UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 14, 2018
WHERE FOOD COMES FROM, INC.
(Exact Name of Registrant as Specified in its Charter)
| Colorado (State or Other Jurisdiction of Incorporation) |
333-133634 (Commission File Number) |
43-1802805 (I.R.S. Employer Identification No.) | ||
| 202 6th Street, Suite 400 | ||||
| Castle Rock, Colorado | 80104 | |||
| (Address of Principal Executive Offices) | (Zip Code) | |||
(303) 895-3002
(Registrant’s Telephone Number, Including Area Code)
Not
applicable
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
☐ Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| Item 2.02 | Results of Operations and Financial Condition |
Reference is made to the Where Food Comes From, Inc. (the “Company”) press release on May 14, 2018, and conference call transcript, attached hereto as Exhibits 99.1 and 99.2, respectively, and incorporated by reference herein (including, without limitation, the information set forth in the cautionary statement contained in the press release and conference call transcript), relating to the Company’s financial results for the first quarter ended March 31, 2018.
| Item 9.01 | Financial Statements and Exhibits |
(d)
Exhibits
| Exhibit No. | Description | ||
| 99.1 | Press Release issued and dated May 14, 2018 | ||
| 99.2 | Transcript for May 14, 2018 conference call |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| WHERE FOOD COMES FROM, INC. (Registrant) | ||
| Date: May 17, 2018 | By: | /s/ Dannette Henning |
| Dannette Henning | ||
| Chief Financial Officer |
Where Food Comes From, Inc. 8-K
Exhibit 99.1
Where Food Comes From, Inc. Reports 2018 First Quarter Financial Results
First quarter revenue increased 18% to $3.6 million year over year
Verification and certification revenue up 9% to $2.8 million
Product sales revenue up 45% to $353,900
Software and consulting revenue segments combine for 71% increased to $470,700
Net income down 69% to $35,500 from $115,400
Adjusted EBITDA down 19% to $355,000 from $436,900
Cash generated from operations of $1.3 million, up 65% from $795,400
CASTLE ROCK, Colo. – May 14, 2018 – Where Food Comes From, Inc. (WFCF) (OTCQB: WFCF), the most trusted resource for independent, third-party verification of food production practices in North America, today announced its 2018 first quarter financial results.
“We are off to a solid start to 2018. We achieved growth in all revenue segments, and are particularly pleased with the performance of our SureHarvest unit, which generated a 71% year-over-year increase in revenue for the quarter,” said John Saunders, Chairman and CEO. “In what is traditionally one of our slower, off-season quarters for beef verification activity, we saw 9% overall growth in this segment, driven in part by an uptick in activity due to the recent re-opening of Chinese beef markets. Although the potential for tariffs on Chinese beef imports has created some uncertainty in this area, we saw steady growth in new customer wins for source and age verifications and are cautiously optimistic that the political issues will be resolved favorably. If that should not be the case, we are still confident in our ability to achieve year-over-year revenue growth.
“In the meantime, we continue to benefit from industry tailwinds around food transparency and consumer preferences for knowing more about where their food comes from,” Saunders added. “Demand for Non-GMO Project and organic certifications, in particular, has been very strong and we continue to benefit from our bundling capabilities made possible by the diversity of our solutions mix. Looking forward, we expect to continue to add new solutions through internal development as well as selective M&A activity that can not only add new verification standards but can strengthen our technology portfolio as well.”
First Quarter Results
Revenue increased 18% in the first quarter of 2018 to $3.6 million from $3.1 million in the same quarter last year. Revenue mix included $2.8 million in verification and certification services revenue, up 9% year over year; product revenue of $353,900, up 45%; license, maintenance and support revenue of $287,400, up 168%; and software-related consulting services of $183,300, up 9%. The increase in verification, certification and product revenue was due to the addition of new customers and increased activity related to the re-opening of Chinese beef markets. Software license, maintenance, support and consulting revenue, all of which is generated by the Company’s SureHarvest subsidiary, increased 71% to $470,700 due primarily to an increase in billable hours.
