March 2004 President's letter:
To Our Valued Shareholder:
At Park City Group, focusing on the needs of customers fuels our passion for innovation. We believe innovative technology has the power to eliminate obstacles and create opportunities.
Retail businesses have significant needs when it comes to information. Making information actionable is central to a company's performance. The ability to collaborate and share ideas, to make better-informed decisions, and to understand customer buying behavior relies on effectively managing information. At the same time, reducing costs remains a priority. Our patented software helps retail customers increase their sales while reducing their inventory and labor costs; the two largest, controllable expenses in the retail industry.
Everyone has experienced long waits in the check-out stand or the lack of customer service. We all have gone to the store to purchase an item that is not in stock and has sold out. Park City Group addresses these problems.
Today, the solutions we create span the entire organization, using technology to give our customers an essential advantage especially as the business of retailing becomes increasingly competitive not only from traditional retailers, but internet retailing and Wal-Mart.
During the year, the Company's senior leadership refined our strategy for achieving growth and success in the years ahead. To help you understand our approach to the possibilities before us, we would like to share with you our business plan.
A Challenging Environment
Because Park City Group continues to make substantial investments in development to enhance the power and value of our products, we are optimistic about the Company's long-term growth opportunities. Like any business, however, we face challenges in both the near and long term. We are addressing them with a well defined plan.
Investments made in research and development in 2001, 2002, and 2003 are beginning to deliver results and driving our business forward. Our progress in the development of a new architecture and new releases of Fresh Market Manager (FMM) and ActionManager are creating positive impacts both for us and in the retail industry. To date, we have been granted numerous patents protecting our intellectual property rights, generated recurring revenues and retained a reputable and well-known customer base. In addition, we have released version 4.0 of both products.
The results are beginning to show. We expect to post a profit in the second quarter of FY2004 (ending June, 2004) exceeding our financial plan. Additionally, we anticipate meeting and exceeding our financial plan through the balance of the fiscal year.
In order to sell more products to our customers and provide new customers with very best solutions available, our business plan details several initiatives currently underway:
Expand our inventory products beyond grocery perishable departments (FMM) and into the center store (products that are non-perishable like canned goods, snacks, beverages, etc.)
Expand the distribution of our workforce products beyond selling ourselves to have partners presenting our products
Deliver best-in-class responsiveness to customers
Strengthen our product leadership
Improve our balance sheet
Ignite customer enthusiasm and continue to use marketing strategies to tell the Park City Group story
Expanding Beyond Fresh Market Manager
As fast-food providers and other Home Meal Replacement players encroach on the supermarket industry, supermarkets have been forced into a position of increasing their perishable department sales from less than 20% to more than 50% of total sales in recent years. The growth in higher margin perishables’ sales has resulted in a variety of management difficulties for retail-focused supermarkets. Supermarkets have attempted to deal with this “new world” with a variety of antiquated gross profit-based business processes, but have largely failed. Our Fresh Market Manager product addresses these problems by helping supermarket enterprises provide higher quality fresh food products in their perishable departments, increasing sales and customer service levels; accomplished by utilizing our just-in-time inventory control, forecasting and production systems.
As critical as the perishable departments are for the supermarket industry, the other half of the store, containing non-perishable items such as dry goods, breads, beverages and cereals predominately lacks updated technology and relies on manual inventory control processes; which are not an efficient task when the center store contains between 20,000 – 50,000 items. Leveraging the investments we made in Fresh Market Manager, especially those of inventory control and forecasting capabilities, we are able to develop and extend products into the center store. We will be able to provide our existing Fresh Market Manager customers and new customers with a complete store-wide inventory system, within the next few months.
Expanding Product Distribution
In January, 2004 we announced a newly formed alliance with CRS Retail Systems, Inc., of Newburgh NY, a recognized leader in software and services in the retail marketplace. With more than 100,000 in-store systems installed, CRS is considered to be a trusted leader in the retail industry.
