ReposiTrak, Inc. (TRAK) Q1 2020 Earnings Report, Transcript and Summary

Good day everyone, and welcome to today's Park City Group Fiscal First Quarter 2020 Earnings Call. At this time, all participants are in a listen-only mode. [Operator Instructions] Please note this call is being recorded. It is now my pleasure to turn today's program over to Rob Fink of FNK IR.

Thank you, operator, and good afternoon everyone. Thank you for joining us today for Park City Group's fiscal 2020 first quarter earnings call. Hosting the call today are Mr. Randy Fields, Park City Group's CEO and Chairman; and John Merrill, Park City Group's CFO. Before we begin, I would like to remind everyone, 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 current, beliefs and expectations, Park City Group management are subject to risks and uncertainties which could cause actual results to differ from forward-looking statements. Such risks are fully discussed in the company's filings with the Securities and Exchange Commission. The information set forth herein should not be -- should be considered in light of such risks. Park City Group does not assume any obligation to update information contained in this conference call. Shortly after the market closed today the company issued a press release overviewing the financial results that we will discuss on today's call. Investors can visit the Investor Relations section of the company's website at parkcitygroup.com to access this news release. In addition in our earnings release and on this call, we may refer to GAAP and non-GAAP financial results including free cash flow, EBITDA, adjusted EBITDA and adjusted earnings per share, which are non-GAAP terms. We believe these non-GAAP terms are useful measures for the company primarily because of the significant non-cash charges in its operating statement. Reconciliations of GAAP and non-GAAP results are in the earnings release and on the Investor Relations website. With all that said, I would now like to turn the call over to John. John, the floor is yours.

