Attached files
| file | filename |
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| EX-99.2 - PRESS RELEASE - PARK CITY GROUP INC | ex99-2.htm |
| 8-K - CURRENT REPORT - PARK CITY GROUP INC | pcyg8k_sep2018.htm |
Exhibit
99.1
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Park City Group
– Fiscal First Quarter 2019 Earnings Call, November 8,
2018
|
C O R P O R A T E P A R T I C I P A N T
S
Rob Fink, Hayden IR
Todd Mitchell, Chief Financial
Officer
Randall Fields, Chief Executive Officer &
Chairman
C O N F E R E N C E C A L L P
A R T I C I P A N T S
Thomas Forte, D.A. Davidson
& Co.
Herbert Buchbinder, Stifel
Stephen Bell, Private
Investor
P R E S E N T A T I O N
Operator:
Good
day, everyone, and welcome to today's Park City Group Fiscal First
Quarter 2019 Conference Call. At this time, all participants are in
a listen-only mode. Later, you will have the opportunity to ask
questions during the Q&A session. Please note, today's call is
being recorded and I will be standing by should you need any
assistance. It is now my pleasure to turn the conference over to
Mr. Rob Fink, Hayden Investor Relations. Please go ahead,
sir.
Rob Fink:
Thank
you, Operator, and good afternoon, everyone. Thank you for joining
us today. Hosting the call today are Randy Fields, Park City
Group’s CEO and Chairman; and Todd Mitchell, Park City
Group’s CFO.
Before
we begin, I would like to remind everyone that this call could
contain forward-looking statements about Park City Group within the
meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements are statements that are not subject to
historical fact. Such forward-looking statements are based on
current belief and expectation of Park City Group Management and
are subject to risks and uncertainties that could cause actual
results to differ from those forward-looking statements. Such risks
are fully discussed in the Company's filings with the Securities
and Exchange Commission. The information set forth hereon in should
be considered in light of such risks. Park City Group does not
assume any obligation to update information contained in this
conference call.
Shortly
after the market closed today, the Company issued a press release
overviewing the financial results that we'll discuss on today's
call. Investors can visit the Investor Relations section of the
Company's website at parkcitygroup.com to access this press
release.
In
addition, in the Company's earnings release and on this call, we
may refer to GAAP and non-GAAP financial results, including free
cash flow, EBITDA, Adjusted EBITDA and adjusted earnings per share,
which are non-GAAP terms. We believe these non-GAAP terms are
useful measures for the Company, primarily because of the
significant noncash charges it has on its operating statement.
Reconciliations of GAAP and non-GAAP results are in the earnings
release and on the Investor Relations website.
With
all that said, I'd now like to turn the call over to Todd. Todd,
you may begin.
|
Park City Group
– Fiscal First Quarter 2019 Earnings Call, November 8,
2018
|
Todd Mitchell:
Thank
you, Rob, and good afternoon, everybody. I hope you all had the
chance to review our fiscal 1Q press release. We were very happy
with fiscal 1Q results. We entered the year with strong momentum
across all of our businesses. We generated solid operating leverage
and strong cash flow for a record end-of-period cash
balance.
I think
the key message we want to deliver on this call is that our
converge business plan is coming together. We're the only company
operating a comprehensive platform of applications suites, which
can help a retailer or a wholesaler manage their relationships with
their suppliers across the entire workflow of the supply chain,
from sourcing a new supplier, to vetting that supplier to make sure
they actually want to do business with them, to onboarding that
supplier rapidly, and then transacting with that supplier
efficiently.
Fiscal
1Q was a strong compliance quarter for us, which drives the scale
of our network. We're getting better at cross-selling, which drives
the scope of our engagement with our customers across that network.
We now have 70,000 compliance connections, for a total of nearly
300,000 buyer-to-supplier connections for all of our applications
across our entire network. Our converge business plan has created a
self-reinforcing ecosystem on a single technology platform. Add a
relentless focus on customer success and we have a business with
low customer acquisition costs and low levels of customer churn on
a highly leveragable cost basis, which should translate to
sustainable long-term growth and high levels of
profitability.