Gross profit for the quarter increased 18% to $1.7 million from $1.5 million a year ago. Gross margin was 47.8%, up slightly from 47.6% in the same period last year. All revenue segments contributed positively to gross profit.
Selling, general and administrative expense increased to $1.7 million from $1.5 million last year. Approximately $57,000 of the increase was due to the write-off of a beneficial lease arrangement (included in depreciation and amortization expense) related to the Company’s 2012 acquisition of ICS. The balance was attributable to costs associated with office space expansion, personnel, and higher public company expenses, including compliance with the new revenue recognition accounting standard ASC 606 implemented in 2017.
Net income attributable to Where Food Comes From, Inc. for the quarter declined to $35,500, or less than $0.01 per share, versus $115,400, or less than $0.01 per share, in the first quarter of 2017.
Adjusted EBITDA was $355,000, down 19% from $436,900 in the same quarter last year.
The Company generated $1.3 million in net cash from operations for the quarter, up 65% year over year from $795,400.
Balance Sheet
The Company’s cash, cash equivalents and short-term investments balance at March 31, 2018, increased 32% to $4.6 million from $3.4 million at 2017 year-end. Working capital was $3.8 million, up from $3.7 million at 2017 year-end.
Conference Call
The Company will conduct a conference call today at 10:00 a.m. Mountain Time.
Dial in:
Domestic Toll Free: 1-877-407-8289
International: 1-201-689-8341
Conference Code: 13679187
Phone replay:
A telephone replay of the conference call will be available through May 28, 2018, as follows:
Domestic Toll Free: 1-877-660-6853
International: 1-201-612-7415
Conference Code: 13679187
About Where Food Comes From, Inc.
Where Food Comes From, Inc. is America’s trusted resource for third party verification of food production practices. The Company supports more than 15,000 farmers, ranchers, vineyards, wineries, processors, retailers, distributors, trade associations, consumer brands and restaurants with a wide variety of value-added services through its IMI Global, International Certification Services, Validus Verification Services, SureHarvest, A Bee Organic and Sterling Solutions units. In addition, the Company’s Where Food Comes From® retail and restaurant labeling program utilizes the verification of product attributes to connect consumers to the sources of the food they purchase through product labeling and web-based information sharing and education. Visit www.wherefoodcomesfrom.com for additional information.
*Note on non-GAAP Financial Measures
This press release and the accompanying tables include a discussion of EBITDA and Adjusted EBITDA, which are non-GAAP financial measures provided as a complement to the results provided in accordance with generally accepted accounting principles ("GAAP"). The term "EBITDA" refers to a financial measure that we define as earnings (net income or loss) plus or minus net interest plus taxes, depreciation and amortization. Adjusted EBITDA excludes from EBITDA stock-based compensation and, when appropriate, other items that management does not utilize in assessing WFCF’s operating performance (as further described in the attached financial schedules). None of these non-GAAP financial measures are recognized terms under GAAP and do not purport to be an alternative to net income as an indicator of operating performance or any other GAAP measure. We have reconciled Adjusted EBITDA to GAAP net income in the Consolidated Statements of Income table at the end of this release. We intend to continue to provide these non-GAAP financial measures as part of our future earnings discussions and, therefore, the inclusion of these non-GAAP financial measures will provide consistency in our financial reporting.
CAUTIONARY STATEMENT
This news release contains "forward-looking statements" within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, based on current expectations, estimates and projections that are subject to risk. Forward-looking statements are inherently uncertain, and actual events could differ materially from the Company’s predictions. Important factors that could cause actual events to vary from predictions include those discussed in our SEC filings. Specifically, statements in this news release about industry leadership; adding new solutions through internal development and M&A activity; strengthening our technology portfolio; potential for a positive outcome to the Chinese beef tariff issue; expectations for continued revenue growth; and impact and efficacy of, the Company’s products and services on the marketplace, are forward-looking statements that are subject to a variety of factors, including availability of capital, personnel and other resources; competition; governmental regulation of the agricultural industry; the market for beef and other commodities; and other factors. Financial results for the first quarter are not necessarily indicative of future results. Readers should not place undue reliance on these forward-looking statements. The Company assumes no obligation to update its forward-looking statements to reflect new information or developments. For a more extensive discussion of the Company’s business, please refer to the Company’s SEC filings at www.sec.gov.
