Financial Data and Key Metrics Changes - Total revenues for Q2 2023 were $100.5 million, an increase of 18.2% compared to Q2 2022, driven by growth in both restaurant retail and government segments [67] - Net loss for Q2 2023 was $19.7 million, or $0.72 loss per share, compared to a net loss of $18.8 million, or $0.70 loss per share in Q2 2022 [9] - Adjusted EBITDA for Q2 2023 was a loss of $9.9 million, compared to an adjusted EBITDA loss of $5.8 million for the same period in 2022 [51] - Cash used in operating activities was $12.8 million for the six months ended June 30, compared to $31.6 million for the prior year [73] Business Line Data and Key Metrics Changes - Subscription services revenue was reported at $30.4 million, an increase of 31.2% from $23.2 million in the prior year, driven by a 21% increase in active sites and a 19% increase in average revenue per site [68] - Operator Solutions ARR grew 38.4% to $50 million in Q2 compared to the same period last year, with 115 new stores added [17] - Professional services revenue was reported at $12.8 million, a slight increase of 1.1% from the prior year [69] - Government contract revenue was $31 million, an increase of 48.2% from $20.9 million in Q2 2022, driven by growth in ISR Solutions product line [5] Market Data and Key Metrics Changes - Contracted annual recurring revenue ended the quarter at $140.2 million, a 7% sequential increase from Q1 [40] - Active store count increased by 13% year-over-year, with over 7,200 active stores reported [20][47] - Government contract backlog as of June 30, 2023, was $297 million, a 61% increase compared to $184.5 million a year earlier [53] Company Strategy and Development Direction - The company is focused on delivering scalability and innovation, with significant investments in infrastructure to support growth in its product offerings [3][46] - There is a strong emphasis on integrating technology into operational expenditures, positioning the company to capture market share as restaurants seek to streamline operations [39] - The company plans to maintain flat operating expenses while pursuing growth opportunities, particularly in the U.S. market [76] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the growth trajectory, citing a strong pipeline and momentum heading into the second half of the year [66] - The company anticipates returning to historical gross margin levels in the low seventies as investments in new products begin to pay off [63][109] - Management acknowledged challenges in scaling infrastructure to meet increased usage but remains optimistic about future profitability [44][108] Other Important Information - The company reported lower than normal adjusted gross margins for subscription services at 61% for the quarter, impacted by one-time customer credits [24] - Cash used in investing activities was $6.2 million for the six months ended June 30, with significant capital expenditures for software and technology development [33] - The company was recognized as a Top Workplace in 2023 for the technology industry, reflecting its commitment to employee satisfaction [60] Q&A Session Summary Question: What drove the growth in Operator Solutions? - The growth was driven by a continued addition of sites and an increase in average revenue per user (ARPU) due to the attachment of payments [78] Question: How should gross margins be expected to trend in the back half of the year? - Management expects to recover some gross margins in the next quarters as one-time expenses normalize and investments in MENU and PAR payments begin to yield results [80][82] Question: Can you provide an update on the Punchh business and its activations? - Punchh has seen a fourfold increase in usage over the past year, with a strong pipeline for Q3 and Q4, although some churn was expected [104][112] Question: What is the company's approach to international markets following the acquisition of MENU? - The company has decided to focus on the U.S. market for now, with plans to eventually revisit international opportunities once the domestic customer base is established [117] Question: How does the company view potential M&A opportunities? - The company is actively exploring M&A opportunities that can enhance its product suite and create synergies, particularly in the restaurant technology space [128][152]

[PART I FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) [Forward-Looking Statements](index=4&type=section&id=Forward-Looking%20Statements) This section outlines forward-looking statements, emphasizing their predictive nature for future operations and financial condition, subject to risks - Forward-looking statements are **predictive** of PAR's future operations, financial condition, financial results, business strategies and prospects, but are **not historical** in nature[7](index=7&type=chunk) - Actual results could **differ materially** due to risks and uncertainties, many beyond PAR's control, including impacts from COVID-19, acquisitions, supply constraints, macroeconomic trends, and geopolitical events[7](index=7&type=chunk) - PAR undertakes no obligation to update or revise publicly any forward-looking statements, except as required under applicable securities law[7](index=7&type=chunk) [Item 1. Financial Statements (unaudited)](index=5&type=section&id=Item%201.%20Financial%20Statements%20%28unaudited%29) This section presents PAR Technology Corporation's unaudited condensed consolidated financial statements [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20at%20June%2030%2C%202023%20and%20December%2031%2C%202022) This section provides a snapshot of the company's financial position, detailing assets, liabilities, and shareholders' equity at specific dates (in thousands) | (in thousands) | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Assets:** | | | | Cash and cash equivalents | **$44,162** | **$70,328** | | Total current assets | **$192,780** | **$223,949** | | Total assets | **$816,482** | **$854,858** | | **Liabilities and Shareholders' Equity:** | | | | Total current liabilities | **$83,501** | **$67,824** | | Long-term debt | **$376,657** | **$389,192** | | Total liabilities | **$474,266** | **$479,664** | | Total shareholders' equity | **$342,216** | **$375,194** | | Total Liabilities and Shareholders' Equity | **$816,482** | **$854,858** | - **Total assets decreased** from **$854.9 million** at December 31, 2022, to **$816.5 million** at June 30, 2023, primarily due to a decrease in cash and cash equivalents and inventories[10](index=10&type=chunk) - **Total shareholders' equity decreased** from **$375.2 million** at December 31, 2022, to **$342.2 million** at June 30, 2023[10](index=10&type=chunk) [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20for%20the%20Three%20and%20Six%20Months%20Ended%20June%2030%2C%202023%20and%20June%2030%2C%202022) This section details the company's financial performance over periods, including revenues, costs, gross margin, and net loss (in thousands, except per share amounts) | (in thousands, except per share amounts) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Total revenues, net | **$100,544** | **$85,093** | **$200,981** | **$165,378** | | Total cost of sales | **$80,014** | **$63,972** | **$157,258** | **$123,644** | | Gross margin | **$20,530** | **$21,121** | **$43,723** | **$41,734** | | Operating loss | **$(17,653)** | **$(16,099)** | **$(31,517)** | **$(28,908)** | | Net loss | **$(19,702)** | **$(18,848)** | **$(35,607)** | **$(34,498)** | | Net loss per share (basic and diluted) | **$(0.72)** | **$(0.70)** | **$(1.30)** | **$(1.27)** | - **Total revenues increased by 18.2%** for the three months ended June 30, 2023, and by **21.5%** for the six months ended June 30, 2023, compared to the respective prior year periods[12](index=12&type=chunk) - **Net loss increased** for both the three-month and six-month periods ended June 30, 2023, compared to the prior year, reaching **$(19.7) million** and **$(35.6) million**, respectively[12](index=12&type=chunk) [Condensed Consolidated Statements of Comprehensive Loss](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss%20for%20the%20Three%20and%20Six%20Months%20Ended%20June%2030%2C%202023%20and%20June%2030%2C%202022) This section presents the company's comprehensive loss, including net loss and other comprehensive income or loss items (in thousands) | (in thousands) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Net loss | **$(19,702)** | **$(18,848)** | **$(35,607)** | **$(34,498)** | | Foreign currency translation adjustments | **$(1,517)** | **$(161)** | **$(1,559)** | **$351** | | Comprehensive loss | **$(21,219)** | **$(19,009)** | **$(37,166)** | **$(34,147)** | - **Comprehensive loss** for the three months ended June 30, 2023, was **$(21.2) million**, an **increase** from $(19.0) million in the prior year, primarily due to higher foreign currency translation adjustments[14](index=14&type=chunk) - For the six months ended June 30, 2023, **comprehensive loss** was **$(37.2) million**, compared to $(34.1) million in the prior year, also impacted by negative foreign currency translation adjustments[14](index=14&type=chunk) [Condensed Consolidated Statements of Changes in Shareholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Shareholders%27%20Equity%20for%20the%20Six%20Months%20Ended%20June%2030%2C%202023%20and%20June%2030%2C%202022) This section outlines changes in the company's shareholders' equity, reflecting impacts from net loss, stock-based compensation, and other adjustments (in thousands) | (in thousands) | Balances at December 31, 2022 | Balances at June 30, 2023 | | :--- | :--- | :--- | | Common Stock | **$570** | **$572** | | Additional Paid in Capital | **$595,286** | **$602,155** | | Accumulated Deficit | **$(205,204)** | **$(240,811)** | | Accumulated Other Comprehensive Loss | **$(1,365)** | **$(2,924)** | | Treasury Stock | **$(14,093)** | **$(16,776)** | | Total Shareholders' Equity | **$375,194** | **$342,216** | - **Total shareholders' equity decreased by $32.9 million** from December 31, 2022, to June 30, 2023, primarily due to net loss and foreign currency translation adjustments, partially offset by stock-based compensation[16](index=16&type=chunk) - **Accumulated deficit increased** from **$(205.2) million** at December 31, 2022, to **$(240.8) million** at June 30, 2023, reflecting the net loss incurred during the period[16](index=16&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20for%20the%20Six%20Months%20Ended%20June%2030%2C%202023%20and%20June%2030%2C%202022) This section details the company's cash inflows and outflows from operating, investing, and financing activities (in thousands) | (in thousands) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | **$(12,795)** | **$(31,589)** | | Net cash used in investing activities | **$(6,165)** | **$(4,963)** | | Net cash used in financing activities | **$(2,481)** | **$(1,778)** | | Net decrease in cash and cash equivalents and cash held on behalf of customers | **$(24,347)** | **$(37,819)** | | Cash and cash