Q3 2025 ReposiTrak Inc Earnings Call
Greetings and welcome to the Repositrak fiscal third quarter 'twenty twenty-five earnings call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation.
Operator: Greetings, and welcome to the ReposiTrak Fiscal Third Quarter 2025 Earnings Call. At this time, all participants are in a listen-only mode.
Operator: A question and answer session will follow the formal presentation.
Operator: If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded.
Sure require operator assistance, Please press star zero quite your telephone keypad.
As a reminder, this conference is being recorded.
Jeff Stanlis: It is now my pleasure to introduce your host, Jeff Stanlis with FNK-IR. Stanlis, you may begin. Thank you, Operator, and good afternoon, everyone.
Speaker Change: It's now my pleasure to introduce your host Jeff stainless F N K I missed.
Speaker Change: Mr. Stainless you may begin.
Speaker Change: Thank you operator, and good afternoon, everyone. Thank you for joining us today for the Repositrak fiscal third quarter earnings call hosting the call today are Randy fields Park trucks, Chairman and CEO and John Merrill Repositrak CFO before we begin we'd like for my different ones that this call could contain forward looking statements about repositrak within the meaning of the private.
Jeff Stanlis: Thank you for joining us today for the ReposiTrak Fiscal Third Quarter Earnings Call. Hosting the call today are Randy Fields, ReposiTrak's Chairman and CEO, and John Merrill, ReposiTrak's CFO.
Jeff Stanlis: Before we begin, I would like to remind everyone that this call could contain forward-looking statements about ReposiTrak within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that are not subject to historical facts. Such forward-looking statements are based upon current beliefs and expectations. ReposiTrak's remarks are subject to risks and uncertainties, and actual results may differ materially. Such risks are fully discussed in the company's filings with the Securities and Exchange Commission. The information set forth herein should be considered in light of such risks.
Speaker Change: <unk> Litigation Reform Act of 1995, well. We're looking statements are statements that are not subject to historical facts such forward looking statements are based upon current beliefs and expectations.
Speaker Change: Does it tracks remarks are subject to risks and uncertainties and actual results may differ materially.
Speaker Change: Risks are fully discussed in the company's filings with the Securities and Exchange Commission. The information set forth herein should be considered in light of such risks Polytrack does not assume any obligation to update information contained in this conference call.
Jeff Stanlis: ReposiTrak does not assume any obligation to update information contained in this conference call.
Jeff Stanlis: Shortly after the market closed today, the company issued a press release overviewing the financial results that we will discuss on today's call. Investors can visit the Investor Relations section of the company's website at repositrak.com to access this press release.
Speaker Change: Shortly after the market closed today the company issued a press release overview in our financial results I will discuss on today's call investors can visit the Investor Relations section of the company's website at Repositrak Dot com to access this press release.
John Merrill: With all that said, I would now like to turn the call over to John Merrill. John, the call is yours. Thanks Jeff and good afternoon everyone. For those of you who know me or have listened to our conference calls have heard me say the proof is in the numbers. That is especially true this quarter. We demonstrated during the quarter that we have and will continue to execute against our stated strategy to grow annual revenue at a double-digit pace somewhere between 10 to 20% and grow profitability even faster. This allows us to generate more cash and return more capital to shareholders.
John Merrill: With all that said I'd now like to turn the call over to John Merrill John called as Yours.
John Merrill: Thanks, Jeff and good afternoon, everyone for those of you who know me or I have listened to our conference calls have heard me say the proof is in the numbers that is especially true this quarter. We demonstrated during the quarter that we have and will continue to execute against our stated strategy to grow annual revenue at a double digit pace somewhere between 10% to 20%.
And grow profitability even faster.
John Merrill: This allows us to generate more cash and return more capital to shareholders.
John Merrill: The hard work of the past two years to position ReposiTrak as the go-to source to address the track and trace opportunity while simultaneously growing all lines of business has not been easy to say the least. and by no means we are claiming mission accomplished. We have plenty more work to do. Remember, we had to make many tough decisions along the way in order to efficiently allocate resources to grow our network. Some of those decisions were not popular with investors like sunsetting products and services and walking away from high-touch, low-opportunity revenue to make room for growth.
John Merrill: The hard work of the past two years to position Repositrak as the go to source to address the track and trace opportunity while simultaneously growing all lines of business has not been easy to say the least.
John Merrill: And by no means we are claiming mission accomplished we have plenty more work to do.
John Merrill: Remember, we had to make many tough decisions along the way in order to efficiently allocate resources to grow our network. Some of those decisions were not popular with investors like sunsetting products and services and walking away from high touch low opportunity revenue to make room for growth.
John Merrill: However, the proof is in the numbers and the results we are reporting for the quarter and year to date are reflected in growth in top line and bottom line and the KPIs in between. Previously, in the second fiscal quarter, we pointed out that our deferred revenue has increased 70% to $4.2 million. As most of you know, deferred revenue is an indicator of future revenue yet to be recognized. Our contracted revenue, and hence deferred revenue, is comprised of all of our solutions, not just traceability. If their services are provided in accordance with the contract, that earned revenue will be layered in over the subsequent 12 months.
John Merrill: Where the proof is in the numbers and the results we are reporting for the quarter and year to date are reflected in growth in topline and bottom line and the kpis in between.
John Merrill: Previously in the second fiscal quarter, we pointed out that our deferred revenue has increased 70% to $4 $2 million.
John Merrill: As most of you know deferred revenue as an indicator of future revenue yet to be recognized.
John Merrill: Our contracted revenue and hence deferred revenue is comprised of all of our solutions not just traceability.
John Merrill: Their services are provided in accordance with the contract that earned revenue will be layered in over the subsequent 12 months.
John Merrill: As you can see by our revenue growth, that earned revenue is accelerating. Revenue grew 16% in the third fiscal quarter to $5.9 million, and we continue to carry a meaningful amount of deferred revenue on our balance sheet, $3.7 million as of March 31. These contracts will be converted to recognized revenue over the next 12 to 15 months and obviously we're adding more and more contracts every week. What you see today is just a portion of the growth we expect over the next few years. As a result, Randy and I are confident that ReposiTrak will continue to deliver on our goal of growing annual top-line revenue at a double-digit clip.
John Merrill: Can see by our revenue growth that earned revenue is accelerating.
John Merrill: Revenue grew 16% in the third fiscal quarter to $5 $9 million and we continue to carry a meaningful amount of deferred revenue on our balance sheet $3 $7 million as of March 31.
John Merrill: These contracts will be converted to recognize revenue over the next 12 to 15 months and obviously, we're adding more and more contracts every week.