Company Contacts:
John Saunders
Chief Executive Officer
303-895-3002
Jay Pfeiffer
Pfeiffer High Investor Relations, Inc.
303-393-7044
Where Food Comes From, Inc.
Statements of Income
(Unaudited)
| Three Months Ended March 31, | ||||||||
| 2018 | 2017 | |||||||
| Revenues: | ||||||||
| Verification and certification service | $ | 2,796,194 | $ | 2,554,635 | ||||
| Product sales | 353,894 | 243,266 | ||||||
| Software license, maintenance and support | 287,444 | 107,186 | ||||||
| Software-related consulting service | 183,270 | 168,861 | ||||||
| Total revenues | 3,620,802 | 3,073,948 | ||||||
| Costs of revenue: | ||||||||
| Costs of verification and certification services | 1,450,609 | 1,257,373 | ||||||
| Costs of products | 225,975 | 153,866 | ||||||
| Costs of software license, maintenance and support services | 137,434 | 127,462 | ||||||
| Costs of software-related consulting services | 75,461 | 72,610 | ||||||
| Total costs of revenue | 1,889,479 | 1,611,311 | ||||||
| Gross profit | 1,731,323 | 1,462,637 | ||||||
| Selling, general and administrative expenses | 1,704,474 | 1,470,829 | ||||||
| Income (loss) from operations | 26,849 | (8,192 | ) | |||||
| Other expense (income): | ||||||||
| Interest expense | 1,079 | 162 | ||||||
| Other income, net | (2,918 | ) | (1,328 | ) | ||||
| Income (loss) before income taxes | 28,688 | (7,026 | ) | |||||
| Income tax expense | 8,000 | 3,000 | ||||||
| Net (loss) income | 20,688 | (10,026 | ) | |||||
| Net loss attributable to non-controlling interest | 14,796 | 125,405 | ||||||
| Net income attributable to Where Food Comes From, Inc. | $ | 35,484 | $ | 115,379 | ||||
| Net income per share: | ||||||||
| Basic | $ | * | $ | * | ||||
| Diluted | $ | * | $ | * | ||||
| Weighted average number of common shares outstanding: | ||||||||
| Basic | 24,648,610 | 24,648,036 | ||||||
| Diluted | 24,845,002 | 24,781,511 | ||||||
| * less than $0.01 per share | ||||||||
Where Food Comes From, Inc.
Calculation of Adjusted EBITDA*
(Unaudited)
| Three
Months Ended March 31, |
||||||||
| 2018 | 2017 | |||||||
| Net Income attributable to WFCF | $ | 35,484 | $ | 115,379 | ||||
| Adjustments to EBITDA: | ||||||||
| Interest expense | 1,079 | 162 | ||||||
| Income tax expense | 8,000 | 3,000 | ||||||
| Depreciation and amortization | 272,500 | 209,921 | ||||||
| EBITDA* | 317,063 | 328,462 | ||||||
| Adjustments: | ||||||||
| Stock-based compensation | 37,902 | 45,057 | ||||||
| Cost of acquisition | — | 63,344 | ||||||
| Adjusted EBITDA* | $ | 354,965 | $ | 436,863 | ||||
*Use of Non-GAAP Financial Measures: Non-GAAP results are presented only as a supplement to the financial statements and for use within management's discussion and analysis based on U.S. generally accepted accounting principles (GAAP). The non-GAAP financial information is provided to enhance the reader's understanding of the Company's financial performance, but non-GAAP measures should not be considered in isolation or as a substitute for financial measures calculated in accordance with GAAP. Reconciliations of the most directly comparable GAAP measures to non-GAAP measures are provided herein.
All of the items included in the reconciliation from net income to EBITDA and from EBITDA to Adjusted EBITDA are either (i) non-cash items (e.g., depreciation, amortization of purchased intangibles, stock-based compensation, etc.) or (ii) items that management does not consider to be useful in assessing the Company's ongoing operating performance (e.g., M&A costs, income taxes, gain on sale of investments, loss on disposal of assets, etc.). In the case of the non-cash items, management believes that investors can better assess the Company's operating performance if the measures are presented without such items because, unlike cash expenses, these adjustments do not affect the Company's ability to generate free cash flow or invest in its business.