Thanks, Rob. During the first quarter, Park City Group continued to build upon its strengths. We have a large and growing network of blue-chip customers in the largest industry sector of the economy. We have a simple story that is resonating with customers. We get retailers and the suppliers compliant give them visibility to actionable information through our supply chain channels and allow the customer to source, vet and transact business through MarketPlace. We provide solutions to our customers in a regulatory environment that is increasingly complex. We provide solutions that address the accelerating threat from online retailers like Amazon that makes our tools not only attractive, but a necessity. We have a strong balance sheet, the strongest in our history and a proven ability to generate cash. Cash balances and cash generation is increasingly important today for our customers' peace of mind. Strategically we remain laser-focused on growing our base of recurring revenue within compliance and supply chain as we advance our MarketPlace solution, which is transactional by its very nature. By design, this initiative will provide us with a more predictable stable and profitable base of recurring revenues. When I became CFO a few months ago and began speaking with the investment community. one of the key pain points I heard was that forecasting and modeling our performance was challenging, particularly since Park City Group does not provide detailed guidance. We listened. We understand that modeling us has been a challenge and that this is in part due to the erratic nature of one-time revenue. It was frustrating for us. And based on feedback it was frustrating for you. More importantly, it made budgeting and forecasting internally more challenging. And frankly, it wasn't an optimal way to run the business. This situation has driven our decision to significantly increase the focus on recurring revenue. This will better position us to maximize contributions from MarketPlace, which may be inherently lumpy and unpredictable given the seasonal categories we currently address. In the short-term, it is nearly impossible mathematically to overcome non-recurring revenue reductions. But longer-term, there is a significant value to be captured. In the first quarter of fiscal year 2020, revenue was $4.8 million, down 19% from $5.9 million in the same quarter in 2019. It should be noted that last year's first quarter included $1.2 million in non-recurring revenue outside of MarketPlace compared to $16,000 in the same quarter of this year. Recurring revenue in Q1 of 2020 grew 4% to $4.1 million, up from $3.9 million in the same quarter of 2019. Year-over-year total recurring revenue increased from 66% of total revenue to 85% of total revenue. As we advance our efforts to drive recurring revenue and drive our Tier 2 initiative this quarter-over-quarter comparison and sequential growth will be the best way to evaluate our progress. It's important to note that since we are focusing on cross-selling and upselling existing customers to drive our recurring revenue I call it farming our cost of acquisition is exceeding low. Furthermore, customer churn is less than 2% and so we will be able to scale our efforts with very little incremental expenses. Non-recurring revenue was $700,000 in the first quarter of fiscal 2020, compared to over $2 million in the year ago quarter. We stated our goal was to drive recurring revenue as a percentage of total revenue to 80% or more. We have achieved this goal for the quarter. However, keep in mind, we will always have customers that demand to buy meaning license versus rent meaning subscription. Total operating expenses were $4.7 million, a decrease of $266,000 or 5% from $4.9 million in Q1 of 2019. This decrease is largely the result of lower sales and marketing expenses of $493,000 due to generally lower sales commissions, lower travel expenses and rationalization of certain marketing campaigns. The decrease in sales and marketing was partially offset by an increase in cost of services and product support of $100,000 or 6% due to higher MarketPlace costs and increase in general and administrative expense of $790,00 related to stock compensation expense and an increase in depreciation and amortization of $48,000 as a result of capital expenditures for leasehold improvements and computer hardware in fiscal year 2019 that's specifically related to relocating our corporate headquarters to a more cost-effective location and upgrading equipment in our data center. Net income to common shareholders for the first quarter of fiscal 2020 was $32,000 or $0.00 per diluted share compared to $820,000 or $0.04 per diluted share in the year ago quarter. The decrease in net income to common shareholders was the result of lower non-recurring revenues, which was partially offset by lower operating expenses. Turning now to cash flow and cash balances. For the first three months of fiscal year 2020, cash flow from operations was $713,000 compared to $1.6 million in the prior year period. After capital investments of $354,000 and cash used in investing of $673,000, which was primarily the repurchase of common stock total cash at the end of the first quarter of fiscal 2020 was $18.3 million when compared to $18.6 million as of June 30, 2019 the end of fiscal 2019. On the current stock buyback authorization, we repurchased 79,955 shares of common stock at an average price of $6.47 per share in the September 2020 quarter for a total of $517,000. To-date, we've repurchased a total of 167,555 shares of common stock at an average price of $5.96 per share. As previously stated, the company holds no treasury stock. The stock purchased under the buyback plan is retired from issuance and hence reduces the total amount of common stock outstanding. The total amount remaining under the buyback plan for purchase and retirement of common shares is approximately $3 million over the next six quarters. We plan to continue to retire shares as they are repurchased thereby reducing the number of common shares outstanding. I will now pass the call over to Randy.

