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)

Par Technology Corporation (NYSE:PAR) Q2 2022 Earnings Conference Call August 9, 2022 9:00 AM ET Company Participants Chris Byrnes - VP, Business Development Savneet Singh - President and CEO Bryan Menar - CFO Conference Call Participants Mayank Tandon - Needham & Company Stephen Sheldon - William Blair Samad Samana - Jefferies Anja Soderstrom - Sidoti & Company Adam Wyden - ADW Capital Operator Good day and thank you for standing by. Welcome to the 2022 Second Quarter Financial Results Conference Call. At ...

Q2 '22 Earnings Presentation August 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 pr ...

PART I - FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial statements, management's analysis, and related disclosures [Forward-Looking Statements](index=4&type=section&id=Forward-Looking%20Statements) This section outlines forward-looking statements regarding PAR's future operations and financial condition, emphasizing their reliance on assumptions and exposure to risks - Forward-looking statements are predictive of PAR's future operations, financial condition, financial results, business strategies, and prospects, identified by words such as 'anticipate,' 'believe,' 'expect,' 'estimate,' 'intend,' 'may,' 'will,' and similar expressions[6](index=6&type=chunk) - Statements are based on management's current expectations and assumptions, subject to risks and uncertainties beyond PAR's control, including COVID-19 effects, timing and benefits of acquisitions, supply constraints, macroeconomic trends, and litigation[6](index=6&type=chunk) - Key risk factors include the effects of COVID-19 (lockdowns, store closures, delayed adoptions), ability to manage suppliers and component shortages, attracting and retaining employees, protecting intellectual property, impact of unfavorable macroeconomic conditions (recession, interest rates, inflation, consumer confidence), and geopolitical events (Russia-Ukraine war)[6](index=6&type=chunk) [Item 1. Financial Statements (unaudited)](index=5&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) This section presents PAR Technology Corporation's unaudited condensed consolidated financial statements, including balance sheets, income statements, cash flows, and detailed notes [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20at%20June%2030%2C%202022%20and%20December%2031%2C%202021) This section presents the unaudited condensed consolidated balance sheets for PAR Technology Corporation as of June 30, 2022, and December 31, 2021 Condensed Consolidated Balance Sheets (in thousands) | Metric | June 30, 2022 | December 31, 2021 | |---|---|---| | **Assets** | | | | Cash and cash equivalents | $150,600 | $188,419 | | Accounts receivable – net | $60,673 | $49,978 | | Inventories | $42,042 | $35,078 | | Total current assets | $261,229 | $283,007 | | Total assets | $859,113 | $888,149 | | **Liabilities** | | | | Current portion of long-term debt | $358 | $705 | | Accounts payable | $26,091 | $20,845 | | Total current liabilities | $61,555 | $60,517 | | Long-term debt | $388,176 | $305,845 | | Total liabilities | $463,613 | $383,804 | | **Shareholders' Equity** | | | | Total shareholders' equity | $395,500 | $504,345 | | Total Liabilities and Shareholders' Equity | $859,113 | $888,149 | - Total assets decreased from **$888.1 million** at December 31, 2021, to **$859.1 million** at June 30, 2022, primarily due to a decrease in cash and cash equivalents[9](index=9&type=chunk) - Total liabilities increased from **$383.8 million** to **$463.6 million**, driven by a significant increase in long-term debt[9](index=9&type=chunk) - Total shareholders' equity decreased from **$504.3 million** to **$395.5 million** during the period[9](index=9&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%202022%20and%20June%2030%2C%202021) This section presents the unaudited condensed consolidated statements of operations for the three and six months ended June 30, 2022, and June 30, 2021 Condensed Consolidated Statements of Operations (in thousands, except per share amounts) | Metric | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | |---|---|---|---|---| | Total revenues, net | $85,093 | $68,950 | $165,378 | $123,417 | | Total cost of sales | $63,972 | $53,847 | $123,644 | $98,114 | | Gross margin | $21,121 | $15,103 | $41,734 | $25,303 | | Total operating expenses | $37,220 | $32,078 | $70,642 | $48,299 | | Operating loss | $(16,099) | $(16,975) | $(28,908) | $(22,996) | | Loss before provision for income taxes | $(18,807) | $(22,253) | $(34,447) | $(30,485) | | Net loss | $(18,848) | $(9,956) | $(34,498) | $(18,227) | | Net loss per share (basic and diluted) | $(0.70) | $(0.39) | $(1.27) | $(0.77) | | Weighted average shares outstanding (basic and diluted) | 26,982 | 25,484 | 27,070 | 23,716 | - Net loss for the three months ended June 30, 2022, increased to **$18.8 million** from **$10.0 million** in the prior year, and for the six months, it increased to **$34.5 million** from **$18.2 million**[11](index=11&type=chunk) - Total revenues increased by **23.4%** for the three months and **34.0%** for the six months ended June 30, 2022, compared to the prior year[11](index=11&type=chunk) - Gross margin improved by **39.8%** for the three months and **64.9%** for the six months ended June 30, 2022, compared to the prior year[11](index=11&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%202022%20and%20June%2030%2C%202021) This section presents the unaudited condensed consolidated statements of comprehensive loss for the three and six months ended June 30, 2022, and June 30, 2021 Condensed Consolidated Statements of Comprehensive Loss (in thousands) | Metric | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | |---|---|---|---|---| | Net loss | $(18,848) | $(9,956) | $(34,498) | $(18,227) | | Foreign currency translation adjustments | $(161) | $355 | $351 | $53 | | Comprehensive loss | $(19,009) | $(9,601) | $(34,147) | $(18,174) | - Comprehensive loss