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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☑ QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 2022
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)
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Delaware |
16-1434688 |
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(State or other jurisdiction of incorporation or
organization) |
(I.R.S. Employer Identification No.) |
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PAR Technology Park, 8383 Seneca Turnpike, New Hartford, New York
13413-4991
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(Address of principal executive offices, including zip
code) |
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(315) 738-0600
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(Registrant’s telephone number, including area code) |
Securities registered pursuant to Section 12(b) of the
Act:
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Title of each class |
Trading Symbol |
Name of each exchange on which registered |
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Common Stock, $0.02 par value |
PAR |
New York Stock Exchange |
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted
electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the
registrant was required to submit such files). Yes ☑ No
☐
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, a
smaller reporting company, or an emerging growth company. See the
definitions of “large accelerated filer”, “accelerated filer”,
“smaller reporting company”, and “emerging growth company” in Rule
12b-2 of the Exchange Act.
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Large Accelerated Filer ☑
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Accelerated Filer ☐
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Non-Accelerated Filer ☐ |
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Smaller Reporting Company ☐
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Emerging Growth Company ☐
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If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act.
☐
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
☑
As of November 4, 2022, 27,289,779 shares of the registrant’s
common stock, $0.02 par value, were outstanding.
PAR TECHNOLOGY CORPORATION
TABLE OF CONTENTS
PART I
FINANCIAL INFORMATION
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Item
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Item 1. |
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Item 2. |
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Item 3. |
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Item 4. |
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PART II |
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OTHER INFORMATION |
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Item 1. |
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Item 1A. |
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Item 2. |
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Item 6. |
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“PARTM,”
“Brink POS®,”
“Punchh®,”
“MENUTM,”
“Data Central®,”
"PARTM
Pay”, “PARTM
Payment Services” and other trademarks appearing in this Quarterly
Report belong to us. This Quarterly Report may also contain trade
names and trademarks of other companies. Our use of such other
companies’ trade names or trademarks is not intended to imply any
endorsement or sponsorship by these companies of us or our products
or services.
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q for the quarter ended
September 30, 2022 (“Quarterly Report”) contains
“forward-looking statements” within the meaning of Section 21E of
the Securities and Exchange Act of 1934, as amended (the “Exchange
Act”), Section 27A of the Securities Act of 1933, as amended (the
“Securities Act”), and the Private Securities Litigation Reform Act
of 1995. Forward-looking statements are not historical in nature,
but rather are predictive of PAR’s future operations, financial
condition, financial results, business strategies and prospects.
Forward-looking statements are generally identified by words such
as “anticipate,” “believe,” “can”, “could”, “continue,” “expect,”
“estimate,” “future”, “goal”, “intend,” “may,” “opportunity,”
“plan,” “should,” “target”, “will,” “would,” “will likely result,”
and similar expressions. Forward-looking statements are based on
management's current expectations and assumptions that are subject
to risks and uncertainties, many of which are beyond PAR’s control,
which could cause PAR’s actual results to differ materially from
those expressed in or implied by forward-looking statements,
including statements relating to and PAR’s expectations regarding
the effects of COVID-19 on its business, financial condition, and
results of operations and the mitigating or otherwise intended
impact of PAR’s responses to the same; the timing and expected
benefits of acquisitions, divestitures, and capital markets
transactions; statements of the plans, strategies and objectives of
management for future operations, including PAR’s unified commerce
experience and its go-to-market strategy; statements concerning the
expected development, demand, performance, market share or
competitive performance relating to PAR’s products or services;
projections of net revenue, margins, expenses, effective tax rates,
net earnings, net earnings per share, cash flows, deferred taxes,
or other financial items, or of PAR’s annual recurring revenue,
active sites, net loss, net loss per share and other key
performance indicators and financial measures; statements
concerning potential supply constraints, component shortages,
manufacturing disruptions or logistics challenges; statements about
PAR’s human capital strategy and engagement; statements regarding
current or future macroeconomic trends or geopolitical events and
the impact of those trends and events on PAR and its financial
performance; statements regarding claims, disputes or other
litigation matters; and any statements of assumptions underlying
any of the foregoing. Factors, risks, trends, and uncertainties
that could cause PAR’s actual results to differ materially from
those expressed in or implied by forward-looking statements include
the effects of COVID-19 on PAR’s business, financial condition, and
results of operations and the timing and actions by PAR, as well as
by governments (including COVID-19 lockdowns), businesses,
customers and consumers, including store closures (temporary or
permanent), decreased or delayed product and service adoptions and
installations, delayed payments or payment defaults by customers,
and the health and safety of PAR’s employees; PAR’s ability to add
and maintain active sites, retain and manage third-party suppliers,
secure alternative suppliers, and manage inventory levels, navigate
component shortages, manufacturing disruptions and logistics
challenges, shipping delays and increased costs; PAR’s ability to
successfully attract, hire and retain necessary qualified employees
to develop and expand its business; the protection of PAR’s
intellectual property; PAR’s ability to increase the number of
integration partners, and acquire and/or develop relevant
technology offerings for current, new, and potential customers for
the build-out of its unified commerce platform; the impact of
unfavorable macroeconomic conditions, such as a recession or slowed
economic growth, increased interest rates, inflation, and a decline
in consumer confidence and discretionary spending, and geopolitical
events, including the effects of the Russia-Ukraine war; risks
associated with PAR’s international operations; changes in
estimates and assumptions PAR makes in connection with the
preparation of its financial statements and in building business
and operational plans and strategies; disruptions in operations
from system security risks, data protection breaches, and
cyberattacks; PAR’s agility to execute its business and strategies
and to manage its business continuity risks, including disruptions
or delays in product assembly and fulfillment and limitations on
PAR’s selling and marketing efforts; potential impacts, liabilities
and costs from pending or potential investigations, claims and
disputes; and other factors, risks, trends and uncertainties that
could cause PAR’s actual results to differ materially from those
expressed in or implied by forward-looking statements contained in
our Annual Report on Form 10-K for the fiscal year ended
December 31, 2021 filed with the Securities and Exchange
Commission (“SEC”) on March 1, 2022, in this Quarterly Report, and
in our other filings with the SEC. We undertake no obligation to
update or revise publicly any forward-looking statements, whether
as a result of new information, future events, or otherwise, except
as may be required under applicable securities law.
PART I – FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS (unaudited)
PAR TECHNOLOGY CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
(unaudited)
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Assets |
September 30, 2022 |
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December 31, 2021 |
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Current assets: |
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Cash and cash equivalents |
$ |
89,504 |
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$ |
188,419 |
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Short-term investments |
40,015 |
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— |
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Accounts receivable – net |
54,845 |
|
|
49,978 |
|
|
|
|
Inventories |
39,707 |
|
|
35,078 |
|
|
|
|
Other current assets |
9,185 |
|
|
9,532 |
|
|
|
|
Total current assets |
233,256 |
|
|
283,007 |
|
|
|
|
Property, plant and equipment – net |
12,836 |
|
|
13,709 |
|
|
|
|
Goodwill |
485,121 |
|
|
457,306 |
|
|
|
|
Intangible assets – net |
116,242 |
|
|
118,763 |
|
|
|
|
Lease right-of-use assets |
2,736 |
|
|
4,348 |
|
|
|
|
Other assets |
14,550 |
|
|
11,016 |
|
|
|
|
Total assets |
$ |
864,741 |
|
|
$ |
888,149 |
|
|
|
|
Liabilities and Shareholders’ Equity |
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
Current portion of long-term debt |
$ |
180 |
|
|
$ |
705 |
|
|
|
|
Accounts payable |
24,601 |
|
|
20,845 |
|
|
|
|
Accrued salaries and benefits |
17,848 |
|
|
17,265 |
|
|
|
|
Accrued expenses |
5,190 |
|
|
5,042 |
|
|
|
|
Customers payable |
3,985 |
|
|
— |
|
|
|
|
Lease liabilities – current portion |
1,262 |
|
|
2,266 |
|
|
|
|
Customer deposits and deferred service revenue |
12,693 |
|
|
14,394 |
|
|
|
|
Total current liabilities |
65,759 |
|
|
60,517 |
|
|
|
|
Lease liabilities – net of current portion |
1,717 |
|
|
2,440 |
|
|
|
|
Deferred service revenue – noncurrent |
5,888 |
|
|
7,597 |
|
|
|
|
Long-term debt |
388,680 |
|
|
305,845 |
|
|
|
|
Other long-term liabilities |
19,611 |
|
|
7,405 |
|
|
|
|
Total liabilities |
481,655 |
|
|
383,804 |
|
|
|
|
|
|
|
|
|
|
Shareholders’ equity: |
|
|
|
|
|
|
Preferred stock, $.02 par value, 1,000,000 shares
authorized
|
— |
|
|
— |
|
|
|
|
Common stock, $0.02 par value, 58,000,000 shares authorized,
28,529,832 and 28,094,333 shares issued, 27,283,410 and 26,924,397
outstanding at September 30, 2022 and December 31, 2021,
respectively
|
569 |
|
|
562 |
|
|
|
|
Additional paid in capital |
592,100 |
|
|
640,937 |
|
|
|
|
Accumulated deficit |
(191,723) |
|
|
(122,505) |
|
|
|
|
Accumulated other comprehensive loss |
(4,204) |
|
|
(3,704) |
|
|
|
|
Treasury stock, at cost, 1,246,422 shares and 1,181,449 shares at
September 30, 2022 and December 31, 2021,
respectively
|
(13,656) |
|
|
(10,945) |
|
|
|
|
Total shareholders’ equity |
383,086 |
|
|
504,345 |
|
|
|
|
Total Liabilities and Shareholders’ Equity |
$ |
864,741 |
|
|
$ |
888,149 |
|
|
|
See accompanying notes to unaudited interim condensed consolidated
financial statements
PAR TECHNOLOGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
|
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
Revenues, net: |
|
|
|
|
|
|
|
|
Product |
$ |
31,343 |
|
|
$ |
30,291 |
|
|
$ |
