Q1 2020 Earnings Call
Good day, everyone and welcome to today's Park City Group fresco first quarter 2020 earnings call.
At this time all participants are in a listen only mode. Later, you will have an opportunity to ask questions. During the question and answer session and you May Register to ask a question at any time by pressing the star and one on your Touchtone phone.
Please note this call is being recorded.
Now my pleasure to during today's program over to Roxane of F. NK IR.
Thank you operator, and good afternoon, everyone. Thank you for joining us today for park city groups fiscal 2021st quarter earnings call hosting the call today are Mr., Randy Field Park City group, CEO , and Chairman and Sean Merrell Park City Group 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 secured.
He's litigation Reform Act of 1995.
Forward looking statements or 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 forward looking statements such risks are fully discussed in the company's filings with the Securities and Exchange Commission.
Nation set forth herein should not be considered to 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 close today the company issued a press release or viewing the financial results that will discuss on today's call investors can visit the Investor Relations section of the company's website at <unk>.
Citi Group Dot Com to access this news release in addition in our earnings release. It 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 <unk>.
<unk> non cash charges itself and its operating statements.
Reconciliations of GAAP, and non-GAAP results or any earnings release and on the Investor Relations website with all that said I would now like turn the call over to John John before is yours.
Thanks, Rob during the first quarter Park City group continued to build upon it strikes we have a large and growing network or 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 suppliers compliance give them visibility to actionable information through our supply chain channels and allow the customer source that and transact business through marketplace.
Provide solutions to our customers at 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 what our history and a proven ability to generate cash cash balances of cash generation is increasingly important today for our customers peace of mind.
Basically we remain laser focused on growing our base and recurring revenue within compliance and supply chain as we advance our marketplace solution, which is transactional by its very nature.
[noise] by design. This initiative will provide us with a more predictable stable and profitable base a recurring revenues.
When I became CFO , a few months ago and begin speaking with the investment community. What are the key pain points I heard wasn't forecasting a modeling our performance was challenging, particularly South Park City group does not provide detailed guidance. We listened we understand that modeling us has done a challenge and that this is in part due to the erratic nature of onetime 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.
The 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 nonrecurring revenue reduction, but longer term there was a significant value to be captured.
And the first quarter fiscal two year 2000, 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, a nonrecurring revenue outside of marketplace compared to $16000 in the same quarter. 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 two 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 a recurring revenues I call. It farming our cost of acquisition is exceedingly low.
Furthermore, customer churn is less than 2% and so we will be able to scale our efforts with very little incremental expenses.
Nonrecurring revenue was 700000 of the first quarter fiscal 2020, compared over 2 million in a year ago quarter.
We stated our goal was to drive recurring revenue as a percentage of total revenue to 80% or more we've achieved this goal for the quarter. However, keep in mind, we will always have customers that demand to buy meaning license versus Rad meeting subscription.
Total operating expenses were 4.7 million a decrease of 266000 or 5% from 4.9 billion and Q1 of 29 team.
This decrease is largely the result of lower sales and marketing expenses of 493000 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 products support of $100000 or 6% due to higher marketplace costs, an increase in general and administrative expense 79000 related to stock compensation expense and an increase in depreciation and amortization of 48000 as a result of capital looks.
That is jurors for leasehold improvements and computer hardware in fiscal year 2019, 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 fiscal 2020 was 32000 or zero cents per diluted share compared to 820000 or four cents per diluted share in the year ago quarter.
The decrease in net income to common shareholders was the result of lower nonrecurring 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 $713000 compared to 1.6 million in the prior year period.
After capital investments of 354000 cash used in investing of 673000, 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 32019, the end of fiscal 2019.
The current stock buyback authorization, we repurchased 79955 shares of common stock at an average price of $6.47 per share in the September 2020 quarter for a total of $517000.
To date, we have repurchased a total of 167555 shares of common stock at an average price of 596 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 or their repurchase, thereby reducing the number of common shares outstanding.
I will now pass the call over to really.
Thanks, John .
I recognize that it might be counter intuitive for as CEO to be excited about announcing results from the high level view shows declining year over year revenues for the quarter, but thats exactly when I'm going to do on today's call frankly for good reason.
Calculated and deliberate effort to reduce onetime revenue to move our business into a more predictable and profitable recurring revenue driven model is taking hold in the quarter onetime revenue other than marketplace was negligible in recurring revenue is growing.
The worst year over year comparisons of this transition are now behind us and the demonstrates three important facts first.
We have the financial stability and strength to lean more heavily on recurring read the onetime revenue its right to the business and Thats right now.
Second it supports our confidence in marketplace and finally.
