Park City Group, Inc.
Q4 2014 Earnings Call Transcript

Published: 12 Sep 2014

[Operator:]

Good day, ladies and gentlemen. And welcome to Park City Group’s Fourth Quarter 2014 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will be given at that time. (Operator Instructions) And as a reminder, this conference call maybe recorded. I would now like to hand the conference over to Mr. David Mossberg, Park City Group’s Investor Relations Representative. Sir, you may begin.

[David Mossberg:]

Thank you, Saeed. Before we begin, we will be referring to today’s earnings release, which can be downloaded from the Investor Relations page of the company’s website at parkcitygroup.com. I will also remind you that this conference 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 such statements that are not historical fact. Such forward-looking statements are based upon the current belief and expectation of Park City Group’s management and are subject to risk and uncertainties, which could cause actual result to differ from 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 risk. Park City Group does not assume any obligation to update the information contained in this conference call. Throughout today’s conference call, we may be referring to both GAAP and non-GAAP financial results, including the terms 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 statement. There is a reconciliation of non-GAAP results in earnings release and on the Investor Relations section of our website. Our speakers today will be Randy Fields, Park City Group’s Chairman and CEO; and Ed Clissold, Park City Group’s CFO. Ed?

[Ed Clissold:]

Thanks, Dave. Good afternoon, everyone, and thank you for joining us on the call today. My remarks will cover our consolidated operating results for our fiscal year ended June 30, and I will also comment on certain cash flow and balance sheet items, and then I will turn the call over to Randy for his comments. I will begin my comments by discussing topline revenue. For the fiscal year ended June 30 subscription revenue increased 17% to $9.4 million, which was another record for the company. Our revenue was $2.5 million for the fiscal year, which is a decrease from the $3.3 million posted during the same period last year. We have some legacy customers that still purchase licenses on the one-off basis, which makes comparisons in the other revenue category difficult due to its relative size and our decision to transition to a subscription based recurring revenue model. Overall, we expect contribution from other revenue will remain at approximately 20% to 30% of our overall revenue. As a result, going forward, total revenue comparisons should more closely mirror that of subscription revenue, intermix with the occasional lumpiness of one-time license sales and consulting agreement. Overall, total revenue increased 5% to $11.9 million for the year. Moving onto operating expenses, in anticipation of the expected acceleration in growth, we increased investment in sales, marketing and account management staff levels during fiscal 2014. This increase in staffing is reflected in the $3.6 million increase in operating expenses during the fiscal year. Total operating expenses were $14.5 million versus $10.9 million last year. At the end of June, our headcount was 68, which is up from 57 at the end of June last year. Below the operating line, interest expense has been changed to interest income and showed the $243,000 improvement, which reflects the increase in cash and decrease in debt level. Touching on profitability for the year, GAAP net loss for the fiscal year ended June 30, 2014 was $2.5 million, as compared to net income of $257,000 during the prior year period. Again, this reflects our investment in sales, marketing and management personnel to support our expected growth. On a non-GAAP basis which is excludes non-cash related expenses, the net loss was $894,000 for the fiscal year versus $693,000 of non-GAAP net earnings last year. Now I'll address our cash flow and financial position. Overall, our balance sheet is in great shape and at the end of the year, we had $3.4 million in cash and $1.8 million in debt, which are relatively unchanged from the prior year. Our cash decreased by about the same amount as our debt decreased. We consumed the small amount of cash this year to increase staffing to support the higher levels of sales that I discussed earlier. Notable changes to our balance sheet include increases in our accounts receivable and note receivable lines. The AR balance reflected DSOs of 84 days versus 74 days last year. Our note receivable balance of $3 million relates to notes due from ReposiTrak. As we have discussed in prior calls, in June of last year we renegotiated our relationship with ReposiTrak. In exchange for a note receivable from ReposiTrak, we negotiated more favorable terms for Park City Group and our shareholders, including an increase subscription fee, which gives Park City Group greater participation in ReposiTrak revenue. Also, we received the fixed cost option to purchase a much larger ownership stake in ReposiTrak and finally, a longer period to exercise that option. Given the progress the venture had made at that time we felt it was in the best interest of our shareholders to increase our potential ownership stake from slightly less than 50% to approximately 75%. Since that time, ReposiTrak has continued to make significant progress in establishing itself as the industry standard food safety platform for the global food supply chain and we are even more confident that this decision was in the best interest of our shareholders. ReposiTrak has continued to onboard new customers at an increasing rate and based on its current pipeline of connections, the venture has a clear path to meaningful cash flow generation over the next 12 months, which could reduce or even payoff our note receivable. Overall, we will likely be net users of cash during the next couple of quarters. However, as our revenue and earnings continue to ramp, we expect to be cash flow generators this year and with the current strength of our balance sheet, we have more than adequate liquidity to fund the cash used this year. As of June 30, our total outstanding share count was 16.9 million shares. That concludes my review of the financials for the fiscal year. I will now turn the call over to Randy.

