Total Revenue (Q4 2024): $5.2 million, up 8% from $4.8 million.
Recurring Revenue (Q4 2024): Essentially 100% of total revenue.
Operating Expenses (Q4 2024): $3.9 million, up 6% from $3.6 million.
GAAP Net Income (Q4 2024): $1.6 million, up 15% from $1.4 million.
GAAP Net Income to Common Shareholders (Q4 2024): $1.5 million, up 18% from $1.2 million.
Earnings Per Share (Q4 2024): $0.08, up from $0.07 last year.
Preferred Stock Redemption (Q4 2024): 81,000 shares at $10.70 per share, totaling just under $870,000.
Total Revenue (Fiscal Year 2024): Up 7%, with recurring revenue at 99% of total revenue.
Operating Expenses (Fiscal Year 2024): Increased 10%.
GAAP Net Income (Fiscal Year 2024): $5.9 million, up 7% from $5.6 million.
GAAP Net Income to Common Shareholders (Fiscal Year 2024): $5.4 million, up 8% from $5 million.
Earnings Per Share (Fiscal Year 2024): $0.30 basic and $0.29 diluted, up from $0.27 last year.
Common Shares Repurchased (Fiscal Year 2024): 177,000 shares for $1.5 million.
Preferred Shares Redeemed (Fiscal Year 2024): 220,000 shares at $10.70 per share, totaling $2.4 million.
Cash Dividends Paid (Fiscal Year 2024): $1.7 million to common shareholders.
Total Cash (June 30, 2024): $25.2 million, up from $24 million at the end of fiscal year 2023.
Cash Generated from Operations (Fiscal Year 2024): Nearly $7 million.
Common Stock Buyback Authorization Remaining: $8 million out of $21 million total.
Quarterly Common Stock Dividend Increase: 10% starting with shareholders of record on December 31, 2024.
Release Date: September 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Increased recurring revenue and delivered solid margins.
Grew net income and EPS faster than anticipated.
Added more cash to the balance sheet, reaching the highest in the company’s history.
Returned over $5.6 million in capital to shareholders through dividends, buybacks, and redemption of preferred shares.
Invested heavily in sales, marketing, cybersecurity, and development platforms to accelerate traceability solutions.
Negative Points
Operating expenses increased by 10%, reflecting investments in various areas.
Eliminated $1.4 million of high-touch, low-opportunity revenue, which impacted comparative growth.
Complex multi-step process for enrolling suppliers due to FDA mandates, making forecasting difficult.
High dependency on the FDA’s timeline for traceability requirements, which could change.
Significant resources required for onboarding suppliers, many of whom lack necessary IT infrastructure.
Q & A Highlights
Q: Have you finished adjusting your customer portfolio to remove high-touch, low-margin ones? Or is that a permanent effort? A: From where we are today, yes. However, if there is more requirement due to an influx of traceability, we have another layer of the onion that we can deal with. But at this point, we think we’re where we want to be.
Q: Can you give your current thoughts on adjacent regulated markets, such as restaurants and healthcare? A: We evaluate both market size opportunity and profitability. Follow-on products to the same customers are more profitable for us. We have some new follow-on products that will be available after the 1st of the year, which are very exciting. We will continue to push into other verticals while bringing forward these products that will sit on top of our traceability solutions.
Q: Can you give updates on your international efforts and opportunity? A: We are currently focused on executing our current workload with thousands of suppliers. However, we believe that the dominant US platform over the next few years will have the greatest opportunity outside the US. Our approach is likely to be in the form of ventures outside the US rather than our own personnel.
Q: Would you ever consider a one-time dividend? A: It’s not off the table, but we prefer to provide a quarterly dividend that investors can count on. If we had a massive cash influx, we would consider a special dividend, but our primary focus would be on increasing the quarterly dividend.
Q: What are you doing today with artificial intelligence, and how might it improve your future top and bottom line? A: Most of our AI work is directed toward our own people to help them make better decisions and focus on customers. We have a couple of AI-based opportunities that could expand the spans of control of our people, potentially doubling the size of the company without additional personnel.
Q: Can you give an updated number on how much it costs to run the business? A: It takes $12 million to run the business. This number may fluctuate with investments in cybersecurity, sales, and marketing, but over time, it will remain around that percentage.
Q: What are your current thoughts on M&A? A: We are laser-focused on executing our current workload. Taking our eye off the ball to do an acquisition could risk our execution. For now, we are focused on bringing in the 4,000 suppliers we have contracted.
Q: What gives you the confidence in your ability to handle compliance and supply chain to augment traceability? A: We have customers with whom we are contracted that have established requirements for their suppliers. We have around 4,000 suppliers that will be brought into the network over the next 12 to 18 months. This contractual obligation drives our revenue and preeminence in the traceability scene.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
