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NYSE MKT: PCYGwww.parkcitygroup.com
Investor Presentation2013 Midwest IDEAS Conference
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Forward-Looking Statement
Statements in this presentation that relate to Park City Group's future plans, objectives, expectations, performance, events and the like are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and the Securities Exchange Act of 1934. Future events, risks and uncertainties, individually or in the aggregate, could cause actual results to differ materially from those expressed or implied in these statements. Those factors could include changes in economic conditions that may change demand for the Company's products and services and other factors discussed in the "forward-looking information" section and the "risk factor" section of the management's discussion and analysis included in the Company's report on Form 10-K and 10-Q or current reports on Form 8-K filed with the Securities and Exchange Commission. This presentation is comprised of interrelated information that must be interpreted in the context of all of the information provided and care should be exercised not to consider portions of this presentation out of context. Park City Group uses paid services of investor relations organizations to promote the Company to the investment community. Investments in any company should be considered speculative and prior to acquisition, should be thoroughly researched. Park City Group does not intend to update these forward-looking statements prior to announcement of quarterly or annual results.
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Customer Value Proposition> Reduced out-of-stocks = Increase in sales 4% to 6%> Lower Inventories / working capital – 10% to 30%> Increased margins – reduced labor and check-in time> Improve food & drug safety - Track & Trace food and drugs
PCG is a cloud-based, big data software company that detects, exposes and solves sales, inventory and product problems in the global food and drug supply chainSupplier
Supplier
Distributor Wholesaler Retailer Customer
Downstream
Upstream
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Park City Group Investment Highlights> Recurring revenue streams with multi-year
visibility – ~90%+ customer retention rate gives strong earnings visibility.
> Generating significant positive cash flow… Significant operating leverage with 75%+ incremental margin. No need to raise capital.
> Accelerating growth & strong balance Sheet– in both revenue and EPS due to recent national account wins.
> Strong competitive advantage – 16 years of development and ~$125 million of invested capital in propriety platform.
> ReposiTrak™ partnership is well positioned to become the standard for tracking and tracing food and drugs in the global supply chain.
> Influential board of directors and experienced management team – current and former grocery, retailing, consumer products, dairy, and magazine industry senior executives.
NYSE MKT: PCYG Headquarters: Salt Lake City, Utah
Recent Price (8/21/13) $6.48 52-Week Range $2.71 -$8.38 Shares Outstanding 16.1 MM Fully Diluted Shares 17.6 MM Market Capitalization $141.9 MM TTM Revenue $10.9 MM
TTM Adjusted-EBITDA $2.6 MMOwnership
~40% Insider Ownership
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The Central Issue in the Grocery Industry Today…
• 50% will purchase at a competitor, up 20% from six years ago
• 38% won’t purchase the item at all, an increase of 30% from six years ago
• 12% will switch brands, down 15% from six years ago
Source: Progressive Grocer “Out-of-Stocks Greatest Influencer of Trip Satisfaction”: Study by Retail Feedback Group , October 16, 2012
… is eliminating out-of-stocks!
When shoppers can’t find what they want…
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What’s Causing the Out-of-Stocks?
Today’s supply chain is broken, using delivery history as the basis for replenishing products…even if it was WRONG!