We use, and we believe investors benefit from the presentation of, EBITDA and Adjusted EBITDA in evaluating our operating performance because it provides us and our investors with an additional tool to compare our operating performance on a consistent basis by removing the impact of certain items that management believes do not directly reflect our core operations. We believe that EBITDA is useful to investors and other external users of our financial statements in evaluating our operating performance because EBITDA is widely used by investors to measure a company's operating performance without regard to items such as interest expense, taxes, and depreciation and amortization, which can vary substantially from company to company depending upon accounting methods and book value of assets, capital structure and the method by which assets were acquired.
Because not all companies use identical calculations, the Company's presentation of non-GAAP financial measures may not be comparable to other similarly titled measures of other companies. However, these measures can still be useful in evaluating the Company's performance against its peer companies because management believes the measures provide users with valuable insight into key components of GAAP financial disclosures.
Where Food Comes From, Inc.
Balance Sheets
| March 31, | December 31, | |||||||
| 2018 | 2017 | |||||||
| ASSETS | (Unaudited) | |||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 3,822,322 | $ | 2,705,778 | ||||
| Accounts receivable, net | 1,523,334 | 1,898,749 | ||||||
| Short-term investments | 745,122 | 743,206 | ||||||
| Prepaid expenses and other current assets | 317,024 | 245,073 | ||||||
| Total current assets | 6,407,802 | 5,592,806 | ||||||
| Property and equipment, net | 1,140,332 | 1,068,087 | ||||||
| Intangible and other assets, net | 3,758,084 | 3,948,530 | ||||||
| Goodwill | 2,652,250 | 2,652,250 | ||||||
| Deferred tax assets, net | 125,622 | 79,622 | ||||||
| Total assets | $ | 14,084,090 | $ | 13,341,295 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 459,020 | $ | 457,307 | ||||
| Accrued expenses and other current liabilities | 666,800 | 555,129 | ||||||
| Customer deposits and deferred revenue | 1,468,537 | 851,185 | ||||||
| Current portion of notes payable | 9,622 | 9,446 | ||||||
| Current portion of capital lease obligations | 7,577 | 7,527 | ||||||
| Total current liabilities | 2,611,556 | 1,880,594 | ||||||
| Notes payable, net | 39,964 | 42,452 | ||||||
| Capital lease obligations, net of current portion | 23,507 | 25,419 | ||||||
| Lease incentive obligation | 144,480 | 147,189 | ||||||
| Total liabilities | 2,819,507 | 2,095,654 | ||||||
| Contingently redeemable non-controlling interest | 1,559,969 | 1,574,765 | ||||||
| Stockholders’ equity: | ||||||||
| Common stock | 24,972 | 24,972 | ||||||
| Additional paid-in-capital | 10,390,939 | 10,353,037 | ||||||
| Treasury stock | (764,178 | ) | (724,530 | ) | ||||
| Retained earnings (accumulated deficit) | 52,881 | 17,397 | ||||||
| Total equity | 9,704,614 | 9,670,876 | ||||||
| Total liabilities and stockholders’ equity | $ | 14,084,090 | $ | 13,341,295 | ||||
Where Food Comes From, Inc. 8-K
Exhibit 99.2
WHERE FOOD COMES FROM, INC.
2017 First Quarter Conference Call Script
Call date: Monday, May 14, 2018
Call time: 10:00 a.m. Mountain Time
Good morning and welcome to the Where Food Comes From 2018 first quarter earnings call.
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 generally accepted accounting principles. We use, and we believe investors benefit from the presentation of, EBITDA and Adjusted EBITDA in evaluating our operating performance because it provides us and our investors with an additional tool to compare our operating performance on a consistent basis by removing the impact of certain items that management believes do not directly reflect our core operations. It is the Company’s policy not to provide specific guidance with respect to future revenue and earnings expectations or new customer wins.
I will now turn the call over to John Saunders, chairman and chief executive officer.
