EPS of $0.07 increased by 14.3% from previous year
Gross margin of 84.0%
Net income of 1.38M
"We are actually doing traceability now, live with our customers, end to end, with a technology that we have had in existence for some period of time." - Randy Fields
Park City Group Inc (PCYG) QQ4 2023 Earnings Analysis and RTN Traceability Outlook
Executive Summary
Park City Group (PCYG) delivered a solid QQ4 2023 results, underscoring a transition to a SaaS-centric, recurring-revenue model anchored by the ReposiTrak Traceability Network (RTN). For the fiscal year ended June 30, 2023, total revenue rose 6% to $19.1 million, with recurring revenue up 7% to $19.0 million, and GAAP net income increasing 40% to $5.6 million. The company ended the year with $24.0 million in cash and zero bank debt, reinforcing its balance sheet health and financial flexibility to fund traceability investments and shareholder value initiatives (dividends, buybacks, and preferred redemption). In QQ4 2023, revenue was $4.80 million, with gross margin around 84% and GAAP net income of $1.38 million (net income to common shareholders of ~$1.2 million, or $0.07 per share).
Management framed RTN as the next major growth driver, expecting incremental ARR of $3–$4 million once fully deployed, driven by existing signed customers. ARR at year-end 2023 stood at ~$20.3 million, with management signaling meaningful RTN revenue in calendar 2024 and stronger top- and bottom-line growth thereafter due to operating leverage and automation. The company reaffirmed a disciplined capital allocator stance: no debt, robust cash generation, a quarterly dividend (currently $0.06 per share) and ongoing share buybacks, with the board also pursuing redemption of the preferred shares over three years. Management emphasized that running the business requires roughly $12 million in annual cash costs, and that every incremental dollar of recurring revenue above fixed costs would contribute meaningfully to the bottom line (estimated $0.80–$0.85 of incremental margin).
Overall, PCYG presents a compelling optionality story: a cash-rich, debt-free balance sheet, high gross margins, and a scalable RTN platform with the potential to convert near-term contracted ARR into material, higher-margin recurring revenue over the next 12–24 months. The key risk is the pace of RTN adoption amid regulatory timing (FSMA 204 enforcement) and the potential for delays in broader customer onboarding. Investors should monitor RTN deployment progress, the cadence of ARR uplift, and management’s capital-allocation decisions (dividend growth, buybacks, and preferred redemption).
Key Performance Indicators
Revenue
4.80M
QoQ: 1.92% | YoY:7.88%
Gross Profit
4.03M
83.98% margin
QoQ: 9.42% | YoY:7.53%
Operating Income
1.17M
QoQ: 4.65% | YoY:13.37%
Net Income
1.38M
QoQ: 1.79% | YoY:14.62%
EPS
0.07
QoQ: 2.83% | YoY:14.29%
Revenue Trend
Margin Analysis
Key Insights
Revenue (Q4 2023): $4.8038 million, up 5% YoY; full-year revenue 2023: $19.1 million, up 6% YoY.
Gross profit (Q4 2023): $4.0341 million; gross margin: 83.98%. Full-year gross margin remained in the ~80%+ range.
Operating income (Q4 2023): $1.1652 million; operating margin: 24.26%; full-year operating income: $5.1 million, up 15% YoY.
Net income (Q4 2023): $1.3768 million; net margin ~28.7%; net income to common shareholders: $1.2 million, $0.07 per share; full-year net income to common shareholders: ~$5.0 million, $0.27 per share.
Financial Highlights
Summary of key QQ4 2023 metrics and year-to-date trend:
- Revenue (Q4 2023): $4.8038 million, up 5% YoY; full-year revenue 2023: $19.1 million, up 6% YoY.
- Gross profit (Q4 2023): $4.0341 million; gross margin: 83.98%. Full-year gross margin remained in the ~80%+ range.
- Operating income (Q4 2023): $1.1652 million; operating margin: 24.26%; full-year operating income: $5.1 million, up 15% YoY.
- EBITDA (Q4 2023): $1.7562 million; EBITDA margin: ~36.6%.
- Net income (Q4 2023): $1.3768 million; net margin ~28.7%; net income to common shareholders: $1.2 million, $0.07 per share; full-year net income to common shareholders: ~$5.0 million, $0.27 per share.
