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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 15, 2023
WHERE FOOD COMES FROM, INC.
(Exact Name of Registrant as Specified in its Charter)
| Colorado | 001-40314 | 43-1802805 | ||
|
(State or Other Jurisdiction of Incorporation) |
(Commission File Number) |
(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)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| Common Stock, $0.001 par value | WFCF | The NASDAQ Stock Market LLC |
| 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 15, 2023 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, 2023.
| Item 9.01 | Financial Statements and Exhibits |
| (d) | Exhibits |
| Exhibit No. |
Description | ||
| 99.1 | Press Release issued and dated May 15, 2023 | ||
| 99.2 | Transcript for May 15, 2023 conference call | ||
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
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) | ||
| By: | /s/ Dannette Henning | |
| Date: May 16, 2023 | Dannette Henning | |
| Chief Financial Officer | ||
Exhibit 99.1
Where Food Comes From, Inc. Reports 2023 First Quarter Financial Results
| ● | Revenue of $5.3 million in Q1 compared to $6.2 million a year ago when Company recognized $850,000 in software revenue for one-time consulting project; Q1 2023 revenue also impacted by lower cattle headcounts, inflation-based shift in consumer food preferences and severe weather that delayed verification activity and tag sales | |
| ● | Net income of $0.1 million vs. $0.5 million a year ago, reflecting lower gross margins and increased SG&A related to post-Covid re-start of industry trade shows, on-site audit staff training and Nasdaq listing event Adjusted EBITDA of $0.4 million vs. $0.9 million last year reflects lower net income, income tax expense, depreciation and amortization and stock-based compensation charges | |
| ● | Company continues share repurchase program, buying back $1.2 million of stock (89,450 shares) in the first quarter |
CASTLE ROCK, Colo., May 15, 2023 (GLOBE NEWSWIRE) -- Where Food Comes From, Inc. (WFCF) (Nasdaq: WFCF), the most trusted resource for independent, third-party verification of food production practices in North America, today announced financial results for its first quarter ended March 31, 2023.
“In the first quarter we incurred a number of anomalous events and circumstances that impacted both revenue and profitability,” said John Saunders, Chairman and CEO. “Our core verification and certification segment was essentially flat year over year due to several unrelated factors, including shifting consumer preferences due to food inflation and multiple severe winter weather events that delayed on-site audits and delivery of tags to customers across the country. At the same time, drought conditions and cyclical cattle trends resulted in lower cattle head counts that also impacted verification activity and tag sales, a trend that’s expected to persist in the near future. Our year-over-year revenue comparison was further skewed by the large, one-time software consulting contract we executed in the first quarter of 2022 that was not duplicated this year.
“The lower revenue and continued inflationary pressures led to a decline in gross margin in the first quarter,” Saunders added. “At the same time, SG&A expense increased as we resumed activities related to industry trade show participation, on-site company-wide training programs and the Nasdaq bell ringing ceremony, all of which had been delayed due to Covid-19 shutdowns. With most of this activity now behind us, we expect these expenses to normalize through the remainder of the year.
“Going forward, despite an expected continuation of inflationary pressures, we anticipate demand for our products and services to increase over the long term, enabling us to continue to profitably grow our business,” Saunders said. “Accordingly, we accelerated our share repurchase program in the first quarter, investing $1.2 million in 89,450 shares of WFCF stock. Over the past five quarters we have repurchased nearly 400,000 shares, reducing our outstanding share count by approximately 7% as of March 31, 2023 -- an indication of the confidence our Board has in our ability to continue generating solid cash flows.”
First Quarter Results
Revenue in the first quarter was $5.3 million, down from $6.2 million in the first quarter last year.
Revenue components included:
| ● | Verification and certification services, flat at $3.8 million. | |
| ● | Product sales, flat at $1.0 million. | |
| ● | Software and related consulting services, down at $0.5 million vs. $1.4 million. |
Gross margins for verification and certification services and associated product sales decreased to 42.1% from 46.3% year over year. The decline was due to weather-related delays and increased costs of products and labor.
Sales, general and administrative expenses in the first quarter increased to $2.0 million from $1.8 million year over year. The increase reflected costs of resuming trade shows, on-site training seminars and the Nasdaq event, all of which were delayed during Covid lockdowns.
Net income in the first quarter was $0.1 million, or $0.02 per basic and diluted share, compared to net income of $0.5 million, or $0.08 per basic and diluted share, in the same quarter last year.
Adjusted EBITDA in the first quarter was $0.4 million, down from $0.9 million in the first quarter last year.
The Company generated approximately $0.5 million in net cash from operations in the first quarter compared to $1.1 million in the same quarter last year.