for the three months ended June 30, 2022, was **$(19.0) million**, compared to **$(9.6) million** in the prior year, primarily due to increased net loss and negative foreign currency translation adjustments[13](index=13&type=chunk) - For the six months ended June 30, 2022, comprehensive loss was **$(34.1) million**, an increase from **$(18.2) million** in the prior year, despite positive foreign currency translation adjustments[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%20for%20the%20Six%20Months%20Ended%20June%2030%2C%202022%20and%20June%2030%2C%202021) This section presents the unaudited condensed consolidated statements of changes in shareholders' equity for the six months ended June 30, 2022, and June 30, 2021 Condensed Consolidated Statements of Changes in Shareholders' Equity (in thousands) | Metric | Balances at Jan 1, 2022 | Balances at June 30, 2022 | Balances at Jan 1, 2021 | Balances at June 30, 2021 | |---|---|---|---|---| | Common Stock Amount | $562 | $565 | $459 | $540 | | Additional Paid in Capital | $574,281 | $582,064 | $243,575 | $514,295 | | Accumulated Deficit | $(135,885) | $(170,383) | $(46,706) | $(64,933) | | Total Shareholders' Equity | $424,309 | $395,500 | $188,405 | $436,561 | - Total shareholders' equity decreased from **$424.3 million** at January 1, 2022, to **$395.5 million** at June 30, 2022, primarily due to net loss of **$34.5 million** and treasury stock acquisitions, partially offset by stock-based compensation[15](index=15&type=chunk) - The adoption of ASU 2020-06 on January 1, 2022, resulted in an **$80.0 million** reduction in total shareholders' equity, reclassifying convertible debt components from equity to debt[15](index=15&type=chunk)[36](index=36&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%202022%20and%20June%2030%2C%202021) This section presents the unaudited condensed consolidated statements of cash flows for the six months ended June 30, 2022, and June 30, 2021 Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | |---|---|---| | Net cash used in operating activities | $(31,589) | $(33,058) | | Net cash used in investing activities | $(4,963) | $(381,701) | | Net cash (used in) provided by financing activities | $(1,778) | $319,347 | | Net decrease in cash and cash equivalents | $(37,819) | $(95,468) | | Cash and cash equivalents at end of period | $150,600 | $85,218 | - Net cash used in operating activities remained relatively stable at **$(31.6) million** in H1 2022 compared to **$(33.1) million** in H1 2021, primarily due to increased net loss offset by non-cash charges and working capital changes[20](index=20&type=chunk)[187](index=187&type=chunk) - Net cash used in investing activities significantly decreased to **$(5.0) million** in H1 2022 from **$(381.7) million** in H1 2021, mainly due to the Punchh Acquisition in the prior year[20](index=20&type=chunk)[188](index=188&type=chunk) - Financing activities shifted from providing **$319.3 million** in H1 2021 (due to common stock and debt issuance) to using **$(1.8) million** in H1 2022, driven by stock-based compensation related transactions[20](index=20&type=chunk)[189](index=189&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20(unaudited)) This section provides detailed notes to the unaudited condensed consolidated financial statements, explaining accounting policies, acquisitions, and specific financial items [NOTE 1: BASIS OF PRESENTATION](index=12&type=section&id=NOTE%201%3A%20BASIS%20OF%20PRESENTATION) This note outlines the basis of presentation for the financial statements, segment reporting, and the impact of recent accounting standard adoptions - The financial statements are prepared in accordance with GAAP for interim statements and SEC regulations, including normal and recurring adjustments, and interim results are not indicative of full-year results[23](index=23&type=chunk) - The Company operates in two segments: Restaurant/Retail (SaaS solutions like Brink POS, Data Central, PAR Pay, Punchh) and Government (technical expertise for DoD and federal agencies, satellite command and control)[25](index=25&type=chunk) - 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 an **$80.0 million** reduction to shareholders' equity by eliminating the separation of convertible debt between debt and equity[35](index=35&type=chunk)[36](index=36&type=chunk) [NOTE 2: REVENUE RECOGNITION](index=14&type=section&id=NOTE%202%3A%20REVENUE%20RECOGNITION) This note details the Company's revenue recognition policies across its Restaurant/Retail and Government segments, disaggregated by recognition method - Revenue is derived from SaaS, hardware/software sales, activation, support, installations, maintenance, and professional services, recognized based on ASC Topic 606 performance obligations[39](index=39&type=chunk) - Restaurant/Retail segment revenue is recognized at a point in time for licensed software, hardware, and installations, and over time for SaaS, Advanced Exchange, on-site support, and other services[40](index=40&type=chunk) - Government segment revenue is recognized over time, predominantly from services, using costs incurred to measure progress for cost-plus-fixed-fee contracts[43](index=43&type=chunk) Disaggregated Revenue by Segment and Recognition Method (Three Months Ended June 30, 2022, in thousands) | Segment/Type | Point in Time | Over Time | Total | |---|---|---|---| | Restaurant/Retail Hardware | $27,771 | — | $27,771 | | Restaurant/Retail Software | $(11) | $20,640 | $20,629 | | Restaurant/Retail Service | $5,141 | $10,630 | $15,771 | | Government (all over time) | — | $20,922 | $20,922 | | **Total** | **$32,901** | **$52,192** | **$85,093** | [NOTE 3: ACQUISITIONS](index=17&type=section&id=NOTE%203%3A%20ACQUISITIONS) This note provides details on recent acquisitions, including the impact on goodwill and the final purchase price allocation for the Punchh Acquisition - In Q1 2022, ParTech acquired a restaurant technology company, resulting in a **$1.2 million** increase to