultimate answer. For years, ReposiTrak has been superb at telling retailers and suppliers about supply chain issues, out of stocks, et cetera. We have tremendous visibility into data and trends, and we can note which stores sell more of a certain product and therefore need more merchandising attention and which ones lag. But visibility without action does not solve the root problems for either the suppliers or the retailers. Our Touchless Retail offering gives our customers the ability to actually fix the problems, not just identify them.

Speaker #2: Simple. Just like you'd expect. The industry is in a spiral, and we think touchless retailing—as we call it—may be an important part of the ultimate answer.

Speaker #2: For years, ReposiTrak has been superb at telling retailers and suppliers about supply chain issues, out-of-stocks, etc. We have tremendous visibility into data and trends, and we can note which stores sell more of a certain product and therefore need more merchandising attention, and which ones lag.

Speaker #2: But visibility without action doesn't solve the root problems for either the suppliers or the retailers. Our touchless retail offering gives our customers the ability to actually fix the problems, not just identify them.

Speaker #2: We believe that our new service will not only reduce the merchandising cost for our customers, but, even more importantly, will enable them to increase sales in a meaningful way.

Randy Fields: We believe that our new service will not only reduce the merchandising costs for our customers, but even more importantly, will enable them to increase sales in a meaningful way. Over the next several months, we will begin to generate the data that we think, in terms of sales increases, supports the fact that we can do that, and we suspect that will help us get many, many additional customers. Beyond that, adding an ability to fix identified problems through people is the ultimate anti-AI strategy for us. In simplest terms, AI will never have arms and legs that can go into a store and touch product. It is obvious, by the way, that we can charge more for such a service, not just to diagnose the problem, but to actually fix it.

Speaker #2: Over the next several months, we'll begin to generate the data that we think, in terms of sales increases, supports the fact that we can do that, and we suspect that will help us get many, many additional customers.

Speaker #2: Beyond that, adding the ability to fix identified problems through people is the ultimate anti-AI strategy for us. In simplest terms, AI will never have arms and legs.

Speaker #2: It can go into a store and touch a product. It's obvious, by the way, that we can charge more for such a service—not just to diagnose the problem, but to actually fix it.

Speaker #2: So our retail customers win with higher sales, our supplier customers win with higher sales, and we get higher sales. In order to add this uniquely human capability, ReposiTrak has now aligned itself with the SPAR Group, one of the largest U.S.

Randy Fields: Our retail customers win with higher sales, our supplier customers win with higher sales, and we get higher sales. In order to add this uniquely human capability, ReposiTrak has now aligned itself with the SPAR Group, one of the largest US merchandising companies. In fact, I believe we are now the largest shareholder of the SPAR Group, and our Touchless Retail offering is designed to address every single one of these pain points for our DSD suppliers. We pair our data and our visibility with the very best team at SPAR. Seriously, only the top performers of SPAR. We create a squad of very talented, proven merchandising experts that can remediate these stocking issues, and the program is resonating. We introduced the service about a month ago, and we have already signed and begun executing several contracts.

Speaker #2: Merchandising companies. In fact, I believe we are now the largest shareholder of the SPAR Group, and our touchless retail offerings are designed to address every single one of these pain points for our DSD suppliers.

Speaker #2: We pair our data and our visibility with the very best team at SPAR. Seriously, only the top performers at SPAR, so we create a squad of very talented, proven merchandising experts that can remediate these stocking issues.

Speaker #2: The programs are resonating. We introduced the service about a month ago, and we've already signed and begun executing several contracts. The technical integration with SPAR and the ramp-up of this offering is taking a lot of time and focus for us, especially over the last quarter.

Randy Fields: The technical integration with SPAR and the ramp-up of this offering is taking a lot of time and focus for us, especially over the last quarter, but the market reception has been exceptionally high. Incidentally, the integration, as you would imagine, is non-trivial. We are deeply integrating at a technical and reporting level to make sure that we have a common view of a customer, and that we can serve them as if we were joined at the hip with SPAR. We expect Touchless Retail to generate a little revenue in the current quarter that is coming up and become a very significant and meaningful contributor in 2027 and beyond. That will have been the fastest concept to revenue of any product we have ever introduced. Beyond the joint offering and its revenue potential as a joint offering, we also have significant cross-sale opportunities.

