ReposiTrak, Inc. 2026 Q4 Earnings Call

Please go ahead. Thank you, operator, and good afternoon, everyone.

Thank you for joining us today for ReposiTrak's fiscal fourth quarter 2026 earnings 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 on 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 the information contained on this conference call.

Shortly after the market closed today, the company issued a press release overviewing the financial results 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. Our strong results for fiscal 2026 demonstrate continued execution against our stated strategy. We have continued to shift our revenue mix towards highly predictable recurring SaaS revenue. We continue to grow this revenue while simultaneously improving our operating cost structure. During the fiscal year, total revenue grew 3%, recurring revenue grew 4%, while total operating expenses declined 6%. As part of our ongoing strategy, we deliberately de-emphasized certain high-touch, low-margin revenue streams, focusing instead on opportunities with the greatest growth potential and profitability. This moderated our revenue growth while contributing to an improved operating margin profile. The result is clear operating leverage, higher GAAP net income, higher earnings per share, solid cash generation, and the continued return of capital to shareholders.

At the same time, we are investing in the long-term infrastructure of our business, both organically through the refresh of our technology stack and continued investment in our traceability solution, and through our collaborative relationship and investment in SPAR Group, which supports our newest initiative, Touchless Merchandising. Randy will discuss Touchless Merchandising in his prepared comments shortly. We view this initiative as a natural extension of our broader platform strategy across traceability, compliance, risk management, and supply chain solutions. I will focus my comments today on the financial results and our capital allocation priorities. Let's get to the numbers. For the full fiscal year, total revenue increased 3%, from $22.6 million to $23.3 million. Total operating expenses for the fiscal year were $15.4 million, versus $16.4 million last year, a decrease of 6%.

These results demonstrate the operating leverage in our business model as we continue to scale our SaaS platform and improve automation. Operating margin expanded to approximately 33.7%, from 27.5% last year, an increase of approximately 620 basis points. Income from operations was up 26% for the fiscal year to $7.8 million versus $6.2 million. GAAP net income increased 8%, from $7 million to $7.6 million. As previously communicated, the company is nearing the end of the benefit period associated with its historical federal and state net operating losses, or NOLs. Our effective tax rate for fiscal 2026 was approximately 21% for federal, 3% for state. As those historical tax benefits diminish, we expect our overall effective tax rate may increase, subject to available state and federal tax credits and other tax attributes.

GAAP net income to common shareholders increased 12%, from $6.6 million in fiscal 2025 to $7.4 million in fiscal 2026, despite an income tax provision of approximately $2 million, compared with approximately $700,000 last year, an increase of approximately 190%. Fiscal 2026 earnings per share were $0.41 basic and $0.39 diluted, based on approximately 18.3 million weighted average basic shares and 19 million weighted average diluted shares, respectively. Diluted earnings per share increased 13% to $0.39, compared with $0.35 for fiscal 2025. Turning to the fourth quarter numbers. Fourth fiscal quarter 2026 revenue was down 3% year-over-year at $5.6 million. As a reminder, the second half of last year included an accelerated pace of traceability activity as the FDA's original January 20, 2026 compliance date approached.

As previously communicated, the FDA has extended the compliance date to July 20, 2028, and Congress has directed FDA not to enforce the food traceability rule before that date. We believe customer activity could increase as the industry prepares for that new deadline date. Total operating expenses for the quarter were down 11% to $3.7 million from $4.2 million, reflecting continued cost discipline and operating efficiencies. Cost of services was down 12%, due partially to capitalized software costs as we significantly enhanced our software stack. Sales and marketing was down 11%. G&A expense was up 3% due to higher benefit costs and other employee costs. Depreciation and amortization declined 75%, primarily because intangible and hard assets became fully amortized or depreciated. Income from operations was up 19% to $1.9 million versus $1.6 million.

GAAP net income for the fourth fiscal quarter of 2026 was $2.1 million, up 16%, versus $1.8 million last year. Keep in mind, this also considers an almost 200% increase in income tax expense. GAAP net income to common shareholders increased 19% to $2.1 million from $1.7 million. Earnings per share for the quarter were $0.11 per basic and diluted share, based on approximately 18.2 million weighted average basic shares and 19 million weighted average diluted shares. Diluted earnings per share increased approximately 20% year-over-year despite the higher income tax burden. Turning to capital allocation and liquidity. We ended fiscal 2026 with $27.3 million in cash, plus our $3 million note receivable from SPAR Group as of June 30, 2026. For fiscal 2026, we generated approximately $8.3 million of cash from operations, compared with $8.4 million last year.

Our strong balance sheet, continued profitability, and cash generation provides meaningful financial flexibility. The company continues to have zero bank debt. During fiscal 2026, the company repurchased and canceled approximately 144,000 common shares for an average price of $12.50 per share for a total of approximately $1.8 million. Since inception of the buyback program, we have repurchased and canceled approximately 2.3 million common shares for approximately $15.2 million at an average price of $6.60 per share. As of June 30, 2026, approximately $6 million remained under the $21 million total common share repurchase authorization. The company holds no treasury stock. Shares are simply repurchased and subsequently canceled. During the year, we redeemed 175,000 preferred shares at the stated redemption price of $10.70 per share for a total of approximately $1.9 million.

Since inception, the company has redeemed approximately 677,000 preferred shares at the stated redemption price of $10.70 per share for a total of approximately $7.3 million. We have approximately 161,000 preferred shares remaining, representing approximately $1.7 million at the stated redemption price. Our current goal remains to redeem all remaining preferred shares outstanding on or before December 2026, subject to business conditions, liquidity requirements, and the board's ongoing evaluation of our capital allocation priorities. On June 18, 2026, the board declared a quarterly dividend of $0.02 per share, $0.08 per share annually to shareholders of record on June 30, 2026. The cash dividends were paid to shareholders of record on or about August 14, 2026. Again, on September 15, 2026, the board declared a September quarterly dividend of $0.02 to shareholders of record on September 30, 2026.

It is anticipated that cash dividends will be paid to September 2026 shareholders on or about November 14, 2026. As previously communicated, all declared dividends will be paid within 45 days of each fiscal quarter end. From time to time, the board will evaluate our capital allocation strategy and make adjustments based on business conditions and the approach it believes is most favorable for the company and its shareholders at that time. Our continued capital allocation objective is to return approximately 50% of annual cash from operations to shareholders while retaining the balance to strengthen the balance sheet and fund future operations. In summary, our strategy has not changed. First and foremost, take exceptional care of the customer and execute flawlessly.

Next, grow recurring revenue, increase profitability faster than revenue, use cash to repurchase common stock and redeem the preferred shares, maintain a debt-free balance sheet, and return capital to shareholders through our cash dividend. That is all I have today. Thanks everyone for your time. At this point, I will pass the call over to Randy.