84,820 |
|
|
$ |
72,786 |
|
|
Service |
37,010 |
|
|
29,530 |
|
|
106,550 |
|
|
74,743 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract |
24,414 |
|
|
18,039 |
|
|
66,775 |
|
|
53,748 |
|
|
Total revenues, net |
92,767 |
|
|
77,860 |
|
|
258,145 |
|
|
201,277 |
|
|
Costs of sales: |
|
|
|
|
|
|
|
|
Product |
25,458 |
|
|
22,786 |
|
|
69,666 |
|
|
56,158 |
|
|
Service |
24,021 |
|
|
20,792 |
|
|
64,981 |
|
|
52,427 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract |
21,880 |
|
|
16,068 |
|
|
60,356 |
|
|
49,175 |
|
|
Total cost of sales |
71,359 |
|
|
59,646 |
|
|
195,003 |
|
|
157,760 |
|
|
Gross margin |
21,408 |
|
|
18,214 |
|
|
63,142 |
|
|
43,517 |
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
Selling, general and administrative |
26,543 |
|
|
21,662 |
|
|
75,309 |
|
|
59,145 |
|
|
Research and development |
12,843 |
|
|
10,122 |
|
|
33,785 |
|
|
24,574 |
|
|
Amortization of identifiable intangible assets |
465 |
|
|
539 |
|
|
1,399 |
|
|
1,303 |
|
|
Gain on insurance proceeds |
— |
|
|
— |
|
|
— |
|
|
(4,400) |
|
|
Total operating expenses |
39,851 |
|
|
32,323 |
|
|
110,493 |
|
|
80,622 |
|
|
Operating loss |
(18,443) |
|
|
(14,109) |
|
|
(47,351) |
|
|
(37,105) |
|
|
Other expense, net |
(179) |
|
|
(539) |
|
|
(804) |
|
|
(931) |
|
|
Interest expense, net |
(2,140) |
|
|
(5,406) |
|
|
(7,054) |
|
|
(12,503) |
|
|
Loss on extinguishment of debt |
— |
|
|
(11,916) |
|
|
— |
|
|
(11,916) |
|
|
Loss before provision for income taxes |
(20,762) |
|
|
(31,970) |
|
|
(55,209) |
|
|
(62,455) |
|
|
(Provision for) benefit from income taxes |
(578) |
|
|
37 |
|
|
(629) |
|
|
12,295 |
|
|
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 (basic and diluted) |
27,110 |
|
25,998 |
|
27,150 |
|
24,485 |
See accompanying notes to unaudited interim condensed consolidated
financial statements
PAR TECHNOLOGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE
LOSS
(In thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
Net loss |
$ |
(21,340) |
|
|
$ |
(31,933) |
|
|
$ |
(55,838) |
|
|
$ |
(50,160) |
|
|
Other comprehensive income (loss), net of applicable
tax: |
|
|
|
|
|
|
|
|
Foreign currency translation adjustments |
(851) |
|
|
(109) |
|
|
(500) |
|
|
(56) |
|
|
Comprehensive loss |
$ |
(22,191) |
|
|
$ |
(32,042) |
|
|
$ |
(56,338) |
|
|
$ |
(50,216) |
|
See accompanying notes to unaudited interim condensed consolidated
financial statements
PAR TECHNOLOGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS'
EQUITY
(In thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock |
|
Additional
Paid in
Capital |
|
Accumulated Deficit |
|
Accumulated Other Comprehensive Income (Loss) |
|
Treasury Stock |
|
Total
Shareholders’
Equity |
|
Shares |
|
Amount |
|
|
|
|
Shares |
|
Amount |
|
|
Balances at December 31, 2021 |
28,095 |
|
|
$ |
562 |
|
|
$ |
640,937 |
|
|
$ |
(122,505) |
|
|
$ |
(3,704) |
|
|
1,181 |
|
|
$ |
(10,945) |
|
|
$ |
504,345 |
|
|
Impact of ASU 2020-06 implementation (see Note 1 - Basis of
Presentation) |
|
|
|
|
(66,656) |
|
|
(13,380) |
|
|
|
|
|
|
|
|
(80,036) |
|
|
Balances at January 1, 2022 |
28,095 |
|
|
$ |
562 |
|
|
$ |
574,281 |
|
|
$ |
(135,885) |
|
|
$ |
(3,704) |
|
|
1,181 |
|
|
$ |
(10,945) |
|
|
$ |
424,309 |
|
|
Issuance of common stock upon the exercise of stock
options |
96 |
|
|
2 |
|
|
811 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
813 |
|
|
Net issuance of restricted stock awards and restricted stock
units |
88 |
|
|
1 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
1 |
|
|
Treasury stock acquired from employees upon vesting or forfeiture
of restricted stock |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
45 |
|
|
(2,051) |
|
|
(2,051) |
|
|
Stock-based compensation |
— |
|
|
— |
|
|
3,536 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
3,536 |
|
|
Foreign currency translation adjustments |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
512 |
|
|
— |
|
|
— |
|
|
512 |
|
|
Net loss |
— |
|
|
— |
|
|
— |
|
|
(15,650) |
|
|
— |
|
|
— |
|
|
— |
|
|
(15,650) |
|
|
Balances at March 31, 2022 |
28,279 |
|
|
$ |
565 |
|
|
$ |
578,628 |
|
|
$ |
(151,535) |
|
|
$ |
(3,192) |
|
|
1,226 |
|
|
$ |
(12,996) |
|
|
$ |
411,470 |
|
|
Issuance of common stock upon the exercise of stock
options |
16 |
|
|
— |
|
|
205 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
205 |
|
|
Net issuance of restricted stock awards and restricted stock
units |
36 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Treasury stock acquired from employees upon vesting or forfeiture
of restricted stock |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
12 |
|
|
(397) |
|
|
(397) |
|
|
Stock-based compensation |
— |
|
|
— |
|
|
3,231 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
3,231 |
|
|
Foreign currency translation adjustments |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(161) |
|
|
— |
|
|
— |
|
|
(161) |
|
|
Net loss |
— |
|
|
— |
|
|
— |
|
|
(18,848) |
|
|
— |
|
|
— |
|
|
— |
|
|
(18,848) |
|
|
Balances at June 30, 2022 |
28,331 |
|
|
$ |
565 |
|
|
$ |
582,064 |
|
|
$ |
(170,383) |
|
|
$ |
(3,353) |
|
|
1,238 |
|
|
$ |
(13,393) |
|
|
$ |
395,500 |
|
|
Issuance of common stock upon the exercise of stock
options |
17 |
|
|
1 |
|
|
249 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
250 |
|
|
Net issuance of restricted stock awards and restricted stock
units |
18 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Issuance of common stock for acquisition |
163 |
|
|
3 |
|
|
6,297 |
|
|
|
|
|
|
|
|
|
|
6,300 |
|
|
Treasury stock acquired from employees upon vesting or forfeiture
of restricted stock |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
9 |
|
|
(263) |
|
|
(263) |
|
|
Stock-based compensation |
— |
|
|
— |
|
|
3,490 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
3,490 |
|
|
Foreign currency translation adjustments |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(851) |
|
|
— |
|
|
— |
|
|
(851) |
|
|
Net loss |
— |
|
|
— |
|
|
— |
|
|
(21,340) |
|
|
— |
|
|
— |
|
|
— |
|
|
(21,340) |
|
|
Balances at September 30, 2022 |
28,529 |
|
|
$ |
569 |
|
|
$ |
592,100 |
|
|
$ |
(191,723) |
|
|
$ |
(4,204) |
|
|
1,247 |
|
|
$ |
(13,656) |
|
|
$ |
383,086 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
`
PAR TECHNOLOGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS'
EQUITY (Continued)
(In thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock |
|
Additional
Paid in
Capital |
|
Accumulated Deficit |
|
Accumulated
Other
Comprehensive
Loss |
|
Treasury Stock |
|
Total
Shareholders’
Equity |
|
Shares |
|
Amount |
|
|
|
|
Shares |
|
Amount |
|
|
Balances at January 1, 2021 |
22,983 |
|
|
$ |
459 |
|
|
$ |
243,575 |
|
|
$ |
(46,706) |
|
|
$ |
(3,936) |
|
|
1,066 |
|
|
$ |
(4,987) |
|
|
$ |
188,405 |
|
|
Issuance of common stock upon the exercise of stock
options |
34 |
|
|
1 |
|
|
408 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
409 |
|
|
Net issuance of restricted stock units |
87 |
|
|
2 |
|
|
263 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
265 |
|
|
Treasury stock acquired from employees upon vesting or forfeiture
of restricted stock |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
76 |
|
|
(3,974) |
|
|
(3,974) |
|
|
Stock-based compensation |
— |
|
|
— |
|
|
1,320 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
1,320 |
|
|
Foreign currency translation adjustments |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(302) |
|
|
— |
|
|
— |
|
|
(302) |
|
|
Net loss |
— |
|
|
— |
|
|
— |
|
|
(8,271) |
|
|
— |
|
|
— |
|
|
— |
|
|
(8,271) |
|
|
Balances at March 31, 2021 |
23,104 |
|
|
$ |
462 |
|
|
$ |
245,566 |
|
|
$ |
(54,977) |
|
|
$ |
(4,238) |
|
|
1,142 |
|
|
$ |
(8,961) |
|
|
$ |
177,852 |
|
|
Issuance of common stock upon the exercise of stock
options |
20 |
|
|
— |
|
|
209 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
209 |
|
|
Net issuance of restricted stock units |
28 |
|
|
1 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
1 |
|
|
Issuance of common stock for acquisition |
1,493 |
|
|
30 |
|
|
108,629 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
108,659 |
|
|
Issuance of common stock, net of issuance costs of $4.3
million
|
2,353 |
|
|
47 |
|
|
155,640 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
155,687 |
|
|
Treasury stock acquired from employees upon vesting or forfeiture
of restricted stock |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
7 |
|
|
(497) |
|
|
(497) |
|
|
Stock-based compensation |
— |
|
|
— |
|
|
4,251 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
4,251 |
|
|
Foreign currency translation adjustments |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
355 |
|
|
— |
|
|
— |
|
|
355 |
|
|
Net loss |
— |
|
|
— |
|
|
— |
|
|
(9,956) |
|
|
— |
|
|
— |
|
|
— |
|
|
(9,956) |
|
|
Balances at June 30, 2021 |
26,998 |
|
|
$ |
540 |
|
|
$ |
514,295 |
|
|
$ |
(64,933) |
|
|
$ |
(3,883) |
|
|
1,149 |
|
|
$ |
(9,458) |
|
|
$ |
436,561 |
|
|
Issuance of common stock upon the exercise of stock
options |
22 |
|
|
1 |
|
|
199 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
200 |
|
|
Equity component of issuance of 2027 convertible notes, net of
deferred taxes of $0.6 million and issuance costs of $2.1
million
|
— |
|
|
— |
|
|
63,068 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
63,068 |
|
|
Issuance of common stock, net of issuance costs of $2.5
million
|
982 |
|
|
19 |
|
|
52,467 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
52,486 |
|
|
Net issuance of restricted stock units |
15 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Issuance of common stock for acquisition |
— |
|
|
— |
|
|
1,081 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
1,081 |
|
|
Treasury stock acquired from employees upon vesting or forfeiture
of restricted stock |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
12 |
|
|
(458) |
|
|
(458) |
|
|
Stock-based compensation |
— |
|
|
— |
|
|
3,785 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
3,785 |
|
|
Foreign currency translation adjustments |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(109) |
|
|
— |
|
|
— |
|
|
(109) |
|
|
Net loss |
— |
|
|
— |
|
|
— |
|
|
(31,933) |
|
|
— |
|
|
— |
|
|
— |
|
|
(31,933) |
|
|
Balances at September 30, 2021 |
28,017 |
|
|
$ |
560 |
|
|
$ |
634,895 |
|
|
$ |
(96,866) |
|
|
$ |
(3,992) |
|
|
1,161 |
|
|
$ |
(9,916) |
|
|
$ |
524,681 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to unaudited interim condensed consolidated
financial statements
PAR TECHNOLOGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30 |
|
2022 |
|
2021 |
|
|
|
Cash flows from operating activities: |
|
|
|
|
|
|
Net loss |
$ |
(55,838) |
|
|
$ |
(50,160) |
|
|
|
|
Adjustments to reconcile net loss to net cash (used in) provided by
operating activities: |
|
|
|
|
|
|
Depreciation and amortization |
19,625 |
|
|
15,069 |
|
|
|
|
Accretion of debt in interest expense |
1,485 |
|
|
5,035 |
|
|
|
|
Current expected credit losses |
739 |
|
|
992 |
|
|
|
|
Provision for obsolete inventory |
1,773 |
|
|
19 |
|
|
|
|
Stock-based compensation |
10,257 |
|
|
9,356 |
|
|
|
|
Loss on debt extinguishment |
— |
|
|
11,916 |
|
|
|
|
Deferred income tax |
— |
|
|
(12,522) |
|
|
|
|
Changes in operating assets and liabilities, net of
acquisition: |
|
|
|
|
|
|
Accounts receivable |
(5,823) |
|
|
3,189 |
|
|
|
|
Inventories |
(6,678) |
|
|
(12,377) |
|
|
|
|
Other current assets |
321 |
|
|
(7,575) |
|
|
|
|
Other assets |
(3,461) |
|
|
(2,774) |
|
|
|
|
Accounts payable |
3,580 |
|
|
7,849 |
|
|
|
|
Accrued salaries and benefits |
325 |
|
|
(2,605) |
|
|
|
|
Accrued expenses |
(260) |
|
|
(7,418) |
|
|
|
|
Customer deposits and deferred service revenue |
(2,924) |
|
|
(1,402) |
|
|
|
|
Customers payable |
3,985 |
|
|
— |
|
|
|
|
Other long-term liabilities |
(685) |
|
|
(211) |
|
|
|
|
Net cash used in operating activities |
(33,579) |
|
|
(43,619) |
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for acquisitions, net of cash acquired |
(18,797) |
|
|
(374,653) |
|
|
|
|
Capital expenditures |
(812) |
|
|
(928) |
|
|
|
|
Capitalization of software costs |
(4,719) |
|
|
(5,471) |
|
|
|
|
Purchase of held to maturity investments |
(40,015) |
|
|
— |
|
|
|
|
Net cash used in investing activities |
(64,343) |
|
|
(381,052) |
