Greetings, and welcome to Park City Group Fiscal Fourth Quarter and Full Year 2021 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions]. As a reminder, this conference is being recorded. I'd now like to turn the conference over to your host, Rob Fink.

Thank you, operator, and good afternoon, everyone. Thank you for joining us today for Park City Group's fiscal fourth quarter and full year earnings conference 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 Reforms Act of 1995. Forward-looking statements are statements that are not subject to historical facts. 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 Website at parkcitygroup.com to access this press release. With all that said, I'd now like to turn the call over to John Merrill. John, the call is yours.

Thanks, Rob, and good afternoon, everyone. We continue to execute on our stated strategy, delivering another profitable quarter and year of growth. We've established a profit-oriented business model with significant recurring revenue, low fixed costs, and a growing operating margin. Our business is now easy to model and on an annual basis, we have significant confidence and consistent growth. Each incremental dollar from here largely falls to the bottom line, meaning our profitability will grow substantially faster than our revenue as it did in the fourth fiscal quarter and all of last year. This yields a strong free cash flow. Highlights of the fiscal year ended June 30 are as follows. Recurring revenue for our SaaS business, which includes compliance and supply chain, was up 11% to $17.7 million. Recurring revenue as a percentage of total revenue increased from 80% to 84%. Our annual recurring revenue run rate or ARR as of June 30, 2021 was $18.4 million at baseline of recurring revenue for fiscal 2022. MarketPlace revenue increased 11% to $3.2 million, with across the board growth, total revenue increased 5% to $21 million. SG&A expenses decreased 5% against the 5% revenue growth. Net income increased 158% to more than $4.1 million. Cash from operations grew to $5.4 million, up 29%. And we ended the year with $24 million in cash, or approximately a $1.23 per share. We have successfully built a scalable, profitable and growing business made up of two components: 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 than our top line. Our MarketPlace offering has matured and its value to our customers has been proven, albeit with a significantly less contribution margin. In order to…

Thanks John. So to sum up the year, we grew our recurring revenue by 11%. We more than tripled our net income to common shareholders. We generated more than $5 million of cash and we ended the year with more than $24 million of cash. Our annualized recurring revenue run rate at the end of the fiscal year was $18.4 million, which more than covers our cash SaaS expenses of $12 million. And it should be noted that we achieved all of this during the most significant disruption of our lifetime at global pandemic. The results again, demonstrate the progress we've made in building the predictable earnings model of the company. Our model, we believe is the definition of sustained profitability and cash flow. There is no doubt that the pandemic is continuing to impact our business. Our customers are once again battling supply chain issues and shortages, and now they have a new challenge to face. In the last call we mentioned, the proposed FDA food traceability requirement of the Food Safety Modernization Act or FSMA. This is a new and frankly burdensome regulation for our customers. This new rule is proposed with aggressive deadlines and aggressive phase in period, and very few exceptions. In short, the proposed rule, imposes new requirements on those who manufacture, process, pack or hold foods on the food traceability list and requiring them to create and to store literally mountains of records. The effect of the rule is to make compliance using paper-based systems nearly impossible and simultaneously massively increased requirements for data retention and data exchange, think literally tens of billions of new records our core competency. At the outset rule tool for us it's called, will only relate to certain high risk products in 15 categories, things like soft cheeses, produce…

Thank you. We will now be conducting a question-and-answer session. [Operator instructions] Our first question is from Victoria James with DA Davidson. Please proceed.

Great. Hi, it's Tom Forte, also at Davidson. So Randy and John, well, the first question I have for you is you sort of talked about this Randy in your opening remarks, but can you give us a sense of the current state of distraction for your core customer, the food service retailer?

Thank you, Victoria. The - sorry, Tom, I couldn't resist. The obvious problem that you're reading about, everyone is seeing in supply chain is a distraction. There's no doubt about it. Costco now is limiting toilet paper. So there is a reality that our customers have to take care of their customers first and themselves second. So the question is, how long will this persist? This is certainly not a new normal as in this last years, but I would imagine that frankly until spring or so, their distraction should continue. We've baked that into our view of the year. At the same time, the FDA concern with traceability is moving along. In fact, reasonably speaking, it's probably moved as far as it has because people are distracted. And when this set of regulations was actually proposed last year in 2020, I suspect the industry distraction with shortages et cetera kept the commentary to the FDA at very low levels. So it's on its way, it's going to happen. So people will just have to find the bandwidth to focus on it. So we've baked that into our forecast, but clearly the supply chain problems you're reading about are real. We see them everywhere.

Excellent. All right. So I have a couple of more questions, Randy, right? So the next one is, I think it's interesting that you're going to pivot MarketPlace to more of a recurring revenue type model. Can we then assume that any new product introductions in the future will also have an emphasis on the current revenue?