John Merrill: Or do you see today is just a portion of the growth we expect over the next few years.
John Merrill: As a result, Randy and I are confident that Repositrak will continue to deliver on our goal of growing annual topline revenue at a double digit clip.
John Merrill: Be clear, we are not a quarterly company. Some quarters may be higher or lower than others. However, we are more confident today than ever before that our goal to grow annual top line revenue by 10 to 20% is here to stay for the foreseeable future. Traceability is accelerating, grabbing headlines, and serving as a current catalyst. We are experiencing growth in all lines of business, traceability, compliance, and supply chain. While traditional sales of one service to solve one customer problem continues to grow, our cross-selling initiatives are gaining momentum for obvious reasons. Why? We have an end-to-end solution, so once we receive customer data and they are successful on one solution, they recognize why not expand to another.
John Merrill: Be clear, we are not a quarterly company some quarters may be higher or lower than others. However, we are more confident today than ever before that our goal is to grow annual topline revenue by 10% to 20% is here to stay for the foreseeable future.
John Merrill: Well traceability is accelerating grabbing headlines and serving as a current Cadillac we're experiencing growth in all lines of business traceability compliance and supply chain.
John Merrill: While traditional sales of one service to solve one customer problem continues to grow our cross selling initiatives are gaining momentum for obvious reasons. Why we have an end to end solution. So once you receive customer data and they were successful on one solution. They recognize why not expand to another.
John Merrill: Yes increased but measured growth is important but in my view generating earnings and cash is the ultimate focus why in the third quarter, we translate a 16% revenue growth and a 27% net income growth.
John Merrill: Yes, increased but measured growth is important, but in my view, generating earnings and cash is the ultimate focus. Why? In the third quarter, we translated 16 percent revenue growth into 27 percent net income growth. But another way, we converted $828,000 in incremental revenue into $415,000 in incremental net income. That's gap net income, not adjusted EBITDA or some other qualified metric. So, 50 cents of every incremental revenue dollar fell to the bottom line. Those results reflect the increased costs for investments in marketing, technology, and onboarding of new customers that we believe will flatten over time. Currently, our revenue contribution margin above fixed costs is about 50%, but our goal is to get closer to 80%.
John Merrill: Put another way, we converted $828000 in incremental revenue into $415000 in incremental net income.
John Merrill: GAAP net income not adjusted EBITDA or some other qualified metric.
So 50 cents of every incremental revenue dollar fell to the bottom line.
John Merrill: Those results reflect the increased cost for investments in marketing technology, and Onboarding of new customers that we believe will flatten over time.
John Merrill: Currently our revenue contribution margin above fixed cost is about 50%, but our goal is to get closer to 80%.
John Merrill: As many of you have heard me say time and time again, it takes $12 million in cash to run this place. Our goal is to deliver $0.70 to $0.80 profit on every dollar of incremental revenue over the annual $12 million in cash costs. that if cash costs excluding stock compensation expense, bad debt, depreciation, amortization, and other non-cash accounting costs. That's the goal, but we ain't there yet.
John Merrill: Many of you have heard me say time and time again, it takes $12 million in cash to run this place.
John Merrill: Our goal is to deliver 70 to 80 profit on every dollar of incremental revenue over the annual $12 million in cash costs.
John Merrill: That is cash costs, excluding stock compensation expense bad debt depreciation amortization and other noncash accounting costs.
John Merrill: That's the goal, but we ain't there yet.
John Merrill: Again our strategy is simple. First, take exceptional care of the customer. Second, execute flawlessly, grow recurring revenue, balancing cost with opportunity, increase profitability, use cash to buy back common stock, redeem the preferred, and do it all with no bank debt. At the same time, return capital to shareholders through an increasing cash dividend. Third, we continue to build cash on the balance sheet over $28 million as of March 31, 2025.
John Merrill: Again, our strategy is simple first take exceptional care of the customer.
John Merrill: Execute flawlessly grow recurring revenue balancing cost with opportunity increased profitability use cash to buy back common stock redeemed the preferred and do it all with no bank debt at the same time return capital to shareholders through an increasing cash dividend.
John Merrill: Third we continue to build cash on the balance sheet over $28 million as of March 31, 2025.
John Merrill: Okay, let's get to the numbers.
John Merrill: Okay, let's get to the numbers. Total revenue for the third quarter of fiscal 2025 was up 16% to $5.9 million versus $5.1 million in the prior year. Recurring revenue increased 15% to $5.8 million.
John Merrill: Total revenue for the third quarter of fiscal 2025 was up 16% to $5 $9 million versus $5 $1 million in the prior year.
John Merrill: Recurring revenue increased 15% to $5 $8 million.
John Merrill: The percentage of recurring to total revenue declined from 99% to 98% due to an acceleration of customer onboarding and the one-time setup fees associated with it. Operating expense increased 7% reflecting our ongoing investment in RTN, higher commissions due to higher revenue, and increases in insurance and benefit costs for employees. Cost of revenue increased 10% due to investment in developer resources to further expand our wizard, a proprietary self-implementing platform to allow suppliers to onboard with little or no human interaction. Sales and marketing increased 4% due to continued investment and awareness of our solutions suite of traceability, supply chain, and compliance.
John Merrill: The percentage of recurring to total revenue declined from 99% to 98% due to an acceleration of customer on boarding and the onetime set up fees associated with them.
John Merrill: Operating expense increased 7%, reflecting our ongoing investment in our T N higher commissions due to higher revenue and increases in insurance and benefit costs for employees.
John Merrill: Cost of revenue increased 10% due to investment in developer resources to further expand our wizard a proprietary self implementing platform to allow suppliers to onboard with little or no human interaction.
John Merrill: Sales and marketing increased 4% due to continued investment in awareness of our solutions suite of traceability supply chain and compliance.
John Merrill: As awareness increases we believe our marketing spend to educate the industry will flatten out over time.
John Merrill: As awareness increases, we believe our marketing spend to educate the industry will flatten out over time. DNA increased 8 percent. This increase reflects increases in company benefits for employees and other insurance costs incurred during the quarter. Depreciation and amortization increased 14% due to leased equipment for our newest data center located at Switch, Reno, Nevada. Switch Reno complements our main data center located at Switch Las Vegas and eliminates our corporate headquarters data center in Utah. Income from operations increased 43% from $1.3 million to $1.8 million. Gap in net income increased from $1.6 million to $2 million, up 27%.
John Merrill: G&A increased 8%.
John Merrill: This increase reflects increases in company benefits for employees and other insurance costs incurred during the quarter.