[Randy Fields:]

Ed, thank you. Thanks everybody for joining us this afternoon. I am going to try and be short and sweet as I can to allow some time for questions. The team is really proud of how we did in 2014. I think I'll add color to what Ed’s commentary was about the financials. But I think most importantly we left ‘14 in a way that positions 2015, ’16 and beyond in a very, very significant position for growth. All of us feel very good about the progress we made last year, but most important, we have accomplish significant improvement in our management structure, in our messaging and frankly, our successes with our customers and I’m come back to that in few minutes. From the supply chain management services perspective and ReposiTrak, I am going to comment, if I can please on both of those areas of the business. Meaningfully, last year we had a number of opportunities to demonstrate what we could do with some of the largest retailers in the world and we are extraordinarily proud of how that turned out. I'm normally inclined to give you some case studies or examples of what we've done. I want to give you one of those and then some summary statistics. One of the more interesting case studies last year was a function of the test that we did with a very large international retailer. And in that test, the retailer very politely asked several of its suppliers to participate with Park City Group in the application of some of our capabilities. As it turns out this particular supplier to this retailer, got terribly, I would say, defensive, but negative would certainly be an adequate description of what position they took. They basically said, no, followed closely by way the heck, no, followed by a little bit more pushing by this international retailer, and finally, reluctantly, they agreed to participate in the pilot test. As it turns out about halfway through the test, they found out some remarkable successes they were having with our technology. And to their credit interestingly, they went from, no way, we don’t want to do this to while, this has really significant impact on our business. Their concern was primarily cost and what they found was using our technology produced very significant reductions in their waste, the amount of product they got return and the number of times they had to visit the stores to make deliveries by virtue of having short shipped of that retailer previously. So the net of it was interestingly, in this case, this supplier went from, no way, they are not going to participate to one of our biggest advocates. They have now signed up as a customer and interestingly, they were a reference for us on the call of number of suppliers where they talked about their own attitude adjustment that they wanted to process. Rarely in my business career, I have seen the turnaround of attitude quite like this, but candidly it came on the back of really, really superb performance by our team in helping them to achieve their economic goals. Aside from that story last year as we total that up, we probably helped retailers and suppliers reduced inventories by something around $100 million or more. We generated numerous instances of sales increases, return decreases, and frankly, therefore better margins for both retailers and the suppliers that participate with us. It was a great year of [recording] (ph) our successes with our customers and for those of you who spent any time with me on the road, who understand how this company think, it’s important to remember that we have a brand promise and that promise is very simply to help our customers sell more, stock less and see everything. And boy oh boy did we deliver on that promise last year and its now showing up in our success, in our numbers, not just last year, but going forward in the next several years. We were just spreading about how we put together our services and the success that we have had. We had some inbound calls from retailers and suppliers asking whether or not they could take advantage of this. So I think that reputationally this was a great year for us 2014 and we suspect that it will impact us this year. Coming out of that test that I referenced a few minutes ago, it is important to -- and because I know I will get the questions, so I will answer it. A number of those suppliers are in the process of signing up with us, so there will definitely be significant revenue as a result of that test that we completed in the spring of last year. In another words it worked and it worked to the benefit of both the retailer and the suppliers and it’s now going to show up in our revenue stream. So I’m very proud of the 17% increase that we had last year. That is our fifth year of increase in growth rate and looking forward this year, we expect that our growth rate of subscription revenue will be even faster than last year. We were able this year again to help attract I think a very deep bench of management. As our spend increases as ReposiTrak close, we have an increased need for the kind of management depths that I know all of you would want us to have. And I believe that team is very solidly in place. I think if you would ask the major achievement of 2014, it was really the basis from my perspective of our brand promises, based on the brand promise of helping our customers to sell more, stock less and see everything. We did that. We've begun reporting to our customers better about how well they do with us and that's driving what I think is the most important accelerant of our growth going forward, which is the network effect where we have suppliers because of their work with us either in ReposiTrak or in our core business taking us to more retailers, more retailers bringing us more suppliers so on and so forth. And this will help fuel a significant ramp in our revenue over the next several years. Let me switch a little bit now to ReposiTrak although I’ve referenced it to this point but a little bit more about it. First of all some background for those of you who are not familiar. ReposiTrak is a venture between Leavitt Group and Park City Group. Leavitt brings to the table some of the deepest expertise in the issues around food and drug safety of anyone organization. We’re proud to be partnering with them and initially we believe that a primary driver of the adoption of the ReposiTrak would in fact be a set of regulations that are currently being promulgated and discussed as a function of something called the Food Safety Modernization Act, known in the trade as FSMA. It trends out FSMA today is about 2000 plus pages of regulations and growing. And for those of you who’re investor centric, let me see if I can in a phrase describe what FSMA is. I think Sarbanes-Oxley for food safety, think Sarbanes-Oxley in terms of liability of accountability for senior