Speaker #2: But the market reception has been exceptionally high. Incidentally, the integration, as you would imagine, is non-trivial. We're deeply integrating at the technical and reporting level to make sure that we have a common view of a customer and that we can serve them as if we were joined at the hip with SPAR.

Speaker #2: We expect touchless retailing to generate a little revenue in the upcoming quarter, and to become a very significant and meaningful contributor in 2027 and beyond.

Speaker #2: That will have been the fastest concept to revenue of any product we've ever introduced. Beyond the joint offering and its revenue potential, we also have significant cross-sale opportunities.

Speaker #2: SPAR has a number of customers that can benefit from our technology, and we have technology customers that can use our merchandising services. If we can execute as well as I expect, this will be a very significant part of our business over the next few years.

Randy Fields: SPAR has a number of customers that can benefit from our technology, and we have technology customers that can use their merchandising services. If we can execute as well as I expect, this will be a very significant part of our business over the next few years. Very significant. On to traceability. We recently spent time with the FDA staff, and especially after the summer we just experienced with food safety issues, they made it clear they have no desire to postpone the implementation of traceability Rule 204. We continue to expect that by year-end, inbound inquiry rate and interest in traceability will increase. This will have a meaningful impact on our business in 2027 as we get closer to the 2028 deadlines. The headlines of the past few months reiterate why traceability is critical.

Speaker #2: Very significant. On to traceability. We recently spent time with FDA staff, and especially after the summer we just experienced with food safety issues, they made it clear they have no desire to postpone the implementation of Traceability Rule 204.

Speaker #2: We continue to expect that by year-end, inbound inquiry rate and interest in traceability will increase. This will have a meaningful impact on our business in 2027 as we get closer to the '28 deadlines.

Speaker #2: The headlines of the past few months reiterate why traceability is critical. As of a few weeks ago, we've had over 160 food-related recalls, which is well ahead of the already accelerated pace from 2025.

Randy Fields: As of a few weeks ago, we've had over 160 food-related recalls. Way ahead of the already accelerated pace from 2025. More importantly, these recalls involve serious, sometimes deadly outbreaks. We all heard about the Cyclospora outbreak in July and August. Iceberg lettuce from a farm in Mexico led to something in excess of 11,000 illnesses across 20 states, 500 hospitalizations and two deaths. As a result, bagged lettuce sales, for example, are down 30%. Lettuce fields in California are being plowed under. That's not the only outbreak. Jalapenos from Mexico led to a Salmonella outbreak resulting in, I don't know, 431 sick people in 32 states with 57 hospitalizations. Food safety problems, exacerbated by a lack of traceability, create an enormous cost burden for the industry, and that doesn't include what you can imagine the litigation costs are likely to be.

Speaker #2: More importantly, these recalls involve serious, sometimes deadly outbreaks. We all heard about the cyclospora outbreak in July and August. Iceberg lettuce from a farm in Mexico led to something in excess of 11,000 illnesses across 20 states, 500 hospitalizations, and two deaths.

Speaker #2: As a result, bagged lettuce sales, for example, are down 30%. Lettuce fields in California are being plowed under. But that's not the only outbreak.

Speaker #2: Jalapeños from Mexico led to a salmonella outbreak, resulting in, I don't know, 436 people in 32 states with 57 hospitalizations. Food safety problems exacerbated by a lack of traceability create an enormous cost burden for the industry.

Speaker #2: And that doesn't include what you can imagine the litigation costs are likely to be. These are case studies for the importance of end-to-end traceability.

Randy Fields: These are case studies for the importance of end-to-end traceability. It was a hell of a summer. Traceability is critical because it enables retailers and suppliers to identify a problem quickly at the source and remove all potentially impacted products from shelves to reduce both human suffering and economic cost, and do it far, far faster. That's why another FDA extension of the deadline is frankly quite unlikely. For the year, as John mentioned, we grew revenue and simultaneously reduced our operating expenses. Our fixed costs actually went down even as we added revenue, added customers, and added offerings. The result was a significant increase again in our profitability. From a balance sheet perspective, we maintained substantial cash, giving our customers comfort and confidence in ReposiTrak, even as we invested in the SPAR Group and continued to return over $5 million of capital to the shareholders.