- Recurring revenue: 99.5% of Q4 2023 revenue; recurring revenue grew 6% YoY in Q4 2023 and 7% for the year.
- ARR and cash: End of FY2023 ARR ~$20.3 million; cash balance ~$24.0 million; zero bank debt; net cash position approximately $23.2 million after debt consideration.
- Cash flow: Operating cash flow for the year $8.9 million (up 45% YoY); Q4 2023 operating cash flow ~$1.79 million; free cash flow ~ $2.56 million in the year; dividends paid (~$1.4 million in FY23); stock buybacks ~232k shares in FY23; no debt.
- Valuation context (as of 2023 data): P/S about 38.65x, P/B ~4.05x, and P/E ~33.71x, reflecting strong expectations for ongoing margin expansion and RTN-driven growth.
- Liquidity and leverage: No debt; current ratio ~6.44; long-term tax assets and goodwill remain; the balance sheet shows meaningful goodwill and intangible assets, with a scalable cost structure supported by automation.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
4.80M
7.88%
1.92%
Gross Profit
4.03M
7.53%
9.42%
Operating Income
1.17M
13.37%
4.65%
Net Income
1.38M
14.62%
1.79%
EPS
0.07
14.29%
2.83%
Key Financial Ratios
currentRatio
6.44
grossProfitMargin
84%
operatingProfitMargin
24.3%
netProfitMargin
28.7%
returnOnAssets
2.72%
returnOnEquity
3%
debtEquityRatio
0.02
operatingCashFlowPerShare
$0.1
freeCashFlowPerShare
$0.14
dividendPayoutRatio
30.6%
priceToBookRatio
4.05
priceEarningsRatio
33.71
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Key takeaways from management commentary on the earnings call:
- Strategy and RTN momentum: Management emphasizes RTN as the next major growth driver and notes that onboarding four customers (two wholesalers and two self-distributed retailers) could generate $3–$4 million of additional annual recurring revenue once fully deployed. Randy Fields stated: We are leading the committee of food industry experts on traceability (RENNAC) and described RTN as a live, interoperable solution already deployed with customers, not just a pilot. He emphasized that onboarding is a lengthy, meticulous process, with potential ramp effects in calendar 2024 and a potential “crush” in 2025 as the network scales.
- Operational leverage and automation: John Merrill highlighted that even with RTN investments, SG&A was largely flat for the year and that profitability and cash flow grew faster than revenue, with GAAP net income up 40% YoY and EPS up 52% YoY for the year. He noted: It takes approximately $12 million in cash to run this place, and for each incremental recurring revenue dollar above fixed costs, $0.80–$0.85 flows to the bottom line.
- Capital allocation and balance sheet: Management underscored a shareholder-centric approach: half of annual cash flow is targeted for balance-sheet strengthening or shareholder returns (dividends and buybacks), with the other half potentially funding traceability initiatives and selective M&A. John Merrill reiterated that the company has zero bank debt and about $24 million in cash. The board recently announced intent to redeem the preferred stock over the next three years.
- Dividend and buybacks: The company has a $0.06 quarterly dividend and has executed buybacks (approx. 48k shares in Q4 at $6.90, ~232k shares for FY23 at avg price $5.65). Randy indicated dividend increases are under consideration but not yet decided; M&A could be considered if strategically compelling.
- Regulatory outlook and customer onboarding: Management expects FDA FSMA Rule 204 implementation to be challenging and could benefit from a potential FDA delay, which would ease onboarding timelines for RTN customers. Randy noted that onboarding is a multi-year effort, with some customers aiming to finish in advance of the 2026 deadline to manage risk and transition smoothly.
We are actually doing traceability now, live with our customers, end to end, with a technology that we have had in existence for some period of time.
— Randy Fields
It takes approximately $12 million in cash to run this place.
— John Merrill
Forward Guidance
Forward-looking assessment based on management commentary and the current pipeline:
- RTN ARR ramp: Management expects incremental RTN ARR of roughly $3–$4 million per year once fully deployed, derived from existing signed customers. ARR as of 6/30/2023 was $20.3 million; if RTN expansions occur as projected, the ARR trajectory implies meaningful top-line growth beyond the current recurring base. The cadence is laddered over the next 12 months, as onboarding is designed to be deliberate and scalable rather than immediate.
