Ladies and gentlemen, thank you for standing by. Good day and welcome to the Park City Group First Quarter 2017 Earnings Call. Today’s conference is being recorded. At this time I would like to turn the conference over to Dave Mossberg, Investor Relations. Please go ahead.

Thank you, Paula. 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. I also want to remind everyone that this 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 the 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 in this call. 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 everybody. It was a great quarter for us. Not only were we able to exceed our internal targets for both revenue and profitability, both came in at record highs for the company. We believe this clearly demonstrates both, acceleration in the business and the operating leverage inherent in our business model. Revenue, fiscal first quarter revenues grew 36% to $4.2 million from $3.1 million a year ago. This was the highest quarterly revenue ever and the highest quarterly growth rate ever. Record top-line results were driven by progressively stronger momentum at ReposiTrak. We believe we have passed an inflexion point and it is becoming the increasingly dominant food safety platform. Given the momentum that we saw in fiscal first quarter and continue to see, we’re increasingly confident that we will not only meet but likely exceed the goals we articulated in our fiscal 2016 earnings call with regards to growth in both connections and total revenue. Profitability, fiscal first quarter net income was $614,000 this was 15% of total revenue in the quarter. And I would note, nearly as high as the company’s net income for all of fiscal 2016. I also think it’s worth pointing out that when compared to a loss of $407,000 in the first quarter of fiscal ‘16, we turned $1.1 million in incremental revenue into a $1 million plus swing in net income. Some of this clearly reflects our ability to leverage investments and infrastructure which we were just completing a year ago. And some of it is an indication of the relatively high contribution margin of our newer growth businesses. Looking out over the remainder of fiscal ‘17, we continue to expect to see profitability scale materially. Expenses, total operating expenses were $3.5 million in the fiscal first quarter, flat with a…

I don’t know that mine are more exciting, Todd, but thank you. Okay, so, first let’s talk about this quarter’s result, yes, it was a great quarter and yes it’s going to be a great year. The truth is; all of us should be thanking the team because they executed literally beautifully. We continue to see the level of our customers’ results that are focused on taking care of them are in fact now paying off for us, they’ve done a wonderful job. So thank you to the whole team. If you remember, we said at the end of fiscal 2016, the growth would accelerate significantly in fiscal ‘17 and it has. And we also said profitability would scale materially and it did. So, our strong first quarter results really were driven first and foremost by continued very strong momentum for ReposiTrak. ReposiTrak’s contribution to total revenue in the quarter was up several hundred percent from a year ago. This momentum was underpinned by several high-profile wins in the quarter, some of which included the best known names in the industry from retail or a wholesale perspective. This brought our total number of ReposiTrak hubs to about 31 from 15 about a year ago, although please note that going forward as we go deeper and deeper into the supply chain that we will be adding more and more hubs, many of which will be smaller. So, it means that the way to calculate how we’re doing based on hubs will become less meaningful going forward. We obviously feel really good about the prospects that ReposiTrak has looking out. We noted in our last call, ReposiTrak has passed that inflexion point with regard to both market acceptance and the industry standard. And frankly its attractiveness to users of compliance based products.…

Paula, can you open the floor for questions please.

[Operator Instructions]. We’ll take our first question from Andrew Gundlach with First Eagle.

Good morning, sorry, good afternoon Randy and team. Thanks for the upbeat comments. The quick question I have is with respect to the revenues and the quarter and the accounts receivables. Can you just explain when you see that coming in as cash?

Yes, it is fair to say that the more business you do as we are now, with retailers notice we have made it a shift from wholesalers to retailers. Retailers little bit slower pace so we’re going to see a build-up in receivables but that should - we would argue peak along with the growth and revenues that we’re getting. And so by the end of the year it will kind of unwind itself and come back to cash.

Got it. So, do you see a - the bigger picture question is, as your business ramps, do you see yourselves needing to invest a larger historical percentage in receivables to match the growth or not?