equivalents and cash held on behalf of customers at end of period | **$53,186** | **$150,600** | - **Net cash used in operating activities significantly decreased to $(12.8) million** for the six months ended June 30, 2023, from $(31.6) million in the prior year, driven by a reduction in net working capital requirements and improved inventory management[21](index=21&type=chunk)[158](index=158&type=chunk) - **Cash and cash equivalents and cash held on behalf of customers decreased to $53.2 million** at June 30, 2023, from $150.6 million at June 30, 2022[21](index=21&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20%28unaudited%29) This section provides detailed explanations and disclosures for the condensed consolidated financial statements [Note 1 — Summary of Significant Accounting Policies](index=12&type=section&id=Note%201%20%E2%80%94%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines the company's key accounting principles and policies, including segment reporting and revenue recognition changes - PAR Technology Corporation operates in two segments: **Restaurant/Retail** (providing technology platforms like Punchh, MENU, Brink POS, PAR Pay, Data Central) and **Government** (providing technical expertise and software solutions for DoD and federal agencies)[24](index=24&type=chunk) - The company retroactively split 'Service' revenue into '**Subscription Service**' and '**Professional Service**' and changed 'Product' to '**Hardware**' for clearer insight into revenue streams[26](index=26&type=chunk) - A **$7.5 million adjustment** was recorded for the six months ended June 30, 2023, to decrease the fair value of the contingent consideration liability related to the MENU Acquisition[30](index=30&type=chunk) Cash and Cash Equivalents and Cash Held on Behalf of Customers (in thousands) | Item | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Cash | **$11,477** | **$18,856** | | Money market funds | **$32,685** | **$51,472** | | Cash held on behalf of customers | **$9,024** | **$7,205** | | Total | **$53,186** | **$77,533** | [Note 2 — Revenue Recognition](index=16&type=section&id=Note%202%20%E2%80%94%20Revenue%20Recognition) This note details the company's revenue recognition policies, including disaggregated revenue and performance obligations Performance Obligations Outstanding (in thousands) | Segment | June 30, 2023 (Current under one year) | June 30, 2023 (Non-current over one year) | December 31, 2022 (Current under one year) | December 31, 2022 (Non-current over one year) | | :--- | :--- | :--- | :--- | :--- | | Restaurant/Retail | **$9,795** | **$4,359** | **$8,459** | **$5,125** | | Government | — | — | — | — | | Total | **$9,795** | **$4,359** | **$8,459** | **$5,125** | - **Deferred revenue** for subscription and professional services **increased from $13.6 million** at January 1, 2023, to **$14.2 million** at June 30, 2023[42](index=42&type=chunk) - The Government segment's existing contracts at June 30, 2023, had a value of approximately **$297.0 million**, with **$96.6 million funded**, expected to be recognized over time[45](index=45&type=chunk) Disaggregated Revenue for Three Months Ended June 30, 2023 (in thousands) | Product Line | Restaurant/Retail (point in time) | Restaurant/Retail (over time) | Government (point in time) | Government (over time) | | :--- | :--- | :--- | :--- | :--- | | Hardware | **$26,390** | — | — | — | | Subscription service | — | **$30,372** | — | — | | Professional service | **$5,709** | **$7,058** | — | — | | Mission systems | — | — | — | **$9,218** | | ISR solutions | — | — | — | **$21,510** | | Commercial software | — | — | **$129** | **$158** | | Total | **$32,099** | **$37,430** | **$129** | **$30,886** | [Note 3 — Acquisitions](index=18&type=section&id=Note%203%20%E2%80%94%20Acquisitions) This note provides details on recent acquisitions, including purchase price allocation and goodwill - On July 25, 2022, ParTech, Inc. acquired MENU Technologies AG for approximately **$18.4 million in cash** and **$6.3 million in common stock**, with an additional earn-out opportunity[49](index=49&type=chunk) - The final purchase price allocation for the MENU acquisition included **$28.5 million in goodwill** and **$10.7 million in developed technology**[52](index=52&type=chunk) [Note 4 — Accounts receivable, net](index=19&type=section&id=Note%204%20%E2%80%94%20Accounts%20receivable%2C%20net) This note presents the breakdown of accounts receivable by segment and related credit loss allowances Accounts Receivable, Net (in thousands) | Segment | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Government segment | **$16,521** | **$17,320** | | Restaurant/Retail segment | **$46,373** | **$42,640** | | Total | **$62,894** | **$59,960** | - **Current expected credit loss** for the Restaurant/Retail segment **increased to $2.3 million** at June 30, 2023, from $2.1 million at December 31, 2022[56](index=56&type=chunk) [Note 5 — Inventories, net](index=19&type=section&id=Note%205%20%E2%80%94%20Inventories%2C%20net) This note details the composition of inventories, including finished goods, work in process, and component parts Inventories, Net (in thousands) | Component | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Finished goods | **$16,084** | **$21,998** | | Work in process | **$166** | **$383** | | Component parts | **$9,193** | **$13,749** | | Service parts | **$1,069** | **$1,464** | | Total | **$26,512** | **$37,594** | - **Inventories, net, decreased from $37.6 million** at December 31, 2022, to **$26.5 million** at June 30, 2023, with excess and obsolescence reserves at **$11.2 million**[58](index=58&type=chunk) [Note 6 — Identifiable Intangible Assets and Goodwill](index=20&type=section&id=Note%206%20%E2%80%94%20Identifiable%20Intangible%20Assets%20and%20Goodwill) This note provides a breakdown of identifiable intangible assets and goodwill by segment, including amortization Identifiable Intangible Assets (in thousands) | Asset Type | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Acquired developed technology | **$119,800** | **$119,800** | | Internally developed software costs | **$34,595** | **$32,274** | | Customer relationships | **$12,360** | **$12,360** | | Trademarks, trade names (non-amortizable) | **$6,200** | **$6,200** | | Less: accumulated amortization | **$(75,823)** | **$(63,386)** | | Total identifiable intangible assets, net | **$101,635** | **$111,097** | - **Goodwill** for the Restaurant/Retail segment was **$486.9 million** at June 30, 2023, and for the Government segment was **$0.7 million**[74](index=74&type=chunk) - **Total identifiable intangible assets, net, decreased from $111.1 million** at December 31, 2022, to **$101.6 million** at June 30, 2023, primarily due to amortization[59](index=59&type=chunk) [Note 7 — Debt](index=21&type=section&id=Note%207%20%E2%80%94%20Debt) This note details the company's debt structure, including convertible senior notes and future principal payments Convertible Senior Notes (in thousands) as of June 30, 2023 | Note Type | Principal Amount Outstanding | Unamortized Debt Issuance Cost | Total Long-Term Portion | | :--- | :--- | :--- | :--- | | 2024 Notes | **$13,750** | **$(161)** | **$13,589** | | 2026 Notes | **$120,000** | **$(2,167)** | **$117,833** | | 2027 Notes | **$265,000** | **$(6,176)** | **$258,824** | | Total | **$398,750** | **$(8,504)** | **$390,246** | Interest Expense on Senior Notes (in thousands) | Type | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Contractual interest expense | **$2,011** | **$2,011** | **$4,005** | **$4,014** | | Accretion of debt in interest expense | **$531** | **$495** | **$1,053** | **$981** | | Total interest expense | **$2,542** | **$2,506** | **$5,058** | **$4,995** | - Future principal payments for the **Senior Notes** include **$13.75 million due in 2024**, **$120.0 million in 2026**, and **$265.0 million in 2027**[62](index=62&type=chunk) [Note 8 — Stock-Based Compensation](index=22&type=section&id=Note%208%20%E2%80%94%20Stock-Based%20Compensation) This note outlines stock-based compensation expense and unrecognized compensation related to equity awards - **Stock-based compensation expense** was **$3.6 million** for the three months ended June 30, 2023, and **$6.7 million** for the six months ended June 30, 2023[63](index=63&type=chunk) - **Unrecognized compensation expense** related to unvested equity awards totaled **$29.0 million** at June 30, 2023, expected to be recognized through 2026[64](index=64&type=chunk) Stock Option and Restricted Stock Unit Activity (in thousands) | Item | Outstanding at Jan 1, 2023 | Outstanding at June 30, 2023 | | :--- | :--- | :--- | | Stock Options | **1,029** | **1,003** | | Restricted Stock Unit Awards | **512** | **880** | [Note 9 — Net Loss Per Share](index=22&type=section&id=Note%209%20%E2%80%94%20Net%20Loss%20Per%20Share) This note presents the calculation of net loss per share, including basic and diluted figures - **Net loss per share (basic and diluted)** was **$(0.72)** for the three months ended June 30, 2023, and **$(1.30)** for the six months ended June 30, 2023[12](index=12&type=chunk) - At June 30, 2023, there were **1.003 million anti-dilutive stock options** and **0.880 million anti-dilutive restricted stock units** outstanding[66](index=66&type=chunk) [Note 10 — Commitments and Contingencies](index=22&type=section&id=Note%2010%20%E2%80%94%20Commitments%20and%20Contingencies) This note discloses the company's legal proceedings, government contract audits, and other commitments - The Company is involved in legal proceedings in the **ordinary course of business**, but management believes they are **not material** or likely to have a material adverse effect on financial condition or results of operations[67](index=67&type=chunk) - **U.S. Government contract costs** are subject to periodic audit and adjustment[67](index=67&type=chunk) [Note 11 — Segment and Related Information](index=22&type=section&id=Note%2011%20%E2%80%94%20Segment%20and%20Related%20Information) This note provides financial information by operating segment, including revenues, operating loss, and key customers - The Company operates in two segments: **Restaurant/Retail** and **Government**. Operating results previously noted as 'Other' are now retroactively combined with the **Restaurant/Retail segment**[68](index=68&type=chunk)[69](index=69&type=chunk) Segment Revenues (in thousands) | Segment | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Restaurant/Retail | **$69,529** | **$64,171** | **$138,113** | **$123,017** | | Government | **$31,015** | **$20,922** | **$62,868** | **$42,361** | | Total | **$100,544** | **$85,093** | **$200,981** | **$165,378** | Segment Operating (Loss) Income (in thousands) | Segment | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Restaurant/Retail | **$(18,982)** | **$(18,413)** | **$(35,129)** | **$(32,769)** | | Government | **$1,329** | **$2,314** | **$3,612** | **$3,861** | | Total | **$(17,653)** | **$(16,099)** | **$(31,517)** | **$(28,908)** | - Key customers include **Yum! Brands, Inc. (10% of total revenue)** and **McDonald's Corporation (8% of total revenue)**, and the **U.S. Department of Defense (31% of total revenue)**[74](index=74&type=chunk) [Note 12 — Fair Value of Financial Instruments](index=25&type=section&id=Note%2012%20%E2%80%94%20Fair%20Value%20of%20Financial%20Instruments) This note discusses the fair value measurements of financial instruments, including contingent consideration liabilities - The Company's financial instruments include cash and cash equivalents, short-term investments, debt instruments, and deferred compensation assets and liabilities, with fair values generally approximating carrying values due to their short-term nature or market-observable inputs (**Level 2**)[75](index=75&type=chunk) - The fair value of the MENU earn-out contingent liability was determined to be **$2.3 million** at June 30, 2023, a **decrease of $7.5 million** for the six months ended June 30, 2023, due to amendments to the earn-out terms[79](index=79&type=chunk)[80](index=80&type=chunk) Contingent Consideration Fair Value Measurement (in thousands) | Contingency Type | Maximum Payout (undiscounted) | Fair Value | Valuation Technique | Unobservable Inputs | Weighted Average or Range | | :--- | :--- | :--- | :--- | :--- | :--- | | Revenue based payments | **$14,100** | **$2,300** | Monte Carlo | Revenue volatility | **25.0 %** | | | | | | Discount rate | **14.0 %** | | | | | | Projected year of payments | **2024** | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=27&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses PAR Technology Corporation's financial condition and results of operations, covering business segments and key metrics [OVERVIEW](index=27&type=section&id=OVERVIEW) This section provides an overview of the company's business, detailing its Restaurant/Retail and Government operating segments - PAR operates through two distinct reporting segments: **Restaurant/Retail** and **Government**[83](index=83&type=chunk) - The **Restaurant/Retail segment** offers technology platforms (Guest Engagement, Operator Solutions, Back Office) to over **500 customers** and **70,000 active restaurant locations**[84](index=84&type=chunk) - The **Government segment** provides advanced systems and software solutions, and support services for the DoD and intelligence community, with offerings in ISR Solutions, Mission Systems, and Commercial Software[85](index=85&type=chunk) [Year-to-Date Q2 2023 Performance Highlights](index=27&type=section&id=Year-to-Date%20Q2%202023%20Performance%20Highlights) This section highlights key performance indicators, including Annual Recurring Revenue (ARR) growth and active site expansion - **Annual Recurring Revenues (ARR) grew to $122.5 million** as of June 30, 2023, a **24.3% increase** from $98.6 million reported as of June 30, 2022[87](index=87&type=chunk) Active Sites Expansion (in thousands) | Category | As of June 30, 2023 | As of June 30, 2022 | Increase | | :--- | :--- | :--- | :--- | | Guest Engagement | **70.5** | **62.3** | **13.1 %** | | Operator Solutions | **21.5** | **17.7** | **21.5 %** | | Back Office | **7.2** | **6.4** | **12.5 %** | - **Subscription service gross margin decreased to 46.6%** for the six months ended June 30, 2023, from **52.1%** in the prior year. **Adjusted subscription service gross margin decreased to 65%** from **75%**[87](index=87&type=chunk) [RESULTS OF OPERATIONS](index=28&type=section&id=RESULTS%20OF%20OPERATIONS) This section analyzes the company's consolidated and segment-specific financial results, including revenues, gross margins, and operating expenses [Consolidated Results](index=28&type=section&id=Consolidated%20Results) This section presents a consolidated view of the company's revenues, gross margin, and net loss for the reporting periods Consolidated Revenues, Net (in thousands) | Revenue Type | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | YoY Change (%) | | :--- | :--- | :--- | :--- | | Hardware | **$26,390** | **$28,390** | **(7.0)%** | | Subscription services | **$30,372** | **$23,150** | **31.2 %** | | Professional services | **$12,767** | **$12,631** | **1.1 %** | | Contract | **$31,015** | **$20,922** | **48.2 %** | | Total revenues, net | **$100,544** | **$85,093** | **18.2 %** | Consolidated Gross Margin (in thousands) | Margin Type | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | YoY Change (%) | | :--- | :--- | :--- | :--- | | Hardware | **$5,064** | **$4,179** | **21.2 %** | | Subscription services | **$13,139** | **$12,489** | **5.2 %** | | Professional services | **$983** | **$2,128** | **(53.8)%** | | Contract | **$1,344** | **$2,325** | **(42.2)%** | | Total gross margin | **$20,530** | **$21,121** | **(2.8)%** | - **Net loss** for the three months ended June 30, 2023, was **$(19.7) million**, an **increase of 4.5%** compared to $(18.8) million in the prior year[88](index=88&type=chunk) [Segment Revenue by Product Line as Percentage of Total Revenue](index=32&type=section&id=Segment%20Revenue%20by%20Product%20Line%20as%20Percentage%20of%20Total%20Revenue) This section breaks down revenue by product line and segment, showing their contribution to total revenue and year-over-year changes Segment Revenue by Product Line (3 Months Ended June 30, 2023 vs 2022) | Product Line | 2023 Revenue (in thousands) | 2022 Revenue (in thousands) | 2023 % of Total | 2022 % of Total | YoY Change (%) | | :--- | :--- | :--- | :--- | :--- | :--- | | Hardware | **$26,390** | **$28,390** | **26.2 %** | **33.4 %** | **(7.0)%** | | Subscription service | **$30,372** | **$23,150** | **30.2 %** | **27.2 %** | **31.2 %** | | Professional service | **$12,767** | **$12,631** | **12.7 %** | **14.8 %** | **1.1 %** | | Mission systems | **$9,218** | **$11,747** | **9.2 %** | **13.8 %** | **(21.5)%** | | ISR solutions | **$21,510** | **$8,883** | **21.4 %** | **10.4 %** | **142.1 %** | | Commercial software | **$287** | **$292** | **0.3 %** | **0.3 %** | **(1.7)%** | | Total revenue | **$100,544** | **$85,093** | **100.0 %** | **100.0 %** | **18.2 %** | - **Government segment revenue increased by 48.2%** for the three months ended June 30, 2023, primarily driven by ISR Solutions[92](index=92&type=chunk) - **Restaurant/Retail segment revenue increased by 8.3%** for the three months ended June 30, 2023, with subscription services showing strong growth[92](index=92&type=chunk) [Revenues, Net](index=32&type=section&id=Revenues%2C%20Net) This section provides a detailed analysis of net revenues, highlighting growth drivers across different product lines and segments - **Total revenues** for the three months ended June 30, 2023, **increased by $15.5 million (18.2%) to $100.5 million**[93](index=93&type=chunk) - **Subscription service revenues increased by $7.2 million (31.2%)** for the three months, driven by increased active sites and average revenue per site in Operator Solutions and Guest Engagement, including MENU revenues[95](index=95&type=chunk) - **Contract revenues increased by $10.1 million (48.2%)** for the three months, primarily due to the Government segment's ISR Solutions product line[97](index=97&type=chunk) - For the six months ended June 30, 2023, **total revenues increased by $35.6 million (21.5%) to $201.0 million**, with **subscription service revenues up $13.9 million (31.3%)** and **contract revenues up $20.5 million (48.4%)**[98](index=98&type=chunk)[100](index=100&type=chunk)[102](index=102&type=chunk) [Gross Margin](index=34&type=section&id=Gross%20Margin) This section analyzes changes in gross margin by product line and segment, explaining factors impacting profitability - **Total gross margin as a percentage of revenue decreased to 20.4%** for the three months ended June 30, 2023, from **24.8%** in the prior year[104](index=104&type=chunk) - **Subscription service margin decreased to 43.3%** for the three months, from **53.9%** in the prior year, due to absorbing initial growth of MENU and Par Payment Services[106](index=106&type=chunk) - **Contract margin decreased to 4.3%** for the three months, from **11.1%** in the prior year, primarily due to a lower contracted margin on a Government segment ISR Solutions contract[108](index=108&type=chunk) - For the six months ended June 30, 2023, **total gross margin as a percentage of revenue decreased to 21.8%** from **25.2%** in the prior year, with similar drivers for subscription and contract margins[109](index=109&type=chunk)[111](index=111&type=chunk)[113](index=113&type=chunk) [Selling, General Administrative Expenses ("SG&A")](index=35&type=section&id=Selling%2C%20General%20Administrative%20Expenses%20%28%22SG%26A%22%29) This section discusses trends and drivers in selling, general, and administrative expenses for the reporting periods - **SG&A expenses decreased by $0.8 million (2.9%) to $25.6 million** for the three months ended June 30, 2023, primarily due to lower acquisition costs compared to the prior year[114](index=114&type=chunk) - For the six months ended June 30, 2023, **SG&A expenses increased by $4.3 million (8.9%) to $53.1 million**, driven by post-acquisition MENU SG&A expenses and increased sales and marketing costs[115](index=115&type=chunk) [Research and Development Expenses ("R&D")](index=36&type=section&id=Research%20and%20Development%20Expenses%20%28%22R%26D%22%29) This section analyzes research and development expenses, highlighting investments in product innovation and platform enhancements - **R&D expenses increased by $4.8 million (47.4%) to $14.9 million** for the three months ended June 30, 2023, driven by higher compensation costs and post-acquisition MENU R&D expenses for Guest Engagement and Operator Solutions[117](index=117&type=chunk) - For the six months ended June 30, 2023, **R&D expenses increased by $8.3 million (39.4%) to $29.2 million**, with similar drivers related to Guest Engagement and Operator Solutions offerings[119](index=119&type=chunk) [Other Operating Expenses](index=36&type=section&id=Other%20Operating%20Expenses) This section details other operating expenses, including adjustments to contingent consideration and gains from insurance proceeds - A **$2.3 million decrease** to the fair value of contingent consideration liability from the MENU Acquisition was recorded for the three months ended June 30, 2023[121](index=121&type=chunk) - A **$0.5 million gain** on insurance proceeds from a legacy claim settlement was recognized for the three months ended June 30, 2023[122](index=122&type=chunk) - For the six months ended June 30, 2023, a **$7.5 million decrease** to the contingent consideration liability and a **$0.5 million gain** on insurance proceeds were recorded[124](index=124&type=chunk)[125](index=125&type=chunk) [Other Income (Expense), Net](index=37&type=section&id=Other%20Income%20%28Expense%29%2C%20Net) This section discusses other non-operating income and expenses, including miscellaneous items and tax-related adjustments - **Other income (expense), net, improved to $0.1 million income** for the three months ended June 30, 2023, from $(0.3) million expense in the