- Profitability and leverage: The company maintains a cost structure where incremental recurring revenue above fixed annual costs (~$12 million) yields a substantial bottom-line contribution (0.80–0.85 dollars per incremental dollar of ARR). This supports operating leverage and EPS growth as RTN expands.
- Cash generation and capital allocation: With no debt and ~$24 million in cash, Park City Group has flexibility to fund RTN investments, continue share repurchases, and potentially increase the common dividend. Redeeming the preferred stock over three years remains a stated objective, which would simplify the capital structure and potentially unlock additional leverage for growth initiatives.
- Risks and uncertainties: The primary risk is regulatory timing, including FSMA 204 enforcement, and the length of onboarding cycles given the complexity of multi-store, multi-supplier implementations. An FDA delay could compress near-term implementation risk but would not eliminate the longer onboarding cycle. A more aggressive or faster-than-expected RTN adoption could accelerate results, while slower uptake or regulatory changes could dampen near-term upside.
- Bottom line for investors: The key catalysts are RTN onboarding progress, the realization of $3–$4 million in annualized recurring revenue in 2024–2025, dividend sustainability/growth, and the timing of preferred redemption. Given the company’s cash-rich balance sheet and high gross margins, the investment thesis hinges on RTN scale, adoption velocity, and continued operating leverage.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
PCYG Focus
83.98%
24.30%
3.00%
33.71%
RDVT
77.80%
-5.94%
-1.24%
-65.25%
MIXT
61.50%
14.40%
2.08%
18.98%
ISDR
64.30%
0.15%
-2.05%
-23.81%
RSSS
39.40%
2.56%
5.13%
36.62%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
PCYG presents a selectively favorable long-term growth thesis anchored by a high-margin recurring SaaS base and a potentially game-changing RTN rollout. The company has demonstrated the ability to grow profitability and cash flow while funding traceability investments and maintaining a debt-free balance sheet. The primary catalysts are the acceleration of RTN ARR through contracted deployments and the management’s ability to scale onboarding across wholesalers and retailers. The near-term risk is execution cadence and regulatory timing, but the upside lies in the potential to convert RTN deployments into a multi-year, high-margin recurring revenue stream that could meaningfully lift earnings power. Investors should approach with a longer horizon, monitoring RTN onboarding milestones, ARR progression, dividend policy, and the redemption of preferred shares as a key optionality in the capital structure.
Key Investment Factors
Growth Potential
RTN offers a large, near-term upside: projected incremental ARR of $3–$4 million annually from contracted customers as deployment completes. Management notes a multi-year onboarding journey with potential for much higher adoption as trade associations and retailers push for end-to-end traceability. Additional growth avenues include expansion into restaurant chains (QSR and casual dining) and other regulated sectors (oil & gas, pharmaceuticals), along with potential international expansion. The recurring revenue base is already sizable and highly margin-rich (80%+ gross margin) with a scalable automation backbone.
Profitability Risk
Key risks include slower-than-expected RTN adoption due to integration complexity, potential delays in FSMA Rule 204 enforcement, and the competition that may arise from new labelling or blockchain-based solutions. Customer concentration risk persists in the sense that RTN revenue depends on onboarding large retailers and wholesalers. The company’s valuation multiples (P/S ~38.6x, P/E ~33.7x) reflect high growth expectations; any execution missteps could compress multiple expansion.
Financial Position
Balance sheet is exceptionally strong: $24.0 million cash, zero bank debt, and a current ratio of ~6.44. The company has meaningful goodwill ($20.9 million) and intangible assets ($0.96 million), indicating scale and potential impairment risk if RTN fails to meet expectations. The lack of debt provides financial flexibility to fund RTN investments and shareholder returns. Management guidance indicates a disciplined capex and opex plan with a focus on operating leverage and cash generation (FY23 operating cash flow of $8.9 million, up 45% YoY).
SWOT Analysis
Strengths
High gross margins (80%+), indicating strong unit economics on recurring revenue
Cash-rich, debt-free balance sheet with ~$24M cash and zero bank debt
Recurring revenue base with 99.5% of Q4 2023 revenue being recurring
First-mover advantage in live traceability (RTN) with strong industry credibility and advisory support (RENNAC)
Automation-driven cost discipline supporting solid profitability and scalable margin expansion
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