Thanks, John. I recognize that it might be counterintuitive for a CEO to be excited about announcing results when the high-level view shows declining year-over-year revenues for the quarter, but that's exactly what I'm going to do on today's call, frankly for good reason. Our calculated and deliberate efforts to reduce onetime revenue to move our business into a more predictable and profitable recurring revenue-driven model is taking hold. In the quarter, one-time revenue other than MarketPlace was negligible and recurring revenue is growing. The worst year-over-year comparisons of this transition are now behind us and it demonstrates three important facts. First, we have the financial ability and strength to lean more heavily on recurring rather than one-time revenue. It's right for the business and it's right now. Second, it supports our confidence in MarketPlace. And finally, it's based on adding some highly proprietary capabilities to our supply chain applications that should allow us to increase recurring revenue more rapidly. In my view, profitable growth is still something largely overlooked these days. The startups and emerging high-tech companies of all sizes have embraced to grow it at any cost mentality. In contrast, I believe that cash is still king. A strong balance sheet is critical, particularly true on our case as our customers require it. Our balance sheet screams that we'll be here for the long-term. Our balance sheet and deep customer network serves as a very wide moat around our business, a durable barrier of entry for startups or outsiders who might seek to displace this. It's because we have the financial structure that we do that underpins our ability to drive our business toward much higher recurring revenue in the core part of our business. This shift will not take years. We're moving quickly on both forgoing onetime revenue and accelerating recurring revenue. So by year-end, the mission will largely be under our belts. While we continue to strengthen our balance sheet, we're also focused on growing our network of blue-chip customers. Each of the three suites of our platform, are now attracting net new participants. And as John shared, we're meticulously focused on growing recurring revenue excluding MarketPlace transactions and further penetrating our existing customer base. We've said that, cross-selling to our existing customer base, has the potential to double if not triple the size of our business. Let me speak to the key performance indicators which will contribute to the financial performance of our company in the future. First, network scale, as of September 30th, we had about 340,000 total connections. That's up, 13% from last year's same time. Tier 2 connections, is an area of focus for us on a critical basis. And I will share more about that shortly is growing very, very rapidly. Recurring revenue doesn't conveniently begin the first day of every quarter. As I've said, new customers every month come in. And we're seeing a rapid acceleration of our month over last year's same month revenue. For example, on an as-reported basis, our Tier 2 revenue increased 8% year-over-year for the whole quarter. But we exited the quarter on a run rate that was 35%, higher than the run rate at the same point last year. Over the next few years as we continue to drive the scale of our network, we can see our way quite quickly to 500,000 total connections and then on to one million. Important to keep in mind, that the real mission of the business is to scale the network until we touch and connect everyone in the supply chain of the U.S. food world and replicate that bundle outside the U.S. As you know the economic value of each connection varies as a function of the service offered, from a few hundred dollars per year to many thousands per year, per connection. This also may help explain to you why the financial results, in any given quarter very much depends on what type of connections we focused on for that particular quarter. The growth and the scale of our network has obviously been the driver of our profitability and as generated the cash flow, that we needed to build out the full platform. Our build-out has been sequential, so as to reduce the dependency on outside capital. And it's obvious and inevitable pollution. We're financing each stage of the platform with cash generated from the previous components and simultaneously, improving our balance sheet to keep our customers secure. Our next focus is to leverage this loyal network and expand our relationships with existing customers. In other words, increase the scope of our offerings. Harvesting our existing customer base represents an additional 8-figure opportunity for us and is a primary focus. As we've said many times, our customers have only so much time and energy, at any given moment. Our deployments take time. Our retailers move slowly. And we can't simultaneously sell two different offerings, to the same customer. Once a customer has fully embraced an application, we can go back for more. This ability to grow revenue much faster than cost is a key leverage point in our business model. During the quarter we made very significant operational progress in each of the three components of our platform. So let me speak to each of them. Compliance, we're methodically executing on our Tier 2 initiative and we're winning. As we said from the beginning of our compliance management initiative years ago, our goal is to connect all of the entities in the global food supply chain. To do that, we must drive deeper and deeper from retailers and their suppliers, to the suppliers of the suppliers then to the suppliers of the suppliers', suppliers and so forth, is exactly where we're headed. During the fiscal first quarter we on boarded 20-plus Tier 2 hubs on the ReposiTrak platform. By comparison, a year ago we had only 25 total Tier 2s. We ended the September quarter with a total of 71 of those kinds of hubs. Our marketing initiatives are clearly working. And we're on track to reach 200 Tier 2 hubs by the end of this fiscal year. And oh! By the way, that represents a 400% increase. From network perspective, in just this year we could add nearly 15,000 more customers to our current network of 23,000 customers. That would represent a 65% increase in the single year. Please keep in mind, that each of those new suppliers itself becomes an up sell candidate. Most recently, we're actually able to raise prices in our Tier 2 initiative with no customer pushback or hesitation. The opportunities amends, the task of signing them all was sure as hell daunting. But we want them all. Equally as important, during the first quarter we