Exhibit
99.1
Park
City Group – Fiscal Second Quarter 2021 Earnings Call,
February 16, 2021
C O R P O R A T E P A R T I C I P A N T S
Rob Fink, Manager Partner, FNK
IR
John Merrill, Chief Financial
Officer
Randy Fields, Chairman & 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
Ananda Baruah, Loop
Capital
Tevis Robinson, D.A.
Davidson
P R E S E N T A T I O N
Operator
Greetings,
and welcome to the Park City Group Fiscal Second Quarter 2021
Earnings Call.
At this
time, all participants are in a listen-only mode. A
question-and-answer session will follow the formal presentation. If
anyone should require Operator assistance during the conference,
please press star, zero on your telephone keypad.
As a
reminder, this conference is being recorded.
It is
now my pleasure to introduce your host, Rob Fink with FNK IR. Mr.
Fink, you may begin.
Rob Fink
Thank
you, Operator. Good afternoon, everyone. Thank you for joining us
today for Park City Group’s fiscal second 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 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 close today, the Company issued a press release
overviewing the financial results that 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
that said, I’d now like to turn the call over to John
Merrill. John, the call is yours.
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Park
City Group – Fiscal Second Quarter 2021 Earnings Call,
February 16, 2021
John Merrill
Thanks,
Rob, and good afternoon, everyone.
Today
we report financial results for the second quarter of fiscal 2021
ending on December 31. Highlights of the quarter are as
follows.
Recurring
revenue growth for our SaaS business, which includes Compliance and
Supply Chain, was up 7%. MarketPlace revenue grew 112%. With growth
in all three product lines, our consolidated revenue grew 7% from
$4.8 million to $5.2 million. Sales and marketing expenses
decreased 17%. Net income increased 145%, aided by a gain related
to the forgiveness of our PPP loan. Cash from operations
year-to-date was $3.8 million, and our balance sheet remains strong
with $23.9 million in cash.
The
bottom line is we continue to deliver a profitable, diversified,
growing business with a strong recurring SaaS component with a
modest cost structure and a MarketPlace business whereby we source
hard-to-find things for our customers. Considering the significant
challenges related to the pandemic and ongoing uncertainty, I am
encouraged with our results thus far for Fiscal 2021.
As we
have said previously on earnings calls, our software business
comprised of Compliance and Supply Chain services is now
effectively all recurring in nature. This recurring revenue more
than covers our fixed cash costs, resulting in predictable
profitability. I believe we are now at scale for the software side
of the business, so incremental revenue, either recurring or
transactional, largely falls to the bottom line at roughly an 80%
to 85% margin. Therefore, as the software side of the business
expands, we are able to support higher revenues without meaningful
increases in our SG&A lines.
While
the pandemic continues to extend the sales cycle for our software
business, we believe there is pent-up demand as things begin to
normalize. When this will occur and what is the new normal, it is
anyone’s guess.
As a
reminder, we still have only a 10% penetration with our existing
software customers, so farming our own customer network remains a
top priority for opportunity. As I’ve said before, we can
significantly grow our software business just by farming the
existing network.
While
the pandemic continues to delay decision-making on the software
side of the business, it has increased demand for our MarketPlace
solution, whereby we source, vet, and transact business for
hard-to-find things such as nitrile gloves, masks, gowns, just to
name a few. This results in a fluctuating amount of non-recurring
and largely unpredictable transactional MarketPlace revenue. This
revenue and its respective cost results in a sales mix between our
software business and MarketPlace business, which may compress our
total Company gross margin, but due to our low fixed cost base, it
is increasing our profitability and free cash flow.
Because
we sit between buyer and seller, our margin, whether as a markup of
goods or a commission, is substantially less than we get in the
software side of the business. Gross margin on incremental revenue
for our software business base is approximately 80% to 85%.
Conversely, MarketPlace is, on average, roughly 5% to 10%. We are
focused on expanding the MarketPlace margin both within and outside
the traditional grocer segment.
While
both the software and MarketPlace offerings of our business are
difficult to separate from our business strategy and software
suite, our overall offering to our customers is a combination of
solutions that enables customers to be compliant, have more
actionable visibility into their supply chain, replacing vendors,
diversifying product offerings and sourcing hard-to-find
items.
