Q2 2023 Park City Group Inc Earnings Call
Greetings and welcome to Park City group fiscal second quarter 2023 earnings calls.
At this time all participants are in a listen only mode.
A question and answer session will follow the formal presentation.
As a reminder, this conference is being recorded.
It is now my pleasure to introduce your host Geoff Stanley with F. N G. I R. It's the San Luis you may begin.
Thank you operator, and good afternoon, everyone and thank you for joining us today for Park City group's fiscal second quarter earnings conference call hosting the call today are Randy fields Park City groups, Chairman and CEO and John Merrill Park City group's CFO before we begin I would like to remind everyone that this call could contain forward looking statements about park city group within the meaning of the private secured.
These litigation Reform Act of 1995, well were looking statements are statements that are not subject to historical facts such forward looking statements are based upon current beliefs and expectations.
Park City group's remarks are subject to risks and uncertainties, which actual results may differ materially such.
Such risks are fully disclosed in the company's filings with the Securities and Exchange Commission.
Nation set forth herein should be considered in light of such risks arc Citigroup, just not assume any obligation to update information contained in this conference call.
Shortly after the market closed today the company issued a press release overview of the financial results that we were just got we will discuss on today's call investors can visit the Investor Relations section of the company's website at Park City group Dot Com to access this press release.
With all that said I'd now like to turn the call over to John Merrill John The call is yours.
Thanks, Jeff and good afternoon, everyone.
Our evolution to a SaaS company continues to be evidenced in the numbers our business is now easier than ever before to model and the results reflect both our ongoing operational and capital allocation strategies jump.
Jumping right into the numbers.
Total revenue was up 9%.
Recurring revenue increased 10% year over year for the December quarter.
<unk> expenses were up 5%.
GAAP net income increased 45% to $1 $3 billion.
GAAP net income to common shareholders increased 54% to $1 $1 million earned.
Earnings per share increased 62% from four cents per share to over six cents per share.
Year to date cash from operations increased 8% to $3 $3 billion and we bought back 89000 common shares at an average share price of $5.05 per share reduced our bank debt by 83% and have $21 $4 million cash in the bank.
With the majority of onetime revenue now fully behind us our comparative results have far less noise than prior periods.
Nevertheless, as I have said it before there will always be a possibility that a customer demand to buy our services, meaning license versus rent meaning subscription.
Fortunately that likelihood is less now than ever before given where we are in our SaaS lifecycle.
Therefore, we expect to continue to deliver year over year recurring revenue growth increase margins accelerated profitability and significant cash generation for the balance of fiscal 2023.
The growth rate as expected is accelerating.
Simultaneously as we've said our profitability and cash flow is and will continue to grow faster than revenue.
Consistent with our strategy our focus on operating leverage many times, making difficult decisions to drive high margin incremental revenue, while keeping costs in line and dropping driving profitability and cash flow.
What do I mean by that.
Starting with revenue we ended the December quarter with an exit rate of annual recurring revenue of $19 $1 billion.
Meaning fiscal year to date revenue plus sign contracts in hand at December 31, 2022 quarter that are billing monthly multiply it times six will generate $19 $1 million in recurring revenue for the balance of fiscal year 2023, absent any new contracts were anticipated growth.
Keep in mind. This is organic revenue growth, meaning existing suppliers of retailers, expanding compliance and supply chain services, adding stores or locations and adding trading partners from our existing business lines.
This does not include any revenue contribution from our projected customer or any new initiatives, including traceability due to fixed mature for it.
Like what we did with marketplace, we continue to deemphasize noncore revenue or revenue with high resource commitment at low upside.
What do we mean by this.
It is material for us the largest opportunity in the company's history and food as the focus.
Therefore general merchandise retailers propane suppliers floral and health and beauty suppliers have the same high touch requirements algae food retailers and their suppliers. However, these non food vendors have little if any long term profitability revenue opportunity underneath the new two O four rules.