We
talked about our customer focus, but I want to give you an example.
I want to read a quote from a head of food safety for a major
retailer. This is about our Compliance Management system, and it's
unsolicited. It's from a presentation at a major food safety
symposium. "Thankfully for ReposiTrak, we were able to reach 95%
compliance in less than 15 months, which is very impressive. They
dug their heels in, worked with our suppliers and constantly
communicated with everyone. As a result, other areas of our
businesses have benefited as well. Our risk Management team and our
finance team have both seen big benefits. The time and the energy
that you put into this system really saves money in the long run."
I think that very succinctly summarizes the value we create for our
customers and why taking care of them is so important.
Now
let's look at the numbers. Revenue. Fiscal 1Q revenue was $5.9
million, up 26% from $4.7 million a year ago. Results for the
quarter were driven by strong growth in compliance connections, a
continuation of positive trends in the Supply Chain, which we've
been seeing for a while, and a growing year-over-year contribution
from MarketPlace.
Profitability.
Total operating expenses grew just 15% in fiscal 1Q to $4.9 million
from $4.3 million a year ago. As a result, fiscal 1Q operating
income was $1 million or 17% of sales, up from $413,000 or 9% of
sales a year ago. Fiscal 1Q net income to common shareholders was
$820,000 or $0.04 per share, up from $214,000 or $0.01 per share a
year ago. We expect to continue to see earnings growth outpace
revenue growth in fiscal 2019 as we leverage last year's investment
in launching MarketPlace, expanding, enhancing the productivity of
the Success Team, and process automation across the Company from
our 10x initiative.
By line
item, cost of services. Cost of services were $1.7 million in
fiscal 1Q versus $1.4 million a year ago. This increase
year-over-year was primarily due to investment in MarketPlace. We
continue to invest in scaling this business and adding new
functionality. We also spent some extra money on support
infrastructure, although you will note gross margin improved about
100 basis points year-over-year.
Sales
and marketing. Sales and marketing was $1.9 million in fiscal 1Q,
up from $1.6 million a year ago. Most of this increase was due to
scaling our Success Team. We will continue to add people here as
warranted, but we're seeing tremendous gains in productivity. As a
result, sales and marketing fell as a percentage of revenue, and we
expect this trend to continue.
General
and administrative. G&A was $1.1 million in fiscal 1Q, which
was basically flat with the year ago. We're seeing overall expenses
mitigate from finishing up big components of our 10x Project. As a
result, we think G&A should be flat to down in the coming
quarters and fall as a percentage of revenue in fiscal
2019.
|
Park
City Group – Fiscal First Quarter 2019 Earnings Call,
November 8, 2018
|
With
regards to cash flow and liquidity. We ended fiscal 1Q with nearly
$16.5 million in total cash. This was a record high, driven by very
strong operating cash flows, which we expect to continue to grow
with profitability.
In
conclusion, we believe we're well positioned for strong results in
fiscal 2019. We continue to expect strong revenue growth and
significant operating leverage, which will allow earnings growth to
continue to outpace revenue growth. We look for accelerating
operating cash flow, which should translate to a growing cash
balance, which, as we've said many times, we view as paramount,
particularly given the larger mandates we're seeing from larger
customers.
Now I'm
going to turn it over to Randy for a little bit more qualitative
review.
Randall Fields:
Todd,
thank you. We're very pleased with the first quarter financial
results. We continue to show the strong operating leverage critical
to our long-run earnings growth, and point of fact, we saw a near
tripling of net income compared to last year. We're also very
pleased that the net income growth was driven by very solid revenue
trends, 26% increase year-over-year. We saw record cash flow
driving the highest ever end-of-quarter cash balance. That, in
turn, provides more and more comfort to our customers and
prospects, which is increasingly important to larger companies with
whom we either are, or might be, doing business.