Speaker #2: It was a hell of a summer. Traceability is critical because it enables retailers and suppliers to identify a problem quickly at the source and remove all potentially impacted products from shelves, to reduce both human suffering and economic cost, and do it far, far faster.

Speaker #2: That's why another FDA extension of the deadline is, frankly, quite unlikely. For the year, as John mentioned, we grew revenue and simultaneously reduced our operating expenses.

Speaker #2: Our fixed costs actually went down, even as we added revenue, added customers, and added offerings. The result was a significant increase, again, in our profitability.

Speaker #2: And from a balance sheet perspective, we maintained substantial cash, giving our customers comfort and confidence in ReposiTrak. Even as we invested in the SPAR Group and continued to return over $5 million of capital to the shareholders.

Speaker #2: Over the next fiscal year, you will see both our touchless offerings expand. As we continue to move toward the FDA deadline, we expect traceability revenue to grow more rapidly, and our touchless merchandising offering to also rapidly expand revenue.

Randy Fields: Over the next fiscal year, you will see both our Touchless offerings expand. As we continue to move toward the FDA deadline, we expect traceability revenue to grow more rapidly and our Touchless Merchandising offering to also rapidly expand revenue. Overall, we feel very confident about the next few years. With that, I'd like to open the call now for questions. Operator?

Speaker #2: Overall, we feel very, very confident about the next few years. So, with that, I'd like to open the call now for questions. Operator?

Speaker #1: Thank you. We will now conduct a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad.

Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. One moment please while we poll for questions. Thank you. Our first question is from Thomas Forte with Maxim Group.

Operator: Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. One moment please while we poll for questions. Thank you. Our first question is from Thomas Forte with Maxim Group.

Speaker #1: A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue.

Speaker #1: For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. One moment, please, while we queue for questions.

Speaker #1: Thank you. Our first question is from Thomas Forte with Maxim Group.

Speaker #3: Great. So, John or Andy, congratulations on another good fiscal year. I'll just go one at a time with my questions. So, John, I apologize.

Thomas Forte: Great. John, Randy, congratulations on another good fiscal year. I will just go one at a time on my questions. John, I apologize, you get the least interesting one first. When you compare your fiscal 2026 results with your fiscal 2025 results, on an earnings per share basis, how much did it cost you, with the higher tax rate for the full year versus last year?

Speaker #3: You get the least interesting one first. When you compare your fiscal 2026 results with your fiscal 2025 results, on an earnings per share basis, how much did it cost you with the higher tax rate for the full year versus last year?

Speaker #2: So, like in my remarks, it was about $2 million for this year. Last year, the expense was $700,000. So, I went to public school, but that's $1.3 million that, like-for-like, was an increase.

John Merrill: In my remarks, it was about $2 million for this year. Last year, the expense was $700,000. I went to public school, but that is $1.3 million that like for like was an increase between fiscal 2026 and 2025.

Speaker #2: Between fiscal 2026 and 2025.

Speaker #3: And how much is that in EPS?

Thomas Forte: How much is that in EPS?

Speaker #2: You figure $200,000 for each penny. So, what is that—six and a half cents?

John Merrill: You figure 200,000 for each penny. What is that, 6.5 cents.

Speaker #3: Thank you. All right, so then on the invested spending related to your software, can you talk at a high level about what you're investing in there?

Thomas Forte: Thank you. All right. On the invested spending related to your software, can you talk about high level, what you are investing in there?

Speaker #2: Well, let me take that. Do you mean, what kinds of things are we doing investment-wise with our software?

Randy Fields: Well, do you mean what kinds of things are we doing investment-wise?

Thomas Forte: Yes

Randy Fields: With our software? Yeah.

Speaker #3: Yeah.

Speaker #2: Yeah. There's God, there's a whole variety of things that are actually going on. We're in the process of rewriting almost the entirety of our technology stack with three intentions.

Thomas Forte: Yes.

