ReposiTrak (NYSE:TRAK) executives emphasized continued progress toward a predominantly recurring SaaS model and improving profitability as the company reported fiscal second-quarter 2026 results. Management also spent much of the call discussing the operational challenges of food traceability—particularly data accuracy—and the company’s approach, which it is seeking to protect with new patents.
Financial results and operating trends
Chief Financial Officer John Merrill said second fiscal quarter revenue rose 7% year over year to $5.9 million, up from $5.5 million. Total operating expenses declined 2% compared with the prior-year quarter, which Merrill attributed to the company reaching “the point where an incremental revenue does not require significant incremental expenses to support our growth,” even while investing in its ReposiTrak Traceability Network (RTN).
For the first half of fiscal 2026, Merrill reported revenue increased 8% year over year to $11.8 million from $10.9 million. Operating expenses were essentially flat at $8.1 million. Income from operations rose 31% to $3.7 million from $2.8 million, and GAAP net income increased 9% to $3.5 million from $3.2 million. GAAP net income to common shareholders rose 13% to $3.4 million from $3.0 million. Year-to-date EPS was $0.19 basic and $0.18 diluted, compared with $0.17 basic and $0.16 diluted in the prior-year period.
Merrill also noted the company is reaching the end of the benefit period from utilized and expiring net operating losses at the federal and state level and said it is “reasonable to assume a 20% effective tax rate going forward.”
Balance sheet, buybacks, preferred redemption, and dividends
ReposiTrak ended the quarter with total cash of $28.7 million, up slightly from $28.6 million at June 30, and Merrill said the company continues to have zero bank debt.
On capital allocation, Merrill detailed activity across buybacks, preferred redemptions, and dividends:
- Share repurchases: The company repurchased about 80,000 common shares for $1.1 million at an average of $13.75 per share during the quarter. Since inception, it has repurchased and canceled 2.22 million shares for $14.5 million at an average price of $6.52. As of December 31, 2025, approximately $6.7 million remained under the $21 million buyback authorization.
- Preferred redemption: ReposiTrak redeemed 70,000 preferred shares for $750,000 at the stated redemption price of $10.70 per share. Since inception, it has redeemed about 642,000 preferred shares for $6.9 million. Merrill said 196,000 preferred shares remain outstanding, representing $2.1 million to redeem, and he reiterated a goal to redeem all remaining preferred shares on or before December 2026, “if not earlier.”
- Dividend: The board declared a quarterly dividend of $0.02 per share on December 19, 2025, payable on or about February 14, 2026, to shareholders of record as of December 31, 2025. Merrill said this was the third 10% dividend increase since the dividend began in September 2022 and that future dividends will be paid within 45 days of each fiscal quarter end.
Merrill said the company’s stated objective is to return 50% of annual cash from operations to shareholders while placing the other half “in the bank.”
Traceability: data quality challenges and “Touchless Traceability”
Chairman and CEO Randy Fields said the RTN is “already the industry leader” and described a queue to join the network that is “much larger than our current installed base,” citing network effects as additional suppliers, distributors, and retailers join.
However, Fields said traceability onboarding is taking longer than hoped because it can be difficult to help suppliers consistently provide the information needed. He described supplier data accuracy as a central issue, estimating the initial error rate from suppliers—especially smaller suppliers—at “somewhere between 50% and 70%.” Fields argued that inaccuracies propagate through the supply chain, making errors difficult and costly to fix manually across multiple systems.
Fields said many approaches to traceability rely on Electronic Data Interchange (EDI) and assume the data received is valid. He contended EDI checks formatting and structure but not the underlying accuracy of the data. He also said another approach—scanning each case in addition to using electronic data—would be economically impractical.
ReposiTrak’s strategy, according to Fields, is to use artificial intelligence tools to detect errors and automatically correct most of them in near real-time without “bothering the supplier that created the data in the first place.” He said the company has “over 500 error detection algorithms” and is expanding detection parameters over time. Fields positioned this detect-and-correct capability as a cost saver for supply chain participants and as a way to enable compliance with FDA regulations while reducing costs.
Patents, product development, and AI commentary
Merrill said the company recently filed for two patents: one for Touchless Traceability and another for a method to identify and automatically correct errors in integrated customer data. He said ReposiTrak has nine U.S. patents and expects to ultimately secure both patents now in process. Fields said the company needed to begin patent protection before initiating sales of Touchless Traceability, describing this as “a bit of a short-term headwind.”
On broader AI trends, Fields said ReposiTrak’s AI approach does not rely on large language models, and he argued that companies without proprietary data or proprietary process improvements could be at risk as AI advances. He said the AI “craze” could be a modest near-term headwind if it leads some companies to believe they can build solutions internally, but he maintained that, over the long term, AI cannot solve the problems ReposiTrak addresses for customers.
Q&A: traceability mix, MAHA, inflation, investment spending, and M&A
During the question-and-answer session, management was asked about the share of revenue coming from traceability. Merrill said it is “between 8% and 10%,” adding it is difficult to isolate precisely due to cross-selling.
Asked about “MAHA,” Fields said it could help indirectly over time by increasing public attention on food health and safety. He referenced a Gallup-cited decline in public belief in U.S. food safety and said increased awareness raises the economic and brand cost to retailers of food safety mistakes.
Fields also discussed ingredient-level capabilities, saying customers can use the company’s system to search for items containing specific ingredients (he used “red dye number three” as an example). He said retailers generally do not maintain ingredient lists in a way that enables those searches and cited nut butter as an example of a category tied to the FDA’s Food Traceability List.
On food inflation, Fields said the impact is indirect: if supermarkets face rising input costs they cannot pass on, margin pressure can lead them to examine all costs, “potentially including us.” He said the company has not seen near-term effects but acknowledged it could emerge.
Regarding investment spending, Merrill said the effects are not necessarily visible in specific P&L line items because the company has shifted resources (for example, less marketing while using some personnel in development), and investors should evaluate expenses “in the totality.” He added that capitalization related to the new patents is “a de minimis number.”
Finally, on strategic M&A, Merrill said management reviews opportunities but views acquisitions as a distraction given current priorities around its technology stack and traceability preparations. Fields added that, as the FDA traceability deadline approaches, he expects growing urgency across the industry and said the company is focused on preparing for what he described as an impending acceleration in demand.
About ReposiTrak (NYSE:TRAK)
ReposiTrak, trading on the New York Stock Exchange under the symbol TRAK, is a provider of cloud-based supply chain compliance and transparency solutions. The company’s platform enables retailers, suppliers and manufacturers to manage, share and validate product data throughout the supply chain. Through its Software-as-a-Service (SaaS) offering, ReposiTrak helps organizations ensure adherence to regulatory requirements, industry standards and retailer-specific guidelines for food safety, sustainability, labeling and quality assurance.
At the core of ReposiTrak’s offerings is its DataHub, a centralized repository that captures critical information such as product specifications, certifications, catch-weight data, temperature logs and recall notifications.