With 300000 in revenue per annum per employee almost twice the industry average, we must make difficult decisions short term to free up internal resources to prepare for onboarding thousands upon thousands of new traceability food suppliers.
Expense management.
Many of you have heard me say it before it takes approximately $12 million in cash to run this place.
Our annual cash spend excludes noncash accounting costs, such as depreciation amortization bad debt expense stock compensation expense and other noncash accounting costs.
As we have said before going forward on each incremental revenue dollar over and above our fixed cash cost of roughly $12 million per year. Our goal is to push 80 to 85 to the bottom line.
With a laser focus on operating leverage there have been de Minimis increases in SG&A expense as a result of ongoing spending or our investment in the Repositrak traceability network or RTL is precisely our strategy.
We accomplished this by automating as much as we can and utilizing our own proprietary tools. This drive exceptional productivity across our entire business.
Despite tight controls on spending growing recurring revenue, we were able to take excellent care of our customers without adding significant head count or other overhead costs.
Well the need for profitability is our goal it will never jeopardize flawless execution and superb customer service our customers our priority. One however, it looks like we are in a favorable position to provide both.
As a result profit and cash will grow faster than revenue you can see this during the second quarter a.
A 9% increase in total revenue for the December quarter translated to a 45% increase in GAAP earnings and $1.5 million in cash from operations.
Summarized we are structurally profitable easy to model with more than five consecutive years of GAAP profitability through strong cycles and week cycles as well as a global pandemic.
Our strategy remains very simple grow recurring revenue control costs increased net income accelerate EPS buyback shares and drive cash.
Turning to the quarterly numbers.
Fiscal year 2023 second quarter revenue was $4 $8 million up 9% from $4 4 million in the same quarter last year.
Recurring revenue as a percentage of total revenue was 99, 8% for the quarter.
Recurring revenue in the quarter grew 10% over the same period of fiscal 2022.
As I mentioned, we continue to streamline our revenue eliminating smaller noncore revenue streams that mostly sit outside the food industry and have limited growth potential.
This frees up resources to prepare for meeting the Fda's food traceability standards, but it also serves as a modest headwind for revenue growth.
To date, we have overcome $700000 of what I call high touch low opportunity revenue wise.
While still increasing both total revenue and recurring revenue for the period.
Total operating expenses increased 5% from $3 $4 million in Q2, 2000 $22 million to $3.6 million in Q2 2023.
Sequentially operating expenses were essentially flat.
Sales and marketing expenses were up approximately 6% and G&A was up approximately 4% reflecting investments in our T M.
Labor market and its impact on salaries inflation pressures on software service costs and recruitment fees and benefits.
For the second fiscal quarter of 2023, GAAP net income was $1 3 million or 27% of revenue versus $872000 or 20% of revenue.
Net margins about 20% are now the norm.
Net income to common shareholders was $1 1 million or six cents per common share based on 18 6 million weighted average shares versus $725000 or four cents per common share based on $19 7 million weighted average shares.
At December 31, 2020 to $18 4 million shares the company's common stock were outstanding.
You'll note, we have reduced our capitalization by over 9% through the repurchase and retirement of shares since our stock buyback plan began.
Turning to the fiscal year to date numbers.
For the six months ended December 31, 2022, total revenue increased 6% to $9 $5 million from $9 million in the same period in fiscal 2022.
Recurring revenue for the same period grew 8% from $8 7 million to $9 4 million.
Revenue growth includes the streamlining of over $350000 and high touch low opportunity revenue, which I mentioned earlier.
Total operating expenses increased 4% largely due to our investment in the <unk> network.
Income from operations increased from $2 $1 million to $2 $4 million, an increase of 13% when compared with the same period in fiscal 2022.
While total revenue grew 6% in the first six months of fiscal 2023 gross margin was 82% and net income grew from $1 $8 million to over $2 $5 million an increase of 40%.
EPS grew 56% from eight per common share to <unk> 12 cents per common share.
Turning now to cash flow and cash balances.
