Greetings, and welcome to the ReposiTrak's Fiscal Second Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Jeff Stanlis with FNK IR. Please go ahead, sir.

Thank you, operator, and good afternoon, everyone. Thank you for joining us today for the ReposiTrak'sFiscal Second 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. Forward-looking statements are statements that are not subject to historical facts. Such forward-looking statements are based upon 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 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 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.

Thanks, Jeff, and good afternoon, everyone. As we reached the midpoint of fiscal 2026, it's important to reiterate our long-term strategy and provide performance metrics against those milestones. First, our goal was to convert all revenue streams largely to SaaS recurring revenue. Since 2020, we have converted over $7 million in onetime revenue to a recurring SaaS and increased our recurring revenue from 62% of total revenue to over 98%. We have done this, while simultaneously overcoming $2 million in the elimination of high-touch low-margin opportunities in order to make way for traceability. Next, pay down debt, keep expenses in check and increase contribution margin. Since 2020, we have paid off over $6 million in bank debt and reduced annual operating expenses from roughly $19 million to $16 million. Meanwhile, we have grown our net margin from 8% to north of 30% during the same period. Third, drive cash and return capital to shareholders. Since 2020, we have increased net cash by a 16% compounded annual growth rate. Net cash means total cash on the balance sheet, less bank debt and leases. We've grown net cash from $13.7 million in 2020 to almost $29 million in 2025. Simultaneously, we have bought back over 2.2 million shares of common stock, redeemed 640,000 shares of preferred stock and increased the common stock dividend now 3x by 10% each time over the previous 3 years. Finally, given our strong cash flow generation, we have invested heavily in our business. This quarter, the investments in our business involve 3 key initiatives: First, we continue to invest in our products, responding to customer pain points with new solutions. We are confident that these solutions will improve tracking accuracy and will reduce operating costs for any customer with a warehouse. Touchless Traceability fits perfectly with our…

Thanks, John. ReposiTrak had an eventful quarter. Some of that shows in our numbers, but much of what we accomplished was behind the scenes. While we're delivering profitable growth from each of our solutions, we continue to add to the moat around our business, specifically the Traceability business. The ReposiTrak Traceability Network, or RTN, is already the industry leader. The queue to join our network is much larger than our current installed base and each new supplier, distributor retailer adds to the network effect of our RTN solution. It's fair to say, and we've said it before, that Traceability for most suppliers is much more difficult than anyone has imagined. The difficulty affect suppliers and, therefore, ultimately impacts everyone upstream, downstream in the supply chain. It currently takes longer than we'd hoped to work with suppliers to get them up to speed and consistently able to provide the information they need to be able to do Traceability. I'll elaborate on this in just a minute. Remember that no one has ever done Traceability before. It's a new thing. It's a new activity, and it's one that requires complex process changes for everyone involved in the supply chain, end to end. As I mentioned, the primary issue with Traceability continues to be the consistent accuracy of supplier data. The error rate and data we initially received from suppliers, especially small suppliers, is somewhere between 50% and 70%. In case it isn't obvious if a supplier has inaccurate data, that data propagates through the supply chain. The grower's bad data becomes the distributor's bad data, which becomes the wholesaler's bad data, which becomes the retailer's bad data. That bad data becomes even worse if additional errors are introduced on another link in the supply chain, making the information even less reliable, if…

[Operator Instructions] And we'll take a question from Thomas Forte with Maxim Group.

Great. So John and Randy, congrats on the quarter. I have four, but as always, depending on your answers to these, I might have more. Randy, I have one warm-up question and then I have 3 real humdingers. So the boring warm-up question, John, I think you said, or it was Randy, that in fiscal '25, Traceability was only 8% of total revenue. Is there a more recent data point on how much total revenue is coming from Traceability?

Who are you aiming that at? I mean I would say it's between 8% and 10%, but it's hard because there's cross-selling.