John Merrill: Depreciation and amortization increased 14% due to leased equipment for our newest data center located at switch Reno, Nevada switch.
John Merrill: Switch Reno complement for our main data center located at switch Las Vegas, and eliminates our corporate headquarters data center in Utah.
John Merrill: Income from operations increased 43% from $1 $3 million to $1 $8 million.
John Merrill: GAAP net income increased from $1 $6 million to $2 million up 27%.
John Merrill: GAAP net income to shareholders increase from $1 $4 million to $1 $9 million up 33%.
John Merrill: Gap in income to shareholders increased from $1.4 million to $1.9 million, up 33%. Earnings per share basic and diluted was $0.10 per share. This compares to $0.08 per basic and diluted share last year. Cash is $28.1 million at the end of the March 31 quarter.
John Merrill: Earnings per share basic and diluted was <unk> 10 per share. This compares to eight cents per basic and diluted share last year.
John Merrill: Cash was $28 $1 million at the end of the March 31 quarter keep in mind. The cash balance is net of the more than $25 million in capital. We've returned to shareholders through a common stock cash dividend that has increased 20% since inception.
John Merrill: Keep in mind, the cash balance is net of the more than $25 million in capital we've returned to shareholders through a common stock cash dividend that has increased 20% since inception. It also includes the redemption of half of the preferred thus far, buying back 2.2 million common shares and paying off over $6 million in bank debt since we instituted our capital allocation strategy only a few short years ago.
It also includes the redemption of half of the preferred thus far buying back $2 2 million common shares and paying off over $6 million in bank debt since we instituted our capital allocation strategy only a few short years ago.
John Merrill: Turning to the fiscal year to date numbers.
John Merrill: Turning to the fiscal year-to-date numbers. Total revenue increase 10.3%, $16.8 million versus $15.3 million. Recurring revenue increased 9% to $16.6 million. Total operating expenses for the fiscal year to date were up 6% due to investments in RTN, increased insurance and employee benefit costs, and investment in development of wizard tools. SG&A costs were up $419,000 or 5% due to investment in our growth. Fiscal year-to-date income from operations was up 25%, $4.6 million versus $3.7 million. Net income to common shareholders increased 24% from $4 million to $4.9 million. Earnings per share for the fiscal year to date was $0.27 per basic share and $0.26 per diluted share.
John Merrill: Total revenue increased 10, 3% $16 $8 million versus $15 $3 million.
John Merrill: Recurring revenue increased 9% to $16 $6 million.
John Merrill: Total operating expenses for the fiscal year to date were up 6% due to investments in our T N increased insurance and employee benefit costs and investment and development Wizard tools.
John Merrill: SG&A costs were up $419000 or 5% due to investment in our growth.
John Merrill: Fiscal year to date income from operations was up 25% $4 $6 million versus $3 $7 million.
John Merrill: Net income to common shareholders increased 24% from $4 million to $4 $9 million.
John Merrill: Earnings per share for the fiscal year to date was 27 cents per basic share and 26 cents per diluted share.
John Merrill: This is based on 18.2 million basic shares outstanding and 19.1 million shares diluted respectively, an increase in EPS of over 22%.
John Merrill: This was based on $18 2 million basic shares outstanding and $19 1 million shares diluted respectively.
John Merrill: An increase in EPS of over 22%.
John Merrill: We remain confident that our continued revenue growth will double our historical $20 million annual revenue over the next several years deliver at least 80% gross margins and 30% net margins.
John Merrill: We remain confident that our continued revenue growth will double our historical $20 million annual revenue over the next several years, deliver at least 80% gross margins and 30% net margins. If we are successful, this will translate to higher earnings per share and significant cash generation.
John Merrill: If we are successful this will translate to higher earnings per share and significant cash generation.
John Merrill: Turning to our capital allocation plan.
John Merrill: Turning to our capital allocation plan. Over the first nine months of the fiscal year, $3.7 million has been returned to shareholders in the form of cash dividends, common stock repurchases, and preferred stock redemption. Since inception, we redeemed $4.6 million in preferred stock with roughly $4.2 million to go. At our continued pace of redemption, the preferred stock will be paid off on or before September 2027.
John Merrill: Over the first nine months of the fiscal year $3 $7 million has been returned to shareholders in the form of cash dividends and common stock repurchases and preferred stock redemptions.
John Merrill: Since inception, we redeemed $4 $6 million and preferred stock with roughly $4 $2 million to go.
John Merrill: And our continued pace of redemption, the preferred stock will be paid off on or before September 2027.
John Merrill: As I have said before the board will evaluate our capital allocation strategy, making appropriate adjustments based on the approach most beneficial to shareholders at that time.
John Merrill: As I have said before, the board will evaluate our capital allocation strategy, making appropriate adjustments based on the approach most beneficial to shareholders at that time. Our goal is to continue to return 50% of annual cash from operations to shareholders and putting the other half in the bank. In summary, our strategy has not changed. Deliver flawless execution for our customers. When the customer is successful, they grow and we grow. Grow recurring revenue, balance cost with opportunity. Continue to increase profitability, EPS and cash. Return more and more capital to shareholders. Yes, it's really that simple and proof will be in the numbers.
John Merrill: Goal is to continue to return 50% of annual cash from operations to shareholders and putting the other half in the bank.
John Merrill: In summary, our strategy have not changed deliver flawless execution for our customers when the customers successful they grow and we grow <unk>.
John Merrill: <unk> recurring revenue balanced cost with opportunity continued to increase profitability EPS and cash returned more and more capital to shareholders.
John Merrill: Yes, it's really that simple and proof will be in the numbers that's all.
John Merrill: That's all I have today.
Randy Fields: All I have today, thanks, everyone for your time at this point I'll pass the call over to Randy Randy.
John Merrill: Thanks everyone for your time.
Randy Fields: At this point, I'll pass the call over to Randy. Randy? Thanks, John. Traceability is continuing to unfold as we expected in terms of timing and process. As we've said, however, the scale of the long-term opportunity is proving to be far larger than we originally. From the very beginning, we've been clear that the FDA's deadline for compliance enforcement was too aggressive, and the industry required more time. While large retailers were positioned to comply on time, the majority of smaller distributors and producers needed more time to fully understand the requirements, assemble the data, ensure the accuracy of that data, blah, blah, blah, and align the processes.
Randy Fields: Thanks, John.
Traceability is continuing to unfold as we expected in terms of timing and process. As we've said however, the scale of the long term opportunities proving to be far larger than we originally expected.
Randy Fields: From the very beginning we've been clear that the fda's deadline for compliance enforcement was too aggressive and the industry required more time.