prior year, primarily due to sales and use tax expense and other miscellaneous expenses[126](index=126&type=chunk) - For the six months ended June 30, 2023, **other income (expense), net, was $36.0 thousand**, an **improvement** from $(0.6) million expense in the prior year, driven by similar factors[128](index=128&type=chunk) [Interest Expense, Net](index=39&type=section&id=Interest%20Expense%2C%20Net) This section analyzes net interest expense, considering contractual interest and interest revenue from investments - **Interest expense, net, decreased by $0.7 million to $1.7 million** for the three months ended June 30, 2023, primarily due to interest revenue from short-term investments[130](index=130&type=chunk) - For the six months ended June 30, 2023, **interest expense, net, decreased by $1.5 million to $3.4 million**, also driven by interest revenue from short-term investments[131](index=131&type=chunk) [Taxes](index=39&type=section&id=Taxes) This section discusses the provision for income taxes, highlighting factors such as foreign jurisdiction tax obligations - **Provision for income taxes increased significantly to $0.4 million** for the three months ended June 30, 2023, from $41.0 thousand in the prior year, primarily due to foreign jurisdiction tax obligations[132](index=132&type=chunk) - For the six months ended June 30, 2023, **provision for income taxes increased to $0.7 million** from $51.0 thousand in the prior year, driven by foreign jurisdiction tax obligations[133](index=133&type=chunk) [Key Performance Indicators and Non-GAAP Financial Measures](index=41&type=section&id=Key%20Performance%20Indicators%20and%20Non-GAAP%20Financial%20Measures) This section presents key operating metrics and non-GAAP financial measures used to evaluate business performance [Key Performance Indicators](index=41&type=section&id=Key%20Performance%20Indicators) This section defines and presents key operating metrics such as Annual Recurring Revenue (ARR) and active sites - **Annual Recurring Revenue (ARR)** is an operating measure calculated by annualizing monthly recurring revenue for all active sites, including subscription fees, related support, and transaction-based payment processing[137](index=137&type=chunk) Annual Recurring Revenue (in thousands) as of June 30 | Category | 2023 | 2022 | Increase (%) | | :--- | :--- | :--- | :--- | | Guest Engagement | **$60,893** | **$53,198** | **14.5 %** | | Operator Solutions | **$50,045** | **$36,159** | **38.4 %** | | Back Office | **$11,556** | **$9,223** | **25.3 %** | | Total | **$122,494** | **$98,580** | **24.3 %** | Active Sites (in thousands) as of June 30 | Category | 2023 | 2022 | Increase (%) | | :--- | :--- | :--- | :--- | | Guest Engagement | **70.5** | **62.3** | **13.1 %** | | Operator Solutions | **21.5** | **17.7** | **21.5 %** | | Back Office | **7.2** | **6.4** | **12.5 %** | [Non-GAAP Financial Measures](index=42&type=section&id=Non-GAAP%20Financial%20Measures) This section reconciles non-GAAP financial measures like Adjusted EBITDA and Adjusted Net Loss to their GAAP equivalents - **Non-GAAP measures** include adjusted subscription service gross margin, EBITDA, adjusted EBITDA, adjusted net loss, and adjusted diluted net loss per share, used to evaluate core business operating results[141](index=141&type=chunk)[142](index=142&type=chunk) Reconciliation of Net Loss to EBITDA and Adjusted EBITDA (in thousands) | Item | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | | :--- | :--- | :--- | | Net loss | **$(19,702)** | **$(18,848)** | | EBITDA | **$(10,625)** | **$(9,915)** | | Adjusted EBITDA | **$(9,905)** | **$(5,760)** | Reconciliation of Net Loss/Diluted Net Loss per Share to Adjusted Net Loss/Adjusted Diluted Loss per Share (in thousands, except per share amounts) | Item | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | | :--- | :--- | :--- | | Net loss/diluted loss per share | **$(19,702)** / **$(0.72)** | **$(18,848)** / **$(0.70)** | | Adjusted net loss/adjusted diluted loss per share | **$(14,123)** / **$(0.52)** | **$(9,827)** / **$(0.36)** | - **Adjusted EBITDA** for the six months ended June 30, 2023, was **$(18.8) million**, compared to $(8.4) million in the prior year[150](index=150&type=chunk) - **Adjusted diluted loss per share** for the six months ended June 30, 2023, was **$(0.98)**, compared to $(0.62) in the prior year[152](index=152&type=chunk) [LIQUIDITY AND CAPITAL RESOURCES](index=45&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) This section discusses the company's financial liquidity, capital resources, and ability to meet its short-term and long-term obligations - Primary liquidity sources are **cash and cash equivalents ($44.2 million)** and **short-term investments ($41.2 million)** as of June 30, 2023[157](index=157&type=chunk) - **Net cash used in operating activities significantly decreased to $(12.8) million** for the six months ended June 30, 2023, from $(31.6) million in the prior year, driven by reduced net working capital and improved inventory management[158](index=158&type=chunk) - **Total contractual obligations** for the next 12 months are **$52.8 million**, including **purchase commitments ($29.9 million)**, **Senior Notes payments ($21.6 million)**, and **facility lease obligations ($1.2 million)**[161](index=161&type=chunk) - The Company expects available cash and cash equivalents to be **sufficient to meet operating needs for at least the next 12 months**[161](index=161&type=chunk) [CRITICAL ACCOUNTING POLICIES AND ESTIMATES](index=46&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES%20AND%20ESTIMATES) This section outlines the company's critical accounting policies and estimates that require significant management judgment - **Critical accounting policies** involve estimates and assumptions for revenue recognition, stock-based compensation, business combinations, carrying amounts of assets, valuation allowances, and contingent consideration[165](index=165&type=chunk) - These estimates are subject to **uncertainties** related to market conditions, risks, and trends, and actual results may differ[165](index=165&type=chunk) - **No material changes** to critical accounting policies were reported from the 2022 Annual Report[165](index=165&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=46&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section discusses the Company's exposure to market risks, including foreign currency and interest rate fluctuations - The Company is exposed to **foreign currency exchange risk** from non-dollar denominated sales and operating expenses in various countries, which could negatively affect revenue and net income[166](index=166&type=chunk) - As of June 30, 2023, the impact of foreign currency exchange rate changes on revenues and net income (loss) was **not material**[166](index=166&type=chunk) - The Company's Senior Notes bear **fixed interest rates**, mitigating direct financial statement risk from interest rate changes, but their fair value is sensitive to common stock price fluctuations and market interest rates[167](index=167&type=chunk)[168](index=168&type=chunk) [Item 4. Controls and Procedures](index=47&type=section&id=Item%204.%20Controls%20and%20Procedures) Management evaluated the effectiveness of the Company's disclosure controls and procedures, concluding they were effective - **Disclosure controls and procedures** were evaluated and deemed **effective** as of June 30, 2023[170](index=170&type=chunk) - **No material changes** in internal control over financial reporting occurred during the quarter ended June 30, 2023[171](index=171&type=chunk) [PART II OTHER INFORMATION](index=47&type=section&id=PART%20II%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=47&type=section&id=Item%201.%20Legal%20Proceedings) The Company is involved in ordinary course legal proceedings, which management believes will not materially affect its financial condition - The Company is party to legal proceedings in the **ordinary course of business**[173](index=173&type=chunk) - Management believes current legal proceedings are **not material** or likely to result in a material adverse effect on the Company's business, financial condition, or results of operations[173](index=173&type=chunk) [Item 1A. Risk Factors](index=47&type=section&id=Item%201A.%20Risk%20Factors) This section refers to the comprehensive list of risk factors from the 2022 Annual Report, which remain current - The risks described in the 'Risk Factors' section of the 2022 Annual Report remain **current in all material respects**[174](index=174&type=chunk) - These risks could **materially and adversely affect** the Company's business, financial condition, results of operations, and the trading price of its common stock[174](index=174&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use Of Proceeds](index=47&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20Of%20Proceeds) This section details the Company's purchases of equity securities, specifically shares withheld from employees for tax obligations - Employees may elect to have the Company withhold shares to satisfy **tax obligations** upon the vesting of restricted stock and restricted stock units[175](index=175&type=chunk) Company Purchases of Equity Securities (Three Months Ended June 30, 2023) | Period | Total Number of Shares Withheld | Average Price Paid Per Share | | :--- | :--- | :--- | | April 1, 2023 - April 30, 2023 | **301** | **$32.01** | | May 1, 2023 - May 31, 2023 | **1,496** | **$34.08** | | June 1, 2023 - June 30, 2023 | **4,272** | **$34.32** | | Total | **6,069** | **$33.47** | [Item 6. Exhibits](index=48&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Quarterly Report on Form 10-Q, including organizational documents and certifications - The report includes various exhibits such as Restated Certificate of Incorporation, Amended and Restated Bylaws, and **certifications from the Principal Executive Officer and Principal Financial Officer**[178](index=178&type=chunk) - **Inline XBRL documents** (Instance, Schema, Calculation, Definition, Label, Presentation Linkbase Documents) and the Cover Page Interactive Data File are filed herewith[178](index=178&type=chunk) [Signatures](index=49&type=section&id=Signatures) This section contains the signature of PAR Technology Corporation, authorized by its Chief Financial Officer, certifying the report filing - The report was signed on behalf of PAR Technology Corporation by **Bryan A. Menar, Chief Financial Officer**, on August 9, 2023[180](index=180&type=chunk)

Q4'22 Q3'22 Adjusted Subscription Service Gross Margin(1) • Large TAM in restaurants with ~1m locations in the US spending 2-3% of total revenue on technology1 ® PAR 27% 30% Y/Y Growth Appendix A Key Performance Indicators ® Industry and Market Data. Where non-GAAP financial measures are included in this presentation, the most directly comparable GAAP financial measures and a detailed reconciliation between GAAP and nonGAAP financial measures is included in the Appendix to this presentation. A little about ...

