Park City Group, Inc. 10-Q Summary
Reporting-period note: Although the request identifies Repositrak, Inc. and “2020 Q1,” the supplied filing is Park City Group, Inc.’s consolidated Form 10-Q for the three months ended September 30, 2020, its fiscal first quarter of 2021. Park City Group is the parent of ReposiTrak, Inc.; the results below are consolidated, not ReposiTrak standalone results.
Business context and financial results
The company provides cloud-based B2B e-commerce, supplier compliance and food-safety, and supply-chain management services, primarily to food retailers, wholesalers, and suppliers. Its hub-and-spoke model generally has retailers or wholesalers engage the company and require suppliers to use its platform.
| Metric | Three months ended Sep. 30, 2020 | Prior-year comparable period |
|---|---|---|
| Revenue | $5.23 million | $4.80 million |
| Operating income | $631,000 | $141,000 |
| Net income | $555,000 | $178,000 |
| Net income attributable to common shareholders | $408,000; $0.02 per basic and diluted share | $32,000; reported as $0.00 per share |
| Cash provided by operating activities | $1.22 million | $713,000 |
Revenue increased 9%, primarily from MarketPlace and software subscription growth. Approximate operating margin rose to 12.1% from 2.9%; net margin rose to 10.6% from 3.7%. Cost of services grew 8% and remained 38% of revenue. Sales and marketing expense fell 9% and general and administrative expense fell 11%; depreciation and amortization increased 28%.
Financial position, liquidity, and debt
- At September 30, cash was $21.16 million, current assets $28.55 million, and current liabilities $10.16 million. Working capital was $18.38 million; the current ratio was approximately 2.8.
- Total liabilities were $11.28 million. Reported debt comprised a $5.28 million line of credit and $1.11 million in Paycheck Protection Program loans; the company reported no notes payable at quarter-end. Total debt was approximately $6.39 million, about 83% variable-rate and 17% fixed-rate.
- Operating cash flow increased 72% year over year. Investing activities used $13,000, versus $354,000 in the prior-year quarter. Financing activities used $397,000, including $921,000 of payments on notes payable and capital leases, partly offset by a $620,000 increase in line-of-credit borrowings.
- Cash increased $813,000 from June 30. Management said cash, short-term investments, and operating cash generation were expected to fund operating and investment needs for at least 12 months.
Changes, outlook, and risks
- Management attributed improved operating results to revenue growth and lower operating costs. Reduced sales and marketing and G&A costs reflected, among other factors, lower travel and contractor costs and cost-control efforts. The prior-year quarter included greater spending on headquarters and data-center buildout.
- Management expects MarketPlace growth to increase service costs in absolute terms and as a percentage of revenue, while it anticipates continued declines in sales and marketing and G&A expenses. No numerical revenue or earnings guidance was provided.
- COVID-19 had not materially adversely affected results through the reported quarter, but management said future effects were uncertain and could materially harm business, financial condition, or results. It cited potential impacts from restrictions and closures affecting the company and customers.
- The company launched FoodSourceUSA, a platform intended to connect excess perishable-food inventory with food-insecure communities through providers, charitable organizations, and government agencies. It was evaluating potential recurring-revenue opportunities; the filing provides no quantified revenue outlook for the initiative.
- Series B and B-1 preferred stock carries dividends at 7% if paid in cash or 9% if paid in additional shares, at the company’s choice. Preferred dividends were $147,000 for the quarter. Management said alternatives to redeeming Series B-1 were more expensive or could weaken cash and customer confidence.
- COVID-related uncertainty, interest-rate exposure, customer payment and revenue-estimation judgments, and potential impairment of goodwill and long-lived assets are relevant risks. The company reported no material pending or threatened legal proceeding, no material off-balance-sheet arrangements, and no subsequent event reasonably likely to affect the financial statements. Its share repurchase program had been temporarily suspended in March 2020.
Key facts for investors to verify
- Confirm the issuer and period: this is Park City Group’s consolidated quarter ended September 30, 2020, not a standalone ReposiTrak filing or a quarter ended earlier in calendar 2020.
- Review the line-of-credit balance, terms, and variable-rate exposure, along with the status and repayment or forgiveness of the $1.11 million in PPP loans.
- Assess receivables and collectability: the allowance for doubtful accounts increased to $377,000 from $252,000 at June 30, while operating cash flow benefited from working-capital movements.
- Track whether MarketPlace and subscription growth continues, and whether expected MarketPlace service-cost increases offset operating-expense reductions.
- Monitor FoodSourceUSA adoption and monetization, COVID-19 effects, and the preferred-stock dividend burden and potential warrant dilution.