ReposiTrak, Inc.

Greetings and welcome to the repository track fiscal second quarter earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If you would like to ask a question at that time, please press star 1 on your telephone keypad. As a reminder, this conference call is being recorded. It is now my pleasure to introduce your host, Rob Fink with FNKIR. And Mr. Fink, you may begin.

Thank you, Operator, and good afternoon, everyone. Thank you for joining us today for the Reposit Track Fiscal Second Quarter Earnings Call. Hosting the call today are Randy Fields, Reposit Track's Chairman and CEO, and John Merrill, Reposit Track's CFO. Before we begin, I would like to remind everyone that this call could contain forward-looking statements about Reposit Track within the meaning of the Private Security Litigation Reform Act of 1995. Forward-looking statements are statements that are not subject to historical facts. Such forward-looking statements are based upon current beliefs and expectations. Proposit Tract's remarks are subject to risks and uncertainties. Actual results may differ materially. Such risks and uncertainties are discussed in the company's filings with the Security and Exchange Commission. The information set forth herein should be considered in light of such risks. Proposit Tract 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 will be discussed on today's call. Investors can visit the investor relations section of the company's website at repositrack.com to access this press release. With all that said, I'd now like to turn the call over to John. John, the call is yours.

Thanks, Rob, and good afternoon, everyone. The second fiscal quarter represented another successful period of execution against our strategy. The growth in all lines of business, including traceability, continues to deliver increases in top-line revenue, profitability, and earnings per share, and it's just beginning. Again, our financial strategy is quite simple. Take great care of the customer, execute perfectly, grow recurring revenue, increase profitability, use cash to buy back common stock, redeem the preferred, and do it with no bank debt. At the same time, return capital to shareholders through an increase in cash dividends. Meanwhile, we continue to build cash on the balance sheet, now $28 million. Yes, it's really that simple, and traceability results are just getting started. Traceability continues to accelerate, understandably, as the January 2026 deadline looms. But more importantly, we are experiencing growth in all lines of business, traceability, compliance, and supply chain. This is evident in our total revenue growth and increases in the deferred revenue line item on our balance sheet. I don't want to get into the weeds, but obviously deferred revenue is an indicator for future revenues recognized in the next 12 months, particularly in a SaaS company. Since June 2024, our deferred revenue has grown 70% from $2.4 million to $4.2 million. If that doesn't raise your investor eyebrow, it should. These are signed customers, fully implemented, and who have paid in full. These customers will add $1.7 million of incremental subscription revenue over the next 12 months. Let me add some color. If you divide $1.7 million by four quarters, that incremental revenue adds about $425,000 to each subsequent quarter going forward. That means our quarterly revenue run rate increases from $5.5 million to roughly $6 million per quarter, assuming no additional sales opportunities, which is highly unlikely. I'm not providing a forecast. It's just math. The conversion of this deferred revenue to recognized revenue over the next few quarters not only will provide double-digit quarterly growth, but fiscal 2025 as a whole. Again, not a forecast, it's just math. While the revenue growth is coming along as anticipated, Randy and I are simultaneously focused on the contribution margin, profitability, EPS, and cash flow. While our current 64% revenue contribution margin above fixed cost is a good start, our goal is to get closer to 80%. meaning for every dollar above the $12 million in cash cost to run this place, as I have said time and time again, our goal is to deliver 80-plus cents profit on every dollar of incremental revenue. That is our goal. Many of you have asked if the current administration is good or bad for us, meaning what if they delay the traceability law? As we have said before, a ladder delay would be good for us. Instead of rushing to onboard thousands upon thousands of last-minute holdouts, it will allow us to administer an orderly onboarding, not at a hurried pace. The complexity is enormous, and time helps us ensure success. The government did the same thing with Sarbanes-Oxley some years ago. We hope they adopt the same ladder compliance for small, medium, and large companies for traceability. Like a financial strategy, our operational philosophy remains very simple. provide customers with superior solutions, deliver our service at a reasonable price, and execute perfectly. We solve complex business problems, and our customers expect us to fix the issue and not complicate their business in the interim. This drives higher levels of customer success and satisfaction. As we have adopted internally, when our customers are successful, they buy more from us. Let's get to the quarterly numbers. For the second quarter of fiscal 2025, total revenue was up 7%, $5.5 million versus $5.1 million. Recurring revenue increased 5% to $5.4 million. Given the amount of one-time setup fees earned during the quarter, the percentage of recurring to total revenue declined from 99% of total revenue to 98%. Cost of revenue increased 3% given increased investment in developer resources to further expand our wizard. a self-implementing automation platform to allow suppliers to onboard with little, if any, human interaction. Operating expenses increased 7% from $3.9 million to $4.1 million, reflecting our ongoing investment in RTN, higher commissions due to higher revenue, and increases in insurance and other benefit costs for employees. Sales and marketing expenses increased 15% as we continue to invest in marketing awareness of our solution suite of traceability, supply chain, and compliance, and increased commissions and payroll taxes. G&A increased 2%. This increase reflects higher benefit costs and other insurance increases that occurred during the quarter. Depreciation and amortization increased 2%, reflecting purchases of technology equipment for our newest data center that is located at Switch in Reno, Nevada, a Tier 5 data center. For the quarter ended December 31, 2024, gap in income increased from $1.5 million to $1.6 million, up 7%. Gap in income to shareholders increased from $1.3 million to $1.5 million, up 12%. Earnings per share basic and diluted was 8 cents per common share and 8 cents per diluted share. This compares to the same quarter last year of 7 cents earnings per share, both basic and diluted, an increase of 14%. Let's turn to the fiscal year-to-date numbers. For the six months ended December 31, 2024, total revenue increased 7.3% from $10 million to $11 million. Recurring revenue increased 6% to just under $11 million. Total operating expenses year-to-date were up 5% due to investment in RTN, increased employee benefit costs, and investment in development of onboarding tools. SG&A costs were up $225,000 or 4% due to investments in RTN, higher commissions, and higher employee benefit costs. Net income increased 14% from $2.8 million to $3.2 million. Net income to common shareholders increased from $2.5 million to over $3 million, an increase of 19%. Earnings per share for the fiscal year to date increased 21%. Basic earnings per share was $0.17 per share and $0.16 diluted. This compares to $0.14 basic and $0.13 diluted in the prior year. Turning now to cash flow and cash balances. Cash on the balance sheet at December 31, 2024 was $28 million, a 12% increase from June 30, 2024. Cash from operations year-to-date was $5.3 million, an increase of 117% from the same period in 2023. The $28 million cash on the balance sheet December 31, 2024 is after we redeemed $1.5 million in preferred paid out $700,000 in common stock dividends, and bought back $100,000 in common shares during the six months ended December 31, 2024. And we have no bank debt. Since inception, we have redeemed 362,000 preferred shares for a total of $3.9 million. The remaining amount available for preferred redemption is $5.1 million. At our current pace of redemption, we are confident in redeeming all of the preferred outstanding on or before September 2027. That's all I have today. Thanks, everyone, for your time. At this point, I'll turn the call over to Randy. Randy?