PAR Technology Corporation (NYSE:PAR) Q1 2023 Earnings Conference Call May 10, 2023 4:30 PM ET Company Participants Christopher Byrnes - Senior Vice President, Business Development Savneet Singh - President and Chief Executive Officer Bryan Menar - Chief Financial Officer Conference Call Participants Samad Samana - Jefferies Will Nance - Goldman Sachs Patrick Mcilwee - William Blair Mayank Tandon - Needham & Company Adam Wyden - ADW Capital Adam Kelsey - Craig-Hallum Anja Soderstrom - Sidoti Operator Good a ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 For the Quarterly Period Ended March 31, 2023 OR ☐ TRANSITION REPORT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period From __________ to __________ Commission File Number: 1-09720 PAR TECHNOLOGY CORPORATION (Exact name of registrant as specified in its charter) Delaware 16-1434688 ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FORM 10-Q (State or other jur ...

PAR Technology Corporation (NYSE:PAR) Q4 2022 Earnings Conference Call March 1, 2023 9:00 AM ET Company Participants Chris Byrnes - SVP-Business Development Savneet Singh - CEO and President Bryan Menar - CFO Conference Call Participants Will Nance - Goldman Sachs Samad Samana - Jefferies Kyle Peterson - Needham and Company Adam Wyden - ADW Capital Stephen Sheldon - William Blair George Sutton - Craig-Hallum Anja Soderstrom - Sidoti Operator Good day, and thank you for standing by. Welcome to the PAR Techno ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-K ☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 31, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period From __________ to __________ Commission File Number 1-09720 PAR TECHNOLOGY CORPORATION (Exact name of registrant as specified in its charter) Delaware 16-1434688 (State or other ...

PAR Technology Corporation (NYSE:PAR) Q3 2022 Earnings Conference Call November 9, 2022 9:00 AM ET Company Participants Chris Byrnes – Vice President-Business Development Savneet Singh – President and Chief Executive Officer Bryan Menar – Chief Financial Officer Conference Call Participants Sam Salvas – Needham & Company Stephen Sheldon – William Blair Adam Wyden – ADW Capital Jeremy Sahler – Jefferies George Sutton – Craig-Hallum Anja Soderstrom – Sidoti Operator Good day, and thank you for standing by. We ...

Q3 '22 Earnings Presentation November 9, 2022 NYSE: PAR Forward-Looking Statements. This presentation contains "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, Section 27A of the Securities Act of 1933, as amended, and the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not historical in nature, but rather are predictive of our future operations, financial condition, financial results, business strategies and ...

[PART I. FINANCIAL INFORMATION](index=5&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements (unaudited)](index=5&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) The company presents its unaudited condensed consolidated financial statements and accompanying notes for the period [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheets (in thousands) | Metric | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | **Assets:** | | | | Cash and cash equivalents | $89,504 | $188,419 | | Short-term investments | $40,015 | — | | Total current assets | $233,256 | $283,007 | | Goodwill | $485,121 | $457,306 | | Total assets | $864,741 | $888,149 | | **Liabilities & Equity:** | | | | Total current liabilities | $65,759 | $60,517 | | Long-term debt | $388,680 | $305,845 | | Total liabilities | $481,655 | $383,804 | | Total shareholders' equity | $383,086 | $504,345 | | Total Liabilities and Shareholders' Equity | $864,741 | $888,149 | - Cash and cash equivalents decreased significantly from **$188.4 million** at December 31, 2021, to **$89.5 million** at September 30, 2022[9](index=9&type=chunk) - Long-term debt increased from **$305.8 million** to **$388.7 million**, while total shareholders' equity decreased from **$504.3 million** to **$383.1 million**[9](index=9&type=chunk) [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Condensed Consolidated Statements of Operations (in thousands, except per share amounts) | Metric | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Total revenues, net | $92,767 | $77,860 | $258,145 | $201,277 | | Gross margin | $21,408 | $18,214 | $63,142 | $43,517 | | Operating loss | $(18,443) | $(14,109) | $(47,351) | $(37,105) | | Net loss | $(21,340) | $(31,933) | $(55,838) | $(50,160) | | Net loss per share (basic and diluted) | $(0.79) | $(1.23) | $(2.06) | $(2.05) | | Weighted average shares outstanding | 27,110 | 25,998 | 27,150 | 24,485 | - Total revenues increased by **19.1%** for the three months and **28.3%** for the nine months ended September 30, 2022, compared to the respective prior periods[11](index=11&type=chunk) - Net loss decreased from **$(31.9) million** to **$(21.3) million** for the three months ended September 30, 2022, but increased from **$(50.2) million** to **$(55.8) million** for the nine-month period[11](index=11&type=chunk) [Condensed Consolidated Statements of Comprehensive Loss](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss) Condensed Consolidated Statements of Comprehensive Loss (in thousands) | Metric | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Net loss | $(21,340) | $(31,933) | $(55,838) | $(50,160) | | Foreign currency translation adjustments | $(851) | $(500) | $(56) | $(109) | | Comprehensive loss | $(22,191) | $(32,042) | $(56,338) | $(50,216) | - Comprehensive loss for the three months ended September 30, 2022, was **$(22.2) million**, compared to **$(32.0) million** in the prior year, primarily due to the net loss[13](index=13&type=chunk) - For the nine months ended September 30, 2022, comprehensive loss was **$(56.3) million**, an increase from **$(50.2) million** in the prior year[13](index=13&type=chunk) [Condensed Consolidated Statements of Changes in Shareholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Shareholders'%20Equity) Condensed Consolidated Statements of Changes in Shareholders' Equity (in thousands) | Metric | Dec 31, 2021 | Jan 1, 2022 (Adjusted) | Sep 30, 2022 | | :--- | :--- | :--- | :--- | | Total Shareholders' Equity | $504,345 | $424,309 | $383,086 | | Accumulated Deficit | $(122,505) | $(135,885) | $(191,723) | | Additional Paid in Capital | $640,937 | $574,281 | $592,100 | | Common Stock Shares | 28,095 | 28,095 | 28,529 | - Total shareholders' equity decreased from **$504.3 million** at December 31, 2021, to **$383.1 million** at September 30, 2022, partly due to the impact of ASU 2020-06 implementation and accumulated net losses[15](index=15&type=chunk) - The Company recorded a cumulative effect upon adoption of ASU 2020-06 on January 1, 2022, which included an **$80.0 million reduction** to total shareholders' equity[15](index=15&type=chunk)[38](index=38&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed Consolidated Statements of Cash Flows (in thousands) | Metric | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(33,579) | $(43,619) | | Net cash used in investing activities | $(64,343) | $(381,052) | | Net cash (used in) provided by financing activities | $(1,968) | $444,280 | | Net (decrease) increase in cash and cash equivalents | $(98,915) | $19,607 | | Cash and equivalents at end of period | $89,504 | $200,293 | - Cash used in operating activities decreased from **$43.6 million** in 2021 to **$33.6 million** in 2022, primarily due to an increase in net loss and working capital requirements[20](index=20&type=chunk)[191](index=191&type=chunk) - Investing activities used **$64.3 million** in 2022, significantly less than **$381.1 million** in 2021, mainly due to lower cash paid for acquisitions (**$18.8 million** in 2022 vs **$374.7 million** in 2021)[20](index=20&type=chunk)[192](index=192&type=chunk) - Financing activities shifted from providing **$444.3 million** in 2021 to using **$2.0 million** in 2022, reflecting reduced debt and equity issuances[20](index=20&type=chunk)[193](index=193&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) [NOTE 1: BASIS OF PRESENTATION](index=12&type=section&id=NOTE%201:%20BASIS%20OF%20PRESENTATION) - The financial statements are prepared in accordance with GAAP for interim reporting and include all necessary adjustments for fair presentation[23](index=23&type=chunk) - The Company operates in two segments: **Restaurant/Retail** (SaaS solutions like Brink POS, Data Central, PAR Pay, Punchh, MENU) and **Government** (technical expertise and advanced systems for DoD and federal agencies)[25](index=25&type=chunk) - The Company adopted ASU No 2020-06 on January 1, 2022, under the modified retrospective method, resulting in an **$81.3 million increase** to convertible notes and a **$66.6 million reduction** to additional paid-in capital, eliminating the separation of convertible debt between debt and equity[38](index=38&type=chunk) [NOTE 2: REVENUE RECOGNITION](index=14&type=section&id=NOTE%202:%20REVENUE%20RECOGNITION) - Revenue is derived from SaaS, hardware/software sales, activation, support, installations, maintenance, and professional services, recognized either at a point in time or over time[41](index=41&type=chunk)[42](index=42&type=chunk) - Government segment revenue is predominantly service-related and recognized over time, often using costs incurred to measure progress[44](index=44&type=chunk) Disaggregated Revenue (in thousands) - 3 Months Ended Sep 30 | Segment/Type | 2022 | 2021 | | :--- | :--- | :--- | | Restaurant/Retail (point in time) | $35,619 | $35,109 | | Restaurant/Retail (over time) | $32,734 | $24,712 | | Government (point in time) | $541 | $55 | | Government (over time) | $23,873 | $17,984 | | **Total** | **$92,767** | **$77,860** | Disaggregated Revenue (in thousands) - 9 Months Ended Sep 30 | Segment/Type | 2022 | 2021 | | :--- | :--- | :--- | | Restaurant/Retail (point in time) | $97,937 | $85,709 | | Restaurant/Retail (over time) | $93,433 | $61,820 | | Government (point in time) | $753 | $220 | | Government (over time) | $66,022 | $53,528 | | **Total** | **$258,145** | **$201,277** | [NOTE 3: ACQUISITIONS](index=19&type=section&id=NOTE%203:%20ACQUISITIONS) - During Q3 2022, ParTech acquired MENU Technologies AG for approximately **$18.4 million cash** and **$6.3 million in common stock**, with a contingent earn-out liability of **$14.2 million**[57](index=57&type=chunk)[59](index=59&type=chunk) - The MENU acquisition resulted in **$28.5 million in goodwill** and **$10.7 million in developed technology**[59](index=59&type=chunk) - The Punchh Acquisition (April 2021) was finalized in Q1 2022, resulting in **$415.1 million in goodwill** and **$84.6 million in developed technology**[65](index=65&type=chunk)[66](index=66&type=chunk) [NOTE 4: ACCOUNTS RECEIVABLE, NET](index=22&type=section&id=NOTE%204:%20ACCOUNTS%20RECEIVABLE,%20NET) Accounts Receivable - Net (in thousands) | Segment | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Government segment | $14,747 | $11,667 | | Restaurant/Retail segment | $40,098 | $38,311 | | **Total Accounts receivable - net** | **$54,845** | **$49,978** | - Accounts receivable increased by **$4.9 million** from December 31, 2021, to September 30, 2022, with both segments contributing to the increase[68](index=68&type=chunk) - Current expected credit loss for the Restaurant/Retail segment increased from **$1.3 million** at December 31, 2021, to **$1.8 million** at September 30, 2022[68](index=68&type=chunk)[69](index=69&type=chunk) [NOTE 5: INVENTORIES](index=22&type=section&id=NOTE%205:%20INVENTORIES) Inventories (in thousands) | Component | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Finished goods | $24,729 | $17,528 | | Work in process | $160 | $688 | | Component parts | $13,857 | $14,880 | | Service parts | $961 | $1,982 | | **Total Inventories** | **$39,707** | **$35,078** | - Total inventories increased by **$4.6 million** from December 31, 2021, to September 30, 2022, primarily driven by an increase in finished goods[70](index=70&type=chunk) - Excess and obsolescence reserves against inventories increased from **$10.8 million** to **$12.6 million** during the same period[71](index=71&type=chunk) [NOTE 6: IDENTIFIABLE INTANGIBLE ASSETS AND GOODWILL](index=23&type=section&id=NOTE%206:%20IDENTIFIABLE%20INTANGIBLE%20ASSETS%20AND%20GOODWILL) - Identifiable intangible assets include acquired developed technology, internally developed software costs, customer relationships, and trade names[79](index=79&type=chunk) Identifiable Intangible Assets (in thousands) | Asset Type | Sep 30, 2022 | Dec 31, 2021 | Estimated Useful Life | | :--- | :--- | :--- | :--- | | Acquired developed technology | $119,800 | $109,100 | 3 - 7 years | | Internally developed software costs | $30,033 | $25,735 | 3 years | | Customer relationships | $12,360 | $12,360 | 7 years | | Trademarks, trade names (non-amortizable) | $6,200 | $6,200 | Indefinite | | **Total Identifiable Intangible Assets (net)** | **$116,242** | **$118,763** | | - Goodwill increased from **$457.3 million** at December 31, 2021, to **$485.1 million** at September 30, 2022, primarily due to the MENU Acquisition (**$28.5 million**) and Q1 2022 Acquisition (**$1.2 million**)[81](index=81&type=chunk) [NOTE 7: DEBT](index=25&type=section&id=NOTE%207:%20DEBT) Long-Term Debt (in thousands) | Notes | Sep 30, 2022 (Net Carrying Amount) | Dec 31, 2021 (Net Carrying Amount) | | :--- | :--- | :--- | | 2024 Notes | $13,447 | $11,846 | | 2026 Notes | $117,322 | $98,147 | | 2027 Notes | $257,911 | $195,852 | | **Total Long-Term Debt** | **$388,680** | **$305,845** | - The Company's long-term debt increased to **$388.7 million** at September 30, 2022, from **$305.8 million** at December 31, 2021, primarily due to the adoption of ASU 2020-06 which reclassified the equity component of convertible notes to debt[82](index=82&type=chunk)[38](index=38&type=chunk) - Interest expense, net, decreased significantly for both the three and nine months ended September 30, 2022, due to the extinguishment of the Owl Rock Term Loan in September 2021 and reduced accretion from ASU 2020-06 adoption[94](index=94&type=chunk)[163](index=163&type=chunk)[164](index=164&type=chunk) [NOTE 8: COMMON STOCK](index=28&type=section&id=NOTE%208:%20COMMON%20STOCK) - The Company issued **162,917 shares** of common stock as part of the purchase consideration for the MENU Acquisition in July 2022, valued at **$6.3 million**[99](index=99&type=chunk)[206](index=206&type=chunk) - In September 2021, the Company completed a public offering, issuing **982,143 shares** for net proceeds of **$52.5 million**[97](index=97&type=chunk) - In April 2021, the Company issued **2,352,942 shares** through a private placement to Act III and TRP, raising approximately **$160.0 million** to partially fund the Punchh Acquisition[98](index=98&type=chunk) [NOTE 9: STOCK-BASED COMPENSATION](index=28&type=section&id=NOTE%209:%20STOCK-BASED%20COMPENSATION) Stock-Based Compensation Expense (in thousands) | Line Item | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Cost of sales - contracts | $32 | $72 | $116 | $256 | | Selling, general and administrative | $3,458 | $3,713 | $10,141 | $9,100 | | **Total stock-based compensation expense** | **$3,490** | **$3,785** | **$10,257** | **$9,356** | - Total stock-based compensation expense for the nine months ended September 30, 2022, was **$10.3 million**, an increase from **$9.4 million** in the prior year[101](index=101&type=chunk) - As of September 30, 2022, the aggregate unrecognized compensation expense related to unvested equity awards was **$21.5 million**, expected to be recognized through 2025[101](index=101&type=chunk) [NOTE 10: NET LOSS PER SHARE](index=29&type=section&id=NOTE%2010:%20NET%20LOSS%20PER%20SHARE) - Basic and diluted net loss per share for the nine months ended September 30, 2022, was **$(2.06)**, compared to **$(2.05)** in the prior year[11](index=11&type=chunk) - Potential shares from convertible notes (2024, 2026, 2027) and a warrant were excluded from diluted net loss per share calculations due to their anti-dilutive impact[105](index=105&type=chunk)[106](index=106&type=chunk) - As of September 30, 2022, there were **1,045,000 anti-dilutive stock options** and **576,000 anti-dilutive restricted stock units** outstanding[104](index=104&type=chunk) [NOTE 11: COMMITMENTS AND CONTINGENCIES](index=29&type=section&id=NOTE%2011:%20COMMITMENTS%20AND%20CONTINGENCIES) - The Company is involved in legal proceedings in the ordinary course of business, but management believes they are not material or likely to have a material adverse effect[107](index=107&type=chunk)[204](index=204&type=chunk) - A **$790 thousand** class-wide settlement for a Biometric Information Privacy Act complaint was granted final approval in July 2022, which the Company had accrued and fully funded by June 30, 2022[108](index=108&type=chunk) [NOTE 12: SEGMENT AND RELATED INFORMATION](index=30&type=section&id=NOTE%2012:%20SEGMENT%20AND%20RELATED%20INFORMATION) - The Company operates in two segments: **Restaurant/Retail** (software, hardware, services for restaurants) and **Government** (technical expertise and solutions for DoD and federal agencies)[110](index=110&type=chunk) Segment Revenues (in thousands) | Segment | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Restaurant/Retail | $68,354 | $59,821 | $191,371 | $147,529 | | Government | $24,413 | $18,039 | $66,774 | $53,748 | | **Total** | **$92,767** | **$77,860** | **$258,145** | **$201,277** | Segment Operating (Loss) Income (in thousands) | Segment | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Restaurant/Retail | $(8,379) | $(15,642) | $(19,303) | $(40,894) | | Government | $2,529 | $1,960 | $6,390 | $4,555 | | Other | $(12,593) | $(427) | $(34,438) | $(766) | | **Total** | **$(18,443)** | **$(14,109)** | **$(47,351)** | **$(37,105)** | - Key customers include Yum! Brands, Inc (**10-12% of Restaurant/Retail revenue**) and McDonald's Corporation (**11-15% of Restaurant/Retail revenue**), and the U.S Department of Defense (**23-27% of Government revenue**)[116](index=116&type=chunk) [NOTE 13: FAIR VALUE OF FINANCIAL INSTRUMENTS](index=32&type=section&id=NOTE%2013:%20FAIR%20VALUE%20OF%20FINANCIAL%20INSTRUMENTS) - The fair values of cash, short-term investments, trade receivables, and payables approximate their carrying amounts due to their short-term nature[117](index=117&type=chunk) - The estimated fair value of the 2024, 2026, and 2027 Notes at September 30, 2022, was **$18.3 million**, **$118.2 million**, and **$195.7 million**, respectively, classified within Level 2 of the fair value hierarchy[117](index=117&type=chunk) - The MENU earn-out contingent liability's fair value was determined to be **$14.2 million** at September 30, 2022, using Monte Carlo simulation modeling (Level 3 fair value measurement)[121](index=121&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=33&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial conditions, operational results, segment performance, and key