Greetings, and welcome to the ReposiTrak Fiscal Fourth Quarter 2024 Earnings Call. At this time, all participants are in a listen-only mode. [Operator Instructions] A brief question-and-answer session will follow the formal presentation. As a reminder, this call is being recorded. I would now like to turn the call over to Rob Fink with FNK IR. Mr. Fink, you may begin.

Thank you, operator, and good afternoon, everyone. Thank you for joining us today for the ReposiTrak fiscal fourth quarter earnings 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 historical facts. Such forward-looking statements are based upon current beliefs and expectations. ReposiTrak 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 SEC. 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 will be discussed 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'd now like to turn the call over to John. John, the call is yours.

Thanks, Rob, and good afternoon, everyone. This was again a milestone year for ReposiTrak. As anticipated, we increased recurring revenue, delivered solid margins, grew net income and our EPS even faster. We added more cash to our balance sheet, now the highest in the company's history. At the same time, we returned over $5.6 million in capital to shareholders through a growing common stock cash dividend, buyback and retirement of common shares and the redemption of preferred shares. At the same time, we invested heavily in sales, marketing, cybersecurity and bolster our development platform and expanded our implementation resources to further accelerate our traceability solution. We have entered fiscal 2025 with significant tailwinds and an enviable competitive position. I believe we are and will continue to be the leader in traceability, doing it, not just talking about it. I believe traceability over the next three years will double our annual recurring revenue run rate at margins of 80% plus as we have historically delivered, yielding higher earnings per share and more operating cash flow, making us even more profitable than ever before. We eliminated $1.4 million of high touch low opportunity revenue, which served as a drag on our actual comparative growth for the last 18 months. The decision may not have appeared logical or popular but necessary, and we are moving to a period of better year-over-year comparisons just as the traceability revenue continues to accelerate. In fiscal 2024, revenue derived from our traceability solution represented 6% of total revenue or $1.2 million. I believe the decision to free up resources was proper, culling the herd will permit us to capitalize on and continue to accelerate, not just on the traceability opportunity, but our entire suite of solutions. Generating higher levels of ARR, profitability and EPS as we scale.…

Thanks, John. Fiscal 2024 was another year of really important evolution for ReposiTrak. Here's just a partial list of what we got done. We rebranded our business to align our corporate identity with our industry leading platform. We uplisted to the New York Stock Exchange. We increased our quarterly cash dividend, repurchased common shares and redeem preferred shares. We returned more than $5.6 million to shareholders during the 2024 fiscal year through common stock purchases, redemption of preferred, and paying out cash dividends. At the same time, we further strengthened our already fortress balance sheet. We increased recurring revenues, grew net income and EPS even faster. We established the ReposiTrak traceability Network or RTN, as we call it, is the obvious choice to address the opportunity related to the FDA's Food Safety Modernization Act, Rule 204. At the same time, we sun-setted (ph) certain high touch, low opportunity revenue lines to free up resources to better address our traceability solution long term, while still delivering 7% revenue growth. We secured industry endorsement, signed major retailers and wholesalers, added thousands of suppliers to our queue and establish ReposiTrak as the thought leader in the space. It's an amazing beginning to the traceability journey that we're on. I'm extremely proud of the team for what we've accomplished. Traceability continues to exceed our expectations in almost every way. The size of the market is larger than we initially expected. The pace of adoption is exceeding our expectations. And beyond traceability for grocery, there's many, many ancillary opportunities in food service, convenience stores, other verticals and some amazing add-on products that will be rolling out in 2025, more about that later, obviously. So where are we? We currently have 4,000 companies and roughly 5,000 facilities that are being actively enrolled by our retail and…

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first question is from Thomas Forte with Maxim Group. Please proceed with your question.

Great. Thanks. So first-off, Randy, and John, congrats on a fantastic quarter and year. Apologies in advance if anyone else is in the queue. I have six questions. I'll go one at a time. The first one is, have you finished adjusting your customer portfolio to remove high touch low margin ones or is that a permanent effort?

Well, the answer to that is from where we are today, yes. However, if, in fact, there is more requirement on our part because of an influx of traceability we have another layer of the onion that we can deal with. But at this point, we think where we want to be, but that's not to say that it's 100% certain that's where we'll stay.

Okay. And then you teased this, so I don't want to discuss the tease part, who says that for future quarters. But can you give your current thoughts on adjacent regulated markets, restaurants, health care, so not to think your teased on the call, but your efforts in restaurants and then your willingness to expand into health care?

Well, what we do is obvious. We take a look at both the market size opportunity and the profitability that we can get from it. So to a certain extent, follow-on products to the same customers are more profitable for us. So there are some new follow-on products that ITs will be available after the first of the year, that are -- from where we stand today, extraordinarily exciting. And so the question is, we'll continue to push into other verticals. We are doing that. And at the same time, we are bringing forward these products that will sit on top of our traceability, and we think make us extremely attractive to prospective customers. So the answer -- the not vague answer to your question is, we're going to try and do both.

Okay. All right. And then next question is, can you give updates on your international efforts and the opportunity?

Well, I think, unfortunately, we are so focused on the execution part of what we're doing today with thousands of suppliers that have to be onboarded. It's too much for us to imagine doing business outside the U.S. It is however, extremely likely that whatever the U.S. platform that becomes most dominant over the next few years is, is likely to have the greatest opportunity outside the U.S., and we are sure that, that's us. Our approach, however, is much more likely to be in the form of ventures outside the U.S. rather than our execution with our own personnel.