goodwill[55](index=55&type=chunk) - The Punchh Acquisition (April 8, 2021) was finalized in Q1 2022, with adjustments including an **$0.8 million** reduction of deferred revenue and a **$1.1 million** reduction to goodwill[59](index=59&type=chunk) Punchh Acquisition Final Purchase Price Allocation (in thousands) | Asset/Liability | Allocation | |---|---| | Cash | $22,714 | | Accounts receivable | $10,214 | | Property and equipment | $592 | | Lease right-of-use assets | $2,473 | | Developed technology | $84,600 | | Customer relationships | $7,500 | | Indemnification assets | $2,109 | | Trade name | $5,800 | | Prepaid and other acquired assets | $2,764 | | Goodwill | $415,055 | | Total assets | $553,821 | | Accounts payable and accrued expenses | $15,617 | | Deferred revenue | $10,298 | | Loan payables | $3,508 | | Lease liabilities | $2,787 | | Indemnification liabilities | $2,109 | | Deferred taxes | $11,794 | | Consideration paid | $507,708 | - The Punchh Acquisition contributed **$8.1 million** in additional revenues for the three and six months ended June 30, 2021[62](index=62&type=chunk) [NOTE 4: ACCOUNTS RECEIVABLE, NET](index=19&type=section&id=NOTE%204%3A%20ACCOUNTS%20RECEIVABLE%2C%20NET) This note presents the breakdown of net accounts receivable by segment and details changes in the current expected credit loss allowance Accounts Receivable, Net (in thousands) | Segment | June 30, 2022 | December 31, 2021 | |---|---|---| | Government segment | $23,300 | $11,667 | | Restaurant/Retail segment | $37,373 | $38,311 | | **Total Accounts receivable - net** | **$60,673** | **$49,978** | - Total net accounts receivable increased to **$60.7 million** at June 30, 2022, from **$50.0 million** at December 31, 2021, primarily driven by a significant increase in the Government segment's billed receivables[64](index=64&type=chunk) Changes in Current Expected Credit Loss (in thousands) | Metric | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | |---|---|---| | Beginning Balance - January 1 | $1,306 | $1,416 | | Provisions | $482 | $922 | | Write-offs | $(218) | $(394) | | Recoveries | — | $(15) | | Ending Balance - June 30 | $1,570 | $1,929 | [NOTE 5: INVENTORIES](index=20&type=section&id=NOTE%205%3A%20INVENTORIES) This note details the components of inventory, including finished goods, work in process, and component parts, and changes in obsolescence reserves Components of Inventory (in thousands) | Component | June 30, 2022 | December 31, 2021 | |---|---|---| | Finished goods | $26,103 | $17,528 | | Work in process | $552 | $688 | | Component parts | $13,608 | $14,880 | | Service parts | $1,779 | $1,982 | | **Total Inventories** | **$42,042** | **$35,078** | - Total inventories increased to **$42.0 million** at June 30, 2022, from **$35.1 million** at December 31, 2021, primarily due to an increase in finished goods[66](index=66&type=chunk) - Excess and obsolescence reserves against inventories increased to **$11.1 million** at June 30, 2022, from **$10.8 million** at December 31, 2021[66](index=66&type=chunk) [NOTE 6: IDENTIFIABLE INTANGIBLE ASSETS AND GOODWILL](index=20&type=section&id=NOTE%206%3A%20IDENTIFIABLE%20INTANGIBLE%20ASSETS%20AND%20GOODWILL) This note outlines the Company's identifiable intangible assets and goodwill, including their components, amortization periods, and segment allocation - Identifiable intangible assets include acquired developed technology, internally developed software costs, customer relationships, and trade names, with varying estimated useful lives[72](index=72&type=chunk) Components of Identifiable Intangible Assets (in thousands) | Asset Type | June 30, 2022 | December 31, 2021 | Weighted Average Amortization Period | |---|---|---|---| | Acquired developed technology | $109,100 | $109,100 | 4.86 years | | Internally developed software costs | $28,672 | $25,735 | 2.67 years | | Customer relationships | $12,360 | $12,360 | 5 years | | Trade names (amortizable) | $1,410 | $1,410 | 3 years | | Less accumulated amortization | $(51,045) | $(39,479) | | | **Net Amortizable Intangibles** | **$100,527** | **$109,156** | | | Internally developed software costs not meeting general release threshold | $3,756 | $3,407 | | | Trademarks, trade names (non-amortizable) | $6,200 | $6,200 | Indefinite | | **Total Identifiable Intangible Assets** | **$110,483** | **$118,763** | | - Goodwill for the Restaurant/Retail segment was **$456.7 million** and for the Government segment was **$0.7 million** at June 30, 2022, with a net increase of **$0.1 million** from December 31, 2021, due to a Q1 2022 acquisition and Punchh acquisition adjustments[73](index=73&type=chunk) [NOTE 7: DEBT](index=22&type=section&id=NOTE%207%3A%20DEBT) This note provides a summary of the Company's long-term debt, including convertible notes, their carrying amounts, and related interest expense Long-Term Debt Summary (in thousands) | Notes | Principal Amount (June 30, 2022) | Net Carrying Amount (June 30, 2022) | Net Carrying Amount (Dec 31, 2021) | |---|---|---|---| | 2024 Notes (4.500%) | $13,750 | $13,402 | $11,846 | | 2026 Notes (2.875%) | $120,000 | $117,158 | $98,147 | | 2027 Notes (1.500%) | $265,000 | $257,616 | $195,852 | | **Total Long-Term Debt** | **$398,750** | **$388,176** | **$305,845** | - The Company's long-term debt increased significantly from **$305.8 million** at December 31, 2021, to **$388.2 million** at June 30, 2022, primarily due to the adoption of ASU 2020-06 which reclassified convertible debt components from equity to debt[74](index=74&type=chunk)[36](index=36&type=chunk) - The 2027 Notes (issued Sept 2021) were used to repay the **$180.0 million** Owl Rock Term Loan, with remaining proceeds for general corporate purposes and business growth[75](index=75&type=chunk)[85](index=85&type=chunk)[86](index=86&type=chunk) Interest Expense, Net (in thousands) | Metric | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | |---|---|---|---|---| | Contractual interest expense | $2,011 | $3,196 | $4,014 | $4,213 | | Amortization of debt issuance costs | $495 | $1,737 | $981 | $2,917 | | **Total interest expense** | **$2,506** | **$4,933** | **$4,995** | **$7,130** | [NOTE 8: COMMON STOCK](index=24&type=section&id=NOTE%208%3A%20COMMON%20STOCK) This note details common stock transactions, including public offerings and private placements related to acquisitions, and their net proceeds - On September 17, 2021, the Company completed a public offering, issuing **982,143 shares** of common stock at **$56.00 per share**, generating net proceeds of **$52.5 million**[88](index=88&type=chunk) - In connection with the Punchh Acquisition (April 2021), the Company issued **2,352,942 shares** of common stock through a private placement to Act III and T. Rowe Price, raising approximately **$160.0 million**[89](index=89&type=chunk)[90](index=90&type=chunk) - An additional **1,493,130 shares** of common stock were issued as part of the consideration for the Punchh Acquisition[91](index=91&type=chunk) [NOTE 9: STOCK-BASED COMPENSATION](index=25&type=section&id=NOTE%209%3A%20STOCK-BASED%20COMPENSATION) This note presents the Company's stock-based compensation expense by line item and the aggregate unrecognized compensation expense for unvested awards Stock-Based Compensation Expense (in thousands) | Line Item | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | |---|---|---|---|---| | Cost of sales - contracts | $36 | $116 | $85 | $184 | | Selling, general and administrative | $3,195 | $4,135 | $6,682 | $5,387 | | **Total stock-based compensation expense** | **$3,231** | **$4,251** | **$6,767** | **$5,571** | - Total stock-based compensation expense for the six months ended June 30, 2022, increased to **$6.8 million** from **$5.6 million** in the prior year, primarily in selling, general, and administrative expenses[93](index=93&type=chunk) - As of June 30, 2022, the aggregate unrecognized compensation expense related to unvested equity awards was **$25.3 million**, expected to be recognized through fiscal year 2025[93](index=93&type=chunk) [NOTE 10: NET LOSS PER SHARE](index=26&type=section&id=NOTE%2010%3A%20NET%20LOSS%20PER%20SHARE) This note details the calculation of basic and diluted net loss per share, including the exclusion of anti-dilutive potential shares - Basic and diluted net loss per share for the three months ended June 30, 2022, was **$(0.70)**, compared to **$(0.39)** in the prior year, and for the six months, it was **$(1.27)** compared to **$(0.77)**[11](index=11&type=chunk) - Potential shares from convertible notes (2024, 2026, 2027 Notes) and a warrant were excluded from diluted net loss per share calculations due to their anti-dilutive impact[97](index=97&type=chunk)[98](index=98&type=chunk) Weighted Average Shares Outstanding (in thousands) | Metric | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | |---|---|---|---|---| | Weighted average shares outstanding (basic and diluted) | 26,982 | 25,484 | 27,070 | 23,716 | [NOTE 11: COMMITMENTS AND CONTINGENCIES](index=26&type=section&id=NOTE%2011%3A%20COMMITMENTS%20AND%20CONTINGENCIES) This note outlines the Company's legal proceedings and contingent liabilities, including a class-wide settlement for a privacy act violation - The Company is involved in legal proceedings in the ordinary course of business and U.S. Government contract costs are subject to audit, but management believes current legal proceedings are not material[99](index=99&type=chunk) - A class-wide settlement for a complaint alleging Illinois Biometric Information Privacy Act violation was granted final approval on July 20, 2022, with the Company having funded a preliminary settlement of **$790 thousand** by June 30, 2022[100](index=100&type=chunk) [NOTE 12: SEGMENT AND RELATED INFORMATION](index=26&type=section&id=NOTE%2012%3A%20SEGMENT%20AND%20RELATED%20INFORMATION) This note provides disaggregated financial information by the Company's Restaurant/Retail and Government segments, including revenues and operating results - The Company operates in two distinct segments: Restaurant/Retail (SaaS solutions for restaurants) and Government (technical solutions for DoD and federal agencies)[101](index=101&type=chunk)[102](index=102&type=chunk)[103](index=103&type=chunk) Segment Revenues (in thousands) | Segment | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | |---|---|---|---|---| | Restaurant/Retail | $64,171 | $51,124 | $123,017 | $87,708 | | Government | $20,922 | $17,826 | $42,361 | $35,709 | | **Total** | **$85,093** | **$68,950** | **$165,378** | **$123,417** | Segment Operating (Loss) Income (in thousands) | Segment | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | |---|---|---|---|---| | Restaurant/Retail | $(5,743) | $(15,968) | $(10,924) | $(25,252) | | Government | $2,314 | $1,405 | $3,861 | $2,595 | | Other | $(12,670) | $(2,412) | $(21,845) | $(339) | | **Total** | **$(16,099)** | **$(16,975)** | **$(28,908)** | **$(22,996)** | - Key customers include Yum! Brands, Inc. (**10-11%** of Restaurant/Retail revenue), McDonald's Corporation (**8-14%** of Restaurant/Retail revenue), and the U.S. Department of Defense (**25-29%** of Government revenue)[110](index=110&type=chunk) [NOTE 13: FAIR VALUE OF FINANCIAL INSTRUMENTS](index=28&type=section&id=NOTE%2013%3A%20FAIR%20VALUE%20OF%20FINANCIAL%20INSTRUMENTS) This note discusses the fair value of the Company's financial instruments, including debt instruments and deferred compensation liabilities - Financial instruments include cash and cash equivalents, trade receivables, trade payables, debt instruments, and deferred compensation assets/liabilities[112](index=112&type=chunk) - The fair value of 2024, 2026, and 2027 Notes at June 30, 2022, was **$21.5 million**, **$139.1 million**, and **$210.5 million**, respectively, classified within Level 2 of the fair value hierarchy[112](index=112&type=chunk) - Deferred compensation liabilities are classified within Level 2, with amounts owed to employees at June 30, 2022, being **$2.0 million**[113](index=113&type=chunk)[114](index=114&type=chunk) [Note 14 — Subsequent Event](index=29&type=section&id=Note%2014%20%E2%80%94%20Subsequent%20Event) This note describes a subsequent event involving the acquisition of MENU Technologies AG, including the purchase price and expected allocation - Subsequent to June 30, 2022, the Company acquired MENU Technologies AG for **$25.0 million** (**$18.7 million** cash, **$6.3 million** stock), with potential additional earn-out based on future SaaS annual recurring revenues[115](index=115&type=chunk) - The acquisition is expected to allocate a portion of the purchase price to identifiable intangible assets like developed technology and customer relationships, with preliminary purchase price allocation expected by Q3 2022[115](index=115&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's analysis of the Company's financial condition, operational results, liquidity, and critical accounting policies for the periods presented [OVERVIEW](index=29&type=section&id=OVERVIEW) This section provides an overview of PAR Technology Corporation's business, detailing its Restaurant/Retail and Government segments and their respective offerings - PAR Technology Corporation operates in two distinct segments: Restaurant/Retail and Government, through its wholly-owned subsidiaries ParTech and PAR Government Systems Corporation[117](index=117&type=chunk) - The Restaurant/Retail segment provides an integrated suite of SaaS solutions (Brink POS, Data Central, PAR Pay, Punchh) to over **500 customers** and **60,000+ active restaurant locations**, focusing on operational efficiencies and a unified commerce platform[118](index=118&type=chunk)[119](index=119&type=chunk) - The Government segment offers technical expertise and advanced systems/software solutions for the DoD and other federal agencies, specializing in Intelligence, Surveillance, and Reconnaissance (ISR) solutions and mission systems operations[120](index=120&type=chunk) [RESULTS OF OPERATIONS](index=30&type=section&id=RESULTS%20OF%20OPERATIONS) This section analyzes the Company's consolidated financial performance, including revenues, gross margin, operating expenses, and net loss for the periods presented Consolidated Financial Highlights (in thousands) | Metric | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | YoY Change (%) | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | YoY Change (%) | |---|---|---|---|---|---|---| | Total revenues, net | $85,093 | $68,950 | 23.4% | $165,378 | $123,417 | 34.0% | | Total gross margin | $21,121 | $15,103 | 39.8% | $41,734 | $25,303 | 64.9% | | Operating loss | $(16,099) | $(16,975) | (5.2)% | $(28,908) | $(22,996) | 25.7% | | Net loss | $(18,848) | $(9,956) | 89.3% | $(34,498) | $(18,227) | 89.3% | - Total revenues increased significantly, driven by strong growth in both Product and Service revenues, particularly from hardware refreshes and SaaS solutions[126](index=126&type=chunk)[127](index=127&type=chunk)[128](index=128&type=chunk)[130](index=130&type=chunk)[131](index=131&type=chunk)[132](index=132&type=chunk) - Gross margin improved due to a higher mix of SaaS software and cost improvement initiatives in the Service segment, despite a decline in Product margin due to higher inventory costs[136](index=136&type=chunk)[137](index=137&type=chunk)[138](index=138&type=chunk)[141](index=141&type=chunk)[142](index=142&type=chunk)[143](index=143&type=chunk) - Net loss increased due to higher operating expenses, including increased selling, general and administrative, and research and development costs, and the absence of a prior-year insurance gain[121](index=121&type=chunk)[123](index=123&type=chunk)[145](index=145&type=chunk)[146](index=146&type=chunk)[149](index=149&type=chunk)[150](index=150&type=chunk)[154](index=154&type=chunk) [Revenues, Net](index=33&type=section&id=Revenues%2C%20Net) This section details the Company's net revenues, disaggregated by Product, Service, and Contract types, and their respective growth drivers Revenues, Net (in thousands) | Revenue Type | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | YoY Change (%) | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | YoY Change (%) | |---|---|---|---|---|---|---| | Product | $28,390 | $23,939 | 18.6% | $53,477 | $42,495 | 25.8% | | Service | $35,781 | $27,185 | 31.6% | $69,540 | $45,213 | 53.8% | | Contract | $20,922 | $17,826 | 17.4% | $42,361 | $35,709 | 18.6% | | **Total revenues, net** | **$85,093** | **$68,950** | **23.4%** | **$165,378** | **$123,417** | **34.0%** | - Product revenue growth (**18.6%** for Q2, **25.8%** for H1) was primarily driven by hardware refresh investments from domestic and international Tier 1 accounts, partly delayed by COVID-19[127](index=127&type=chunk)[131](index=131&type=chunk) - Service revenue saw substantial growth (**31.6%** for Q2, **53.8%** for H1), largely due to increases in Punchh SaaS revenues (**$4.5 million** Q2, **$15.7 million** H1) and Brink POS SaaS revenues (**$2.4 million** Q2, **$5.1 million** H1)[128](index=128&type=chunk)[132](index=132&type=chunk) - Contract revenues (Government segment) increased by **17.4%** for Q2 and **18.6%** for H1, driven by growth in ISR solutions and Mission systems product lines[129](index=129&type=chunk)[134](index=134&type=chunk) [Gross Margin](index=35&type=section&id=Gross%20Margin) This section analyzes the Company's gross margin performance across Product, Service, and Contract segments, highlighting factors influencing changes Gross Margin and Percentage of Revenue (in thousands) | Metric | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | |---|---|---|---|---| | Product Gross Margin | $4,179 (14.7%) | $5,452 (22.8%) | $9,269 (17.3%) | $9,123 (21.5%) | | Service Gross Margin | $14,617 (40.9%) | $8,245 (30.3%) | $28,580 (41.1%) | $13,578 (30.0%) | | Contract Gross Margin | $2,325 (11.1%) | $1,406 (7.9%) | $3,885 (9.2%) | $2,602 (7.3%) | | **Total Gross Margin** | **$21,121 (24.8%)** | **$15,103 (21.9%)** | **$41,734 (25.2%)** | **$25,303 (20.5%)** | - Product margin decreased due to a **$1.5 