ReposiTrak, Inc.

Greetings, and welcome to the Reposit Track Fiscal Third Quarter 2024 Earnings Call. At this time, all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. To ask a question, you may press star, then 1 on your telephone keypad. To withdraw your question, please press star, then 2. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jeff Stanliss with FNKIR. Mr. Stanlis, you may begin.

Thank you, operator, and good afternoon, everyone. Thank you for joining us today for Repositrak's fiscal third quarter earnings call. Hosting the call today are Randy Fields, Repositrak's chairman and CEO, and John Merrill, Repositrak's CFO. Before we begin, we'd 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, which 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 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. Investors can visit the investor relations section of the company's website at RepositTrack.com to access the press release. With all that said, I would now like to turn the call over to John Merrill. John, the call is yours.

Thanks, Jeff, and good afternoon, everyone. The March quarter for fiscal 2024 was yet another period of solid results. Before jumping into the financial results, I believe it is important for shareholders to take a moment and embrace the rearview mirror through the eyes of management and recognize some significant milestones we have achieved. During the March quarter, we completed onboarding hundreds upon hundreds of suppliers in their respective production facilities during the period. This was no easy task, but we have done it before. Those new suppliers and their respective facilities are currently generating 5% of total recurring revenue or $1 million during the fiscal year. The growth in total revenue considers the $1.4 million in high touch, low opportunity revenue that we sunsetted over the past 24 months, which we previously announced. There is another five X facilities that once fully onboarded will add to our previously announced $3 to $4 million annual recurring revenue already in the queue since May of 2023. Therefore, by June 2024, we anticipate having 6,000 to 10,000 FSMA 204 facilities standing in line to be implemented. There are many nuances to onboarding. We learn more and more every day. Randy will add more color in his commentary. However, the bottom line, we are more confident than ever before that those customers in hand today will double the size of our annual recurring revenue in the next 24 to 36 months. Let's get to the quarterly numbers. Total revenue was up 5% for the March quarter. Recurring revenue was essentially 100% of total revenue, up 6%. Operating expenses increased 12%. Yes, we continue to invest in the Reposit Track Traceability Network, or RTN, adding more sales and implementation personnel to facilitate onboarding of signups. Shareholders should note the prior year third quarter results reflects $1 million in lower operating expenses due to the receipt of our employee retention credit. In short, we applied for and received a $1 million employee retention credit, or ERC, which provided a refund of certain payroll taxes incurred during the COVID period. Obviously, the refund received in February of 2023 will muddy our comparative results for the third quarter of 2024. G&A costs were up 48%, again, reflecting the ERC impact last year. Gap mid-income decreased 7%, again, reflecting the ERC impact. Gap mid-income to common shareholders decreased 7%. Earnings per share was $0.08 per share unchanged from last year. Year-to-date cash from operations was $5 million. We have over $24 million cash in the bank and no debt. And we continue to pay a quarterly cash dividend, boosting at 10% as you saw the Board approve in November 2023. For several quarters, we have been discussing the FDA's FSMA Rule 204 mandate and the impact this will have on the food industry. The FDA's mandate is scheduled for 2026. As we discussed last quarter, we are seeing an industry reaction far sooner than we anticipated, and we believe we will be the benefactor of it. The traceability mandate is increasingly being driven by the market from the top down rather than from government regulations. You are seeing this acceleration in a steady flow of press releases from us announcing suppliers joining the RTN. There are many, many more in the queue, and we are not announcing every addition. Far from it. The revenue from these suppliers is currently 5% of our quarterly revenue, up from just 1% to 2% of revenue just nine months ago. We are investing heavily in sales, marketing, and implementation staff to process the pipelines. As Randy will discuss further, awareness among retailers is relatively high, but awareness among suppliers is quite low. So when will this cadence of traceability signups translate into complete onboarding and hence revenue, you might ask? It takes approximately six to nine months once a customer signs up before meaningful revenue is generated. Then that revenue is amortized over the subsequent 12 months. Randy will add more color in his commentary. Again, the strategy has not and will not change. Take great care of the customer, increase automation to expedite customer onboarding, sort through the nuances of customer systems, sophistication of documentation, and ability to exchange data electronically. We've been through this process before with our compliance solution. Our confidence has never been higher, and to summarize, we drive adoption, sign-ups, and onboarding, hence generate more recurring revenue keep expenses in line, generate cash, and return cash to shareholders, yes, it's that simple. As I've said time and time again, it takes approximately $12 million in cash a year to run this place. Even with our investment in RTN during the nine months ended March 31, 2024, our gross margin and net margin still remains at 80% and 24% respectively. Turning now to cash flow and cash balances. Total cash at March 31, 2024 was $24.5 million compared to $24 million at the end of fiscal year 2023. Total cash at March 2024 reflects repurchasing over 2.2 million common shares, redeeming over 140,000 shares of preferred stock, paying off $6 million in bank debt, and returning over $2.4 million in cash to common shareholders in the form of a dividend since inception. Fiscal year to date, we generated cash from operations of $5 million despite our elimination of high-touch, low-opportunity revenue. Since inception, we have repurchased 2.2 million common shares for $6.13 per share, or a total of $13 million. Since inception, the company has redeemed over 140,000 shares of preferred stock at the $10.70 redemption price for circa $1.5 million. The remaining amount of preferred stock redemption is $7.5 million. As previously announced, the company anticipates redeeming all of the preferred stock issued in outstanding over the next three years. We paid out our March 31 quarterly cash dividend on or about May 10, 2024. As we previously announced, subsequent quarterly cash dividends will be paid within 45 days of the quarter's end of June 30, September 30, and December 31. Again, we will take half the annual cash generated from operations and return it to shareholders in the form of a dividend, buying back additional shares of common and preferred shares or increasing the dividend, whichever lever makes the most sense at that time. The other half goes in the bank and will be strategically used to fund initiatives. From time to time, the Board will continue to evaluate our capital allocation strategy and may adjust the different capital levers, whichever lever is more favorable to shareholders at that time. That's all I have today. Thanks, everyone, for your time. At this point, I'll pass the call over to Randy. Randy?