ReposiTrak, Inc.

Greetings and welcome to the RepositTrack's fiscal third 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. If anyone requires operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Jeff Stanlis of FNKIR. You may begin.

Thank you, Operator, and good afternoon, everyone. Thank you for joining us today for the Repositrak Fiscal Third Quarter 2026 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. Overlooking statements are statements that are not subject to historical facts. Such forward-looking statements are based upon current beliefs and expectations. Proposite tracks for marks are subject to risks and uncertainties, and actual results may differ materially. Such risks are fully discussed in the company's filings to the Securities and Exchange Commission. The information set forth herein should be considered in light of such risks. A composite track 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 reposithack.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.

Thanks, Jeff, and good afternoon, everyone. As we close out the third quarter of fiscal 2026 and head into the final quarter of the fiscal year, I want to spend a few minutes reinforcing the long-term framework that continues to guide our execution, operating discipline, and capital allocation strategy. At Repositrak, our strategy has remained disciplined and consistent. We've remained focused on building a highly scalable SaaS platform characterized by recurring revenue, expanding operating margins, cash flow generation, and a conservatively capitalized balance sheet. At the same time, we have maintained a balanced approach towards reinvestment, innovation, and direct shareholder returns. I believe our results demonstrate the strength and consistency of that operating framework. First, our transition to a recurring SAS revenue model has fundamentally transformed both the quality and predictability of our business. Since fiscal 2020, we have converted more than $7 million of historical one-time revenue streams into recurring SAS revenue. During that same time period, recurring revenue increased from approximately 62% of total revenue to more than 98% today. Importantly, we accomplished this transition while simultaneously eliminating approximately $2 million of high-touch, low-margin revenue opportunities that no longer aligned with our long-term strategic direction. While those decisions reduced near-term revenue opportunities at that time, they created capacity for higher-value recurring revenue streams and positioned the company for sustainable long-term margin expansion. Second, we have remained highly focused on operational discipline and efficiency. Since fiscal 2020, we have reduced annual operating expenses from approximately $19 million to roughly $16 million, while simultaneously eliminating $6.4 million of bank debt. At the same time, our profitability profile has improved significantly. Net margins have expanded from approximately 8% several years ago to north of 30% today. We believe this performance continues to demonstrate the operating leverage embedded within our SAS model and the scalability of the underlying platform. Third, we continue to prioritize strong cash generation and disciplined capital allocation. Since fiscal 2020, net cash has compounded at approximately 16% annually. We define net cash as total cash less bank debt and lease obligations. Net cash increased from approximately $13.7 million in fiscal 2020 to nearly $28 million by fiscal 2025, providing us with flexibility to invest in SPAR Group while still maintaining a very strong liquidity position and zero bank debt. We believe that SPAR investment aligns with our broader platform, expansion objectives, and has the potential to generate attractive long-term shareholder value. The collaboration also supports our broader vision of extending our platform capabilities from supply chain intelligence into operational execution. Our capital allocation framework remains balanced between reinvestment opportunities and disciplined shareholder returns. During the current fiscal year to date period alone, we have returned roughly $5 million to shareholders through common share repurchases, preferred share redemptions, and dividends. Since inception of our capital return initiatives, we have repurchased and retired a meaningful amount of both common and preferred shares. In addition, we have increased the common dividend three separate times by 10% each time since the program was initiated in 2022. Meanwhile, we continue investing selectively in long-term strategic initiatives across three primary areas. The first area is product innovation. We are responding directly to customer pain points with solutions designed to improve supply chain visibility, reduce labor dependency, and increase data accuracy across increasingly complex distribution environments. Our touchless traceability initiative represents an important extension of the repository traceability network, or RTN. We believe this solution represents a significant advancement in how FDA compliant traceability can be implemented