Under the terms of the agreement, CRS Retail Systems is granted an exclusive license and additional rights to brand and resell Park City Group's patented technology for labor scheduling, forecasting, and reporting into specific retail segments. The alliance was officially unveiled at the 93rd Annual National Retail Federation Convention and EXPO in New York City in January 2004. This is an achievement of another step in our plan to increase the distribution of our workforce technologies into the retail market.
Responsiveness to Customers
Providing value to our customers means not only building great products, but also listening carefully to customer concerns, responding quickly, and being more accountable. The fact that our customers are achieving improved economic performance is the best measure of OUR performance; and we don’t intend to rest on this commitment.
We have intensified our focus on engineering excellence to help ensure that our products not only deliver more value to our customers, but also become more powerful and simple to use. We continue to enhance the capabilities of our products to deliver information that is “actionable” helping our customers make more informed decisions about their business while sharing best-practices across their organization.
In short, we are committed to doing whatever it takes to ensure that our customers are highly satisfied with our products and services.
Strengthen Product Leadership
A component of our strategy was to focus on maintaining and expanding our product leadership. From the time that we purchased the software rights from Mrs. Fields Cookies in 1993, Park City Group has had eight patents issued with five pending patents. Our intellectual property is an integral part of the application strategy and it enhances and differentiates us from many of the other solution providers in the retail industry. We have invested considerable effort and energy in developing our patents and it is essential that we protect and defend them.
As a result of these investments and our ongoing developments, we have built the most comprehensive family of labor and inventory applications available—more than 20 products directly addressing the problems retailers are facing today. We support multiple languages and have installations in all hemispheres of the world. We are expanding our product base to include new solutions based on hand-held and wireless technologies.
The market opportunities before us, in the retail industry are significant. Our financial position is improving and our cost structure lean. Our products are gaining market share and our customers are highly satisfied. We have a strong management team with extraordinary depth and insight into retail operations. We are confident that we will be able to strengthen our product leadership and emerge as a market leader.
Financial Discussion Fiscal Year 2004
We set our operating plan to focus on four primary objectives for our 2004 fiscal year:
1) Grow revenues and customers
2) Maintain strict control of expenses
3) Operate a cash-positive business
4) Improve the balance sheet
I am pleased to report that even under continuingly difficult market conditions—Park City Group is meeting and exceeding plan. We posted a profit in the second quarter of FY2004. We have redoubled our efforts this year to control expenses, but not at the expense of our long term business prospects. Finally, as we begin to operate a healthy business, we anticipate the ability to improve our balance sheet this year by paying down debt. When evaluating our balance sheet, it is important to remember that our primary debt holders are predominantly composed of directors and major shareholders of the Company.
Commitment to Shareholders
We will continue to focus attention on increasing visibility of the Company to potential and existing investors through our investor relations programs and we will make every effort to improve and strengthen shareholder value.
The Path Forward
We believe our plan puts us on a sure path to achieve our goals. All of our actions are aimed at putting the customer first. Doing so, we believe, is critical to our continued success. Going forward, we will remain focused on the fundamentals. Generate cash. Strengthen the balance sheet. Maintain customer satisfaction. Extend product leadership and market share.
Making technology easier and better for customers was our inspiration 15 years ago when Mrs. Fields first rolled out computers to all of its stores. We called it Retail Operations Intelligence, and it helped revolutionize retailing. Today, we are developing products that will again transform how retailers do their business. We are totally focused on our mission of enabling businesses to realize their full potential. Our innovation not only drives our competitive advantage but also our customers’ success in the market.
We appreciate your support and offer you the opportunity to contact me at any time to discuss our plans or receive your suggestions. We are committed to working hard to earn your confidence in Park City Group.
Sincerely,
Randy Fields
CEO and Chairman
Park City Group, Inc.
randy@parkcitygroup.com
435.649.2221
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