The consumer is faced with substitution or going elsewhere
Supply doesn’t match demand
Forecasting is based on what was delivered last time, and available space to hold it
Consumer | Retailer | Retailer Distribution | Supplier Distribution | Supplier Plant
Mistakes in manufacturing quantities are repeated
Product is pushed into the supply chain based on inaccurate forecasted sales
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Park City Group Solves the Out-of-Stock Problem…
PCG’s solutions work along the entire supply chain to ensure the product is available for the consumer by using consumer demand through point-of-sale data to drive downstream replenishment and manufacturing
The consumer is THE best demand signal
Exposing and solving out-of-stocks will increase sales
Improving forecast accuracy will reduce inventory levels and increase order fill rates
Consumer | Retailer | Retailer Distribution | Supplier Distribution | Supplier Plant
Smoothing the demand allows more efficient manufacturer planning
…at each level of the supply chain by pulling the right amount of product through
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Park City Group Solutions> Provide greater visibility into consumer demand> Turn data into actionable information across the entire supply chain> Enable collaboration between the Retailer and the Supplier (“collaborative
commerce”)
Customer Value Proposition> Reduced out-of-stocks = Increase in sales 4% to 6%> Lower Inventories / working capital – 10% to 30%> Increased margins through greater logistic efficiency, inventory accuracy
and less promotional spending
99
Evidence of PCG Effectiveness
PCG growth opportunities
OOS = Out-of-stock
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PCG dominant in these categories
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Leveraging PCG’s Proven Technology Platform…
More foods are being imported (80% of seafood)
Fewer inspections occurring (less than 2% of imported seafood is being inspected)
Greater awareness of Food & Drug Safety (over 237 recalls in calendar 2012)
…to address the growing importance of food and drug safety
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Why Do Food & Drug Companies Care?
Regulator Risk – New food and drug safety lawFinancial Risk – Food is the next tobacco for litigatorsBrand Risk – Loss of confidence in the brand
The new Food Safety Modernization Act is 2,000 pages and growing…
Marler is reportedly seeking $100 million in damages from Walmart and others in the cantaloupe supply chain. The potential for litigation plays a major role in retailers changing their food supply system.
-Bill Marler, Attorney for 37 clients in Jensen Farms Litigation, June 2012
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ReposiTrak™-Global Food and Drug Track & Trace System
Michael O. Leavitt – former U.S. Secretary of Health and Human Services, and Administrator of the Environmental Protection Agency and 3-time governor of Utah
Dr. David Acheson – former FDA Associate Commissioner of Foods, former Chief Medical Officer at the FDA's Center for Food Safety & Applied Nutrition (CFSAN)
Park City Group joins with Leavitt Partners to create ReposiTrak
Park City Groups brings proven technology
Leavitt Partners brings thought leadership in the fields of food and drug safety
16 years and $125 million of invested Capital Processes millions of transactions per day
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ReposiTrak™-Global Food and Drug Track & Trace System …Provides opportunity to accelerate growth of PCG’s existing hub and spoke network…• Tracks and traces products and components to products
throughout the food, drug and dietary supplement supply chains • Receives, stores, shares, and maintains regulatory documentation
all in one convenient location • Near real-time identification of the supply chain path taken by
recalled products • Strong retailer and supplier value proposition
• Inexpensive to use ($100 per month per participant)• Several million possible participants
• Compliance with food and drug safety law• Reduces litigation risk• Provides point of differentiation for early adopters
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Rapidly Becoming the Standard for…
Initial retail, wholesaler and supplier implementations began in August 2012
ROFDA adopts ReposiTrak in May 2013 (Retailer Owned Food Distributors & Associates) as part of a trade-association wide initiative with 14 possible wholesalers representing 20% of the supermarket stores in the US with more than 150,000 suppliers
…tracking and tracing food & drugs in the global supply chain
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Large Addressable Market
Addressable Market
$550 million addressable U.S. market > ~150 - 200 Retailers> ~100,000 total connections @ ~$5K each
Additional supply chain management services> From basic service to enterprise supply
chain management > Increase average rev. per connection
$1 billion+ food & drug safety> 167,000 domestic manufactures,
processors, warehouses; 254,000 foreign> 570,000 U.S. facilities in the food service
segment> 2 million farmers / 5 million international
Base Level Service
$550 million
Food & Drug
SafetyAdditional
Services [2x Base
Level]
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Impactful Leadership TeamName ExperienceRandy Fields Chairman & CEO Co-founder Mrs. Fields Cookies, Co-founder Captiva Software
Ed Clissold CFO & General Counsel
Previously served as General Counsel for Mrs. Fields’ Cookies and was also in private practice
Robert Allen Director Former CEO of Southern Belle Dairy and EVP of Borden, Inc.
