Dave Mossberg - IR Randy Fields - Chairman and CEO Todd Mitchell - CFO

Good day everyone and welcome to the Park City Group Third Quarter Earnings Call. Today’s call is being recorded. And at this time, I’d like to turn the conference over to Dave Mossberg, Investor Relations. Please go ahead, sir.

Thanks, Laurie. Before we begin, we will be referring to today’s earnings release, which can be downloaded from the Investor Relations section of the Company’s website at parkcitygroup.com. The conference call could contain forward-looking statements about Park City Group within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that are not historical facts. Such forward-looking statements are based upon the current beliefs and expectations of Park City Group’s management and are subject to risks and uncertainties which could cause actual results to differ from forward-looking statements. Such risks are more 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. Park City Group does not assume any obligation to update the information contained on this conference call. Throughout today’s call, we may be referring to both GAAP and non-GAAP financial results, including the terms free cash flow, EBITDA, adjusted EBITDA, net debt, net income and loss and earnings per share, which are non-GAAP terms. We believe these non-GAAP terms are useful financial measure for our Company, primarily because of the significant non-cash charges in our operating statement. There is a reconciliation of non-GAAP results in our earnings release and on the Investor Relations section of our website. Our speakers today will be Randy Fields, Park City Group’s Chairman and CEO; and Todd Mitchell, Park City Group’s CFO. Todd?

Good afternoon. Thank you, Dave. It was another great quarter for us financially, both from a top line and from a bottom line perspective. Before I begin, I want to highlight that my comments on our financial results will be focused on our pro forma results that is as if we had owned ReposiTrak in the comparable period a year ago. This is because we believe this gives a more accurate apples-for-apples view of our underlying performance. Revenue: Total revenues grew 25% in the quarter on a pro forma basis to $3.6 million from $2.9 million a year ago. This was our highest revenue quarter ever and better than internal expectations with growth across both businesses. Our core supply chain business generated double-digit growth and ReposiTrak continues to generate triple-digit growth on a pro forma basis. I think it’s fair to say that we are in a period of fairly dynamic growth. Our year-over-year growth rate has increased every quarter this fiscal year. The number of supply chain customers has grown every quarter this fiscal year. And importantly, we keep adding new hubs and new capabilities to ReposiTrak, every one of which represents a step function upwards in terms of the revenue generating capabilities of that business. Going forward, I think we have an even greater opportunity for revenue growth from layering on our unified application portal and marketplace to both our food safety and our supply chain customer bases. Profitability: We were profitable again. We reported net income of $295,000 in the quarter, up from a loss of $550,000 on a pro forma basis a year ago. In fact, this was the highest quarter of net income ever for the Company, which was due to both, strong revenue growth and lower operating expenses. On the back of fiscal third…

Thank you, Todd; excellent. Okay, I want to apologize in advance because I have lot to say, not much time to say it, and I’ve written it out on the very small part. So, some risk of either speaking too fast, speaking over my words, in which case feel free to ask questions at the end. You can tell from what Todd said that our underlying business is very strong. Food safety continues to be and obvious and key accelerant of our business. And interestingly, we’re going to talk about this a lot, we’re beginning to see us leading to even broader opportunities with our other products and services. Supply chain continues to generate double-digit growth. I apologize sometimes we talk about our supply chain business as if it is our red-headed stepchild, and we love the business, doing very well and continues to put us in this appropriate position going forward. But, the strength of both of these businesses is allowing us to accelerate what we call convergence, which means bringing together ReposiTrak after the acquisition into Park City Group, so that we can create this single integrated opportunity for all of us. At the same time, we’re doing this convergence however, we’re actually expanding our footprint, both on the supply chain side as well as in terms of our food safety offering, more about that in a second. As Todd mentioned and it’s certainly true, we’re beginning to use the infrastructure in lighter touch business model ReposiTrak to more aggressively deploy our supply chain application. We’ve enhanced the ReposiTrak’s infrastructure to clearly think of it as an application portal which hosts both of our food safety and our supply chain applications. And we recently announced that we’re developing a marketplace, we call a ReposiTrak marketplace, which is technically…

Thank you. [Operator Instructions] We do have a question in our queue from Guy Regal from [indiscernible].

I was just curious, can you remind me again what you hope to the end of the year at in terms of the number of hubs that you’ll have?

We really haven’t said. I think, we’ve indicated the following by way of goal. The perfect world for us is one new hub per month because that gives us time to get them going and that sort of thing without running the risk of too much too fast. And I think what I just indicated is, I think you will see our pace, we will see our space increase here shortly. And what I’d like is for the next year, instead of 12 hubs, the goal for the next 12 months might be about 20 hubs. So, the pace should quicken and should continue to quicken thereafter as well.

Okay. And gain, the hubs are for -- are they for just ReposiTrak or are they combination of both?

That’s a really good question. This is the problem of having multiple children because we’re really just thinking of ReposiTrak because we’re continuing add hubs in our supply chain business also. And as these things converge, the distinction between a -- good catch, Guy -- the distinction between a ReposiTrak hub and the supply chain hub and portal hub really won’t make any difference. So, I was really speaking of ReposiTrak hub, but I would like to see over the next 12 months, a goal -- a bit of a stretch of about 20, which would be almost doubling the rate over the last year.

Okay.

But all the three of those businesses should continue to add hubs.

I see, and then as it relates to supply chain, I’ve forgotten it; do you disclose publically how many connections you’ve got and what your goals were there?

No. As I said, now that the businesses are converging, it will certainly become -- we won’t be doing this.

That does conclude our question-and-answer session. At this time, I’ll turn the call back over to speakers for any final or additional comments.

Thank you, everybody; appreciate it, And, you all know, if you have questions or what not, send us an e-mail contact, Todd or Randy, and we’ll get back to you. Thanks.

Everyone that does conclude our conference call for today. Thank you all for your participation.