Good day and welcome to the Park City Group’s Third Quarter 2017 Earnings Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Dave Mossberg, Investor Relations. Please go ahead, sir.

Thank you, Noah. Before we begin, we will be referring to today’s earnings release, which can be downloaded from the Investor Relations page on the company’s website at parkcitygroup.com. I also want to remind everyone that this 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 subject to historical facts. Such forward-looking statements are based upon the current beliefs and expectations of Park City Group’s management and are subject to risks and uncertainties which could cause actual results 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 this call we may be referring to both GAAP and non-GAAP financial results, including free cash flow, EBITDA, adjusted EBITDA, net debt, net income 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 statements. The reconciliation of non-GAAP results in earnings release and on the Investor Relations section of our website. Our speakers today will be Mr. Randy Fields, Park City Group’s CEO and Chairman and Todd Mitchell, Park City Group’s CFO. With that, I’ll turn the call over to Todd?

Thank you, Dave. We put up another strong quarter, fiscal third quarter revenues grew 33% to $4.8 million. This was in line with our expectations for the quarter and puts us on track to achieve our financial targets for the year. Top line growth was driven by revenue growth from our largest ReposiTrak, year-over-year gains in supply chain revenue and an acceleration in smaller supplier hub sign up. Fiscal third quarter net income was 900,000, up from 295,000 a year ago. This was 19% of total revenue, also in line with our expectation. So far this fiscal year we have converted $3.5 million in incremental revenue into $2.8 million in incremental net income for an incremental contribution margin of 80%. Clearly, this demonstrates the operating leverage in our business model. We remain confident that revenue and profits in the second half of the year will be stronger than the first half and that we will exceed the financial and operating targets we articulated at the end of fiscal 2016. Now, with regard to expenses, total operating expense were $3.8 million in fiscal third quarter, up 17% versus a year ago. This was expected, we said last Q, operating expenses was kind of hit in the back half of the year. We are not a quarterly company, the revenue and expenses are going to fluctuate quarter-to-quarter. We are investing where we believe it will translate into faster revenue growth and improved operating leverage. Specifically, during the quarter, we expanded our account management team. We initiated execution on our next 10x project and we launched MarketPlace. And while we talked about these investments in terms of helping to drive revenue growth and operating leverage, what they are really designed to do is to drive customers success, because if we are successful in…

Okay. I apologize I'm going to read my remarks again today that constrains me a bit, but we'll get to questions later and I'll try and add some color as I go through these prepared remarks. Important to recognize for those of you who are new to listening to the conference call, that I am almost impossible to satisfy, it’s just not in my nature. Having said that, the fact is it was a terrific quarter by [indiscernible] The financial results were very strong, that generated 33% year-over-year revenue growth, made even me smile. We had record operating cash flow that's critically important. And as Todd pointed out, we ended up with $13.5 million of cash on the balance sheet, up a couple of million dollars just two quarters ago. When you look at that number and for those of you who've been around for a while and look back on where we were just a few years ago that should certainly bring a smile to your face as it does to mine. As we look to the future though, we see pretty incredible opportunity to continue to grow our best. Fundamentally we have the opportunity to do business with absolutely everyone who touches through in the global supply chain, which is as we all know, the largest SIC Code in the world. Importantly though, we also have the opportunity to increasingly sell more and more value added services that helps each of the participants in that supply chain and as we fondly said, sell more, stock less and see everything that happens with their trading mark. In other words, we expect that the network effect is beginning to take hold that will drive our business substantially over the next several years. To address opportunities ahead of us, during this…

Thank you. [Operator Instructions] And we'll take our first question from Bob Miller with UBS Financial.

Hi, Randy.

Hi, Bob.

So operating expenses went up about $400,000 sequentially and that was to support growth, MarketPlace and account reps and so forth. Is that something that should start you know, growing much slower here in the coming quarters or should we just expect that to keep going up rapidly to support your growth?