million** charge for excess & obsolete inventory and higher inventory costs in 2022[137](index=137&type=chunk)[142](index=142&type=chunk) - Service margin significantly improved (**40.9%** Q2, **41.1%** H1) due to a higher mix of SaaS software and cost improvement initiatives in hosting and customer support, even with amortization of acquired intangible assets[138](index=138&type=chunk)[143](index=143&type=chunk) - Contract margin improved (**11.1%** Q2, **9.2%** H1) due to higher margin Mission systems contracts and decreased corporate expenses[140](index=140&type=chunk)[144](index=144&type=chunk) [Selling, General Administrative Expenses](index=36&type=section&id=Selling%2C%20General%20Administrative%20Expenses) This section details the changes in selling, general, and administrative expenses, identifying key drivers such as sales & marketing and operational costs Selling, General and Administrative Expenses (in thousands) | Metric | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | YoY Change (%) | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | YoY Change (%) | |---|---|---|---|---|---|---| | Selling, general and administrative | $26,398 | $22,946 | 15.0% | $48,766 | $37,483 | 30.1% | - The increase in SG&A expenses for Q2 2022 was driven by **$1.9 million** in Sales & Marketing, **$1.0 million** in internal technology infrastructure, and **$0.6 million** in corporate management expenses[145](index=145&type=chunk) - For H1 2022, the increase was primarily due to **$6.3 million** in Punchh operational expenses, **$2.2 million** in corporate/business management, **$1.2 million** in internal technology infrastructure, and **$0.9 million** in acquisition-related costs[148](index=148&type=chunk) [Research and Development Expenses](index=38&type=section&id=Research%20and%20Development%20Expenses) This section analyzes the changes in research and development expenses, attributing increases to software product development and acquisition-related R&D Research and Development Expenses (in thousands) | Metric | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | YoY Change (%) | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | YoY Change (%) | |---|---|---|---|---|---|---| | Research and development | $10,101 | $8,643 | 16.9% | $20,942 | $14,452 | 44.9% | - The increase in R&D expenses for Q2 2022 was driven by **$1.5 million** for additional investments in software product development[149](index=149&type=chunk) - For H1 2022, the increase was primarily due to **$4.2 million** for Punchh-related R&D and **$2.3 million** for additional investments in existing product development[150](index=150&type=chunk) [Other Operating Expenses: Amortization of Intangible Assets / Insurance Proceeds](index=38&type=section&id=Other%20Operating%20Expenses%3A%20Amortization%20of%20Intangible%20Assets%20%2F%20Insurance%20Proceeds) This section discusses other operating expenses, including amortization of intangible assets and the impact of prior-year insurance proceeds Amortization of Identifiable Intangible Assets (in thousands) | Metric | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | YoY Change (%) | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | YoY Change (%) | |---|---|---|---|---|---|---| | Amortization of identifiable intangible assets | $721 | $489 | 47.4% | $934 | $764 | 22.3% | - A **$4.4 million** gain on insurance proceeds from a legacy claim was recognized in H1 2021, with no comparable gain in H1 2022, contributing to the increase in operating expenses[154](index=154&type=chunk) [Other Expense, Net](index=39&type=section&id=Other%20Expense%2C%20Net) This section details the Company's other expense, net, primarily driven by currency revaluation and miscellaneous expenses Other Expense, Net (in thousands) | Metric | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | YoY Change (%) | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | YoY Change (%) | |---|---|---|---|---|---|---| | Other expense, net | $(257) | $(341) | (24.6)% | $(625) | $(392) | 59.4% | - The increase in other expense, net, for H1 2022 was primarily driven by currency revaluation and other miscellaneous expenses[157](index=157&type=chunk) [Interest Expense, Net](index=39&type=section&id=Interest%20Expense%2C%20Net) This section analyzes the Company's interest expense, net, highlighting the impact of debt refinancing and accounting standard adoption Interest Expense, Net (in thousands) | Metric | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | YoY Change (%) | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | YoY Change (%) | |---|---|---|---|---|---|---| | Interest expense, net | $(2,451) | $(4,937) | (50.4)% | $(4,914) | $(7,097) | (30.8)% | - Interest expense, net, decreased significantly due to the refinancing of the Owl Rock loan with the issuance of the 2027 Notes in September 2021 and a reduction of accretion resulting from the January 1, 2022 adoption of ASU 2020-06[158](index=158&type=chunk)[159](index=159&type=chunk) [Taxes](index=40&type=section&id=Taxes) This section details the Company's provision for income taxes, noting the significant change from a prior-year tax benefit (Provision for) Benefit from Income Taxes (in thousands) | Metric | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | YoY Change (%) | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | YoY Change (%) | |---|---|---|---|---|---|---| | (Provision for) benefit from income taxes | $(41) | $12,297 | (100.3)% | $(51) | $12,258 | (100.4)% | - The Company recorded a net tax provision of **$41 thousand** for Q2 2022 and **$51 thousand** for H1 2022, a significant change from the net tax benefit of **$12.3 million** in the prior year periods[160](index=160&type=chunk)[161](index=161&type=chunk) - The prior year's tax benefit was due to a partial release of the deferred tax asset valuation allowance resulting from deferred tax liabilities recognized with the Punchh Acquisition[160](index=160&type=chunk)[161](index=161&type=chunk) [Key Performance Indicators and