Greetings. Welcome to the Where Food Comes From 2019 Year-End Earnings Conference Call. At this time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note this conference is being recorded. I'll now turn the conference over to your host Jay Pfeiffer, Investor Relations. Mr. Pfeiffer, you may begin.

Good morning. Welcome to the Where Food Comes From 2019 fourth quarter and year end earnings call. Joining me on the call today are John Saunders, CEO; Leann Saunders, President; and Dannette Henning, CFO. During the course of this call we will be making forward-looking statements based on current expectations, estimates and projections that are subject to risk. Statements about future revenue, expenses, profitability, cash, growth strategy, new customer wins, business opportunities, market acceptance of our products and services and potential acquisitions are forward-looking statements. Listeners should not place undue reliance on these statements as there are many factors that could cause actual results to differ materially from our forward-looking statements. We encourage you to review our publicly filed documents as well as our news releases and website for more information about the company. Today, we will also be discussing EBITDA and adjusted EBITDA, which are non-GAAP financial measures, provided as a complement to the results provided in accordance with GAAP principles. We use and believe investors benefit from the presentation of EBITDA and adjusted EBITDA in evaluating our operating performance because it provides an additional tool to compare our operating performance on a consistent basis by removing the impact of certain items and management believes do not directly reflect our core operations. I'll now turn the call over to John Saunders, Chairman and Chief Executive Officer. John?

Good morning and thanks for joining the call. This morning we issued our 2019 earnings release and it occurred to me that it's been a dozen years since we did this for the very first time as a public company. Back in 2007 we'd have small fraction of the number of shareholders we have today. Many of them were not only original seed investors, but they were also our customers as well. Today, I'm happy to say that many of them still own our stock and in fact a few of them are among our four or five largest individual stock holders. I'm sure several of these investors are listening in on this call today. It's extremely gratifying that these individuals not only bought into our original vision for the company, but continue to support us as both customers and shareholders to this day; their confidence in what we're doing means a lot to us. As noted in our press release this morning, we had a very strong year in terms of financial results. Revenue, gross profit, net income, earnings per share and adjusted EBITDA all reached record levels. We attribute this to terrific employees across all of our business units who consistently perform at a very high level and who have helped us capitalize on broad consumer and industry trends that drive what we do on a daily basis. A few financial highlights beginning with the fourth quarter. Revenue increased 23%, $5.7 million from $4.6 million reflecting good demand across our broad range of offerings. Gross margin increased to 48% from 38%, this big jump stemmed from a couple of anomalous factors including lower bonus accrual and an acceleration of beef audits in the fourth quarter. Net income attributable to Where Food Comes From rose 178% to 586,000 from…

At this time we will be conducting a question-and-answer session. [Operator Instructions] Our first question is from Alex Team, First Ballantyne. Please proceed with your question.

Along the line of the coronavirus, do you see continued demand increases due to the wildlife bans?

That's an interesting question. I think, yes. I do think there's an opportunity for a more robust approach to the protein sources that we're able to produce here. Just purely based on the fact that there aren't -- there isn't as much food and the concern over the wild animals that were being consumed. I really am not an expert in that field, so that's just kind of a guess. But, yes, it would seem to lend itself for a stronger focus on more consistent and hopefully more reliable sources of protein.

Okay. And then about your new acquisition that was just announced today, just to verify that's on sustainability and not verification of the types of seafood that are being monitored/

Again, great question. Yes, Postelsia has a wide range of services that they offer to a broad range of seafood products. But the real primary focus is on shrimp to start. So we do see both activities involved there. So it will be consulting and traceability, but also the verification of those attributes and where those products are produced.

And was that paid with cash on hand or did you draw down on a credit facility?

Nope. That was just cash on hand. It was purely cash. No stock.

Okay. Thanks guys. I'll jump back in the queue if I have more questions.

Our next question is from [Ames Stevens] [ph], Private Investor. Please proceed with your question.

Yes. Good morning. Congratulations on all that you've done over the years. It's really remarkable. Just a few questions. First of all about the Postelsia. I take it that you're not releasing, what the cost of that acquisition was and then related to acquisitions overall, do you feel like we're done for a while given that we have the whole assortment of offerings or do you feel like there's more areas where we would need to do an acquisition?

Yes. Great question. I do believe we're going to report the financials. I'm going to ask a question, Dannette is that accurate?

Yes. There would be some more information in our Form 10-K that is filed later today.

Okay.

And then, the second question. No, it does not complete our acquisition strategy. We see that there's always opportunities for us to reinforce our position in those specific industries. And as I've mentioned several times over the past, when we initially started our acquisition strategy, we had more than three dozen companies that we identified and many more have come to light since then. So we'll continue on a lot of the factors that go into the acquisition strategy really are based on the timing of those -- how those relationships evolve over time. And we've still got several in the queue.

That's good. And so regarding the supermarkets that you're pitching to or maybe fast food chains given that we're sort of the dominant player and presuming they have ongoing interest, who would we lose to? I mean, who's sort of second and third in line after Where Food Comes From?

Great question. Really, there aren't a lot of alternatives out there. I think as I mentioned, our scenario that changed last year with Whole Foods has really put us in unique position to approach retailers in a much different way than we have in the past. And our new care program, which again is addressing sustainability in a more specific way, in a more defined way. And what I mean by that is that, a lot of people talk about sustainability, but it's very -- as we talk to retailers and we talk to brands, it's very clear that maybe depending on the generation of the people that we're talking to, are there specific market that they're in. Sustainability means a lot of different things. So one of the critical aspects of care was our ability to really define what we meant by sustainability. And animal husbandry, environmental stewardship and then the people in community that are working around and with that specific producer where the key pillars of that -- of what we thought sustainability really meant. And where we've been very encouraged by the initial response to that and just having a definition of how it was going to be communicated directly to consumers. So again, we've only -- this has only been about a two month process so far. So the initial results have been really, really encouraging. And as far as I know, I don't see another competitor out there that's doing it in the same way.

That's great. And then just one more question about China. So with all that's happened there, I feel like they should be called where food shouldn't come from. It's scary considering the open meat markets and the bats and the civic cats and the food chain, which is just disturbing and sort of more stuff comes to light as time goes on. Putting aside for a second, the beef issues and the delays and also the trade war, isn't there just a giant opportunity in China to have proteins, which they're always short on coming in from the U.S. where they do understand the verification and where all these products come from. And are you seeing interest or is it just too crazy in China right now? And maybe they're not reaching out to you, but don't you see like a huge opportunity in the long-term there?

Yes. I mean, my last comment about the coronavirus, I think what it's done most specifically for us internally and I think within our sphere of influence here with the protein producers that we're engaged with is, there's more of a need for a traceability system than ever before because of this uncertainty, the market swings on a daily basis. And the confusion around what it means. It just highlights that having a consistent safe source of protein is critically important for a population definitely as large as China, but all around the world, I think it's highlighted how important it is. So, yes, I think the big message that we're trying to convey is that there could be short-term slopes and kind of fits and starts and we're seeing a little bit of that. But the long-term opportunity related to coronavirus is enormous. And I think it's something that we're very, very keen to help promote our producers, our brands, the companies that we work with today and their ability to assure Chinese consumers and consumers all over the world around what a great source of protein we have here in the United States.

That's awesome. And I'll take myself out of the queue, but at some point, I hope you talk about the opportunity in [hemp] [ph] as well. Thanks for the color.

We have reached the end of the question-and-answer session; I will now turn the call back over to John Saunders for closing remarks.

Well, thanks again everybody for the call for the time today. We're very excited about 2020 and I look forward to talking to you here in a couple months. Have a great day.

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