I think at this point it’s fair to say that it’s more likely to be kind of one time and by the end of this year as we make a shift from wholesalers to retailers is the dominant growth engine if you will. It’s pretty much a one-time shift. So we don’t see that, we don’t see a need to keep investing in it.

Okay, great. Well, congratulations on the progress.

Thank you, thanks Andrew.

Thanks.

Moving on. Next we’ll go to Will Hamilton with Manatuck Hill Partners.

Hi, good afternoon guys. I don’t know if I missed this, but did you say how many connections you added for ReposiTrak?

No; but its many thousands.

Many thousands.

Will, that’s one of those numbers that’s somewhere between, I’m only kidding. No, we deliberately actually didn’t say.

So, okay, you’re not going to continue providing that?

Well, we probably just won’t do it quarterly. But what we did say was for the full year, if you remember, we were 10, we said we’d roughly double so that by the end of the fiscal year we would be at 20. And what Todd indicated was that we felt that that was now a conservative number. The reason for not doing it is, because we’re not a quarterly business. And I really don’t want to take numbers for one quarter and then the next quarter is higher or lower, it just creates a poor metric we think. So, yes, we will be reporting on it but we’re well on our way to making sure that we’re going to be north of adding 10,000 connections for the year.

Okay, yes, I understand the quarterly guidance it’s just good to see your maybe range?

You can probably assume from our not mentioning it that it was higher than we expected. And we just don’t want to reset expectations yet.

Okay.

That’s a reasonable interpretation of our not speaking to it.

Right; and what about in terms of breaking down the revenue between ReposiTrak and Legacy [ph] business?

Yes, we’re not going to be doing that, there is a whole bunch of customer driven reasons for not doing it. So, we’re really just reporting from this point forward, especially since we’re passed that pro forma thing from last year of just reporting revenue. We’ll try and give some indications as to what it looks like. But we will not be breaking it out.

Will it be in the K possibly?

No.

No, so not at all?

No.

Okay. All right. Last question just as it relates to gross margins. Year-over-year up nicely, sequentially down just a little bit. Despite the uptick in - is that mix between supply chain and ReposiTrak I’m just wondering a little bit, or some investment in on-boarding?

I think you won’t like the answer to this. It’s not even a number that internally we track. And the reason is, it’s an artifact of the accounting under GAAP is the best way to put it. Our business model is - we’re a largely fixed cost business with a variable cost associated with sales and sales commissions. That’s how we think about it. So, what happens from an accounting perspective is you’re really apportioning cost against things like costs of goods sold and that, it’s just - I wish GAAP didn’t work that way, I’m not sure that it’s helpful. So, I think you should, if I, were an outsider looking in, we always try and say here is how management sees it. We really look at our expense line because it’s so largely a fixed number. And as I think Todd alluded to, that number through the year, although it was only up, I think 1% over last year, it will climb during the year in dollars. But the growth rate of the top-line is such that even though it will grow in dollars, it will fall as a percentage of sales. It’s just a lousy metric and it has nothing to do with us, it’s really just our GAAP makes you do it.

Okay. Last question from me, you announced ever since of course it’s a nice win, I mean, is that a sign at all that you’re starting to get the attention of some of these larger grocers versus in the past you were tackling some of the wholesalers before and well that’s still important, and we could expect some other large grocers to come on-board in the next six or nine months?

Well, let me put out a fact that we find internally very interesting. Because we are paid by the connection, and we’re paid roughly the same per connection, the truth is, a large retailer might have marginally more connections than a mid-sized retailer but it’s not huge. So let me give you an example. A large retailer might have 1,500 maybe 2,000 connections, suppliers that, does business with but a medium-sized retailer might have 80% or 85% of that number of connections. So going forward the difference between a large retailer and a mid-sized retailer in terms of economic value to us won’t be huge. It’s pretty interesting. And so, it’s not, but here is what is important about someone like let’s say in Albertsons. There are companies in the industry that you’d have to be an insider to go - they are thought leaders, they are more important than their size because people pay attention to what they do. So, we’ve been very successful with what I call thought leaders in the industry. We remain very close to the industry and the industry problems, so although it’s a great feather in our cap to get someone like let’s say an Albertsons. Economically the difference between Albertsons and a mid-sized retailer is not enormous. So from a shareholder perspective, it’s less important than it would appear. Is that helpful? And I know that you’re second last question, do you have a third last question?