Turning
to the numbers. Fiscal Year 2021 second quarter revenue was $5.2
million, up 7% from $4.8 million in the same quarter last year. It
should be noted that $410,000 of one-time revenues of software
business occurred in the December 2019 quarter that did not reoccur
in the same quarter of 2020. If you consider that we backfilled a
large portion of the one-time revenue with subscription, our
software revenue was up 17% year-over-year.
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Park
City Group – Fiscal Second Quarter 2021 Earnings Call,
February 16, 2021
Total
operating expenses increased 14% from $4.2 million in Q2 2020 to
$4.7 million in Q2 2021. The principal driver and the increase in
total operating expenses was the increase in cost of services and
product support related to higher MarketPlace revenue and partially
offset by cost reductions in hosted software and other technology
service charges.
Sales
and marketing expenses decreased from $1.4 million in Q2 2020 to
$1.2 million in Q2 2021. This 17% decrease was the result of lower
sales travel, trade shows and cost reductions, partially offset by
higher commissions due to higher revenue.
G&A
costs increased modestly from $1.1 million in Q2 2020 to $1.2
million in Q2 2021. This was primarily the result of rising
insurance cost due to the pandemic and increases in our bad debt
reserve. We believe it is prudent to increase our reserves in this
uncertain time.
For the
second quarter of Fiscal 2021, GAAP net income was $1.6 million or
31% of revenue versus $663,000 or 14% of revenue. The forgiveness
of our PPP loan, recognized as a onetime gain on debt
extinguishment, was $1.1 million of this increase.
Earnings
per share for the second quarter of Fiscal 2021 was $0.08 per
share, more than double the $0.03 per share in the same period of
Fiscal 2020. Fiscal Year 2021 year-to-date revenue was $10.4
million, up 8.3% from the $9.6 million in the same period of Fiscal
2020. It should be noted that year-to-date revenue in Fiscal 2020
included $475,000 in onetime revenue that did not occur in the same
period of Fiscal 2021.
As we
have said previously, from time to time, there will always be a
small component of customers that buy, meaning license, versus
rent, meaning subscription. In Fiscal 2021, year-to-date onetime
revenue in our software business is less than 1%.
Total
operating expenses for Fiscal 2021 year-to-date was $9.4 million
versus $8.9 million. This 6% increase is largely the result of
higher revenue and the associated cost of services of that increase
in revenue.
Sales
and marketing expenses for Fiscal 2021 year-to-date declined 13%
from $2.9 million in Fiscal 2020 to $2.5 million in Fiscal 2021.
This was due largely to telecommuting versus in-office maintenance
costs, a reduction in trade shows and lower travel
expenditures.
G&A
costs for Fiscal 2021 year-to-date versus Fiscal 2020 were
essentially flat, down 1% or $24,000. While cost of benefits,
insurance and reserves for bad debt have increased as a result of
the pandemic, we remain committed to adjusting our cost structure
in other areas to keep the costs low.
Turning
now to cash flow and cash balances. For the second fiscal quarter
of Fiscal Year 2021, we generated cash from operations of $3.7
million compared to $2.7 million in the prior year period, an
increase of 37% due to increases in incremental revenue. Total cash
at December 31, 2020 was $23.9 million compared to $20.3 million at
the end of Fiscal Year 2020.
With
respect to our stock buyback program, as we said during the height
of the COVID pandemic, we made the prudent decision to halt our
buyback program. We did not purchase any shares during either the
first or second fiscal quarter of 2021. The Company has $1.46
million remaining on its existing buyback program and given our
current ability to generate cash, we may consider opportunistically
resuming the program at some point in Fiscal 2021.
Thanks,
everyone, for your time today. At this point, I’ll pass the
call over to Randy. Randy?
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Park
City Group – Fiscal Second Quarter 2021 Earnings Call,
February 16, 2021
Randy Fields
Thanks,
John.
The
second quarter continued our momentum and validated the progress
we’ve made in driving the earnings power and cash generation
ability of the Company. All three segments of our business grew,
highlighted by our MarketPlace offering. We’ve now reached
sufficient scale with our decreased and modest fixed cost base that
we’re positioned for sustainable and growing profitability.
As a Company, this has been and remains our focus, growing
profitability and cash flow. This is how we measure ourselves, and
we think this is how Investors should measure us as
well.
