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Actionable news in PCYG: Park City Group, Inc.,

Park City Group, Inc

The following excerpt is from the company's SEC filing.

Fourth Quarter 2015 Earnings Call

Park City Group

Inc. Fourth Quarter 2015 Earnings Call, September 14, 2015

C O R P O R A T E P A R T I C I P A N T S

Dave Mossberg,

Investor Relations, Three Part Advisors, LLC

Randy Fields,

Chairman and Chief Executive Officer

Ed Clissold,

Chief Financial Officer

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

Steve Bell (phon),

Private Investor

P R E S E N T A T I O N

Operator:

Good day, and welcome to the Park City Group Fourth Quart er 2015 Earnings Call. Today's conference is being recorded.

At this time, Id like to turn the conference over to David Mossberg, Investor Relations for Park City Group. Please go ahead, sir.

Dave Mossberg:

Thank you, Angela. I want to remind everybody, before we begin, we will be referring to today's earnings release, which can be downloaded from the Investor Relations page of the Company's website, at parkcitygroup.com.

Also, this conference 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 historical fact. Such forward-looking statements are based upon the current belief and expectation of Park City Group's Management and are subject to risks and uncertainties, which could cause actual result to differ from the forward-looking statements. Such risks are more fully discussed in the Company's filings with the Securities and Exchange Commission. The information set forth herein should be considered in light of such risks. Park City Group does not assume any obligation to update the information contained in this conference call.

Throughout today's conference call, we may be referring to both GAAP and non-GAAP financial results, including the terms free cash flow, EBITDA, Adjusted EBITDA, net debt, net income/loss, and earnings per share, which are non-GAAP terms. We believe these non-GAAP terms are useful financial measure for our Company primarily because of the significant non-cash charges in our operating statement. There is a reconciliation of non-GAAP results in our earnings release and on the Investor Relations section of the website.

ViaVid has made considerable efforts to provide an accurate transcription, there may be material errors, omissions, or inaccuracies in the reporting of the substance of the conference call. This transcript is being made available for information purposes only.

1-888-562-0262 1-604-929-1352

www.viavid.com

Our speakers today will be Randy Fields, Park City Group's Chairman and CEO; and Ed Clissold, Park City Group's CFO. Ed?

Ed Clissold:

Thanks, Dave. Good afternoon everyone, and thank you for joining us on the call today. My remarks will cover our consolidated operating results for our fiscal fourth quarter and year ended June 30. I will also comment on certain cash flow and balance sheet items, and then I'll turn the call over to Randy for his comments.

I will begin my comments by discussing revenue trends. We achieved record annual revenue growth for fiscal 2015, with fiscal fourth quarter's total revenue growing 13%, and a 14% increase for the full year. Importantly, fourth quarter subscription revenue grew 18%, to $2.9 million, driving a 16% increase for the full year. It's worth noting, because we are accounting for ReposiTrak on an unconsolidated basis in our fiscal 2015 result, the main driver of this growth was an acceleration in our supply chain subscription services, which grew 22% in the fourth quarter, as we suggested it would, resulting in a 19% increase for the full year.

Looking forward to fiscal 2016, we expect overall revenue growth to continue to accelerate. Moreover, we expect to see sequential growth in total revenues in each of the quarters of the year. Importantly, we expect to generate even more significant year-over-year growth in pro forma revenues after accounting for the acquisition of ReposiTrak.

That being said, I want to highlight some changes in how we will be thinking about revenues going forward. First, we'll be accounting for ReposiTrak on a consolidated basis going forward. As a result, we will report consolidated and pro forma comparisons for the next year. In our view, the pro forma comparisons will give better insight into the actual growth of our combined businesses.

Second, we are going to end the distinction between total revenue and subscription revenue. Over the past couple of years, as we've transitioned to a SaaS sales model, we asked you to focus on the growth of our subscription revenue as a measure of our success. Now, we are essentially done with this transition, and subscription revenue accounted for over 80% of total revenues in fiscal 2015, and will be over 90% in fiscal 2016.

I urge everyone to look at the table at the end of today's release for a pro forma of financials for Park City Group, as if we had owned ReposiTrak for each of the quarters of 2015.