Important
drivers though are, in a sense, what we ought to be focused on, why
did the performance happen? Well, the truth is, it's the same ones
we've been talking about for some period of time, the same ones
that we've driven into our culture and that we talk about on
virtually every conference call. First, it's our relentless focus
on the customer, on the customer success and on the customer's
feeling in relationship with us. We call it the bedrock principle
of the business. Secondly, it's the breadth of the offering across
our platform that allows our customers, as they experience success
with one of our products, to use more other services to deepen our
contribution to their business. This gives us the ability to
cross-sell our customers sequentially as they prioritize their
needs.
In the
first quarter, we rotated our focus to compliance. Results here
continue to be driven by our superb execution. We've been able, for
example, to collapse the time it takes to get a HUB supplier on the
system and compliant. The bigger we get interestingly, the better
we are at execution. This has always been my hope and now it's our
reality. The Success Team, as they're called, has done an amazing
job of continually improving our ability to execute at this scale.
With our rotation and focus, we saw strong growth in our Tier
1—we call them retailer/wholesaler HUBs in terms of those
connection. It's important to remember that each quarter, we do
change the focus for new sales activity. Our customers obviously
need absorption time naturally, and this will be our standard of
practice for a while longer.
As we
highlighted in our last call, we signed the largest compliance
deal. Indeed, I think it's the largest deal of any kind in the
Company's history during the last quarter. This shows we really
have cornered the compliance market with big retailers and
wholesalers. We are the industry-endorsed standard. As such, we
also saw very strong growth in Supplier HUB connections from our
Tier 2 growth initiative that we began in the last quarter of last
year. We added more Tier 2 HUBs in the first quarter of this year
than we did in the fourth quarter of last year when we began the
initiative. Our momentum is growing progressively, and we expect it
to do that for a long time in the future. Many tens of thousands of
Supplier HUBs can be brought into the network if we're successful.
It’s a very big opportunity for us. We already have thousands
of Tier 2 suppliers somewhere in our network, and there are
literally hundreds of thousands of potential targets for
us.
Todd
highlighted a customer comment from one of our retailers. I wanted
to highlight another comment from the COO of a specialty produce
supplier. In fact, they were one of our first Tier 2 Supplier HUBs.
At a recent SQF conference, she called us out by saying—and
this is a quote, "We were looking for something that was really
easy to use, and which would help us comply with the Food Safety
Modernization Act. What we found with ReposiTrak is that we get
supported 100% through the process. ReposiTrak has worked with us
to adapt the system to address the needs we have. We've been on the
system now for four years, and the support continues at the same
pace. For us, it's really taking the burden of clients and spread
it out through the whole Supply Chain." That's a tremendous
endorsement. They did this publicly, and we could not be prouder of
the team for doing this kind of execution for us.
|
Park City Group
– Fiscal First Quarter 2019 Earnings Call, November 8,
2018
|
Let's
shift for a moment to Supply Chain. While we rotated our focus to
compliance, Supply Chain also performed very well in the quarter.
As we've highlighted, we're seeing on Amazon effect driving demand
for our Supply Chain solutions. We're doing more larger deals, and
we're seeing our customers take more of our Supply Chain
applications. For example, this quarter, one of our largest Scan
Based Trading customers decided to implement our ordering solution
across their entire footprint. Effectively, that doubled the size
of their engagement with us. As a result, Supply Chain revenue
trends continued to be very positive. We never took our eye off the
ball while we're developing compliance and MarketPlace. Like
compliance, it also has incredibly low levels of churn and a very
high contribution margin. Given the trends we continue to see,
we're very confident that fiscal '19 will be an even better year
for the Supply Chain than fiscal '18, even though we should
remember that fiscal '18 was the strongest year for Supply Chain in
the Company's history.
MarketPlace.
I saved MarketPlace for last. We did see the expected seasonal
pullback in revenue contribution from MarketPlace. Nevertheless, it
continues to be a significant addition to our overall business and
continues potentially to be a very important part of our mix. We're
still at least one year or more away from developing all of the use
cases that we've talked about and scaling the business, so our
execution maintains our standards and our reputation. Internally
though, I can tell you we're very excited about the promise of what
we're doing, and our excitement continues to grow.
