Greetings, and welcome to the Park City Group Fiscal Third Quarter 2022 Earnings Conference 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. It is now my pleasure to introduce your host, Jeff Stanlis of FNK IR. Thank you, 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 Chairman and CEO; and John Merrill, Park City Group's CFO. Before we begin, I would like to remind everyone that the 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 facts. Such forward-looking statements are based upon current beliefs and expectations. Park City Group management are subject to risks and uncertainties, which could cause actual results to differ 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 discuss 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 would now like to turn the call over to John Merrill. John, the call is yours.

Thanks, Jeff, and good afternoon, everyone. Our transition to a SaaS company is complete. 100% of our revenue is recurring. Our strategy is very simple, grow recurring revenue, control costs through a combination of increased productivity and cost management, increased net income, accelerate EPS, buy back shares and drive cash. Recurring revenue grew 7% year-over-year and 8% year-to-date. We ended the quarter with an exit rate of recurring revenue of $18.6 million. What does that mean? That means signed contracts in hand at March 31, 2022, that are billing monthly multiplied times 12, will generate $18.6 million of recurring revenue in the subsequent 12 months if we just stand still. Again, our revenue is 100% recurring today. To put that in perspective, last year, recurring revenue was 71%. This also included over $4 million in onetime revenue like marketplace and recurring revenue products and services that had little upside or very low margin. We've eliminated all this non-core non-recurring revenue. By controlling costs and increasing productivity, we have reduced our overall annual cash spend to under $12 million. What do I mean by productivity? We have eliminated using outside third-party vendors for CRM, employee expense reporting and document compiling for both Sarbanes-Oxley and SOC compliance. We are a software company. Instead of utilizing third-party software to facilitate these tasks, we built it internally. We have the development team to do things better, cheaper and more efficiently tailored for our specific needs. This efficiency is reflected in the financial results. Increasing net income is a derivative of growing recurring revenue, managing expenses and productivity and it shows in the quarterly results. Gross margin increased from 56% in Q3 2021 to 83% in Q3 2022. Income from operations increased from $720,000 to $1.18 million, up 64%. Net income grew 41% to $1.09…

Thanks, John. As John noted, our recurring revenue is growing nicely. Our net income is growing faster and our earnings per share is growing faster yet, that has and will be the plan. Proof is in the pudding literally, pretty simple, we think. So how are we going to continue to do this? Well, we're expanding our relationships with our customers as part of our continued land-and-expand strategy. In fact, our largest customers are growing quite rapidly by adding SKUs, store count, suppliers and in addition, taking on more of our value-add modules, including our out-of-stock solution. When your biggest customers add more, it really attests to the success of our products, but equally, we think it's to the customer service we provide. Looking forward, we're currently seeing a nice pickup in our revenue run rate in the current quarter, and that's going to set us up for a strong close to this fiscal year. As a SaaS company, we, therefore, have a pretty good line of sight to fiscal 2023, and it looks really excellent from a revenue, profit, cash and EPS perspective. The growth we are seeing is actually across the board. All of our product lines are growing. As John mentioned, after the June quarter, the comps will change without nonrecurring revenue in the mix. We will finally have optics to match our recurring revenue performance. Again, our bottom line will grow faster, and our EPS will grow faster yet. We continue to reduce the shares outstanding. John mentioned that our costs are also in excellent shape. Why is that? Please note that our business is extremely efficient. Our results now provide much more transparency and clarity than ever before to that fact. Our internal productivity has and will continue to be a critical focus for us…

Thank you. [Operator Instructions] The first question is coming from Tom Forte of D.A. Davidson. Please go ahead.

Great. John, congrats on the quarter. I have only Randy five questions. I'll go one at a time . So John, you did a great job of discussing how you're managing cost at the company level. The question I have for you was how are you managing labor? Right now, it seems like there's very tight labor market for tech talent. How are you managing labor?

Well. How do we both do it?

You go ahead.

Okay. Thank you. Okay. So there's a number of things about us that make working here attractive. We are geographically free, meaning you can work from home. Most -- all of our employees do that. We've done that for 15 years. So we're used to a remote culture. We pay very competitively, and all of our employees participate in a stock purchase plan. So at the end of the day, I think we find ourselves not struggling to get people, although it's always a struggle to find great people and make sure that they stay with you. Our tenure with our staff is actually really, really long. So I'm not sure all the things we're doing right, but I think on balance, we are doing it right. John?

