Filing context
This is Park City Group, Inc.’s Form 10-Q for the quarter ended March 31, 2022, filed May 16, 2022. Park City Group is the parent of ReposiTrak, Inc., whose SaaS platform provides marketplace, supplier compliance/food-safety, and supply-chain services. The request labels this “Repositrak, Inc., 2021 Q3,” but the supplied filing is for Park City Group’s fiscal third quarter of 2022; its reporting period is not 2021 Q3.
Financial performance and position
Amounts below are in U.S. dollars. Three- and nine-month income-statement comparisons are to the periods ended March 31, 2021; balance-sheet comparisons are to June 30, 2021.
| Metric | Three months ended March 31, 2022 | Nine months ended March 31, 2022 |
|---|---|---|
| Revenue | $4.56 million, down 24% | $13.47 million, down 18% |
| Operating income | $1.18 million, up from $0.72 million | $3.30 million, up from $1.73 million |
| Net income | $1.09 million, up from $0.77 million | $2.91 million, down from $2.95 million |
| Net income applicable to common shareholders | $0.94 million; diluted EPS $0.05 | $2.47 million; diluted EPS $0.13 |
| Operating cash flow | Not separately provided | $4.03 million, versus $3.35 million |
Operating margin was approximately 25.8% for the quarter and 24.5% year to date, compared with approximately 11.9% and 10.6%, respectively, in the prior-year periods. Cost of services and product support was 17% of quarterly revenue and 18% of nine-month revenue, versus 44% and 41%. These percentages are calculated from the reported figures.
At March 31, cash was $21.27 million; current assets were $26.69 million and current liabilities $6.54 million, for disclosed working capital of $20.15 million. Total liabilities were $6.87 million, including $3.39 million drawn on lines of credit and $0.39 million of operating lease liabilities. Stockholders’ equity was $42.80 million. Cash declined $2.80 million from June 30, 2021.
Nine-month investing cash flow was positive $1.32 million, principally reflecting $1.37 million from the sale of property and equipment; financing cash flow was negative $8.16 million, including $5.21 million of stock repurchases, a $2.61 million net reduction in lines of credit, and $0.44 million of preferred dividends paid.
Material changes and management commentary
- Revenue fell as exceptional, largely COVID-related Marketplace sales—especially PPE and other hard-to-source goods—did not recur. Management also chose to discontinue low-margin products and services. Recurring subscription, support, and services revenue increased to $4.55 million for the quarter from $4.25 million and to $13.26 million for nine months from $12.26 million. Marketplace transaction revenue declined to $2,062 for the quarter and $128,096 for nine months.
- Management attributed higher operating income despite lower revenue to reducing procurement costs, exiting low-margin offerings, sunsetting two vendor-managed pricing products, eliminating some third-party software services, and controlling costs. The filing reports no separate gross-profit line; the cost-of-services percentages above are provided as a useful comparison, not as a stated gross margin.
- Nine-month other income/expense shifted from $1.26 million of income to $0.27 million of expense. Drivers included the prior-year PPP loan forgiveness gain, current-period unrealized investment losses as interest rates rose, and interest expense associated with stock-repurchase financing. The PPP loan of approximately $1.1 million was forgiven in December 2020.
- The company introduced an Audit Management solution and enhanced automated vendor vetting and onboarding, including ERP connections through APIs. Management also said it was preparing to launch the ReposiTrak Traceability Network.
Outlook, liquidity, and risks
The filing gives no quantified revenue or earnings guidance. Management said existing cash and short-term investments, together with operating cash generation, should be sufficient for operating and investment needs for at least 12 months, and expected cash flow and working capital to improve, while noting there can be no assurance.
A $10 million revolving credit facility with U.S. Bank matures March 31, 2023. Borrowings bear interest at 1.75% plus one-month LIBOR and are subject to covenants, including maintaining liquid assets at least equal to the amount outstanding and a senior-funded-debt-to-EBITDA ratio no greater than 3:1. The filing says debt was 100% variable-rate at quarter-end. Management reported $3.39 million of lines of credit on the balance sheet.
Management identified uncertainty around future Marketplace demand as pandemic-related demand abates and amid geopolitical conflict, including the war in Ukraine. It said neither had materially adversely affected results through the reported period but could not predict future effects. Other noted exposures include interest-rate-related declines in investment values and the risks and uncertainties described in the company’s prior annual report. The company reported no pending or threatened material legal proceeding, no additional risk factors, and no material subsequent event through the filing date.
Investor verification points
- Confirm the intended issuer and period: this filing is Park City Group, Inc.’s quarter ended March 31, 2022, not a 2021 Q3 ReposiTrak filing.
- Track whether growth in recurring subscription and services revenue can offset the disappearance of COVID-era and other Marketplace transactions.
- Review the $10 million revolving facility’s remaining availability, variable-rate cost, maturity, and covenant compliance; the filing gives the drawn balance but not a clear undrawn-availability figure.
- Assess the effects of continued share repurchases ($5.21 million in the nine-month period), preferred dividends, and the $0.44 million of accrued nine-month preferred dividends on cash and per-share results.
- Monitor investment valuations and the reported $0.33 million nine-month unrealized loss, as well as execution and commercial uptake of the new product initiatives.