Total cash at December 31, 2022 was $21 $4 million compared to $21 5 million at June 32022.
The $21 $4 million is inclusive of the pay down of $2 $1 million on our revolving line of credit during the quarter.
The company carried approximately $448000 on its revolving line of credit as of December 31, 2022, compared to $2 6 million on June 32022.
Subsequent to the end of the quarter, we fully paid off this line of credit therefore as of today, we have zero bank debt, let me say that again zero bank debt.
Giving rising interest rates and only made sense to pay off and reduce our debt.
Fiscal year to date, we generated cash from operations of $3 $3 million compared to $3 million last year, an increase of 8%.
In the second quarter, we repurchased 88741 shares an average price of $5 five for a total of $449000.
The company has approximately $10.2 million remaining on the $21 million total buyback authorization since inception.
Since inception of the buyback program. The company has repurchased a total of $10 $7 million worth of stock retiring 182 million shares, hence reducing capitalization by approximately 9% since 2019.
In my view, our business has come a long way in a very short time, we have much more to achieve our focus on operating leverage and implementing our capital allocation strategy is the right decision.
Now more than ever before our business is easy to model.
We are growing recurring revenue no meaningful customer concentration very little churn 80, plus percent gross margins and double digit EPS growth.
We have a fortress balance sheet, including $21 million in cash little debt and a shrinking capitalization.
It doesn't matter, what John thinks or believes the proof is in the numbers.
As I communicated on our last call. The board has added an additional lever to our capital allocation strategy in the form of six annual dividend.
One five paid quarterly.
We paid our first dividend in the second fiscal quarter subsequent quarterly dividends will be paid within 45 days. The quarter's end of December 31 March 31 June 30 and September 30.
As we've said previously our goal is to take half the annual cash generated from operations and return it to shareholders in the form of a dividend or buying back additional shares hence increasing EPS for all shareholders.
They're half goes in the bank or used to fund initiatives like traceability.
From time to time, the board will evaluate capital allocation strategy and may adjust the different levels, including the dividend buybacks, considering M&A opportunities paying down debt and retiring the preferred shares based on whichever lever is more favorable to shareholders at that time.
Therefore, it is our ongoing goal to allocate a meaningful portion of our free cash flow to returning capital to shareholders and other levers I outlined previously in our capital allocation plan.
That's all I have today, thanks, everyone for your time at this point I'll pass the call over to Randy Randy.
As John mentioned, the benefits of our transition to a SaaS company are now evident the form of significant operating leverage and cash generation weed.
We delivered top line growth solid in our view with recurring revenue growth exceeding 10% and consolidated revenue growth of 9%, even as we deemphasize noncore and our transactional revenue.
More importantly, our bottomline improvement significantly exceeded our revenue growth and our EPS grew even faster yet exactly our plans.
Park City is inherent earnings power is now obvious sustainable and easy to model.
Our accelerated growth rate comes amidst global economic headwind I think it's fair to say that our customers are not immune to these challenges recessionary concerns are causing there'll be one question discretionary or even necessary expenditures. So far this has had only a minor effect on us.
Importantly, the uptick in our growth rate also does not include any contribution from the traceability, but does include some of the impact of our sunsetting selective engagements where the opportunity is limited.
The cost of traceability or in our numbers, but not the revenue.
As we've said before we're strategically deemphasizing non core revenue, meaning smaller higher touch engagements with the ultimate revenue opportunity is limited or where the margin profile is lower than our food focus.
We make these decisions to free up internal resources to prepare for the traceability initiative.
I've been saying that opportunity is coming fast in fact, it's coming certainly faster than we expected we.
We had previously said that we expected litigation to slow the rollout extending the fda's target timeline and giving the industry time to react in many ways. We actually believe this would be helpful. Why.
Because contrary to our original belief interest in adoption from the top down is moving faster than we did expect in my view the industry is woefully unprepared for this new requirement.
Tempered adoption would allow us to execute flawlessly, which is our style and we've always done that versus a fast one which.