Yes, one more. Because I don’t want to get too love to ReposiTrak, I want to give a little bit of love to supply chain here. Just as you mentioned, they’re accelerating growth there. Are we talking mid-teens type growth and if you’d just elaborate a little bit more of what you’re seeing in terms of the catalyst behind that, what’s driving the re-acceleration there?

Well, the largest driver as I mentioned is two of our largest accounts are going to grow at nearly 50% annualized rate this year. So, even very big accounts, when you think of this as relatively fully deployed, we’re finding more and more opportunities. So, I think, I’m not sure how to say this, I feel badly that our supply chain business is sort of red-headed stepchild. And it’s not fair and it’s not reasonable and etcetera. It is now going to get tied more closely to the rest of our activities including ReposiTrak. And that over time, I think the two growth rates will converge. So it will speed up and you can’t grow a company like ReposiTrak as we are now in the hundreds of percent per year. That will slow a bit in the out-years. But it perfectly clear to me that supply chain is going to pick it up. So, it’s doing wonderfully. We continue to execute honestly, brilliantly, brilliantly. We’re really producing some tremendous results for our customers. And that’s what enables us to continue to expand our footprint within even our largest accounts. So, again, I’m proud of the team, they’ve done a hell of a job. And going forward I think we’ll get more out of the supply chain business. Okay, let’s go on.

[Operator Instructions]. Moving on, we’ll go to Walter Schenker with MAZ Partners.

Thank you. Randy, even you never suggested that you would be the only person in food safety but expected to be multiple competitors. Did you just give us some sense as you accelerate the growth and you pick-up some big people such as Albertsons, sort of how they on a competitive basis made a decision whether it was - whether there were two or three people with competing systems, it doesn’t have to be - you don’t have to name which accounts it is, but just sort of better sense on how your customers are making their decision?

Yes, that’s interesting, that’s a terrific question. Let me tell you what I know and this is completely full disclosure. We have been told by one, two, three, four of our largest customers, not in terms of revenue to us, but their actual scale in the marketplace. So four of our largest customers have all said essentially the same thing, which is they examined every way they could think of to do what we do and they all came back and said that we were in a league all by ourselves in terms of both capability and market reputation. I’m kind of blown away by, you love it when your team executes you love it when they take care of your customers. But aren’t customers really, really like - I wish I could I’ve got an e-mail from one of our customers recently. And they had given a presentation on our behalf at a food safety show about ReposiTrak. And now I’m going to, I can’t remember direct quote but I’m going to get as close as I can. I simply sent this man an e-mail and said “Hi, thank you very much for speaking on our behalf” and he said “Randy, you should be extraordinarily proud of the team you have surrounded yourself with. They are absolutely extraordinary like nothing I have ever seen before”. I was just blown away by. We hear that all the time. Our people are very good, what we do is very good and I know it’s upsetting, I can’t give you better information but I can just tell you, the biggest guys in the industry, when they check us out, always come back with wow. You guys understate what you do. I’ve heard that repeatedly too. So, we stay close to the industry.…

And therefore, as you describe it, it’s based on capability and service, no one wants to pay more and the monthly payment is fairly low, there is no reason to believe at least for the foreseeable future you will face margin pressure from competitor pricing?