We
continue to believe that we'll add two more buyers to MarketPlace
during the fiscal year. Like our first buyer, they will start small
and continue to grow hopefully as they have a base of success with
us. Interest continues to exceed our expectations. Our first buyer
continues to explore and add additional areas where MarketPlace can
aid their sales growth. The truth is that, that's the best measure
of our success. We're very pleased with the results. Beyond that,
we're also scaling our efforts to develop a private MarketPlace for
our partner, GMDC. GMDC is bringing new suppliers into the
MarketPlace. In addition, they're getting in front of several new
prospective buyers. We're always, as you know, cautious when we
bring a new product to market and laser-focused on the customer's
success. But the reality is it's going at least as well as we could
have hoped.
In
conclusion, you can see our integrated platform of applications is
coming together nicely. We're doing what we said we would do. At
this point, we have the only platform that we're aware of that can
help a retailer or wholesaler source a new supplier rapidly and
efficiently, vet a new supplier rapidly and efficiently, and then
onboard and transact with that supplier rapidly and efficiently. We
continue to be focused on growing the scale of the network. For
now, compliance really remains a major driver of this concept of
increasing scale, and our rotation into compliance in the first
quarter helped drive our total compliance connections to nearly
70,000 and brought our total connections across our network to
nearly 300,000. By the way, even I'm wowed by that
scale.
Our
focus on our customer's success is the primary driver of our growth
in scale because it results in our having very low churn. It's not
just enough to add customers, you have to keep them. Interesting to
note that our churn across the network in fiscal '18 was less than
2%, less than 2%. That's a level that's exceptional in the SaaS
world and one that we're very, very proud of. We hope you are as
well.
We're
focused on also though growing the scope of our engagements. We're
really at the beginning stages of learning to cross-sell, but I'm
optimistic about either—what I'm seeing. Our two
tiers—our Tier 2 Supplier HUB growth initiative, which is
based on the idea of upselling is off to a very strong start.
Additionally, I'm seeing some positive development, and I mentioned
one of them in adding services to our Supply Chain customer set.
MarketPlace, obviously, is the ultimate opportunity for
cross-selling because of the benefits it brings both to the HUBs
and simultaneously to their suppliers by increasing
sales.
Interestingly,
when you look at the whole of our capabilities in a single,
integrated platform, we have a perfect applicability so we do some,
we consider, interesting, highly regulated industries where
compliance, tracking, inventory Management and tax collection are
at play. We're not going to talk anymore about that now, but it's
fair to say that we're examining this regulated opportunity and
we're responding to some inquiries. Hopefully, more about that
later.
|
Park City Group
– Fiscal First Quarter 2019 Earnings Call, November 8,
2018
|
What
does all of these mean to you as an investor? We have a
self-reinforcing business model with fabulous operating leverage.
Over the long term, we should generate sustainable growth and
really superior earnings growth, but we need to continue to focus
on execution and keeping our customers engaged. We will continue to
change our focus quarter-to-quarter in a cadence that matches our
customers' opportunities and needs. This, in our view, is how you
build a sustainable business. We emphasize profitability.
Profitless growth is not our plan. Our goal is to grow faster, have
earnings grow faster than the revenue and have cash grow on top of
that. It's all happening now, and we hope you're as pleased as we
are. I could not be prouder of the team. Amazing people, really
amazing.
Okay.
Operator let's open it up to some questions.
Operator:
Certainly.
At this time, if you would like to ask a question, please press
star, then one on your touchtone phone. You may withdraw yourself
from the question queue at any time by pressing the pound key. Once
again, star, then one if you would like to ask a
question.
Our
first question comes from Thomas Forte with Davidson. Please go
ahead.
Thomas Forte:
Great.
Thanks. Thanks, Randy, and thanks, Todd. The question I had is, you
talked a little about this but, Randy, I guess, what makes you
convinced that you have enough headcount to support all your
initiatives? I recognize that there are things like MarketPlace
that maybe don't have the same or require the same quarterly
attention as Supply Chain and food safety. But what gives you
confidence that—because it looks like all three businesses
are really positioned to take off this year—what gives you
confidence that you have enough staffing to really leverage that
opportunity this year?