Randy Fields: God, there's a whole variety of things that are actually going on. We're in the process of rewriting almost the entirety of our technology stack with three intentions. We're going to more deeply embed AI capabilities in what we're doing. We've always been a pioneer in the area of AI, but we're going to more deeply embed it. That's number one. Number two, as we're now going to be sharing customers with SPAR, we're modifying our technology to create the ability for both companies to act as one. I know that sounds relatively trivial, but it's actually very difficult. We both want to be able to look at a customer, the results. We want to treat the customer between us in a way so that things never fall through the cracks. So we're doing major technology changes both for SPAR and ourselves in order to have that capability.

Speaker #2: We're going to more deeply embed AI capabilities in what we're doing. We've always been a pioneer in the area of AI, but we're going to more deeply embed it.

Speaker #2: That's number one. Number two, as we're now going to be sharing customers with SPAR, we're modifying our technology to create the ability for both companies to act as one.

Speaker #2: I know that sounds relatively trivial, but it's actually very difficult. We both want to be able to look at a customer—at the results. We want to treat the customer between us in a way so that things never fall through the cracks.

Speaker #2: So we're making major technology changes, both for SPAR and ourselves, in order to have that capability. We've announced several new products, as you know.

Randy Fields: We've announced several new products, as you know, and we're investing in those products as well. Perhaps the most interesting thing that'll change, we think, how the world sees us is, as we now have the capability to fix problems with people with SPAR, we're going to go much deeper into the analytics of the supply chain so we can identify out of stocks and whatnot more quickly and deal with them more in real time. So there's an enormous amount of development work going on.

Speaker #2: And we're investing in those products as well. Perhaps the most interesting thing that'll change, we think, how the world sees us is as we now have the capability to fix problems with people, with SPAR, we're going to go much deeper into the analytics of the supply chain.

Speaker #2: So we can identify out-of-stocks and whatnot more quickly, and deal with them more in real time. So there's an enormous amount of development work going on.

Speaker #3: All right. And then.

Thomas Forte: All right.

Speaker #2: Is that the question you were asking? I just want to make sure I answered the right question.

Randy Fields: Is that the question you were asking? I just want to make sure I answered the right question.

Speaker #3: Yes. No. Thank you for that. So, John, historically, you've provided a number on the amount of money it requires to run the business. With Randy talking about embedding AI more deeply, does that change that number?

Thomas Forte: Yes. No, thank you for that. John, historically, you have provided a number on the amount of money it requires to run the business. With Randy talking about embedding AI more deeply, does that change that number?

Speaker #2: Not at all. I mean, we still maintain that we're sub-$12 million in cash. Take accounting out of it: bad debt expense, stock comp, accounting.

John Merrill: Not at all. We still maintain that we are sub-$12 million in cash. Take accounting out of it, bad debt expense, stock comp accounting, we are still sub-12. It is about $11.4 million right now. Will those increases or those significant enhancements to our software stack change that? The answer is no. Because as we have done in the past, we would just reallocate, like you have seen with our total expenses have gone down dramatically. So we would just reallocate. We would not spend more on those enhancements with the software development. Does that answer your question?

Speaker #2: We're still sub-12; it's about 11.4 million right now. Now, will those increases or those significant enhancements to our software stack change that? The answer is no.

Speaker #2: Because, as we've done in the past, we would just reallocate. As you've seen, our total expenses have gone down dramatically. So we would just reallocate.

Speaker #2: We wouldn't spend more on those enhancements with the software development.

Speaker #3: Well, actually, I think

Speaker #4: He was asking—I could be wrong, John—but I think he was actually asking the reverse question: Will this ultimately enable our cost structure to be lower as time goes on?

Randy Fields: Well, actually, I could be wrong, John, but I think he was actually asking the reverse question. Will this ultimately enable our cost structure to be lower as time goes on? Some of the things that we are doing will take more human requirements out of the equation. As we do more work with SPAR, it is not unreasonable to imagine our expenses lightening up a little bit even from where they are. They will definitely not go up significantly.

Speaker #4: Some of the things that we're doing will take more human requirements out of the equation. And as we do more work with SPAR, it's not unreasonable to imagine our expenses lightening up a little bit, even from where they are.

Speaker #4: They'll definitely not go up significantly.

Speaker #3: Okay. And then, Randy, did you give a statistic on the percent of food retailers' orders that are essentially online deliveries? I think I thought you gave a statistic there.

Thomas Forte: Okay. Randy, did you give a statistic on the percent of food retailers' orders that are essentially online deliveries? I thought you gave a statistic there.

