Filing and reporting period
Important identification note: The supplied filing is Park City Group, Inc.’s Form 10-Q for the quarter ended March 31, 2020, filed May 11, 2020—not a 2019 Q3 filing by ReposiTrak, Inc. ReposiTrak is a wholly owned operating subsidiary. Financial statements are unaudited.
Park City Group provides SaaS applications for supplier discovery and B2B commerce, food safety and compliance, and supply-chain management. Its hub-and-spoke model typically serves retailers and wholesalers that require suppliers to use its platform.
Financial performance and position
| Metric | Three months ended March 31, 2020 | Prior-year quarter | Nine months ended March 31, 2020 | Prior-year period |
|---|---|---|---|---|
| Revenue | $4.63 million | $5.01 million | $14.27 million | $16.51 million |
| Operating income | $0.24 million | $1.02 million | $1.01 million | $3.72 million |
| Net income | $0.27 million | $1.07 million | $1.11 million | $3.72 million |
| Net income applicable to common shareholders | $0.13 million | $0.92 million | $0.67 million | $3.28 million |
| Basic/diluted EPS | $0.01 / $0.01 | $0.05 / $0.05 | $0.03 / $0.03 | $0.17 / $0.16 |
Revenue declined 7% in the quarter and 14% year to date. Operating margins were approximately 5.1% and 7.1%, respectively, versus approximately 20.3% and 22.5% in the comparable periods. The filing attributes the revenue decline mainly to lower one-time transactional revenue; the company is emphasizing recurring subscriptions. Nine-month cost of services rose 6% and was 32% of revenue, compared with 26% a year earlier.
For the nine months, operating cash flow was $2.27 million, down from $3.48 million. Investing activities used $0.64 million, primarily for equipment; financing activities used $2.36 million, mainly reflecting common-stock repurchases and preferred dividends. Cash fell by $0.73 million from June 30, 2019 to $17.88 million at March 31, 2020.
At March 31, 2020, current assets were $25.45 million, current liabilities $8.60 million, and working capital $16.85 million. Total liabilities were $10.00 million and stockholders’ equity $42.14 million. Debt was reported as $5.996 million: $5.0 million of variable-rate credit-line borrowings and $0.996 million of fixed-rate debt. The credit line maturity was extended to December 31, 2020. Cash was $17.88 million; management stated it believed cash and funds from operations were sufficient for at least the next 12 months.
Material changes and management commentary
- Lower one-time transactional revenue reduced sales, while professional services and Marketplace revenue partially offset the nine-month decrease.
- Marketplace investment increased service costs. Sales and marketing expense rose 11% in the quarter, principally due to inside-sales headcount; nine-month expense was approximately flat. General and administrative expense rose 16% in the quarter, while nine-month expense increased 1%. Depreciation and amortization increased 37% for the quarter and 42% year to date, reflecting infrastructure, headquarters, and data-center investment.
- Preferred-stock dividends were $146,611 for the quarter and $439,833 for the nine months. Series B and B-1 preferred shares carry a 7% cash dividend rate or 9% if paid in additional preferred shares.
- The company repurchased common stock during the period. The board suspended its repurchase program on March 17, 2020 amid COVID-19 uncertainty; $1.36 million of authorization remained at March 31.
- Management gave no quantified revenue or earnings guidance. It expected service costs to increase as it invests in Marketplace; it anticipated sales and marketing and general and administrative expense to remain relatively flat in absolute terms in subsequent periods.
Outlook, risks, and unusual items
- COVID-19 had not materially adversely affected third-quarter results or operations, but management said the future impact was uncertain and that restrictions and customer or company facility closures could affect sales and service delivery, potentially materially.
- In April 2020, the company announced FoodSourceUSA, a planned platform to match excess perishable food with food-insecure communities. Pilot tests were planned in two states; the filing does not report operating results or revenue from the initiative.
- On April 23, 2020, after quarter-end, the company received an approximately $1.1 million PPP loan at 1% interest, scheduled to mature April 23, 2022. It intended to use proceeds primarily for eligible payroll, rent, and utility costs. The loan is not included in March 31, 2020 balance-sheet debt.
- The company adopted lease accounting requirements effective July 1, 2019, recognizing operating lease assets and liabilities. It reported no material pending or threatened legal proceedings and no material off-balance-sheet arrangements.
- Management identified no additional risk factors beyond its prior annual report other than COVID-19 risks. Debt was approximately 83% variable rate; management considered the near-term interest-rate effect unlikely to be material.
Important facts for investors to verify
- Confirm the issuer and reporting period: this is Park City Group’s March 31, 2020 quarterly filing, despite the request metadata naming ReposiTrak and 2019 Q3.
- Track whether revenue stabilizes as the company shifts toward recurring subscriptions, and whether lower revenue and increased investment continue to pressure margins and operating cash flow.
- Review COVID-19 effects on customers, service delivery, sales, and the FoodSourceUSA initiative; the filing provides no quantified forward outlook.
- Check the terms, use, and any forgiveness or repayment status of the post-quarter-end PPP loan.
- Monitor the December 31, 2020 credit-line maturity, variable-rate exposure, and preferred-stock dividend burden.