executives in the food business. Nothing like this has ever been brought forward before. This is the most radical change in regulation around food since 1938 and senior executives that can find themselves just like they do when they sign documents under Sarbanes are going to find themselves on the hook even without signing for what goes on in their businesses from a safety perspective. This law has criminal tip in it. It has regulatory fine tip in it and it puts the liability squarely on the industry to heal itself. So the reality is that as these regulations unfold and they begin to take effect now more next year, more the year the followings over the next several years as the industry faces the burden of these regulations. We anticipate it will have a salutary impact on the growth of ReposiTrak which as you know is currently our customer. I want to make out a picture and it’s little difficult to describe but let me try. What we've found is a substantially greater degree of non-compliance with basic process, basic documentation in the supply chain from those that we have brought onto the system, we call it onboarding than we would have imagined. It’s substantially worse in terms of compliance, I think than the people in the industry would've guessed. And that’s both good news and bad news. It’s good news from the perspective of ReposiTrak because it heightens people’s interest because as they think about whether their supply chain might also be less compliant than they’d expect, I think it causes people to think whether or not they ought to move ahead in a positive way with using ReposiTrak. On the negative side, that there's a lot to be done. Interestingly, we've already begun to see a significant impact. And we're going to focus on this for the next few months, the significant impact when the suppliers are on the system that they move from lack of compliance to higher levels of compliance and that at the end of the day will be one of the metrics that people will care about as they adopt ReposiTrak increasingly seen as the industry standard through safety platform. So what’s happening is ReposiTrak is not just giving visibility to supply chain, it’s improving the compliance of the supply chain. And personally, I think that’s critically important. Remember we have over 15 years north of $100 million of investment in underlying technology that runs ReposiTrak. We’ve priced it the way that they think is extremely attractive for people to participate. And we are certainly in our own minds doing very, very well at the onboarding process, the automation. We have added several people on our side in inside sales activities to accelerate the onboarding process. So we are to use a hackneyed expression, was pleased as punch with how ReposiTrak is doing in its onboarding process. Remember that the organization we’re currently working with [Ruster] (ph) an organization wholesalers had somewhere between 35,000 and 65,000 suppliers that at the end of the day are out there to be onboarded over the next four or five years. So a lot of work has to be done. As I mentioned, the regulations continue to be promulgated. And in fact, this month it's anticipated that there will be what they call in bureaucratics a re-proposal and those re-proposals are going to include a second aspect of ReposiTrak. So in other words, the way the regulatory environment is evolving, its increasing the specific needs that people have with the capabilities for ReposiTrak. So we couldn't be happier sadly to say with how the regulatory environment is unfolding, it’s certainly going to create a demand for what we do. In addition, recently many of you are aware of the fact that there was a settlement on the Jensen Farms cantaloupe food safety issue, where several dozen people died from listeria. Many, many, many more were seriously sickened and it’s been reported that Walmart settled something on the order of 23 lawsuits for having sold in essence defective products. What’s important is, is that becomes a game changer for the industry. If you go to the normal circumstance of manufacturing to retail distribution, let say, cars or cigarettes, when it was determined that cigarettes kill people, people sue the manufacturers of cigarette. They didn't sue the retailers. So this is a new idea that if you are a sickened or if you die as a result of food poisoning from a product purchased at retailer, suing the retailer is the new idea. Think of automobile, the generalist have motors ignition problem. If you have a problem with that, if you’re going to sue somebody, you don't sell the dealer where you bought the car, you sell the manufacturer of the car. So this is a pretty fundamental change in liability. As that gets recognized in the market, there is going to be a need for more ReposiTrak like capabilities. So we’re very excited about the possibilities from ReposiTrak over the next several years. We are in fact working on some strategic relationships within ReposiTrak. It might even help subsidize the already low cost. So there’s a lot going on. And I think over the course of the next year, we’ll begin to report to you more about these qualitatively, if not quantitatively how we’re doing with ReposiTrak. So one other important thing that we hope to have, I want to put out there. Randy is inclined to do this, sort of, like just one more thing. What we hope to do this year is to establish an effective way by which users of ReposiTrak can become aware of Park City Group Services so that there's an opportunity to move them from food safety to supply chain. And we have some ideas for what that path might be and we’ll be trying them over the course of this year. And hopefully, by this same time next year, I’ll be able to report that we see a clear path for the ability to move people from ReposiTrak centric to Park City Group centric as well. That we think is certainly another very exciting opportunity for us. So looking forward this year and next year, 17% is behind us. It’s in the rearview mirror So that said, next year is going to be better than that and year after we think better than that and so on and so forth for several years. We anticipate that we’ll be doing more business with more of our customers which certainly adds to what we’re trying to do. More of our customers are buying more of our services from the GetGo which is certainly a terrific thing for us. But the net of all of this is that we have a great value proposition inside of ReposiTrak to protect people and we have a terrific proposition inside Park City Group to help people to sell more, stock less and see everything. Frankly, at this point I'm more optimistic than I've ever been and I’ve never lacked for optimism historically as you all know. So I’ll shut up and let everybody ask questions. Thank you.

