PAR(PAR) - 2023 Q2 - Quarterly Report

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