Workflow
ReposiTrak(TRAK) - 2020 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q1 of fiscal 2020, revenue was $4.8 million, down 19% from $5.9 million in the same quarter in 2019, primarily due to a decrease in non-recurring revenue [14] - Recurring revenue grew 4% to $4.1 million, up from $3.9 million in the same quarter of 2019, with total recurring revenue increasing from 66% to 85% of total revenue [14][15] - Net income for Q1 of fiscal 2020 was $32,000 or $0.00 per diluted share, compared to $820,000 or $0.04 per diluted share in the prior year [18] Business Line Data and Key Metrics Changes - Non-recurring revenue was $700,000 in Q1 of fiscal 2020, down from over $2 million in the same quarter last year [16] - Total operating expenses decreased by 5% to $4.7 million, largely due to lower sales and marketing expenses [17] - Customer churn remained below 2%, indicating strong customer retention [15] Market Data and Key Metrics Changes - As of September 30, the company had approximately 340,000 total connections, a 13% increase year-over-year [30] - Tier 2 revenue increased 8% year-over-year for the quarter, with a run rate at the end of the quarter 35% higher than the same point last year [31] Company Strategy and Development Direction - The company is focused on transitioning to a more predictable and profitable recurring revenue model, aiming to increase the percentage of recurring revenue to 80% or more [10][55] - The strategy includes expanding the network of blue-chip customers and enhancing the MarketPlace solution to drive transactional business [10][41] - The company plans to grow its Tier 2 initiative significantly, targeting a 400% increase in Tier 2 hubs by the end of the fiscal year [38][53] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges posed by online retailers like Amazon and emphasized the importance of their out-of-stock management capabilities [44][82] - The management expressed confidence in the company's ability to grow recurring revenue and improve forecasting for Wall Street [55][70] - The company aims to maintain a strong balance sheet while continuing to buy back shares without additional borrowing [56] Other Important Information - Cash flow from operations for Q1 of fiscal 2020 was $713,000, down from $1.6 million in the prior year [19] - The company repurchased 79,955 shares of common stock at an average price of $6.47 per share during the quarter [20] Q&A Session Summary Question: Update on hiring specialists for Tier 2 or MarketPlace - Management confirmed two specialists are focused on Tier 2 conversions, with plans to add more personnel in the future [60][61] Question: Any large license deals in upcoming quarters that could create lumpiness? - Management indicated that there are license deals in the next quarter, but the focus is on avoiding such transactions moving forward [66][67] Question: How are cross-selling efforts performing? - Management reported better-than-expected results, with examples of compliance hubs transitioning to supply chain services [77] Question: Impact of Amazon's free delivery for grocery on the industry - Management highlighted that Amazon's quick delivery poses a significant threat to physical retail, emphasizing the importance of addressing out-of-stock issues [82] Question: What might margins look like when recurring revenue targets are met? - Management stated that the margins for recurring revenue would be similar to those for one-time revenue, with a strong cash flow structure in place [87][88]