Cash
and cash equivalents at March 31, 2023, were $3.4 million versus $4.4 million at 2022
year end. The cash and cash equivalents balance declined primarily due to the Company’s $1.2 million share buyback in the first
quarter and a $0.2 million investment in the BlueTrace seafood traceability company. The Company has no long-term debt.
Conference Call
The Company will conduct a conference call today at 10:00 a.m. Mountain Time.
Dial-in numbers for the conference call:
Domestic Toll Free: 1-877-407-8289
International: 1-201-689-8341
Conference Code: 13738420
Phone replay:
A telephone replay of the conference call will be available through June 11, 2023, as follows:
Domestic Toll Free: 1-877-660-6853
International: 1-201-612-7415
Conference Code: 13738420
About Where Food Comes From, Inc.
Where Food Comes From, Inc. is America’s trusted resource for third party verification of food production practices. Through proprietary technology and patented business processes, the Company estimates that it supports more than 17,500 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, Validus Verification Services, SureHarvest, WFCF Organic, and Postelsia units, Where Food Comes From solutions are used to verify food claims, optimize production practices and enable food supply chains with analytics and data driven insights. In addition, the Company’s Where Food Comes From® retail and restaurant labeling program uses web-based customer education tools to connect consumers to the sources of the food they purchase, increasing meaningful consumer engagement for our clients.
*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, the cattle cycle, expectations that demand for products and services will remain strong and that the Company will continue to generate solid cash flows and profitably grow its business; expectations for expenses to normalize for the remainder of 2023; ability to continue share repurchases; and demand for, 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 of 2023 and the Company’s pace of stock buybacks 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.
Contact:
Jay Pfeiffer
Pfeiffer High Investor Relations, Inc.
303-880-9000
jay@pfeifferhigh.com
Where Food Comes From, Inc.
Statements of Income (Unaudited)
|
Three months ended March 31, |
||||||||
| (Amounts in thousands, except per share amounts) | 2023 | 2022 | ||||||
| Revenues: | ||||||||
| Verification and certification service revenue | $ | 3,806 | $ | 3,784 | ||||
| Product sales | 971 | 1,007 | ||||||
| Software and related consulting revenue | 490 | 1,365 | ||||||
| Total revenues | 5,267 | 6,156 | ||||||
| Costs of revenues: | ||||||||
| Costs of verification and certification services | 2,196 | 2,036 | ||||||
| Costs of products | 568 | 537 | ||||||
| Costs of software and related consulting | 360 | 1,186 | ||||||
| Total costs of revenues | 3,124 | 3,759 | ||||||
| Gross profit | 2,143 | 2,397 | ||||||
| Selling, general and administrative expenses | 1,988 | 1,774 | ||||||
| Income from operations | 155 | 623 | ||||||
| Other income/(expense): | ||||||||
| Dividend income from Progressive Beef | 50 | 50 | ||||||
| Other income, net | 9 | - | ||||||
| Loss on foreign currency exchange | (2 | ) | (12 | ) | ||||
| Interest expense | (1 | ) | (1 | ) | ||||
| Income before income taxes | 211 | 660 | ||||||
| Income tax expense | 90 | 163 | ||||||
| Net income | $ | 121 | $ | 497 | ||||
| Per share - net income: | ||||||||
| Basic | $ | 0.02 | $ | 0.08 | ||||
| Diluted | $ | 0.02 | $ | 0.08 | ||||
| Weighted average number of common shares outstanding: | ||||||||
| Basic | 5,730 | 6,067 | ||||||
| Diluted | 5,799 | 6,150 | ||||||
Where Food Comes From, Inc.