Frankly is not in anybody's interest.
Wariness about the regulation the timeline and the enormous impact of traceability on everyone's business is surprisingly low perhaps it was dependent that make perhaps it was the economy, but many customers are simply not aware of how disruptive. This traceability initiative is going to be for their businesses.
A great deal of our early efforts in.
<unk> actually educating customers about it. We're opening is challenging you have to think deer in headlights keep in mind rule tool for has been in the works however for more than a decade.
Many suppliers in fact believe their labeling systems or other what we would call technical approaches mean that they're already compliant they're only compliant internally once they ship their products to the customers any system and its associated compliance with dual tool for breaks down.
Labeling barcodes.
Block change and the like don't actually contained all the information needed to comply with the new regulation.
And certainly don't satisfy the needs of the retailer or wholesaler customers to be compliant.
What may in fact work for an individual business in isolation doesn't work necessarily that the customers of that business.
In fact for traceability to work at all the entire supply chain around and item needs to be connected and not just move products around but more importantly move data and information around.
One participant in the chain, having the correct information doesn't do it what do I mean by that well a retailer bringing in millions of cases of skus from hundreds of suppliers can't have dozens of different labeling protocols different labeling designs and mark.
Defied their system to work with each of those suppliers we.
We estimate that our medium size wholesaler and his thousands of customers will need to correctly create about 50 million records each and every year.
It's hard enough.
Without us is costly, but suppose that he and his supply chain have I don't know a 2% error rate and a 2% error rate would be abnormally low we're talking about then literally hundreds of thousands of errors and issues that have to be corrected.
That requires humans and the inherent payroll that goes along with them no retailer large wholesaler anyone in that chain is thinking about this particular problem and no one either wants to or frankly could hire dozens or hundreds of employees to chase down missing or inaccurate data.
The industry will insist on the extreme end to end automation, we already provide that and that includes our ability to do the error correction.
Just like with our compliance solution. This will be a mandate did use model, where a large retailer wholesaler requires that their suppliers comply.
We've already signed a few wholesalers retailers and suppliers and recently, we signed a large tier one wholesaler and retailer for both compliance management and later traceability typically each retailer or wholesaler will have a few hundred affected suppliers need to be on our network to cover their tool for products.
In short I think you'd have to say that we feel very very good about where we are.
This onboarding process of many thousands of suppliers is going to take time.
Certainly several years.
This is very similar to the ramp we saw with compliance five or six years ago, only it's much larger more complex and it's operating in a more complex.
<unk> pressed timeline.
Government is after all set end date.
That will be a challenge. This is why we're freeing up and dedicating resources.
The longer term opportunities and traceability, our customers the large retailer or wholesaler needless to automate just as much as we do we still expect that the onboarding ramp will be slow at first let's say through 2023 calendar accelerating in 2024 and exploding by 2012.
Five.
Our technical approaches to ride above all of the individual solutions and make the data readable to any recipient without the end user having to do.
James or implement any other system think of it as a universal translator, it's unique in its key.
We offer a no touch no labor low cost solution that enables that require exchange of data.
So you have to think about there for how well positioned we think we are.
Already the largest connected network of food companies on planet Earth.
With respect to revenue ultimately traceability will generate significant recurring revenue at our typical margins.
There's a bit of a delay to allow for setup to the start of revenue with traceability naturally, but we're seeing a growing number of trials going with a repository traceability network, our RTL as we speak.
Fortunately, our compliance business becomes a great catalyst to traceability.
As of today, we have nearly 10000 facilities that could use the RT in a.
While our focus will be on the grocery industry important. Please remember that rule tool for impacts convenience stores restaurants and others to.
Theres more than 1 million businesses, maybe as many as a million and a half that will be affected by rule tool for let me say that again more than a million businesses affected including restaurants grocery stores foodservice convenience stores et cetera.
So here we are.
We're continuing to grow recurring revenue and manage our expenses recurring revenue more than covers our cash costs by millions of dollars, enabling what we considered to be a structural growing cash generation machine.