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
Principal payments of long-term debt |
(525) |
|
|
(4,004) |
|
|
|
|
Payments for the extinguishment of notes payable |
— |
|
|
(183,618) |
|
|
|
|
Proceeds from common stock issuance |
— |
|
|
215,000 |
|
|
|
|
Payments for common stock issuance costs |
— |
|
|
(6,827) |
|
|
|
|
Proceeds from debt issuance, net of original issue
discount |
— |
|
|
441,385 |
|
|
|
|
Payments for debt issuance costs |
— |
|
|
(13,998) |
|
|
|
|
Treasury stock acquired from employees upon vesting or forfeiture
of restricted stock |
(2,711) |
|
|
(4,477) |
|
|
|
|
Proceeds from exercise of stock options |
1,268 |
|
|
819 |
|
|
|
|
Net cash (used in) provided by financing activities |
(1,968) |
|
|
444,280 |
|
|
|
|
Effect of exchange rate changes on cash and cash
equivalents |
975 |
|
|
(2) |
|
|
|
|
Net (decrease) increase in cash and cash equivalents |
(98,915) |
|
|
19,607 |
|
|
|
|
Cash and cash equivalents at beginning of period |
188,419 |
|
|
180,686 |
|
|
|
|
Cash and equivalents at end of period |
$ |
89,504 |
|
|
$ |
200,293 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to unaudited interim condensed consolidated
financial statements
PAR TECHNOLOGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
(In thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30 |
|
2022 |
|
2021 |
|
|
|
Supplemental disclosures of cash flow information: |
|
|
|
|
|
|
Cash paid during the period for: |
|
|
|
|
|
|
Interest |
$ |
20 |
|
|
$ |
6,337 |
|
|
|
|
Income taxes |
660 |
|
|
— |
|
|
|
|
Master development agreement with related party |
— |
|
|
813 |
|
|
|
|
Capitalized software recorded in accounts payable |
36 |
|
|
— |
|
|
|
|
Capital expenditures in accounts payable |
37 |
|
|
88 |
|
|
|
|
Common stock issued for acquisition |
6,300 |
|
|
109,740 |
|
|
|
|
Acquisition contingent consideration recorded in Other long-term
liabilities |
14,200 |
|
|
— |
|
|
|
|
Tax withholding in accrued salaries and benefits related to
treasury stock acquired from employees |
— |
|
|
451 |
|
|
|
|
Acquisition consideration recorded in accounts payable |
— |
|
|
121 |
|
|
|
|
Master development agreement expenditures with related party in
accounts payable |
— |
|
|
163 |
|
|
|
See accompanying notes to unaudited interim condensed consolidated
financial statements
PAR TECHNOLOGY CORPORATION
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(unaudited)
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited interim condensed consolidated financial
statements (“financial statements”) of PAR Technology Corporation
and its consolidated subsidiaries (collectively, the “Company”,
“PAR”, “we”, “us” or “our”) have been prepared in accordance with
accounting principles generally accepted in the United States of
America (“GAAP”) for interim financial statements and the
instructions to Form 10-Q and Regulation S-X pertaining to interim
financial statements as promulgated by the SEC. In the opinion of
management, the Company's financial statements include all normal
and recurring adjustments necessary in order to make the financial
statements not misleading and to provide a fair presentation of the
Company's financial results for the interim period included in this
Quarterly Report. Interim results are not necessarily
indicative of results for the full year or any future periods. The
information included in this Quarterly Report should be read in
conjunction with the Company's audited consolidated financial
statements and notes thereto included in the Company’s Annual
Report on Form 10-K for the fiscal year ended December 31,
2021 (the “2021 Annual Report”).
The preparation of the financial statements requires management of
the Company to make a number of estimates and assumptions relating
to the reported amount of assets and liabilities and the disclosure
of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the period. Significant items subject to such estimates and
assumptions include revenue recognition, stock-based compensation,
the recognition and measurement of assets acquired and liabilities
assumed in business combinations at fair value, the carrying amount
of property, plant and equipment including right-to-use assets and
liabilities, identifiable intangible assets and goodwill, the
measurement of liabilities and equity recognized for outstanding
convertible notes, current expected credit losses for receivables,
and net realizable value for inventories. Actual results could
differ from these estimates. The Company's estimates and
assumptions are subject to uncertainties, including those
associated with market conditions, risks and trends and the ongoing
COVID-19 pandemic.
The Company operates in two distinct reporting segments,
Restaurant/Retail and Government. The Company’s chief operating
decision maker is the Company’s Chief Executive Officer. The
Restaurant/Retail segment provides enterprise restaurants,
franchisees, and other restaurant outlets in the three major
restaurant categories, quick service, fast casual, and table
service, with operational efficiencies, offering them an integrated
suite of SaaS solutions that includes Brink POS for front-of-house,
Data Central for back-office, PAR Pay and PAR Payment Services for
payments, and Punchh for customer loyalty and engagement. The
Government segment provides technical expertise and development of
advanced systems and software solutions for the U.S. Department of
Defense (“DoD”) and other federal agencies, as well as satellite
command and control, communication, and IT mission systems at
several DoD facilities worldwide. The financial statements also
include corporate operations, which are comprised of
enterprise-wide functional departments.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with
a remaining maturity of three months or less, to be cash
equivalents, including money market funds. Cash held on behalf of
customers represents an asset arising from our payment processing
services that is restricted for the purpose of satisfying
obligations to remit funds to various merchants.
The Company maintained bank balances that, at times, exceeded the
federally insured limit during the nine months ended
September 30, 2022. The Company has not experienced losses
relating to these deposits and management does not believe that the
Company is exposed to any significant credit risk with respect to
these amounts.
Cash and cash equivalents consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
September 30, 2022 |
|
December 31, 2021 |
|
Cash and cash equivalents |
|
|
|
|
Cash |
$ |
16,062 |
|
|
$ |
69,249 |
|
|
Money market funds |
69,457 |
|
|
119,170 |
|
|
Cash held on behalf of customers |
3,985 |
|
|
— |
|
|
Total cash and cash equivalents |
$ |
89,504 |
|
|
$ |
188,419 |
|
Short-Term Investments
Short-term investments include held-to-maturity investment
securities consisting of investment-grade interest bearing
instruments, primarily treasury bills and notes, which are stated
at amortized cost. The Company does not intend to sell these
investment securities and the contractual maturities are not
greater than 12 months. The Company did not record any material
gains or losses on these securities during the three months ended
September 30, 2022. The estimated fair value of these securities
approximated their carrying value as of September 30,
2022.
The carrying value of investment securities consist of the
following:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
September 30, 2022 |
|
December 31, 2021 |
|
Short-term Investments |
|
|
|
|
Treasury Bills & Notes |
$ |
40,015 |
|
|
$ |
— |
|
|
Total Short-term Investments |
$ |
40,015 |
|
|
$ |
— |
|
Gain on Insurance Proceeds
During the first quarter of 2021, the Company received $4.4 million
of insurance proceeds in connection with the settlement of a legacy
claim. No insurance proceeds were received during the nine months
ended September 30, 2022.
Customers Payable
Customers payable represent obligations arising from our payment
processing services to remit funds to various
merchants.
Other Long-Term Liabilities
Other liabilities represent amounts owed to employees that
participate in the Company’s deferred compensation plan, the
Company's repayment obligations associated with deferred payroll
taxes under the Coronavirus Aid, Relief, and Economic Security Act
(the “CARES Act”) and contingent consideration recognized in
conjunction with the acquisition of MENU Technologies AG (refer to
“Note 3 — Acquisitions”, for additional information).
Amounts owed to employees participating in the deferred
compensation plan were $1.9 million and $2.4 million at
September 30, 2022 and December 31, 2021,
respectively.
Under the CARES Act employers were permitted to defer payment of
the employer portion of social security taxes through the end of
2020: 50% of the deferred amount was due December 31, 2021 and the
remaining 50% is due December 31, 2022. The Company deferred
payment of the employer portion of social security taxes through
the end of 2020. The Company paid $1.9 million in December
2021 and the remaining balance is to be paid by December 2022.
Deferred payroll taxes were $1.9 million at September 30,
2022 and December 31, 2021 and are included within accrued
salaries and benefits on the condensed consolidated balance
sheets.
Related Party Transactions
Act III Management LLC (“Act III Management”), a service company to
the restaurant, hospitality, and
entertainment industries, may from time to time provide software
development and restaurant technology consulting services to the
Company pursuant to a master development agreement. Additionally,
during the three months ended September 30, 2022, the Company
entered into a strategic advisor agreement with Act III Management
and Ronald Shaich, pursuant to which, Ronald Shaich, the sole
member of Act III Management, serves as a strategic advisor to the
Company's Board of Directors. Keith Pascal, a director of the
Company, is an employee of Act III Management and serves as its
vice president and secretary. Mr. Pascal does not have an ownership
interest in Act III Management.
As of September 30, 2022, and December 31, 2021, the
Company had no accounts payable owed to Act III Management, in the
three and nine months ended September 30, 2022, the Company
paid Act III Management $0.1 million and $0.6 million,
respectively, and in the three and nine months ended
September 30, 2021, the Company paid Act III Management
$0.5 million and $0.8 million, respectively, for services
performed under the master development agreement.
Recently Adopted Accounting Pronouncements
In August 2020, the FASB issued ASU No. 2020-06,
Debt – Debt with Conversion and Other Options (Subtopic 470-20) and
Derivatives and Hedging – Contracts in Entity’s Own Equity
(Subtopic 815-40).
The new guidance is intended to simplify the accounting for certain
convertible instruments with characteristics of both liability and
equity. The guidance removes certain accounting models which
separate the embedded conversion features from the host contract
for convertible instruments. As a result, after the adoption of
this guidance, an entity’s convertible debt instrument will be
wholly accounted for as debt. The guidance also expands disclosure
requirements for convertible instruments and simplifies diluted
earnings-per-share calculations by requiring the use of the
if-converted method. The guidance was effective for fiscal years
beginning after December 15, 2021 and could be adopted on either a
fully retrospective or modified retrospective basis. The Company
adopted the new standard as of January 1, 2022 under the modified
retrospective method and recorded a cumulative effect upon adoption
of a $81.3 million increase to convertible notes,
$66.6 million reduction to other paid in capital,
$13.4 million reduction to accumulated deficit, and a
$1.3 million reduction to deferred tax liability to reflect
the reversal of the separation of the convertible debt between debt
and equity. Prior year presentation of debt was not impacted. The
adoption of this standard also decreased the amount of non-cash
interest expense to be recognized in future periods as a result of
eliminating the discount associated with the equity component.