Non-GAAP Financial Measures](index=40&type=section&id=Key%20Performance%20Indicators%20and%20Non-GAAP%20Financial%20Measures) This section presents key operating metrics and non-GAAP financial measures, including ARR, Active Sites, and Adjusted EBITDA, used to assess performance - The Company monitors Annual Recurring Revenue (ARR), Active Sites, Segment Revenue by Product Line, Recurring and Non-Recurring Revenue, Adjusted EBITDA, and Adjusted Net Loss/Adjusted Diluted Net Loss Per Share as key operating and non-GAAP financial measures[162](index=162&type=chunk)[169](index=169&type=chunk) Annual Recurring Revenue (ARR) (in thousands) | Product | As of June 30, 2022 | As of June 30, 2021 | YoY Change (%) | |---|---|---|---| | Brink POS* | $36,159 | $27,605 | 31.0% | | Data Central | $9,223 | $8,801 | 4.8% | | Punchh | $53,198 | $40,300 | 32.0% | | **Total ARR** | **$98,580** | **$76,706** | **28.5%** | Active Sites (in thousands) | Product | As of June 30, 2022 | As of June 30, 2021 | YoY Change (%) | |---|---|---|---| | Brink POS* | 17.7 | 13.2 | 34.1% | | Data Central | 6.4 | 6.0 | 6.7% | | Punchh | 62.3 | 48.4 | 28.7% | | *Brink POS includes PAR Payment Services | | | | | **Total Active Sites** | **86.4** | **67.6** | **27.8%** | Recurring and Non-Recurring Revenue (in thousands) | Revenue Type | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | YoY Change (%) | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | YoY Change (%) | |---|---|---|---|---|---|---| | Recurring revenue | $30,998 | $23,049 | 34.5% | $60,169 | $38,244 | 57.3% | | Non-recurring revenue | $33,173 | $28,075 | 18.2% | $62,848 | $49,464 | 27.1% | | Total Restaurant/Retail | $64,171 | $51,124 | 25.5% | $123,017 | $87,708 | 40.3% | | Total Government | $20,922 | $17,826 | 17.4% | $42,361 | $35,709 | 18.6% | | **Total revenue** | **$85,093** | **$68,950** | **23.4%** | **$165,378** | **$123,417** | **34.0%** | Adjusted EBITDA (in thousands) | Metric | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | |---|---|---|---|---| | Net loss | $(18,848) | $(9,956) | $(34,498) | $(18,227) | | EBITDA | $(9,915) | $(10,765) | $(16,708) | $(14,518) | | Adjusted EBITDA | $(5,760) | $(3,571) | $(8,365) | $(8,917) | Adjusted Net Loss Per Share | Metric | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | |---|---|---|---|---| | Net loss/diluted loss per share | $(0.70) | $(0.39) | $(1.27) | $(0.77) | | Adjusted net loss/adjusted diluted loss per share | $(0.36) | $(0.36) | $(0.62) | $(0.70) | [LIQUIDITY AND CAPITAL RESOURCES](index=46&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) This section discusses the Company's liquidity and capital resources, analyzing cash flows from operating, investing, and financing activities - Primary liquidity source for H1 2022 was existing cash and cash equivalents from 2021 financing transactions[187](index=187&type=chunk) - Cash used in operating activities was **$31.6 million** for H1 2022, driven by increased net loss and working capital requirements (inventory, Government segment accounts receivable)[187](index=187&type=chunk) - Cash used in investing activities significantly decreased to **$5.0 million** in H1 2022 (Q1 2022 acquisition, software capitalization) from **$381.7 million** in H1 2021 (Punchh Acquisition)[188](index=188&type=chunk) - Cash used in financing activities was **$1.8 million** in H1 2022 (stock-based compensation related transactions), a shift from **$319.3 million** provided in H1 2021 (common stock issuance, Owl Rock Term Loan)[189](index=189&type=chunk) - The Company expects available cash and cash equivalents to be sufficient for operating needs for at least the next 12 months, with actual needs dependent on revenue growth, product development, and market acceptance[190](index=190&type=chunk) [CRITICAL ACCOUNTING POLICIES AND ESTIMATES](index=47&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES%20AND%20ESTIMATES) This section outlines the Company's critical accounting policies and estimates, emphasizing their reliance on assumptions and market uncertainties - Financial statements rely on GAAP-compliant estimates and assumptions, including revenue recognition, stock-based compensation, business combinations, carrying amounts of assets (property, plant, equipment, intangibles, goodwill), convertible notes, and valuation allowances[191](index=191&type=chunk) - Estimates are subject to uncertainties from market conditions, risks, trends, and the ongoing COVID-19 pandemic[191](index=191&type=chunk) - Critical accounting policies have not materially changed from the 2021 Annual Report[191](index=191&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=47&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section discusses the Company's exposure to market risks, specifically foreign currency exchange and interest rate risks, and their potential financial impact [Foreign Currency Exchange Risk](index=47&type=section&id=Foreign%20Currency%20Exchange%20Risk) This section details the Company's exposure to foreign currency exchange risk from non-dollar denominated sales and operating expenses - Primary foreign currency exposures relate to non-dollar denominated sales and operating expenses in Canada, Europe, and Asia, including Great British Pound, Euro, Australian dollar, Singapore dollar, Canadian dollar, Indian Rupee, and Chinese Renminbi[192](index=192&type=chunk) - Changes in exchange rates may negatively affect revenue and net income (loss) as expressed in U.S. dollars, and the Company experiences fluctuations from foreign currency transactions and remeasurement of monetary assets/liabilities[192](index=192&type=chunk) - As of June 30, 2022, the impact of foreign currency exchange rate changes on revenues and net income (loss) was not material[192](index=192&type=chunk) [Interest Rate Risk](index=47&type=section&id=Interest%20Rate%20Risk) This section discusses the Company's interest rate risk, noting that fixed-rate debt instruments mitigate financial statement risk from rate changes - As of June 30, 2022, the Company had **$13.8 million**, **$120.0 million**, and **$265.0 million** in aggregate principal amount outstanding of the 2024, 2026, and 2027 Notes, respectively[193](index=193&type=chunk) - The Notes bear fixed interest rates, meaning there is no financial statement risk associated with changes in interest rates[194](index=194&type=chunk) - The fair value of the Notes can change due to fluctuations in the market price of the Company's common stock or changes in interest rates[194](index=194&type=chunk) [Item 4. Controls and Procedures](index=48&type=section&id=Item%204.