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Greetings, and welcome to the ReposiTrak's Fiscal Second Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Jeff Stanlis with FNK IR. Please go ahead, sir.

Thank you, operator, and good afternoon, everyone. Thank you for joining us today for the ReposiTrak'sFiscal Second Quarter 2026 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 upon 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 information contained in this conference call. Shortly after the market closed today, the company issued a press release overviewing the financial results that 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. As we reached the midpoint of fiscal 2026, it's important to reiterate our long-term strategy and provide performance metrics against those milestones. First, our goal was to convert all revenue streams largely to SaaS recurring revenue. Since 2020, we have converted over $7 million in onetime revenue to a recurring SaaS and increased our recurring revenue from 62% of total revenue to over 98%. We have done this, while simultaneously overcoming $2 million in the elimination of high-touch low-margin opportunities in order to make way for traceability. Next, pay down debt, keep expenses in check and increase contribution margin. Since 2020, we have paid off over $6 million in bank debt and reduced annual operating expenses from roughly $19 million to $16 million. Meanwhile, we have grown our net margin from 8% to north of 30% during the same period. Third, drive cash and return capital to shareholders. Since 2020, we have increased net cash by a 16% compounded annual growth rate. Net cash means total cash on the balance sheet, less bank debt and leases. We've grown net cash from $13.7 million in 2020 to almost $29 million in 2025. Simultaneously, we have bought back over 2.2 million shares of common stock, redeemed 640,000 shares of preferred stock and increased the common stock dividend now 3x by 10% each time over the previous 3 years. Finally, given our strong cash flow generation, we have invested heavily in our business. This quarter, the investments in our business involve 3 key initiatives: First, we continue to invest in our products, responding to customer pain points with new solutions. We are confident that these solutions will improve tracking accuracy and will reduce operating costs for any customer with a warehouse. Touchless Traceability fits perfectly with our ReposiTrak Traceability Network Solution, creating a comprehensive method for delivering end-to-end Traceability; second, we filed for 2 patents in the last few weeks, one for Touchless Traceability and a second for an innovative method for identifying and automatically correcting errors in the data we integrate for customers. ReposiTrak has not been shy about patenting our innovations. We have a portfolio of 9 U.S. patents, and we are confident we will ultimately secure both these patents that are now in process. These patents serve as yet another moat around our business. Randy will add more color on Touchless Traceability and the patents in his section. The inventions involved in these 2 patents, and our innovation in general, continues to revolutionize the industry. We have carefully observed what others in the space envision to address issues like Traceability, and we know what has worked and what doesn't. We are confident that as our competitors recognize the optimal path forward, they will discover that we have patented the process and systems that make the correct approach possible; third, we continue to invest in our systems and core software stack, adding artificial intelligence and modernized features and setting us up for improved operational efficiency. Randy talked about this last quarter, and we do not anticipate a meaningful increase in our cash expenses or capital expenditures related to this initiative. Let's get to the numbers. Second fiscal quarter revenue increased 7% from $5.5 million to $5.9 million. Total operating expenses for the quarter were down 2%, inclusive of investment in RTN, including Wizard onboarding tools, more cybersecurity costs, database license fees and other direct costs associated with development. We've reached a point where an incremental revenue does not require significant incremental expenses to support our growth. SG&A costs for the quarter were up 5% due to higher commissions and direct costs associated with higher revenues, increased insurance premiums and increases in employee benefit costs. Income from operations was up 34% to $1.8 million versus $1.4 million. GAAP net income for the second fiscal quarter of 2026 was $1.7 million, up 9% versus $1.6 million last year. As previously communicated, the company is at the end of the benefit period from utilized and expiring net operating losses for both federal and state income tax. Accordingly, it is reasonable to assume a 20% effective tax rate going forward. GAAP net income to common shareholders increased 13% to $1.6 million from $1.5 million. Earnings per share for the quarter was $0.09 basic and diluted, this is based on 18.2 million basic shares outstanding and 19.1 million shares diluted, resulting in a year-over-year EPS growth of 13% when factoring in higher income taxes. Total cash increased to $28.7 million from $28.6 million at June 30, and the company continues to have a 0 bank debt. Fiscal 2026 year-to-date total revenue increased 8% from $10.9 million to $11.8 million. Total operating expenses for the fiscal year-to-date were $8.1 million versus $8.1 million for the same period last year, essentially flat. Income from operations was up 31% for the fiscal year-to-date, $3.7 million versus $2.8 million. GAAP net income increased 9% from $3.2 million to $3.5 million. GAAP net income to common shareholders increased 13% from $3 million in fiscal 2025 to $3.4 million in the year-to-date period in fiscal 2026. Fiscal 2026 year-to-date earnings per share was $0.19 basic and $0.18 diluted. This is a 13% increase when compared to $0.17 basic and $0.16 diluted for the same period last year. We are experiencing growth in all lines of business, while traditional sales of one service to solve one problem is growing, our cross-sell initiatives are delivering continued momentum. Again, our strategy has not changed. First and foremost, take exceptional care of the customer and execute flawlessly. Next, grow recurring revenue, increased profitability even faster, use cash to buy back common stock, redeem the preferred and do it with no bank debt. At the same time, return capital to shareholders through a growing cash dividend. Finally, we have and we'll continue to build cash on the balance sheet, close to $29 million as of December 31, 2025. Continuing to bolster our balance sheet maintains our customers' confidence in our ability to be a durable partner in otherwise uncertain economic time. Common stock buyback. During the second quarter of fiscal 2026, the company repurchased roughly 80,000 common shares for a total of $1.1 million, an average of $13.75 per share. This inception, the company has repurchased and canceled 2.22 million common shares for $14.5 million at an average price of $6.52 per common share. The company has approximately $6.7 million remaining of the $21 million total common share buyback authorization as approved by the Board of Directors and shareholders as of December 31, 2025. The company holds no treasury stock, common shares are repurchased and simultaneously canceled. Preferred stock redemption. During the second quarter of fiscal 2026, the company also redeemed 70,000 preferred shares at the stated redemption price of $10.70 per share for a total of $750,000. Since inception, the company has redeemed approximately 642,000 shares of preferred stock at the stated redemption price of $10.70 per share for a total of $6.9 million. We have 196,000 preferred shares left to redeem for a total of $2.1 million. At the current rate of redemption of $750,000 a quarter, I maintain our goal to redeem all the remaining preferred shares issued and outstanding on or before December of 2026, if not earlier. The quarterly dividend. On December 19, 2025, the Board declared a quarterly dividend of $0.02 per share to shareholders of record as of December 31, 2025, payable on or about February 14, 2026. This represents the third 10% increase in the company's dividend since the dividend was established in September of 2022. Subsequent dividends will be paid within 45 days of each fiscal quarter end, from time to time, the Board will evaluate our capital allocation strategy, making appropriate adjustments based on the approach most beneficial to all shareholders at that time. Our goal is to continue to return 50% of annual cash from operations to shareholders and putting the other half in the bank. That's all I have today. Thanks, everyone, for your time. At this point, I'll pass the call over to Randy. Randy?