[David Mossberg:]

Saeed, can you give instructions to how to poll for questions?

[Operator:]

Thank you, sir. (Operator Instructions) Our first question comes from Todd Mitchell from Brean Capital. Your line is open. Please go ahead sir.

[Todd Mitchell:]

Thank you. I’d like to know if you could go into this issue of non-compliance a little bit. Specifically could you sort of address the levels of non-compliance you’re seeing. Did you also sort of talk about what that means in terms of ReposiTrak’s business model? I mean, you should have highlighted that there is an opportunity here but it will also be slower. Can you put some sort of quantitative metrics around that in the sense that what can you do that obviously it creates a value of this system to retailers or wholesalers. Is there a business model in actually managing the compliance of their suppliers? And then also what does it mean to be onboarding processes and the speed which you can ramp that and ultimately is there any implications on the level of penetration that you do get into the supply chain? Thank you.

[Randy Fields:]

Okay. Todd, thank you. Good questions. Hopefully, I can remember all of it. I’ll tell you my own personal -- this is a personal view, not the company view. When we were doing this and we helped determine what the compliance metric should be and each of our customers get this specified, what he calls compliance. How many documents you have to have, insurance levels, S2F test, all of those kinds of things. My guess was that the industry would see a 10%, maybe 11%, I’m going to call it non-compliance rate overall. That’s what I was personally thinking. Honestly what we’re seeing is the numbers are 50% or more percent non-compliant. In other words, I’m extraordinarily surprised. Now, what I think about how could it be, it’s because it’s managing the paper storm. In other words, imagine you are -- you have 5000 suppliers. You are wholesaler of 5,000 suppliers. And you require 10 documents a year to be updated to maintain, some of which come from third-party sources. That’s 50,000 documents a year, each of which has a date and expiration, has numbers associated with it. So the truth is nobody that we have currently talked to have a system for managing that the same way that ReposiTrak does. So I think because it's been manual, because there hasn’t been a good system for doing this. I believe that what’s occurred is call as a system of trust that I simply trusted my suppliers are doing what they're supposed to do. So I think this brings the Ronald Reagan’s 'trust, but verify' to the fore that’s certainly what we're doing. And I think everybody is in the same place I am, all the industry people that I showed to go, well on the one hand it’s shocking, and then on the other end I am not completely surprised. I think that’s the general reaction that I get from senior people in the industry. My concern is that it means that there is a large exposure out there. And I think part of the business model for ReposiTrak long-term could, operative word could, could involve helping people, get their supply chain into compliance, outbound calling. We already notify people that they are not in compliance and what they need to do, but sometimes people just ignore it. So increasingly, and I can tell you absolutely as FSMA takes hold, every executive in the line of -- in the chain of command inside of a wholesaler or retailers that has its own distribution center, whoever is covered by FSMA and that’s not all retailers, but anybody who's covered is going to have to -- provide some level of authentication that the supply chain is verified and real. It’s with imported food. I don’t think Wall Street has any idea what this law says. It’s stunning. And by the way it isn’t going to be discussed to that. There is a court order date by which it has to be in effect. So the FDA -- everybody thought the FDA was dragging its feet, somebody took him to court and there is now a court order mandating the last date, August of next year, October 31 of next year, several dates very close in, by which the law has to be in effect. So this thing is a train that has left the station and is barreling down the track and the deeper we get into it, the bigger the level of surprise that I think retail and foodservice and other people who are touched by this is going to have to pay attention to. For example, just an