Randall Fields:
Well,
let me parse that a little bit, if it's okay, Tom. One of our
businesses is experimental. It has a discovery period around it,
and we're learning that nine women in the room for a month does not
make a baby under those circumstances. For us, MarketPlace is
staffed very adequately for what we're doing. It needs a small,
nimble staff of people for execution and exploration. Once we feel
like we've got a number of the use cases pounded out, and that will
still take at least a year, then we will add the staffing to that
mix because we will know what the roles and responsibilities are.
We've already actually made at least one significant change in
terms of staffing. We brought a person who is peripheral to
MarketPlace—in the MarketPlace full time doing some of the
supplier relationship stuff. We've already begun to make some of
those moves. But frankly, I just don't think we know enough yet
about the business to understand how, ultimately, it will be
staffed.
On the
other two pieces of business, if you will, the other two buckets of
activity, the Supply Chain business and our Compliance business, we
are well-staffed and know what we're doing. We have budgeted
headcount increases, but one of the things that, hopefully, you
will see from us going forward is that when in doubt, use
automation. Don't have humans doing low-level clerical work to the
extent you can eliminate it. The job of human beings is to interact
with other human beings. That, to me, is a new, religious
principle. We spent significant money every year looking for those
things that we can do to automate what our people do so they can
spend more time contacting our customers, et cetera. I think we've
made the investments. I think we're showing the margin improvement
that comes from that. I think the truth of the matter is we're
actually well-staffed at the moment. Sorry, long-winded. Next
question?
|
Park
City Group – Fiscal First Quarter 2019 Earnings Call,
November 8, 2018
|
Thomas Forte:
Okay.
Yes. Then as a quick follow-up, can you give us an update on where
you are as far as your international plans? I think, historically,
you've talked about maybe looking for a partner. It seems like the
international food safety opportunity is at least as big as U.S.,
probably many times that. Can you talk about that
again?
Randall Fields:
Sure.
As you probably saw some number of months ago, we have our first
partner doing some work with large companies in the U.K. and on the
continent, and he probably has three or four significant potential
engagements in play. So far, our first relationship outside the
U.S. has produced a very interesting activity. No deals yet. We
didn't expect that, but I think there's a reasonable chance that in
the current fiscal year ending in June, that between us, we will
have brought in one international deal, if you will, of scale, at
least as a result of his work. Now we're also in the hunt for
others in other geographical areas. We're engaged in at least three
or four conversations.
I'm
pretty optimistic. Again, everything we do is crawl, walk, run.
We're learning to work with our first partner. We're getting the
kinks, if you will, out of how to do that, how to execute it, how
to be responsive to what he needs. There are translation issues.
There are nomenclature issues and so on and so forth. As we work
those out, that gives us the ability to apply that same learning to
other areas. I'm feeling very good about the strategy, and I think
we'll have, hopefully, at least one additional partner in place
before the end of the fiscal year somewhere. On top of that, I
actually think we'll produce the deal from our international
partner. Oddly, a lot of his business experience is in food
service, which has been an area of interest to us and with
U.S.-based companies. It’s actually conceptually possible
that the first deal that we do with him may, in fact, be a
U.S.-based company in food services where he's simply very
well-connected. That would be—that would certainly be an
expected result. But we've got a number of interesting things at
play.
Thomas Forte:
Great.
Thank you, Randy.
Randall Fields:
You
bet. Thank you.
Operator:
Thank
you. Again, as a reminder, if you would like to ask a question,
please press star, then one on your touchtone phone. If you have
yourself on mute or speakerphone, please take that off for our
system to better recognize your signal. Again, star, then one if
you would like to ask a question. We will pause for just a moment
for any additional questions in queue.
We do
have a follow-up from Thomas Forte with Davidson. Please go
ahead.
Thomas Forte:
Great.