Thanks, John. ReposiTrak had an eventful quarter. Some of that shows in our numbers, but much of what we accomplished was behind the scenes. While we're delivering profitable growth from each of our solutions, we continue to add to the moat around our business, specifically the Traceability business. The ReposiTrak Traceability Network, or RTN, is already the industry leader. The queue to join our network is much larger than our current installed base and each new supplier, distributor retailer adds to the network effect of our RTN solution. It's fair to say, and we've said it before, that Traceability for most suppliers is much more difficult than anyone has imagined. The difficulty affect suppliers and, therefore, ultimately impacts everyone upstream, downstream in the supply chain. It currently takes longer than we'd hoped to work with suppliers to get them up to speed and consistently able to provide the information they need to be able to do Traceability. I'll elaborate on this in just a minute. Remember that no one has ever done Traceability before. It's a new thing. It's a new activity, and it's one that requires complex process changes for everyone involved in the supply chain, end to end. As I mentioned, the primary issue with Traceability continues to be the consistent accuracy of supplier data. The error rate and data we initially received from suppliers, especially small suppliers, is somewhere between 50% and 70%. In case it isn't obvious if a supplier has inaccurate data, that data propagates through the supply chain. The grower's bad data becomes the distributor's bad data, which becomes the wholesaler's bad data, which becomes the retailer's bad data. That bad data becomes even worse if additional errors are introduced on another link in the supply chain, making the information even less reliable, if not completely unusable. So now the question is, how do you fix an error? Since the errors ripple through many, many systems, it's more difficult than you can imagine. Each company will have to manually fix its records, conceivably hundreds or thousands of error fixes every day. This is ultimately the Achilles heel of track and trace bad data. Imagine the challenge this presents for a small family grower, most of whom don't even have an IT department. Now imagine the challenge for a large distributor, taking in thousands of shipments daily each with a high error rate. Now imagine how a large retailer think about this if they need to hire dozens of employees just to trace down all of these different errors. It's just not going to happen. It would be cost prohibitive. Here's what's even stranger. Most people who are trying to think about Traceability have no idea that this error problem even exists. The errors are not obvious and require knowledge and skill to detect much less to correct. For the most part, people who think about Traceability are simply relying on something that's called Electronic Data Interchange or EDI to gather their data and they're making the assumption that the data they're getting from suppliers is valid. Any approach that relies on EDI alone to track data through the system is not detecting or validating for erroneous data. We've invested heavily over the years. And remember, this is not our first rodeo with supplier data, and we know that the data quality is poor at best. But you have to be able to detect the errors to know that. Bad data is the disease that's difficult to detect, but actually is way at the core of Traceability. Our competitors approach to Traceability has to go one of two ways. The first way is to trust the data, believing that EDI gives you accurate data. We've already said that it doesn't. All EDI does is to check the format and structure of data, but does not validate the accuracy. It doesn't even check. EDI is just the envelope. It's sort of like the post office. It only deals with the outside of the envelope, the size? Does it have the right postage? Does it have a