Speaker #4: I didn't. Well, I think the stat that I gave relates to direct store delivery, which is how suppliers get product to the stores. Really, there are multiple paths.

Randy Fields: I didn't. I think the stat that I gave relates to direct store delivery, which is how suppliers get product to the stores. Really, there are multiple paths. The two biggest paths are through a warehouse, a distributor-owned warehouse, or we call it self-distributor, where the retailer owns his own distribution centers. That is about 70%. The remainder, 30%, is direct store delivery, where vendors like The Coca-Cola Company and PepsiCo, Inc. and others come directly to each of the retail stores, bring product in, put it on the shelf, and take care of the product, easing the labor pains of a retailer. That is the area where we have both the greatest market penetration and frankly, the greatest expertise. That is the area that is fraught with poor ordering. You have to think about it. There are thousands and thousands of relatively small vendors, notwithstanding the Cokes and Pepsis, the rest are small.

Speaker #4: The two biggest paths are through a warehouse distributor, or an owned warehouse—which we call self-distributor—where the retailer owns his own distribution centers.

Speaker #4: That's about 70%. The remainder, 30%, is direct store delivery, where vendors like Coke, Pepsi, and others come directly to each of the retail stores, bring product in, put it on the shelf, and take care of the product.

Speaker #4: Easing the labor pains of a retailer—that's the area where we have both the greatest market penetration and, frankly, the greatest expertise. And that's the area that is fraught with poor ordering, and you have to think about it.

Speaker #4: There are thousands and thousands of relatively small vendors—notwithstanding the Cokes and Pepsis, the rest are small. So, these smaller vendors have trouble first staffing to get into stores to address the merchandising issue.

Randy Fields: These smaller vendors have trouble, first, staffing to get into stores to address the merchandising issue. Secondly, to figure out what the order ought to be, and they just do not have the tools. That is our market opportunity. There are thousands of these vendors that have the need that they have got to have better merchandising capability than they do today. They need that and want that at a lower cost with higher effectiveness. They need the ability to have automated ordering that we bring to the table, and the maintenance of perpetual inventories and whatnot, all of which are part of the service that we provide to DSD vendors. This segment of the market, this 30% of the entire grocery market, really needs what we do.

Speaker #4: Secondly, to figure out what the order ought to be. And they just don't have the tools, and that's our market opportunity. There are thousands of these vendors that have the need—they've got to have better merchandising capability than they do today.

Speaker #4: They need that and want that at a lower cost with higher effectiveness. They need the ability to have automated ordering that we bring to the table.

Speaker #4: And the maintenance of perpetual inventories and whatnot, all of which are part of the service that we provide to DSD vendors. So this segment of the market—this 30% of the entire grocery market—really needs what we do.

Speaker #3: All right, so I hate to end on a negative, but all right. Can you specifically address two macro factors and how they're affecting maybe your customer and you indirectly?

Thomas Forte: All right. Then I hate to end on a negative, but can you specifically address two macro and how they are affecting maybe your customer and you indirectly? One is just elevated price of oil. Then you had made, Randy, some pretty specific comments earlier this fiscal year on the perceived AI threat and your efforts to address that and mitigate that. I know you touched on it in your prepared remarks, but I would appreciate if you expand on it a little.

Speaker #3: One is just the elevated price of oil, and then you had made, Randy, some pretty specific comments earlier this fiscal year on the perceived AI threat and your efforts to address that and mitigate that.

Speaker #3: So, can you—I know you touched on it in your prepared remarks, but I'd appreciate it if you could expand on that a little.

Speaker #4: Yeah, there's zero doubt that the increase in transportation costs, primarily because of diesel fuel, is putting more upward pressure on every aspect of the supply chain.

Randy Fields: Yeah. There is zero doubt that the increase in transportation costs, primarily because of diesel fuel, is putting more upward pressure on every aspect of the supply chain. Food moves by truck by and large, and as a result, it is definitely impacted by the change in diesel prices. The result of that is that people are cautious. They are very much concerned that consumers have reached the endpoint of willingness to pay. So it is causing the industry certainly pain and does not affect us per se, but it certainly is affecting the way supermarkets are approaching their business. An example is with the change in management recently, Kroger is going all in on bringing grocery prices down. They think market share now depends upon the perception that consumers have of the prices of groceries in their stores. The price battle has certainly begun.