Based on adding some highly proprietary capabilities to our supply chain applications that should allow us to increase recurring revenue more rapidly.
View profitable growth is still something largely overlooked these days the startups and emerging high tech companies of all sizes have embraced to grow at any cost mentality. In contrast, I believe that cash is still king.
A strong balance sheet is critical particularly to in our case as our customers requiring our balance sheet screamed that will be here for the long term.
Our balance sheet and deep customer network services, a very wide moat around our business durable barrier of entry for startups are outsiders, Mike seat displaces.
Just 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 for going onetime revenue and accelerating recurring revenue sell by year end the mission will largely be under our belts while we.
Continued 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 and no attracting net new participants and as John shared we're meticulously focused on growing recurring revenue excluding marketplace transactions and further penetrating existing customer base, we've said that cross selling to our existing customer base has the potential the double if not tripled.
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 Thirtyth, we had about 340000 total connections that's up 13% from last year same time.
Two connections as 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.
Over last year same month revenue.
Sample on an as reported basis, our tier two 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 continued to drive the scale of our network. We can see our way quite quickly to 500000 total connections and then onto a million.
Importantly, keep in mind that the real mission to the businesses the scale the network until we touch and connect everyone in the supply chain of the U.S. food World and replicate that model outside the us as you know the economic value of each connection varies as a function of the service offered from the $200 per year to many.
Allison's per year per connection. This also may help explain to you what the financial results.
Any given quarter very much depends on what type of collections, we focused on to that particular quarter.
The growth in the scale of our network has obviously been the driver for our profitability and has generated cash flow that we needed to build out the full platform.
Buildout has been sequential so as to reduce the dependency on outside capital and it's obvious and the inevitable dilution.
We're financing each stage at the platform with cash generated from the previous components and simultaneously improving our balance sheet to keep our customers secure.
Our next focused is to leverage this loyal network and expand our relationships with existing customers in other words increased the scope of our offerings.
Harvesting in our existing customer base represents an additional eight figure opportunity for us and as a primary focus as we've said many times our customers have only so much time and energy in any given moment.
Employments take time, our retailers move slowly and we can't simultaneously sell two different offerings to the same customer.
Once a customer is fully embraced in application. We can go back for more this ability to grow revenue much faster can cost is the 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.
Clients.
Methodically executing on our tier two initiatives and we're winning so 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 into this.
Suppliers at the suppliers suppliers and so forth exactly where we're headed.
During the fiscal first quarter, we Onboarded 20, plus tier two hubs and Repositrak platform.
By comparison, a year ago, we had only 25 total tier twos.
We ended the September quarter with a total of 71 of those kinds of hubs are marketing initiatives for clearly working and we're on track to reach 200 tier two clubs by the end of this fiscal year and all by the way that represents a 400% increase.
From network perspective.
Yes. This year, we could add nearly 15000 more customers to our current network of 23000 customers that would represent a 65% increase in the single year.
Please keep in mind did each of those new suppliers itself becomes an up sell candidate.
Most recently, we're actually able to raise prices in our tier two initiative with no customer pushback or hesitation.
Opportunities amend the task of signing the mall is sure to sell daunting, but we want them all.
Equally as important during the first quarter, we signed our first repositrak compliance tough in the United Kingdom.
To very important when is this is one the largest wholesalers in Britain and overtime. 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 Rep reputation no pun intended.
So amended the win.
Marketplace as we said before marketplaces potentially the most significant product launch and the company's history because of its ability to increase the scope of our engagement across the scale of our network without commensurate increase touch.
During the first fiscal quarter, we added two new buyers not previously customers of any of our applications to the marketplace network wholesaler and a large drug chain in fact, the wholesale again does from a retailer could work with us and they had in turn been trying to solve the sourcing problem that they were having good news is it means that we're just spreading.
Our pipeline of new buyers and new opportunities with marketplace continues to expand interest in there remains very very high we hope that a few more buyers in several new programs over the balance for the year, we're feeling better and better about marketplace.
Supply chain.
In supply chain, we continued to see industry dynamics driving dramatically higher interest under 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.
Well each add in our compliance business is relatively small financially each added in our supply chain business has much more impact.
If you want to think about it it's actually in 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 loss sales more importantly, it's not just a lot sale is the customer loyalty, that's being eroded when the product isn't in stock.
Historically retailers have had no easy way to addresses.
And availability has become the most important consideration today not price consumers don't care as much about saving two cents 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 the stock.
Many retailers are now beginning to recognize the magnitude of this challenge as customers come into their store don't find what they need pull out their phone see it's in stock on Amazon and decide to go home in shops on the couch instead.
We believe that out of stocks are potentially exit the existential threat to the retail food industry.