There was no impact to the Company’s condensed consolidated
statements of cash flows as the result of the adoption of ASU No.
2020-06.
In October 2021, the FASB issued ASU No. 2021-08,
Business Combinations (Topic 805), Accounting for Contract Assets
and Contract Liabilities from Contracts with
Customers,
which is intended to require acquiring entities to apply Topic 606
to recognize and measure contract assets and contract liabilities
in a business combination. ASU 2021-08 is effective for fiscal
years, and interim periods within those fiscal years, beginning
after December 15, 2022, with early adoption permitted. The Company
early adopted the new standard as of January 1, 2022, with no
impact to the Company's condensed consolidated financial statements
at adoption. Future impact of adoption is dependent on the
Company's activity as an acquiring entity in transactions subject
to Topic 805.
With the exception of the standards discussed above, there were no
other recent accounting pronouncements or changes in accounting
pronouncements during the nine months ended September 30, 2022
that are of significance or potential significance to the
Company.
NOTE 2: REVENUE RECOGNITION
The Company's revenue is derived from software as a service
(“SaaS”), hardware and software sales, software activation,
hardware support, installations, maintenance and professional
services. Accounting Standards Codification
(“ASC”) Topic 606:
Revenue from Contracts with Customers
requires the Company to distinguish and measure performance
obligations under customer contracts. Contract consideration is
allocated to all performance obligations within the arrangement or
contract. Performance obligations that are determined not to be
distinct are combined with other performance obligations until the
combined unit is determined to be distinct and that combined unit
is then recognized as revenue over time or at a point in time
depending on when control is transferred.
The Company evaluated the potential performance obligations within
its Restaurant/Retail segment and evaluated whether each
performance obligation met the ASC Topic 606 criteria to be
considered a distinct performance obligation. Revenue in the
Restaurant/Retail segment is recognized at a point in time for
licensed software, hardware and installations. Revenue on these
items are recognized when the customer obtains control of the
asset. This generally occurs upon delivery and acceptance by the
customer or upon installation or delivery to a third party carrier
for onward delivery to the customer. Additionally, revenue in the
Restaurant/Retail segment relating to SaaS, the Company's Advanced
Exchange hardware service program, its on-site support and other
services is recognized over time as the customer simultaneously
receives and consumes the benefits of the Company’s performance
obligations. The Company’s support services are stand-ready
obligations that are provided over the life of the contract,
generally 12 months. The Company offers installation services
to its customers for hardware and software for which the Company
primarily hires third-party contractors to install the equipment on
the Company's behalf. The Company pays third party contractors an
installation service fee based on an hourly rate agreed to by the
Company and contractor. When third party installers are used, the
Company determines whether the nature of its performance
obligations is to provide the specified goods or services itself
(principal) or to arrange for a third-party to provide the goods or
services (agent). In the Company's customer arrangements, the
Company is primarily responsible for providing a good or service,
has inventory risk before the good or service is transferred to the
customer, and discretion in establishing prices; as a result, the
Company has concluded that it is the principal in the arrangement
and records installation revenue on a gross basis.
The support services associated with hardware and software sales
are “stand-ready obligations” satisfied over time on the basis that
the customer consumes and receives a benefit from having access to
the Company's support resources, when and as needed, throughout the
contract term. For this reason, the support services are recognized
ratably over the contract term since the Company satisfies its
obligation to stand ready by performing these services each day.
Contracts typically require payment within 30 to 90 days from the
shipping date or installation date, depending on the Company's
terms with the customer. The primary method used to estimate a
stand-alone selling price, is the price that the Company charges
for the particular good or service sold by the Company separately
under similar circumstances to similar customers. The Company
determines stand-alone selling prices as follows: hardware,
software and software activation (a one-time fee at the initial
offering of software or SaaS) performance obligations are
recognized at a stand-alone selling price based on the price at
which the Company sells the particular good or service separately
in similar circumstances and to similar customers. The stand-alone
selling price for all other performance obligations, including:
pass-through hardware, such as terminals, printers, or card
readers; hardware support (referred to as Advanced Exchange),
installation, maintenance, licensed software upgrades, and
professional services (project management) is recognized by using
an expected cost plus margin.
The Company's revenue in the Government segment is recognized over
time as control is generally transferred continuously to its
customers. Revenue generated by the Government segment is
predominantly related to services; provided, however, revenue is
also generated through the sale of materials, software, hardware,
and maintenance. For the Government segment cost plus fixed fee
contract portfolio, revenue is recognized over time using costs
incurred to date to measure progress toward satisfying the
Company's performance obligations. Incurred cost represents work
performed, which corresponds with, and thereby best depicts, the
transfer of control to the customer. Contract costs include labor,
material, overhead and general and administrative expenses. Profit
is recognized on the fixed fee portion of the contract as costs are
incurred and invoiced. Long-term fixed price contracts involve the
use of judgment to estimate the total contract revenue and costs.
For long-term fixed price contracts, the Company estimates the
profit on a contract as the difference between the total estimated
revenue and expected costs to complete the contract, and recognize
that profit over the life of the contract. Contract estimates are
based on various assumptions to project the outcome of future
events. These assumptions include: labor productivity and
availability; the complexity of the work to be performed; and the
performance of subcontractors. Revenue and profit in future periods
of contract performance are recognized using the aforesaid
assumptions, and adjusting the estimate of costs to complete a
contract. Once the services provided are determined to be distinct
or not distinct, the Company evaluates how to allocate the
transaction price. Generally, the Government segment does not sell
the same good or service to similar customers and the contract
performance obligations are unique to each government solicitation.
The performance obligations are typically not distinct. In cases
where there are distinct performance obligations, the transaction
price would be allocated to each performance obligation on a
ratable basis based upon the stand-alone selling price of each
performance obligation. Cost plus margin is used for the cost plus
fixed fee contract portfolios as well as the fixed price and time
and materials contracts portfolios to determine the stand-alone
selling price.
In the Government segment, when determining revenue recognition,
the Company analyzes whether its performance obligations under
Government contracts are satisfied over a period of time or at a
point in time. In general, the Company's performance obligations
are satisfied over a period of time; however, there may be
circumstances where the latter or both scenarios could apply to a
contract.
The Company usually expects payment within 30 to 90
days from satisfaction of its performance obligations. None of
its contracts as of September 30, 2022 or September 30,
2021 contained a significant financing component.
Performance Obligations Outstanding
The Company's performance obligations outstanding represent the
transaction price of firm, non-cancellable orders, with expected
delivery dates to customers after September 30, 2022 and 2021,
respectively, for work that has not yet been performed. The
activity of outstanding performance obligations as it relates to
customer deposits and deferred service revenue is as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
2022 |
|
2021 |
|
Beginning balance - January 1 |
$ |
20,046 |
|
|
$ |
11,082 |
|
|
Acquired deferred revenue (Note 3) |
443 |
|
|
11,125 |
|
|
Recognition of deferred revenue |
(28,493) |
|
|
(15,846) |
|
|
Deferral of revenue |
24,837 |
|
|
14,257 |
|
|
Ending balance - September 30 |
$ |
16,833 |
|
|
$ |
20,618 |
|
The above table excludes customer deposits of $1.7 million and
$1.7 million for the nine months ended September 30, 2022
and 2021, respectively. The majority of the deferred revenue
balances above relate to professional services, maintenance
agreements, and software licenses. These balances are recognized on
a straight-line basis over the life of the contract, with the
majority of the balance being recognized within the next twelve
months.
In the Restaurant/Retail segment most performance obligations
relate to service and support contracts, approximately 64% of which
the Company expects to fulfill within 12 months. The Company
expects to fulfill 100% of support and service contracts within 60
months. At September 30, 2022 and December 31, 2021,
transaction prices allocated to future performance obligations were
$16.8 million and $20.0 million, respectively.
During the three months ended September 30, 2022 and 2021, the
Company recognized revenue included in contract liabilities at the
beginning of each respective period of $3.1 million and $2.4
million. During the nine months ended September 30, 2022 and
2021, the Company recognized revenue included in contract
liabilities at the beginning of each respective period of $12.7
million and $7.5 million.
In the Government segment, the value of existing contracts
at September 30, 2022, net of amounts relating to work
performed to that date, was approximately $344.8 million, of which
$94.9 million was funded, and at December 31, 2021, the
value of existing contracts, net of amounts relating to work
performed to that date, was approximately $195.3 million, of
which $38.6 million was funded. The value of existing
contracts in the Government segment, net of amounts relating to
work performed at September 30, 2022, is expected to be
recognized as revenue over time as follows (in
thousands):
|
|
|
|
|
|
|
Next 12 months |
$ |
160,767 |
|
|
Months 13-24 |
122,362 |
|
|
Months 25-36 |
51,875 |
|
|
Thereafter |
9,746 |
|
|
Total |
$ |
344,750 |
|
Disaggregated Revenue
The Company disaggregates revenue from contracts with customers by
major product line for each of its reporting segments because the
Company believes it best depicts how the nature, amount, timing and
uncertainty of revenue and cash flows are affected by economic
factors.
Disaggregated revenue is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2022 |
|
(in thousands) |
Restaurant/Retail
point in time |
|
Restaurant/Retail
over time |
|
Government point in time |
|
Government
over time |
|
Hardware |
$ |
30,796 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
Software |
2 |
|
|
22,436 |
|
|
— |
|
|
— |
|
|
Service |
4,821 |
|
|
10,298 |
|
|
— |
|
|
— |
|
|
Mission systems |
— |
|
|
— |
|
|
— |
|
|
8,982 |
|
|
Intelligence, surveillance, and reconnaissance
solutions
|
— |
|
|
— |
|
|
— |
|
|
14,710 |
|
|
Commercial software |
— |
|
|
— |
|
|
541 |
|
|
181 |
|
|
Total |
$ |
35,619 |
|
|
$ |
32,734 |
|
|
$ |
541 |
|
|
$ |
23,873 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2021 |
|
(in thousands) |
Restaurant/Retail
point in time |
|
Restaurant/Retail
over time |
|
Government point in time |
|
Government
over time |
|
Hardware |
$ |
29,669 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
Software |
290 |
|
|
16,878 |
|
|
— |
|
|
— |
|
|
Service |
5,150 |
|
|
7,834 |
|
|
— |
|
|
— |
|
|
Mission systems |
— |
|
|
— |
|
|
— |
|
|
9,619 |
|
|
Intelligence, surveillance, and reconnaissance
solutions
|
— |
|
|
— |
|
|
— |
|
|
8,237 |
|
|
Commercial software |
— |
|
|
— |
|
|
55 |
|
|
128 |
|
|
Total |
$ |
35,109 |
|
|
$ |
24,712 |
|
|
$ |
55 |
|
|
$ |
17,984 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2022 |
|
(in thousands) |
Restaurant/Retail
point in time |
|
Restaurant/Retail
over time |
|
Government point in time |
|
Government
over time |
|
Hardware |
$ |
83,219 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
Software |
25 |
|
|
62,389 |
|
|
— |
|
|
— |
|
|
Service |
14,693 |
|
|
31,044 |
|
|
— |
|
|
— |
|
|
Mission systems |
— |
|
|
— |
|
|
— |
|
|
26,781 |
|
|
Intelligence, surveillance, and reconnaissance
solutions
|
— |
|
|
— |
|
|
— |
|
|
38,746 |
|
|
Commercial software |
— |
|
|
— |
|
|
753 |
|
|
495 |
|
|
Total |
$ |
97,937 |
|
|
$ |
93,433 |
|
|
$ |
753 |
|
|
$ |
66,022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2021 |
|
(in thousands) |
Restaurant/Retail
point in time |
|
Restaurant/Retail
over time |
|
Government point in time |
|
Government
over time |
|
Hardware |
$ |
70,858 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
Software |
827 |
|
|
39,318 |
|
|
— |
|
|
— |
|
|
Service |
14,024 |
|
|
22,502 |
|
|
— |
|
|
— |
|
|
Mission systems |
— |
|
|
— |
|
|
— |
|
|
28,450 |
|
|
Intelligence, surveillance, and reconnaissance
solutions
|
— |
|
|
— |
|
|
— |
|
|
24,706 |
|
|
Commercial software |
— |
|
|
— |
|
|
220 |
|
|
372 |
|
|
Total |
$ |
85,709 |
|
|
$ |
61,820 |
|
|
$ |
220 |
|
|
$ |
53,528 |
|
Practical Expedients and Exemptions
The Company generally expenses sales commissions when incurred
because the amortization period would be less than one year or the
total amount of commissions is immaterial. Commissions are recorded
in selling, general and administrative expenses. The Company
elected to exclude from measurement of the transaction price, all
taxes assessed by governmental authorities that are both imposed on
and concurrent with a specific revenue-producing transaction and
collected by the Company from a customer (for example, sales, use,
value added, and some excise taxes).