Randy Fields: While large retailers, we're positioned to comply on time, the majority of smaller distributors and producers needed more time to fully understand requirements assemble the data and it showed the accuracy of that data blab blab Landa lineup processes thankfully.
Randy Fields: Thankfully, the FDA extended the enforcement deadline by 30 months, which will give us the time to make sure that the onboarding that's needed progresses smoothly, the data is accurate, the systems work as everybody hoped. This extension is exactly what we were hoping. Importantly, while the enforcement deadline was extended, the law has not changed. And despite the FDA's decision, the pace of adoption has remained the same. It's a market competition issue, not a regulatory deadline that's driving adoption. Market forces have taken over. In other words, what I mean by this is that leading retailers, Kroger, Albertsons, Walmart, Target, and others, have made food safety a business priority.
Randy Fields: The FDA extended the enforcement deadline by 30 months, which will give us the time to make sure that the onboarding. It's needed progresses smoothly. The data is accurate systems work as everybody hope for.
Randy Fields: This extension is exactly what we were hoping for.
Randy Fields: Importantly, while the enforcement deadline was extended the law has not changed and despite the Fda's decision. The pace of adoption has remained the same.
Randy Fields: As a market competition issue not a regulatory deadline, that's driving the adoption market forces have taken over in other words, what I mean by this is that leading retailers Kroger Albertsons Walmart target and others have made food safety a business priority.
Randy Fields: They are investing in all food traceability, not just to comply with the dismal 204 regulations.
Randy Fields: They're investing in all food traceability, not just to comply with the FSMA 204 regulations, but because it protects their brand and, frankly, it strengthens their operations. Once they've made this commitment, the rest of the industry has now fallen. The result is that suppliers who work with these retailers need to be traceability capable, and we're solving that need for these suppliers. Initially, we believed that the smallest ingredient suppliers would not be included in the initiative. But over the last few months, our inbound inquiries have shifted from retailers primarily pushing suppliers to us to suppliers pulling their downstream suppliers.
Randy Fields: Because it protects their brand and frankly, it strengthens our operations.
Randy Fields: Once they've made this commitment the rest of the industry is now following.
Randy Fields: The result is that suppliers, who work with these retailers need to be traceability capable and we're solving that need for these suppliers.
Randy Fields: Initially we believe that the smallest ingredient suppliers would not be included in the initiative, but over the last few months, our inbound inquiries have shifted from retailers, primarily pushing suppliers to us to suppliers pulling their downstream suppliers to us this added momentum as aligned perfectly with our execution strategy.
Randy Fields: This added momentum is aligned perfectly with our execution strategy and, frankly, our long-term expectation. ReposiTrak has emerged as the go-to solution to meet both the FDA demands, as well as the individual preferences of retailers, all in a way that suppliers can manage efficiently and inexpensively. We are arguably the largest operating traceability network in the world. Our scale in terms of numbers of participants in the network is certainly drawing the attention of a whole industry. This is leading to new partnerships as well as more and more commercial interest.
Randy Fields: And frankly, our long term expectations.
Randy Fields: We're positive track has emerged as the go to solution to meet both the FDA demands as well as the individual preferences of retailers all in a way that suppliers can manage efficiently and inexpensively.
Randy Fields: We are arguably the largest operating traceability network in the world our scale in terms of numbers of participants in the network and certainly drawing the attention of the whole industry.
Randy Fields: This is leading to new partnerships as well as more and more commercial inquiries importantly.
Randy Fields: Importantly... All of our major solutions, traceability, supply chain, compliance, etc. are all built on a single technology platform. This fact creates enormous financial and operational efficiencies for us, and it continues to show up in our financials. Simply put, we have amazing opportunities. Even more importantly, the Common Technology Platform is proving to be important for our customers. Over the last few months, we've increased our cross-selling initiative. And it's delivering increasing results, contributing to our overall growth across all parts of our business, not just traceability. Meaning, if I am a customer and ReposiTrak has my data for compliance initiatives, I already did the work to implement, synchronizing data, scrubbing vendors, and ensuring the accuracy of data, why not expand into other ReposiTrak service offerings?
Randy Fields: All of our major solutions traceability supply chain compliance et cetera are all built on a single technology platform.
Randy Fields: That creates enormous financial and operational efficiencies for us and it continues to show up in our financials simply put we have amazing operating leverage even more importantly, the common technology platform is proving to be important for our customers over.
Randy Fields: Over the last few months, we've increased our cross selling initiatives.
And this delivery and increasing results contributing to our overall growth across all parts of our business not just traceability, meaning if I am a customer in Repositrak has my data for compliance initiatives I already did the work to implement synchronizing data scrubbing vendors and ensuring the accuracy of data why not expand into us.
Randy Fields: Repositrak service offerings, such as traceability or supply chain and vice versa.
Randy Fields: such as traceability or supply chain, and vice versa. That's the beauty of our strategic vision, executed both with automation and a single flexible platform. Automation is our efficiency strategy. Today, roughly two-thirds of our new traceability customers are joining the ReposiTrak traceability network through our automated wizard, with little or no human intervention. I doubt we'll ever get to 100%, but our goal is to make it easier and easier over time for customers to join through the wizard. If you remember a year ago, we set some objectives in terms of what this wizard might do for us, and it certainly has already exceeded our expectations.
Randy Fields: That's the beauty of our strategic vision executed both with automation and a single flexible platform.
Randy Fields: Automation is our efficiency strategy.
Randy Fields: Today, roughly two thirds of our new traceability customers are joining the Repositrak traceability network through our automated wizard with little or no human intervention.
Randy Fields: Well, let me get to 100%, but our goal is to make it easier and easier over time for customers to join to the Wizard. If you remember a year ago we.
Randy Fields: We set some objectives in terms of what this wizard might do for US and this certainly has already exceeded our expectations.
Randy Fields: Our accomplishments to date are precisely what we've been communicating to shareholders for some time.
Randy Fields: Our accomplishments to date are precisely what we've been communicating to shareholders for some time. Maintaining all along that the needs of our customers have and always will come first. We have and will continue to add new products to the platform based on our customer needs. We have lots more ideas in the hopper. Take my word. We've communicated many times that our goal is growing revenue at 10 to 20% annually and earnings growth much higher. As John pointed out, we generated 16% revenue growth in the third fiscal quarter and 10% in the fiscal year to date.
Randy Fields: Maintaining all along that the needs of our customers have and always will come first we have and will continue to add new products to the platform based on our customer needs. We have lots more ideas in the hopper take my word for it with.