Yeah, I think that, as Randy said, I mean, Park City Group, it's not a job, it's a lifestyle. So for us, we're not - we have developers in India, Slovakia, our salespeople are across the company - country where our customers are. We have very few folks that come into the office in Murray. We have great work life balance with our CSMs and sales folks . We've reduced our office size just to be - to go hand and go out with the company's mantra now of remote work. So I don't see as it being challenging to keep talent or attract talent. And again, as Randy pointed out, many of our talent or the 10 year is between 7 to 10 years, over 10 years.

Great. And then Randy, I know you talked about the impact to your core customer, a food retailer with COVID and work disruptions as far as the employees getting sick, things of that nature. I was wondering if you could answer the same question on the great resignation. So how's the great resignation impacting your core customer food retailers? And is it having any indirect impact on your business?

Well, for us, the obstacle to moving forward with new products, if you will, the new services with our existing customers is getting and keeping their attention. So to the extent that inside their business, they are focused on, in this case, keeping labor in the stores, taking care of their customers. It's sometimes hard to get their intention. So the attention span that we need to sell, implement and manage a relationship requires that there be somebody on the other side to work with. So over the last year, it's certainly fair to say that it's been more difficult than historically. It's still not as easy as we would like it or it could be. But we think over the next several months that supply chain issues in the supermarket will get a little bit better. We suspect that as the economy cools and we're anticipating that as the economy cools perhaps slips into a recession, the labor participation rate will go back up. It will be easier for our customers to hire people, keep their stores stocked, et cetera. So we would envision in the next 6 months it will get easier rather than harder.

Great. And the next one hopefully is an easy one. With consumers trading down, are you at all impacted by the mix of sales that are private label for your food retail customers?

Well, it's an ongoing battle and the tragedy of inflation that affects everyone is that you save money where you can. And people are definitely - we see it trading out of brand name CPG products, where there's a good substitute as a private label alternative, we're definitely seeing that. That impacts our customers, although in a way that isn't perhaps obvious. There's typically more margin for a retailer in a private label product than the comparable CPG brand name product. So it slightly impacts the revenue side, meaning those products often sell for a little bit less on a unit basis, the private label products. But there's better margin. So in between all of that, it's working in the long run to the advantage of the supermarket. Maybe the most important thing that's going to happen in the next year is that I suspect we've seen peak unlineness shifting to Amazon. So that's likely to help our customers, physical retailers as people realize that they're better off going into the stores, finding their bargains on their own and not having to deal with the substitution mass from delivery services. So we're seeing an uptick in in-person shopping and the ability to substitute more rapidly than otherwise would be the case.

All right. So you actually answered question number four, if you answer on that one. So my last question then, Randy, can you give an updated M&A strategy? What are your current thoughts on your M&A strategy?

Remains the same. We think that - in a business like ours, you have to have a forward view. Our forward view is that there's definitely difficult times ahead for startups. There's definitely difficult times ahead for companies that assume that the only thing that mattered was top line growth and didn't have business models that lead to profitability and cash flow. So we suspect and we're preparing ourselves for opportunities that could present themselves at some future date. There's nothing we're actively looking at, at the moment. But we've got a balance sheet and banking relationships such that if the right opportunity or two were to present themselves, we could both move quickly and effectively to take advantage of those. Hope that wasn't too ambiguous

No. Thank you, Randy. Thank you, John.

Thank you.

Thank you, Tom.

Thank you. At this time, I'd like to turn the floor back over to Mr. Fields for any additional or closing comments.

No, we don't have anything. We feel really good about where we are. I think, mersively [ph] we're noticing that the environment is becoming more favorable to us and to our customers. So we're hopeful that everything is we would want it over the course of the next year. But we appreciate everybody taking their time to listen. And obviously, we'll answer any questions we can.

Thank, all.

Ladies and gentlemen, thank you for your participation. This concludes today's event. You may disconnect your lines at this time, and enjoy the rest of your day.