example, a great deal of the food that you need comes from outside the U.S. Importer, now importers of record are going to have to certify that that’s food in essence achieves U.S. inspection and safety standard. And if you sell it, you maybe at risk that it didn’t. So you have to come up with a verification system that stays that it does achieve that standard. This is a big deal. It’s much bigger than I knew a year ago and the more I learned, the more concerned I become about the industry’s ability to actually deal with it. For us it’s great news, for the industry it’s maybe not such a great news. But there is an opportunity and we haven't figured it out yet to help people with compliance. Right now, we are moving more in the direction of helping with outbound calling, calling suppliers, explaining to them carefully what they've got to do that they risk not doing business with people because of the lack of compliance and we're just getting started. This isn’t the list of compliance documents that will exist in two years. This is the third of maybe less. So there's an enormous opportunity beyond just the basics of ReposiTrak to help people get into compliance. And over the next few months we are going to find out more about what that might look like. But it’s different than we thought Todd. It’s just very different than we thought.

[Todd Mitchell:]

And can you just tell us an impact the rate at which you can onboard customers?

[Randy Fields:]

I think over the next couple of months, it will slow down a little bit as we spend more time helping people get their compliance. We already made dramatic improvements. It’s improved by about a third, not a third of total, but the third of the lack of compliance, I think is a -- and I could be wrong, I think that’s what I am guessing. So we are already nagging people. It will slow down a little bit, but this is going to be a terrific year for ReposiTrak as this whole compliance stuff outcomes through the pipe. And as we get closer to next year, just watch what happens. One year from today when people are looking at October as the start date and August as the start date, there will be sure panic among -- in this industry about old, wow what do we do that. Everybody's waiting, not everybody, significant number are waiting the last possible minute and that will be a failing strategy.

[Todd Mitchell:]

Is there an equation for you in terms of the rate at which you can onboard customers and the amount that you spend on infrastructure, two onboard customers and help them become compliant where there is sort of an optimum level? And given what you know about lack of compliance and sort of deadlines that are looming, is there a case for stealing up the infrastructure there?

[Randy Fields:]

I think the answer is I hate giving this answer. We don't know yet. We now know what level of resource we need and it is not a significant level of human resource to bring, to do this thing we call onboarding, meaning corralling people, getting them the go to Webinar or get them signed up. It’s not a huge resource. It’s very comfortably covered by our onboarding fees and whatnot. So that’s not a significant number. What we don't know Todd is I think what you’re alluding to, what is the cost associated with getting people into compliance, what’s that taken? The answer is I don't know yet, but we will in the next quarter or two, because I'm committed, because I think, well, let me tell you why. From a industry perspective, it’s just scary, it is seriously scary. From a business perspective, I want to be able to demonstrate the efficacy of ReposiTrak that when you start ReposiTrak, you might be 50% non-compliant. But once you use ReposiTrak, your compliance rate will significantly improve. I have never thought about that as a metric, but I think that's going to be an important metric in the long run to get convince CEOs that they need to make disposition. So I just don't know. I don't think it’s going to be very expensive honestly. I think look some of this could be lap, some of this is, oh, I just forgot or some of it is, oh, something, I was on vacation. I don’t know. I'm one of those (indiscernible) that always believes the best, but some of this could be deception, some of this could be, I didn't want somebody know. We have heard that, but I don’t think it’s going to be too expensive, but I won’t know for a quarter or two.

