Greetings, and welcome to Park City Group fiscal second quarter 2022 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Rob Fink, with FNK IR. Mr. Fink, you may begin.
Thank you, operator, and good afternoon, everyone. Thank you for joining us today for Park City Group's fiscal second earnings conference call. Hosting the call today are Randy Fields, Park City Group's 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 Securities Litigation Reform Act of 1995. Forward-looking statements are statements that are not subject to historical facts. Such forward-looking statements are based on current beliefs and expectations. Park City Group management are subject to risks and uncertainties, which could cause actual results to differ materially from those forward-looking statements. Such risks are fully disclosed in the company's filing with the Securities and Exchange Commission. The information set forth herein should be considered in light of such risks.
Park City Group does not assume any obligation to update information contained in this conference call. Shortly after the market closed today, the company issued a press release overviewing its financial results that will be discussed on today's call. Investors can visit the investor relations section of the company's website at parkcitygroup.com to access this press release. With that said, I'd now like to turn the call over to John Merrill. John, the call is yours.
Thanks, Rob, and good afternoon, everyone. The December quarter marked the completion of our three-year transition to a SaaS company. Essentially all of our revenue in the quarter, 99%, was sold on a subscription basis. Hence now all of our revenue is recurring. To put this in perspective, in 2018, only 64% of our revenue was recurring. Marketplace revenue was volatile and highly unpredictable, and we sold software licenses and other lumpy one-time services. This made it very challenging for us and our investors to predict quarter-to-quarter revenue and provide any actionable line of sight to our profitability. In 2019, our goal was to convert non-recurring revenue to SaaS while simultaneously reducing cash expenses, making our business much easier to forecast and more profitable. We have achieved that. It was a bold goal. It was difficult. It was methodical.
We heavily invested in technology and process. We have a superior team, just 64 people, and we utilized our own technology, replacing third-party CRM providers, antiquated contract storage partners, scrutinizing and eliminating waste, and streamlining every process from contract to cash. Nonetheless, as I have said before, from time to time, there will always be a customer that insists on buying, meaning license, versus renting, meaning SaaS subscription. However, that occurrence should be few and far between, and we have structured our sales process and pricing models to encourage the sale of SaaS solutions wherever possible. Going forward, our current baseline recurring revenue, together with our stated goal to grow recurring revenue at approximately 10%-20% annually, should serve as a model for predictable top-line growth for us and our shareholders.
It should be noted that consolidated revenue in the quarter reflects the absence of $1 million in non-recurring marketplace revenue and sunsetting vendor-based pricing, which accounted for approximately $650,000 annually in revenue and $200,000 in the quarter. Eliminating one-time revenue and ancillary efforts enables us to reallocate and realign resources to prepare for one of the largest opportunities in the company's history, providing our customers a cost-effective solution for the anticipated FDA's food traceability mandate. Please note that despite our recurring revenue achievements, we will commonly experience volatility on a quarter-to-quarter basis. We have seasonal vendors. There is constant consolidation in the grocery industry we serve. Consequently, some quarters will be higher and some quarters lower. In any event, we maintain our goal to grow our recurring revenue at 10%-20% annually.
In addition to growth in recurring revenue, we continue to reduce our cash operating expenses. Total operating expenses decreased 29% year-over-year, partly due to lower cost of goods sold associated with one-time marketplace sales, but largely due to continued expense management and permanent expense reductions in our SG&A and R&D lines, which we have previously communicated. The net result is systemic profitability. As I have said before, each incremental revenue dollar over our $11 million-$12 million in fixed cash costs, now $11 million, largely falls to the bottom line. You can see that in our revenue per employee, $305,000 each, 84% higher than the industry average.
You can see that in the cash we are generating, $3.1 million in the first six months of this fiscal year and $2 million in the second fiscal quarter alone. This validates the leverage in the model. In other words, our cash and profitability grow substantially faster than revenue. Our net income, excluding the one-time benefit from the forgiveness of our PPP loan in the prior year's second quarter, increased 66% on a decrease in consolidated revenue. The earnings power of the company is now clear and easy to model. As we grow our top line, we should grow our bottom line even faster. Highlights as of December 31 are as follows. Total revenue decreased 16% to $4.4 million due to lower marketplace revenue and sunsetting of ancillary products.
