Greetings, and welcome to the Where Food Comes From Third Quarter 2023 Earnings Call. [Operator Instructions] As a reminder this conference is being recorded. At this time I would like to turn the call over to Jay Pfeiffer of Investor Relations. Thank you. You may begin.

Good morning, and welcome to the Where Food Comes From 2023 third quarter earnings call. Joining me on the call today are CEO, John Saunders; President, Leann Saunders; and Chief Financial Officer, Dannette Henning. During this call, we'll make forward-looking statements based on current expectations, estimates and projections that are subject to risk. Statements about current and future financial performance, growth strategy, customers, 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. Today we'll also discuss adjusted EBITDA, a non-GAAP financial measure provided as a complement to GAAP results. Please refer to today's earnings release for important disclosures regarding non-GAAP measures. I'll now turn the call over to John Saunders.

Good morning, and thanks for joining the call today. As highlighted in our third quarter earnings release, this morning our core verification and certification revenue increased for both the third quarter and nine-month period, despite continuing headwinds primarily associated with smaller herd sizes related to the cyclical cattle trends. These increases were offset by lower hardware revenue, which resulted in a decline in total revenue for both periods. You might remember that on our last call in August, I mentioned that headwinds were likely to persist for a while so slightly lower overall revenue in Q3 was not a surprise. Nevertheless, we continue to generate a lot of cash and deliver solid profitability in the quarter and year-to-date period. We also returned $855,000 in value to stockholders in the form of stock buybacks in the quarter with year-to-date buybacks, totaling nearly $3 million. So in the context of challenges we've been facing on multiple fronts in recent quarters we're pretty pleased with our overall performance and as evidenced by our continued stock buybacks confident in our future prospects. Getting back to our verification and certification business, which is by far our largest revenue segment, we achieved 4% growth in the quarter and 8% growth through the first nine months of 2023. Within this segment, beef verification is the largest single component of revenue. As herd sizes have shrunk over the past year or so due to a combination of drought impact and normal cattle cycles, our tag sales have declined as well. So as I said, the initial audit and tagging process is the first step in the revenue continuum that follows each animal along its path to the consumer. So again the current environment of smaller herd sizes there are fewer animals in the pipeline. And that along with…

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first questions come from the line of Raphi Savitz with RYS Advisors. Please proceed with your question.

Hey John. I think a few calls back you had referenced potential regulations that could drive increased demand for your tags. Just wanted to see where that stood and what your sort of outlook in there?

Thanks Raphi for the question. There hasn't been any significant movement other than the closure of a comment period that the USDA put out to the public for comment and those results I think are being compiled. We hope to see something early next year in regard to the results of that, but they haven't published anything yet.

Got it. And then maybe big picture. You've been with this business and you've built this business for a number of years at this point. I guess what are you as you look to the future what are you most excited about?

We -- good question and it goes back and forth between things that are requiring attention immediately. I will tell you over the last 12 months what we've seen is an increased focus on sustainability. And I think where we're seeing the most interest is what's called Level 3 supply chain and valuations related to the sustainability. And specifically -- most specifically, the carbon footprint. I think that's taking most of the headlines these days. So, we find ourselves right at the middle of that because we are the ones that are in charge of keeping track where the food comes from. So, it's a core component and it's foundational to most of the other attributes, but specifically, the carbon footprint of an animal has to start when that animal is born. So full traceability is a requirement of being able to manage whatever offsets or insets are being associated with that supply chain. And we find ourselves in the middle of a number of different pilot projects and programs that are under the USDA's Climate-Smart program sheerly because we are the ones that are maintaining the traceability of the product.

Got it. And any real change in competitive dynamics within auditing all of your tags?

Not really to speak of. I do think I spoke on our last call about the struggles we're dealing with in finding talent and finding. Just keeping our auditor staff. We find that's the number one limiting factor for us right now is just being able to identify qualified individuals that are able to handle the audits that we're looking for.

Got it. And just one last one if I can. Happy to see that you've been buying back stock this year. How do you think about your kind of capital allocation at this point?

Yes. As I mentioned many times we are constantly looking for any type of M&A opportunity. That does bode well with what we're doing. And the Smart Catch program was one of those opportunities so investing quite a bit there. In lieu of those opportunities, we're going to continue to look at our stock very, very aggressively and to continue to buy back in lieu of having other opportunities. But we still are looking at those Raphi so don't think that we've moved on from that. It's just allocating the resources when we can and getting the best bang for our buck.

Perfect. Thanks, John. Good luck.

Thank you.

Thank you. Our next questions come from the line of Chris Brown with Oake Financial. Please proceed with your questions.

Thanks, Raphi actually took a couple of my questions, but one follow-up was on the ADT program. I know it's kind of taking a while and you -- from the beginning you said it was going to take a while for the changes to go through. Do you still see it as a kind of potential tailwind? Has anything changed materially in what they're considering that you know of?

Yes. We continue to work with industry groups including NCBA and CattleTrace, specifically, the two groups that are involved with traceability and related to ADT. In fact next month, I'll be traveling to an industry meeting in Kansas that's going to be focused on that. And then most of the conferences that we do are early in the year and the focus specifically of the National Cattlemen's Association is traceability and we're going to be sponsoring an event there. So we're looking forward to having probably several hundred producers there in attendance. A lot of them are decision makers not only for their operations, but also potentially in the states and the regions that they live. So again, we've always been really focused on making sure that there's a value opportunity and a return on investment for producers to engage. So that continues to be the case. So we're pleased to continue to see momentum, but we also want to make sure that as producers are engaging that there's a way for the sustainability of their operation to continue as a result of that which unfortunately over time can be fairly unique patients. And that's what we're doing.

Thanks for your time. Appreciate it.

Thank you.

We have reached the end of our question-and-answer session. I would now like to turn the floor back over to John Saunders for any closing remarks.

Once again, thank you for the time and great questions. And we look talk -- look forward to talking to you after the first of the year. Take care.

Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.