Calculation of Adjusted EBITDA*
(Unaudited)
|
Three months ended March 31, |
||||||||
| (Amounts in thousands) | 2023 | 2022 | ||||||
| Net income | $ | 121 | $ | 497 | ||||
| Adjustments to EBITDA: | ||||||||
| Interest expense | 1 | 1 | ||||||
| Income tax expense | 90 | 163 | ||||||
| Depreciation and amortization | 172 | 195 | ||||||
| EBITDA* | 384 | 856 | ||||||
| Adjustments: | ||||||||
| Stock-based compensation | 15 | 51 | ||||||
| Cost of acquisitions | - | - | ||||||
| ADJUSTED EBITDA* | $ | 399 | $ | 907 | ||||
| *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 (Unaudited)
| March 31, | December 31, | |||||||
| (Amounts in thousands, except per share amounts) | 2023 | 2022 | ||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 3,400 | $ | 4,368 | ||||
| Accounts receivable, net of allowance | 2,065 | 2,172 | ||||||
| Inventory | 970 | 888 | ||||||
| Prepaid expenses and other current assets | 488 | 463 | ||||||
| Total current assets | 6,923 | 7,891 | ||||||
| Property and equipment, net | 916 | 998 | ||||||
| Right-of-use assets, net | 2,543 | 2,607 | ||||||
| Equity investments | 1,191 | 991 | ||||||
| Intangible and other assets, net | 2,257 | 2,340 | ||||||
| Goodwill, net | 2,946 | 2,946 | ||||||
| Deferred tax assets, net | 526 | 523 | ||||||
| Total assets | $ | 17,302 | $ | 18,296 | ||||
| Liabilities and Equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 667 | $ | 640 | ||||
| Accrued expenses and other current liabilities | 932 | 769 | ||||||
| Deferred revenue | 1,256 | 1,278 | ||||||
| Current portion of finance lease obligations | 12 | 9 | ||||||
| Current portion of operating lease obligations | 338 | 341 | ||||||
| Total current liabilities | 3,205 | 3,037 | ||||||
| Finance lease obligations, net of current portion | 51 | 37 | ||||||
| Operating lease obligation, net of current portion | 2,663 | 2,745 | ||||||
| Total liabilities | 5,919 | 5,819 | ||||||
| Commitments and contingencies | ||||||||
| Equity: | ||||||||
| Preferred stock, $0.001 par value; 5,000 shares authorized; none issued or outstanding | - | - | ||||||
| Common stock, $0.001 par value; 95,000 shares authorized; 6,501 (2023) and 6,501 (2022) shares issued, and 5,685 (2023) and 5,775 (2022) shares outstanding | 6 | 6 | ||||||
| Additional paid-in-capital | 12,160 | 12,145 | ||||||
| Treasury stock of 817 (2023) and 727 (2022) shares | (8,493 | ) | (7,263 | ) | ||||
| Retained earnings | 7,710 | 7,589 | ||||||
| Total equity | 11,383 | 12,477 | ||||||
| Total liabilities and stockholders’ equity | $ | 17,302 | $ | 18,296 | ||||
Exhibit 99.2
Where Food Comes From, Inc.
2023 First Quarter Conference Call
Call date: Monday May 15, 2023
Call time: 10:00 a.m. Mountain Time
Jay Pfeiffer – Investor Relations
Good morning and welcome to the Where Food Comes From 2023 first 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.
John Saunders
Good morning and thanks for joining the call today.
This morning we announced our first quarter financial results for the period ended March 31, 2023. As we detailed in our news release, we encountered a flurry of anomalous circumstances and events in Q1 that negatively impacted both revenue and profitability. The good news is, in an economic environment where many companies are focusing on layoffs and hammering down costs wherever they can in the face of inflationary pressures and a potential recession, we believe we are faring comparatively well. In fact, we believe the combination of verification industry tailwinds, very sticky customer relationships, our lean operating model, and the tremendous value we provide our customers will enable us to continue to weather macro headwinds and profitably grow our business over the long haul.
Now to our first quarter results…
Revenue in Q1 was $5.3 million, down from $6.2 million in the first quarter last year. Keep in mind, however, that in the year-ago first quarter we booked $850,000 in software and consulting revenue from a one-off consulting contract with a Japanese government agency. So adjusted for that, year-over-year revenue would have been essentially flat – which isn’t too bad given macro headwinds and the impact of a few unrelated events I referenced earlier.
Specifically, our verification and certification revenue was flat based on a few things: One, we are still feeling the effects of severe drought conditions that significantly reduced herd sizes last year and had ripple effects this year in the form of fewer cattle for us to verify. The situation of overall fewer cattle moving through the system in the current cycle impacts not only the annual on-site audits but also the revenue we derive from right-to-ship fees each time an animal moves to a new location on its way to the packer.
This cyclical cattle trend could last for some time, but we think we’ll see some positive offset to that from the USDA’s ADT program, which in coming years is expected to add up to another 11 million head annually of cattle required to be verified with an RFID tag. The momentum behind this evolving new standard, which has been in the works for years, is based largely on concerns about traceability in the event a foreign animal disease enters the U.S. While there is pushback in some circles, the National Cattlemen’s Beef Association, is fully supporting the program and we believe the transition is relatively inevitable.
Another factor impacting revenue was the severe winter weather events across the country that limited our ability to conduct audits and deliver ear tags in the month of March. The good news is, those audits were delayed, not cancelled, so we expect to capture that revenue over the remainder of the year, although not necessarily all in the second quarter. To put this more into perspective, in all our years as a public company, only recently has weather – be it drought or too much snow – had this kind of impact on our operations and year-over-year financial results.
Yet another issue factoring into our verification activity is a shift in consumer purchasing activity based on food inflation. We’re seeing this not so much in the beef area, where consumers continue to pay up for premium products, but rather in other food sectors where our customers are shrinking their offerings in certain verified product lines to conform to changes based on inflationary pressures. That, in turn, lowers our verification activity with those customers.