Okay. And then I wanted to ask on the capital allocation, and the dividend increase for the regular quarterly dividend is fantastic. All the other things were fantastic. Would you ever consider a onetime dividend?

John?

I don't think it's off the table, but I think just as an investor, I would want to look at what line of sight quarter-to-quarter. I would much rather have the Board approve a dividend quarterly so to where people can count on that as opposed to some dividend in the future? Is it possible? Of course, it's possible, but I'd rather increase the quarterly dividend that gives line of sight to investors.

Okay. So then stated differently, John and Randy. So if you had -- if the pace of adoption far exceeded expectations and given your high level of contribution margin on an incremental dollar, you just had a massive cash influx. What would you do with it, hypothetically?

Exactly what we're saying that we're doing. We would take half -- at least half the cash from operations and return that in the form of redeeming the preferred buying back the shares and increasing the dividend, that could also mean a special dividend. But to your point, you would have to look at that number of cash from operations and assume that we would at least take half of that. To your point, if we had a big influx rapid sign-up and influx of cash, we would consider that as well. It's exactly what we're saying. It doesn't change anything.

I won't ask you a third question. All right. So Randy, what are you doing today with artificial intelligence and how might your artificial intelligence related efforts improves our future top and bottom line?

Well, most of the work that we do in AI is candidly directed toward our own people, how to allow them to make better decisions, do less what we call administrivia, moving paper and stuff around and better able to focus on their customers. We have a couple of other ideas that we're pursuing aggressively that are AI based, as you know, we've been doing the AI stuff for many years. We think we have another couple of opportunities that could expand the spans of control of our people. Again, we, I'd say, perhaps another double. In other words, we think we can double the size of the company, but not have very additional people executing the workload that comes from a company double. So it's moving along, and we think our customers benefit from having higher level people always interacting with them.

Okay. And then I apologize, John, if you gave this number on the call, but you're usually pretty specific on how much it costs to run the business. Can you give an updated number there?

I mean it's the same thing. I've said it takes $12 million to run this place. And I would say that's smooth, meaning that if we're investing in cybersecurity or front loading sales and marketing getting out the trade shows obviously, that's going to -- that may go up or down. But I think as I put in my comments, that as we get stabilize and get to where we're onboarding fast or get better at it, I think, over the course of time, you'll look back at it and it will be that same type of percentage the $12 million on the $20 million. And it maybe I can't see it going above $18 million on $30 million or $35 million, that's not a forecast. I just don't see what incremental expenses that we would have that are beyond where we're at, unless we're investing short term in sales, marketing, cybersecurity efforts. Does that answer your question?

Yes. All right. And then I had my original question, then I have one new one. So can you give your current thoughts on M&A? You have a very strong balance sheet, you're executing at a very high level. I'm imagining you're getting presented opportunities often, what are your thoughts?

Well, I think John and I have the same thought. We are as laser focused as we can be on the execution part of where we are. It is an enormous workload. And if we take our eye off the ball to do an acquisition or god knows what else, we run the risk that will screw up our execution. If there's anything in the history of the company, where we've been flawless, it is in our execution. We are really operationally inclined. The team is magnificent and they're caring about customers, and that's why we do it. So the risk is, if we go to do an acquisition, we take our eye off the ball. Now that's not to say a year from now that it might not be different, but for now, staying focused on bringing in these 4,000. Remember, the 4,000 are where we are today, in the next month, the odds are pretty good. There'll be another hub in the next month, another hub. And each time a new hub comes in anywhere from a few hundred to 1,000 more suppliers enter that queue. So the 4,000 is just what we've got in our hot little hand. And I would imagine that a year from now, that number will be very significantly larger. It isn't worth the risk of screwing up that opportunity to do a deal.

All right. And then I want to ask you this directly. I was hoping that we could get an indirect answer for my questions, but I think this is really important. So, when I hear the prepared remarks and your answers to my questions, I'm hearing that you have a lot of confidence in hand, meaning that there are sometimes when you're hyper focused on an initiative, what it feels like, it's all hands on deck about initial initiatives. But this time, it really feels like to me that you're really confident. And the comment you made was the ability to do compliance and supply chain to augment traceability. So I'd like to understand what gives you that confidence.

Well, the reality is, as we described it, we have customers with whom we are contracted that have now established requirements for their suppliers that number around 4,000 customers of ours that will be brought into the network. So in other words, in our hot little hands as I like to say, we have around 4,000 suppliers, call it, 5,000 facilities that will be brought into the network over some reasonably close in period of time 12 months to 18 months. We can't screw that up. A year ago, what we were hoping for was that all of the time and effort we've put into traceability get us to exactly where we are now. So the difference that hopefully people are hearing is before we had a good feeling about where we were and what we do, that feeling has translated into contractual obligations that will drive the revenue of the business and the preeminence of ReposiTrak and the traceability team that we were hoping for. So it's a difference between hope and real.

Okay. I've exhausted my questions. Congrats again.

Thank you.

Thanks, Tom.

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

Really nothing to say in closing, we're heads down getting the work done. We feel very, very good about where we are. We know there's going to be issues of absorption and whatnot. It's just the way it is, but we thank all of you for the support. Thank you guys for being on the call this afternoon and we'll be talking to you soon. John, thank you. Rob, thank you.

Thanks, everyone. Have a great day.

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