Form 8-K - Current report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): November 14, 2023

PARK CITY GROUP, INC.

(Exact name of Registrant as specified in its Charter)

Nevada	001-34941	37-1454128
(State or other jurisdiction of incorporation)	(Commission File No.)	(IRS Employer Identification No.)

5282 South Commerce Drive, Suite D292, Murray, Utah 84107

(Address of principal executive offices)

(435) 645-2000

(Registrant’s Telephone Number)

Not Applicable

(Former name or address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of exchange on which registered
Common stock, par value $0.01 per share	TRAK	New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR 230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR 240.12b-2)

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Item 2.02 Results of Operations and Financial Condition.

On November 14, 2023, Park City Group, Inc. d/b/a/ ReposiTrak (the “Company”) issued a press release and hosted an earnings call to announce the Company’s financial results for the first quarter ended September 30, 2023. A copy of the press release and the earnings call transcript are attached hereto as Exhibit 99.1 and 99.2, respectively.

Item 7.01 Regulation FD Disclosure.

See Item 2.02.

In accordance with General Instruction B.2 for Form 8-K, the information in this Form 8-K, including Exhibits 99.1 and 99.2, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such filing.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

Exhibit Number		Description
99.1		Press Release, dated November 14, 2023
99.2		Earnings Call Transcript
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


	PARK CITY GROUP INC.

November 14, 2023	/s/ John Merrill
	John Merrill
	Chief Financial Officer

Exhibit 99.1

Park City Group, d/b/a ReposiTrak, Revenue Increases 7%, Net Income Increases 7%, and Earnings Per Share Increases 17%, for Fiscal 2024 First Quarter

Board Increases Quarterly Cash Dividend by 10% to 6.6 Cents Per Share Annually

Salt Lake City, UT – November 14, 2023 – Park City Group, Inc., d/b/a ReposiTrak (NYSE: TRAK), the world's largest food traceability and regulatory compliance network, built upon its proven inventory management and out-of-stock reduction SaaS platform, today announced financial results for the first fiscal quarter (“FQ1 2024”) ended September 30, 2023.

First Quarter Financial Highlights:

●

First quarter total revenue increased 7% to $5.1 million from $4.7 million.

●

Recurring revenue increased 8%, net of the planned elimination of high-touch, low-opportunity revenue, to $5.0 million from $4.7 million, representing approximately 99.7% of total revenue.

●

Quarterly operating expense increased 11% to $3.9 million from $3.5 million, representing primarily one-time investment in sales and marketing to raise awareness about the FDA mandate and the ReposiTrak Traceability Network solution.

●

Quarterly operating income decreased 2% to $1.2 million from $1.2 million last year.

●

Quarterly GAAP net income increased 7% to $1.4 million from $1.3 million last year.

●

Quarterly net income to common shareholders was $1.2 million, up 8% from $1.1 million last year.

●

Quarterly EPS of $0.07, up 17% from $0.06 last year.

●

During the quarter, the Company repurchased 155,025 shares at an average price of $8.53 for a total of $1.3 million.

●

The Board of Directors approved an increase in the Company’s quarterly cash dividend, to 6.6 cents per share annually (1.65 cents per share quarterly), effective with the December dividend.

Randall K. Fields, Chairman and CEO of Park City Group commented, “As we expected, we continued to grow our recurring revenue, income and cash flow, while intensely focusing on our Traceability initiative. Our financial results this quarter reflected the success of that strategy. Our consistent cash generation has enabled the Board of Directors to authorize a 10% increase in our quarterly cash dividend starting with shareholders of record on December 29, 2023.”

“During the quarter, we invested more heavily than usual in sales and marketing expense to build the infrastructure for Traceability and continue to increase awareness,” continued Mr. Fields. “As a result, we have seen an acceleration in the adoption of Traceability – faster than we originally anticipated. We now have nearly 500 suppliers in the enrollment cycle, and about 1,000 in the queue that we anticipate will be added over the next nine to 12 months. Our Traceability revenues are modest at this point, but our pipeline is deep and we expect more hubs (and as a result, their many suppliers) accelerating implementations as the 2026 deadline looms.”

Mr. Fields continued, “Our current backlog will keep us very busy through the end of our current fiscal year, as we accelerate our implementation process. The revenue ramp from Traceability will grow accordingly throughout the year. We have created a durable moat around our business as we become the largest and preferred provider for the industry. As I have said before, while many are talking about traceability, we are the ones actually doing it, with live customers, operating at scale.”

First Fiscal Quarter Financial Results (three months ended September 30, 2023, vs. three months ended September 30, 2022):

Total revenue was up 7% to $5.06 million as compared to $4.72 million in the prior-year first quarter. Total operating expense was $3.86 million, up 11% compared to $3.49 million last year, reflecting a 25% increase in sales and marketing expense related to building awareness for Traceability and other growth initiatives. General and administrative expense increased by 5%. GAAP net income was $1.38 million compared to $1.29 million. Net income to common shareholders was $1.23 million, or $0.07 per diluted share, compared to $1.14 million, or $0.06 per diluted share.