We’re
an earnings company today. Three years ago, we signaled our
strategic direction to drive the Company toward higher recurring
revenue, making it easier to predict and delivering structural
profitability and cash flow. We’re very proud of how well and
how quickly that’s come about. This year is and will continue
to be a showcase for the validity of that direction. Keep in mind,
we report GAAP rather than non-GAAP as most people in technology
do.
Generally
speaking, the pandemic continues to affect our business, slowing
decision-making and the sales cycle for our Compliance and our
Supply Chain solutions. But at the same time, it’s
illuminated an increasing customer awareness of our capability to
source hard-to-find products in MarketPlace. This reality validates
the strategy of having these three synergistic legs to our business
stool. We’ve become the industry leaders in our specialty
Supply Chain offerings and in our Compliance Management. Over time,
it’s our hope to establish ourselves as the go-to place for
hard-to-find items. We’re making progress, but we’re
not there yet.
Our
MarketPlace Solutions help our customers secure products from
vetted suppliers when others have been unable to supply, and our
out-of-stock solution has helped customers keep better supplies on
their shelf. As the pandemic abates and we begin to normalize, we
expect to see increased demand from our traditional recurring
revenue solutions in both Compliance and Supply Chain.
As
we’ve said before, the three legs of our stool provide a
complete Supply Chain solution for our customers. It enables them
to source suppliers, vet suppliers and transact all business in one
integrated complementary solution. I don’t know of any other
Supply Chain vendor, which does all of this end-to-end. But with
our transition from onetime to recurring revenue effectively
complete, the impact of this revenue mix is unlikely to materially
diminish our ability to remain profitable.
Today,
we enjoy a highly visible SaaS revenue stream, which more than
covers our fixed costs and enables consistent profitability. In
other words, we have a business that we call structurally
profitable, structurally generating cash and the most significant
improvement in our balance sheet in our history. The proof is in
those numbers that you’ve now seen. In our view, we’re
positioned now to opportunistically resume our share repurchase and
simultaneously continue to fortify our balance sheet. We
don’t have to choose one or the other. In fact, we now know
we can do both.
Our
customers demand financial strength, and we’re using it as a
primary anchor in our net new business marketing, and that message
is definitely resonating with our prospects. But importantly,
we’re working to expand our customer relationships and our
revenue per customer. We’re doing it actually in two
different but related ways. Let me see if I can
explain.
We’re
trying to get our customers to take up more modules per customer
and more application suites per customer. Let me go through that.
First, we’re adding additional functional modules to our
existing applications and up-selling those to our existing
customers. We’re in the process of adding terrific new
functionality to each of the three components of our platform, to
Compliance, to Supply Chain and to MarketPlace. Each one of these
additions, each one of these modules will add revenue. Importantly,
each is attractive in its own right to prospective new customers.
We’ve already seen that, in fact.
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Park
City Group – Fiscal Second Quarter 2021 Earnings Call,
February 16, 2021
At the
same time, we’re advancing our cross-selling, moving our
customers across the whole platform from Compliance to Supply Chain
to MarketPlace and vice versa, as John puts it, farming. Again,
this will have the impact of increasingly driving our monthly
revenue from each customer by adding incremental value, frankly,
with very little cost on our part. The up-selling to new modules is
a very important way to grow our business. For example, we have two
new products targeted to our Tier 2 suppliers.
Our new
active quality management system, which we call Active QMS, allows
quality and safety teams at manufacturing and distribution
operations to simplify the tedious error-prone manual recordkeeping
processes required for critical controls, things like temperature
checks, swab testing, sanitation, pest control, equipment
inspections, cleaning floors, et cetera. Initial market reaction to
this new and unique offering is very, very strong. From our
perspective, the offering typically doubles the recruiting revenue
that a customer pays us.
Our
certificate and analysis product, which helps track certification
from suppliers and matches them to distributors’ needs, is
also in our new portfolio of modules. This helps create an
end-to-end tracking of various elements required by retailers or
distributors and provides evidence of the supply chain to ensure
Compliance along the entire supply chain. Our Tier 2s demanded a
solution like this, we listened and now it’s available. It
makes their job much easier. Once again, this offering, as
implemented, will meaningfully increase the recurring revenue from
a Tier 2 supplier. In fact, we already have a few new wins with
both of these add-ons. We have a great deal of headwind with our
existing customers and we’re learning to capitalize on
it.