This was the plan. Recurring revenue for our SaaS business, which includes compliance and supply chain, was up 7% to $4.3 million for the quarter, and 9% year-to-date. Recurring revenue now represents 99% of total revenue. Total expenses decreased 29% due to lower across-the-board costs. Operating income surged 148%. Net income, excluding the non-recurring $1.1 million gain on the forgiveness of our PPP loan, increased 66%. Our net income for the quarter was $872,000 or $0.04 per diluted share. Cash from operations was nearly $2 million. We bought back over 244,000 shares of stock, and we ended the quarter with $21.7 million in cash in the bank. Park City Group is now a SaaS company.
The transactional revenue, which created volatility in our quarter-to-quarter revenue and a drag on our margins, has now shifted to a SaaS model. To summarize, we have a combination of proven solutions that enables customers to be compliant, provide more actionable visibility into their supply chain, replace vendors, and source hard-to-find items now all on a subscription basis. Turning to the quarterly numbers. Fiscal year 2022 second quarter revenue was $4.4 million, down 16% from $5.2 million in the same quarter last year. The decrease was due to $1.2 million lower revenue as part of our strategic plan, as I've already discussed. Recurring revenue as a percentage of total revenue was 99% for the quarter, or $4.3 million. This is a 7% increase over the same period in fiscal 2021.
Total operating expenses decreased 29% from $4.8 million in Q2 2021 to $3.4 million in Q2 2022. Decrease is due to lower across-the-board costs. Sales and marketing expenses decreased from $1.2 million in Q2 2021 to $1.15 million in Q2 2022. This decrease was the result of lower sales travel, trade shows, and cost reductions. G&A costs were essentially flat at $1.2 million. In the second quarter of fiscal 2022, GAAP net income was $872,000, or 20% of revenue, versus $1.6 million last year, which included the $1.1 million benefit for the forgiveness of our PPP loan.
Excluding this gain, net income in the second quarter last year was $524 thousand, or 10% of revenue. For the second quarter in a row, we've essentially doubled our net margin. Net income to common shareholders was $725 thousand or $0.04 per common share versus $1.5 million or $0.08 per common share. Again, the prior year quarter includes the impact of the PPP loan forgiveness. Turning to the six-month numbers. Fiscal year 2022 year-to-date revenue was $8.9 million, down 14% from $10.4 million in the same period last year. Recurring revenue as a percentage of total revenue was 98% for the six months, or $8.7 million. This is a 9% increase over the same period in fiscal 2021.
Total operating expenses decreased 28% from $9.4 million to $6.8 million for the first six months of fiscal 2022. Sales marketing expenses decreased from $2.4 million in 2021 to $2.3 million in fiscal 2022. Again, G&A costs were essentially flat at $2.3 million. Year-to-date GAAP net income was $1.82 million, or 20% of revenue, versus $2.18 million inclusive of the $1.1 million gain on the forgiveness of our PPP loan. Excluding this, net income in the second quarter last year was $1.1 million, or 11% of revenue. Again, for the second quarter in a row, we have essentially doubled our net margin.
Year-to-date GAAP net income to common shareholders was $1.53 million or $0.08 per common share versus $1.88 million or $0.10 per common share last year, which again includes the impact of the PPP loan forgiveness. Turning now to cash flow and cash balances. For the fiscal second quarter, we generated cash from operations of $2 million. Total cash at December 31, 2021 was $21.7 million compared to $24 million at the end of fiscal year 2021. The decrease in total cash was due to the payoff of a $6 million credit facility with a bank during the first quarter. The company now carries approximately $930,000 in short-term debt on its revolving line of credit. The short-term debt was used to buy back additional shares of stock.
During the quarter, we repurchased 244,552 shares at an average price of $5.85 per share, for a total of $1.43 million. To date, the company has repurchased 1,002,914 shares at an average price of $5.06 per share for a total of $5.7 million. The company has approximately $10.5 million remaining on the $12 million buyback authorization. Thanks, everyone, for your time today. At this point, I'll pass the call over to Randy. Randy?
Thanks, John. As John pointed out, we achieved the non-trivial task of converting basically all of our revenue to recurring revenue. We did this without sacrificing our profitability during that transition. In fact, we've meaningfully increased our profitability and our cash generation. We've always believed that cash is king. During uncertain times, we think profitability and cash generation are even more important. Recurring revenue grew 7% in the quarter, nearly 9% for the first 6 months of the year, and we expect it to grow at least 10% for the full year. Since we made the strategic decision to convert one-time revenue into a recurring revenue model wherever possible, enabling us to focus on our SaaS revenue, our growth rate for recurring revenue has been around 15%. That's exactly the midpoint of the range that we're targeting long term.