NOTE 3: ACQUISITIONS
MENU Acquisition
During the three months ended September 30, 2022, ParTech, Inc.
("ParTech") acquired 100% of the stock of MENU Technologies AG
("MENU"), a restaurant technology company offering fully integrated
omnichannel ordering solutions to restaurants worldwide (the "MENU
Acquisition"), for purchase consideration of approximately
$18.4 million paid in cash and $6.3 million paid in shares of
Company common stock. 162,917 shares of common stock were issued as
purchase consideration, determined using a fair value share price
of $38.67. In addition, the sellers have the opportunity to earn
additional cash and Company common stock consideration over an
earn-out period ending July 31, 2024, primarily based on MENU's
future SaaS annual recurring revenues.As of September 30, 2022, the
Company determined the fair value of the MENU earn-out to be $14.2
million.
The transaction was accounted for as a business combination in
accordance with ASC Topic 805,
Business Combinations.
Accordingly, assets acquired and liabilities assumed have been
accounted for at their preliminarily determined respective fair
values as of July 25, 2022, the date of acquisition. The
preliminary fair value determinations were based on management's
best estimates and assumptions, and with the assistance of
independent valuation and tax consultants. Identified preliminary
fair values are subject to measurement period adjustments within
the permitted measurement period (up to one year from the
acquisition date) as independent consultants finalize their
procedures and net working capital adjustments are agreed upon and
settled.
The following table presents management's preliminary purchase
price allocation:
|
|
|
|
|
|
|
(in thousands) |
Purchase price allocation |
|
Cash |
$ |
843 |
|
Accounts receivable |
209 |
|
Property and equipment |
204 |
|
Developed technology |
10,700 |
|
Prepaid and other acquired assets |
221 |
|
Goodwill |
28,495 |
|
Total assets |
40,672 |
|
Accounts payable and accrued expenses |
1,300 |
|
|
|
Deferred revenue |
443 |
|
|
Earn-out liability |
14,200 |
|
|
Consideration paid |
$ |
24,729 |
|
The Company determined the acquisition date fair value of
contingent consideration associated with the MENU earn-out using a
discounted cash flow method, with significant inputs that are not
observable in the market and thus represents a Level 3 fair value
measurement as defined in ASC 820,
Fair Value Measurement;
refer to "Note 13: Fair Value of Financial
Instruments".
The estimated fair value of acquired developed technology was
determined based on an income approach which estimated the fair
value based upon the present value of cash flows the asset is
expected to generate. The acquired developed technology asset is
being amortized on a straight-line basis over its estimated useful
life of seven years,
Consideration paid in cash on the date of acquisition included
$3.0 million deposited into an escrow account administered by
a third party, to be held for up to 18-months following the date of
acquisition, to fund potential post-closing adjustments and
obligations.
The Company incurred expenses related to its acquisition of MENU of
approximately $1.1 million.
The Company has not presented combined pro forma financial
information of the Company and MENU because the results of
operations of the acquired business are considered
immaterial.
Q1 2022 Acquisition
During the three months ended March 31, 2022, ParTech acquired
substantially all the assets and liabilities of a privately held
restaurant technology company (the "Q1 2022 Acquisition"). The
transaction was accounted for as a business combination in
accordance with ASC Topic 805,
Business Combinations,
resulting in an increase to goodwill of $1.2 million. The
Company determined that the preliminary fair values of all other
assets acquired and liabilities assumed relating to the transaction
did not materially affect the Company's financial condition; this
determination included the preliminary valuations of identified
intangible assets. The preliminary fair value determinations were
based on management's best estimates and assumptions, and through
the use of independent valuation and tax consultants. Identified
preliminary fair values are subject to measurement period
adjustments within the permitted measurement period (up to one year
from the acquisition date) as independent consultants finalize
their procedures. The Company considers the results of operations
of the acquired business to be immaterial and therefore has not
presented combined pro forma financial information.
Punchh Acquisition
On April 8, 2021, the Company, ParTech, and Sliver Merger Sub,
Inc., a wholly owned subsidiary of ParTech (“Merger Sub”), entered
into an Agreement and Plan of Merger (the “Merger Agreement”) with
Punchh Inc. (“Punchh”), and Fortis Advisors LLC, solely in its
capacity as the initial Stockholder Representative. Pursuant to the
Merger Agreement, on April 8, 2021, Merger Sub merged with and into
Punchh (the “Merger”), with Punchh surviving the Merger and
becoming a wholly owned subsidiary of the Company (“Punchh
Acquisition”).
Allocation of Acquisition Consideration — Punchh
Acquisition
The Punchh Acquisition was accounted for as a business combination
in accordance with ASC Topic 805,
Business Combinations.
Accordingly, assets acquired and liabilities assumed in the Punchh
Acquisition were accounted for at their final determined respective
fair values as of April 8, 2021. The final fair value
determinations were based on management's best estimates and
assumptions, and through the use of independent valuation and tax
consultants.
During the first quarter of 2022, the fair values of assets and
liabilities as of April 8, 2021 were finalized to reflect final
acquisition valuation analysis procedures.
The following table presents management's final purchase price
allocation for the Punchh Acquisition:
|
|
|
|
|
|
|
(in thousands) |
Purchase price 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 |
|
Unaudited Pro Forma Financial Information
For the nine months ended September 30, 2021, the Punchh
Acquisition resulted in additional revenues of $17.8
million.
The following table summarizes the Company's unaudited pro forma
operating results:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, |
|
(in thousands) |
|
|
|
|
|
|
2021 |
|
Total revenue |
|
|
|
|
|
|
$ |
209,997 |
|
|
Net loss |
|
|
|
|
|
|
$ |
(53,440) |
|
The unaudited pro forma results presented above are for
illustrative purposes only and do not reflect the realization of
actual cost savings or any related integration costs. The unaudited
pro forma results do not purport to be indicative of the results
that would have been obtained, or to be a projection of results
that may be obtained in the future. $3.5 million of acquisition
costs have been reflected in the 2021 unaudited pro forma
results.
NOTE 4: ACCOUNTS RECEIVABLE, NET
The Company’s net accounts receivables consist of:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
September 30, 2022 |
|
December 31, 2021 |
|
Government segment: |
$ |
14,747 |
|
|
$ |
11,667 |
|
|
|
|
|
|
Restaurant/Retail segment: |
40,098 |
|
|
38,311 |
|
|
Accounts receivable - net |
$ |
54,845 |
|
|
$ |
49,978 |
|
At September 30, 2022 and December 31, 2021, the Company
had current expected credit loss of $1.8 million and $1.3 million,
respectively, against accounts receivable for the Restaurant/Retail
segment.
Changes in the current expected credit loss for the nine months
ended September 30 were:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
2022 |
|
2021 |
|
Beginning Balance - January 1 |
$ |
1,306 |
|
|
$ |
1,416 |
|
|
Provisions |
739 |
|
|
992 |
|
|
Write-offs |
(263) |
|
|
(692) |
|
|
Recoveries |
— |
|
|
(15) |
|
|
Ending Balance - September 30 |
$ |
1,782 |
|
|
$ |
1,701 |
|
Accounts receivables recorded as of September 30, 2022
and December 31, 2021 represent unconditional rights to
payments from customers.
NOTE 5: INVENTORIES
Inventories are used in the assembly and service of
Restaurant/Retail products. The components of inventory, adjusted
for reserves, consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
September 30, 2022 |
|
December 31, 2021 |
|
|
|
Finished goods |
$ |
24,729 |
|
|
$ |
17,528 |
|
|
|
|
Work in process |
160 |
|
|
688 |
|
|
|
|
Component parts |
13,857 |
|
|
14,880 |
|
|
|
|
Service parts |
961 |
|
|
1,982 |
|
|
|
|
Inventories |
$ |
39,707 |
|
|
$ |
35,078 |
|
|
|
At September 30, 2022 and December 31, 2021, the Company
had excess and obsolescence reserves of $12.6 million and $10.8
million, respectively, against inventories.
NOTE 6: IDENTIFIABLE INTANGIBLE ASSETS AND GOODWILL
The Company's identifiable intangible assets represent intangible
assets acquired in acquisitions and software development
costs. The Company capitalizes certain costs related to the
development of its unified commerce platform and other software
applications for internal use in accordance with ASC Topic
350-40,
Intangibles - Goodwill and Other - Internal - Use
Software.
The Company begins to capitalize its costs to develop software when
preliminary development efforts are successfully completed,
management has authorized and committed project funding, and it is
probable that the project will be completed and the software will
be used as intended. The Company stops capitalizing these project
costs when software is substantially complete and ready for its
intended use, including the completion of all significant testing.
These project costs are amortized on a straight-line basis over the
estimated useful life of the related asset, generally estimated to
be
three to seven years. The Company also capitalizes costs
related to specific upgrades and enhancements, when it is probable
the expenditure will result in additional functionality, and
expense costs are incurred for maintenance and minor upgrades and
enhancements. Costs incurred prior to meeting these criteria
together with costs incurred for training and maintenance are
expensed as incurred and recorded within research and development
expenses in the Company's condensed consolidated statements of
operations.
The Company exercises judgment in determining the point at which
various projects may be capitalized, in assessing the ongoing value
of the capitalized costs, and in determining the estimated useful
lives over which the costs are amortized. To the extent the Company
can change the manner in which new features and functionalities are
developed and tested related to its software products, by assessing
the ongoing value of capitalized assets or determining the
estimated useful lives over which the costs are amortized, the
amount of internal-use software development costs the Company
capitalizes and amortizes could change in future
periods.
Included in identifiable intangible assets are approximately
$3.9 million and $3.4 million of costs related to
software products that did not satisfy the general release
threshold as of September 30, 2022 and December 31, 2021,
respectively. These software products are expected to be ready for
their intended use within the next 12 months. Software costs
related to products placed into service during the three months
ended September 30, 2022 and 2021 were $1.4 million and
$1.6 million, respectively. Software costs related to products
placed into service during the nine months ended September 30,
2022 and 2021 were $4.3 million and $9.1 million,
respectively.
Annual amortization charged to cost of sales related to the
Company's software products is computed using the straight-line
method over the remaining estimated economic life of the product,
which is generally three years.