Cross-selling
from one of our suites to another, like Compliance to Supply Chain,
is obvious. It’s also substantially more challenging. But
we’re learning and we’ll continue to learn to do it.
We’ve begun to see accelerating success in our cross-selling
efforts. We recently signed our first large Compliance customer for
our out-of-stock management offering. Additionally, more Tier 2
hubs are adding modules driving higher recurring revenue. Our
pipeline for new Tier 1 hubs for our Supply Chain offering is
expanding, growing even in this uncertain time.
In the
interim, MarketPlace has emerged as a critical part of our
platform. The pandemic has made it harder than ever to find
trustworthy, compliant, vetted vendors. Shortages of PPE, chest
freezers and the like and other items has created incremental
challenges for retailers trying to compete with online retailers to
maintain their market share. MarketPlace has solved many of these
challenges, contributing to significant transactional revenue to
our topline this quarter, the third such quarter in a row. The
result is topline revenue growth for the fiscal year. Though in
future years, we’re likely to be more focused, frankly, on
growing the bottom line than just the topline as the pandemic
abates and the MarketPlace revenue normalizes.
We do,
however, believe that MarketPlace actually will be profitable for
the full year. We’ve recently added some additional talent to
our MarketPlace team to drive some recurring revenue and grow out
the space with additional capabilities. The industry dynamics that
serve as long-term secular catalysts for us have not changed. If
anything, they’ve been reinforced. Sometimes, a whole new
market can appear to open for us, like Compliance Management a few
years ago.
Recently,
we’ve been exploring government as a possible market. In that
vein, we launched an inventory control grant management
reconciliation platform for the critical emergency management
organizations that every state government has. This expansion of
our MarketPlace solution, built on the ReposiTrak platform
naturally, will streamline and automate critical supply chain
processes. We expect that it will help significantly solve the
challenge of complicated manual grant tracking and auditing that is
going to be, and in the future, increasingly overwhelming for those
state agencies. This offering could increase our presence in the
government market, expand our offerings, certainly well beyond our
traditional grocery space. We have our first state customer now
engaged in a pilot program, but it will be some months before we
have a good read on the opportunity, but I’ll certainly keep
you posted.
Finally,
a few years ago, we launched our 10x initiative, which was focused
on increasing what we call internal efficiency and productivity.
This program has wildly exceeded our goals, so we’re now
doing more with fewer people, all the while continuing to delight
our customers. Let me give you an example.
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Park
City Group – Fiscal Second Quarter 2021 Earnings Call,
February 16, 2021
When we
launched this initiative some years ago, we had five people in
accounting servicing 800 accounts from an
accounting perspective. Today, we have a team of five people
servicing 20,000 accounts. Much of this success has come from
internally developed automation, CRM tools, which help drive
productivity. It’s in fact, an obsession of
ours.
The
next step will be leveraging artificial intelligence to drive even
more productivity enhancements for the Company as a whole.
We’re growing. The goal is to grow efficiently and not spend
all of the growth on added costs. We prefer what we call, again,
structural profitability, carefully contained costs well below a
predictable recurring revenue base.
In
fact, the ability to automate internally is actually an important
core competency of ours, and it’s certainly a critical
element in growing our structural profitability. I’m very,
very excited about what we might uniquely be able to achieve in
this area. It has the possibility, if we can develop the tools that
we currently envision, of simultaneously driving our revenue and
decreasing our related costs for some period of time into the
future.
In
summary, we’re in an excellent position with strong recurring
revenue, synergistic transactional revenue, structural
profitability, growing cash flow and a very strong balance sheet.
The pandemic has certainly slowed some parts of our business but
serves as a powerful catalyst for some of the others. In other
words, we’re able to grow our topline, while expanding our
bottom line even faster.
With
that, I’d like to now open the call for questions.
Operator?
Operator
Thank
you. We will now be conducting a question-and-answer session. If
you would like to ask a question, please press star, one on your
telephone keypad. A confirmation tone will indicate that your line
is in the question queue. You may press star, two if you would like
to remove your question from the queue. For participants using
speaker equipment, it may be necessary to pick up your handset
before pressing the star keys. One moment, please, while we poll
for questions. Thank you.