Randy Fields: We've communicated many times that our goal is growing revenue at 10% to 20% annually and earn needs growth much higher as John pointed out we generated 16% revenue growth in the third fiscal quarter and 10% in the fiscal year to date, yes, some quarters will be higher and some lower however, we maintained the 10 to 20.
Randy Fields: Yes, some quarters will be higher and some lower. However, we maintain that a 10 to 20% annual growth rate in revenue enables us to provide to our customers. And that's where we are today. That balance of customer service and shareholder value is frankly reflected in the numbers. In the third quarter, revenue grew 16% but operating expenses only grew 7%. Much of this was related to onboarding of new customers, which have higher one-time costs. As a result, we grew operating income 43%, gap net income 27%, and net income to common shareholders 33%, all on the 16% revenue growth.
Randy Fields: <unk> annual growth rate in revenue enables us to provide maximum value to the shareholders without jeopardizing the impeccable customer service to our customers, that's where we are today.
Randy Fields: That balance of customer service and shareholder value.
Randy Fields: <unk> reflected in the numbers in the third quarter revenue grew 16%, but operating expenses only grew 7% much of this is related to onboarding of new customers, which have higher one time costs. As a result, we grew operating income, 43% GAAP net income 27% and.
Randy Fields: Net income to common shareholders, 33% all on a 16% revenue growth.
Randy Fields: We're converting revenues to cash at an accelerated rate, and we've generated close to $7 million in cash from operations during this year so far. As we said before, we expect to return about 50% of our annual cash generation to shareholders through dividends, stock repurchases, and the other half will go in the bank. We've said that for some time and we've done it for some time now. We do not see that this is going to change in the foreseeable future.
Randy Fields: We're converting revenues to cash at an accelerated rate.
Randy Fields: We generated close to 7 million cash from operations during this year so far at.
Randy Fields: We said before we expect to return about 50% of our annual cash generation to shareholders through dividends and stock repurchases and the other half will go into bank we.
Randy Fields: We've said that for some time and we've done it for some time now we do not see that this is going to change in the foreseeable future.
Randy Fields: Nonetheless, we have lots of work to do balancing our opportunities with our incredible customer service. Once again, our business model is simple. Our customers are priority one. Deliver success to our customers and they'll buy more. Buying more generates revenue and accelerates profitability faster and generates more cash. This enables us to continue to return more and more capital to shareholders and drive earnings per share. It requires a superior team and hard work, but it's really that simple.
Randy Fields: Nonetheless, we have lots of work to do balancing our opportunities with incredible customer service once again, our business model is simple.
Randy Fields: Our customers are priority one.
Randy Fields: Deliver success for our customers and they'll buy more buy more generates revenue and accelerates profitability faster and generates more cash. This enables us to continue to return more and more capital to shareholders and drive earnings per share. It requires a superior team and hard work, but it's really that simple so with that.
Randy Fields: So with that, I'd like to now open up the call for questions. Operator? Thank you.
Speaker Change: Like to now open up the call for questions operator.
Speaker Change: Thank you we will now be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad confirmation tone will indicate that your line is in the question queue.
Operator: We'll now be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. Confirmation tone will indicate that your line is in the question... You may press star 2 to remove yourself from the queue. participants using speaker equipment, it may be necessary to pick up a handset before pressing start. One moment while we poll for questions.
Randy Fields: Press Star two to remove yourself from the queue.
Randy Fields: Participants using speaker equipment and may be necessary to pick up the handset before pressing the star keys, one moment, while we poll for questions.
Speaker Change: And our first question comes from Thomas Forte with Maxim Group. Please proceed with your question.
Thomas Forte: And our first question comes from Thomas Forte with Max. please proceed with your questions. Great.
Thomas Forte: Great So Randy and John Congrats on the quarter I have a number of questions and then Randy as I don't like your answer I will ask the question again differently.
Thomas Forte: So, Randy, John, congrats on the quarter. I have a number of questions. And then, Randy, if I don't like your answer, I will ask the question again.
Randy Fields: The first question I had was can you talk about the impact of tariffs on your business? The only effect we think that terrorists have had, are having, and will have going into the future, is the uncertainty that it addresses. So when you have a business like the supermarket or food business, John Merrill, Thomas Forte, John Merrill, Jeff Stanlis, ReposiTrak But it's reasonable to assume that tariffs are just one more hurdle, nothing like the pandemic, but certainly one more hurdle for the food industry to have to overcome. So it's something, but it's not a big. All right, so then, that's pretty good, but I want to, all right, so.
Thomas Forte: Alright. So the first question I had was right.
Thomas Forte: Can you talk about the impact of tariffs on your business.
Thomas Forte: Yes.
Thomas Forte: Well.
Thomas Forte: The only effect, we think the tariffs have had are having and will have going.
Thomas Forte: Into the future.
Thomas Forte: Is the uncertainty that introduces.
Thomas Forte: So when you have a business like the supermarket or food business.
Thomas Forte: Uncertainty causes people to think very deeply about what theyre doing so to a certain extent it slows things down we haven't seen that in our business is obviously accelerating but it's reasonable to assume that tariffs are just one more hurdle nothing like the pandemic, but certainly one more hurdle for the food industry to have to overcome so.
Thomas Forte: It's something but it's not a big something how's that.
Thomas Forte: Alright, So then.
Thomas Forte: That's pretty good alright.
Thomas Forte: Alright.
Randy Fields: So there isn't a situation where, in a low-margin industry like the food retail sector, where you have something like tariffs that puts incremental cost pressure and then makes it more difficult, like lengthens your sales cycle, or in any way has a negative impact on your business in that manner. No, we don't think so. We certainly don't see it at this point. Okay, good.
Speaker Change: So there isn't a situation where in a low margin industry like the food retail sector.
Speaker Change: Where you have something like tariffs that puts incremental cost pressure and then makes it more difficult like length of sales cycle or in any way has a negative impact on your business in that manner.
Speaker Change: No. We don't think so we certainly don't see it at this point.
Speaker Change: Okay. Good alright, so John 11 minutes of prepared remarks, I feel like that was an all time high.
Thomas Forte: All right, so, John, 11 minutes of prepared remarks. I feel like that was an all-time high. I know in the prepared remarks, you made a lot of expense-related comments.
Thomas Forte: So in the prepared remarks.
Thomas Forte: Made a lot of expense related comments.
John Merrill: I was hoping you could distill it to... How should we think about changes in your cost structure and how your next dollar of revenue converts into profitability? So I mean, we will continue to invest in the awareness, even though the delay with the FDA, it's no longer, it's still not a regulatory deadline, it's an industry deadline. So we still have to get that awareness to be priority. We still want to make because obviously, our goal is to get, you know, not a forecast, get thousands upon thousands of onboards. So we can't do that necessarily with humans, we want to invest in automation.
