PAR(PAR)2024-02-26 16:00Restaurant/Retail Segment - PAR's Restaurant/Retail segment serves over 70,000 active restaurant locations with omnichannel cloud-based software and hardware solutions[14] - PAR's subscription services include SaaS solutions and transaction-based payment processing, with over 500 integration partners[18][23] - PAR's hardware offerings include POS terminals, tablets, wireless headsets, and drive-thru systems, designed for harsh food service environments[24] - PAR's long-term relationships with McDonald's and Yum! Brands contribute 17% of total revenue[31] - PAR's SaaS solutions include PUNCHH for customer loyalty and MENU for digital ordering, enhancing customer engagement and operational efficiency[18][19] - PAR's omnichannel solutions aim to integrate data points for guest satisfaction and operational efficiencies across restaurant enterprises[16] - The Restaurant/Retail segment offers omnichannel solutions including point-of-sale, customer engagement, digital ordering, and payment processing[278] - The company's revenue in the Restaurant/Retail segment is derived from hardware sales, subscription services, and professional services, with revenue recognition governed by ASC Topic 606[307] - Hardware revenue is recognized at the point in time when the customer obtains control of the asset, typically upon delivery to a third-party carrier[309] - Subscription service revenue, including SaaS solutions, is recognized ratably over the contract period, which generally ranges from 12 to 36 months[311] - Software support revenue is recognized ratably over the contract term, typically 12 months, as the company satisfies its "stand-ready" obligations[312] - Transaction-based payment processing revenue is recognized net of refunds and reversals, with variable fees allocated based on ASC 606 allocation objectives[313] - Deferred revenue for the Restaurant/Retail segment was $7.3 million (current) and $4.2 million (non-current) as of December 31, 2023[371] - Total disaggregated revenue for 2023 was $124.9 million (Point in Time) and $151.8 million (Over Time) for the Restaurant/Retail segment[375] - Net accounts receivable for 2023 was $63.4 million, with $42.7 million from the Restaurant/Retail segment[378] Government Segment - PAR's Government segment provides advanced systems and software solutions for the U.S. Department of Defense and intelligence community[37] - PAR's ISR group focuses on mobile geospatial applications, C-sUAS, and data science, supporting tactical edge situational awareness[38][39] - PAR's ISR group is expanding through the development and implementation of C-sUAS systems, supporting force protection efforts[41] - PAR's MS group operates and maintains satellite communication and teleport facilities with ultra-high, super high, and extremely high frequency satellite communication earth terminals[42] - Approximately 70% of PAR's MS group footprint is outside the continental U.S., with contracts in Europe, Middle East, Africa, Australia, and U.S. commonwealths and territories[45] - PAR Government has an average contract duration of three to five years, with some contracts continuing for 20 years or more[46] - PAR Government offers three commercial software products: geospatial visualization (GV) image processing suite, Situation-X (Sit-X), and GVStreamer software[48] - PAR's MS group provides 24/7/365 support services for satellite communication systems, including satellite control center operations and mission planning[43] - PAR's MS group supports critical information systems for the National Command Authority, DoD, and other federal agencies, with a significant global presence[45] - PAR Government's commercial software business focuses on video streaming and replication technologies for unmanned aerial vehicle operators and tactical edge mobile device users[51] - The Government segment provides ISR solutions, mission systems operations, and commercial software products for defense and intelligence applications[278] - The company's Government segment revenue is predominantly recognized over time, with revenue generated from services, materials, software, hardware, and maintenance[322] - The government segment had a contract backlog of $326.0 million as of December 31, 2023, with $179.5 million expected to be recognized in the next 12 months[373] Financial Performance - Total revenues for 2023 increased to $415.8 million, up 16.9% from $355.8 million in 2022[268] - Subscription service revenue grew to $122.6 million in 2023, a 25.7% increase from $97.5 million in 2022[268] - Net loss for 2023 was $69.8 million, slightly higher than the $69.3 million loss in 2022[268] - Cash and cash equivalents decreased to $37.4 million in 2023 from $70.3 million in 2022[266] - Total assets declined to $802.6 million in 2023 from $854.9 million in 2022[266] - Research and development expenses increased to $58.4 million in 2023, up 20% from $48.6 million in 2022[268] - Gross margin improved to $98.3 million in 2023, up 10.1% from $89.3 million in 2022[268] - Weighted average shares outstanding increased to 27.6 million in 2023 from 27.2 million in 2022[268] - Net loss for 2023 was $69.8 million, compared to $69.3 million in 2022 and $75.8 million in 2021[274] - Cash used in operating activities decreased to $17.1 million in 2023 from $43.1 million in 2022 and $53.2 million in 2021[274] - Cash used in investing activities was $7.8 million in 2023, significantly lower than $66.7 million in 2022 and $383.0 million in 2021[274] - Cash and cash equivalents decreased to $47.5 million at the end of 2023 from $77.5 million in 2022 and $188.4 million in 2021[274] - Stock-based compensation expense was $14.4 million in 2023, compared to $13.4 million in 2022 and $14.6 million in 2021[274] - Depreciation and amortization expenses increased to $27.5 million in 2023 from $26.1 million in 2022 and $21.4 million in 2021[274] - Total shareholders' equity decreased to $333.1 million at the end of 2023 from $375.2 million in 2022 and $504.3 million in 2021[271] - Net loss per share for 2023 was $(2.53), compared to $(2.55) in 2022 and $(3.02) in 2021[337] Acquisitions and Contingent Considerations - The fair value of contingent consideration for the MENU Technologies AG