signed our first ReposiTrak compliance hub in the United Kingdom. It's a very important win, as this is one of the largest wholesalers in Britain. And over time it will generate more incremental recurring revenue, expand our addressable market, and lead us to additional opportunities as the next year unfolds. This win interestingly was based on intense reference checking. And our sterling reputation no pun intended, cemented the win. MarketPlace, as we've said before MarketPlace is potentially the most significant product launch in the company's history, because of its ability to increase the scope of our engagement across the scale of our network, without commensurate increased touch. During the first fiscal quarter, we added two new buyers, not previously customers of any of our applications to the MarketPlace network, a wholesaler and a large drug chain. In fact the wholesaler came to us from a retailer, who had worked with us. And they had in turn been trying to solve a sourcing problem that they were having. Good news is it means the word is spreading. Our pipeline of new buyers and new opportunities with MarketPlace continues to expand, interest and it remains very, very high. We hope to add, a few more buyers and several new programs, over the balance of the year. We're feeling better and better, about MarketPlace. Supply chain. In supply chain, we continue to see industry dynamics driving dramatically higher interest in our applications, especially for our out-of-stock management capability. We continue to believe supply chain, could be the standout performer in our fiscal 2020 year. While each add in our compliance business is relatively small financially, each add in our supply chain business has much more impact. In fact if you want to think about it, it's actually an order of magnitude larger in terms of revenue. As online competitors like Amazon expand home delivery, out-of-stocks have taken on critical importance for food retailers, and their lost sales. More importantly, it's not just the lost sale it's the customer loyalty that's being eroded, when a product isn't in stock. Historically, retailers have had no easy way to address this. And availability has become the most important consideration to-date, not price. Consumers don't care as much about saving $0.02 on an item. They probably don't even notice. But they certainly notice if they drive to a store hunt for an item. And discover it's out of stock. Many retailers are now beginning to recognize the magnitude of this challenge, as customers come in to their store, don't find what they need, pull out their phones, see it's in stock on Amazon. And decide to go home and shop from their couch instead. We believe that out-of-stocks are potentially an existential threat, to the retail food industry. Our ReposiTrak out-of-stock management capability is based on many, many years of research, terabytes of historical data and proprietary algorithms that we've built. At this point, all I can say is, we're uniquely good at this. Our effectiveness at reducing out-of-stocks exceeds, even my own expectations. We're seeing about 80% of the suppliers getting significant reductions, 40% in less than three months of use. Over time, this will help us expand our footprint substantially, within our existing customers. And importantly, the service is only available as a service not on a license basis. And it should assist us therefore, in growing our recurring revenue and avoiding cannibalization, by licensing in our supply chain activity, to double win, growing our existing customers and at the same time, attracting new ones. In fact, we've added a number of additional salespeople over the last few months to capitalize on these opportunities. So from a summary perspective, we're unique in our ability to help the buyers source that and transact efficiently, with a new supplier. We have multiple moats around the business that led us to build out the scale and scope of our network. And we're doing this in what we think, is a very strategic and deliberate manner that allows us to maximize each component, while simultaneously generating exceptional profits and cash flow. To judge our progress in fiscal 2020, I would have you look for the following. The overall goal is to nurture this acceleration that we're seeing in recurring revenue, so that by year's end, total revenue except for MarketPlace, will increasingly be driven by this growing predictable revenue stream. We believe importantly, that by shifting to more recurring revenue, we make Wall Street's ability to forecast our progress much, much easier. A question could be asked, how will we grow both compliance and supply chain recurring revenue? Well, let me reiterate. First, we're going to execute on our Tier 2 initiative to drive the compliance recurring revenue. In fiscal 2020, we have a goal to increase the number of Tier 2 hubs as I mentioned by 400% to a total of nearly 200 by year-end and we are on track to do that. Second, we're going to drive our out-of-stock management program to rapidly grow our supply chain recurring revenue business. That will be done by expanding our footprint with our current customers. And in most cases, we could double our revenue with them over time. Our supply chain business by year-end should be accelerating dramatically based on our out-of-stock management ability and our new sales staff. And finally, we will grow our recurring revenue as a percentage of total revenue. We'll continue to grow our bottom line and cash-generation capabilities. As we said, in fiscal 2019 the percent of recurring revenues increased to 70% from the mid-60s in the prior year and our goal in the next few years is to drive that consistently in the '80s. We achieved this goal in the first quarter. Now we have to keep it there. Profitability is strengthened in our balance sheet, which is a critical concern for our customers and it's enabling us to continue to buy back shares without additional borrowing or impairing our growing cash balance. Very soon, we'll be in a place where the need to increase the cash balance will diminish. To the strategic and deliberate execution of our strategy, we will expand both the scope and the scale of our network. Our customers will see what we're doing for them that will enable us to reaccelerate our revenue growth all the while generating growing profitability, cash flow and cash. In turn, we expect that this should help to increase shareholder value. To be clear, while we're acutely focused on our earnings power and cash generation we still expect fiscal 2020 to be a year of top line growth. With that, let's open it up for questions. Operator?

