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Category: Stock Market and Park City Group
Date: 13 September 2019 Stock Price: $7.65 We take a look at the 4th quarter earnings release of their 2019 fiscal year of Park City Group, a B2B and supply chain management firm.
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About Park City Group
Park City Group, Inc. (NASDAQ: PCYG), the parent company of ReposiTrak, Inc., which operates a B2B ecommerce, compliance, and supply chain platform that partners with retailers, wholesalers, and their suppliers, to accelerate sales, control risk, and improve supply chain efficiencies.
The image below shows some of Park City's clients.
The image below shows some of Park City's clients.
Financial overview of Park City Group's latest earnings report
The numbers we are interested in (for the quarter):
- Revenue $4.65 million (down from $6.320 million from the same quarter of the previous year)
- Cost of goods sold: $4.385 million (down from $5.030 million for the same quarter of the previous year)
- Net earnings: $182.3 thousand (down from $1.27 million for the same quarter of the previous year)
- Diluted earnings per share: $0.00 (up from $0.06 for the same quarter of the previous year)
- Diluted weighted-average shares outstanding: 20.303 million (unchanged from 20.346 million for the same quarter of the previous year)
- Cash generated from operations (for 12 months) : $3.9 million
- Cash generated from operations per share: $0.19
Park City Group's management commentary on the results and earnings guidance
"This was a year of continued progress as each of the three revenue streams drove a 13% increase in the size of our network as we reduced our cost structure," said Randall K. Fields, Chairman and CEO of Park City Group. "We are focused on continuing to grow recurring revenue and reducing non-recurring license revenue. We are on increasing Tier 2 connections and farming our existing base of over 23,000 customers. Driving the network scale, making it easier for customers to buy, provides cross selling opportunities for more services, at a competitive price. In addition, the broader scale of suppliers in our network empowers MarketPlace."
"Our cost structure continues to be well controlled," added Mr. Fields. "This enables us to grow our earnings power and increase our cash flow from operations. We ended the year with the strongest balance sheet in our company's history." Mr. Fields concluded, "Our focus for fiscal 2020 is to continue to grow the percentage of our revenue that is recurring, helping to mitigate the impact of the lumpy contribution from MarketPlace. The 5% year-over-year increase in recurring revenues in the fourth quarter demonstrates our initial ability to achieve this goal, and we expect to report continued increases in our recurring revenue going forward as we grow our network scale. Strategically we remain focused on leveraging our modest fixed cost structure, maximizing profitability and strengthening our balance sheet, which will enable us to repurchase shares and generate value for our customers and shareholders."
Financial Highlights:
Strategic Outlook:
Over the last 12 months, Park City Group has introduced MarketPlace, validated its value to customers, and built the infrastructure and systems to support it. MarketPlace, as expected, will contribute to the volatility of quarter-to-quarter revenues and will increase non-recurring transactional revenue. To offset this impact, and help improve predictability in quarterly revenue, management is focused on growing its recurring revenue base from Supply Chain and Compliance revenue streams, transforming the Company into more of a SaaS provider. In the short term, this may negatively impact revenues, but over time we believe it will create sustainable growth, as well as improved gross and operating margins.
"As we expand our network, adding additional Tier-2 hubs and the suppliers that work with these customers, we expect fiscal 2020 to again be a year of top line growth," added Mr. Fields. "Growing our participation with our existing customers continues to represent a significant revenue opportunity, and we are focused on harvesting this opportunity while maximizing our profitability."
In addition, we believe the Company is now positioned to convert a larger percentage of operating income into net income and a greater percentage of net income into free cash flow. Accordingly, management continues to expect to grow the bottom line faster than the top line.
"Our cost structure continues to be well controlled," added Mr. Fields. "This enables us to grow our earnings power and increase our cash flow from operations. We ended the year with the strongest balance sheet in our company's history." Mr. Fields concluded, "Our focus for fiscal 2020 is to continue to grow the percentage of our revenue that is recurring, helping to mitigate the impact of the lumpy contribution from MarketPlace. The 5% year-over-year increase in recurring revenues in the fourth quarter demonstrates our initial ability to achieve this goal, and we expect to report continued increases in our recurring revenue going forward as we grow our network scale. Strategically we remain focused on leveraging our modest fixed cost structure, maximizing profitability and strengthening our balance sheet, which will enable us to repurchase shares and generate value for our customers and shareholders."
Financial Highlights:
- Full-year cash from operations more than doubled to $4.6 million. Total cash of $19 million
- Compliance network reached 89,000, up 42%
- Total Tier 2 connections increased 25%
- Total revenue decreased 4% due to lower non-recurring license, professional service and MarketPlace revenue
- Recurring revenue increased from 64% to 70% of total revenue
- Operating expense decreased 7%
- Net income increased 14%
- Repurchased 87,600 shares at an average price of $5.47 under share repurchase program for a total of nearly $500,000
Strategic Outlook:
Over the last 12 months, Park City Group has introduced MarketPlace, validated its value to customers, and built the infrastructure and systems to support it. MarketPlace, as expected, will contribute to the volatility of quarter-to-quarter revenues and will increase non-recurring transactional revenue. To offset this impact, and help improve predictability in quarterly revenue, management is focused on growing its recurring revenue base from Supply Chain and Compliance revenue streams, transforming the Company into more of a SaaS provider. In the short term, this may negatively impact revenues, but over time we believe it will create sustainable growth, as well as improved gross and operating margins.
"As we expand our network, adding additional Tier-2 hubs and the suppliers that work with these customers, we expect fiscal 2020 to again be a year of top line growth," added Mr. Fields. "Growing our participation with our existing customers continues to represent a significant revenue opportunity, and we are focused on harvesting this opportunity while maximizing our profitability."
In addition, we believe the Company is now positioned to convert a larger percentage of operating income into net income and a greater percentage of net income into free cash flow. Accordingly, management continues to expect to grow the bottom line faster than the top line.
Park City Group (NASDAQ: PCYG) stock price history
The image below, obtained from Google shows the stock price history of Park City Group over the last 5 years. And its not been a good time for Park City stockholders. 5 years ago it was trading at $10.50 a stock and its currently trading at $7.65. That is a -27.1% loss for Park City stockholders over the last 5 years. And the stock is currently trading at close to the mid point between its 52 week low and its 52 week high,which is a sign that the short term sentiment and momentum towards the stock is neutral.
Park City Group (NASDAQ: PCYG) latest stock valuation
So what is Park City Group stock worth based on their latest earnings report? It is hard to value a stock that is not really making any profits per share. With the earnings for the 4th quarter being $0.00, but for the full fiscal year earnings came in at $0.16. Using their full year earnings per share and their cash generated per share out valuation model sets a target price on Park City Group stock of $4.20. We therefore believe the stock is overvalued and we expect it to continue its downwards slide to levels closer to our target (ful value) price in the coming weeks and months.