acquisition was adjusted to $0.6 million as of December 31, 2023[260] - The MENU Acquisition resulted in an initial contingent consideration liability of $14.2 million in 2022, which was adjusted to $9.8 million by the end of 2022 and further reduced to $0.6 million by the end of 2023[330][331] - The MENU acquisition in 2022 involved $18.4 million in cash and $6.3 million in company stock, with an additional $14.2 million earn-out potential[342] - The MENU earn-out fair value was adjusted to $0.6 million as of December 31, 2023, down from $14.2 million at acquisition[342] - The Punchh acquisition in 2021 totaled $507.7 million, including $397.5 million in cash and 1,493,130 shares of company stock[353] - The company incurred $1.1 million in acquisition expenses related to the MENU acquisition[349] - The Punchh acquisition resulted in a $3.5 million reduction in cash consideration due to escrow account settlements[356] - The fair value of developed technology in the Punchh acquisition was reduced by $3.6 million during 2021[358] - The total purchase price allocation for the Punchh Acquisition was $553.8 million, with goodwill accounting for $415.1 million[361] - The Punchh Acquisition added $27.7 million in revenue for the year ended December 31, 2021[369] - The company's unaudited pro forma total revenue for 2021 was $291.6 million, with a net loss of $79.1 million[370] Debt and Financial Instruments - As of December 31, 2023, PAR had $120.0 million and $265.0 million in aggregate principal amount outstanding on the 2026 Notes and 2027 Notes, respectively[252] - Long-term debt decreased to $377.6 million in 2023 from $389.2 million in 2022[266] - The company repurchased $66.3 million of 2024 Notes using proceeds from the 2026 Notes issuance, resulting in a loss on settlement of $8.1 million[389] - The 2027 Notes were issued at $265.0 million with a 1.500% interest rate, used to repay the $180.0 million Owl Rock Term Loan and for general corporate purposes[390] - The company acquired $13.75 million of 2024 Notes in exchange for 497,376 shares of common stock, resulting in a $0.6 million loss on extinguishment of debt[391] - The 2026 Notes are convertible at 23.2722 shares per $1,000 principal amount, while the 2027 Notes are convertible at 12.9870 shares per $1,000 principal amount[392] - The implied effective rate of the liability component for the 2024 Notes, 2026 Notes, and 2027 Notes was 10.2%, 7.3%, and 6.5%, respectively[394] - Initial measurement of the 2024 Notes resulted in a liability of $62.4 million and an implied value of the convertible feature of $17.6 million[395] - Initial measurement of the 2026 Notes resulted in a liability of $93.8 million and an implied value of the convertible feature of $26.2 million[395] - Initial measurement of the 2027 Notes resulted in a liability of $199.2 million and an implied value of the convertible feature of $65.8 million[395] - Issuance costs for the 2024 Notes amounted to $4.9 million, with $3.8 million allocated to debt and $1.1 million to equity components[395] - Issuance costs for the 2026 Notes amounted to $4.2 million, with $3.3 million allocated to debt and $0.9 million to equity components[395] - Issuance costs for the 2027 Notes amounted to $8.3 million, with $6.2 million allocated to debt and $2.1 million to equity components[395] Research and Development - Research and development expenses were $58.4 million in 2023, up from $48.6 million in 2022 and $34.6 million in 2021[36] - Research and development expenses increased to $58.4 million in 2023, up 20% from $48.6 million in 2022[268] Workforce and Diversity - PAR Government's U.S. employee population consists of 27% ethnically diverse employees and 28% women, while globally, the workforce consists of 26% women[59] Operational Risks and Mitigations - PAR's hardware supply chain faces risks from industry-wide shortages and pricing fluctuations, mitigated by expanded supplier networks[35] Accounting and Financial Reporting - The company retroactively split its "Selling, general and administrative" financial statement line item into "Sales and marketing" and "General and administrative" for clearer insight into operating expenses[325] - The company is evaluating the impact of new FASB standards ASU 2023-09 and ASU 2023-07 for future financial disclosures[338][339] - The company's provision for income taxes is based on pretax loss, with deferred income taxes provided for temporary differences between financial reporting and tax bases[335] Inventory and Asset Management - Inventories decreased to $23.6 million in 2023 from $37.6 million in 2022, with finished goods dropping to $13.6 million from $22.0 million[379] - Property, plant, and equipment increased to $43.4 million in 2023 from $37.6 million in 2022, with software assets rising to $17.2 million from $12.4 million[380] - Internally developed software costs increased to $36.9 million in 2023 from $32.3 million in 2022, with a weighted average amortization period of 1.95 years[382] - Goodwill increased to $489.7 million in 2023 from $486.8 million in 2022, primarily due to foreign currency translation adjustments[384] Leases and Contingent Liabilities - The company's total lease expense for 2023 was $2.0 million, with future lease payments totaling $4.6 million[376][377] - Warranty provisions decreased to $650,000 in 2023 from $722,000 in 2022, with $112,000 in claims settled in 2023 compared to $224,000 in 2022[304] - Contingent consideration liability related to the MENU Acquisition was reclassified to accrued expenses, with a balance of $0.6 million in 2023 compared to zero in 2022[298] Insurance and Legal Settlements - The company received $0.5 million in insurance proceeds during 2023 and $4.4 million in 2021, related to the settlement of a legacy claim[332] Shareholder Equity and Stock Options - The company had 920,403 anti-dilutive stock options outstanding as of December 31, 2023, down from 1,029,417 in 2022 and 1,305,881 in 2021[336] Miscellaneous - Payments to Act III Management for services decreased to $0.1 million in 2023 from $0.6 million in 2022 and $1.3 million in 2021[306] - In Q4 2023, the company acquired payment facilitator referral commissions for $2.2 million, increasing intangible assets[341]