Thomas Forte: I was hoping you could just fill it too.
Thomas Forte:
Speaker Change: How should we think about changes in your cost structure and how your next dollar of revenue converts into profitability.
Speaker Change: So I mean, we will continue to invest in the awareness, even though the delay with the FDA. It's no longer it's still not a regulatory deadline, it's an industry deadlines. So we still have to get that awareness to be priority.
Speaker Change: We still want to make because obviously our goal is to get you know not a forecast to get thousands upon thousands of onboard. So we can't do that necessarily with humans, we want to invest in automation. So we've done that so our goal is to flatten that over time as the awareness of the Onboarding comes in but as far.
John Merrill: So we've done So our goal is to flatten that over time as the awareness and the onboarding comes in. But as far as the variable expenses, you're only talking about commission and those direct costs for increases in revenue. So I don't believe our cost structure will change significantly. With automation, we've done a lot with only 67 employees, so that'll only get better. I don't see the staff getting lower, but if you think about once this, you know, call in the next 12 to 20 months, you'll see the expenses for onboarding through automation flatten, the advertising flatten, but again, you know, I've said $12 million to run this place.
Speaker Change: Or is the variable expenses you were only talking about commission and those direct costs for increases in revenue. So.
Speaker Change: I don't believe our cost structure will change significantly with the automation we've done a lot with only 67 employees. So that will only get better I don't see the staff getting lower but if you think about once this call in the next 12 to 20 months Youll see the expenses for Onboarding through autumn.
Speaker Change: <unk> flattened the advertising flatten, but again, you know I've said $12 million to run this place. So the rest of the accounting stuff I don't see any vast difference going forward.
John Merrill: So the rest of the accounting stuff, I don't see any vast difference going forward. Okay, so then can you remind me, you may have said in a pair of remarks, what's the contribution margin then on the incremental dollar? Right now it's $0.50. Our goal is to get it to $0.70 to $0.80. So what I'm saying is that when those expenses flatten, you're still gonna have commission and whatnot relative to the increase in revenue, but you're not gonna have the same marketing spend. You're not gonna have the same, you know, and we will have new products and services, but you will not have the same onboarding and development costs in the distant future.
Speaker Change: Okay.
Speaker Change: Okay. So then can you remind me you mentioned in her prepared remarks, what's what's the contribution margin and then on the incremental dollar of revenue.
Speaker Change: Right now it's good to remember no rate right now its 50 says our goal is to get it to 70% to 80%.
Speaker Change: What I'm, saying is is that when those expenses flat and you're still going to have commission and whatnot relative to the increase in revenue, but youre not going to have the same marketing spend you're not going to have the same.
Speaker Change: We will have new products and services, but you will not have the same onboarding and development costs. Some in the distant future call. It 12 months to 20 months.
John Merrill: Call it 12 to 20.
Speaker Change: Okay, and then can you if you reiterate or repeat your comments before on your ability to cross sell products I think we sometimes they get hyper focused on your ability to convert on the.
Thomas Forte: Okay, and then can you, if you reiterate or repeat your comments before on your ability to cross sell products, I think we, sometimes we get hyper focused on your ability to convert on that opportunity as it pertains to traceability, and things of that nature. But can you talk about the growth of the other initiatives?
Speaker Change: Opportunity as it pertains to <unk>.
Speaker Change: Traceability and things of that nature, but can you talk about the growth of the other.
Speaker Change: She lives.
Randy Fields: You want me to take that Randy you you want to do it.
John Merrill: You want me to take that, Randy, or do you want to do it? Tom didn't give us a name in front. He was, you know, he's supposed to say. Randy, would you answer this question, or are you supposed to say John? Who would you like to answer that? I'll answer it. Well, all right, so how about we both answer it? Yeah, both. Okay.
Randy Fields: Tom didn't give us a name in front he was he supposed to say.
Randy Fields: Randy would you answer. This question are you supposed to say John so.
Speaker Change: Thomas who would you like to answer that I'll answer well, how about we have some closings.
Randy Fields: Okay.
Randy Fields: Okay.
Randy Fields: So let me go.
Randy Fields: So, what we're doing- Let me go first, let me go first. So think about it, Tom, because I'll give you a 10 second answer and Randy will have more color. Think about it. If I've spent this time turning the aircraft carrier, and I'm still committed to doing that, I have all hands on deck, and the data is already with this provider, and I share the same pain points as my fellow retailers, suppliers, and wholesalers, why would I not expand? Now Randy will give you his two-minute version. Go ahead, Randy. So, our business reality is, as I mentioned, and I think we've talked about.
Randy Fields: Great.
Randy Fields: Let me go first.
Speaker Change: So think about it Tom because I'll give you a 10 second answer and Randy will have more color.
Randy Fields: Think about it if I've spent this time, turning the aircraft carrier and I'm still committed to doing that I has all hands on deck and the data is already with this provider and I share. The same pain points is my fellow retailers suppliers wholesalers why would I not expand.
Randy Fields: Mhm.
Randy Fields: Now Randy will give you his two minute version go ahead right.
Randy Fields: So our business reality is as I mentioned and I think we've talked about before.
Randy Fields: We have one platform. from which all technology. And to say that that gives us operating leverage is a grotesque understatement. It's really incredible. I don't know of any other software firm that can say that. that has a suite of applications as broad as ours, but operates from a single. So what that means to our customers is everything has the same look and feel, everything has the same comfort, we're something to our customers because of our customer service, it's quite different than other technologies. We actually like to talk. So the result of that is that we have relationships that are long and very, very deep.
Speaker Change: We have one platform from.
Speaker Change: From which all technology emanates in to say that that gives us operating leverage as a grotesque understatement, it's really incredible I don't know of any other software firm that can say that.
Speaker Change: That has a suite of applications as broad as ours, but operates from a single platform.
Speaker Change: So what that means to our customers is everything has the same look and feel.
Speaker Change: Everything has the same comfort.
Speaker Change: Where something to our customers because of our customer service, it's quite different than other technology firms, we actually like to talk to our customers. So the result of that is that we have relationships that are long and very very deep they like us and how 'bout. This our technology works it actually.
Randy Fields: They like us. And how about this? Our technology works. It actually. So the result is that as we find our customers experiencing different product that we have from a tell-me-about-it perspective. Meaning, they're experiencing a problem, they see a product that we have that may solve that problem, they want to talk to us. So we've been modestly successful historically, and I think I've been pretty frank. modestly successful at cross And now we're getting to be really, really good. So we've matured, we have people who are more specialists in their product areas, and the result is we're now seeing growth across.