Speaker #4: Food moves by truck, by and large, and as a result, it is definitely impacted by the change in diesel prices. So the result of that is that people are cautious.

Speaker #4: They're very much concerned that consumers have reached the end point of willingness to pay, so it's causing the industry certainly pain. It doesn't affect us per se, but it certainly is affecting the way supermarkets are approaching their business.

Speaker #4: An example is with the change in management recently. Kroger is going all in on bringing grocery prices down. They think market share now depends on the perception that consumers have of the prices of groceries in their stores.

Speaker #4: So the price battle has certainly begun. In terms of AI, you can tell that it seems to have quieted down a little bit. AI will enable large companies to try and bring more software systems in-house, "roll-your-own," as we call it, where they build their own systems, potentially with the aid of AI. Which, incidentally, we think is one of the reasons that the SPAR relationship is so important to us longer term.

Randy Fields: In terms of AI, you can tell that that seems to have quieted down a little bit. AI will enable large companies to try and bring more software systems in-house, roll your own, as we call it, where they build their own systems, potentially with the aid of AI, which incidentally, we think is one of the reasons that the SPAR relationship is so important to us longer term. The tool that AI can build, software, can be really good, as we know, because we do it, at the identification of problems. But there is simply an issue with retailers and suppliers. It is one thing to know that there is a problem, and it is a whole different thing, who the hell goes into the store to fix it. We believe that the future is in that ability to dispatch people, get the problem fixed, and own that space.

Speaker #4: It's one of the tools that AI can build; software can be really good, as we know, because we use it for the identification of problems.

Speaker #4: But there's simply an issue with retailers and suppliers. It's one thing to know that there's a problem, and it's a whole different thing—who the hell actually goes into the store to fix it?

Speaker #4: So, we believe that the future is in that ability to dispatch people, get the problem fixed, and own that space. And I can't think of a more rightful heir than us.

Randy Fields: I cannot think of a more rightful heir than us. We are tremendous at the identification of issues. With the addition of our relationship with SPAR, we are going to be even better at the full solution of how do you find and then how do you fix issues inside of retail grocery stores. We think it will be a pretty significant addition to what we are doing. Not a substitute, it is an addition.

Speaker #4: We're tremendous at the identification of issues. And with the addition of our relationship with SPAR, we're going to be even better at the full solution of how you find and then how you fix issues inside of retail grocery stores.

Speaker #4: So, we think it will be a pretty significant addition to what we're doing— not a substitute. It's an addition.

Speaker #3: Excellent. Thank you so much, Randy and John, for taking all my questions.

Thomas Forte: Excellent. Thank you so much, Randy and John, for taking all my questions.

Speaker #4: Thank you, guys.

Randy Fields: Thank you, guys.

Speaker #1: Thanks, Tom. Thank you. There are no further questions at this time. I'd like to hand the floor back over to Randall Fields for any closing comments.

John Merrill: Thanks, Tom.

Operator: Thank you. There are no further questions at this time. I'd like to hand the floor back over to Randy Fields for any closing comments.

Speaker #4: Paul, thank you. Thanks, everybody, for taking time this afternoon. We're obviously excited about where we are. As I said earlier, we've never introduced a product like we have with touchless retailing.

Randy Fields: Paul, thank you. Thanks everybody for taking time this afternoon. We're obviously excited about where we are. As I said earlier, we've never introduced a product like we have with Touchless Retail that went from a press release to revenue in about 45 days. It's pretty remarkable. So we feel very good about how that's doing. We certainly feel good about how the trends in the traceability market that we've opened up are likely to be coming our way here in the next few months. So we feel great about our current position. Thank you all. Talk to you soon. Bye.

Speaker #4: That went from a press release to revenue in about 45 days. It's pretty remarkable. So we feel very good about how that's doing. We certainly feel good about how the trends in the traceability market that we've opened up are likely to be coming our way here in the next few months.

Speaker #4: So, we feel great about our current position. Thank you all. Talk to you soon.

John Merrill: Thank you.

Operator: This concludes today's conference. You may disconnect your lines at this time. Thank you again for your participation.