Our ongoing share repurchase program shrinks, our capitalization and obviously accelerates our earnings per share.
As you've seen we've built a consistent cash generation business with more than five consecutive years of real GAAP, yes, GAAP profitability.
Operational efficiency is central to how we think and everything we do we generate nearly $300000 a year of revenue per employee that's more than double our typical peers.
And even as we prepare to onboard thousands of traceability customers.
We actually expect to do that without significantly increasing our head count.
The impact of that is our revenue per employee will get much larger widening the profitability and efficiency gap that we have to other SaaS providers. We think the comparison is.
Turning to look really really good.
We maintained and will continue to build a fortress balance sheet with more than $21 million of cash and a current ratio of six four to one.
Our business is efficient easy model and we're positioned to scale.
So going forward, our ongoing strategy will be to first continued to take great care of our customers a major component of our position and traceability initiative is at many of our existing customers happy customers will need our traceability help.
We will not jeopardize that for any reason it's based on trust.
This consumer focus remember is our bedrock principle stands above everything.
Second.
We still maintain our goal of growing recurring revenue at the pace of 10% to 20% a year over the long run by the way our CAGR in top line revenue growth has been 10% over the last five years.
Traceability will push that number a bit higher over the next few years, but in the long run we're going to stay with that as a goal.
We're going to continue to drive our internal productivity with continued development of our internal tools.
So that 80% to 85% of our incremental revenue becomes real cash earnings and fourth finally, we will continue to shrink the number of shares outstanding.
Pay down debt and return capital to shareholders by both buying back shares and paid a cash dividend.
Result, therefore should be faster revenue growth, even faster net income growth and faster yet earnings per share growth. We have a lot of work to go lots of things to do but I'm proud of our position today and what we've achieved so far much more to come so with that I'd like to open the call for questions operator.
Sure.
Thank you we will now be conducting a question and answer session.
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One moment, please while we poll for questions.
Our first question is from the line of Tom Forte with D. A Davidson. Please go ahead.
Great. So first off rainy John Great quarter, I have three questions I'll go one at a time.
I know you discussed at great length.
I suspect the contribution margin of even the non food customers.
There's really good.
Given you're just margin structure in general So can you help me understand why it's in or instead of a hand from a customer standpoint.
Okay, I'm, sorry, I thought you usually do all three questions, which challenges my memory. So thank you for doing one at a time.
There is a business reality for us which is at the end of the day the more intense our customer focus the more we are in touch with what our customers can do by way of the extension from where they are the better off the company is and.
And so it's absolutely true that there are some pieces of our business.
<unk>.
Although they are at the moment profitable don't have from our perspective enough growth. So in a way. It's we think of this as a rowboat.
Probably a bad metaphor, we think of it as a rowboat and we have too many passengers on to take care of all of them at the level that we would like so when we have customers that may pay us I'm going to make a number up 100 to $150 a month for our services and they have no growth.
<unk> at all.
The resource that it takes to handle them the human resource the focus of our people the number of humans in our business. The management structure that sits around that all of that says that we are better off substituting that customer for one that could be spending 500 700.
<unk> may be even as much as $1000 a month. So we believe our goal is always as ethically as we can to have a customer set that has not just the best current opportunity, but the best ultimate opportunity and the fact of the matter is we believe.
And I think we haven't communicated it well.
Traceability is a fundamental transformation of the supply chain.
Nothing like this has ever been directed by an entity and in this case government.
Meaning that even when we talk to people and we mentioned this educational thing there.
They are like deer in the headlights, our prospects and our customers.
And what we realized is that the industry is ill prepared that the industry has an enormous amount of heavy lifting to do let me just give you an example.
Every aspect of how the supply chain works is about to change.
Today in terms of food related activity the.
The supply chain is responsible for what's called one forward one back meaning that you need to know when that's the operative word you need to know who you got your product from and.
And you need to know who you set your product to.