Amortization of acquired developed technology for the three months
ended September 30, 2022 and 2021 was $4.2 million and $3.7
million, respectively. Amortization of acquired developed
technology for the nine months ended September 30, 2022 and
2021 was $11.5 million and $8.3 million, respectively.
Amortization of internally developed software costs for the three
months ended September 30, 2022 and 2021 was $1.7 million and
$1.3 million, respectively. Amortization of internally
developed software costs for the nine months ended
September 30, 2022 and 2021 was $5.1 million and $3.8 million,
respectively.
The components of identifiable intangible assets are:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
September 30, 2022 |
|
December 31, 2021 |
|
|
|
Estimated
Useful Life |
|
Weighted-Average Amortization Period |
|
Acquired developed technology |
$ |
119,800 |
|
|
$ |
109,100 |
|
|
|
|
3 - 7 years
|
|
5.17 years |
|
Internally developed software costs |
30,033 |
|
|
25,735 |
|
|
|
|
3 years |
|
2.42 years |
|
Customer relationships |
12,360 |
|
|
12,360 |
|
|
|
|
7 years |
|
4.61 years |
|
Trade names |
1,410 |
|
|
1,410 |
|
|
|
|
2 - 5 years
|
|
2.5 years |
|
Non-competition agreements |
30 |
|
|
30 |
|
|
|
|
1 year |
|
1 year |
|
|
163,633 |
|
|
148,635 |
|
|
|
|
|
|
|
|
Less: accumulated amortization and currency translation |
(57,494) |
|
|
(39,479) |
|
|
|
|
|
|
|
|
|
106,139 |
|
|
109,156 |
|
|
|
|
|
|
|
|
Internally developed software costs not meeting general release
threshold |
3,903 |
|
|
3,407 |
|
|
|
|
|
|
|
|
Trademarks, trade names (non-amortizable) |
6,200 |
|
|
6,200 |
|
|
|
|
Indefinite |
|
|
|
|
$ |
116,242 |
|
|
$ |
118,763 |
|
|
|
|
|
|
|
Balances include foreign currency translation
adjustments.
The expected future amortization of intangible assets, assuming
straight-line amortization of capitalized software development
costs and acquisition related intangibles, excluding software
development costs not meeting the general release threshold, is as
follows:
|
|
|
|
|
|
|
(in thousands) |
|
|
2022, remaining |
$ |
6,204 |
|
|
2023 |
22,933 |
|
|
2024 |
20,610 |
|
|
2025 |
18,229 |
|
|
2026 |
17,576 |
|
|
Thereafter |
20,587 |
|
|
Total |
$ |
106,139 |
|
The Company operates in two reporting segments, Restaurant/Retail
and Government, which are the identified reporting units for
purposes of evaluating goodwill impairment. The Company tests
goodwill for impairment on an annual basis, or more often if events
or circumstances indicate that there may be impairment of goodwill.
Goodwill is assigned to a specific reporting unit at the date the
goodwill is initially recorded; once assigned, goodwill no longer
retains its association with a particular acquisition and all of
the activities within the reporting unit, whether acquired
organically or from a third-party, are available to support the
value of the goodwill.
Goodwill carried by the Restaurant/Retail and Government segments
is as follows:
|
|
|
|
|
|
| (in
thousands) |
|
|
Beginning balance - December 31, 2021 |
$ |
457,306 |
|
|
Q1 2022 Acquisition |
1,212 |
|
|
MENU Acquisition |
28,495 |
|
|
ASC 805 measurement period adjustment |
(1,085) |
|
|
Foreign currency translation |
(807) |
|
|
Ending balance - September 30, 2022 |
$ |
485,121 |
|
|
Refer to “Note 3 — Acquisitions”, for additional information on
goodwill from the 2022 Acquisitions. |
NOTE 7: DEBT
The following table summarizes information about the net carrying
amounts of long-term debt as of September 30,
2022:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
2024 Notes |
|
2026 Notes |
|
2027 Notes |
|
Total |
|
Principal amount of notes outstanding |
$ |
13,750 |
|
|
$ |
120,000 |
|
|
$ |
265,000 |
|
|
$ |
398,750 |
|
|
Unamortized debt issuance cost |
(303) |
|
|
(2,678) |
|
|
(7,089) |
|
|
(10,070) |
|
|
|
|
|
|
|
|
|
|
Total long-term portion of notes payable |
$ |
13,447 |
|
|
$ |
117,322 |
|
|
$ |
257,911 |
|
|
$ |
388,680 |
|
The following table summarizes information about the net carrying
amounts of long-term debt as of December 31,
2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
2024 Notes |
|
2026 Notes |
|
2027 Notes |
|
Total |
|
Principal amount of notes outstanding |
$ |
13,750 |
|
|
$ |
120,000 |
|
|
$ |
265,000 |
|
|
$ |
398,750 |
|
|
Unamortized debt issuance cost |
(334) |
|
|
(2,440) |
|
|
(5,984) |
|
|
(8,758) |
|
|
Unamortized discount |
(1,570) |
|
|
(19,413) |
|
|
(63,164) |
|
|
(84,147) |
|
|
Total long-term portion of notes payable |
$ |
11,846 |
|
|
$ |
98,147 |
|
|
$ |
195,852 |
|
|
$ |
305,845 |
|
Refer to "Recently Adopted Accounting Pronouncements" within "Note
1 - Basis of Presentation" for additional information relating to
impact to discount resulting from the Company's adoption of ASU
2020-06.
Convertible Senior Notes
On September 17, 2021, the Company sold $265.0 million in aggregate
principal amount of 1.500% Convertible Senior Notes due 2027 (the
“2027 Notes”). The 2027 Notes were issued pursuant to an indenture,
dated September 17, 2021, between the Company and The Bank of New
York Mellon Trust Company, N.A., as Trustee (the “2027 Indenture”).
The 2027 Notes bear interest at a rate of 1.500% per year, which is
payable semiannually in arrears on April 15 and October 15 of each
year, beginning April 15, 2022. Interest accrues on the 2027 Notes
from the last date to which interest has been paid or duly provided
for or, if no interest has been paid or duly provided for, from
September 17, 2021. Unless earlier converted, redeemed or
repurchased, the 2027 Notes mature on October 15, 2027. The Company
used net proceeds from the sale, in conjunction with net proceeds
from the September 2021 sale of common stock (Refer to “Note 8 —
Common Stock” for additional information), to repay in full the
principal amount of $180.0 million outstanding as of September 17,
2021 (the “Owl Rock Term Loan”) under the credit agreement entered
into on April 8, 2021 by the Company and certain of its U.S.
subsidiaries, as guarantors, with the lenders party thereto and Owl
Rock First Lien Master Fund, L.P. as administrative agent and
collateral agent (the “Owl Rock Credit Agreement”). The Company
intends to use the remaining net proceeds from the sale for general
corporate purposes, including continued investment in the growth of
the Company’s businesses and for other working capital needs. The
Company may also use a portion of the net proceeds to acquire or
invest in other assets complementary to the Company’s businesses or
for repurchases of the Company’s other indebtedness.
On February 10, 2020, the Company sold $120.0 million in aggregate
principal amount of 2.875% Convertible Senior Notes due 2026 (the
“2026 Notes”). The 2026 Notes were issued pursuant to an indenture,
dated February 10, 2020 (the “2026 Indenture”), between the Company
and The Bank of New York Mellon Trust Company, N.A., as Trustee.
The 2026 Notes pay interest at a rate equal to 2.875% per year,
payable semiannually in arrears on April 15 and October 15 of each
year, beginning October 15, 2020. Interest accrues on the 2026
Notes from the last date to which interest has been paid or duly
provided for or, if no interest has been paid or duly provided for,
from February 10, 2020. Unless earlier converted, redeemed or
repurchased, the 2026 Notes mature on April 15, 2026.
On April 15, 2019, the Company sold $80.0 million in aggregate
principal amount of 4.500% Convertible Senior Notes due 2024 (the
“2024 Notes” and, together with the 2026 Notes and the 2027 Notes,
the “Notes”). The 2024 Notes were issued pursuant to an indenture,
dated April 15, 2019, between the Company and The Bank of New York
Mellon Trust Company, N.A., as Trustee (the “2024 Indenture” and,
together with the 2026 Indenture and the 2027 Indenture, the
“Indentures”). The 2024 Notes pay interest at a rate equal to
4.500% per year, payable semiannually in arrears on April 15 and
October 15 of each year, beginning October 15, 2019. Interest
accrues on the 2024 Notes from the last date to which interest has
been paid or duly provided for or, if no interest has
been
paid or duly provided for, from April 15, 2019. Unless earlier
converted, redeemed or repurchased, the 2024 Notes mature on April
15, 2024.
The Company used approximately $66.3 million (excluding cash
payments relating to accrued interest and fractional shares) from
its sale of the 2026 Notes and issued 722,423 shares of common
stock at $32.43 per share out of treasury stock with an average
cost basis of $3.37 per share to repurchase approximately $66.3
million in aggregate principal amount of the 2024 Notes through
individually negotiated transactions. Of the total price paid for
the 2024 Notes, $59.0 million was allocated to the 2024 Notes
settlement, $30.8 million was allocated to equity, and $1.0 million
was used to pay off accrued interest on the 2024 Notes. The
consideration transferred was allocated to the liability and equity
components of the 2024 Notes using the equivalent rate that
reflected the borrowing rate for a similar non-convertible debt
instrument immediately prior to settlement.
Prior to the Company's adoption of ASU 2020-06 on January 1, 2022,
the carrying amount of the liability component of the Notes was
calculated by estimating the fair value of similar notes that do
not have associated convertible features. The carrying amount of
the equity component, representing the conversion option, was
determined by deducting the fair value of the liability component
from the fair value amount of the Notes. The valuation model used
in determining the fair value of the liability component for the
Notes includes inputs, such as the implied debt yield within the
nonconvertible borrowing rate. The implied estimated effective rate
of the liability component of the 2024 Notes, 2026 Notes, and 2027
Notes was 10.2%, 7.3%, and 6.5% respectively.
The Notes are senior, unsecured obligations of the Company. The
2024 Notes, the 2026 Notes, and the 2027 Notes are convertible, in
whole or in part, at the option of the holder, upon the occurrence
of specified events or certain fundamental changes set forth in the
Indentures prior to the close of business on the business day
immediately preceding October 15, 2023, October 15, 2025, and April
15, 2027, respectively; and, thereafter, at any time until the
close of business on the second business day immediately preceding
maturity. The 2024 Notes are convertible into Company common stock
at an initial conversion rate of 35.0217 shares per $1,000
principal amount, the 2026 Notes are convertible into Company
common stock at an initial conversion rate of 23.2722 shares per
$1,000 principal amount, and the 2027 Notes are convertible into
Company common stock at an initial conversion rate of 12.9870
shares per $1,000 principal amount. Upon conversion, the Company
may elect to settle by paying or delivering either solely cash,
shares of Company common stock or a combination of cash and shares
of Company common stock.