[Operator Instructions] And we'll take our first question today from Ananda Baruah with Loop Capital. Your line is open.

Hi. Good afternoon guys. Appreciate the question. Two for me if I could guys. The first is, could you update us on progress of hiring the specialists, I believe you talked about are going to augment the direct salespeople? And I think they are -- in particular, they're and correct me if I'm wrong, but they're to focus on -- is it Tier 2 or MarketPlace, the specialists and then I have a follow-up. Thanks.

Yes. So the numbers speak for themselves. We have two people committed to the effort now over the course of the next couple of months there will be at least one addition. So the marketing pieces, the sales pieces are moving along. And eventually it should become almost like a machine.

And Randy, are they each focusing -- are they focusing on -- is it one on Tier 2 one on MarketPlace? Just a little context here. Are they sort of each focusing on each?

No. Right now the strategy is pretty simple, which is get Tier 2 conversions from being a user, because they are ordered to and they -- to using that for their own supply chain. We call that the Tier 2 hub. And both of these people at the moment are focused on directly selling, developing the marketing materials and strategies and 100% focused on the Tier 2 initiative. In addition to that, however, we've added salespeople to our general sales work, which would include at this point primarily our supply chain activity and our Tier 1 effort in the compliance business. But by the end of the year, if MarketPlace does what we are hoping it will do, then we'll be adding salespeople to that as well. So, for now sales addition and marketing addition on the Tier 2 effort. In addition additional salespeople on the supply chain and Tier 1 effort, and by year-end hopefully some people on MarketPlace.

Randy, that's really detailed and super helpful. Clarification, when you say by year-end is it your fiscal year-end? Or is that…

Sorry. Yes. Fiscal year, June.

Awesome. Thanks. Thanks. And then one for John here. Any large license as you sort of continue on through the transition towards a subscription from license, are there any large license deals in the upcoming quarters that won't recur that we should be aware of that could create some lumpiness?

As far as what we've done in prior years or what's upcoming?

Sorry, prior years John that could create some compares.

There are license deals in the next quarter. But as we've talked about, our focus going forward is not getting involved in when we could avoid it license transactions. But comparatively, there were licenses in the September -- I'm sorry, the December 2018 quarter that will not appear in December 2019 quarter.

Got it. So -- yeah. I got it, got it. And so -- and then that sounds like you guys just -- may -- are you implying that that will be the last quarter where you'll sort of be having the outsized compare at least based on license lumpiness on a year-over-year basis?

Correct.