Return of Capital:

In the first fiscal quarter of fiscal 2024, the Company repurchased 155,025 shares of common stock at an average price of $8.53 for a total of $1.3 million. Since inception, the Company has repurchased 2.05 million shares of common stock for $12.5 million at an average price per share of $6.22. The Company has approximately $8.5 million remaining on the $21 million total buyback authorization since inception.

In September 2022, the Company’s Board of Directors declared a quarterly cash dividend of $0.015 per share ($0.06 per year). In November 2023, the Board of Directors approved a 10% increase in the quarterly cash dividend, to 6.6 cents per share annually, or 1.65 cents per share quarterly, effective with the December 2023 dividend.

In September 2023, the Company announced it plans to redeem its Preferred Stock over the next three fiscal years. No Preferred Stock was redeemed during the quarter.

Balance Sheet:

The Company had $23.7 million in cash and cash equivalents at September 30, 2023, compared to $24.0 million at June 30, 2023. The Company had nothing drawn on its working line of credit as of September 30, 2023 or June 30, 2023.

Conference Call:

The Company will host a conference call at 4:15 p.m. Eastern today to discuss the Company’s results. The conference call will also be webcast and will be available via the investor relations section of the Company’s website, www.parkcitygroup.com.

Participant Dial-In Numbers:
Date: Tuesday, November 14, 2023

Time: 4:15 p.m. ET (1:15 p.m. PT)

Toll-Free: 1-877-300-8521

Toll/International 1-412-317-6026

Conference ID: 7050708

Replay Dial-In Numbers:

Toll Free: 1-844-512-2921

Toll/International: 1-412-317-6671

Replay Start: Tuesday, November 14, 2023, 7:15 p.m. ET

Replay Expiry: Thursday, December 14, 2023 at 11:59 PM ET

Replay Pin Number: 10184210

About Park City Group (d/b/a ReposiTrak)

Park City Group, Inc. d/b/a ReposiTrak (NYSE: TRAK), a compliance, supply chain, and e-commerce platform that partners with retailers, wholesalers, and their suppliers, to accelerate sales, control risk, and improve supply chain efficiencies. More information is available at www.repositrak.com.

Specific disclosure relating to Park City Group, including management's analysis of results from operations and financial condition, are contained in the Company's annual report on Form 10-K for the fiscal year ended June 30, 2023, and other reports filed with the Securities and Exchange Commission. Investors are encouraged to read and consider such disclosure and analysis contained in the Company's Form 10-K and other reports, including the risk factors contained in the Form 10-K.

Forward-Looking Statement

Any statements contained in this document that are not historical facts are forward-looking statements as defined in the U.S. Private Securities Litigation Reform Act of 1995. Words such as “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “intend,” “may,” “plan,” “project,” “predict,” “if”, “should” and “will” and similar expressions as they relate to Park City Group, Inc., Park City Group d/b/a ReposiTrak, or ReposiTrak (“Park City Group”) are intended to identify such forward-looking statements. Park City Group may from time-to-time update these publicly announced projections, but it is not obligated to do so. Any projections of future results of operations should not be construed in any manner as a guarantee that such results will in fact occur. These projections are subject to change and could differ materially from final reported results. For a discussion of such risks and uncertainties, see “Risk Factors” in Park City Group annual report on Form 10-K, its quarterly report on Form 10-Q, and its other reports filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the dates on which they are made.

Investor Relations Contact:

John Merrill, CFO

Investor-relations@repositrak.com

FNK IR

Rob Fink

646.809.4048

rob@fnkir.com

PARK CITY GROUP, INC.

Consolidated Condensed Balance Sheets (Unaudited)

	September 30, 2023			June 30, 2023
*Assets*
Current Assets
Cash	$	23,697,228		$	23,990,879
Receivables, net of allowance for doubtful accounts of $194,656 and $170,103 at September 30, 2023 and June 30, 2023, respectively		3,022,038			2,523,019
Contract asset – unbilled current portion		160,749			186,959
Prepaid expense and other current assets		316,473			573,763
Total Current Assets		27,196,488			27,274,620

Property and equipment, net		844,705			986,300

Other Assets:
Deposits and other assets		22,414			22,414
Prepaid expense – less current portion		21,147			36,282
Contract asset – unbilled long-term portion		108,052			108,052
Operating lease – right-of-use asset		295,967			310,796
Customer relationships		229,950			262,800
Goodwill		20,883,886			20,883,886
Capitalized software costs, net		619,866			698,281
Total Other Assets		22,181,282			22,322,511