Lower revenue due to the events I just described – combined with some continued wage inflation – impacted gross margins for our verification/product segment, which came in 42.1% in the quarter versus 46.3% in the same quarter last year.
At the corporate level, SG&A expenses in the first quarter increased to $2.0 million from $1.8 million last year. A lot of this increase resulted from the timing of activities that had been delayed due to Covid shutdowns.
Specifically, in the first quarter we incurred significant costs due to the following:
| ● | We sent teams to a number of industry trade shows around the country. |
| ● | We resumed our annual on-site training program that brought some 100 auditors from across the country to Castle Rock and Des Moines for two two-day sessions. |
| ● | And we sent a contingent to New York for the Nasdaq bell ringing ceremony – an event that drew a lot of attention to the Company but, again, is a one-time cost. |
As a result of lower gross margins, inflationary pressures and the abnormal concentration of various expenses in the first quarter, Q1 net income was $0.1 million, or 2 cents per basic and diluted share, compared to net income of $0.5 million, or 8 cents per basic and diluted share, in the same quarter last year. Adjusted EBITDA was $0.4 million, down from $0.9 million year over year.
Cash and cash equivalents at March 31, 2023, were $3.4 million versus $4.4 million at 2022 year end.
The lower cash balance is attributable to two factors, both of which validate our optimism about future growth and the sustainability of our solid cash flows.
One, we invested $200,000 in seafood traceability company BlueTrace, whose management team we got to know at one of the trade shows I referenced earlier. Currently a private company, BlueTrace offers a cloud-based solution that helps players across the shellfish supply chain comply with government regulations, manage their inventories and optimize profitability. Our investment was part of an oversubscribed stock offering led by venture capital and angel investors.
Based in Maine, BlueTrace is growing rapidly with more than 350 customers – primarily in the shellfish industry – in all but two coastal U.S. states and most Canadian provinces. The Company’s digital traceability solution uses a mobile app and tamper evident barcode tags to replace outdated paper-based tracking solutions that have become more challenging in light of increasingly stringent traceability standards. Those standards are established and enforced by the Interstate Shellfish Sanitation Commission (ISSC), which is particularly focused on safety issues around freshness and temperature.
BlueTrace is expected to benefit from ongoing implementation of the Food Safety Modernization Act, which is expanding traceability beyond shellfish to include other types of seafood beginning in 2023. The Company’s software and systems, designed originally to address the oyster industry, are seamlessly adaptable for the broader seafood landscape.
We made the BlueTrace investment for two reasons: One, we like the space and BlueTrace’s early mover status, and we believe our investment will appreciate in value. Two, and more importantly, we plan to work closely with their team in areas that augment our own initiatives in the seafood space, including enhancing our FishCARE sustainability standard and other aquaculture offerings going forward.
On the subject of investments – and again speaking to our optimism about business prospects going forward – we accelerated our share repurchase program in the first quarter, buying back 89,450 shares of WFCF stock at a cost of $1.2 million. Over the past five quarters we have repurchased nearly 400,000 shares, reducing our share count by approximately 7%. Your management team, myself and the Board believe our shares represent an excellent value at these levels and we expect to continue these buybacks as long as our cash flows support it.
So, thanks again for joining us on the call today. And with that, I’ll open the call to questions. Operator...
Question and Answer Session:
Question 1: Chris Brown
Thank you very much. Just was wondering if you could give a little bit more color on how you guys think the ADT regulations play out over the next couple of years? Is that something that’s gradual? Is it big? And then I was wondering if you have an idea of like what kind of market share you guys have in the bigger picture of United States cattle verification?
John Saunders
Sure. I’ll answer the second question, first. Today we verified just under 2.5 million cattle, which is just at about a little bit under 10% of the cattle, which are slaughtered in the US every year. So we have it just a little bit under 10%. ADT is going through a process, as I mentioned, this has been a long-term program offered by the USDA. This change specifically Chris is, the transition from metal clip tags to electronic identification tags.
The ruling was set to begin January 1 2023, or to sunset basically and this new rule to start to move forward with the EIDs. We’re currently in a comment period, so we’re still receiving comments from the industry. But yes, we anticipate that it will be a gradual move. But as I mentioned, with only 2.5 million cattle that we identified this year, we see this as a real tailwind for us and tags and radio frequency identification in the cattle industry moving forward, over the next couple of years. So yes, we see it coming in gradually. It won’t happen all at once, but in the next 18 to 24 months, we see it moving in that direction.
And one clarification Chris, on that question. Leann just pointed out to me that, there’s roughly 2.5 million so about 10% of the cattle industry is verified. We have our percentage of that as somewhere north of 90%, so we feel we have a very strong control position. So just to answer that finally, Chris. Thanks for the question. Thanks everybody for participating today, and we’ll talk to you again in three months. Take care.
Operator
This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.