John
Good morning and thanks for joining today.
Our first quarter of 2018 saw a continuation of the steady growth momentum we built through 2017.
| ● | Total revenue in the first quarter increased 18% year over year to $3.6 million from $3.1 million. That included a nice balance of growth between our core verification and certification business and our relatively new software-based business. As a reminder, Where Food Comes From is becoming an increasingly diversified company, so we now report four separate revenue segments to give our investors a better understanding of the progress we’re making with the various components of our mix. In the first quarter, all four segments generated solid year over year revenue growth. | |
| ● | Verification and certification revenue, which is our legacy business and the largest of our segments, grew by approximately $242,000, or 9%, to $2.8 million. This growth is based primarily on a combination of new customer wins, continued strong demand for Non-GMO Project and Organic audits, and the impact of China reopening its markets to U.S. beef. | |
| ● | Product sales, which increase in proportion to beef verifications, grew approximately $111,000, or 45%, to $354,000. Product sales represent RFID ear tags used by ranchers to track the source and age of cattle from birth through processing. This is a good margin revenue stream for us that is expected to grow steadily as more producers take advantage of the premiums available with exported beef. You may recall, the United States is the only developed country and the only major beef producer that does not mandate source and age verifications for cattle ranchers. It is strictly voluntary and our customers for this service are those ranchers who want to qualify their beef for higher value export markets such as the European Union and China. If source and age ever DOES become mandatory, our IMI Global unit, which dominates cattle industry verifications in the U.S., will be in prime position to benefit because currently only a small fraction of domestic cattle are source and age verified. | |
| ● | Our third and fourth revenue segments are comprised of software-related revenue generated by our relatively new SureHarvest subsidiary, whose core business is based on a software as a service, or SaaS, model that helps high value crop growers and wine grape growers implement and track sustainable growing programs. | |
| ● | Software license, maintenance and support service revenue increased approximately $180,000, or 168%, in the first quarter to $287,000. This category represents a combination of annual software license revenue combined with ongoing software enhancements and upgrades – as well as a range of professional services that generate incremental revenue. The solid year over year increase in revenue in this segment was due to a general increase in customer activity. | |
| ● | And finally, software-related consulting service revenue, comprised of customer education and training services, increased 9% to $183,000 in the first quarter. | |
| ● | All four revenue segments generated a gross profit in the quarter. | |
| ● | Net income attributed to Where Food Comes From for the quarter totaled approximately $35,000, down from $115,000 in the same quarter last year. About $57,000 of that decline is attributable to the write-off of a beneficial lease arrangement related to our 2012 acquisition of ICS (and that is imbedded in depreciation and amortization this quarter). Another $66,000 of the decline is due to costs of complying with ASC 606. Adjusted EBITDA in the first quarter was $355,000, down from $437,000 a year ago with most of the decline being attributable to last year’s first quarter having $63,000 in acquisition costs and higher stock-based compensation costs. | |
| ● | We generated $1.3 million in net cash from operations in the quarter, which was up 65% year over year from $795,400. Our cash, cash equivalents and short-term investments increased 32% to $4.6 million from $3.4 million at year-end. Working capital was $3.8 million, up slightly from year-end. |
Where Food Comes From has the most diversified and complete solutions offering in the industry. We now audit to approximately 40 different standards. We view our diversity as a key strength and a differential competitive advantage in that we almost certainly pop up on the radar of any producer in any food group looking for an independent third-party verifier. And as I’ve said many times, our ability to bundle multiple services gives us an edge in pricing and convenience and represents great value for our customers.
Our broad solutions offering and the ability of our field teams to form long-term, sticky customer relationships and execute at a very high level year after year is unquestionably the strength of our business. This is still very much a boots-on-the-ground relationship business. But there’s another aspect to our business that is absolutely essential to taking WFCF to the next level – and that’s technology. In order to support the kind of growth we anticipate in coming years, we recognize we must commit to building out a technology platform that is capable of handling much heavier transaction traffic in a way that preserves our lean operating philosophy and offers our customers more convenience and lower costs of compliance.