Now, with respect to operating expenses and profitability, fourth quarter operating expenses were $5.9 million, up 65% year-over-year. For the full year, operating expenses were $13.6 million, an increase of 14% from fiscal 2014. However, both numbers include a one-time non-cash charge of $1.5 million in the fourth quarter to write-down the carrying value of intangible assets acquired six years ago. Excluding this charge, operating expenses increased 23% in the fourth quarter, and 12% for the year, mostly related to marketing expenses and compensation.

At the end of June, our headcount was unchanged at 68. GAAP net loss to common shareholders was $6.6 million or $0.38 per share in fiscal 2015, compared to a net loss of $3.1 million or $0.19 per share, the year before. Higher losses were largely due to non-cash charges of $2.1 million related to the restructuring of our Series B Preferred Stock in the third quarter, and the aforementioned $1.5 million write-down of intangibles in the fourth quarter.

We reported positive net income for fiscal 2015 on a non-GAAP basis, which excludes these and other non-cash expenses. Fiscal 2015 non-GAAP net income increased to $259,000 or $0.01 per share, versus a net loss of $926,000 or $0.05 per share, last year.

Looking forward to fiscal 2016, excluding one-time charges from the comparison, we expect operating expenses to be relatively flat with 2015. As a result, with the anticipated contribution from revenue growth, we expect to report positive GAAP net income in fiscal 2016.

Now, on to the balance sheet, our balance sheet is significantly stronger. At the end of fiscal 2015, we had $11.3 million in cash, up from $3.4 million at the end of the prior year. We generated $1.7 million in free cash flow in fiscal 2015, and completed an offering of common stock of 573,000 shares in the fourth quarter, which raised $6.7 million in net proceeds, and broadened our institutional ownership.

Looking forward to fiscal 2016, we expect cash balances to continue to grow, as free cash flow turned positive in the latter half of fiscal 2015, and should grow significantly in fiscal 2016. As of June 30, 2015, our diluted share count was 20.3 million shares, versus 18.3 million shares at the end of last year. The increase in the diluted share count is related to 873,000 shares of unregistered common stock that were issued for the ReposiTrak transaction, 573,000 shares that were issued in the common stock offering during the fourth quarter, 120,000 shares of common stock issued in a private placement during the second quarter, and the remaining from employee equity compensation.

That concludes my review of the financials for the fiscal fourth quarter and year. I'll now turn the call over to Randy.

Randy Fields:

Ed, thank you. Appreciate everybody taking time this afternoon. Happy New Year to those of you for whom it is. Okay, I'm going to spend a few minutes talking about last year.

Last year in our view was a very important year because it represented the transition from an old way of doing business. We'll think of it as the old Park City Group to the new Park City Group.

Most importantly, after some number of years of doing this, we have completed the transition from a licensing company to a SaaS company. Last year, something in excess of 80% of our revenue came from software-as-a-service, and in the year that we're in, we think that number will exceed 90%. Perhaps even a little bit more than 95%. So we are a SaaS company.

So the difficult transition has certainly been an interesting one. We appreciate your forbearance while we've been going through it. But obviously the benefit to our customers and to ourselves are extraordinary. Last year, we constantly focused on our customers' successes, you know that that's core to how we think about our business. The supply chain revenue, as a result, grew 22% in the fourth quarter, and as Ed mentioned 19% for the full year. Each of the last several years we've wanted to see the growth rate of that core business continue to accelerate, and it has, largely because we're doing for our customers what they would like done. We're helping them to sell more, stock less, and see everything.

Second accomplishment last year, really, was taking ReposiTrak beyond what you would call a proof of concept. Awareness has been building steadily over the year. We're adding new hubs, we're adding new wholesalers. Now, we're starting to focus on retailers. From what we see, the pace of new connections continues to accelerate.

We completed the acquisition of ReposiTrak on June 30. It was sooner, and we certainly think well below the market perception of the level of dilution that it was going to take than many of you would've expected. Going forward, consolidating ReposiTrak will more accurately reflect the underlying economic performance of the Company. We think it positions us for an extraordinary few years looking forward.

As we anticipated, by the way, ReposiTrak began to pay down its notes prior to the acquisition, and certainly...


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