It's important to recognize that our growth rate in the quarter reflects several strategic decisions. In the year-ago quarter, one-time low-margin marketplace revenue was about $1 million. In fact, you can already see that we're making progress in our quarterly margins. Secondly, it reflects the strategic decision to sunset certain services that, although they were substantial in terms of current revenue, had less long-term growth potential and frankly were distractions to the more exciting areas of opportunity for us. The impact is about $700,000 this year, about 4% of our total. By exiting this product, we sacrifice a small amount of quarterly revenue, but we free up resources for the much larger opportunity coming down the pike, traceability. We have continued preparing for the company's track and trace initiative.
This is going to be a significant opportunity for us, uniquely in my opinion, for us, and the FDA mandates will effectively do much of the marketing for us. The proposed Rule 204 imposes burdensome new requirements for those who manufacture, process, pack, or hold the products on what's called the Food Traceability List. There's about 16 categories of items on this list from the FDA, such as eggs, soft cheese, herbs, leafy greens, et cetera. Please note, the FDA has specifically said that paper-based systems are no longer sufficient. They are mandating truly an electronic solution. Our niche in traceability is important and will augment what many others in this field are doing. We believe we'll play a very important role in the industry's move to solving the problem of end-to-end traceability.
Traceability requires massive micro execution, the ability to process and handle literally tens of billions of transactions per year and do it at the same time accurately, quickly, electronically, and in a fully automated fashion. Since we already do track and trace successfully, affordably, and at scale as part of our supply chain platform, this opportunity is squarely in our wheelhouse. Park City Group has more than a decade of addressing compliance and supply chain challenges. Accordingly, we are the obvious vendor to address it. In a sense, traceability is a marriage of compliance and supply chain. It's like this challenge, in fact, was actually designed for us. Importantly, as we prepare our traceability solution, we're leveraging our experience in the industry, our relationships with our retail and supplier customers, and the lessons we've learned in rolling out compliance and supply chain solutions at scale across the industry.
Our business model for traceability is incredibly simple. Make it very low cost and exceptionally easy to adopt. We know that simplicity and low cost are the keys in this industry for adoption, and we know that we can generate meaningful revenue and profitability even at a low monthly subscription rate. We already have the systems in place, so no major development is needed. That's key. Any new entrants into the marketplace can't match that advantage. Think about it, a proven scale and already connected to a vast network of suppliers and retailers. Has always been the case, we're focused on our customers and what they need. We know them, and they know and trust us. We're up to the challenge. In reality, these mandates will just expand the scope and increase the importance of adoption. It won't be optional anymore.
To put this in context, given our existing 25,000-plus customer base, we've identified something in the order of 6,000 suppliers whose products may be initially affected by Rule 204. Even at a modest subscription rate, this opportunity will be a substantial add-on to our current $20 million a year of SaaS revenue. The size of this, the compressed timeline, the mandates that are being created, and the massive impact on our customers and their suppliers requires us to pull all hands on deck to perfect the rollout of our solution now. This validates our decision to de-emphasize certain non-core offerings. We aren't, however, expecting meaningful revenue from traceability in this fiscal year. The regulations will be finalized by November, and that will be the starting gun.
In fact, none of our internal models require any contribution from traceability to achieve our goals of 10%-20% a year revenue growth. This is the year we do the hard work without any traceability revenue. This is the year we do everything we need to be fully ready to be able to implement this at scale with our customers, and it's important for us, therefore, to be organized around their needs. The FDA's timeline makes this a top priority for us and even more so for our customers. We've been doing a series of tests that we've mentioned with our customers, and no surprise, obviously, it's all going very well, exactly as we planned. Simultaneously, we're continuing the cross-selling activities that we've mentioned on prior calls. We've had several successes this quarter. Our largest user of out-of-stock management recently expanded their agreement with us.
Our out-of-stock solution is increasingly contributing to our core SaaS revenue, and it provides a valuable service for our customers in a world increasingly dominated by Amazon. Our tier two program is growing quite rapidly in terms of numbers and revenue, and most importantly, seriously, our execution continues to be something that as shareholders, we can all be proud of. Interestingly, most of our largest customers are growing the use of our services quite rapidly. That certainly speaks volumes about how well our team is delivering on our brand promise. When traceability becomes a reality, it will be our largest customers who roll out traceability first. Our long-term relationships and our laser focus on keeping our customers delighted and successful is perhaps our most durable competitive moat. We have a fortress balance sheet. Seriously.