Okay. All right. So and then, Randy, I'll take the bait. Can AI improve the accuracy of Traceability data?

Well, the way we use AI and have for a long time, it's really been part of what we do for many years. It absolutely does. The concept of LLMs, however, which is the current range with AI is a bit misleading. In other words, you have to detect what's wrong and how it got wrong to be able to fix it. I didn't -- there's 3 steps. I'm sorry, and let me back up and see if I can make this clearer than I have. Most people who will try and do Traceability will not even see that they have errors. It's not detectable by looking at it. You actually have to have a deep database to check every field in every record and determine whether or not in the context of that record is it a correct reference. So it's a little bit, as I mentioned earlier, it's a little bit like the post office. You could have a note, let's say, you sent a note to me, and that note said Randy, I now believe that the earth is flat, okay. Now you take that little note, you put it in an envelope, you look it, put a stamp on it and take it to the post office. That's like EDI. Here's what the post office does, though. The post office looks at the size of the envelope and says, okay, that's a legal-sized envelope. It has enough postage, it weighs it and checks the postage and then it says it's got a ZIP code, good to go. That's what EDI does. It's just the transport mechanism. Meanwhile, inside your envelope is an untrue statement. The earth is not flat. And therefore, it's not detectable in the context of EDI. We detect it. We've tested hundreds and hundreds, actually since we have 2 million records now. We've tested about every combination and permutation of type of error that you can imagine. So step one is can you see the errors and AI can help us with that. But here's where we've gone because we realized what a problem, the errors themselves are. If every day you are a supplier and you send out 1,000 files and as we found half of those are erroneous, half of them are erroneous. And we sent you a message and said, here's the 500 files that are wrong, fix them, you would have to hire an army. Everybody would hire everyone they could find to check for errors and fix it. So we've developed a way, again with AI, to not just detect the errors, but in essence, autocorrect them. So we're a little bit like spellcheck and auto correction. And that's an enormous difference. And our system is AI-based, but doesn't, in any way, rely on what today's people people would call a large language model. It's a different -- it's AI for sure, but it's not large language Model. Sorry, long-winded answer, but hopefully it was complete.

I appreciate the EDI in the post office comparison. All right. So then this is one of those -- all right. So is there any impact to ReposiTrak from MAHA.

Well, in a way, yes, longer term, especially. Let's talk about what MAHA is. MAHA and organic are really a similar idea. Organic is an idea that lays on top of food safety where people think if they eat organic food, it is healthier for them. MAHA sits on top of all of that and says, in general, you should eat food that is healthy, whatever that would be, Whole Foods, not foods that have been ultra processed without food colorings, et cetera. All of that lays on top of a looming problem, which is -- according to Gallup, there's been a long-term decline in the U.S. in terms of the public's belief in food safety. So almost every year, people are believing less and less about the safety of food. So in a sense, what happens is MAHA, organic, et cetera, are causing people to worry more and more about the safety of what they eat. All of that awareness around safety is good for us because it means that the economic cost, the brand equity cost to a retailer who makes a mistake is tremendous. So MAHA impacts us by virtue of increasing people's awareness of the issue of safety of food. It's really that simple.

Right. So this should be my most related question to that one. So you've talked in the last couple of quarters about Traceability on a buy ingredients basis. So if I go to Stew Leonard's and I buy prepared foods, can you -- any update on thoughts there?

Well, we actually are capable of doing that. In other words, companies can sign up with us and determine, if you will, at a shipment level, at a product level that they have issues, but they can also use our system for specifications around ingredients. So within our system, you could say, wait a minute, if red dye #3 is a problem, let me search all of the items that I sell that have red dye #3 in it. And that's an interesting problem because Traceability, and the reason I'll come back to it in a minute, the FDA has designated certain products like products that contain nut butters, as being on their food traceability list, but you have to think about that for a moment. There's not a retail chain in the country that can tell you the products it has on the shelf that contain a nut butter, have no idea, literally, no idea because retailers don't maintain a list of ingredients, and they just can't track them, strangely enough within our system. We have the capability of doing that. So over time, what we suspect happens is people move from being oriented toward the product. And from the product, they'll drop down to the ingredient. We're fully capable of doing that today.