Prior to the Company's adoption of ASU 2020-06 on January 1, 2022,
in accordance with ASC Topic 470-20
Debt with Conversion and Other Options — Beneficial Conversion
Features,
the initial measurement of the 2024 Notes at fair value on issuance
resulted in a liability of $62.4 million and an implied value of
the convertible feature recognized as additional paid in capital of
$17.6 million; the initial measurement of the 2026 Notes at fair
value on issuance resulted in a liability of $93.8 million and an
implied value of the convertible feature recognized as additional
paid in capital of $26.2 million; and, the initial measurement of
the 2027 Notes at fair value on issuance resulted in a liability of
$199.2 million and an implied value of the convertible feature
recognized as additional paid in capital of $65.8 million. Issuance
costs for the Notes amounted to $4.9 million, $4.2 million, and
$8.3 million for the 2024 Notes, 2026 Notes, and 2027 Notes,
respectively. These costs were allocated to debt and equity
components on a ratable basis. For the 2024 Notes, this amounted to
$3.8 million and $1.1 million to the debt and equity components,
respectively. For the 2026 Notes, this amounted to $3.3 million and
$0.9 million to the debt and equity components, respectively. For
the 2027 Notes, this amounted to $6.2 million and $2.1 million to
the debt and equity components, respectively. Refer to 'Recently
Adopted Accounting Pronouncements' in Note 1 for a summary of the
Company's January 1, 2022 adoption of ASU 2020-06,
Debt – Debt with Conversion and Other Options (Subtopic 470-20) and
Derivatives and Hedging – Contracts in Entity’s Own Equity
(Subtopic 815-40).
The Indentures contain covenants that, among other things, restrict
the Company’s ability to merge, consolidate or sell, or otherwise
dispose of, substantially all of its assets and customary Events of
Default (as defined in the Indentures).
Prior to the Company's adoption of ASU 2020-06 on January 1, 2022,
the Company recorded an income tax liability of $15.6 million in
2021 associated with the portion of the 2027 Notes that was
classified within shareholders' equity. GAAP requires the offset of
the deferred tax liability to be classified within shareholders'
equity, consistent with the equity portion of the 2027 Notes. The
creation of the deferred tax liability produced evidence of
recoverability of the Company's net deferred tax assets, which
resulted in the release of a valuation allowance, totaling
$14.9 million, that was also classified within shareholders'
equity pursuant to ASU 2019-12.
Credit Facility
In connection with, and to partially fund the approximately $397.5
million in cash paid to former Punchh equity holders (the "Cash
Consideration") for the Punchh Acquisition, on April 8, 2021, the
Company entered into the Owl Rock Credit Agreement. Issuance costs,
which included a 2% Original Issue Discount, amounted to $9.3
million with net proceeds amounting to $170.7 million.
The Company used net proceeds from the sale of the 2027 Notes and
its concurrent sale of common stock (refer to “Note 8 — Common
Stock” for additional information about the sale) to repay in full
the Owl Rock Term Loan, including $1.8 million accrued
interest and $3.6 million prepayment premium, on September 17,
2021. Following its repayment, the Owl Rock Credit Agreement was
terminated.
The following tables summarize interest expense recognized on the
Notes and on the Credit Facility:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
Three Months
Ended September 30, |
|
2022 |
|
2021 |
|
Contractual interest expense |
$ |
2,011 |
|
|
$ |
3,284 |
|
|
Amortization of debt issuance costs |
504 |
|
|
2,118 |
|
|
|
|
|
|
Total interest expense |
$ |
2,515 |
|
|
$ |
5,402 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
Nine Months
Ended September 30, |
|
2022 |
|
2021 |
|
Contractual interest expense |
$ |
6,025 |
|
|
$ |
7,497 |
|
|
Amortization of debt issuance costs |
1,485 |
|
|
5,035 |
|
|
|
|
|
|
Total interest expense |
$ |
7,510 |
|
|
$ |
12,532 |
|
|
|
|
|
In connection with the acquisition of AccSys, LLC in December 2019,
the Company entered into a $2.0 million subordinated
promissory note. The note bears interest at 5.75% per
annum, with monthly payments of principal and interest in the
amount of $60.6 thousand payable beginning January 15, 2020
through maturity on December 15, 2022. As of September 30,
2022, the outstanding balance of the subordinated promissory note
was $0.2 million, which was recorded in the current portion of
long-term debt.
The following table summarizes the future principal payments as of
September 30, 2022:
|
|
|
|
|
|
|
(in thousands) |
|
|
2022, remaining |
$ |
180 |
|
|
2023 |
— |
|
|
2024 |
13,750 |
|
|
2025 |
— |
|
|
2026 |
120,000 |
|
|
Thereafter |
265,000 |
|
|
Total |
$ |
398,930 |
|
NOTE 8: COMMON STOCK
On September 17, 2021, the Company completed a public offering of
its common stock in which the Company issued and sold 982,143
shares of common stock at a public offering price of $56.00 per
share. The Company received net proceeds of $52.5 million, after
deducting underwriting discounts, commissions and other offering
expenses.
In connection with, and to partially fund the Cash Consideration of
the Punchh Acquisition, on April 8, 2021, the Company entered into
securities purchase agreements (the "Purchase Agreements") with
each of PAR Act III, LLC ("Act III") and T. Rowe Price Associates,
Inc., acting as investment adviser (such funds and accounts being
collectively referred to herein as "TRP") to raise approximately
$160.0 million through a private placement of the Company's common
stock. Pursuant to the Purchase Agreements, the Company issued and
sold (i) 73,530 shares of its common stock to Act III for a gross
purchase price of approximately $5.0 million ($68.00 per share),
and (ii) 2,279,412 shares of common stock to TRP for a gross
purchase price of approximately $155.0 million ($68.00 per share)
for an aggregate of 2,352,942 shares. The Company incurred $4.3
million of issuance costs in connection with the sale of its common
stock.
The Company issued 1,493,130 shares of its common stock as part of
the consideration paid to former Punchh equity holders in
connection with the Punchh Acquisition. Refer to “Note 3 —
Acquisitions” for additional information about the Punchh
Acquisition.
The Company issued 162,917 shares of its common stock as part of
the purchase consideration paid to former MENU equity holders in
connection with the MENU Acquisition. Refer to "Note 3 -
Acquisitions" for additional information about the MENU
Acquisition.
NOTE 9: STOCK-BASED COMPENSATION
The Company applies the fair value recognition provisions of ASC
Topic 718:
Stock Compensation.
Stock-based compensation expense, net of forfeitures of $0.1
million and $0.3 million for the three months ended
September 30, 2022 and 2021, respectively, and $0.9 million
and $0.4 million for the nine months ended September 30, 2022 and
2021, respectively, was recorded in the following line items in the
condensed consolidated statements of operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
2022 |
|
2021 |
|
2022 |
|
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 |
|
At September 30, 2022, the aggregate unrecognized compensation
expense related to unvested equity awards was $21.5 million, which
is expected to be recognized as compensation expense in fiscal
years 2022 through 2025.
A summary of stock option activity for the nine months ended
September 30, 2022 is below:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands, except for weighted average exercise
price) |
Options outstanding |
|
Weighted
average
exercise price |
|
Outstanding at January 1, 2022 |
1,306 |
|
|
$ |
11.95 |
|
|
|
|
|
|
Exercised |
(129) |
|
|
8.39 |
|
|
Canceled/forfeited |
(132) |
|
|
10.65 |
|
|
Outstanding at September 30, 2022 |
1,045 |
|
|
$ |
12.87 |
|
A summary of unvested restricted stock awards activity for the nine
months ended September 30, 2022 is below:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands, except for weighted average award value) |
Restricted Stock Awards |
|
Weighted
average
award value |
|
Outstanding at January 1, 2022 |
27 |
|
|
$ |
25.42 |
|
|
|
|
|
|
Vested |
(27) |
|
|
25.42 |
|
|
|
|
|
|
Outstanding at September 30, 2022 |
— |
|
|
|
A summary of unvested restricted stock units activity for the nine
months ended September 30, 2022 is below:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands, except for weighted average award value) |
Restricted Stock
Unit Awards |
|
Weighted
average
award value |
|
Outstanding at January 1, 2022 |
418 |
|
|
$ |
34.08 |
|
|
Granted |
371 |
|
|
38.12 |
|
|
Vested |
(124) |
|
|
30.15 |
|
|
Canceled/forfeited |
(89) |
|
|
48.00 |
|
|
Outstanding at September 30, 2022 |
576 |
|
|
$ |
35.25 |
|
NOTE 10: NET LOSS PER SHARE
Net loss per share is calculated in accordance with ASC Topic
260:
Earnings per Share,
which specifies the computation, presentation and disclosure
requirements for earnings per share (“EPS”). It requires the
presentation of basic and diluted EPS. Basic EPS excludes all
dilution and is based upon the weighted average number of shares of
common stock outstanding during the period. Diluted EPS
reflects the potential dilution that would occur if convertible
securities or other contracts to issue common stock were
exercised. At September 30, 2022, there were 1,045,000
anti-dilutive stock options outstanding compared to 1,364,000 as of
September 30, 2021. At September 30, 2022 there were
576,000 anti-dilutive restricted stock units compared to 468,000 as
of September 30, 2021.
The potential effects of the 2024 Notes, 2026 Notes, and 2027 Notes
conversion features were excluded from the diluted net loss per
share as of September 30, 2022 and 2021. Potential shares from
2024 Notes, 2026 Notes, and 2027 Notes conversion features at
respective maximum conversion rates of 46.4037 per share, 30.8356
per share, and 17.8571 per share are approximately 638,051,
3,700,272, and 4,732,132 respectively. Refer to “Note 7 — Debt” for
additional information about the Notes.
In connection with the Punchh Acquisition as discussed in “Note 3 —
Acquisitions” and “Note 8 — Common Stock,” the Company issued Act
III a five-year warrant to purchase 500,000 shares of common stock
with an exercise price of $76.50 per share; in connection with the
Company's 2021 public offering of its common stock, an additional
3,975 shares of common stock are available for purchase under the
warrant and the warrant exercise price is $75.90 per share. The
warrant was excluded from the diluted net loss per share as of
September 30, 2022 due to its anti-dilutive
impact.
NOTE 11: COMMITMENTS AND CONTINGENCIES
From time to time, the Company is party to legal proceedings
arising in the ordinary course of business. Additionally, U.S.
Government contract costs are subject to periodic audit and
adjustment. Based on information currently available, and based on
its evaluation of such information, the Company believes the legal
proceedings in which it is currently involved are not material or
are not likely to result in a material adverse effect on the
Company’s business, financial condition or results of operations,
or cannot currently be estimated.
On July 20, 2022, the Federal District Court of the Northern
District of Illinois granted final approval of a $790 thousand
class-wide settlement of the complaint filed by Kandice Neals on
behalf of herself and others similarly situated against ParTech,
alleging that ParTech violated the Illinois Biometric Information
Privacy Act in the alleged collection, use, and storage of her and
others' biometric data derived from fingerprint scans taken for
authentication purposes on point-of-sale systems. The Company had
accrued for this liability in December 2021 and fully funded the
settlement as of June 30, 2022.
NOTE 12: SEGMENT AND RELATED INFORMATION
The Company is organized in two segments, Restaurant/Retail and
Government. Management views the Restaurant/Retail and Government
segments separately in operating its business, as the products and
services are different for each segment.
The Restaurant/Retail segment is a provider of software, hardware
and services to the restaurant and retail industries. The
Restaurant/Retail segment provides multi-unit and individual
restaurants, franchisees, and enterprise customers in the three
major restaurant categories (fast casual, quick serve, and table
service) with operational efficiencies, offering them an integrated
suite of SaaS solutions that includes Brink POS for front-of-house,
Data Central for back-office, PAR Pay and PAR Payment Services for
payments, Punchh for customer loyalty and engagement and MENU for
integrated omnichannel ordering solutions. This segment also offers
customer support, including field service, installation, depot
repair, and 24-hour telephone support. The Government segment
provides technical expertise and development of advanced systems
and software solutions for the DoD, the intelligence community and
other federal agencies. This segment also provides support services
for satellite command and control, communication, and IT systems at
several DoD facilities worldwide.