The first major step in this process was our acquisition of SureHarvest, which added a SaaS component to our existing proprietary verification software capabilities. Over the past year we layered on our Sales Force initiative, which has strengthened our sales and marketing capabilities and dramatically improved internal communications and transparency between our various operating subsidiaries and our corporate office. Our goal is to enhance our systems and processes to optimize operations and logistics in a focused effort to create a platform that can support a much larger organization. We expect to continue enhancing our systems and intellectual property portfolio through internal development as well as selective M&A activity.
Before I open the call to questions, I want to address a topic that I’m sure is on your mind and that’s the potential for tariffs on U.S. beef imports to China. We are cautiously optimistic that the back and forth between Beijing and the Trump administration is political posturing that will be resolved without any negative ramifications for U.S. beef producers. To be clear, as of today no final decisions have been made on tariffs and we continue to add new source and age customers. At the same time, we don’t have a crystal ball and have no idea where all this will end up. I will remind you, however, that we were growing at a good clip prior to China reopening their markets and we expect to continue growing whether or not tariffs are imposed.
So with that, I’m now happy to take questions. Operator…
Question-and-Answer Session
Operator - Our first question comes from the line of Terry Thompson, Private Investor. Please go ahead.
Terry Thompson - What is probably an enduring question for most of the other investors but since I'm fairly new, I'm just curious if you have any idea what's caused the stock to fall to around $2 from $3.50 just a few months ago. I'm curious if you have any ideas on what generated that?
Jay Pfeiffer - Yes, Terry, back to John's crystal ball room ultimately nobody has any idea for sure why stocks go up and down but I will tell you that we have had a lot of or several regional investors who were involved in the private placement 10 or 12 years ago who we are where they have sold stock recently and we had some maybe getting too little deep in the weeds here but we've had some investors who have passed away and the stock went on to their errors and their errors were not up to speed on what it was etcetera so. I just think just some general selling that was not met by volume.
Terry Thompson - Yes, obviously I did at least know when the market -- that price dropped means there are more people selling than buying, I just was curious for an expert view on what might have caused that. I appreciate your time and I will see you this week John and Leann and I'm on my way to Denver now. Thank you very much.
John Saunders - Thank you, Terry.
Operator - Our next question comes from the line of [indiscernible]. Please go ahead.
Unidentified Analyst - Sort of new to this story as well but I was wondering if you could comment on I guess your incremental EBITDA margins, it looks like you had an increase in SG&A that was pretty big and so I'm curious whether at some point that flows down or stops and you know more of the revenue growth posted offline, maybe not this year but what do you think your long term incremental EBITDA margins are?
John Saunders - We will continue to improve margins over time you know what we've been pretty upfront with over the last several years is we have been engaged in this pretty aggressive M&A strategy and I think I think I will remind everybody at this point in the last five years we've executed on eight separate transactions to continue to consolidate our position and to continue to consolidate growth as we've done those acquisitions and probably the most unique process has been our acquisition of SureHarvest that its very difficult for us to predict where those margins will go year over year because it's so lumpy as this point but it will continue to iron out as we move ahead but I will tell you and you can see through some of the numbers that we reported around SureHarvest, their business has the potential to grow very, very quickly and at a certain point the margins will become very much more positive. So we're again -- I'm reluctant to give specific numbers but yes as we continue to build more and more moments, more and more scalability with as I mentioned the implementation of sales force the margins will continue to get better and better.
Unidentified Analyst - And then I guess to that end maybe just talk about your I guess your market, your competitive position and you know what you think you're doing better versus your competitors and what you think your competitors are doing better just kind of curious, is this still somewhat newer industry and I'm curious how that's evolving?
John Saunders - Yes, great question. So we have got some traditional competitors which are based in Europe that are more established, they audit to a much more broad set of standards meaning beyond food. So when we compete with those and see they are much larger, they have much larger resources but they don't have the domain expertise of the lingo and what it means to compete here in the United States. So what we're competing with is a very fragmented industry that as I mentioned we began an acquisition strategy about 10 years ago that was targeted to take this fragmented segmented at certification industry and to create a platform which at the time we dubbed Where Food Comes From and that has been the foundation of this model since that point. So today we have very, very specific competitors and some very specific more markets but our real secret recipe is our ability to bundle audits across different certifications. So within the organic market we have some large non-profits that exist and some large companies that provide certification regionally mostly in California and Oregon and then we have in other areas some very targeted specific competitors but no competitors that cross the range of certifications that we do and that’s the typical reason for our customer wins when we are able to bundle organic in a non-GMO with a GAAP audit potentially that that makes us very, very appealing to customers.