Our
first question comes from Ananda Baruah with Loop Capital. Please
proceed with your question.
Ananda Baruah
Hey,
good afternoon, guys. Happy New Year, and glad you guys are doing
well. Good to hear. Congrats on solid results, and congrats on the
stock acting well, as well, of late, reflects
performance.
I guess
I have a few, if I could. I guess, the first one would
be—they’re all revenue related, but the first one, this
is probably for John. You mentioned you guys are at scale in
software, and incrementally, the rest falls to EPS at 85% margin. I
guess that’s baseline revenue dollars, John, and what should
we use roughly as that baseline dollar? Should we use the dollar
for the quarter? Then should we just literally think of the
incremental value going forward and that’s the drop
through?
John Merrill
Yes.
Again, we’ve said this on prior calls, it takes about $12
million to $13 million in cash, forget the accounting, to run our
business, specifically the software business. As we incrementally
add more recurring revenue, then that dollar—about $0.80 to
$0.85 on the dollar falls to the bottom line. That’s the
software side of the business. But as we add more MarketPlace
revenue, obviously that’s with a far lower margin, call it 5%
to 10%.
Ananda Baruah
Yes, I
got it. It’s just $0.80 to $0.85 on the dollar after the $12
million to $13 million? Or is it from the—above the cash or
is it from the (inaudible)?
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Park
City Group – Fiscal Second Quarter 2021 Earnings Call,
February 16, 2021
John Merrill
If you
look at the—call it, the recurring software side of the
business, call it, $16.5 million or so on top of that, any
incremental dollar over that would fall to the bottom line, 80% to
85%. But again, it’s about $13 million in our basic cash
costs.
Ananda Baruah
Totally
got it. Totally got it. Then just on the pent-up demand, just the
context you can give us that indicates that to you—I know
timing sounds like it’s—understandably, like you have
not—not perfectly clear. But what are the indications that
are pointing to pent-up demand? What’s the feedback you guys
are getting in that regard?
Randy Fields
John,
you want me to answer that?
John Merrill
Randy,
yes, you could take that one.
Randy Fields
Well,
we’re seeing more inbound inquiries, which is usually a very
good sign. The reception to our new products has been very strong.
For reasons that must have something to do with people, and I
don’t want to say normalizing because
that’s—we’re a long distance in the world from
that, but people adjusting to the current environment is creating a
better selling environment. We’re getting people on the
phone. When this first started to happen, honestly, for the first
six months, you had people that had never worked from home before.
Just getting them to talk to you is like, really, that’s
tough.
Now I
think there’s been an adjustment to the Zoomization of the
supermarket industry. To a certain extent, it’s not quite
business as normal because people are still struggling to keep
things in stock. If you were a supermarket chain, you’ve got
to worry about your frontline workers. You’ve got to worry
about gloves, masks, cleaning. I mean, running a retail business
today is exquisitely difficult.
In the
midst of all of that, we are seeing more interest, and we suspect
that, that will begin to show up in our P&L late in this fiscal
year, which would be June—May, June or early in the next
quarter, or both of those, July, August. It just feels very good to
us at the moment.
Interestingly,
we have several of the—we call them Tier 1s, the largest
accounts in our pipeline, are starting to roll out and get more
aggressive about what we can do for them. It just feels good at the
moment.
Ananda Baruah
That’s
awesome. Just with regards to—you guys, the 10% penetration
of—I’m going to call it your installed base. I think
you said software customers. This year is going to be a big focus
on increasing that penetration. Is there anything that you
can—well, is there anything that you guys are deciding to do
a bit differently to press that penetration? Or is it a matter of
just you doing the right things, just keep doing what you’re
doing, the penetration is going to come naturally?
Randy Fields
Well, I
think I want to be careful how I characterize this because this
will sound a bit more negative than it might otherwise. We are
extremely good at taking care of our customers and servicing our
customers. That requires both good work on our part and excellent
communication on the part of the people in our business that manage
the accounts, clearly. Our lack of turnover, our customer success
reflects that. But what we haven’t been very good at,
historically, is asking the customer, literally, as simple as,
we’ve done this for you, shouldn’t we do more?
“Oh, I didn’t even know you guys did
that.”