[Todd Mitchell:]

Okay. Thank you.

[Randy Fields:]

Thank you.

[Operator:]

Thank you. And our next question comes from Amit Dayal from H.C. Wainwright. Your line is open, please go ahead.

[Amit Dayal:]

Hi, Randy.

[Randy Fields:]

Hi, there. How are you, Amit?

[Amit Dayal:]

Good. Thank you. Just from a high level perspective, could you talk about some of the drivers that are going to be the key support drivers if you will in terms of growth next to any guidance at a high level even in terms of revenue growth we saw around 17% this year? Is it something we can match next year? And then on the cost side, I know in the press release you have mentioned that cost probably will look similar to what we have seen yes in the fourth quarter at least. Any guidance on modeling point if you…?

[Randy Fields:]

Let me see if I can help not that much. Next year will be better than '17. And look as far out as we can see, we continue to believe so long as we help our customers sell more stock less see everything, we will grow. We are seeing growth in most of our accounts. We are doing a better and better job of delivering on that brand promise. So I have every reason to believe that we will participate as our customers participate. We have some very large deals that we've been working on as everybody knows. Those continue to grow very rapidly. And so as I look from my feet to this year, this will be our best year, again another record year in terms of growth rate and also dollars of growth. We now as you know have overcome the decline in the licensing aspect of our business. So now the topline of the business continues to grow as we said it would three years ago. We’ve reached that (indiscernible) in our licensing business. So that it will -- the whole business now will accelerate. So you can plug any number in, that’s north of 17. It’s going to be a great year. It will be a great year and the year after will continue to be great, as long as we deliver on that brand promise. Now on the cost side, the cost we've invested, we have the people. Cost would probably go up no more than 6%, 7%, I am looking at my controller who has his fingers on all these numbers that a fair number, yes, 6% to 7% a year. And obviously if we're growing north of 17, I'm not a mathematician or anything, only kidding I am. But its topline is growing at 17 and costs are growing at 6, something magical starts to happen. So we are feeling very good about the business.

[Amit Dayal:]

Thank you. And any updated metrics on the ReposiTrak with its connections or customers starting to deploy this. Any updates versus the last quarter for us?

[Randy Fields:]

No, nothing really new. It’s just that internally we’ve had a plan. We continue to be on it. We have several thousand connections in the pipeline. We certainly have in the many hundreds on the system, many hundreds of connections, that's not as close as I will give you to a number. It’s going better than I would have guessed. It’s evolving differently than I would've guessed by virtue of this lack of compliance issue. I think it is an issue. But I think the most important thing we can do over the next 12 months as we’ve learned about FSMA is the FSMA is going to require a systems that looks like ReposiTrak. I mean, honestly, it's like they were peaking in writing these rigs. So I think it's very important this year to get ready to be able to take on the number of people that are going to want to have a system as they begin to see the foreign supply, for the foreign supplies and if you want to go have fun this weekend, I don’t know what you call fun. But if you want to have real fun, I mean serious fun, go read the foreign supplier verification part regulations of the Food Safety Modernization Act. It is as thrilling as a Clancy novel and it is terrifying. So he is just terrifying, what’s going to happen and it starts in a year, a year and nobody is thinking about it yet that I can see.

[Amit Dayal:]

Just a follow-up on that comment. I mean, you did mention hard dates, the hard dates you said it was August, something next year?

[Randy Fields:]

Yes. There was hard dates in August, there is hard dates in October, and then there are several other hard dates. And what’s interesting is I think people have been thinking that the FDA might let this slip because it’s bureaucracy. Well, these are court order dates. The court, a judge said you are going to slow, so you can go as fast or slow as you want, but this is the date by which you will publish and be real, pretty profound.