Speaker Change: Works.
Speaker Change: So the result is that as.
Speaker Change: As we find our customers experiencing different products.
Speaker Change: That we have from a tell me about it perspective, meaning they're experiencing a problem. They see a product that we have that may solve that problem. They wanted to talk to us about it.
Speaker Change: So we have been modestly successful historically and I think I've been pretty Frank about that modestly successful at cross selling and now we're getting to be really really good at it. So we've matured we have people who are more specialist in their product areas and the result is we're now seeing growth across the business.
Speaker Change:
Speaker Change: I think conceptually what that means is that the deeper somebody gets into our ecosystem.
Randy Fields: I think, conceptually, what that means is that the deeper somebody gets into our ecosystem... It doesn't just produce more revenue. It gives us opportunities to find new problems which our customers are experiencing, where we can develop new products. So, I mentioned in my previous remark. We have a number of new products that we'll be bringing to market over the course of the next year or two. They're as exciting as what we're already doing.
Speaker Change: It doesn't just produce more revenue for us it gives us opportunities to find new problems with which our customers are experiencing where we can develop new products. So I mentioned in my previous remarks.
Speaker Change: We have a number of new products that will.
Speaker Change: We will be bringing to market over the course of the next year or two there as exciting as what we're already doing so.
Randy Fields: So. I think we're really well positioned.
Speaker Change: I think we're really well positioned.
Speaker Change: Alright last one is boring I apologize so I guess, what about Randy you talked about in the prepared remarks scan, but your capital allocation plans.
Thomas Forte: All right, last one's boring, I apologize. So I guess we'll go Randy.
Randy Fields: You talked about it in prepared remarks again, but your capital allocation plans, including buying back stock, and then your current thoughts on strategic M&A. It sounds like you have the ability to, as you just pointed out, work on new product efforts. So, historically, what's been your build versus buy decision making? Yeah, for the most part, because of the platform that we have, it means that acquisitions would look different for us than they might for others. Was that Well, we can build an application typically in a matter of months, seriously, months, not years, based on how robust our current And as a result, we're not terribly interested in people's technologies that we could acquire.
Speaker Change: Buying back stock.
Speaker Change: And then your current thoughts on strategic M&A. It sounds like you have the ability to.
Speaker Change: Just pointed out.
Speaker Change: Our work on new product efforts.
Speaker Change: So historically whats been your build versus buy.
Speaker Change: Decision, making process.
Speaker Change: Yeah for the most part because of the platform that we have it means that acquisitions would look different for us than they might for others, what does that mean.
Well, we can build an application typically in a matter of months seriously months not years.
Speaker Change: Just on how robust our current platform is.
Speaker Change: And as a result were not terribly interested in People's technologies that that we could acquire we're much more interested in either their domain knowledge, meaning do they do foodservice or something where we don't have as much experience or and do they have customers that wed like to acquire.
Randy Fields: We're much more interested in either their domain knowledge, meaning do they do food service or something where we don't have as much experience, or and do they have customers that we'd like to hire. So, we're pretty picky. We look at stuff, it's just the nature of this business, people bring us opportunities. We just haven't seen anything yet that's so exciting that we have to go pull. So we continue along the road of building the platform out, adding new capabilities, and we think that'll drive our revenue.
Speaker Change: So we're pretty picky.
Speaker Change: We look at stuff does it's just the nature of this business people bring us opportunities. We just haven't seen anything yet. It's so exciting that we have to go pull the trigger. So we continue along the road of building.
Speaker Change: The platform out, adding new capabilities, and we think that will drive our revenue pretty significantly over the next several years.
Speaker Change: Alright, and then buybacks is there I know you talked about being.
John Merrill: All right, and then on buybacks, I know you talked about when you expect to be done buying them back to preferred. Is there a situation where you would buy back? The basic, common, and the preferred in the same quarter. Of course. Again, we have quarterly board meetings, and it's not like we have a large board and their phone call away. So when the board determines that the use of half of that cash makes the most sense with a dividend, or obviously we've set a cadence for about $750,000 preferred per quarter, they could increase that and they could buy back the common.
Speaker Change: When do you expect to be done buying back the preferred is there a situation where you would buyback.
Speaker Change: The basic common and the preferred in the same quarter.
Speaker Change: Of course.
Speaker Change: Again, I mean, we have quarterly board meetings and you know it's not like we have a large board in and I mean their phone call away. So when the board determines that you know the use of half of that cash makes the most sense with a dividend or you know obviously, we set a cadence of about 750.
Speaker Change: Thousands dollars of preferred per.
Speaker Change: Quarter, they could increase that and they could buy back the common we have no debt.
John Merrill: We have no debt. And as Randy pointed out, as far as M&A, there's lots on our plate.
Speaker Change: And as Randy pointed out as far as M&A, you know theres lots on our plate that would be my short version to you and our platform is unique and we can build so we measure all of those things at least quarterly if not I don't know 456 times a year to see what investment in that.
John Merrill: That would be my short version to you. And our platform is unique and we can build. So we measure all of those things at least quarterly, if not, I don't know, four or five, six times a year to see what investment in that capital allocation strategy is palatable for the board at that time. I think it's something, Tom, that's not obvious that... John, our total of buybacks, etc. now is redemption. Haven't we given $25 million, some number like that? If you add up the fact of how all the shareholders have benefited through eliminating bank debt, buying back the preferred, buying back the common, increasing the dividend or putting a dividend and then increasing it twice since then, it's almost $25 million.
Speaker Change: In that capital allocation strategy.
Speaker Change: It's palatable for the board at that time.
Tom: Hi, Craig it's something Tom it's not obvious that.
John Merrill: John our total of buybacks etcetera now is.
John Merrill: Redemption, it's weighted heavily given $25 million give some number like if if if you add up the fact of how all the shareholders have benefited through eliminating bank debt buying back the preferred buying back the common increasing the dividend or putting a dividend and then increasing it twice since then it's almost $25 million.
John Merrill: Since inception.
John Merrill: Synthesis. Yeah, so for a little company that and at the moment, we still have north of 28 million of cash in the bank. So we're generating lots of cash, we're getting more and more adept at the management of that cash. And I didn't, I think that the shareholders so far like the way we're allocating capital. Some years it'll be heavier on redemption. Some years... We might put more cash on the balance sheet. Good.
John Merrill: Yeah, so for a little company debt.
John Merrill: And at the moment, we still have north of $28 million of cash in the bank. So we're generating lots of cash we're getting more and more adept at the management of that cash.