Total Assets	$	50,222,475		$	50,583,431

*Liabilities and Shareholders’ Equity*
Current liabilities
Accounts payable	$	314,888		$	431,387
Accrued liabilities		1,608,640			1,620,000
Contract liability – deferred revenue		2,080,424			1,903,001
Operating lease liability – current		60,063			58,771
Notes payable and financing leases – current		214,926			219,262
Total current liabilities		4,278,941			4,232,421

Long-term liabilities
Operating lease liability – less current portion		247,537			263,047
Notes payable and financing leases – less current portion		81,534			206,032
Total liabilities		4,608,012			4,701,500

Commitments and contingencies

Stockholders’ equity:
Preferred Stock; $0.01 par value, 30,000,000 shares authorized;
Series B Preferred, 700,000 shares authorized; 625,375 shares issued and outstanding at September 30, 2023 and June 30, 2023;		6,254			6,254
Series B-1 Preferred, 550,000 shares authorized; 212,402 shares issued and outstanding at September 30, 2023 and June 30, 2023, respectively		2,124			2,124
Common Stock, $0.01 par value, 50,000,000 shares authorized; 18,171,068 and 18,309,051 issued and outstanding at September 30, 2023 and June 30, 2023, respectively		181,713			183,093
Additional paid-in capital		66,507,428			67,732,887
Accumulated deficit		(21,083,056	)		(22,042,427	)
Total stockholders’ equity		45,614,463			45,881,931
Total liabilities and stockholders’ equity	$	50,222,475		$	50,583,431

PARK CITY GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

	Three Months Ended September 30,
	2023			2022

Revenue	$	5,060,112		$	4,720,477

Operating expense:
Cost of revenue and product support		766,334			832,704
Sales and marketing		1,505,501			1,200,259
General and administrative		1,279,323			1,223,462
Depreciation and amortization		308,945			236,006
Total operating expense		3,860,103			3,492,431

Income from operations		1,200,009			1,228,046

Other income (expense):
Interest income		258,161			79,092
Interest expense		(6,344	)		(24,652	)
Unrealized gain (loss) on short term investments		27,186			(7,415	)
Other gain (loss)		-			70,047
Income before income taxes		1,479,012			1,345,118

(Provision) for income taxes:		(100,464	)		(60,006	)
Net income		1,378,548			1,285,112

Dividends on preferred stock		(146,611	)		(146,611	)

Net income applicable to common shareholders	$	1,231,937		$	1,138,501

Weighted average shares, basic		18,225,000			18,465,000
Weighted average shares, diluted		18,839,000			18,753,000
Basic income per share	$	0.07		$	0.06
Diluted income per share	$	0.07		$	0.06

PARK CITY GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

	Three Months Ended September 30,
	2023			2022
Cash flows from operating activities:
Net income	$	1,378,548		$	1,285,112
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		308,945			236,006
Amortization of operating right of use asset		14,829			14,142
Stock compensation expense		85,375			111,046
Bad debt expense		75,000			150,000
(Increase) decrease in:
Accounts receivables		(547,809	)		(255,281	)
Long-term receivables, prepaids and other assets		216,340			434,448
Increase (decrease) in:
Accounts payable		(116,499	)		(264,711	)
Operating lease liability		(57,164	)		(13,003	)
Accrued liabilities		(14,218	)		(58,182	)
Deferred revenue		177,423			171,898
Net cash provided by operating activities		1,520,770			1,811,475

Cash flows from investing activities:
Purchase of property and equipment		-			(19,533	)
Net cash provided by (used in) investing activities		-			(19,533	)

Cash flows from financing activities:
Net (decrease) increase in lines of credit		-			(1,294,317	)
Common Stock buyback/retirement		(1,322,082	)		(103,657	)
Proceeds from employee stock plan		57,743			48,903
Dividends paid		(421,248	)		(146,611	)
Payments on notes payable and capital leases		(128,834	)		(129,481	)
Net cash used in financing activities		(1,814,421	)		(1,625,163	)

Net increase (decrease) in cash and cash equivalents		(293,651	)		166,779

Cash and cash equivalents at beginning of period		23,990,879			21,460,948
Cash and cash equivalents at end of period	$	23,697,228		$	21,627,727

Supplemental disclosure of cash flow information:
Cash paid for income taxes	$	221,661		$	146,723
Cash paid for interest	$	2,329		$	24,653
Cash paid for operating leases	$	18,141		$	17,613

Supplemental disclosure of non-cash investing and financing activities:
Common stock to pay accrued liabilities	$	37,500		$	76,873
Dividends accrued on preferred stock	$	146,611		$	146,611

Exhibit 99.2

C O R P O R A T E P A R T I C I P A N T S

Jeff Stanlis, Vice President of Communications, FNK IR

John Merrill, Chief Financial Officer

Randy Fields, Chairman and Chief Executive Officer

C O N F E R E N C E C A L L P A R T I C I P A N T S

Tom Forte, D.A. Davidson

P R E S E N T A T I O N

Operator

Greetings, and welcome to the ReposiTrak Fiscal First Quarter 2023 Earnings Call.

