Park City Group, Inc. (parent of ReposiTrak) — FY2022 Form 10-K
Reporting period: Fiscal year ended June 30, 2022, compared with fiscal 2021. This is the consolidated filing of Park City Group, Inc.; it does not provide standalone ReposiTrak financial statements. The filing describes ReposiTrak as the group’s B2B e-commerce, supplier-compliance, food-safety and supply-chain SaaS platform.
Key financial results
| Metric | FY2022 | FY2021 | Change |
|---|---|---|---|
| Revenue | $18.05 million | $21.01 million | -14% |
| Operating income | $4.41 million | $2.89 million | +53% |
| Net income | $4.00 million | $4.12 million | -3% |
| Net income applicable to common shareholders | $3.42 million | $3.53 million | -3% |
| Basic and diluted EPS | $0.18 | $0.18 | Flat |
| Cash from operating activities | $6.10 million | $5.40 million | +13% |
| Cash and cash equivalents at year-end | $21.46 million | $24.07 million | -11% |
| Working capital at year-end | $20.49 million | $20.40 million | +$0.08 million |
| Line-of-credit balance | $2.59 million | $6.00 million | -$3.41 million |
Operating margin was approximately 24.5%, up from 13.8%; net margin was approximately 22.2%, compared with 19.6%. Cost of revenue and product support fell to $3.19 million from $6.88 million, representing approximately 18% of revenue versus 33%. The filing does not provide a clear standalone gross-margin measure by product suite.
Cash used in financing activities was $10.03 million, mainly reflecting $6.15 million of share repurchases and a net reduction in lines of credit. Investing activities provided $1.32 million, principally from selling property and equipment. Total assets were $49.32 million and total liabilities were $6.42 million at June 30, 2022.
Material changes and notable items
- Total revenue fell primarily because exceptional, largely PPE-related MarketPlace transactions during the COVID-19 supply disruptions did not recur. Transaction-based MarketPlace revenue declined 97% to $0.11 million from $3.57 million.
- Recurring subscription, support and services revenue increased 6% to $17.86 million, partially offsetting the transactional decline. Management said it is prioritizing recurring revenue and eliminating non-core, non-recurring and low-margin business.
- Lower-cost operations helped lift operating income despite lower revenue. Cost reductions included exiting low-margin MarketPlace activity, sunsetting two vendor-managed pricing products and associated headcount, and eliminating certain third-party software services.
- FY2021 other income included a $1.11 million gain on debt extinguishment, which did not recur. FY2022 included a $0.35 million realized loss on short-term investments; management attributed investment declines to rising interest rates. These items help explain why net income did not rise with operating income.
- The company repurchased 983,275 shares for approximately $6.14 million in FY2022. Remaining repurchase authorization was $10.82 million at year-end. Common shares outstanding declined from 19.35 million to 18.46 million.
Liquidity, debt and outlook
- U.S. Bank’s revolving facility provides up to $10.0 million and matures March 31, 2023. Borrowings bear interest at 1.75% plus one-month LIBOR. The company reported $2.59 million drawn at June 30, 2022 and disclosed customary covenants, including a requirement to maintain liquid assets equal to the note balance and a maximum Senior Funded Debt-to-EBITDA ratio of 3:1.
- Management said cash and operating cash flow were sufficient for operations and investment needs for at least 12 months, and expected adequate resources to meet debt obligations and the announced dividend. It also cautioned that future capital needs depend on growth, spending and market acceptance; this is not a quantified earnings or revenue forecast.
- On September 28, 2022, after fiscal year-end, the board declared a quarterly common dividend of $0.015 per share, or $0.06 annualized. The company cautioned that future dividends are discretionary and may be discontinued. Series B and Series B-1 preferred stock carry dividends at 7% in cash or 9% if paid in additional preferred shares.
- Management said the war in Ukraine had not materially adversely affected FY2022 results, but its future effects were uncertain. Other cited risks include inflation and weaker economic conditions, customer renewals and concentration in food retail, competition, product execution, cybersecurity and service interruptions, and possible delays or changes to FSMA 204 implementation.
- New initiatives included audit-management software and automated vendor vetting and onboarding. The filing reports no pending or threatened material legal proceedings and no material off-balance-sheet arrangements.
Audit and reporting notes
The independent auditor issued an unqualified opinion on the consolidated financial statements. The auditor identified revenue recognition for multiple-element arrangements and capitalization of software development costs as critical audit matters. Approximately $760,000 of direct costs for a new software product were capitalized. Management concluded disclosure controls and internal control over financial reporting were effective; the auditor did not express an opinion on internal-control effectiveness.
Important facts for investors to verify
- Whether growth in recurring subscription revenue can continue to offset the loss of exceptional MarketPlace transactions, and how management defines its targeted recurring-revenue mix.
- The amount, terms, interest cost and covenant headroom of borrowing under the revolving facility, particularly ahead of its March 2023 maturity.
- Cash-flow sustainability after significant share repurchases, the new common dividend and preferred-stock dividend obligations.
- Whether new audit-management and onboarding products gain customers, and the commercial impact of FSMA 204 timing and implementation.
- The effect of the $0.35 million investment loss, remaining investment exposure, and the potential tax value of approximately $44.26 million in net operating loss carryforwards, which are subject to a full valuation allowance and possible ownership-change limitations.