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Park
City Group – Fiscal Second Quarter 2021 Earnings Call,
February 16, 2021
I would
say that we’ve not been very good historically beyond
the—I’m going to call it servicing, of our accounts and
we’ve been fabulous at that. We’re beginning to create
more sales, not just incentive, but sales environment for our
people, better support from them, better marketing, et cetera.
It’s not a quick fix. It’s a slowly changing the
culture to a more sales oriented culture. A year ago, as we got
started on this, we did it in fits and starts and then sadly the
world went to sleep because of COVID. But it’s beginning to
wake up and our people are getting better. They’re more
excited about it because they’re learning new skills. I think
that, that change positions us really well.
We’ve
had a number of competitive wins where pieces of our business that
others have—customers have come to us because of failures
with other customers. Our financial strength has really been a
competitive advantage. I think all the pieces are in place.
I’m not satisfied with how well we’re doing it. I am
satisfied with how we’re approaching it. I would expect the
pace to begin picking up. I’m going to guess honestly though
it’s at least another year until we’re at a pace that
I’m pleased with.
Ananda Baruah
Got it.
Randy, that’s super helpful. Then just my last one—that
dovetails into my last one. I always enjoy getting updates on every
quarter. How are you guys are reviewing the revenue growth
potential longer term of the recurring business? I think right
now—I didn’t check my notes, but I believe it’s
north of 10% or 10% plus or something like that, in that ballpark,
the last time I asked you guys this. Is that still the case? Randy,
if you can get—and if you can get meaningful install-based
penetration, would that have the potential to move higher over
time?
Randy Fields
Well,
to a certain extent, our service mentality and the need to really
wrap ourselves around our customers creates a constraint.
It’s not just bring them in, wham, bam, thank you,
ma’am, and move on. It’s nothing like that. It’s
very intense. Consequently, I still believe for the next year or
two that the recurring revenue growth is going to fall somewhere in
the bracket of 10% to perhaps 20% per year.
Over
time, as we do what we talked about today, add more easily upgraded
modules and get better at cross selling, given the scale of the
white space in our customers, there really isn’t a reason
that not only is that achievable, but yes, it possibly, possibly
could go higher. The reason that, that would be acceptable to us is
that if it’s more revenue from the same customers, it
doesn’t mean that we’re spreading an increasingly thin
service group over that customer set.
Ananda Baruah
Yes, I
got it.
Randy Fields
The
answer to your question is we really do feel good about where we
are. Quarter-to-quarter it may vary from that, but we can’t
see why 10% to 20% a year—and remember what that does to our
bottom line. It’s pretty highly leveraged, not in a debt
sense, but in an operational sense. The bottom line
should—and cash generation should be exquisite. As I say, we
feel very good about where we are. This is going to be a very good
year.
Ananda Baruah
That’s
really helpful. All right, I’ll cede the floor. Thanks so
much.
Randy Fields
Thanks,
Ananda.
Operator
Thank
you. Our next question comes from Tevis Robinson with D.A.
Davidson. Please proceed with your question.
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Park
City Group – Fiscal Second Quarter 2021 Earnings Call,
February 16, 2021
Tevis Robinson
Thanks
so much and congrats on a great quarter.
First
off, on your new products offering, one, an extension of the
MarketPlace and the other the Compliance, how should we think about
their potential financial impact during the next 12 months?
Additionally, what’s the backstory on your effort with FEMA?
How do you secure that opportunity? I have a follow-up after
that.
Randy Fields
Okay.
Well, let me answer—let me try and give you an intelligent
answer to that, starting with the more difficult piece of it, the
government. We did some government work in our last fiscal year.
It’s not like dealing with the private sector. It’s
quite different. Again, we need to learn more about that and get
more proficient at it.
As a
result of that work, we stumbled into a couple of other interesting
opportunities, one of which we’ve seized on and initiated a
pilot. The pilot is with the State Emergency Management Group. The
Director of that Management Group has made the decision to use our
technology. I would think, so far, the way they’ve laid out
the requirements, that we should be quite successful over the next
six months in helping them.
If that
happens, going from state to state will just become part of our
sales process, and we’re already learning the mechanisms for
doing that. It’s simply too early to see what the outcome
would be with any degree of certitude, but we’re bringing it
up because we periodically do these new things. We did Compliance.