All right. And then this is one of those questions where I have no idea what your answer is. So these are fun ones. All right. Does food inflation have a direct or indirect impact on your business? And I have 3 specific examples. Cocoa, coffee and beef.

The answer is, indirectly they do. To the extent that we are in a period where increasing costs to the supermarket, the inputs, can't be passed on to the consumer. Inevitably, supermarkets and everybody in that space has a margin squeeze. In which case, every element of cost, potentially including us, is something that they will look at. So inflation without the ability to pass it on is problematic in general and it's certainly something that we think about. We haven't seen anything over the very short term, but that doesn't mean that it couldn't be something that pops itself up in the future.

Excellent. Two more. This one I'll direct towards John. So John, you talked about investment spending, but I'm trying to understand how that showed up in your results because you've talked about how it seems that you reduced the amount of OpEx required. So where does the investment spending, where do I see that in the P&L?

So you would spend more in development, less in sales and marketing, but some of those things cover in both categories. So because we spent less in marketing, but some of those people were utilized in development. You have to look at the totality of the expenses. We can't look at necessarily the line items. So in aggregate, our spending is less. It's just more targeted resource spending, as we said before, as Traceability becomes more top of mind, our laser focus is to spread the word on the marketing side. But obviously, we've done a lot as far as the marketing and the messaging and we've now shifted it towards the development. And you're not going to see it in line -- you're not going to see it in necessarily the line item. You have to look at the totality of expenses.

Are you capitalizing any of those costs?

There's some costs that -- with the patent now, but it's a de minimis number.

Okay. And then last question, unless you answer in a way that inspires me to ask one more. Current thoughts on strategic M&A?

I mean, look, Randy and I see things every month, but we have so much on our plate right now. It's a distraction. Reemphasizing our stack and our code base and Traceability, remember what Randy said, while it may seem like it's 2 years out, at the end of this year, Traceability is going to be right around the corner. We've got plenty on our plate to keep us busy. But of course, if the right opportunity came around, yes, we're acquisitive, but we have plenty on our plate at this moment. Unless Randy, you've got a different opinion.

Yes, John, let me add something to that. As we take a look at the next 12 months, it is extremely likely that there will be, again, a flood of need and interest, et cetera, around Traceability, why? We think it takes a full 2-plus years to get your entire supplier base Traceability ready and capable. We know that because we've been doing it. But as I said, we already have nearly 2 million records and -- as far as I know, we are the only firm that is actually -- can -- you can come look at it, doing end-to-end Traceability. We are tracking products going from a supplier, into a distribution center, into a retail store, and we create all of those records. We're doing it. It's the real deal. It's pretty amazing. We haven't tooted our own horn very much about that, but we will. But here's the issue, as people think about Traceability, what they're going to be realizing very quickly was that they've now used up the runway that the FDA gave people when they gave them 30 months. It's now closer than it was. And by the end of this year, you'll be at what we think is the, my God, you're at a cliff, the 18-month mark. We don't think anybody that has hundreds of suppliers can be ready in 18 months. We think it takes a full 2 years. But people will shorten that and imagine that 18 months is the magic number. So as this year progresses, and I'd guess sometime in the summer or early fall. The world will once again wake up and go, yes, Traceability whoops, we need to get going. So we're really more in the mood of preparing for that than we are thinking about being acquisitive at the current moment.

Thank you. That will conclude the question-and-answer session. I would now like to turn the floor back to Randy Fields for closing remarks.

Okay. Well, we appreciate everybody taking the time this afternoon. Not much more to say. Have a good one. Talk to you soon. Take care.

Thank you. This does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time.