Thanks. You talked a lot about how the fear of Amazon is inspiring
companies in the food industry to embrace technology much more
quickly than in the past. Can you update us on your thoughts
there?
|
Park City Group
– Fiscal First Quarter 2019 Earnings Call, November 8,
2018
|
Randall Fields:
Yes. I
think it's maybe a little bit of elaboration on what we've said
before that but the Amazon threat is perceived, perceived by the
industry as a technological threat. That is to say that people see
Amazon as being agile with technology. Depending on who you are in
the industry and where you are, not geographically but in terms of
the supply chain, you see the Amazon threat through colored lenses.
For example, if you are, let's say, a wholesaler, you look at what
Amazon does logistically and you go, "Wow, they really get
logistics." If you are a retailer and you're under margin pressure,
then you have—how do I say this? Then your fear is that you
look at what they're doing and you go, "Boy, they can sell at lower
margins than I can, that puts me under threat." In other words,
wherever you are in the food supply chain, if you will, you see the
Amazon threat somewhat differently, but all of it has to do with
technology.
There's
a general sense in the industry that whatever your problem is,
whatever you—wherever you're stuck, you at least ought to get
a look at what technology might, in fact, enable you to move
forward. One of the things the industry has historically done
that's problematic is that they have—I want to be careful how
I say this—that they have responded to cost pressure and for
that—or perhaps reduced their cost, if you will, too much so
that, for example, in stores, you may not see enough people. The
consequence of that is that you don't get service levels that you
want. The industry in some areas has cut cost too much and in
technology is not invested enough. I think the consequence of that
is that it's beginning to right-size, and we're pretty excited
because I think that's stimulating people to call us. Our market
reputation with our customers is extraordinary. Seriously, I use
that word, really, in this case, cautiously.
Recently,
as an example, one of our customers called us and said, "Look, I
know I took a long time to buy your product," he did, it was more
than a year. But he says, "Wow." He said, "You guys have done a
tremendous job with us. In fact, it's so good, I want to help you
organize an industry council that can help get more people on your
system. The more, the better. What can I do to help?" How often,
for any of you who are listening, have you had a customer say I
want to help you do better and get more customers? The fact that we
always say, on every call, that our customer comes first, that we
pay huge attention to the customer's success rate, has really been
an important part of where we are today. We mentioned that our
churn rate is less than 2%. Wow. Remember, that includes people who
go out of business, stopped doing business with one of our trading
partners and so on and so forth. Are we satisfied with that? No,
no. But do we feel great about how the team has executed? Yes, yes.
It's going very well. I wish that all of what we did was as well
done as the execution. It isn't. I'm not satisfied with our
cross-selling efforts, by the way, I mentioned that. That's going
to have to get better over time, so there's lots—and there's
still lots to be learned about MarketPlace execution so we
don’t try and scale it ahead of the demand, if you will.
We've really just got to be better and better at what we do. I
think it's beginning to pay off. I hope everybody listening like
the numbers as much as we did internally.
Thomas Forte:
Great.
It's feeling...
Randall Fields:
I'm
sorry, Tom.
Thomas Forte:
One
last question for me. I think Todd mentioned that this was an
all-time high as far as cash in the balance sheet. Can you talk
about, A, the importance of cash on the balance sheet and then to
the extent that you continue to accumulate cash, what are potential
uses for that maybe excess cash?
|
Park City Group
– Fiscal First Quarter 2019 Earnings Call, November 8,
2018
|
Randall Fields:
Yes,
one of the things a few years ago—and we made an error. We
assumed that we would appeal mostly to small- and medium-sized
retailers and wholesalers. That was just a business decision under
the theory big guys didn't need us. As I've said multiple times, it
was an error probably mostly on my part and the consequence was, as
we started dealing with larger and larger companies—remember,
at least three of the five largest retailers in the U.S. in food do
business with us. Big companies are terrified of doing business
with small companies because if they come—become dependent on
them for service and that company goes out of business, oh my God,
people lose their jobs. Large companies want to make sure that
we're strong financially and that we will be there. The most
important metric to a large company is cash position. If anybody
thinks it's anything else, they're wrong; it's cash
position.