The operative word is I said is the word no. So for example, if you're a supplier that sends I'll make this up produce to a wholesaler.
Today's world if there's a problem that retailers is allowed to call you and say hey.
I got this product from you they're doing a trace back on this where did it come from.
Okay. So in other words, you simply have to have the knowledge base that would let you identified that as an.
Issue.
Under the new World of Traceability, you have to send that information.
Along with the product that doesn't mean on the package of the product. It means cotemporaneous Lee with the product. So you have to be able to communicate with your customers all of whom have different systems.
And we're going to look at your labeling or whatever system you use to communicate this information.
They're not going to be able to read it so you're in a fundamentally different world, where you have to figure out how do I communicate with every single one of my customers your customers in turn.
To create a record keeping system, which we do for them.
That identifies that information that they were passed and makes it readable to the F. D. A when the F. D. A says I want a sort of a spreadsheet.
It may sound to a technical person as if it's trivial.
It's imaginably difficult.
Today for example.
A distribution center can receive a pallet or a truckload of product and check it in 10 minutes just take the pallets off the truck drop them on the D. C floor and go stack them well now there's a problem many of the cases that come in there's no I don't know 15 or 20.
<unk> thousand Skus covered by rule tool for now.
Now you'd have to check each and every palate potentially break down each and every palate to find out which cases on which pallets half.
<unk> products that are covered by rule tool for so for example, if you were shipped a pallet of produce and there's let's say a layer of onions in cartons, a layer of tomatoes, maybe something else.
Well, you've got to get to the identification codes on the tomatoes, not the onions, they're not covered.
The logistical difficulty of the supply chain is fundamentally different we are prepared to handle it we are able to do it in a way that's pretty noninvasive and non intrusive I'm sorry can you tell I'm excited about this.
I think we're uniquely positioned to help transform the industry from where it was to a much safer one over time.
To do that we need intense focus absolutely intense focus if you keep customers that don't have that same future with you you're diluting the focus and knowledge base of the business, we like to keep management lean we want the entire business to be focused on our revenue.
Per employee and when you follow that kind of our mantra you end up having customers that are not a good long term fit.
I'm, sorry that was super long winded, you've probably forgotten your two other questions.
I hope I haven't cause I'm, turning the second one on Ted Alright, So based on your comments, John and Randy It sounds like Youre confident you have the head count and cost structure to support greater than 20% revenue growth.
So given everything you just said Randy help me understand why you're confident that you can support.
Greater than 20% revenue growth.
Okay, well here's the answer is in the long run I don't even know what the Hell long run means but it certainly means more than a few years in the long run we're still convinced our growth will fall somewhere in the 10 to 20 range and as I mentioned recurring revenue has grown at a 10% CAGR over the last five.
So it'll be higher than we've done over the last five I think we have a few years ahead of us as this kicks in that will be north of 20, let me explain why.
If we have 10000 <unk>.
Suppliers, if you will facilities in our current network people, we currently touch.
That are likely to be covered by rule tool for.
That is about $25 million a year of revenue within our existing customer set.
There's a timeline on this it has to happen by January of 2026, Okay.
Okay.
All of those plus others that are not currently customers are going to end up doing something around traceability why shouldn't it be us. So in other words, when we begin to tack on what we think is a.
I'm going to call it our fair share of this market and given that they're already customers and given that we have the lowest cost ability to do this.
It seems like the opportunity could lead to over the next few years not 20 years over the next few years our growth rate.
Obviously in excess of that 10 to 20 bracket. So that'll take it over the top end for a few years, but.
I doubt that to 10 or 20 year growth rate.
Heart to compounded into the two bigger numbers.
We do have the head count second part of that question. We do have the people on board to day to do that it does require some of the thinning of our non go forward customers our noncore stuff.
To do that but that puts our most experienced people on the problem, which is sure as hell and what you want in an operating business and number two we will be adding some people. It's just not clear at this point until we've done five or 10 of these implementations perhaps over the next year.