Unidentified Analyst - Okay. Where do you think your size relative to your next nearest competitor at this point in the U.S. I guess?
John Saunders - The non-profits that that we compete with were much larger then. The European companies that I mentioned SCS those are 80,000 employee company so that are a $1 billion so they are much larger than us so we're kind of -- I would cause relatively big fish in a small pond that is verification in the United States today but the pond is growing quickly.
Operator - Our next question comes from the line of Jason Hershman, Private Investor. Please go ahead.
Jason Hershman - I've few questions for you today actually. I know you've spoken a lot about the importance of bundling and the competitor advantage of you know bundling services that Where Food Comes From offers. I was wondering if you could speak to the implication of bundling on basically the future of the software sustainability business and specifically the SureHarvest. I would expect that this movement towards funding would have strong implication in terms of how the software industry must be developing.
John Saunders - That's actually a very insightful question, Jason. We spend a lot of time talking about the future of auditing and certification and today was what's occurring is because we're at the bleeding edge of auditing in the United States. There's this mantra of trust but verify. So there's a requirement in most of this standards that we audit today that requires an annual visit from a person to go and actually look and feel and touch the operation, make sure that the claims are being made are accurate. Well over time what happens you know and really just paying taxes in the United States is a good example that the majority of people on this call although they probably haven't been audited by the IRS and that I might have to make a copy of that maybe this group has been audited but I would venture to say that everybody has paid their taxes. So what that would lead one to believe is that over time you will have when there's a critical mass of verification and it becomes an accepted practice to engage in the third party verified program there will be those that will argue for innovation around the verification process that may not necessarily require an individual go on site each and every year to verify that same production practices.
Now bear in mind what I'm describing maybe 10 or 20 or 30 years down I think there's a lot of things that need to transpire in that timeframe, but our acquisition of SureHarvest was a direct buttress against that realization that there will be -- there will be a time when there probably will be a slowing down on site audits and technology will replace the way the verification occurs and there's a half a dozen technologies which I've talked about in the past that I could mention today including drones, including video conferencing, including augmented reality, including D&A including microbiome tracking that all of which including boxing all of which represents different technologies that could enhance and provide us innovation around the entire verification and certification process. So over time and it's a very long winded answer to your question but over time I think we're at Where Food Comes From anticipating expanding our technology capabilities and our innovation around technology and how it helps us innovate rather than the alternatives.
Jason Hershman - That was an excellent answer. Just want to take it a little bit from some 30,000 to a little bit closer to say for the next few years then, do you see SureHarvest adding new -- I know you're very much involved, intertwined. Is the opportunity really sort of multiple new products and I know you are focused more on the West Coast -- if you could just speak to maybe where the near term opportunities are also that for the SureHarvest.
John Saunders - Another great question. Yes the near term opportunities are in those industries which Where Food Comes From is already engaged and providing the self-assessment sustainability model to those industries that SureHarvest has perfected in the almond industry. So our number one targets are beef, pork, dairy and poultry. So those conversations and that dialogue has already begun and has been in process for the last couple of years.
Jason Hershman - Okay. Just my final sort of follow up is have you then begun or have the software developed at this point for say beef and poultry and pork or is that something that we should anticipate let's say in subsequent quarters or in the 2019 and beyond.
John Saunders - They are in process. We have begun them already. So yes anticipate that coming in the next several quarters.
Operator - Thank you. This concludes our question and answer session. I'd like to turn the floor back to John Saunders for closing comments.
John Saunders - Well it's a great time here at spring in Colorado so look forward to seeing everybody this week, it's coming to the shareholder meeting. Very exciting things on the horizon for us and I look forward to talking to everybody this week or if not sooner next quarter call. So thank you all very much.