efficiently and at scale across the global food supply chain. Second, we continue strengthening our intellectual property portfolio. During the quarter, we filed two additional patent applications. One relates directly to touchless traceability, while the second covers innovative methods for identifying and automatically correcting data integrity issues within integrated supply chain environments. Repositrix has a long history of protecting its innovation through patents, and we now maintain a portfolio of nine U.S. patents, further extending our competitive positioning and intellectual property portfolio. Third, we continue modernizing our software architecture and internal systems infrastructure, including targeted artificial intelligence initiatives intended to further enhance automation, workflow efficiency, and platform scalability. Importantly, we do not anticipate a meaningful increase in cash operating expenses or capital expenditures associated with these initiatives. Let's get to the numbers. Third quarter fiscal 2026 revenue was $5.9 million, essentially flat year over year compared to $5.9 million in the prior year quarter. As a reminder, the March quarter fiscal 2025 benefited from elevated traceability onboarding activity ahead of the original FDA compliance deadlines, which contributed to approximately 16% revenue growth during that period. Following the FDA's extension of the FSMA 204 compliance deadline, that accelerated onboarding activity did not recur at the same magnitude during the current year quarter. Despite this temporary timing shift in onboarding activity, we continue to deliver meaningful growth and profitability. Total operating expenses decreased 12% year-over-year to $3.6 million compared to $4.1 million in the prior year period. Income from operations increased 24% to approximately $2.3 million, compared to $1.8 million in the prior year quarter. Gap net income increased 1% to approximately $2 million, while net income attributable to common shareholders increased 4% to approximately $2 million. It is also important to note again that the company no longer benefits from significant net operating loss carry-fors to offset taxable income. During the third quarter of fiscal 2026, tax expense increased approximately 200% for prior year period, representing roughly a $300,000 increase. As a result, our effective tax rate was approximately 18% for the quarter, and we continue to model an effective tax rate of approximately 20% going forward. Basic earnings per share for the quarter were 11 cents per share, while diluted earnings per share were 10 cents per share. Turning to the year-to-date numbers, The first nine months of fiscal 2026, total revenue increased 5% year-over-year at $17.7 million compared to $16.8 million from the prior year period. Total operating expenses declined 4% to $11.7 million. Income from operations increased 28% to $6 million compared to $4.6 million in the prior year period. Gap net income increased 6% to $5.5 million, while net income to common shareholders increased 9% to $5.4 million. Year-to-date diluted earnings per share increased 9% to $0.28 per share compared to $0.26 per share in the prior year period. We ended the quarter with approximately $26.4 million in cash and zero bank debt. Operating cash flow generation also remained strong. For the first nine months of fiscal 2026, the company generated $6 million in cash from operations. Now let me address our capital allocation initiatives in more detail. During the fiscal year, we have repurchased 144,000 common shares for approximately $1.8 million at an average purchase price of approximately $12.50 per share. Since inception of the buyback program, we have repurchased approximately 2.3 million shares for approximately $15 million at an average cost of roughly $6.60 per common share. We currently have $6 million remaining under the existing board authorization. Importantly, the company does not hold treasury shares. Repurchased shares are immediately retired, which further enhances the long-term accretive impact of the buyback program. During fiscal 2026, we have redeemed 175,000 preferred shares with approximately 161,000 shares left outstanding. Finally, regarding the dividend. On March 20, 2026, our board declared a quarterly cash dividend of two cents per share payable to shareholders of record as of March 31, 2026. This marks the third consecutive annual 10% increase in the company's dividend since the program was initiated in September of 2022. As we look ahead, our priorities remain unchanged, disciplined execution, sustainable recurring revenue growth, continued profitability expansion, prudent capital allocation, balance sheet strength, and long-term shareholder value creation. Our objective will remain straightforward to continue delivering superior value to customers, continue strengthening the scalability of the platform, continue generating durable cash flow, and continue executing with consistency and discipline over the long term. Thanks, everyone, for taking the time today. At this point, I'll turn the call back over to Randy. Randy?