John Merrill: And I didn't I think that the shareholder so far like the way, we're allocating capital some years it'll be heavier on redemption.
John Merrill: Some years.
John Merrill: We might put more cash on the balance sheet.
John Merrill: Yeah.
John Merrill: Good.
Thomas Forte: Well, Rainey and John, thanks for taking all my questions. Thank you.
Speaker Change: Well, Randy and John Thanks for taking all my questions.
Thanks.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: Thank you.
Operator: As a reminder, if you'd like to ask a question, please press star 1 on your telephone keypad. That's star 1.
Speaker Change: Reminder, if you'd like to ask a question. Please press star one on your telephone keypad that's star one.
Guy Riegel: And our next question comes from Guy Riegel with Ingalls & Schneider. Please proceed with your question.
Speaker Change: And our next question comes from Guy Riegel with Ingalls <unk> Snyder. Please proceed with your question.
Guy Riegel: Hey, Randy Hey, John.
Guy Riegel: Hey, Randy.
John Merrill: Hey, John. You got one one for John and one for you, Randy. John, when do you all expect to, what year do you expect to become a full? taxpayers and what rate would you expect to be paying? Great, great question. We have You can do the math. It's roughly about $8 million to $9 million left in net operating losses between federal and state. So we're knocking at the door right now. I don't have an answer for you on the rate. I'm working with the tax guys right now. But there are also incentives that we can take advantage of both at the state and the federal level for R&D tax credits among lots of different tax credits.
Speaker Change: <unk> got one one for Jon and one for you Randy.
Speaker Change: John when a when do you all expect to what year do you expect to become a full <unk>.
Speaker Change: Taxpayers and what rate would you expect to be paying.
Speaker Change: Great Great question, we have.
Speaker Change: You can do the math, it's roughly about $8 million to $9 million left in net operating losses between federal and state. So we're knocking at the door right now I don't have an answer for you on the rate I'm working with the tax guys right now, but there were also incentives that we can take advantage of both the state and the federal level for R&D tax.
Speaker Change: Credits among lots of different tax credits I don't have an answer for you, but I would be guessing, but it's definitely going to be.
John Merrill: I don't have an answer for you. I would be guessing, but it's definitely going to be pretty much higher than what we're paying right now. I just don't have a good answer. I would be giving you a guessing number, but we can answer that on the next call. I'll have that information. Great.
Speaker Change: Pretty much pretty higher than what we're paying right now I just don't have a good answer I would be giving you a guessing a guessing number but we can answer that on the next call we'll have that information.
Speaker Change: Great.
Randy Fields: And then, Randy, you mentioned layering in maybe new products over the next couple of years. on your platform. Can you talk about any of those products? Well, I think if you appreciate where we are in terms of our customer, in other words, what kinds of problems do we solve? We solve compliance problems. Oh, okay. What else? We solve traceability. That's more supply chain. We do ordering, out-of-stock management, scan-based trading, etc. All of those have adjacencies. That would be interesting add-ons an example. We've mentioned we've mentioned this one If we're doing traceability, shouldn't we be doing recall management?
Speaker Change: And then Randy are you you mentioned a layering in maybe new products over the next couple of years.
Speaker Change: On your platform.
Speaker Change: Can you can you talk about any of those products.
Speaker Change: Well I think if you.
Speaker Change: Appreciate where we are in terms of our customer in other words, what kinds of problems do we solve we solve compliance problems. So okay. What else we solve traceability problems. That's more supply chain, we do ordering out of stock management scan based trading et cetera.
Speaker Change: All of those have adjacencies.
Speaker Change: It would be interesting to add ons as an example, we've mentioned we've mentioned this one.
Speaker Change: If we're doing traceability shouldn't we be doing recall management well of course.
Randy Fields: If we're doing what we now see as a way of tracking shipments and whatnot, shouldn't we get deeper into the ordering and forecasting process? Absolutely. Each one of the areas that we service has what we call these adjacencies that give us another opportunity. From an economic perspective, because it's the same platform, you have to think, wait a minute, so their development costs will remain essentially fixed. They're not going up. And they get incremental revenue. They get to use the same account management staff. So all of these adjacencies and add-ons actually come at an even higher margin than our embedded margin.
Speaker Change: If we're doing our work.
Speaker Change: What we now see as a way of tracking shipments and whatnot shouldn't we get deeper into the ordering and forecasting process absolutely.
Speaker Change: Each one of the areas that we service has what we call. These adjacencies.
Speaker Change: Give us another opportunity from an economic perspective, because it's the same platform you have to think wait a minute. So their development costs will remain essentially fixed they are not going up.
Speaker Change: And they get incremental revenue they get to use the same account management staff. So all of these adjacencies and add ons actually come at an even higher margin than our embedded margin. So.
Speaker Change: And that's as you know that's how we think it's not just about the revenue side of the equation. It's can we make money can we serve our customers solve a problem for a customer and simultaneously.
Randy Fields: And that's, as you know, that's how we think. It's not just about the revenue side of the equation. It's can we make money? Can we serve a customer, solve a problem for a customer in simultaneous? We can make more money from doing it, that's what's on the list.
Speaker Change: Make more money from doing it but that's what's on the list, but there's this is a pretty interesting.
Guy Riegel: But there's a pretty interesting series of products that we'll bring. Great. Okay. Thanks, guys. Thanks for the answers. Thank you. Thanks, guys. They got it. Thanks, guys. Thank you.
Speaker Change: Christine series of products that we'll bring to market.
Speaker Change: Great. Okay. Thanks, guys. Thanks for the answers. Thank you thanks Guy.
Speaker Change: Thanks Guy.
Speaker Change: Okay.
Speaker Change: Thank you.
Operator: And with that, there are no further questions at this time.
Speaker Change: That there are no further questions at this time I would like to turn the floor back to Randy fields for closing remarks.
Randy Fields: I'd like to turn the floor back to Randy Fields for closing remarks. Well, thank you, guys. I'm sure you can tell we're not just in good moods, but we feel very, very good about where we are. Hopefully, you're all pleased with the results we've produced and the next several years are going to even be more fun than this. So thanks for giving us your time this afternoon. Take care. Thank you.
Speaker Change: Well. Thank you guys I'm sure you can tell we're not just in good moods, but we feel very very good about where we are.
Speaker Change: Hopefully you're all pleased with the results we produced in the next several years of could even be more fun than this so thanks for giving US your time this afternoon take care.
Speaker Change: Thank you and with that this does conclude today's teleconference. We thank you for your participation you may disconnect. Your lines at this time I have a great day.
Operator: And with that, this does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time. Have a great day. © BF-WATCH TV 2021
Okay.
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