We want
more cash on our balance sheet, not infinite cash, but we're not
too far away from where we want to be, probably another couple of
years, another $6 million or $ 7 million, some number like that.
Where we want to be cash-wise is strong enough that our customers
look at us and go, no risk. We've actually still, even at this
level, had several conversations with customers where they're
nervous. Now we've got them over the goal line, but it's critical
that we have a very strong balance sheet. Not only that, there's a
certain level of economic uncertainty right now. Cash is king for
us. It's important to have it on the balance sheet, and we're being
cautious. But eventually, other uses of cash would include the
obvious which is a redemption of the preferred and certainly some
other things that we think make sense for us.
Thomas Forte:
Great.
Thank you for giving me the opportunity to ask more questions.
Thank you.
Randall Fields:
You
bet. Absolutely.
Operator:
Thank
you. Our next question comes from Herb Buchbinder with Stifel.
Please go ahead.
Herbert Buchbinder:
Can you
explain the seasonality in MarketPlace? I know you just basically
have one customer. Is there some peak quarter? How much of the
revenue drop was there in this quarter versus the last quarter?
When will it bounce back?
Randall Fields:
Yes,
good question. Well, remember—let's talk about what we're
doing today with that customer in terms of the kinds of products
they use us for sourcing. The reality is that we are a niche,
seasonal, local kind of business. It means it's more seasonal than
general merchandise, but tends, on balance, to follow the overall
seasonality of retailing. We're not doing special things around the
holidays, meaning Christmas. We've deliberately moved away from
that. We're doing things, as we've mentioned, from beach and
tailgating and sports stuff, all of those kinds of things and they
all have seasonality to them. Now over time, as we add
more—how do I say this—different kinds of products, if
you will, that we can help them source, then we hope that some of
that seasonality will come out. But it'll—it's just seasonal.
It's just the nature of what we're doing. More important, in terms
of what will happen over the next year, is not so much seasonality,
but rather a shift in terms of use cases. I know I use that term a
lot, but here's an example.
|
Park City Group
– Fiscal First Quarter 2019 Earnings Call, November 8,
2018
|
When we
started MarketPlace, we had a view about vendor substitution which
we think is our strength. Well, we haven't had time to get people
to do that with us yet. That's a whole different use case. We've
got to get into that and understand how that stresses the system
when people are looking at how we execute, et cetera. We've got to
explore that. There are several other kinds of use cases, which are
coming up as a function of the work we're doing with GMDC. He, in
fact—or they, in fact, if you consider them an organization
and they are—they have a whole variety of different use cases
for us, some specialization and private label, Herb, meaning
products that are branded by the retailer, wholesaler. We've got
some pretty interesting engagements moving along. One prospective
buyer came to us and said, "I'm looking for specialty books." Some
of those books are tourist-related, and so they will have
seasonality. But we've got several different use cases to put
together and what's critical is that we examine each of those use
cases, be sure that we can execute across all of those use cases
and then scale the business properly.
Herbert Buchbinder:
What's
your best guess as to how long it will take to get a second
customer for MarketPlace?
Randall Fields:
I said
there'll be two more before June.
Herbert Buchbinder:
Before
June?
Randall Fields:
Oh,
yes. There'll be two more customers. But all of the
people—and we do this deliberately, what we say to somebody
is, "Start small with us. Do a test. Do a few. And if we're
successful with you, Mr. Retailer, then do some more. Don't go all
in.” Why? Well, the risk is much higher for both of us. But
it's critically important that each new engagement be highly
successful. We've built this business this way, so we're not going
to change our stripes. Execution is everything, and we'll continue
that. I want to get two more buyers in the system before June, and
we certainly have enough prospects to do that. I think it's fair to
say we're working on a small one now, and we'll get more experience
with more buyers. Each one of those buyers will test the system,
and I mean stress the system, really. As we get better and better,
we grow faster and faster. Remember the...