That turned out very good. We did MarketPlace. That’s turning
out to be very, very good. Now we’re going to try some
government activity that combines those two activities. We shall
see. But we do feel good about it at the moment.
On the
new modules part of our business, we are increasingly going to be
modularizing what we do so that we can, as we develop new
functionality—and it’s usually customer-driven.
Typically, a customer will come to us and say – and I’m
not exaggerating it. This is true. They will say, “We love
working with you guys. We wish you could do this because this is a
problem that we’re having, and we would love it if you could
solve that problem.” We typically then take a look at the
problem, assess it, decide how it can fit into our platform, and
then we go off and do it. It’s rarely more than a few months
of development time line for us to bring a new module to
market.
We then
typically start with the customer that asked about the problem. We
then go to a couple of others. At that point, it’s been
productized, if you will, and should be sellable. This is a
somewhat different approach than we’ve taken before. I guess,
in a way, I’m just trying to keep everyone on the bus, and in
the know.
Historically,
we’ve just included everything. We are the everything
platform. Now what we’re saying is that our customers are
going to begin to pay for the additional functionality as we
deliver it. We think that gives them more, literally, investment on
what we’re doing. Obviously, it has the salutary impact of
increasing our revenue. I think both of these new products have the
potential in the next fiscal year, not the one we’re in, but
next year, to make a significant contribution. We feel good about
the direction. There’s a lot of work going on internally in
terms of this modularization of our platform. But watch this space.
We’ll be talking more about it over the next year or two. Was
that too indirect, Tevis?
Tevis Robinson
No, no,
that makes sense. Yes, just for a follow-up, I was wondering if you
could talk about the current level of distraction at the food
retailer level, when it comes to your core decision-maker and how
they may or may not be affecting your sales cycle. For instance,
can you quantify what this is doing to the sales cycle?
Yes.
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Park
City Group – Fiscal Second Quarter 2021 Earnings Call,
February 16, 2021
Randy Fields
Yes.
It’s a really good question, but let me give you a couple of
examples. These are absolute examples within the last 30 days. We
will call to speak to—and remember, we sell quite high inside
of an organization. When we’re calling on our customers,
it’s typically somebody in the C-suite or very close to the
C-suite.
On
several occasions that I’m aware of, here’s what we
were told: “He’s not in to take your call. He’s
in the stores working because we are short staffed. So it’s
not clear when he’ll be able to get back to you.”
Literally, there’s such a shortage of—and remember that
the horrible position that grocery store workers are put in. They
stand all day long—and sure, they have masks and gloves, but
zillions of people going in and out. They’re exposed to the
virus. It’s not an easy thing. The absentee rate, the
sickness rate is higher than anybody would like, which puts
pressure on these companies to get as many people in the field in
the stores as they can. I’ve never seen it like this before.
It does impact, and if the question is quantification, it’s
not years, it’s months.
Now as
the situation seems to be normal, I—God, I hate to use that
word, but whatever the word should be. As that’s beginning,
we’re seeing it’s easier to get some phone calls and
whatnot. Internally, we refer to it as people are able to now move
their attention to other things. The industry as a whole is very
thin, managerially. It’s always been that way because
it’s a low-margin business. Consequently, they can’t
handle five or six or 10 things at a time. It’s sequential.
Right now, it’s staffing the stores, stocking the stores, et
cetera. Over time, it’s been getting better, and we feel good
about that. It’s not where it was before the pandemic, maybe
a third of the way back is probably the best way to put
it.
Tevis Robinson
Great.
Thanks so much for taking my questions.
Randy Fields
Of
course.
Operator
Thank
you. There are no further questions at this time. I would like to
turn the floor back over to Randy Fields for any closing
comments.
Randy Fields
Not
much to say. I think we’ve given you a pretty good indication
that the year is going to be an excellent year. We are continuing
our focus on our balance sheet. As we mentioned, we feel
increasingly good about the position that we’re in. Rob,
anything else that we need to cover off on? Or are we there? Sounds
like we’re there. Thank you, all. Talk to you
soon.
John Merrill
Thanks,
everyone.
Operator
This
concludes today’s conference. You may disconnect your lines
at this time. Thank you for your participation. Have a wonderful
evening.
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