Got it. Got it. Very helpful. Let me squeeze one more…

Let me add a little – Ananda, let me add a little color to that. It is very -- it is more difficult than anyone can imagine to avoid the one-time revenue, because sometimes people have professional services that they need. That's going to be one-time hopefully. There will be licensing that some larger customers in particular want to do in which case they present us as you can imagine with like a sort of Damocles and say, I'm going to go buy this service that you only offer as a software as a service from someone else on a license basis. That happens in our supply chain business primarily as you can imagine. So sometimes we're just faced with difficult choices. So far it's working, but the reason that we think 80% to 85% is about as much of a penetration into the business that's not MarketPlace that we can get is we really think that's the best guess. Last quarter, it was better than that. And hopefully, we can continue to keep it down. Obviously, it makes it a much easier business to forecast, because you now will only have to get a sense of the growth rate of our recurring revenue, and then you'll have to take a stab at MarketPlace. So we think this grotesquely simplifies the job that Wall Street has in understanding this.

That's really helpful. And so Randy just one last one for me guys. It's a question off of what I'm going to ask is the clarification. I think you mentioned -- that correctly when you mentioned in your prepared remarks a good way to think about progress right now is sequential growth. I thought that I heard that. And then listen I know forecasting isn't art. It's much of a science, but what should we think of in that context with regards to sort of sequential -- potential for sequential growth sort of from this point forward. I'm saying sort of philosophically…

Sure. Yeah. I mean, John, that's a perfect tee up for you.

I mean, we're -- our focus is on the recurring revenue as our recurring revenue grows sequentially and that's compounding. To Randy's point as we add Tier 2s, they don't all start on July one or October 1. So as that percentage increases then obviously the growth sequentially for our quarters is based on that growth in subscription, that recurring revenue. So as Randy said, comp over comp 8% for Tier 2s, but ending the quarter at a 35% growth on the subscription not assuming that that is going to be the growth rate for the year. But you can understand how the recurring revenue makes it much easier for Wall Street to predict based on that compounding growth versus what happened in a prior quarter of $1.2 million that wouldn't happen in a subsequent quarter, if we can maintain that 85% recurring to total revenue percentage. Does it make sense?

It makes perfect sense and it's really helpful guys. Thanks so much. I appreciate it.

[Operator Instructions] We'll go next to Thomas Forte with D.A. Davidson. Your line is open.

Great. Thanks for taking my question. So Randy, I recognize it's early. But how would you say so far your cross-selling efforts are working? Do you any good examples of successful stories so far to date?

Yes. Actually better than planned, but different than planned. Let me give you a couple of examples. One of our largest compliance hubs has now begun to work in our supply chain area, big win and could end up being very, very large in supply chain as well. We have a number of cases and these are really surprising where some of our early Tier two hubs, so that would mean a supplier, who had been asked typically to do compliance work because one of their retailers required it. And this one is actually in process now, so it's fresh, new and exciting. They came to us and said can you help us with our supply chain? Yes. So they became a Tier two hub. Somehow, some way, as we've mentioned from Ananda's question, the salesperson who is working on the account happened to mention to them, as you grow, there's many other things that we're going to be able to help you with, help you forecast, help you reduce your out-of-stocks with your retailers et cetera. And this particular company went Oh my god, really? Yes, really. So they are now in the process of going from a Tier two compliance. So they started as a Tier one spoke. They've become a Tier two hub and now they're exploring moving into our supply chain world. So, this is the kind of account where there's no signed agreement yet, but it's rapidly in process where they went from a few hundred dollars a month to potentially over the next couple of years a few hundred thousand dollars a year. There are a number of those where it's beginning to happen. So we're seeing people go from compliance to supply chain and a reasonable number of those, both from the supplier side and I think in the course of the next two quarters, several of our retail compliance hubs will begin to adopt our out-of-stock management program. So, it's feeling very, very good. The new sales people that we've hired are enjoying the fact that they have more to offer to their customer set, so I'm feeling pretty good about it at the moment.

Great. And then the next question I had was, you've touched upon this in your prepared remarks, but I wanted to know, what you thought this meant to both the industry and what it meant to Park City of the notion now that Amazon is doing free delivery for grocery?