Our repositrak out of stock management capabilities based on many many years of research terabyte of historical data in proprietary algorithms that we've built at this point all I can say is we're uniquely good at this.
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 abuse.
Over time, this will help us expand our footprint substantially within our existing customers.
And importantly, this service is only available as a service not on the license basis and it should assist this therefore in growing our recurring revenue and avoiding cannibalization by licensing in our supply chain activities to double win.
Growing their existing customers and at the same time, attracting new wins.
Fact, we've added number of additional salespeople over the last few months to capitalize on these opportunities.
So from a summary perspective.
We are unique in our ability to help buyer source that and transact efficiently with new supplier, we have multiple modes around the business OLED is build out the scale and scope of our network and we're doing this and what we think is a very strategic and deliberate and then manner that allows us to maximize each component while simultaneously generating.
Exceptional profits and cash flow.
To judge our progress in fiscal 20, 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 years end total revenue except for marketplace will increasingly be driven by this growing predictable revenue stream.
We believe importantly, the pipe shifting to more recurring revenue, we make wall street's ability to forecast our progress from much much easier.
Question could be asked how will the growth both compliance and supply chain recurring revenue well, let me reiterate first we're going to execute on our tier two initiative to drive the compliance recurring revenue.
In fiscal 20, we have a golden piece and number two 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 customer.
Since in most cases, we could double our revenue with them over time.
Supply chain business by year end should be accelerate even dramatically based on or out of stock management ability and our new sales staff.
Finally, we will grow our recurring revenue as a percentage of total revenue will continue to grow our bottom line cash generation capabilities. As we said in fiscal 19 the percent of recurring revenues increased to 70% in the mid sixtys in the prior year and our goal in the next few years drive that consistently in the eighties, we achieved this goal.
In the first quarter now we have to keep it there.
Profitability is strengthening 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 the play so the need to increase the cash balance will diminish.
The strategic and deliberate execution of our strategy, we will expand both the scope and the scale of our network.
Customers, we'll 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 this should help to increase shareholder value to be clear, while we're acutely focused on our earnings foreign cash generation.
We still expect fiscal 2020 to be a year of topline growth with that let's open it up for questions operator.
At this time, if you would like to ask a question. Please press the star and one on your Touchtone telephone you may withdraw your question at any time by pressing the pankey once again to ask a question. Please press the star and one on your Touchtone phone.
And we'll take our first question today from Landaburu with loop capital. Your line is open.
Hi, Good afternoon, guys. Appreciate the question.
Seems to me if I could guys.
First in could you update us on progress.
Hiring to special it's never easy opted out our demo.
Augment augment.
Direct salespeople I think there in particular, there off correct me if I'm wrong, but they are focused on is it seems to marketplace. The specialist and 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'll 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.
Hi, there are they establishing and they focusing on.
We did one on Q1 on marketplace historical context, where they sort of each focusing on each.
No right now the strategy is pretty simple, which is get tier two conversions from the net units or because they are ordered two.
And Dave and today.
To use the net for their own supply chain, we call editor to 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 two initiatives.
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 one effort in in the compliance business.
But by the end of the year if marketplace.
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 two effort.
In addition.
Additional sales people on the supply chain and tier one effort.
And by year end, hopefully some people on marketplace.
And yet Thats really detailed super helpful. Clarification, when you say by year end is it your fiscal year ending debt.
All right, yes fiscal year June .
June often fall.
Thanks, and then.
One for John here any any large in license you that you.
Continue on Cludia and the transition.
Shifting for license are there any large license deals in upcoming quarters than what we call we should be aware.
Thank you create some lumpiness.
As far as what we've done in prior years or whats coming.
So prior years, they could create some comparisons.
There there are.
License deals and the next quarter, but as we've talked about our focus going forward.
Is not getting involved in.
One we could avoided license transactions, but comparatively there were licenses in the September I'm, sorry, the December 18 quarter that will not appear in December 19 quarter.
Got it and so yes, I got it and so and then that that sounds like you guys just.
You imply did that probably the last quarter, where you'll sort of you have them outside compare at least based upon.
Based on license Lumpiness.
Correct.
Basis.
Correct.
Let me squeeze on maybe let me add a little so none of the let me let me add a little color, let me add a little color to that.
It is very it is more difficult than anyone can imagine to avoid the onetime 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 by this service 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 just space with difficult choices, so far it's working.
But the reason that we think 80% to 85% is about as much of the penetration into the business. That's not marketplace that we can get is we really think thats 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.
Get wall Street hasn't understanding us.
That's really helpful.
And so Randy just.
One last one from me guys. It's.
It's a question off of them and asking the clarification.
Thank you mentioned that name correctly that you mentioned in your ego markets.