[Operator Instructions] And we'll take a question from Thomas Forte with Maxim Group.

Great. So John and Randy, congrats on the quarter. I have four, but as always, depending on your answers to these, I might have more. Randy, I have one warm-up question and then I have 3 real humdingers. So the boring warm-up question, John, I think you said, or it was Randy, that in fiscal '25, Traceability was only 8% of total revenue. Is there a more recent data point on how much total revenue is coming from Traceability?

Who are you aiming that at? I mean I would say it's between 8% and 10%, but it's hard because there's cross-selling.

Okay. All right. So and then, Randy, I'll take the bait. Can AI improve the accuracy of Traceability data?

Well, the way we use AI and have for a long time, it's really been part of what we do for many years. It absolutely does. The concept of LLMs, however, which is the current range with AI is a bit misleading. In other words, you have to detect what's wrong and how it got wrong to be able to fix it. I didn't -- there's 3 steps. I'm sorry, and let me back up and see if I can make this clearer than I have. Most people who will try and do Traceability will not even see that they have errors. It's not detectable by looking at it. You actually have to have a deep database to check every field in every record and determine whether or not in the context of that record is it a correct reference. So it's a little bit, as I mentioned earlier, it's a little bit like the post office. You could have a note, let's say, you sent a note to me, and that note said Randy, I now believe that the earth is flat, okay. Now you take that little note, you put it in an envelope, you look it, put a stamp on it and take it to the post office. That's like EDI. Here's what the post office does, though. The post office looks at the size of the envelope and says, okay, that's a legal-sized envelope. It has enough postage, it weighs it and checks the postage and then it says it's got a

I appreciate the EDI in the post office comparison. All right. So then this is one of those -- all right. So is there any impact to ReposiTrak from MAHA.

Well, in a way, yes, longer term, especially. Let's talk about what MAHA is. MAHA and organic are really a similar idea. Organic is an idea that lays on top of food safety where people think if they eat organic food, it is healthier for them. MAHA sits on top of all of that and says, in general, you should eat food that is healthy, whatever that would be, Whole Foods, not foods that have been ultra processed without food colorings, et cetera. All of that lays on top of a looming problem, which is -- according to Gallup, there's been a long-term decline in the U.S. in terms of the public's belief in food safety. So almost every year, people are believing less and less about the safety of food. So in a sense, what happens is MAHA, organic, et cetera, are causing people to worry more and more about the safety of what they eat. All of that awareness around safety is good for us because it means that the economic cost, the brand equity cost to a retailer who makes a mistake is tremendous. So MAHA impacts us by virtue of increasing people's awareness of the issue of safety of food. It's really that simple.

Right. So this should be my most related question to that one. So you've talked in the last couple of quarters about Traceability on a buy ingredients basis. So if I go to Stew Leonard's and I buy prepared foods, can you -- any update on thoughts there?