(Operator Instructions)

As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Jeff Stanlis with FNK IR. Mr. Stanlis, you may begin.

Jeff Stanlis

Thank you, Operator, and good afternoon, everyone. Thank you for joining us today for Park City Group, doing business as ReposiTrak’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 upon current beliefs and expectations. Park City Group remarks are subject to risks and uncertainties which actual results may differ materially. Such risks are fully disclosed 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.

ViaVid has made considerable efforts to provide an accurate transcription. There may be material errors, omissions, or inaccuracies in the reporting of the substance of the conference call. This transcript is being made available for information purposes only.

1-888-562-02621-604-929-1352 www.viavid.com

Shortly after the market closed today, the Company issued a press release overviewing 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.

John Merrill

Thanks, Jeff, and good afternoon, everyone.

The first fiscal quarter of 2024 again highlights the simplicity, reliability, and predictability of our business model; grow revenue, increase profits, generate cash, and return capital to shareholders. In short, in the September quarter, we grew both total revenue and recurring revenue; invested heavily in sales and marketing promotions to increase awareness and traceability, accelerating FSMA 204 education of the looming 2026 deadline for both retailers and their suppliers. We grew net income and EPS, bought back more common shares, and continued to issue a quarterly cash dividend to common shareholders. We achieved these results while navigating another period of global economic uncertainty, rising interest rates, political unrest, inflation, and, at the same time, overcoming the planned elimination of approximately $1 million of high-touch, low-opportunity revenue since traceability started.

I believe it is extremely important to point out that while we have been more vocal for the last year on traceability, our compliance and supply chain offerings, particularly in this environment, have experienced growth in every line of business; scan based trading, compliance, and out-of-stocks, only to name a few. I believe we have developed our core business into a well-structured, cash-generating engine. It was not easy, and the next phase of our growth, traceability, is no different, but advancing rapidly and will become even more complex. Nonetheless, we are confident over time that we can add traceability to the same well-oiled, cash-generating machine that our core compliance and supply chain offerings have become.

As you can imagine, FSMA 204’s requirements are complicated, having a level of uniqueness based on a customer supply chain, the product, and ways of doing business. This requires us to invest in technical and customer-facing roles, as well as sales and marketing to position our RTN solution as the go-to solution to achieve FSMA 204 compliance with little change to how our customers do business. We’ve responded by adding several members to our Commercial, Technical, and Leadership teams, including industry veterans with deep relationships and expertise.

As you have seen, we increased our spending in the quarter on sales and marketing in order to accelerate the reach and frequency to not only our existing customers, but to our prospects. I want to reiterate; we will automate wherever we can and we’re very good at it. However, with enormous traceability opportunity upon us, sometimes good old-fashioned smile and dial, reaching frequency through various messaging mediums makes the most sense. Our response is balanced; reallocate short-term spending towards sales and marketing efforts and continue to eliminate high-touch, non-core activities to free up resources to make the most noise in the urgency of our customers to comply with FSMA 204.

Remember, we are early in the traceability race. It began in April of 2023. It is a marathon, not a sprint. While traceability only represents 1% to 2% of our current revenue, we believe our land grab efforts will develop traceability into the same cash-generating machine we have developed within our core compliance and supply chain solutions.

Let’s get to the numbers.

1-888-562-02621-604-929-1352 www.viavid.com

Total revenue was up 7% for the September quarter. Recurring revenue increased 8% for the quarter. Selling and marketing costs increased 25%, as we invested heavily in the short term and the awareness of ReposiTrak Traceability Network, or RTN. G&A costs were up 5%. Total expenses were up 11%. GAAP net income increased 7% for the quarter. GAAP net income to common shareholders increased 8%. Earnings per share increased 17% year-over-year to $0.07 per share. Quarterly cash from operations was $1.2 million, and we bought back approximately 155,000 common shares at an average share price of $8.53 per share, have $24 million cash in the bank, and no debt.

As we said, our profitability and cash flow will continue to grow. Consistent with our strategy, our focus is on increasing operating leverage. This requires us to continue to make difficult decisions to drive high-margin incremental revenue while keeping costs in line and driving profitability and cash.

As Randy will further comment on, the customers we have signed so far for our traceability initiative or somewhere in the implementation queue should generate $3 million to $4 million additional annual dollars of recurring revenue once fully deployed. That does not take into consideration any new customers or expansion of existing customers. This only includes birds of the hand.

We ended the fiscal year with an exit rate of annual recurring revenue of $20.3 million, meaning, as of June 30, 2023, those contracts in hand billing monthly times 12 will generate $20.3 million in annual recurring revenue in the subsequent 12 months. At the end of September, that number increased to $20.8 million with modest additions as a result of traceability. Keep in mind, this is organic revenue growth, meaning existing suppliers or retailers that have expanded compliance and supply chain services, adding stores or locations and traceability in the current fiscal year to date. This does not include any revenue contribution from a projected new customer.