[Amit Dayal:]

What are the implications for people who are not prepared, who are not ready? I mean, why is this not being taken as serious?

[Randy Fields:]

I don’t know -- I don’t understand. Okay. So this is a theory you made, I cannot prove this. It’s a theory. When you talk to a Chief Executive about food safety rules and regulations, in his mind this is some kind of business level process that his food safety person should be handling. So I think he goes well here, I’ll forward this e-mail to that person and, boy, they sure know all about this stuff. But I believe and I could be wrong, but, I mean, I check, I’ve asked experts 10 times. I said isn’t this Sarbanes-Oxley, isn’t this the same idea that the executive is responsible for this. He is the one who is on the hook, potentially criminally for saying that he has in fact verified his supply chain. And the answer is, yes, he is on the hook. He doesn’t even have to sign anything. He is just on the hook. Its worst than Sarbanes-Oxley from a liability perspective and we have hard dates now. So unless something miraculous changes and I don’t want to get into politics here, but I have a lot of the trouble imagining the current administration relaxing these rules that remember when Sarbanes-Oxley happen, even Senators and Congressmen who are opposed to the bill said I can't oppose this bill. I mean my heart thinks this is stupid. But if I say no to this bill, it means I'm in favor of Enron. So nobody is going to get in front of this bill and say it’s stupid because it sounds like you’re asking for Jensen Farms all over again. I become more alarmed in the last two weeks as I’ve talked to more experts about this. We’re doing a Webinar now on tomorrow in fact for our customers on, do you really understand FSMA because it is not what it appears to be. It’s not just 2,000 pages, the little things you need to do. It’s going to do two things. And frankly one of the world’s experts in this topic I asked point blank. I said, will this increase or decrease the number of food safety lawsuits, not by the government but tort, the answer was increase it. So think about it. You’re going to regulatory risk and increased tort risk as a function of the FSMA, terrifying. And every single executive out there is on the hook for compliance. You are basically saying, if you're the CEO or CFO of a food supplier here or abroad, you are saying that you’ve verified everything in your supply chain. You verified it. You’re signing up for it. I’m sorry. That express my -- that was a sarcastic because it’s not -- I'm sorry, Randy, keep your personality in the door while you do this. It is far worst than I imagine. And we’ve got to get to the bottom of what it means and that’s certifying, because it's going to be very painful for this industry. It could have a significant impact on the imported food.

[Amit Dayal:]

Understood.

[Randy Fields:]

How do you know what they're doing in the olive oil plant in Italy? But he is the importer and by the way the importer, I’m sorry, you can tell and fired up about this. The importer may or may not be the guy who imports it, how is that? The FDA has the authority under this law to designate whoever it wants as the importer of record. So for example, suppose you are a spice manufacturer and you go to some little broker and you say, hey Frank, will you please import some rosemary for me from China. And he places the order and brings it in and you say, we duct a bullet on that one. He is the importer of record. I got him to sign this piece of paper. He is taking all the risk. Guess what, the FDA might say, you cause that product to come into the country. It is adulterated. That’s what they have the right to do, even if it’s not adulterated. If you didn't follow the process, if you didn't get it verified, they can proclaim its adulteration, how’s that for a lawsuit in the making. This stuff is -- I have no idea why it is being discussed. I have no idea but good for us.

[Amit Dayal:]

Thank you. I’ll get back in queue. Thank you.

[Ed Clissold:]

Yeah. And stop eating food. That’s Randy’s other advise. If you don’t grow it, don’t eat it.

[Operator:]

Thank you. And our next question comes from Robert Kecseg from Las Colinas Capital. Your line is open. Please go ahead.

[Robert Kecseg:]

Thank you. So my question is on the food safety side, do you have insurance because anybody who is involved is going to be named? And have you gotten any or have you priced it?