Austin Noll Director Consumer packaged goods consultant. Former executive at General Foods, Borden, and Nabisco
Rich Juliano Director Grocery retailer consultant. Former executive at SUPERVALU, Giant Eagle, and others
James Gillis Director Co-CEO of Source Interlink Companies, Inc., a marketing and fulfillment company of entertainment products
Bob Hermanns Director Director of Food Industry Programs at the University of Southern California and former CEO of Associated Grocers
Bill Kies Director Principal of Kies Consulting, specializing in the supermarket industry. Former COO of IGA, Inc.
Ronald Hodge Director Former CEO of Delhaize America and former CEO of Hannaford Bros. Co.
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Select Retailer Partners
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Select Supplier Customers
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“Hub & Spoke” Financial Model3 terms of art: Hub = Retailer Spoke = Supplier Connection = Retailer & Supplier data exchange
which requires no installation of software AND no on-site visit
Original market of smaller hubs and their spokes Retailers paid an annual subscription and “rolled-out” platform to Supplier base Historical Hub/Spoke subscription value of $500,000 to $1,000,000 annually
Now shift in focus to larger hubs & upsell opportunities Larger hubs with a national footprint have a potential $3 - 5,000,000 in annual
subscription Opportunities to upsell additional supply chain modules increase revenue per
connection by an order of magnitude
Strong customer retention equals recurring revenue PCG solutions become foundational, making PCG invaluable with a 90%+
retention rate
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Contribution Margin Going Forward
100% 75%
25%
Incremental Revenue Incremental Cost of Sale
Marketing Allowance Sales Commissions Travel Sales Promotions Miscellaneous
Incremental Contribution Margin
2121
Q3-20
09Q4-
2009
Q1-20
10Q2-
2010
Q3-20
10Q4-
2010
Q1-20
11Q2-
2011
Q3-20
11Q4-
2011
Q1-20
12Q2-
2012
Q3-20
12Q4-
2012
Q1-20
13Q2-
2013
Q3-20
13
$1,200,000.0$1,300,000.0$1,400,000.0$1,500,000.0$1,600,000.0$1,700,000.0$1,800,000.0$1,900,000.0$2,000,000.0$2,100,000.0
Financial “Snapshot”• Adjusted EBITDA: EBITDA plus bad debt expense, stock
compensation & expenses, and acquisition related costs.• Free Cash Flow: Net cash provided by (used in) operating activities
less replacement purchases of property and equipment
FY 2008 FY 2009 FY 2010 FY 2011 FY 2012($3)
($2)
($1)
$0
$1
$2
$3
Free Cash Flow *($millions)
FY 2008 FY 2009 FY 2010 FY 2011 FY 2012($3)
($2)
($1)
$0
$1
$2
$3
Adjusted EBITDA *($millions)
Subscription Revenue Growth Qtrly ($millions)
Net Debt
Q2-2010
Q3-2010
Q4-2010
Q1-2011
Q2-2011
Q3-2011
Q4-2011
Q1-2012
Q2-2012
Q3-2012
Q4-2012
Q1-2013
Q2-2013
Q3-2013
(10,000,000)
(8,000,000)
(6,000,000)
(4,000,000)
(2,000,000)
-
2,000,000
4,000,000
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Park City Group Investment Highlights> Recurring revenue streams with multi-year
visibility – ~90%+ customer retention rate gives strong earnings visibility.
> Generating significant positive cash flow… Significant operating leverage with 75%+ incremental margin. No need to raise capital.
> Accelerating growth & strong balance Sheet– in both revenue and EPS due to recent national account wins.
> Strong competitive advantage – 16 years of development and ~$125 million of invested capital in propriety platform.
> ReposiTrak™ partnership is well positioned to become the standard for tracking and tracing food and drugs in the global supply chain.
