Filing Summary
Period and entity: The supplied filing is Park City Group, Inc.’s unaudited Form 10-Q for the quarter and nine months ended March 31, 2021, filed May 17, 2021. This does not match the request metadata identifying ReposiTrak, Inc. and “2020 Q3.” Park City Group is the parent of ReposiTrak, and the reported results consolidate the operating results of Park City Group’s subsidiaries, including ReposiTrak.
Business context
The company provides SaaS and business-to-business e-commerce, compliance, food-safety and supply-chain services. Its products serve retailers, wholesalers, suppliers and food-service businesses through subscription, professional-services and transaction-based offerings.
Financial performance
| Metric | Three months ended March 31 | Nine months ended March 31 |
|---|---|---|
| Revenue | 2021: $6.02 million; 2020: $4.63 million, up 30% | 2021: $16.42 million; 2020: $14.27 million, up 15% |
| Operating income | 2021: $718,297; 2020: $236,923 | 2021: $1.73 million; 2020: $1.01 million |
| Net income | 2021: $773,197; 2020: $271,987 | 2021: $2.95 million; 2020: $1.11 million |
| Net income applicable to common shareholders | 2021: $626,586; 2020: $125,376 | 2021: $2.51 million; 2020: $673,608 |
| Basic and diluted EPS | 2021: $0.03; 2020: $0.01 | 2021: $0.13; 2020: $0.03 |
- For the quarter, cost of services and product support rose 92% to $2.63 million, faster than revenue. It was 44% of revenue versus 30% a year earlier. Sales and marketing fell 30% to $1.16 million; general and administrative expense rose 6% to $1.26 million.
- For the nine months, cost of services and product support rose 45% to $6.71 million, or 41% of revenue versus 32%. Sales and marketing declined 19% to $3.64 million; general and administrative expense increased 1% to $3.57 million.
- Operating margin was approximately 11.9% for the quarter versus 5.1% in the prior-year quarter, and 10.6% for the nine months versus 7.1%. These reported margins reflect the company’s expense mix, including Marketplace transactions.
- Nine-month operating cash flow was $3.35 million, compared with $2.27 million in 2020. Investing activities used $105,391, versus $642,922; financing activities used $414,400, versus $2.36 million. Cash rose to $23.18 million from $20.35 million at June 30, 2020.
- At March 31, 2021, current assets were $31.27 million and current liabilities were $10.69 million; reported working capital was $20.59 million. Total assets were $56.23 million and stockholders’ equity was $44.92 million.
- Debt included $6.0 million outstanding on a variable-rate line of credit. Notes payable and Paycheck Protection Program loans shown at June 30, 2020 were no longer outstanding at March 31, 2021. Operating lease liabilities remained.
Changes, outlook and risks
- Revenue growth came from subscription and Marketplace activity. Marketplace sales benefited from pandemic-related demand for hard-to-find products, particularly personal protective equipment. Management cautioned that PPE-related demand and associated Marketplace revenue and costs may decline as the pandemic abates.
- Nine-month other income included a $1.11 million gain on debt extinguishment, a material nonrecurring contributor to reported earnings. The filing also reports $54,434 of unrealized gains on short-term investments for the nine-month period.
- Management said cash, short-term investments and operating cash generation should fund operating and investment needs for at least 12 months. It expected sales and marketing costs to decline and anticipated cost of services could rise as Marketplace grows. No specific revenue or earnings guidance was provided.
- Management described continuing uncertainty from COVID-19, including possible effects of restrictions and closures on the ability to sell and provide services. It also cited uncertainty about future capital needs, revenue growth and market acceptance.
- The company launched a pilot grant-management system with one state in December 2020 and reported continuing discussions with states and federal agencies about FoodSourceUSA; potential additional recurring revenue was not assured.
- The company reported no pending or threatened material legal proceeding, no new risk factors beyond those in its prior annual report, and no material subsequent events. Management judged disclosure controls effective and reported no material change in internal control over financial reporting.
Important facts for investors to verify
- Confirm the intended issuer and period: the provided document is Park City Group’s March 31, 2021 Form 10-Q, not a ReposiTrak, Inc. 2020 Q3 filing.
- Assess how much of revenue and earnings growth depends on pandemic-driven, transaction-based Marketplace sales and whether those sales are repeatable.
- Separate recurring operating performance from the $1.11 million nine-month debt-extinguishment gain when evaluating earnings.
- Review Marketplace margins and the impact of its rising cost of services, as well as the collectability of receivables; nine-month bad-debt expense was $516,694.
- Verify the terms and interest-rate exposure of the $6.0 million variable-rate credit line and the company’s 12-month liquidity assessment.
- Consider the ongoing 7% cash or 9% paid-in-kind preferred-stock dividend terms and the resulting preferred dividends, which totaled $439,833 for the nine months.