Hi, good way.
Think about progress right now the sequential growth across adults Bob.
Well listen I know.
Casting isn't lessen the sound.
But what should we think the lump on thoughts with regards to up.
Sort of see quite so great potential for sequential growth.
So there's some good points forward I'm, saying sort of philosophically chart on the Don you, but yes.
John that's a perfect tee up for you.
Okay.
I mean, if where our focus is on the recurring revenue is our recurring revenue growth sequentially.
And Thats compounding to Randy's point as we add tier two they don't I'll start on July one or October one so as that percentage increases then obviously the growth.
Sequentially four quarters is based on that growth in subscription that recurring revenue.
So as Randy said comp over cop, 8% for tier twos.
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 compounded growth versus what happened in a prior quarter at $1.2 million that wouldn't happen and.
Subsequent quarter, if we can maintain that 85% recurring to total revenue.
Senate.
That makes sense.
It makes perfect sense and this is Alan thanks, so much I appreciate it.
And as a reminder, if he would like to ask a question today. Please press the star and one on your Touchtone phone. We'll go next to Thomas Forte with da 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 year cross selling efforts are working do you have any good examples of successful story, so far to date.
Yeah actually.
Better than planned but different than plan.
Let me give you a couple of examples one of our largest compliance hubs.
Has now begun to work in our supply chain area.
The big 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 hub, 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's 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 someway as we mentioned from the non does question.
The sales person who is working on the account happened dimension to them you know 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 you out of stocks with your retailers et cetera.
And this particular company went Oh my God.
Really really.
So they are now in the process of going from a tier two compliant. So they started this a tier one spoke they become a tier two hub and now they are exploring moving into our supply chain world. So this is the kind of account when there's there's no signed agreement yet but its wrap.
Thirdly 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 year.
There are number of those where it's beginning to happen. So we're seeing people go from compliance to supply chain.
And that's a reasonable number of those both from the suppliers side and and I think and of course that 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 salespeople that we've hired our.
Our enjoying the fact that they have more to offer to their customer set so I'm feeling pretty good about it the moment.
Great and then the next question I had was you touched upon this in your prepared remarks, but I wanted to know what you saw this meant to both the industry and what it meant to park city.
The notion now that Amazon is doing free delivery for grocery.
Well, it's a I want to let me clarify if it's okay. Tom it's not so much did its free.
That it's quick.
So in the sense historically, if you had 10 items on your shopping listen you went into a store to buy that 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 expectations.
What Amazon is done though is to change the expectations. So there. If you go on Amazon to those same 10 items as long as they are not the most perishable items like milk or whatever but the rest of year list Amazon would say, we can have that to you in a few days. Okay. So I don't need at right now I guess that's okay.
But once Amazon announced two things one everything nationwide with the next day by the end of next year.
And now with.
There are new initiatives that will be same day for perishable items in many places.
We think thats, a really significant threat to the industry.
We know is this coupled with 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 a I'll just stock at a physical retailer.
So what we know absolutely is that Amazon is being fed 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 four they're fighting the price War, we don't think Thats 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 were getting with our out of stock works 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 at approximately 200 vendors across 12000 retail stores and 25000 items.
Have seen an average reduction with us up 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 would just kind of moving it forward now because we think thats 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 the additional vendors to the program, we suspect that will happen. So.
They are 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 care about free shopping aldi, the people, who care about convenience don't care that it's free they just cared that they can get it.
So.
It's a it's a real threat and the receptivity of the marketplace to what we're doing is pretty significant takes us time to do it as usual because we want to be sure that were brilliant on the execution side.
And we are doing that.
But that said I just wanted I answer the question. Okay. So so last question in in two 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.
Not much different John and I, both believe John keep me honest here.
That.
Costs us call at $17 million a year here in the company.
And that call it 80% to 90% of what happens after that.
Becomes cash flow in 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 guys companies struggle with how did they actually ever make money that does not already issue.
We're now at this scale the business do it carefully make sure your customers are thrilled level that the business because the making money part I think we understand well so as we grow with 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 agree John .
Yes on the recurring revenue is spot on $70 million.
On this place every dollar after that.
Based on variable costs and your AD 80, 85 cents. The bottom line you only color I would add to randy's comments as marketplace is it depends on what products what category was seasonality and the vendors are.
But again, the nonrecurring events that may impact our overall margin.
Yeah, exactly I'm, sorry, the should've mentioned net marketplaces that different creature.
Okay Alright. Thank you Randy Thank you John Thank you guys.
And I am showing that we have no further questions at this time I'll turn the call back for any further for closing remarks.
No I think were 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 ask.
This does conclude today's program. Thank you for your participation you may disconnect at any time.