Good question, Bob. The way – again, we think about this is, we're not a quarter-to-quarter company. So annually we would expect our expenses versus our revenue to be significantly lower. But in any given quarter there may be increase. So overall for the year we're going to as you know, quarters 1 and 2 were small increases, quarter 3 was larger, but the year will be quite comfortable in relation to the top line growth. We're obviously on a trajectory I guess, year-to-date we're probably, I'm just thinking 30, I'm looking at my CFO, 34% to 55% top line and expenses are probably 10 – 7%. Call me crazy, but I think that's the way we would like to see it. So the goal here is to invest conservatively, but to make sure that the level of support that we're giving our customers for their success is appropriate.

Okay. And when you talk about the MarketPlace being an important contributor not in the quarters ahead, but years ahead, how do you monetize that?

The truth is we see several paths to the monetization of the MarketPlace. At this point those are not things that we really want to talk about publicly. We're still working on them internally between our hubs and our suppliers. But in the very long run, we think the MarketPlace is central to what we do. In a way historically we've grown by using our technology to help our customers see their problems. We call that visibility and then from seeing their problem we've made it our responsibility to help them with the solution to those problems. So in a way we feel this obligation if you will that having exposed this problem in the industry where 15% to 20% possibly even more of the suppliers are – let at this point say they are suspect, we just don't know, they won't give us the information or they do give us the information and it’s scary. We in essence have uncovered a problem for the industry which are non-compliant suppliers and I can tell you that one of our largest customers basically now has T-shirts for people in the office that say if you do not comply you do not supply. But the problem is how do they go find all of the good kinds of suppliers, the good guys that they should be doing this. And that's what MarketPlace is about. So we're going to enter this territory. I am sure that we - one of the methods that we see are more for monetization of the MarketPlace will be put in place. But for now we just want to see what the adoption rate is like to get it right and get it - get it up and running in the way that’s self sustained.

Okay. And you mentioned that this is one of the largest undertakings that the company has committed to and that there's still a lot more investment and work left to be done on it. So could you kind of give us a little more flavour of exactly what that means as...

Yes. It’s not – that probably sounds like a financial commitment, it’s not as much financial as it is time and focus from multiple groups. Let me give you an example, because this is very different, the MarketPlace is very different from anything we've done. We had to involve the whole sales organization, so they could learn the product well enough to talk to suppliers and hubs about it. We had to create training for the support people. We had to create if you will a whole new system internally for reporting problems around it. We had marketing involved in it. We had training involved in it. So - and that's all aside from development. Interestingly the major cost element has not been development, it's the focus of every other group of the company on the MarketPlace to hold the hands of each other and customers to be sure that adoption goes properly. So it's really a focus issue, it’s not a pure financial issue and that's going to continue for some time until we get everybody inside the business comfortable with this idea of MarketPlace, until we start getting buyers and sellers together on a weigh larger scale than we do today. And we think at that point much like ReposiTrak it becomes a network enabled. The network of buyers and sellers tend to create more buyers and sellers. So it's pretty exciting internally, it’s just take and getting more groups of people focused on this than anything we've ever had to do.

Okay. And one more question. You said your first customers on MarketPlace now and they're using you for non-food items. So that just sounds like a contradiction of what MarketPlace is. So what is MarketPlace...

No, no, not at all. Remember, we didn’t say unsafe food, we said compliant...

You’re using – you said that they were using it for non-food items or not..

Yeah, remember our - first of all ReposiTrak covers more than just food, basically if you are a vendor, if you are a service agent, if you service refrigeration in the store there are compliance standards that you have to adhere to, to do business with one of our hubs. You have to have workman's comp as an example. So we don't just cover food safety, we cover compliance of all vendors against all criteria that a hub if you will, retailer wholesaler would establish for his supply chain including service center. So the reality area is that non-food items are definitely going to be a major part of the MarketPlace just as food items. We just wanted to know that it was interesting that the first transaction inside of MarketPlace have been non-food.

Okay. Can you give us a couple of examples of what those were?

Everything from Haitian flag to beach towels to water bottle.

Okay...

We would not otherwise imagine would be under our [indiscernible] So it's been very - it's really been intriguing, and intriguing.

All right. That’s all I have. Thank you.