No, definitely not. We priced - it is fair to say we are priced very low, very inexpensive. And I think I said that already three times in my presentation this afternoon. Because we understand this industry, we almost have a pack, it’s not an explicit pack, it’s an understanding pack that says this is a low-margin industry, it needs not just an effective solution, it needs a cost effective solution, emphasis on cost. So, we do this at very low rates. And I would tell you Walter, we have many, in many cases just had to push back against the idea of, well, you could charge more than that. We actually have some people that are incredulous in how little we charge for what we do and what we charge, it’s a great value. But the goal really is to avoid the industry having a point of view about it that they’re expensive, they’re good that they’re expensive. That’s a killer. We want people to say they’re very fair in what they charge and they’re extraordinarily effective.

Good. Okay. Thank you, Randy.

You bet, thanks Walter.

Moving on, we’ll go to John Evans with SG Capital.

Can you just talk a little bit about the sequential increase in G&A and just kind of how you guys think about the G&A line as you go forward?

Yes. Typically we level up sort of with our employees in the first quarter, and it can be a high OpEx quarter for us. I think and as I said there were some one-time items there, there was some ketch-up and travel expenses. I think going forward, G&A will probably be flat or it could even be down, I don’t think overall, operating expenses will be down. But I think its component will become a smaller component of the overall mix in the coming quarters.

So, when you say flat to down, you’re talking like if I took your last year’s annual numbers, it could be flat to down G&A total dollars, is that what you mean?

I was more thinking of flat to down sequentially over the coming quarters versus the first quarter yes.

Okay, got it. And then, the other question is, you talked about a $5 million revenue quarter this quarter. Can you just help us think about the seasonality, is that kind of the expectation for your fourth quarter or because you do have some seasonality in the business, correct?

No, actually what we said was sometime during fiscal ‘17, which ends in June, we would have a - really have two things we have left to do to kind of keep our goals to be gear intact. One; is to have a $5 million quarter and the other is to have $1 million net income quarter. So, we haven’t said which quarter that is. And there is some seasonality in the business so, we’re not terribly sequential if you go back and look at history, you’ll see we’re not terribly sequential. There is seasonality and that’s because retailers of course have a high degree of seasonality in their business and therefore they tend not to start projects at certain times of the year. So, don’t look for us to be sequential yet. And in a year or two we’ll be more sequential. But sometime this year we’re going to have a $5 million quarter and we will have $1 million net income quarter sometime this year also.

And then just a last follow-up is, I assume, and maybe this is a wrong assumption but the timing of the Albertsons’ announcement that you have. Did you receive any revenues in the quarter from Albertsons’ or do you want to disclose that?

We tend not to talk about that. Let’s talk a little bit though, you give me a good platform and hate to hitch-hike on it but I will. A number of our customers do not make announcements about working with us. And it’s not about us they’re just some that don’t see that they should. We encourage people to do it because it helps them with the recruitment into their supply chain of their suppliers. So, making the statement about food safety to your suppliers, if you’re a retailer or wholesaler, we think it’s a very important thing to do. So, it is fair to say we also will add hubs that will not show up in press releases. And that’s maybe I don’t know, 25% or 30% of them just never show up because they don’t want to do press releases. Nothing personal is not us they just have a general position about doing that.

Great. Thanks for the information.

You bet, thank you.

Moving on, we’ll go to Steve Bell, private investor.

Randy, Todd, congratulations on a great quarter.

Thank you, Steve.

Randy, you mentioned new apps and features that you’ve got coming here. Can you give us a little more color on what those might be and in which ReposiTrak or the legacy side?

