ReposiTrak, Inc. Q2 FY2025 earnings call

• Business strategy: Take care of customers, execute perfectly, grow recurring revenue, increase profitability, use cash for stock buybacks, redeem preferred, no bank debt, and return capital to shareholders.
• Revenue growth: Total revenue up 7%, recurring revenue up 5%. Deferred revenue grew 70% since June 2024, indicating future revenue.
• Contribution margin: Current 64% revenue contribution margin above fixed cost, goal to reach 80%.
• Traceability: Growth accelerating, with delay in enforcement law being welcome for orderly onboarding.
• Operational philosophy: Provide superior solutions, reasonable price, perfect execution; customer success leads to more business.
• Cash position: Cash on balance sheet $28 million, up 12% from June 2024; redeemed $1.5 million preferred, paid dividends, bought back stock, no bank debt.

For the second fiscal quarter of 2025, total revenue was up 7% to $5.5 million versus $5.1 million. Recurring revenue increased 5% to $5.4 million. Deferred revenue has grown 70% from $2.4 million to $4.2 million since June 2024, with $1.7 million of incremental subscription revenue over the next 12 months. The contribution margin is currently 64% above fixed cost, with the goal to get closer to 80%. Traceability, compliance, and supply chain are the product segments, with all lines of business growing.

• Anticipate accelerating to double-digit revenue growth in the second half of the fiscal year, bringing full year top line growth to 10%-20%.
• Deferred revenue conversion to lead to double-digit quarterly growth and fiscal 2025 growth.
• Goal to redeem all preferred shares by September 2027.

• Potential delay in traceability law enforcement, but industry inevitability of traceability remains.
• Uncertainty around government policies and regulations impacting traceability adoption.

Q: Please provide an update on onboarding via the Wizard.

A: A higher percentage of onboards are going through the Wizard end-to-end. Expect 60%-70% of onboards to be through the Wizard with minimal assistance by year from now.

Q: How should we think about fixed cost versus variable costs?

A: Cash costs to run the place are ~$12 million; incremental revenue has de minimis additional costs, primarily commissions and related taxes.

Q: What are the implications of RFK Junior leading health and human services?

A: Safety is his primary concern, but there's ignorance about current state of food tracking; need for legislation change to stop traceability.

Q: Any AI-related implications for ReposiTrak?

A: No impact; ReposiTrak has been doing AI for years, CapEx not affected.

Q: Efforts with restaurants?

A: Closer to bringing food distributors in for restaurant industry, but less lucrative due to fewer suppliers.