Greetings, and welcome to Park City Group Fiscal First Quarter 2023 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded today, the 14th of November 2022. 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 first 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 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 facts. Such forward-looking statements are based on current beliefs and expectations. Park City Group remarks are subject to risks and uncertainties which actual results could differ materially. Such risks are fully discussed in the company's filings with the Securities and Exchange Commission. The information set forth herein should not -- 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 overviewing the company's 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 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 successful transition to a SaaS company continues to be evident in the numbers. Our business is now easier than ever before to model and the results reflect our ongoing strategy. Let's get right to it. Recurring revenue increased 6% year-over-year for the September quarter. Total revenue was up 4%. Even with significant investments in our ReposiTrak Traceability Network or RTN, in advance of the Office Federal Register publication of FISMA 204 ruling, our SG&A costs were up just 3%. GAAP net income increased 36% to $1.3 million. Earnings per share increased 50% from $0.04 to $0.06. Cash from operations increased 62% to $1.8 million. And we bought back 20,000 common shares, reduced our bank debt by half and have $21.6 million cash in the bank. With the transition from onetime revenue to SaaS recurring subscription now fully behind us, our comparative results have far less noise than in prior periods. Hence, we expect to continue to deliver year-over-year revenue growth, increase margins, accelerated profitability and significant cash generation for the balance of fiscal 2023. Investors should take note that we expect our profitability and cash flow to continue to grow faster than our revenue. What do I mean by that? Starting with revenue, we ended the September quarter with an exit rate of annual recurring revenue of $19.5 million, meaning fiscal year-to-date revenue plus signed contracts in hand at September 30, 2022 quarter that are billing monthly multiplied times 9 will generate $19.5 million of recurring revenue for the balance of fiscal year 2023, absent any new contracts or anticipated growth. Keep in mind, this is organic revenue growth, meaning existing suppliers or retailers expanding compliance and supply chain services. adding stores or locations and adding trading partners from existing business lines. This…

Thanks, John. We're continuing to grow revenue and managed expenses. We're growing our net income even faster and with our share repurchase program ongoing, we're doing even better yet in terms of earnings per share. Simultaneously, we've also grown our cash balance, paid down half of our debt and we've begun paying the dividend. As you can see, we've built a consistent cash generation machine with more than 5 consecutive years of GAAP profitability. I believe an important metric that we have not historically talked about that warrants pointing out is our current ratio. That current ratio is now 5.2:1. Let me say that again, 5.2:1. That means the company can pay its current obligations 5 times over. I've been in this business for a long time. I've not seen a metric for a company of our size ever. Another metric that should be noted is our annual revenue per employee. With 64 employees, the company generates almost $300,000 per employee per year. Based on independent comparisons, that's over double compared to our peers. That number and our belief will continue to grow over the next few years as our revenue grows substantially and our headcount only increases marginally. Furthermore, as we've said, incremental revenue over our $12 million annual cash operating expenses is largely converted to incremental cash, 82% in the current quarter, in fact. If you analyze our first quarter cash from operations and assume no growth, we've grown our annual cash from operations by about 27% on a CAGR compounded annual growth rate basis. since 2018. Our business is efficient. Needless to say, it's easy to model, we think and we're certainly positioned to scale. Our recent performance doesn't include any revenue at all in terms of the contribution for the largest opportunity we have to date,…

[Operator Instructions] Your first question comes from Thomas Forte of D.A. Davidson.

Great. So Randy and John, congrats on the quarter and thanks for taking my questions. I have 1 question and 1 follow-up. So Randy, at a high level, how should we think about the impact, if any, of Kroger and Albertsons merging? And generally speaking, can you remind me on your customer churn which historically is kind of very low?

Okay. Yes. The -- this industry that we serve, retail food, is in the continual process of consolidation and spin-off, Albertsons is the result of a spin-off, other pieces of Albertsons were the result of the spin-off. So -- if this is approved and that's a big if, what will happen is a substantial number of stores will be sold off and become either independent or parts of other chains or another chain in and of itself. So there's no real impact on us from that kind of activity. The industry is rife with it. From a churn perspective, it's typically in the area of less than 1% of our customers each year, typically of that, about half are a result of what we would call merger or acquisition. So 2 customers become one which obviously reduces our footprint. And the other is more typically, they cease doing business with a trading partner. So rarely does it actually happen that someone says, we don't like you or you're not successful with us go away? That's really rare. As John mentioned, we're still looking at some of the rationalization that we have to do in order to accommodate what we believe is going to happen with traceability. Your follow-up.

My second question. So Randy, you did do a good job of explaining the traceability that you're going to ruin the question that I had on traceability. Now that you've initiated the dividend, you left me the boring question. Now that you've initiated the dividend, are you going to think about once a year on an annual basis, potentially raising the dividend? How should we think about your -- the prospect of you raising the dividend in the future?

Yes, you're probably going to hate this answer, but it's truthful. Each year, we're going to look at where we are and that that, by definition, means what -- how much cash have we generated? What have we done over the last year? And now how does the next year look and where is the stock price. So if the stock price at that point in time looks attractive to us, meaning lower than we think it ought to be, we'll probably allocate some percentage of our cash flow to more stock buyback. Kind of if you said overall, what do you expect to do looks about like this. Roughly half of our cash flow each year will end up on the balance sheet in the form of cash. The other half of the cash flow is likely to be divided in some ratio between dividend and, of course, the stock buyback. So that ratio is really a function of what's the stock price. So if the stock price is too low in relation to what we think intrinsic value would be, we're likely to allocate a higher percentage of that half, if you will, to stock buyback. So over time, if we continue to do as well as we're hoping it's reasonable that both the dollars of stock buyback will go up and the dollars of dividend will go up. John, you agree with that? Did I speak out -- I just want to make sure John isn't going to slap me for saying something.

Yes, that's spot on. I mean like we discussed before, there are levers that we will utilize when it makes the most sense for all shareholders. And as I described in this quarter, I thought it made the most sense to pay down $1.3 million of bank line debt as those interest rates are going up. So as Randy said, we would definitely take - our goal is to take 50% of our cash from operations and return it to shareholders and the other half goes on the balance sheet. That's the goal, but conditions may change. And as we look out 12 to 18 months, that may change. But right now, we're very confident using that 50% marker.

At this time, there are no further questions. So I will turn the conference back to your hosts for any closing remarks.

Okay. Well, this is Randy. Thank you all for taking your time this afternoon. Just in summary, we feel really good about where we are. We like new contracts that we have in hand and certainly the traceability initiative is likely to be a big part of our future. So thanks for the support. Talk to you all soon. Bye-bye.

Ladies and gentlemen, this does conclude your conference call for this afternoon. We would like to thank everyone for participating and ask that you please disconnect your lines.