Well, it's -- I want to -- let me clarify, if it's okay, Tom. It's not so much that it's free. It's that it's quick. So in the sense, historically if you had 10 items on your shopping list, then you went into a store to buy the 10, you did it because the odds were pretty good. You would get most of those things seven of the 10 perhaps at the supermarket. And that was that. That was the consumer expectation. What Amazon has done though, is to change the expectations, so that if you go on Amazon for those same 10 items as long as they're not the most perishable items like milk or whatever, but the rest of your list, Amazon would say we can have that to you in a few days. Okay. If I don't need it right now, I guess, that's okay. But once Amazon announced two things, one everything nationwide would be next day by the end of next year. And now, with their new initiative, that it will be same-day for perishable items in many places, we think that's a really significant threat to the industry. What we know is this couple of statistics that are pretty scary, 24% of Amazon's total North American revenue, tens of billions of dollars of revenue comes from people who started on Amazon because there was an out-of-stock at a physical retailer. So, what we know absolutely is that Amazon is being set by out-of-stocks in retail stores. And retailers -- we're all fond of saying generals fight the last war. Retailers are fighting the last war. They are fighting the price war. We don't think that's the war at all. So the reality is, this is a very significant threat to physical retailing and one that we can help with a lot, the results that we're getting with our out-of-stock work are again way, way better than I ever would have imagined. In the most recent week, just under 80% of the vendors doing it, call it approximately 200 vendors across 12,000 retail stores and 25,000 items have seen an average reduction with us of nearly 40% of their out-of-stocks. It's huge. It works. So the reception in the MarketPlace as part of our supply chain business and it's something we've done for a long time. We're just kind of moving it forward now because we think that's the major problem. All of our existing customers that use that technology could double their revenue with us over the next couple of years by just adding additional vendors to the program. We suspect that will happen. So they're afraid of Amazon. This is a game changer, the idea of next-day delivery or same-day delivery, the free isn't the big deal. The people who care about free shop at Aldi. The people who care about convenience don't care that it's free; they just care that they can get it. So, it's a real threat. And the receptivity of the MarketPlace to what we're doing is pretty significant. It takes us time to do it as usual because, we want to be sure that we're brilliant on the execution side and we are doing that. Is that the -- did I answer the question?

Yes.

Okay.

So last question in two different ways. So, when you get the percentage of sales to be recurring that you want versus nonrecurring, what might your margin look like at that point in the future or -- and/or, how should we think about the incremental margin on recurring revenue versus onetime revenue?

It's not much different. John and I both believe John keep me honest here, that it costs us I'll call it $17 million a year here in the company. And that call it 80% to 90% of what happens after that, becomes cash flow and bottom line. So, to us, there isn't any difference except volumetrically between recurring revenue and onetime revenue. It's a very different financial structure and operating structure than most SaaS companies have. As you know, most SaaS companies struggle with how do they actually ever make money. That is not our issue. We're now at the scale of business, do it carefully, make sure your customers are thrilled level of the business because the making-money part, I think we understand well. So, as we grow from the recurring revenue part of what we're doing, the margins will be what the margins have been. There will be no difference that I can see. Do you agree, John?

Yes. On the recurring revenue spot-on, it's $17 million to run this place. Every dollar after that based on variable costs, I mean you're adding $0.80 to $0.85 to the bottom line. The only color I would add to Randy's comment is MarketPlace is, it depends on what products, what category, what seasonality and the vendors are. But that's again the nonrecurring, but that may impact our overall margin.

Yes exactly. I'm sorry I should have mentioned. That MarketPlace is a different creature.

Good. All right. Thank you, Randy, thank you, John.

And I am showing that we have no further questions at this time. I'll turn the call back for any further or closing remarks.

No. I think we're there. So, I appreciate everybody joining us and we are feeling obviously very good about what we're doing and where it's headed. All the bar indicators feel very good at the moment. So thank you for taking your time with us today.

Thank you.

This does conclude today's program. Thank you for your participation. You may disconnect at any time.