Greetings, and welcome to the Park City Group Fiscal Third Quarter 2021 Earnings Call. All participants will be in listen-only mode [Operator Instructions]. Please note this event is being recorded. It is now my pleasure to introduce your host, Jeff Stanlis with FNK IR. Mr. Stanlis, you may begin.

Thank you, operator, and good afternoon, everyone. Thank you for joining us today for Park City Group's fiscal third quarter earnings call. Hosting the call today are Randy Fields, Park City Group's CEO and Chairman; and John Merrill, Park City Group's CFO. Before we begin, I would like to remind everyone that this 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 subject to historical fact. Such forward-looking statements are based on current beliefs and expectations. Park City Group management are subject to risks and uncertainties, which could cause actual results to differ materially from those forward looking statements. 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. Park City Group 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 over-viewing the financial results that we will be discussed on today's call. Investors can visit the Investor Relations section of the company's Web site at parkcitygroup.com to access this press release. With that said, I'd now like to turn the call over to John Merrill. John, the call is yours.

Thanks, Jeff and good afternoon, everyone. Q3 was another strong quarter for the company. We continued our focus on growing our recurring revenue, expanded our product offerings, delivered solid profitability and drove cash. Highlights for the quarter ended March 31 are as follows. Recurring revenue for our SaaS business, which includes compliance and supply chain, was up 13% to $4.57 million. Marketplace revenue grew 225% to 1.45 million. With across the board growth revenue increased 30% to $6.02 million. SG&A expenses increased 11% against the 30% revenue growth. Net income increased 184%. Year-to-date, cash from operations surpassed $3.35 million. And our balance sheet remains strong with $23.2 million or approximately $1.90 per share in cash. The bottom line is we have built a scalable, profitable and growing business made up of two components: a recurring SaaS business and a transactional marketplace business. We continue to drive both components with a modest SG&A cost structure, which enables us to grow our bottom line faster on our top line. After two years of transitioning from significant lumpy one time revenue in our mix, our software business is effectively all recurring. Simply put, it is comprised of various food safety, compliance and supply chain modules sold on a monthly subscription basis. While we solve complex business problems, our business is relatively straightforward. Let me take a minute to add some clarity on how management views the business and perhaps help you develop a line of sight on how we may look going forward. With our third quarter fiscal 2021 results reflecting $4.5 million in recurring revenue, we internally assign that run rate as our base in the software business out for the next four quarters. Therefore, our next 12 months of base recurring revenue is $18 million assuming no additional growth. because we…

Thanks, John. To repeat, remember that our plan from a couple of years ago included the following: reduce onetime revenue in our software business; drive profitability, GAAP profit, not imaginary non-GAAP profits; and grow cash. So here we are. Virtually no onetime revenue in our software business, millions in onetime revenue replaced with recurring revenue and much more cash. The result is improved visibility as well as strong GAAP profitability and cash flow. We've now reached sufficient scale with a very modest fixed cost base that clearly positions us for sustainable and growing profitability. You saw that this quarter as our net income more than doubled, in fact, nearly tripled on the 30% revenue growth. Now you know our focus, profitability and cash generation. We're an earnings company today. Once again, let me remind you, we're not a quarterly company. Our trends will be growth in annual revenue that we can be proud of and simultaneously much faster growth of earnings and cash flow. The pandemic continues to impact our business, but perhaps not in the way you might think. While the sales cycle for our compliance and supply chain solutions has been elongated, this has been offset by urgent demand from our marketplace offering as customers struggle to find hard-to-find products. And while customers are putting out fires, which is the reason for the elongated sales cycle, they are certainly well aware of the sourcing and supply chain challenges that impacted their business over the last year or so. And this is driving increased interest in our SaaS offerings, including our new out-of-stock solution. They may have to extinguish fires but they now know more than ever that they do, in fact, actually need us and our solutions. We've added some exciting new modules of functionality. This is the…

[Operator Instructions] The first question comes from Tom Forte with D.A. Davidson.

So Randy and John, I have three questions, one at a time. So the first question I have is you talked about still facing an elongated sales cycle. So I wanted to know if there's a difference as far as the current state of your customer distraction in US markets that have reopened faster, such as Florida and Texas versus the rest of the US?

Well, that's an interesting question. And what we're seeing so far is that the industry is just waking up. In other words, without any geographical limitations, we are seeing more interest, more conversations. It's not fair to say things are back to normal, whatever that is from 18 months ago. But it is fair to say that it's easier to get to people, we're more deeply engaged, more projects are looking like they're getting scheduled and now it's showing up in our revenues. So I don't think we can say with any certitude that it's a function of the states that are opening up so much as remember, supermarkets have been open and doing incredible business really for the last period of time during COVID. So it's just that they were distracted trying to keep product on the shelf. Second question…

My second question. So I wanted to talk about your build versus buy strategy as it pertains to You have products and services you're offering and potential M&A, including geographic expansion.

As a rule, we prefer to build things because we have a proprietary development environment and a fabulous team of people, world class, that have been with us for many, many years. So it's pretty easy for us to add to our existing platform additional functionality. So overall, we're inclined to do it. However, we are -- and our cash position allows us to be interested in M&A activity. And we do look at those things that are presented to us. And the most interesting opportunities are companies that are likely in a different industry, not retail food than we are in, so we could take our platform with people who are experienced into other vertical markets. So absolutely, we do look at M&A, but there's nothing that is hot at the moment.

Third and final question, Randy. So when I think about your now steady revenue and your cash flow generation, I'm curious what your thoughts are on potentially considering a private equity sell -- selling to a private equity firm?

I think it's fair to say and for reasons we're not sure of, we've had a number of inquiries from interested parties in the last few months. We have an obligation to examine those all seriously. And obviously, if there's ever a need for us to make a regulatory disclosure, because of the status of a possible transaction, we certainly will. We think the stock is attractive. That's why we're expanding our buyback. So it's probably not terribly surprising that others are finding us attractive at the moment. So I don't have any news per se. But yes, I think it's fair to say we've attracted a reasonable amount of interest at this stage.

This concludes our question-and-answer session. I would like to turn the conference back over to Randy Fields for any closing remarks.

Well, we appreciate everybody taking the time this afternoon. We've worked hard to create a company that is, I think, easier to understand and certainly easier to forecast. From where we are, things feel very, very good. We like the fact that we've created a structurally profitable business given our relatively small size. We've been very successful with our customer set and feel that the next several years, we're going to grow into the kind of company from a size perspective that all of us would like to have. So again, we're ready anytime to answer questions. And we appreciate you taking the time this afternoon. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.