Yes. All over, we’ve got - it's interesting when you have a vision of something, my life experience is the vision tends to be a little fuzzy. It’s not quite like follow the dots, it’s better than that but it’s not fully filled in. And we are, let me give you an example of that. Three years ago, I never would have imagined that we would end up getting into the relationship that we’re now in with SQF. There is a perfect example of something that now fits into the fold. And it wasn’t part of the vision, so my apologies that I’m being opaque here as I try not to be. But Steve it’s all over. We’ve got some new things coming in food safety, we have some things that are, we have two more things that are coming that I think are, have the potential to be larger than our food safety business ultimately, we’re just not talking about it yet. Here is a little one, just an example, this is tiny but important. We spend, I don’t know, I hope I’ve mentioned our customers 10 times so far, here comes number 11. Our customers really help us and they help us not just because their references for us and they talk about us, they help us because they give us new ideas. So we had two of our top people go visit one of our largest customers that’s been around in ReposiTrak for three years now, two and half, three years, one of our first. And they marched us around their warehouse, one of their warehouses. And while my guys are marching around, they see some dude with a baseball cap and a funny uniform walking around and roughly 50-100 feet he stops, bends over, looking at something, takes a picture. So they said, what the hell is that? Actually they didn’t say that. Randy would have said that. They were probably nicer. They probably said something like I wonder what that gentleman is doing. And what we found was that this guy is a full-time individual who goes around and inspects rodent traps and insect traps inside of food warehouse, makes perfect sense, perfect sense. So we figured out how to automate that, how do we take this company seriously, every year uses 140,000 pieces of paper, 140,000 pieces of paper tracking and they do this, he opens up these traps. And if there is a little rodent in there, remember Randy is an animal welfare guy. So, if he sees some poor little rodent in there, he takes a mug-shot of this rodent that has to be put on file along with some piece of paper. We’re going to end all of that.

So, that’s just one company and 140,000 pieces of paper?

One company and 140,000 pieces of paper.

And you would basically eliminate it or make it go?

All gone. And there are two full-time people doing this, we think that there is the potential for productivity improvement there. So, when we go out and we visit with customers and we say, where does it hurt, sometimes the customer doesn’t even know where they’re hurt because they’re still used to doing what they do today. I assure you they never would have thought of well, maybe we can automate this process. But we came back from that visit with four or five ideas around safety that will significantly improve the productivity of our customer. Obviously we will make money doing that. They’ll get a tremendous payback and it can be sold to our other customers. So, our customers help us deepen the offerings. We have a couple of pilots going right now and some new activities that I’m not going to talk about. But we think very significant upside, I think.

Underlying on the pilots would you guess six months, 12 months?

At least a year, these are really interesting big ideas, these are non-trivial, this is not like a new little app, this is like; this is the big idea.

Okay. And then I guess my last question would be you mentioned that in the legacy side of the business that is growing as well. I’m wondering if you could give us some color as to perhaps what categories, salty, dairy, produce, but what categories are showing the most activity currently?

It’s everything. In fact mostly what we’re seeing is people are coming to us with why can’t we do this category? One of our customers has come to us and we’re going to do beach-wear. So, there is no end to what we’re doing on the supply-chain side. We just need somebody that’s willing to experiment with us, give us a chance to execute and see how we do. But our hubs are increasingly innovative. They’re increasingly willing to examine pretty fundamental business propositions about how they do business today. If we’re right Steve, if we’re right, five years from now, retailers will be doing business very differently than they have been doing and I think we’re going to be right in the middle of that. Deliberately I’m doing this.

That’s fine. I expect that from you. The last question I would have as far as, I know I mentioned this on last call. But possible new verticals we’ve certainly talked about pharmacy before, you certainly mentioned transportation last quarter. Where might things in that general area be as far as new verticals?

Well, transportation is going to happen because retailers and wholesalers will have to track stuff around their drayage. So, that just is going to happen. That is really not so much fee.

Okay.

Yes, that won’t so much be a new vertical for us, that’s an extension of what we’re doing. I’ve already mentioned that I continue to be disappointed in Pharma, but we’re working really hard on some interesting stuff in food service. And we’ll see we’re yet to land a big one. But it’s not to say we’re not trying. But food service has some pretty interesting potential.

Well, gentlemen. Thank you. Great call. And certainly great earnings.

Thank you, Steve.

And that will conclude our and-answer session. I’d like to turn it back to our presenters for any additional or closing comments.

Thank you all for listening. And we’re available if anybody has any follow-up questions.