Thanks, Bob.

[Operator Instructions] We'll take our next question from Guy Riegel with Ingalls & Snyder.

Hey, guys. How are you?

Good.

Good. Hey just getting back to MarketPlace and somebody you know, your main - one of your main clients has signed up for it and is using it. How is it populated, meaning let's say Randy you're using Todd as a supplier of food and it comes out that he's non-compliant. So now you got to look for somebody else. How do you populate kind of the MarketPlace...

Got it. Guy, that's a good question. It's a bit counterintuitive, stay with me. Let's make it more complex than you instinct, meaning let's suppose I have three different buyers, three different retail companies in the MarketPlace, each of those company has different compliance standard than the other. There is no concept of compliance. It's a relative concept. So an example might be, I require $5 million of liability insurance and a $1million umbrella and I require an SQF [ph] we might have somebody else that requires $10 million and no SQF. So in – what the MarketPlace does is take to look at a supplier who would achieve your compliance standard as opposed to quote the compliance standard, which don’t exist and it would see that supplier up for you to do business with because he is to you a good guy. That makes sense?

But how do I know about that supplier or that vendor who meets my standards?

Yes. As you literally would go into the MarketPlace think of it is, it’s almost Amazon like and what you would do is let's suppose you were looking for and making this [indiscernible] a tomato paste vendor. So you would type in tomato paste and the system would return to you vendors to achieve your criteria. So it would show you tomato paste vendors in the system that in fact and they will have self-implemented, they will put all of their product level information in et cetera. And now you will see just like on Amazon the vendors that you could do business with.

And is it the concept of - if I'm the tomato paste vendor, and I have signed up for ReposiTrak. Are you going to allow me to check a box to say you can also sign up for MarketPlace?

Bingo.

And in that scenario are you getting paid twice?

Well, not really, at this point there's no incremental charge to be in MarketPlace because we want to increase the sales of our user and we want to solve the problem of our buyers because they really have a tough job ahead of them to find good suppliers to replace suppliers that aren't as good. So there is no...

How do you get compensated, how does MarketPlace then make money?

What I said a little bit ago was, we don't want to discuss all of that at this point. We see several paths to interesting revenue opportunities for us, but at a minimum if you in fact find a connection, so you're a buyer and you suddenly start doing business with a new supplier that becomes at a minimum a new connection. So worst case we end up with additional connection revenue as we do today. So that's the worst case, but we think there are some other interesting cases beyond that which is probably we don't want to talk about.

Got it. Okay. Thank you so much.

You bet. Thanks, Guy.

We'll take our next question from Mark Stafford with [indiscernible] Capital.

Hi, Randy.

Hi, Mark.

When you were talking about MarketPlace, I was just thinking about the other businesses with pharma, and insurance and you know some of those other areas you touched on you know in the past calls, anything new in those areas?

Yeah, a little bit of an update. The insurance thing is getting to be – remember, let's go back. First let me deal with pharma, we're just not going to do it. I just don't have the patience. I had expressed that, it's almost a personal thing because it's lawyer driven. It is so slow, so slow to adopt, so peculiar. We're just not emotionally cut out for that. So we're just not continuing to invest the effort against pharma at this point. But on the insurance side, that’s moving relatively well. And what's happening is just as we would want. We now have one of the largest insurance companies in the world saying to its customers who are retail hubs and wholesale hubs, if you will. That if you are a ReposiTrak user we're going to improve on newer insurance rate. So that's beginning to have a pretty interesting impact, it’s still early, but we were able to get over the goal line with one largest insurance companies on [indiscernible] and now what we want is we’re moving that along inside some trade associations et cetera. But the insurance part of our business, meaning, the idea of rewarding people for being good citizens is going very well.

Okay. Thanks.

You bet.

And at this time, we will conclude the question-and-answer session. I’d like to turn the call back over to management for any additional or closing remarks. Thank you all for you interest in Park City Group. Our form is present at the bottom of the press release, please feel free to reach out to us if you have any additional questions.

And that does conclude today's conference. Thank you for your participation. And you may now disconnect.