I believe the momentum we are seeing initially with traceability customers, faster than I anticipated, will only accelerate. We are confident that traceability will begin to generate meaningful revenue in calendar 2024.

As I have said time and time again, it takes approximately $12 million in cash a year to run this place. Our annual cash spend excludes non-cash accounting costs such as depreciation, amortization, bad debt expense, stock compensation expense, and other non-cash accounting costs. Our focus is on operating leverage; rationalizing the revenue generated with costs expended.

Again, our strategy remains very simple: take care of the customer - I cannot emphasize this enough -; grow recurring revenue, rationalizing costs with the opportunity of future revenues; control costs; increase net income; accelerate EPS; buy back shares, which now includes the preferred shares; drive cash; and return capital to shareholders in the form of a cash dividend.

Turning to the quarterly numbers.

Fiscal year 2024 first quarter revenue was $5.1 million, up 7% from $4.7 million in the same quarter last year. Effectively, all of our revenue was recurring; 99.7% to be exact.

Total operating expenses increased 11% to $3.9 million in Q1 2024, which I already commented on, which was largely a non-recurring increase in sales and marketing spend for traceability during the quarter. Hence, sales and marketing expenses increased 25% due to investments in awareness building for RTN.

G&A expenses increased 5% due largely to higher costs and employee benefits.

1-888-562-02621-604-929-1352 www.viavid.com

Depreciation and amortization increased 31%, reflecting investments in cyber security and other routine Capex expenditures that took place in the prior fiscal year.

For the first fiscal quarter of 2024, GAAP net income was $1.4 million or 27% of revenue versus $1.3 million or 27% of revenue. GAAP net income increased year-over-year by 7%.

Net income to common shareholders was $1.2 million or $0.07 per common share based on 18.2 million weighted average shares versus $1.1 million or $0.06 per common share based on 18.5 million weighted average shares. Shareholders should also take note that we have reduced our capitalization by over 10% since we initiated our stock buyback plan some four years ago.

Turning now to cash flow and cash balances.

Total cash at September 30, 2023 was $23.7 million compared to $24 million at the end of fiscal year 2023.

As of September 30, 2023, the Company had zero bank debt.

In the first fiscal quarter, we generated cash from operations of $1.2 million.

In the first quarter, we repurchased approximately 155,000 shares at an average price of $8.53 per share for a total of $1.3 million. The Company has approximately $8.5 million remaining on the $21 million total buyback authorization.

We paid our September 30 quarterly cash dividend on November 1. Subsequent quarterly dividends will be paid within 45 days of the quarters’ end of December 31, March 31, and June 30.

As we have said previously, our goal is to take half the annual cash generated from operations and return it to shareholders in the form of a dividend, buying back additional shares, and, as we announced recently, redeeming the preferred. The other half goes in the bank or will be strategically used to fund initiatives like traceability. We also carefully evaluate other opportunities, including M&A, but we are selective. We certainly have ample dry powder if the right opportunity comes along.

As you have seen, we transferred our listing from NASDAQ to the New York Stock Exchange under the ticker TRAK. It's where we belong, to quote Maverick from Top Gun. We now have earned the prestige of sharing the big board with many of our customers as a strong advocate with powerful solutions to improve their business. We are very honored to share the same stage with some of the most well-respected names in the industry.

As I said before, from time to time, the Board will evaluate its capital allocation strategy and may adjust the different levers, whichever is more favorable to shareholders at that time. As part of the process, the Board of Directors recently announced our intent to redeem our preferred stock over the next three years. Most recently, given our consistent cash flow generation and line of sight to future cash flows, the Board unanimously approved a 10% increase in the quarterly common stock dividend from $0.06 per share annually to $0.066. The increase in our quarterly cash dividend will start with shareholders of record on December 29, 2023.

That's all I have today. Thanks, everyone, for your time. At this point, I'll pass the call over to Randy. Randy?

1-888-562-02621-604-929-1352 www.viavid.com

Randy Fields

Thanks, John.

As we end the first quarter of fiscal 2024, the sustainability and predictability of our recurring revenue-based business model is now clear. Our recurring revenue covers not only our fixed costs, but it fuels our ability to return capital to the shareholders. The SaaS transition was completed a little bit more than a year ago, so we're now comparing our results to post-transition quarters. Despite our sunsetting of certain high-touch, low-opportunity revenue to the tune of about a $1 million a year, we've continued to grow recurring revenue, we've grown GAAP net income even more, and grown earnings per share even faster than that. The flywheel of our business model is delivering as expected, and we think we're creating lasting value.