> Influential board of directors and experienced management team – current and former grocery, retailing, consumer products, dairy, and magazine industry senior executives.
NYSE MKT: PCYG Headquarters: Salt Lake City, Utah
Recent Price (8/21/13) $6.48 52-Week Range $2.71 -$8.38 Shares Outstanding 16.1 MM Fully Diluted Shares 17.6 MM Market Capitalization $141.9 MM TTM Revenue $10.9 MM
TTM Adjusted-EBITDA $2.6 MMOwnership
~40% Insider Ownership
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NYSE MKT: PCYGwww.parkcitygroup.com
Thank You
For more info, contact:
Dave MossbergInvestor RelationsThree Part Advisors817-310-0051
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APPENDIXPark City Group
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Early results show an incredible time savings for category management personnel who previously took months to get the info consolidated for analysis
Consolidation of over 50 million points of data into a usable format enabling analysis by store cluster, which validated and improved on the retailer’s previous analysis
PCG recommended quantity and assortment by UPC for prescribed store clusters
In Focus in a Fraction of the TimeDSD Visibility/Category Review for a Retailer
RESULTS:
CLIENT:
CHALLENGE:
SOLUTION:
Large, national retail chain and their reading glasses vendor
The Category Manager needed to know how much inventory to carry in each store cluster and getting this information together was previously a long, manual, tedious process (taking months)
PCG brought the necessary info together in one place (ScoreTracker) enabling analysis by PCG’s retail-tenured category management experts
Long-term expectation is to improve distribution voids, reduce inventory by $15+ million and begin following an automated approach to ensure appropriate ordering
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RESULTS:
CLIENT:
Got (the right amount of) Milk!SBT / SLR for a Supplier
Borden DairyCHALLENGE: Borden lacked visibility to in-store performance Was not using actual consumer demand via point-of-sale data to
create replenishment orders Suffered from high out-of-stocks, and high returns (dumps)
Sales are up ~10% Out of stocks have been cut by 50% (an identified problem at
certain stores) Returns have been cut by almost 50%
SOLUTION: Through a scan-based trading go-to-market strategy coupled with PCG’s
store-level replenishment solution, Borden was able more closely match delivery to actual consumer demand
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SOLUTION:
CLIENT:
Spend a Dollar, Make ElevenScan-based Trading & DSD Visibility
Mid-Size Mid-western Grocery Chain
CHALLENGE:
Scan-based Trading Over the previous three years, and a $300,000 investment (combined monthly subscription
and implementation costs), this chain has recorded an ROI of ELEVEN times the cost ($3.4m) with a modest SBT group of less than half a dozen vendors
DSD Visibility Future program expansion will be to utilize PCG’s DSD Visibility solution where out of stock
and overstock situations can be identified and corrected and the targeted savings is about $5,000,000 annually.
Executing an SBT program developed from scratch, this mid-western chain of about 130 stores was super cost conscious when it came to a third-party SBT service provider
NEXT STEPS: PCG will continue engagement with merchandising using our “Customer
First” approach, to locate lost sales opportunities for the SBT vendors Future expansion to remaining DSD vendors (non-SBT) to enable a
complete view of the out-of-stock and overstock situations
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PCG Reduces ShrinkScan-based Trading
Park City Group Retailer Non-Park City Group Retailer
00.10.20.30.40.5
.14%
.45%
Shrink % $/Inventory
“BBU runs significantly lower shrink when the retailer is PCG partner, versus our other SBT retailers who do not have a relationship with PCG. With synchronization, all pricing and promotional errors are identified before the fact rather than after, virtually eliminating the tedious task of identifying and resolving these issues.” Don Rehe, Bimbo Bakeries, USA
Shrink averages three times
higher without PCG
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RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
For the Three and Nine Months Ended March 31, 2013 and 2012
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Non-GAAP Metrics Disclosure The Company believes that providing both GAAP and adjusted non-GAAP measures of its
performance will provide meaningful supplemental information regarding its operational effectiveness and to enhance investors’ overall understanding of the Company’s current financial performance and prospects for the future. Management believes that investors benefit from seeing its results “through the eyes” of management in addition to the GAAP presentation.