%20Controls%20and%20Procedures) This section addresses the effectiveness of the Company's disclosure controls and internal control over financial reporting, including identified material weaknesses and remediation efforts [Evaluation of Disclosure Controls and Procedures](index=48&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) This section reports on the effectiveness of disclosure controls and procedures, noting material weaknesses in internal control over financial reporting - As of June 30, 2022, the CEO and CFO concluded that disclosure controls and procedures were not effective due to continuing material weaknesses in internal control over financial reporting, as previously identified in the 2021 Annual Report[195](index=195&type=chunk) [Remediation Efforts to Address the Material Weaknesses](index=48&type=section&id=Remediation%20Efforts%20to%20Address%20the%20Material%20Weaknesses) This section outlines ongoing remediation efforts to address identified material weaknesses, including implementing and documenting new controls - Remediation efforts to address identified material weaknesses are ongoing, involving the implementation and documentation of necessary policies, procedures, and internal controls[196](index=196&type=chunk) - The material weaknesses are not considered remediated until applicable controls have operated for a sufficient period and management has concluded, through testing, that they are operating effectively[196](index=196&type=chunk) [Changes in Internal Control Over Financial Reporting](index=48&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) This section discusses changes in internal control over financial reporting, including those from acquisitions, and confirms no material changes during the quarter - Internal controls over financial reporting include those inherited from the Punchh Acquisition, which have been evaluated and supplemented by management[197](index=197&type=chunk) - No additional changes in internal control over financial reporting materially affected, or are reasonably likely to materially affect, the Company's internal control during the quarter ended June 30, 2022[197](index=197&type=chunk) PART II - OTHER INFORMATION This part provides additional information, including legal proceedings, risk factors, equity security sales, exhibits, and corporate signatures [Item 1. Legal Proceedings](index=48&type=section&id=Item%201.%20Legal%20Proceedings) This section incorporates legal proceedings information, stating that no pending litigation is expected to materially affect the Company's financial condition or operations - Information on legal proceedings from Note 11 – Commitments and Contingencies is incorporated by reference[199](index=199&type=chunk) - The Company does not believe any pending litigation would have a material adverse effect on its financial condition or results of operations[199](index=199&type=chunk) [Item 1A. Risk Factors](index=48&type=section&id=Item%201A.%20Risk%20Factors) This section updates risk factors, highlighting the potential material adverse impact of deteriorating macroeconomic conditions and geopolitical events on the Company's business and operating results - The risks described in the 'Risk Factors' section of the 2021 Annual Report remain current and are supplemented by this Quarterly Report[200](index=200&type=chunk) - Deteriorating macroeconomic conditions (recession, interest rates, inflation) and geopolitical events (Russia-Ukraine war) could materially and adversely impact demand for products/services, supply chains, and customer financial conditions[201](index=201&type=chunk) - While current impacts are not material, sustained supply chain disruptions, continued inflationary pressures, and harm to customer/partner businesses could negatively affect the Company's business and results of operations[201](index=201&type=chunk)[203](index=203&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use Of Proceeds](index=49&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 to satisfy tax withholding obligations upon vesting of restricted stock and units - Employees may elect to have the Company withhold shares to satisfy minimum statutory tax withholding obligations upon vesting of restricted stock and restricted stock units[204](index=204&type=chunk) Company Purchases of Equity Securities (Shares Withheld) | Period | Total Number of Shares Withheld | Average Price Paid Per Share | |---|---|---| | April 1, 2022 - April 30, 2022 | 109 | $34.21 | | May 1, 2022 - May 31, 2022 | — | $— | | June 1, 2022 - June 30, 2022 | 11,498 | $34.21 | | **Total** | **11,607** | **$34.21** | [Item 6. Exhibits](index=50&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Quarterly Report on Form 10-Q, including organizational documents, certifications, and XBRL-related documents - Exhibits include Restated Certificate of Incorporation, Bylaws, Certifications of Principal Executive and Financial Officers (Rule 13a-14(a) and 13a-14(b)), and Inline XBRL documents[208](index=208&type=chunk) [Signatures](index=51&type=section&id=Signatures) This section contains the signature of the registrant, PAR Technology Corporation, by its Chief Financial and Accounting Officer, Bryan A. Menar, certifying the filing of the report - The report is signed on behalf of PAR Technology Corporation by Bryan A. Menar, Chief Financial and Accounting Officer, on August 9, 2022[211](index=211&type=chunk)