Herbert Buchbinder:
Have
you figured out how to get paid on this yet?
Randall Fields:
Well,
we're trying several different ways, yes. We've got three or four
different ways going right now, and we like it. We're good on that.
But I think it's important all of us remember not too long ago, we
did 200 connections in a year with ReposiTrak compliance; 200 in a
year. It's now scaling to a point that it's 70,000 connections.
That's crawl, walk, run. We really believe that's important because
if we scaled it quickly and we failed, we're dead. Every customer
has to be treated uniquely in terms of their success. It's pretty
exciting. I don't think we've got the kinks out of it yet. I'm not
happy yet, but it's coming along at a pretty rapid
pace.
|
Park City Group
– Fiscal First Quarter 2019 Earnings Call, November 8,
2018
|
Herbert Buchbinder:
Oh,
then the more customers you get, the less seasonality that we have,
you think?
Randall Fields:
Correct.
That's what we think. Exactly, yes.
Herbert Buchbinder:
All
right, thanks a lot.
Randall Fields:
You
bet. Thanks, Herb.
Operator:
Our
next question comes from Steve Bell. Please go ahead.
Randall Fields:
Hi,
Steve. How are you feeling?
Stephen Bell:
I'm
better than most. As a heart patient, let me tell you, medicine,
it’s a great way. I'm better-looking through chemicals. Good
quarter, really good to see you hitting on all cylinders there. Can
you give us a little more color on the progress that you're having
with the California Prop 65?
Randall Fields:
Yes. As
I've said on several calls, my father is probably turning over in
his grave at the prospect that I am interested in more regulation.
I'm sure it bothers him. The reality here is that there is—in
spite of what we all think, the regulatory environment actually, on
balance, is becoming more difficult. Prop 65 in California is a
great example. For those of you that don't know what it is, the
State of California had one of their initiatives, as they called
them, that was passed by substantial numbers of people voting in
favor of it. It requires labeling and disclosure around a list of
chemicals that could be cancer-causing. I think there's now 800
chemicals on the list. If you have those—how
many?
|
Park City Group
– Fiscal First Quarter 2019 Earnings Call, November 8,
2018
|
Stephen Bell:
Over
900.
Randall Fields:
Yes. It
keeps growing. If you have, anywhere in your Supply Chain, one of
these chemicals, you've now got an interesting disclosure problem.
In addition, the attorney general basically has deputized everyone
in the state, especially attorneys, to bring litigation against
people who don't follow the code of the disclosure that's required.
You can go into any supermarket now in California and find
products—and here's one that we had to deal with for a
customer. I'm not even sure what it's called. It's the little thin
papers that you would have on sushi made out of seaweed, whatever
those papers are called or whatever that product is called. It
contains cadmium. Why? Well, it comes from the ocean, for heaven's
sakes. It's made out of seaweed. Of course it has cadmium. Well, it
had to be disclosed. It's done very well for us. It highlights to a
California retailer, in particular, wow, there's all of these kinds
of compliance issues. It's not just food safety. It's, are we, in
fact, in compliance with Prop 65? There will be more and more of
these. As you know, our penetration of the California market is
pretty extraordinary. I think we—I would bet that in terms of
numbers of stores, I would bet that we have—I'm just going to
guess—70% of the stores in California that in one way or
another are attached to our Compliance Management system. It's been
very good for us, very good for us. Sorry for the long-winded
answers.
Stephen Bell:
No, its
fine. Again, congratulations on the quarter.
Randall Fields:
Thank
you, Steve. Take care of you.
Operator:
Thank
you. Once again, if you would like to ask a question, please press
star, then one on your touchtone phone. You may withdraw yourself
from the question queue by pressing the pound key. If you have
yourself on mute or speakerphone, please take that off for our
system to better recognize your signal. Again, star, then one if
you would like to ask a question. We will pause just a
moment.
It
appears we have no additional questions at this time. We do
appreciate your participation in today's conference. This does
conclude our presentation. You may disconnect at any time, and have
a great day.