It is Managements belief that while not in accordance with or an alternative for GAAP, the adjusted information allows for greater transparency to supplemental information used by management in its financial and operational decision making.
The adjusted information excludes items, such as amortization of intangible assets, impairment charges, depreciation, charges to consolidate and integrate recently acquired businesses and non-cash stock based compensation, and other non-cash charges that may have a material effect on the Company’s net income and net income per share in accordance with GAAP.
Management monitors these items to ensure that expenses are in line with expectations and that its GAAP results are correctly stated, but does not use them to measure the ongoing bottom line operating performance of the Company. Furthermore, the non-GAAP or adjusted information provided by the Company may be different from the non-GAAP or adjusted information provided by other companies.
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For the Three Months Ended For the Nine Months Ended(In $000's)Audited results of operations 2013 2012 2013 2012
Net Income (loss) 209$ (353)$ 350$ (808)$
Adjusted EBITDA Reconciliation Adjustments:Depreciation and amortization 223 226 683 671Bad debt expense 81 103 81 173Interest, net 34 47 112 168Stock based compensation 252 248 777 811One-time expenses (stock and cash) - - - 60
Adjusted EBITDA 799$ 271$ 2,003$ 1,075$
March 31, March 31,
Adjusted EBIDTA Reconciliation of GAAP and Non-GAAP Financial Measures
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For the Three Months Ended For the Nine Months Ended(In $000's, except per share)Audited results of operations 2013 2012 2013 2012
Net Income (loss) 209$ (353)$ 350$ (808)$
Non-GAAP Net Income (loss) Reconciliation Adjustments:Stock based compensation 252 248 777 811One-time expenses (stock and cash) - - - 60Acquisition related amortization (1) 126 126 378 378
Adjusted Non-GAAP Net Income (loss) 587$ 21$ 1,505$ 441$
Preferred Dividends (289) (208) (788) (626)Adjusted Non-GAAP Net income to Common Shareholders 298$ (187)$ 717$ (185)$
Weighted average shares, diluted 12,750,000 11,838,000 12,420,000 11,733,000Adjusted Non-GAAP EPS, diluted 0.02$ (0.02)$ 0.06$ (0.02)$
March 31, March 31,
Non-GAAP Earnings Per Share Reconciliation of GAAP and Non-GAAP Financial Measures
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For the Three Months Ended For the Nine Months Ended(In $000's)Audited results of operations 2013 2012 2013 2012
Net cash provided by operating activities (462)$ 252$ 417$ 644$
Purchase of property and equipment (48) (91) (113) (145)Adjusted Free Cash Flow (510)$ 161$ 304$ 499$
March 31,
Non-GAAP Free Cash Flow Reconciliation Adjustments:
March 31,
Free cash flow includes net cash provided by operating activities less replacement purchases and equipment.Capital expenditures related to long-term investments and new technology developments are omitted. During2Q13 the Company invested $232,000 in leasehold improvements for its new corporate headquarters located inSalt Lake City, UT, this amount is excluded from the Free Cash Flow calculation.
Non-GAAP Free Cash Flow Reconciliation of GAAP and Non-GAAP Financial
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(In $000's)Audited results of operations 2013 2012
Total Debt 2,285$ 2,849$
Less: Total Cash 4,396 631
Non-GAAP Net Debt (2,111)$ 2,218$
Non-GAAP Free Cash Flow Reconciliation Adjustments:
As of March 31,
Non-GAAP Net Debt Reconciliation of GAAP and Non-GAAP Financial
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For More Information
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Contact:
Dave MossbergInvestor RelationsThree Part Advisors817-310-0051
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