We are structurally profitable with growing recurring revenue that significantly exceeds our cash operating expenses and the leverage that's inherent in the model that enables us to grow profitably and cash faster than revenue. We have made and continue to make significant investments in our own internal technology and systems. Our proprietary tech has massively increased the measurable productivity of our team. That's why our revenue per employee is so high. In fact, that number should continue to climb over time. Our method of continually examining costs and automating administration across the business is actually a very important competitive advantage for us. Our aim is to continue to grow our GAAP earnings at a very rapid rate. We recognize that our conservative nature makes understanding us a little bit harder, but we're in an environment where conservatism, we believe, is and will be rewarded.
Our company should now be much easier to understand and much more likely to be appreciated. Every product area of our business is growing. Our pipeline of prospective new business is excellent, and we're attracting a very high caliber of new staff. We are accelerating our revenue and expect to see continued improvement over the next several quarters. To reiterate, our key goals for this fiscal year are, one, be ready for the track and trace solution before the mandate. Two, continue to add modules to our existing applications. This gives us an even broader portfolio of solutions that we can sell to our customers. In fact, even the traceability product already has a roadmap to additional modules or add-ons in our plan. Our focus is simple, continue to generate additional profitability, drive cash, and buy back stock. We've achieved a lot in the last year.
We've done it amidst an obviously difficult global pandemic and deep supply chain disruptions. I'm incredibly proud of the team and how we've navigated this transition to a full SaaS model and at the same time maintaining very high levels of customer success and satisfaction and at the same time, our own growth and profitability. Given our opportunities, I'm very optimistic for fiscal 2022, and I believe you should be too. With that, I'd like to now open the call for questions. Operator.
Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Our first question comes from the line of Tom Forte with D.A. Davidson. Please proceed with your question.
Great. Randy and John, thanks for taking my questions. Congrats on the quarter. I'll go one at a time to make it easy. First one is the one I'm consistently asking. Randy and John, can you talk about the state of distraction for your core customer, given the current challenges today? I think, Randy, you had talked about intra-quarter the notion that a lot of the food retailers were challenged with Omicron, from a labor shortage standpoint, but is that affecting at all your sales cycle?
The answer really was contained in the statement that I made that all of our products now seem to be coming alive. Our pipeline is superb. The labor issues remain. People still need more staff than they have, and that affects the entire supply chain. Most food retailers still have a lot of focus on supply chain. There's a tiny bit of evidence that it's beginning to free up a bit, but fortunately, I think the worst is behind us.
Second question is, you talked about the pivot to recurring revenue. From an expense standpoint, if you're successful in exploiting the opportunity on traceability, how would that affect, if at all, your operating expenses?
Well, I think John and I are of the belief that, and I think the way he stated it, I certainly agree with, that from here forward, 80%+ of our additional revenue will become cash and income. We expect that, there's some variable expenses with what we'll be doing, but not substantial. It will not impact our margins negatively. How's that?
All right. Third and final, from a capital allocation standpoint, how should we think about buybacks? How should we think about potential M&A? I know you've talked a lot about using your free cash flow to buy back more shares. Are there opportunities to add products to complement what you have today or any other potential uses of capital?
John, you want to take that?
Yeah. I think we've said it on previous calls that the cash that we generate quarterly, we would take half of that cash and buy back additional shares of stock, put the rest of it in the bank. That may change from quarter to quarter, but looking back, that is our goal, to take half the cash and buy back stock. As far as the traceability or other initiatives, I don't see more headcount. As Randy pointed out, it doesn't require more development. We're already doing traceability. I think last quarter we talked about expenses going down. You had asked were they permanent? The answer is yes. In my statement, you know, we had always said it takes $12 million, you know, to keep the company alive. I think we've now reduced that down to $11 million.
That is permanent. I don't see that changing going forward with traceability. As far as M&A, you know, we're always acquisitive, but with revenue multiples right now, I don't see anything that makes sense. We have plenty on our plate, let's put it that way, without M&A.
Excellent. Thanks for taking my questions.
We have reached the end of the question and answer session. I'll now turn the call back over to Randy for closing remarks.
Okey-doke. Thank you. We appreciate everybody taking time this afternoon. I think the only question that wasn't raised is the likelihood of the traceability initiative coming to fruition with a government mandate. Perhaps we should have explained in our commentary. We see no way that the government can exit the road that it's on. It's laid down a proposed rule. We're sure there'll be some tweaking around the edges, but traceability is going to happen. We actually think that we've developed a way to help the industry use traceability to its economic advantage rather than disadvantage. We're finding the market even more receptive to what we're doing than we originally had guessed. Full speed ahead. Thanks everybody for taking time this afternoon. We'll talk to you all next quarter. Thank you.
This concludes today's conference, and you may disconnect your lines at this time.