Absolutely. I think really, there's two or three issues to think about. We're not for this issue of track and trace, which is going to be enormous. It's not just enormous in terms of opportunity, but the changes that it will create in the supply chain are unlike anything we have ever seen. We do not believe that the industry is ready for it. We believe that the perturbations will be large and that the scramble over time to be compliant, do the right thing, et cetera is going to be a real challenge for a whole industry, the largest industry in the world. So given that, I think our reality is that we just cannot focus on all of the things that we are doing. So we took something that has great potential MarketPlace and we have to find another way to do it for the next period of time, maybe forever that requires less focus on our part is a little bit easier to execute. Simultaneously, we have a product that we've successfully sold and implemented in the past that actually quite a good product. And if we had infinite resource from a human perspective, it's not a cost thing, it's just the human part of it. We'd probably pursue it. But for now, we're just going to walk away. And you're exactly right, we're in the SaaS business, so going forward, I think you'll see things that we do have that SaaS component to really enable us to keep one simple business model in mind.

Great. All right. So two more, Randy. So I'll ask one, I guess, and then I'll ask the other one. So you mentioned Costco, and if you look at Costco's last three quarters, they've raised their expectations as far as the implications of inflation on their results. So how do you think about inflation affecting food retailers? And then how far therefore wouldn't affect Park City Group?

Yeah, inflation I hesitate to contradict experts like Chairman Powell, but it ain't going away. It's now here, it's now been embedded, it's – and the future look because of the cost pressures are also there. I think Powell may have been thinking about the monetary side of inflation. Well, this is going to be cost push. So I saw a recent example where a year ago, the cost of moving a container from Asia to, let's say, New York pick a number was like $2,000 and that same container today is $16,000. There's a bit of inflation in that. That means that everything that's inside that container is going to have to absorb that very substantial, incremental cost. So the fact is transportation costs are going up. You can call it shortages doesn't matter. So food is transportation intensive obviously. Those costs as they work the way - continue to work their way through the system are going to have to get reflected. There's not much room in the food business to absorb cost increases. It's a low-margin business end-to-end. So the truth is, as you watch the inputs go up in price, you can expect consumer prices to tag along with it. The implications for us are really pretty much neutral. The reality is inflation is generally not a strong negative in the food industry. They're fast turn items. So you have a chance to stock up at today's prices, sell them soon at tomorrow's prices. So it tends to help food retailers. I wouldn't want to be in the business of having slow-moving products, but for the most part, this is a fast-moving business. So it'll generally be good for our customers, things that are good for our customers therefore tend to be very good for us also.

Wonderful. All right. So last one and I can't think of Randy the perfect way to ask this question. So I'll ask it imperfectly. So I apologize. So one of the things that your company has done so well is enable your core customer to better compete against Amazon. So when your core customer, I guess, is less afraid of Amazon is that a net negative for you? How should we think about the fear of Amazon and how well it's motivating your core customer right now to more warmly embraced technology and if that's -- if they're less afraid of Amazon, is that a problem?

Well, I'm not sure that it's any longer a fear of Amazon that began to recede really several years ago. The fear in the industry was, is on online-ness going to be the way that groceries are done. In other words, take Amazon out of the equation. It was how much online business are we going to have to do? How do we do that? And now increasingly how do we do it and not have huge margin contraction, which in the 1% business you can ill afford. Now, mercifully what's happened is as much of the move to online-ness was driven by the obvious pandemic, and that's going to recede a bit. So I suspect that we're going to see the fear of online, this meaning it's going to take away from the core business for retailers abait. I think they're going to learn to make adjustments in the online world and frankly, that creates what's called Omni channel, which is really good for us. We're -- a number of our customers Omnichannel, meaning that they've got inventory issues that they have to manage on both the online side to their business in store. There's a lot of complexity with that and we help them with that complexity. So I'm not sure that there's any real impact and as I say, I don't think it's really so much Amazon-driven as it is. Is the world going to suddenly shift completely to online and how do we compete? I'm sure you saw it, but now Amazon is introducing delivery charges to whole foods. So much of what Amazon thought that it could do, or we imagined thought were not psychic, but so much of what we thought and feared from Amazon as an industry, it turns out there's no magicians there that the costs or the costs, they don't have distribution advantages, etcetera and now they're finding obviously that delivering whole foods multiple times per week, two people included in Prime, doesn't out economically. So I think that the Amazon threat per se is less important. Our customers are less fearful, less fear is actually probably good for us on balance.

Excellent. Randy and John, thank you for taking our questions.

Thanks, Tom.

Thank you. Ladies and gentlemen, there are no further questions at this time. I'd like to turn the call back to Randy Fields for any closing remarks.

No, I really don't have anybody to call on for questions. So we'll wrap it up and thanks everyone for taking your time this afternoon. Take care. Bye-Bye.

This concludes today's conference. You may disconnect your lines at this time. Thank you very much for your participation and have a great day.