Well, we actually are capable of doing that. In other words, companies can sign up with us and determine, if you will, at a shipment level, at a product level that they have issues, but they can also use our system for specifications around ingredients. So within our system, you could say, wait a minute, if red dye #3 is a problem, let me search all of the items that I sell that have red dye #3 in it. And that's an interesting problem because Traceability, and the reason I'll come back to it in a minute, the FDA has designated certain products like products that contain nut butters, as being on their food traceability list, but you have to think about that for a moment. There's not a retail chain in the country that can tell you the products it has on the shelf that contain a nut butter, have no idea, literally, no idea because retailers don't maintain a list of ingredients, and they just can't track them, strangely enough within our system. We have the capability of doing that. So over time, what we suspect happens is people move from being oriented toward the product. And from the product, they'll drop down to the ingredient. We're fully capable of doing that today.

All right. And then this is one of those questions where I have no idea what your answer is. So these are fun ones. All right. Does food inflation have a direct or indirect impact on your business? And I have 3 specific examples. Cocoa, coffee and beef.

The answer is, indirectly they do. To the extent that we are in a period where increasing costs to the supermarket, the inputs, can't be passed on to the consumer. Inevitably, supermarkets and everybody in that space has a margin squeeze. In which case, every element of cost, potentially including us, is something that they will look at. So inflation without the ability to pass it on is problematic in general and it's certainly something that we think about. We haven't seen anything over the very short term, but that doesn't mean that it couldn't be something that pops itself up in the future.

Excellent. Two more. This one I'll direct towards John. So John, you talked about investment spending, but I'm trying to understand how that showed up in your results because you've talked about how it seems that you reduced the amount of OpEx required. So where does the investment spending, where do I see that in the P&L?

So you would spend more in development, less in sales and marketing, but some of those things cover in both categories. So because we spent less in marketing, but some of those people were utilized in development. You have to look at the totality of the expenses. We can't look at necessarily the line items. So in aggregate, our spending is less. It's just more targeted resource spending, as we said before, as Traceability becomes more top of mind, our laser focus is to spread the word on the marketing side. But obviously, we've done a lot as far as the marketing and the messaging and we've now shifted it towards the development. And you're not going to see it in line -- you're not going to see it in necessarily the line item. You have to look at the totality of expenses.

Are you capitalizing any of those costs?

There's some costs that -- with the patent now, but it's a de minimis number.

Okay. And then last question, unless you answer in a way that inspires me to ask one more. Current thoughts on strategic M&A?

I mean, look, Randy and I see things every month, but we have so much on our plate right now. It's a distraction. Reemphasizing our stack and our code base and Traceability, remember what Randy said, while it may seem like it's 2 years out, at the end of this year, Traceability is going to be right around the corner. We've got plenty on our plate to keep us busy. But of course, if the right opportunity came around, yes, we're acquisitive, but we have plenty on our plate at this moment. Unless Randy, you've got a different opinion.

Yes, John, let me add something to that. As we take a look at the next 12 months, it is extremely likely that there will be, again, a flood of need and interest, et cetera, around Traceability, why? We think it takes a full 2-plus years to get your entire supplier base Traceability ready and capable. We know that because we've been doing it. But as I said, we already have nearly 2 million records and -- as far as I know, we are the only firm that is actually -- can -- you can come look at it, doing end-to-end Traceability. We are tracking products going from a supplier, into a distribution center, into a retail store, and we create all of those records. We're doing it. It's the real deal. It's pretty amazing. We haven't tooted our own horn very much about that, but we will. But here's the issue, as people think about Traceability, what they're going to be realizing very quickly was that they've now used up the runway that the FDA gave people when they gave them 30 months. It's now closer than it was. And by the end of this year, you'll be at what we think is the, my God, you're at a cliff, the 18-month mark. We don't think anybody that has hundreds of suppliers can be ready in 18 months. We think it takes a full 2 years. But people will shorten that and imagine that 18 months is the magic number. So as this year progresses, and I'd guess sometime in the summer or early fall. The world will once again wake up and go, yes, Traceability whoops, we need to get going. So we're really more in the mood of preparing for that than we are thinking about being acquisitive at the current moment.

Thank you. That will conclude the question-and-answer session. I would now like to turn the floor back to Randy Fields for closing remarks.

Okay. Well, we appreciate everybody taking the time this afternoon. Not much more to say. Have a good one. Talk to you soon. Take care.