Hubs that bring us many spokes, we've got to find out what kind of resource we have to have available to help them do this we just don't know yet. So our plan is to continue to add a few people a year, but its not dozens or hundreds of thousands but it'll be a few people per year and I have to be candid and tell you I suspect it.
It'll be more on the implementation side of our business and on the sales side of our business not in other areas.
Hope that was had been answered your question.
Alright, so now I've got to model right. So.
With your fortress of sorry fortress of our balance sheet and your free cash flow generation can you give us your current thoughts on the M&A.
John do you want to comment on M&A since you and I talked about it a lot.
I mean look where we are first off we are laser focused on traceability. So.
The bolt ons to compliance and supply chain.
You know it.
We get approached from time to time, but I think right now our focus on traceability.
I think that we have a good source of banking relationship we have lines of credit we have cash available and obviously you are buying down our share. So we also have that equity if somebody should come available, but right now from our focus on traceability.
If we're sunsetting certain products that give distraction unless it's something just ultimately compelling on the acquisition side, it's really not our focus but look life is a negotiation.
We're not going to walk from something that may have been in our view overly valued for the last number of years 14, 15 times earnings that might or might not occur.
But right now our focus is on traceability, but again.
Part of our Arsenal, our quiver is to have that ability that if an opportunity comes about.
We have a number of levers that we could access to fund that.
Okay.
Alright, and then I was a little I was a little shorter than Randy.
Yeah, a lot shorter alright so.
So it isn't it.
Usually at this question is clear to me, so I'm asking because it's not so it is unclear to me how the current environment is negatively impacting yourselves for example, you've talked in the time in the past how do you have a distracted because customer things of that nature I understand the macroeconomic environment. So challenging to some degree you have a fair amount of inflation.
But can you explain in simple terms like how are you currently.
Negatively impacted sales and profits by the current environment.
Maybe the answer is not at all.
Well, it's somewhere between not at all and not very much.
And really all it seems to be doing when we talk to our.
Our prospects and this will change coming.
Come to that in a second since I'm long winded.
Bring your food ton over lay down and I'll keep talking.
I suspect is today the talk of recession, the Taco food inflation is causing people in that industry you'd be wary of what's happening to their customers.
When they become wary they do tend to just slow down their decision, making and that's good business. Its good practice now.
Having said that there is a final date around traceability.
It was it's now January of 'twenty 'twenty six hopefully they will push that date back we really genuinely hope because we don't believe the whole world can get ready for it but what that says is as you get closer to that date and the market begins to wake up and we.
Say market I mean, the participants in the global food supply and that supply chain wake up.
There will be a panic in fact, a very well known attorney in the food business Shawn Stevens is a direct quote.
When he was talking about Pismo rule tool for here's what he said.
There's just enough time to panic.
People aren't even aware of this yet and when they when they wake up the very smallest change we're going to get pushed to the end the largest change probably don't have enough time to get this done and it's difficult to execute so it's got all of the hallmarks of a.
Of a shark feeding frenzy towards the end and that's why I said this year, we'll see a relatively slow sign up.
We'll pick up next year and by 2025 My guess is it's.
It's going to be extraordinary.
So they'll wake up right now they're worried about recession.
Alright, so thank you John Thank you Randy for taking my questions.
Of course right.
Thanks, Tom.
Yeah.
So Randy maybe you have any other questions.
Yeah, I was going to say well calibrated closing remarks, okay. There are no further questions. At this time I would like to turn the floor back over to Randy for closing comments.
Great. Thank you operator, thank you John .
Everybody. We appreciate you hopefully you got your questions answered.
We're obviously very comfortable where we are but there is an enormous mountain of opportunity in front of us. So we're climbing it and we're geared ready and this will be pretty exciting adventure. So fasten. Your seatbelts. Thanks, a lot talk to you all soon.
<unk>.
Alright.
Thank you. This concludes today's teleconference. You may disconnect your lines at this time.
Thank you for your participation.
Okay.
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