At the same time, though, we're investing in our next major growth opportunity; traceability and our ReposiTrak Traceability Network, RTN as we call it. These investments include marketing to expand industry awareness and systems to help us automate the on-boarding process, so where are we? Well, so far, we have more than 500 suppliers in the queue to use the RTN, and they're coming into the network based on the requirement of one or more of their customers who have chosen to use us to comply with the FDA traceability mandate. Just what we've signed up in terms of retailers and wholesalers so far should generate another 1,000 suppliers ultimately on top of the 500 that are actually in the process of enrolling now, so once fully implemented, and that’ll take certainly until the end of our fiscal year, maybe even a bit longer, our current hubs and spokes, as we call them, should generate $3 million to $4 million per year in additional annual recurring revenue, perhaps even more. This is a very, very good start. Duh.

Even better, our pipeline of new potential hubs is deep, and we will be adding significantly to the network as the year goes on. That’s certainly our belief from where we are. So far, we're running well ahead of what we expected to have at this point in time, and we see signs of an acceleration from our current pipeline. We now believe, interestingly, that the TAM from our current line of sight that we have is potentially $20 million in annual recurring revenue, which is a significant increase from how we saw it a year ago. This obviously isn't going to happen in a year, but it certainly could happen in the next few years. Some number of the suppliers will, of course, have an overlap across retailers and wholesalers. This makes our revenue forecasting, honestly, a little bit more difficult, naturally.

Why do I say that? What do I mean by that? Well, obviously, any one supplier may deliver to more than one of our retailers or wholesalers. When the supplier joins the network, generally speaking, that subscription membership covers all retailers and wholesalers. That fee structure, in fact, though, is part of our attraction. In fact, though, suppliers are already beginning to refer us to more retailers and wholesalers. Think about that. Suppliers are referring us to their customers, and why not? Once they've gone through the on-boarding process, gathered all the data and entered into our easy to use system, paid their membership fee, why wouldn't they want to use this with other retailers? There'll be no incremental costs for them, only incremental efficiency, and nobody wants to use many multiple systems. That defeats the purpose of automation.

As we've said, traceability awareness and interest seem to be increasing. Our network growth shows that. For example, in April of '23, we had zero. In July of '23, we had about 90 suppliers somewhere in the process. In August, that number doubled to 200. In November, we now have more than 500 in the queue and adding more. You may have recently seen the cadence and content of our industry-directed press releases validating our progress. These supplier customers span all parts of the industry; produce seafood, cheese, just to name a few. Interestingly, several of the network members actually provide products that are not covered by the traceability rule. Well, why would they do this if they're not required to?

1-888-562-02621-604-929-1352 www.viavid.com

Simply, we believe they recognize the inherent value of traceability independent of the regulation. Think about it for a moment. A truck of produce arrives at your dock. You’re a retailer. It's filled with different kinds of produce. How can you possibly know or efficiently offload the truck to identify only the FSMA 204 traceability cases of product? The short answer is you can't. We believe retailers will ultimately decide to include all forms of produce, for example, separating out FSMA impacted boxes from non-FSMA impacted boxes as well. That's an impossible headache that retailers don't want and we don't think they'll take on. How do we know? Well, keep in mind, we're actually doing traceability now; not piloting, not talking, but doing it. We learn every day through the challenges, including challenges that nobody else, in fact, could have anticipated, including us.

Our expertise and actual experience is unmatched, and it represents a durable competitive advantage for us going forward. This real-life, practical knowledge is an enormous competitive advantage, and we believe that we're the only ones that understand it in total. It's an important moat around our traceability business, and that's in addition to our technology mode.

In this last quarter, we spent heavily on sales and marketing to support the RTN, as we call it. Most of this involves awareness building and much of it was just one time. You've heard me speak about other proposed solutions. They're not going to work. In my view, they're based on labels or barcodes alone that are unlikely to work in theory and sure as hell won't work in practice, or they're based on some complicated technology that won't align with the simple business practices of retailers and wholesalers.

When traceability grows in terms of numbers of customers for us, the incremental variable cost as we add new users will be nominal. We've automated much of the process. We're working on even higher levels of automation as we speak, and, as you know, it's our way of doing business, meaning the revenue opportunity is significant, but we don't expect a significant increase in our cost structure.

To summarize, we will continue to take great care of our customers.

Two, we have a consistent cash generation machine with many consecutive years of GAAP profitability.

Three, we continue to deploy our capital allocation strategy: buying back stock, both common and preferred; paying a dividend; and growing our cash. Our Board just voted to increase the dividend by 10%. As we have said, the Board will periodically review the capital allocation strategy. They will adjust the dividend and other levers that we have based on our cash generation. Over time, we do expect to be able to continue to grow the dividend even as we're adding cash to the balance sheet.

Four, we're maintaining a fortress balance sheet with nearly $24 million in cash and no debt.

Five, very importantly, our business is efficient, it's easy to model and we're positioned to scale. The net result; faster revenue growth, even faster net income growth, and faster yet EPS growth.