Information noted as “Other” primarily relates to the Company’s
corporate operations.
Information as to the Company’s segments is set forth in the tables
below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, |
|
Nine months ended September 30, |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
Revenues: |
|
|
|
|
|
|
|
|
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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) income: |
|
|
|
|
|
|
|
|
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) |
|
|
Other expense, net |
(179) |
|
|
(539) |
|
|
(804) |
|
|
(931) |
|
|
Interest expense, net |
(2,140) |
|
|
(5,406) |
|
|
(7,054) |
|
|
(12,503) |
|
|
Loss on extinguishment of debt |
— |
|
|
(11,916) |
|
|
— |
|
|
(11,916) |
|
|
Loss before provision for income taxes |
$ |
(20,762) |
|
|
$ |
(31,970) |
|
|
$ |
(55,209) |
|
|
$ |
(62,455) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation, amortization and accretion: |
|
|
|
|
|
|
|
|
Restaurant/Retail |
$ |
6,255 |
|
|
$ |
5,833 |
|
|
$ |
18,113 |
|
|
$ |
13,789 |
|
|
Government |
112 |
|
|
30 |
|
|
340 |
|
|
263 |
|
|
Other |
904 |
|
|
2,453 |
|
|
2,657 |
|
|
6,051 |
|
|
Total |
$ |
7,271 |
|
|
$ |
8,316 |
|
|
$ |
21,110 |
|
|
$ |
20,103 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures including software costs: |
|
|
|
|
|
|
|
|
Restaurant/Retail |
$ |
1,439 |
|
|
$ |
1,645 |
|
|
$ |
4,686 |
|
|
$ |
5,342 |
|
|
Government |
33 |
|
|
139 |
|
|
89 |
|
|
592 |
|
|
Other |
161 |
|
|
177 |
|
|
756 |
|
|
465 |
|
|
Total |
$ |
1,633 |
|
|
$ |
1,961 |
|
|
$ |
5,531 |
|
|
$ |
6,399 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues by country: |
|
|
|
|
|
|
|
|
United
States |
$ |
88,555 |
|
|
$ |
71,595 |
|
|
$ |
243,406 |
|
|
$ |
186,325 |
|
|
International |
4,212 |
|
|
6,265 |
|
|
14,739 |
|
|
14,952 |
|
|
Total |
$ |
92,767 |
|
|
$ |
77,860 |
|
|
$ |
258,145 |
|
|
$ |
201,277 |
|
The following table represents assets by reporting
segment.
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
September 30, 2022 |
|
December 31, 2021 |
|
Restaurant/Retail |
$ |
718,643 |
|
|
$ |
674,032 |
|
|
Government |
17,630 |
|
|
14,831 |
|
|
Other |
128,468 |
|
|
199,286 |
|
|
Total |
$ |
864,741 |
|
|
$ |
888,149 |
|
The following table represents identifiable long-lived tangible
assets by country based on the location of the assets.
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
September 30, 2022 |
|
December 31, 2021 |
|
United States |
$ |
818,733 |
|
|
$ |
871,184 |
|
|
Other Countries |
46,008 |
|
|
16,965 |
|
|
Total |
$ |
864,741 |
|
|
$ |
888,149 |
|
The following table represents goodwill by reporting
segment.
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
September 30, 2022 |
|
December 31, 2021 |
|
Restaurant/Retail |
$ |
484,385 |
|
|
$ |
456,570 |
|
|
Government |
736 |
|
|
736 |
|
|
Total |
$ |
485,121 |
|
|
$ |
457,306 |
|
Customers comprising 10% or more of the Company’s total revenues by
reporting segment are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
Restaurant/Retail reporting segment: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yum! Brands, Inc. |
10 |
% |
|
11 |
% |
|
10 |
% |
|
12 |
% |
|
McDonald’s Corporation |
15 |
% |
|
12 |
% |
|
12 |
% |
|
11 |
% |
|
Government reporting segment: |
|
|
|
|
|
|
|
|
U.S. Department of Defense |
26 |
% |
|
23 |
% |
|
26 |
% |
|
27 |
% |
|
All Others |
49 |
% |
|
54 |
% |
|
52 |
% |
|
50 |
% |
|
|
100 |
% |
|
100 |
% |
|
100 |
% |
|
100 |
% |
No other customer within All Others represented 10% or more of the
Company’s total revenue for the three and nine months ended
September 30, 2022 or 2021.
NOTE 13: FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company’s financial instruments have been recorded at fair
value using available market information and valuation
techniques. The fair value hierarchy is based upon three
levels of input, which are:
Level 1 — quoted prices in active markets for identical assets or
liabilities (observable)
Level 2 — inputs other than Level 1 that are observable, either
directly or indirectly, such as quoted prices for similar assets or
liabilities, quoted prices in inactive markets, or other inputs
that are observable market data for essentially the full term of
the asset or liability (observable)
Level 3 — unobservable inputs that are supported by little or no
market activity, but are significant to determining the fair value
of the asset or liability (unobservable)
The Company’s financial instruments primarily consist of cash and
cash equivalents, short-term investments, trade receivables, trade
payables, debt instruments and deferred compensation assets and
liabilities. The carrying amounts of cash and cash equivalents,
short-term investments, trade receivables and trade payables as of
September 30, 2022 and December 31, 2021 were considered
representative of their fair values because of their short-term
nature. The estimated fair value of the 2024 Notes, 2026 Notes, and
2027 Notes at September 30, 2022 was $18.3 million, $118.2
million, and $195.7 million respectively. The valuation techniques
used to determine the fair value of the 2024 Notes, 2026 Notes, and
the 2027 Notes are classified within Level 2 of the fair value
hierarchy.
The deferred compensation assets and liabilities primarily relate
to the Company’s deferred compensation plan, which allows for
pre-tax salary deferrals for certain key employees. Changes in the
fair value of the deferred
compensation liabilities are derived using quoted prices in active
markets of the asset selections made by plan participants. The
deferred compensation liabilities are classified within Level 2,
the fair value classification as defined under FASB ASC Topic
820:
Fair Value Measurements,
because their inputs are derived principally from observable market
data by correlation to the hypothetical investments. The Company
holds insurance investments to partially offset the Company’s
liabilities under its deferred compensation plan, which are
recorded at fair value each period using the cash surrender value
of the insurance investments.
The amounts owed to employees participating in the deferred
compensation plan at September 30, 2022 was $1.9 million
compared to $2.4 million at December 31, 2021 and are included
in other long-term liabilities on the condensed consolidated
balance sheets.
The Company uses Monte Carlo simulation modeling to determine the
fair value of the earn-out liability associated with the
acquisition of MENU. Significant inputs used in the simulation are
not observable in the market and thus the liability represents a
Level 3 fair value measurement as defined in ASC 820. Ultimately,
the liability will be equivalent to the amount paid, and the
difference between the fair value estimate and amount paid will be
recorded in earnings. The amount paid that is less than or equal to
the liability on the acquisition date will be reflected as cash
used in financing activities in the Company's consolidated
statements of cash flows. Any amount paid in excess of the
liability on the acquisition date will be reflected as cash used in
operating activities. The Company determined the fair value of the
MENU earn-out contingent liability to be $14.2 million at
September 30, 2022.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition
and results of operations should be read in conjunction with our
financial statements and the notes thereto included under Part I,
Item 1 "Financial Statements (unaudited)" of this Quarterly Report
and our audited consolidated financial statements and the notes
thereto included under Part II, Item 8 "Financial Statements and
Supplementary Data" of the 2021 Annual Report. This discussion
contains forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from the
results contemplated by these forward-looking statements due to a
number of factors we describe in our filings with the SEC,
including in this Quarterly Report.
OVERVIEW
We, through our wholly owned subsidiaries - ParTech and PAR
Government Systems Corporation - operate in two distinct reporting
segments, Restaurant/Retail and Government.
Our Restaurant/Retail segment is a leading provider of software,
hardware, and services to the restaurant and retail industries,
with more than 500 customers currently using our software products
and more than 60,000 active restaurant locations. We provide
enterprise restaurants, franchisees, and other restaurant outlets
in the three major restaurant categories - quick service, fast
casual, and table service - with operational efficiencies by
offering them a suite of unified commerce solutions across three
product groupings: Guest Engagement, which includes Punchh for
customer loyalty and engagement and MENU for omnichannel digital
ordering and delivery, Operator Solutions, which includes Brink POS
for front-of-house and PAR Pay and PAR Payment Services for
payments, and Back Office, which includes Data Central. Our
solutions are extensible and built on open application programming
interfaces ("API") that retain flexibility and the market
optionality of an open platform. More than 400 partners leverage
our open platform to extend the reach and capabilities of their own
solutions for the leading brands in our industry.
Our Government segment provides technical expertise and development
of advanced systems and software solutions for the DoD, the
intelligence community, and other federal agencies. Additionally,
we provide support services for satellite command and control,
communication, and IT mission systems at several DoD facilities
worldwide. The Government segment has three principal offerings:
Intelligence, Surveillance, and Reconnaissance solutions ("ISR
Solutions"), mission systems operations and maintenance ("Mission
Systems"), and licensed software products for use in analytic and
operational environments that leverage geospatial intelligence data
("Commercial Software").
In the U.S., the Inflation Reduction Act ("Act") was signed into
law on August 16, 2022. We do not currently expect the Act to have
a material impact on our Consolidated Financial
Statements.
RESULTS OF OPERATIONS
Consolidated Results:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Percentage of total revenue |
|
Increase (decrease) |
|
in thousands |
2022 |
|
2021 |
|
2022 |
|
2021 |
|
2022 vs 2021 |
|
Revenues, net: |
|
|
|
|
|
|
|
|
|
|
Product |
$ |
31,343 |
|
|
$ |
30,291 |
|
|
33.8 |
% |
|
38.9 |
% |
|
3.5 |
% |
|
Service |
37,010 |
|
|
29,530 |
|
|
39.9 |
% |
|
37.9 |
% |
|
25.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract |
24,414 |
|
|
18,039 |
|
|
26.3 |
% |
|
23.2 |
% |
|
35.3 |
% |
|
Total revenues, net |
$ |
92,767 |
|
|
$ |
77,860 |
|
|
100.0 |
% |
|
100.0 |
% |
|
19.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin |
|
|
|
|
|
|
|
|
|
|
Product |
$ |
5,885 |
|
|
$ |
7,505 |
|
|
6.3 |
% |
|
9.6 |
% |
|
(21.6) |
% |
|
Service |
12,989 |
|
|
8,738 |
|
|
14.0 |
% |
|
11.2 |
% |
|
48.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract |
2,534 |
|
|
1,971 |
|
|
2.7 |
% |
|
2.5 |
% |
|
28.6 |
% |
|
Total gross margin |
$ |
21,408 |
|
|
$ |
18,214 |
|
|
23.1 |
% |
|
23.4 |
% |
|
17.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
$ |
26,543 |
|
|
$ |
21,662 |
|
|
28.6 |
% |
|
27.8 |
% |
|
22.5 |
% |
|
Research and development |
12,843 |
|
|
10,122 |
|
|
13.8 |
% |
|
13.0 |
% |
|
26.9 |
% |
|
Amortization of identifiable intangible assets |
465 |
|
|
539 |
|
|
0.5 |
% |
|
0.7 |
% |
|
(13.7) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
$ |
39,851 |
|
|
$ |
32,323 |
|
|
43.0 |
% |
|
41.5 |
% |
|
23.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations |
$ |
(18,443) |
|
|
$ |
(14,109) |
|
|
(19.9) |
% |
|
(18.1) |
|