Executive Summary
Park City Group (PCYG) delivered a solid QQ3 2023 performance anchored by a high-quality recurring revenue base, expanding margins, and meaningful cash generation. Total revenue reached $4.824 million, up 6% year over year, with recurring revenue representing 99.7% of the quarter’s revenue and also rising 6% YoY. GAAP net income rose to $1.663 million and diluted EPS to $0.08, reflecting strong operating leverage on roughly $12 million of fixed annual cash costs. The company also demonstrated durable profitability and balance-sheet strength, ending the quarter with approximately $22.9 million in cash and no bank debt, and a net cash position of about $22.2 million. Management emphasizes that the incremental top-line progress comes with deliberate investment in the ReposiTrak Traceability Network (RTN) as the core lever for the next growth phase, including automation and AI-driven productivity tools designed to lift operating leverage and customer engagement without proportionally increasing headcount.
Management underscored a multi-year strategic shift toward traceability, with ARR exiting Q3 at $19.4 million and the expectation that RTN onboarding will accelerate through calendar 2024 and into 2025. While short-term revenue headwinds may arise from deemphasizing high-touch, low-opportunity revenue, the company asserts this is a rational allocation of resources to support high-margin, recurring revenue and the scalable RTN platform. The earnings-call commentary also highlighted four growth pillars—new RTN products, net-new customers, deeper penetration within existing customers, and selling additional services to current customers—each expected to contribute to accelerating revenue and EPS growth. The near-term investment cadence remains modest on the expense line, with the firm projecting continued cash generation, ongoing share repurchases, a cash dividend, and potential opportunistic M&A when capital markets permit.
Key Performance Indicators
Key Insights
Revenue: $4.824M, up 6% YoY; Gross Profit: $3.964M, gross margin ~77.98%; Operating Income: $1.261M, margin ~31.55%; Net Income: $1.663M, net margin ~34.48%; EPS: $0.08; Recurring Revenue: $4.808M (approx.), 99.7% of quarterly revenue; ARR exit rate: $19.4M; Cash and equivalents: ~$22.94M; Debt: $0 bank debt; Net Cash: ~$22.18M; Operating cash flow: ~$3.766M; Free cash flow: ~$3.134M; Current ratio: ~6.69; Debt/Asset: ~0.88%; EBITDA: ~$2.118M; EBITDA margin: ~41.39%; Share count: ~18.39–18.75M...
Financial Highlights
Revenue: $4.824M, up 6% YoY; Gross Profit: $3.964M, gross margin ~77.98%; Operating Income: $1.261M, margin ~31.55%; Net Income: $1.663M, net margin ~34.48%; EPS: $0.08; Recurring Revenue: $4.808M (approx.), 99.7% of quarterly revenue; ARR exit rate: $19.4M; Cash and equivalents: ~$22.94M; Debt: $0 bank debt; Net Cash: ~$22.18M; Operating cash flow: ~$3.766M; Free cash flow: ~$3.134M; Current ratio: ~6.69; Debt/Asset: ~0.88%; EBITDA: ~$2.118M; EBITDA margin: ~41.39%; Share count: ~18.39–18.75M weighted; Dividend: $0.06 annualized; Share buybacks: ~74.15k shares (~$429k) in Q3; Return metrics: ROA ~3.35%, ROE ~3.68%, Interest coverage ~156x.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
4.82M |
5.41% |
-0.80% |
| Gross Profit |
3.98M |
-0.49% |
2.90% |
| Operating Income |
1.52M |
-17.05% |
1.73% |
| Net Income |
1.66M |
-6.77% |
6.84% |
| EPS |
0.08 |
-2.75% |
8.36% |
Key Financial Ratios
operatingProfitMargin
31.5%
operatingCashFlowPerShare
$0.21
freeCashFlowPerShare
$0.17
dividendPayoutRatio
25.4%
Management Commentary
- Strategy and execution themes: Randy Fields emphasizes four growth avenues for SaaS scaling—new products (RTN), adding net-new customers, expanding penetration with existing customers (cross-sell across compliance, trading, etc.), and selling additional services to current customers. He notes the goal of becoming the dominant player in traceability and expects onboardings to ramp significantly from 2023 into 2024 and 2025. He also highlights the value of AI tools and automation to uplift productivity (described as turning administrivia into customer-facing time) and asserts a multi-year, scalable path for ARR growth as RTN expands.
- Capital allocation and M&A: John Merrill discusses a prudent capital strategy focused on returning cash to shareholders via buybacks and dividends, while maintaining a debt-free balance sheet. He notes the potential for M&A if capital becomes constrained and strategic opportunities arise, but emphasizes avoidance of high-multiple acquisitions in a crowded market. He also cites the belief that Blu/Risk-adjusted M&A could be pursued if a suitable bolt-on target with FSMA/Food-safety relevance is identified, though the company is prioritizing internal growth and profitability.
“Traceability opportunity, now that the rules are defined, is emerging at a much faster rate than we anticipated.”
— Randy Fields
“If that were one of the levers we wanted to pull at that time, we would definitely do so.”
— John Merrill
Forward Guidance
- Management outlook centers on accelerating RTN adoption in fiscal 2024 and beyond, with ARR potentially expanding significantly as new retailers and wholesalers onboard and as existing customers adopt additional RTN-related services.
- Revenue growth target: Recurring revenue growth targeted in the 10%–20% range over the long run; management acknowledges a near-term headwind as noncore, high-touch revenue is deemphasized, but expects top-line growth to accelerate as RTN scales.
- Profitability: The company aims to maintain 80%–85% incremental revenue converted to cash earnings through internal productivity, AI automation, and lean cost structures. They project faster earnings growth and a higher earnings-per-share trajectory due to operating leverage and active capital-redeployment (buybacks and dividends).
- Key monitoring factors for investors: pace of RTN onboarding (new sign-ups and store-level adoption), ARR trajectory (especially if onboarding timelines shift), cross-sell success within existing customers, sustainability of cost reductions, and the evolution of capital allocation policy (dividends, buybacks, and potential M&A).