As I'm sure you saw, on November 2, we uplisted from NASDAQ to the New York Stock Exchange. This move to the big board puts us in the same company as Albertsons, Kroger, Natural Grocers, Weis Markets, Cisco, U.S. Foods; all NYSE listed companies in the grocery or food distribution space. Fortune 500 in the food industry is who we serve. It's our world. It just makes sense for us to be on the NYSE because it gives comfort to our customers. This is also the first step in a broader rebranding from Park City Group to ReposiTrak, the brand that our customers know. We’ve changed our ticker, as I'm sure you know, to TRAK, and in the coming months we will fully change our corporate name.

With that, I'd like to now open the call for questions. Operator?

1-888-562-02621-604-929-1352 www.viavid.com

Operator

(Operator Instructions)

Today's first question comes from Thomas Forte with D.A. Davidson. Please proceed.

Tom Forte

Great, so Randy and John, congrats on the quarter. I have six questions, so I apologize to anyone else who is in the queue. One at a time, so number one, would appreciate your thoughts on capital allocation or your current thoughts on capital allocation. John mentioned this a little in his prepared remarks, including using free cash flow to buy back the preferred, to buy back the common, pay dividends, and for strategic M&A.

Randy Fields

Well, it sounded like the answer was inside the question.

John Merrill

I was going to say the same thing.

Tom Forte

No, that’s the menu. No, I need some priorities.

Randy Fields

Okay, so here's how we see it, and, admittedly, it is a little vague, but that depends on market circumstances at the time. Clearly, we feel as if our cash flow over the next several years is going to be growing. As a result, we are quite confident that the dividend increase that we put in place could be the first of other dividend increases, so that part of it looks like it's going to continue on that track. We've also committed to redeeming the preferred over a three-year period, so we'll begin to do that, and, so therefore, the loosey goosey part of it, if you will, would be the sum of those two numbers minus 50% of our free cash flow each year, so that's what we've decided to do. Half the cash we generate goes on the balance sheet to strengthen it and the other half will be divided around those three levers; buying back stock, the cash dividend, and buying back or redeeming the preferred.

Now, almost by definition, we would be opportunistic in terms of the stock. When we think the stock represents a better buy and reducing the capitalization moves up, we'll spend more money on that. That's probably the best way to put it, but, in general, we see, over the foreseeable future, half of our cash flow going against those three levers. Question two?

Tom Forte

All right, number two, John, last quarter, you indicated you ended the fiscal year with an exit rate of annual recurring revenue of $20.3 million. Can you update that number after one quarter?

John Merrill

Yes, in my remarks, it's $20.8 million, so if you were to take what the contracts we have in hand as of September 30 times 12, that number now is $20.8 million. That assumes no new customers. That only assume the customers that we have in the queue.

1-888-562-02621-604-929-1352 www.viavid.com

Tom Forte

Excellent. All right, so where are you today in your efforts to upgrade your existing customers or engage in, I don't think use the term, but intentional churn to focus your efforts on traceability?

Randy Fields

The answer to that is actually pretty simple. We designated a group of customers that, in our view, are not long-term fits, meaning either that they are very, very small, that they have no food business inherent in what they do, so that they will not be doing traceability, for example, so you can think of them as high-touch and limited upside, and the run rate on what we've eliminated is just about $1 million a year, so it's, for the most part, gone. There's a little bit more to go over the next quarter or two, and we've done this before, actually.

Periodically, we look at our product set and decide which of those products and services fit nicely into the future we see for the business, and we're not afraid of pruning. Many businesses keep remnants of their past. We choose not to do that because, number one, if a product is not part of our future, it means, almost by definition, we are in a, I'm going to call it, an ethical bind with the customer, and we choose never to do that. We always want our customers to be first, and the best way to do that is to make sure that the product set that they're using is the product set that we're taking into the future and investing with, so it's mostly behind us. There's a little bit more headwind in the next quarter or two, and then we'll be done with it for now.

Tom Forte

Great, and then, Randy, I'd appreciate your thoughts on how your Company uses artificial intelligence to improve its efforts?

Randy Fields

Well, we're somewhat skeptical about all the hype around AI. We've talked about it for many years. I don't know, we've been a user of AI-based tools for least a decade, and we see them as tools for us that do things that humans can do, but a machine can do much faster, and we’ll continue to invest in that direction.

By and large, our investments in tools like AI are intended to help our people be better with their customers. It's internal productivity measures is the best way to think about it, and it allows us to have better spans of control. It enables us to be much more effective in communicating with our customers. Maybe I'm old fashioned, maybe just old, but the reality for us is high-touch is how we see ourselves, and when people do work that we call administrivia, and you may have heard me use that term a few times, administrivia gets in the way of customer relationships, so our objective with our own technology is always to get rid of administrivia so that people spend more and more of their time with their customers and less and less of their time with what I call the in/out box syndrome and that sort of thing.