non-GAAP metrics [OVERVIEW](index=33&type=section&id=OVERVIEW) - PAR Technology Corporation operates in two distinct segments: **Restaurant/Retail** and **Government**[123](index=123&type=chunk) - The Restaurant/Retail segment offers unified commerce solutions to over **500 customers** and **60,000 active restaurant locations**[124](index=124&type=chunk) - The Government segment provides advanced systems and software solutions for the DoD and federal agencies, including ISR Solutions, Mission Systems, and Commercial Software[125](index=125&type=chunk) [RESULTS OF OPERATIONS](index=34&type=section&id=RESULTS%20OF%20OPERATIONS) [Consolidated Results](index=34&type=section&id=Consolidated%20Results) Consolidated Results (in thousands, except percentages) | Metric | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | YoY Change % | | :--- | :--- | :--- | :--- | | Total revenues, net | $92,767 | $77,860 | 19.1% | | Product revenue | $31,343 | $30,291 | 3.5% | | Service revenue | $37,010 | $29,530 | 25.3% | | Contract revenue | $24,414 | $18,039 | 35.3% | | Total gross margin | $21,408 | $18,214 | 17.5% | | Operating loss | $(18,443) | $(14,109) | 30.7% | | Net loss | $(21,340) | $(31,933) | (33.2)% | Consolidated Results (in thousands, except percentages) | Metric | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | YoY Change % | | :--- | :--- | :--- | :--- | | Total revenues, net | $258,145 | $201,277 | 28.3% | | Product revenue | $84,820 | $72,786 | 16.5% | | Service revenue | $106,550 | $74,743 | 42.6% | | Contract revenue | $66,775 | $53,748 | 24.2% | | Total gross margin | $63,142 | $43,517 | 45.1% | | Operating loss | $(47,351) | $(37,105) | 27.6% | | Net loss | $(55,838) | $(50,160) | 11.3% | - Total revenues increased by **19.1% for Q3 2022** and **28.3% for the nine months** ended September 30, 2022, driven by strong growth across all revenue categories[127](index=127&type=chunk)[129](index=129&type=chunk) - Net loss decreased by **33.2% for Q3 2022** but increased by **11.3% for the nine months** ended September 30, 2022, reflecting varying impacts of operating expenses and other income/expenses[127](index=127&type=chunk)[129](index=129&type=chunk) [Revenues, Net](index=38&type=section&id=Revenues,%20Net) Revenues, Net (in thousands) | Revenue Type | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | YoY Change % | | :--- | :--- | :--- | :--- | | Product | $31,343 | $30,291 | 3.5% | | Service | $37,010 | $29,530 | 25.3% | | Contract | $24,414 | $18,039 | 35.3% | | **Total revenues, net** | **$92,767** | **$77,860** | **19.1%** | Revenues, Net (in thousands) | Revenue Type | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | YoY Change % | | :--- | :--- | :--- | :--- | | Product | $84,820 | $72,786 | 16.5% | | Service | $106,550 | $74,743 | 42.6% | | Contract | $66,775 | $53,748 | 24.2% | | **Total revenues, net** | **$258,145** | **$201,277** | **28.3%** | - Service revenues saw the strongest growth, increasing by **25.3% for Q3 2022** and **42.6% for the nine-month period**, primarily driven by Punchh and Brink POS SaaS revenues[134](index=134&type=chunk)[139](index=139&type=chunk) - Contract revenues increased by **35.3% for Q3 2022** and **24.2% for the nine-month period**, largely due to growth in ISR Solutions and Mission Systems product lines[135](index=135&type=chunk)[140](index=140&type=chunk) [Gross Margin](index=39&type=section&id=Gross%20Margin) Gross Margin (in thousands, except percentages) | Margin Type | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | 2022 % | 2021 % | YoY Change % | | :--- | :--- | :--- | :--- | :--- | :--- | | Product | $5,885 | $7,505 | 18.8% | 24.8% | (21.6)% | | Service | $12,989 | $8,738 | 35.1% | 29.6% | 48.6% | | Contract | $2,534 | $1,971 | 10.4% | 10.9% | 28.6% | | **Total gross margin** | **$21,408** | **$18,214** | **23.1%** | **23.4%** | **17.5%** | Gross Margin (in thousands, except percentages) | Margin Type | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | 2022 % | 2021 % | YoY Change % | | :--- | :--- | :--- | :--- | :--- | :--- | | Product | $15,154 | $16,628 | 17.9% | 22.8% | (8.9)% | | Service | $41,569 | $22,316 | 39.0% | 29.9% | 86.3% | | Contract | $6,419 | $4,573 | 9.6% | 8.5% | 40.4% | | **Total gross margin** | **$63,142** | **$43,517** | **24.5%** | **21.6%** | **45.1%** | - Service margin improved significantly to **35.1% for Q3 2022** and **39.0% for the nine-month period**, driven by a higher mix of SaaS software and cost improvement initiatives[143](index=143&type=chunk)[148](index=148&type=chunk) - Product margin decreased to **18.8% for Q3 2022** and **17.9% for the nine-month period**, primarily due to product mix and higher excess and obsolescent inventory charges[142](index=142&type=chunk)[147](index=147&type=chunk) [Selling, General Administrative Expenses](index=40&type=section&id=Selling,%20General%20Administrative%20Expenses) Selling, General and Administrative Expenses (in thousands) | Period | 2022 | 2021 | YoY Change % | | :--- | :--- | :--- | :--- | | 3 Months Ended Sep 30 | $26,543 | $21,662 | 22.5% | | 9 Months Ended Sep 30 | $75,309 | $59,145 | 27.3% | - SG&A expenses increased by **22.5% for Q3 2022** and **27.3% for the nine-month period**, driven by higher sales and marketing, internal technology infrastructure, and corporate management expenses, including MENU-related costs[150](index=150&type=chunk)[151](index=151&type=chunk)[152](index=152&type=chunk) [Research and Development Expenses](index=42&type=section&id=Research%20and%20Development%20Expenses) Research and Development Expenses (in thousands) | Period | 2022 | 2021 | YoY Change % | | :--- | :--- | :--- | :--- | | 3 Months Ended Sep 30 | $12,843 | $10,122 | 26.9% | | 9 Months Ended Sep 30 | $33,785 | $24,574 | 37.5% | - R&D expenses increased by **26.9% for Q3 2022** and **37.5% for the nine-month period**, reflecting additional investments in software product development, including Punchh-related and MENU-related R&D[154](index=154&type=chunk)[156](index=156&type=chunk) [Other Operating Expenses: Amortization of Intangible Assets / Insurance Proceeds](index=42&type=section&id=Other%20Operating%20Expenses:%20Amortization%20of%20Intangible%20Assets%20/%20Insurance%20Proceeds) Other Operating Expenses (in thousands) | Metric | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Amortization of identifiable intangible assets | $465 | $539 | $1,399 | $1,303 | | Gain on insurance proceeds | — | — | — | $(4,400) | - Amortization of identifiable intangible assets remained relatively stable, at **$0.5 million for Q3 2022** and **$1.4 million for the nine-month period**[157](index=157&type=chunk)[159](index=159&type=chunk) - A **$4.4 million gain** on insurance proceeds was recognized in the nine months ended September 30, 2021, with no comparable gain in 2022[160](index=160&type=chunk) [Other Expense, Net](index=43&type=section&id=Other%20Expense,%20Net) Other Expense, Net (in thousands) | Period | 2022 | 2021 | YoY Change % | | :--- | :--- | :--- | :--- | | 3 Months Ended Sep 30 | $(179) | $(539) | (66.8)% | | 9 Months Ended Sep 30 | $(804) | $(931) | (13.6)% | - Other expense, net, decreased for both the three and nine months ended September 30, 2022, compared to the prior year[161](index=161&type=chunk)[162](index=162&type=chunk) [Interest Expense, Net](index=43&type=section&id=Interest%20Expense,%20Net) Interest Expense, Net (in thousands) | Period | 2022 | 2021 | YoY Change % | | :--- | :--- | :--- | :--- | | 3 Months Ended Sep 30 | $(2,140) | $(5,406) | (60.4)% | | 9 Months Ended Sep 30 | $(7,054) | $(12,503) | (43.6)% | - Interest expense, net, decreased significantly by **60.4% for Q3 2022** and **43.6% for the nine-month period**[163](index=163&type=chunk)[164](index=164&type=chunk) - The decrease was driven by the extinguishment of the Owl Rock Term Loan in September 2021 and a reduction of accretion resulting from the January 1, 2022, adoption of ASU 2020-06[163](index=163&type=chunk)[164](index=164&type=chunk) [Taxes](index=44&type=section&id=Taxes) (Provision for) Benefit from Income Taxes (in thousands) | Period | 2022 | 2021 | YoY Change % | | :--- | :--- | :--- | :--- | | 3 Months Ended Sep 30 | $(578) | $37 | (1662.2)% | | 9 Months Ended Sep 30 | $(629) | $12,295 | (105.1)% | - The Company recorded a net tax provision of **$0.6 million** for both the three and nine months ended September 30, 2022, primarily due to foreign taxes[165](index=165&type=chunk)[166](index=166&type=chunk) - In contrast, the nine months ended September 30, 2021, saw a net tax benefit of **$12.3 million**, resulting from a partial release of the deferred tax asset valuation allowance related to the Punchh Acquisition[166](index=166&type=chunk) [Key Performance Indicators and Non-GAAP Financial Measures](index=44&type=section&id=Key%20Performance%20Indicators%20and%20Non-GAAP%20Financial%20Measures) [Annual Recurring Revenue](index=45&type=section&id=Annual%20Recurring%20Revenue) Annual Recurring Revenue (ARR) (in thousands) | Product Grouping | As of Sep 30, 2022 | As of Sep 30, 2021 | YoY Increase % | | :--- | :--- | :--- | :--- | | Guest Engagement | $57,506 | $43,950 | 30.8% | | Operator Solutions | $38,879 | $29,479 | 31.9% | | Back Office | $10,238 | $9,114 | 12.3% | | **Total** | **$106,623** | **$82,543** | **29.2%** | - Total ARR increased by **29.2% to $106.6 million** as of September 30, 2022, compared to the prior year[169](index=169&type=chunk) - Guest Engagement and Operator Solutions segments showed strong ARR growth of **30.8%** and **31.9%**, respectively[169](index=169&type=chunk) [Active Sites](index=45&type=section&id=Active%20Sites) Active Sites (in thousands) | Product Grouping | As of Sep 30, 2022 | As of Sep 30, 2021 | YoY Increase % | | :--- | :--- | :--- | :--- | | Guest Engagement | 67.1 | 52.9 | 26.8% | | Operator Solutions | 18.6 | 14.9 | 24.5% | | Back Office | 6.7 | 6.2 | 7.9% | - Guest Engagement active sites increased by **26.8% to 67.1 thousand**, and Operator Solutions active sites increased by **24.5% to 18.6 thousand** as of September 30, 2022[170](index=170&type=chunk) [Segment Revenue by Product Line as Percentage of Total Revenue](index=45&type=section&id=Segment%20Revenue%20by%20Product%20Line%20as%20Percentage%20of%20Total%20Revenue) Segment Revenue by Product Line (in thousands) - 3 Months Ended Sep 30 | Product Line | 2022 | 2021 | YoY Change % | | :--- | :--- | :--- | :--- | | Hardware | $30,796 | $29,669 | 3.8% | | Software | $22,438 | $17,168 | 30.7% | | Services (Restaurant/Retail) | $15,119 | $12,984 | 16.4% | | ISR (Government) | $14,710 | $9,619 | 52.9% | Segment Revenue by Product Line (in thousands) - 9 Months Ended Sep 30 | Product Line | 2022 | 2021 | YoY Change % | | :--- | :--- | :--- | :--- | | Hardware | $83,219 | $70,858 | 17.4% | | Software | $62,414 | $40,145 | 55.5% | | Services (Restaurant/Retail) | $45,737 | $36,526 | 25.2% | | ISR (Government) | $38,746 | $28,450 | 36.2% | - Software revenue in the Restaurant/Retail segment grew significantly by **30.7% for Q3 2022** and **55.5% for the nine-month period**[171](index=171&type=chunk)[172](index=172&type=chunk) - ISR solutions in the Government segment showed strong growth, increasing by **52.9% for Q3 2022** and **36.2% for the nine-month period**[171](index=171&type=chunk)[172](index=172&type=chunk) [Recurring and Non-Recurring Revenue as Percentage of Total Revenue](index=46&type=section&id=Recurring%20and%20Non-Recurring%20Revenue%20as%20Percentage%20of%20Total%20Revenue) Recurring and Non-Recurring Revenue (in thousands) - 3 Months Ended Sep 30 | Revenue Type | 2022 | 2021 | YoY Change % | | :--- | :--- | :--- | :--- | | Recurring revenue | $33,804 | $24,974 | 35.4% | | Non-recurring revenue | $34,549 | $34,847 | (0.9)% | | **Total Restaurant/Retail** | **$68,353** | **$59,821** | **14.3%** | | **Total Government** | **$24,414** | **$18,039** | **35.3%** | | **Total revenue** | **$92,767** | **$77,860** | **19.1%** | Recurring and Non-Recurring Revenue (in thousands) - 9 Months Ended Sep 30 | Revenue Type | 2022 | 2021 | YoY Change % | | :--- | :--- | :--- | :--- | | Recurring revenue | $93,974 | $62,939 | 49.3% | | Non-recurring revenue | $97,396 | $84,590 | 15.1% | | **Total Restaurant/Retail** | **$191,370** | **$147,529** | **29.7%** | | **Total Government** | **$66,775** | **$53,748** | **24.2%** | | **Total revenue** | **$258,145** | **$201,277** | **28.3%** | - Recurring revenue in the Restaurant/Retail segment increased by **35.4% for Q3 2022** and **49.3% for the nine-month period**, indicating a shift towards more predictable revenue streams[173](index=173&type=chunk) - Recurring revenue includes SaaS, hardware/software maintenance, and payment processing revenue[174](index=174&type=chunk) [About Non-GAAP Financial Measures](index=48&type=section&id=About%20Non-GAAP%20Financial%20Measures) - The Company uses non-GAAP measures like EBITDA, adjusted EBITDA, adjusted net loss, and adjusted diluted net loss per share to provide a more meaningful comparison of core business operating results[175](index=175&type=chunk)[176](index=176&type=chunk) Reconciliation of Adjusted EBITDA (in thousands) | Metric | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Net loss | $(21,340) | $(31,933) | $(55,838) | $(50,160) | | EBITDA | $(12,181) | $(20,365) | $(28,562) | $(34,883) | | Adjusted EBITDA | $(7,963) | $(3,987) | $(16,001) | $(12,904) | Reconciliation of Adjusted Net Loss/Diluted Loss Per Share (in thousands, except per share amounts) | Metric | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Net loss/diluted loss per share | $(21,340) / $(0.79) | $(31,933) / $(1.23) | $(55,838) / $(2.06) | $(50,160) / $(2.05) | | Adjusted net loss/adjusted diluted loss per share | $(11,906) / $(0.44) | $(9,320) / $(0.36) | $(28,852) / $(1.06) | $(26,038) / $(1.06) | [LIQUIDITY AND CAPITAL RESOURCES](index=51&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) - Primary liquidity sources are cash and cash equivalents (**$85.5 million**, excluding $4.0 million held for customers) and short-term investments (**$40.0 million**) as of September 30, 2022[190](index=190&type=chunk) - Cash used in operating activities was **$33.6 million** for the nine months ended September 30, 2022, driven by net loss and increased working capital requirements (inventory and accounts receivable)[191](index=191&type=chunk) - Cash used in investing activities was **$64.3 million**, including **$18.8 million** for acquisitions and **$40.0 million** for short-term held-to-maturity securities[192](index=192&type=chunk) - The Company expects available cash and cash equivalents to be sufficient for operating needs for at least the next 12 months[194](index=194&type=chunk) [CRITICAL ACCOUNTING POLICIES AND ESTIMATES](index=52&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES%20AND%20ESTIMATES) - Critical accounting policies and estimates include revenue recognition, stock-based compensation, business combinations, carrying amounts of assets, convertible notes, credit losses, and inventory valuation[196](index=196&type=chunk) - These estimates are subject to uncertainties related to market conditions, risks, trends, and the ongoing COVID-19 pandemic[196](index=196&type=chunk) - No material changes to critical accounting policies and estimates were reported from the 2021 Annual Report[196](index=196&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=52&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company discusses its exposure to market risks, specifically foreign currency exchange and interest rate risk - The Company is exposed to foreign currency exchange risk from non-dollar denominated sales and operating expenses, but the impact was not material as of September 30, 2022[197](index=197&type=chunk) - Interest rate risk is primarily related to fixed-rate convertible senior notes, meaning there is no financial statement risk from interest rate changes, though fair value can fluctuate[198](index=198&type=chunk)[199](index=199&type=chunk) [Item 4. Controls and Procedures](index=52&type=section&id=Item%204.%20Controls%20and%20Procedures) The company addresses the effectiveness of its disclosure controls, noting ongoing material weaknesses and remediation efforts - Management concluded that disclosure controls and procedures were **not effective** as of September 30, 2022, due to continuing material weaknesses in internal control over financial reporting[200](index=200&type=chunk) - Remediation efforts to address identified material weaknesses are ongoing, involving the implementation and documentation of necessary policies, procedures, and internal controls[201](index=201&type=chunk) - No additional material changes in internal control over financial reporting occurred during the quarter ended September 30, 2022, beyond those inherited from the Punchh Acquisition[202](index=202&type=chunk) [PART II. OTHER INFORMATION](index=53&type=section&id=PART%20II%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=53&type=section&id=Item%201.%20Legal%20Proceedings) The company confirms that no pending litigation is expected to have a material adverse effect on its financial condition - The Company does not believe that any pending litigation would have a material adverse effect on its financial condition or results of operations[204](index=204&type=chunk) [Item 1A. Risk Factors](index=53&type=section&id=Item%201A.%20Risk%20Factors) Risk factors previously disclosed in the 2021 Annual Report and Q2 2022 Form 10-Q remain current - The risk factors described in the 2021 Annual Report and Q2 2022 Form 10-Q remain current in all material respects and could materially and adversely affect the Company's business[205](index=205&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use Of Proceeds](index=53&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20Of%20Proceeds) The company details the issuance of common stock in unregistered sales for the MENU Acquisition and shares withheld for taxes - On July 25, 2022, the Company issued **162,917 shares** of common stock, valued at **$6.3 million**, as part of the purchase consideration for the MENU Acquisition[206](index=206&type=chunk) - For the three months ended September 30, 2022, **8,707 shares** were withheld from employees to satisfy tax withholding obligations arising from the vesting of restricted stock[207](index=207&type=chunk)[209](index=209&type=chunk) [Item 6. Exhibits](index=54&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Quarterly Report, including organizational documents and officer certifications - The exhibits include the Restated Certificate of Incorporation, Amended and Restated Bylaws, certifications from the Principal Executive Officer and Principal Financial Officer, and various Inline XBRL documents[210](index=210&type=chunk) [Signatures](index=55&type=section&id=Signatures) This section contains the official signatures certifying the filing of the report on behalf of the company - The report was duly signed on November 9, 2022, by Bryan A Menar, Chief Financial and Accounting Officer[212](index=212&type=chunk)