[Randy Fields:]

Well, we have a limitation of liability clause in our contract and you are absolutely right. I think one of the long-term issues for us is everybody and their brother will be sued when this happen. So its something we have two layers of lawyer. Two layers of lawyers that a great visual. We have two layers of lawyers that go through this stuff and keep us as non-liable as we can possibly get. So the answer is we do pay attention to it and overtime we’ll continue to pay increased attention to it. Technically, we’re simply a document repository. So people have to give permission to release their documents to be viewed by anybody and so on and so forth. So, I think we've done a good job to this point but I'm looking at our General Counsel and we will tighten that up overtime. It will continue to get tighter. Actually we ask our outside liability counsel to review our webinars and everything we do once a month, so we are definitely sensitized to it. But I can’t protect us from ever being named in the lawsuit. We can only do the best that we can to make sure that we don't actually have a real liability.

[Robert Kecseg:]

But you don’t really have insurance in particular specific for the food safety?

[Randy Fields:]

Just liability.

[Robert Kecseg:]

Okay. Just regular liability.

[Randy Fields:]

Regular liability.

[Robert Kecseg:]

Okay. And then I kind of get an idea about how you have people deployed between the food safety side and the supply chain side. About how many people are dedicated to each part of the business?

[Randy Fields:]

There’s only about four or five people, maybe six that do the ReposiTrak type stuff. And over time this year, there’s probably another potentially -- it’s a separate company they build to ReposiTrak. But there will be more inside sales people we call them that will be brought on to ReposiTrak as we ramp it up this year.

[Robert Kecseg:]

Okay. And then on the supply chain side, the first national account that we have that we have now gone, we have been serving them for a couple of years? I was going to ask a question this way. About how much, if you look at the total suppliers that potentially could be put on the system, through -- with -- I know the first year was a slowest and the second year was better? So what I am trying to understand is about much how much has been connected and how much percent is left, so we kind of have an idea of how much longer it can contribute?

[Randy Fields:]

It sounds like lot of those secrets handshakes still [win, wink] (ph). It’s terrific and in the next few years we are working on something we could make it genomes. How is that? But, seriously, it’s going to be, there are some stuff going on and you know how new stuff, if we just keep doing what we are doing, it’s going to be an enormous account, many millions of dollars a year in the next four or five years, it just continue to get bigger. While we have got some other stuff that’s cooking with them, we could think it a really big account. We have a number of what internally we refer to is elephant in our sites. We have got some really lovely big things that we are very carefully managing, making sure that they go right and so we have got, that one is getting bigger, it is just all good, its all good.

[Robert Kecseg:]

So, then the metric that we use is -- what is the metric that you think we should use try to measure the company?

[Randy Fields:]

Aged the CEO, I'm not sure. I mean, I think, you are going to see, as I get older, I want to see it faster and faster growth rate, but I want the growth rate to be a function of success with our customers that continues to be the constraint. So the way of thinking about it from this guy's perspective is each year as long as we deliver to our customers the prior year, the next year should get even better and that’s happened. So I am as happy as human can be and be a CEO of a public company. It’s great. I mean, we so delivered last year, Bob, I mean, it was our best yet and I will tell you something, this year is going to be better. I mean, I am already looking at the kinds of things we're doing for us some of our customers this year. It is extraordinary. Our customers are coming to see us as their most trusted advisor and that’s a dream position to be in. So we are doing more categories of stuff, more suppliers, more regions, it just -- all of it is more. So we still have our foot on the throne of the beast. It is not going to grow so fast that we screw up the customer piece which is the most important. So it will just continue to get better.

[Robert Kecseg:]

This is one national account has come on in a particular product area that you released. You had some other releases in the past. So are there still other national account test continuing with other companies?

[Randy Fields:]

Well, the other ones are simply testing new categories of stuff and those have long since come and gone, meaning, gone from a test to doing it. So the answer is, yes, and those are all, everything we have tested is worth, from my perspective, from the customer perspective as well as it could and that’s terrific by the way. So, yes, all good.

[Robert Kecseg:]

So are they test or are they customers now?

[Randy Fields:]

Yes. Customers.

[Robert Kecseg:]

Okay. That’s all I got. Thanks.

[Randy Fields:]

Okay. Thank you.

[Operator:]

Thank you. And I am showing no further questions at this time. I would like to hand the conference back over to management for closing remarks.

[Ed Clissold:]

Thank you all for participating. If you have any questions feel free to give us a call. We will be happy to answer them.

[Operator:]

Ladies and gentlemen, thanks for your participation in today’s conference. This concludes our program. You may all disconnect and have a wonderful day.