AI, for us, has a very important contribution, we think, to the future, and the reason, if you were to quantify it, we've suggested that the TAM for traceability as we see it today has the potential for doubling the size of our Company in some number of years. I won't be too specific about that, but we think we could do that with the addition of no more than five to seven more people than we have today. That's pretty astounding, and then if you think of one other current statistic, we generate about $300,000 a year of recurring revenue for each and every employee, but if you were to compare us to the industry, John will keep me honest here, but I think the industry is less than half of that, about $140,000 some odd a year, so our investment in productivity and AI in particular has enabled us to double the revenue per employee that we generate compared to anybody else in the business, and, honestly, that shows up in our GAAP profitability.

1-888-562-02621-604-929-1352 www.viavid.com

Tom Forte

All right, last two, and I, again, apologize to anyone else in the queue. All right, so John, you mentioned inflation in your prepared remarks. It seems like we're seeing signs of abatement. Are you seeing that on your end, and how, if at all, would you be impacted even if there was a deflation, as an example?

John Merrill

Well, I think we've positioned ourself as being the low cost leader, so I think that’s because of our efficiencies, whether it be AI, people, removing administrivia, we're positioned as the, I don't want to say the cheapest, but certainly, for our cost structure, we can provide the lowest cost, best solution to our customers. Inflation I don't think affects us as much as it may affect our customers, that if they have higher prices, but that still doesn't change the need for them in a high-volume, low-margin business for them to, one, do compliance that has no relationship to inflation, but also they need to get the most value out of the product that they're selling, so we're kind of agnostic to it, but I think that we've positioned our pricing structure to it doesn't matter whether there's inflation or not. I think it's a matter of our customers. It's not a matter of the services that we provide at ReposiTrak.

Randy Fields

Actually, if I could add a little bit that, John's explanation is exactly right, but as a matter of strategy, we want to be the low-cost provider. We want to have, strangely enough, the best service simultaneously at the lowest comparable price, so when it comes to traceability, for example, a supplier pays us one time unlimited use over the course of any given year, so it's a subscription model, but it's an unlimited use model. Everyone else is trying to, as they think about traceability, doing it on a per-click basis, which almost, by definition, makes us the low-cost provider. We think that's very competitive.

Tom Forte

Okay, great. All right, so then, would appreciate your current thoughts on entering adjacent markets such as restaurants or other highly-regulated markets such as healthcare?

Randy Fields

Well, traceability is pretty close to a universal problem for anyone that sells food, so, obviously, we're most experienced in the supermarket or mass merchant business where they sell food as groceries, but clearly, convenience stores carry foods that would be covered under the traceability rules as they currently exist. Restaurants, absolutely; quick service restaurants; QSR foodservice like cafeterias and whatnot, so there's a whole variety of possibilities for us to expand in that area. We're making efforts today in doing that, and hopefully, in the next year, we'll begin to penetrate that market just as we are the supermarket industry.

I think something that maybe didn't come through as clearly as we'd like, our pipeline is extraordinary. We are winning. It's pretty remarkable. I think over the next several quarters, we'll be announcing additional hubs, which are the primary users of our technology, meaning retailers and wholesalers, and I'll be very surprised if we don't see a move toward market dominance that we've always wanted to have in traceability over the next two years. We weren't kidding. It's not a tagline. It's true. Everyone else is talking about traceability. We would do this. Whatever it would be, we're actually doing it. We know of absolutely no one else that now at scale is doing traceability in the world of food. We're pretty excited about it. Our profile's a little bit lower than we'd like. That's why we invested the way we did last quarter, but the truth of the matter is we are winning.

1-888-562-02621-604-929-1352 www.viavid.com

Tom Forte

Great. Thank you, Randy. Thank you, John.

Randy Fields

Thank you.

John Merrill

Thanks, Tom.

Operator

At this time, we are showing no further questioners in the queue, and this does conclude our question-and-answer session. I would now like to turn the conference back over to Randy Fields for any closing remarks.

Randy Fields

Well, I think we've said it all. We feel great, obviously, about where we are. Lots to do in traceability, as we mentioned. For us, it's day by day uncovering new obstacles, new solutions, etc., so that we can dominate the traceability market to the extent that we desire, so appreciate your support, and we'll talk to you in a few months. Thanks.

John Merrill

Thanks, everyone.

1-888-562-02621-604-929-1352 www.viavid.com

Document And Entity Information	Nov. 14, 2023
Document Information [Line Items]
Entity, Registrant Name	PARK CITY GROUP, INC.
Document, Type	8-K
Document, Period End Date	Nov. 14, 2023
Entity, Incorporation, State or Country Code	NV
Entity, File Number	001-34941
Entity, Tax Identification Number	37-1454128
Entity, Address, Address Line One	5282 South Commerce Drive, Suite D292
Entity, Address, City or Town	Murray
Entity, Address, State or Province	UT
Entity, Address, Postal Zip Code	84107
City Area Code	435
Local Phone Number	645-2000
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Common stock
Trading Symbol	TRAK
Security Exchange Name	NYSE
Entity, Emerging Growth Company	false
Amendment Flag	false
Entity, Central Index Key	0000050471