PAR(US:PAR)2022-05-09 16:00PART I FINANCIAL INFORMATION Financial Statements (unaudited) PAR Technology Corporation reported Q1 2022 revenues of $80.3 million, up 47.4%, with a net loss of $15.7 million due to increased operating expenses Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $163,207 | $188,419 | | Total current assets | $270,087 | $283,007 | | Goodwill | $457,433 | $457,306 | | Total assets | $871,696 | $888,149 | | Total current liabilities | $58,337 | $60,517 | | Long-term debt | $387,681 | $305,845 | | Total liabilities | $460,226 | $383,804 | | Total shareholders' equity | $411,470 | $504,345 | Condensed Consolidated Statements of Operations (in thousands, except per share amounts) | Account | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Total revenues, net | $80,285 | $54,467 | | Gross margin | $20,613 | $10,200 | | Operating loss | $(12,809) | $(6,021) | | Net loss | $(15,650) | $(8,271) | | Net loss per share (basic and diluted) | $(0.58) | $(0.38) | Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Account | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(21,198) | $(3,434) | | Net cash used in investing activities | $(3,060) | $(1,669) | | Net cash used in financing activities | $(1,411) | $(2,116) | | Net decrease in cash and cash equivalents | $(25,212) | $(7,564) | | Cash and equivalents at end of period | $163,207 | $173,122 | Notes to Condensed Consolidated Financial Statements (unaudited) Notes detail accounting policies, segment operations, convertible instrument reclassification, and Q1 2022 acquisition and Punchh purchase price finalization - The company operates in two distinct reporting segments: Restaurant/Retail, providing integrated cloud solutions, and Government, offering advanced systems for federal agencies25 - On January 1, 2022, the company adopted ASU 2020-06 for convertible instruments, resulting in an $81.3 million increase to convertible notes and a $66.6 million reduction to additional paid-in capital34 - In Q1 2022, the company acquired a privately held restaurant technology company for $1.2 million, recorded as goodwill, and finalized the Punchh acquisition purchase price allocation, reducing goodwill by $1.1 million5154 Outstanding Convertible Senior Notes (Principal Amount, in thousands) | Note Series | Principal Amount | | :--- | :--- | | 2024 Notes | $13,750 | | 2026 Notes | $120,000 | | 2027 Notes | $265,000 | | Total | $398,750 | Segment Revenues and Operating (Loss) Income (in thousands) | Segment | Revenue Q1 2022 | Revenue Q1 2021 | Operating (Loss) Income Q1 2022 | Operating (Loss) Income Q1 2021 | | :--- | :--- | :--- | :--- | :--- | | Restaurant/Retail | $58,846 | $36,584 | $(5,181) | $(9,285) | | Government | $21,439 | $17,883 | $1,547 | $1,190 | Management's Discussion and Analysis of Financial Condition and Results of Operations Q1 2022 total revenue increased 47.4% to $80.3 million, driven by service revenue growth, with operating expenses rising significantly leading to a higher operating loss Consolidated Results of Operations Highlights (in thousands) | Metric | Q1 2022 | Q1 2021 | % Change | | :--- | :--- | :--- | :--- | | Total revenues, net | $80,285 | $54,467 | 47.4% | | Gross margin | $20,613 | $10,200 | 102.1% | | Loss from operations | $(12,809) | $(6,021) | 112.7% | | Net loss | $(15,650) | $(8,271) | 89.2% | - Service revenue growth of 87.3% was primarily driven by $11.2 million in revenue from the Punchh acquisition, which occurred in April 2021119 - Operating expenses increased significantly, with Selling, General & Administrative (SG&A) up 53.9% and Research & Development (R&D) up 86.6%, largely due to Punchh integration and strategic investments125126 Annual Recurring Revenue (ARR) (in thousands) | Product | Q1 2022 | Q1 2021 | % Change | | :--- | :--- | :--- | :--- | | Brink POS | $35,518 | $25,647 | 38.5% | | Data Central | $8,703 | $8,968 | (3.0)% | | Punchh | $50,220 | — | N/A | | Total | $94,441 | $34,615 | 172.8% | Active Sites (in thousands) | Product | Q1 2022 | Q1 2021 | % Change | | :--- | :--- | :--- | :--- | | Brink POS | 16.9 | 12.1 | 39.6% | | Data Central | 6.0 | 6.0 | —% | | Punchh | 58.8 | — | N/A | - Cash used in operating activities was $21.2 million, a significant increase from $3.4 million in the prior year, driven by higher net loss and increased working capital needs150 Quantitative and Qualitative Disclosures About Market Risk The company faces market risks from foreign currency and interest rate fluctuations, primarily related to fixed-rate convertible notes, with foreign currency impact not material - The company's primary foreign currency exchange risk exposures relate to sales and operating expenses in Canada, Europe, and Asia, with no material impact as of March 31, 2022156 - The company has $398.8 million in aggregate principal of fixed-rate convertible notes, whose fair value fluctuates with market interest rates and the company's stock price157158 Controls and Procedures Disclosure controls and procedures were deemed ineffective as of March 31, 2022, due to ongoing material weaknesses in internal control over financial reporting - The CEO and CFO concluded that disclosure controls and procedures were not effective as of March 31, 2022159 - The ineffectiveness is due to ongoing material weaknesses in internal control over financial reporting, with remediation efforts in progress but not yet completed159160 PART II OTHER INFORMATION Legal Proceedings The company is involved in ordinary course legal proceedings, with management not anticipating any material adverse effect on financial condition or operations - The company states that it does not believe any pending litigation would have a material adverse effect on its financial condition or results of operations163 Risk Factors No material changes have been made to the risk factors disclosed in the 2021 Annual Report - No material changes have been made to the risk factors disclosed in the 2021 Annual Report164 Unregistered Sales of Equity Securities and Use Of Proceeds During Q1 2022, the company withheld 44,659 shares of common stock to satisfy employee tax withholding obligations related to vested equity awards - For the three months ended March 31, 2022, the company withheld 44,659 shares to satisfy minimum statutory tax obligations for employees related to vested equity awards165 Exhibits This section lists the exhibits filed with the Form 10-Q, including certifications by the CEO and CFO, and XBRL data files - The report includes various exhibits, such as an amendment to an employment letter and certifications from the Principal Executive Officer and Principal Financial Officer168