Log in
E-mail
Password
Remember
Forgot password ?
Become a member for free
Sign up
Sign up
New member
Sign up for FREE
New customer
Discover our services
Settings
Settings
Dynamic quotes 
OFFON

PAR TECHNOLOGY CORPORATION

(PAR)
  Report
SummaryQuotesChartsNewsRatingsCalendarCompanyFinancialsConsensusRevisions 
SummaryMost relevantAll NewsAnalyst Reco.Other languagesPress ReleasesOfficial PublicationsSector news

PAR TECHNOLOGY : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

05/10/2021 | 05:10pm EDT
When used in this Quarterly Report on Form 10-Q ("Quarterly Report"), the terms
"PAR", "the Company," "we," "us" and "our" refers to PAR Technology Corporation
and its consolidated subsidiaries, unless the context indicates otherwise. 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 of this Quarterly Report and our
audited consolidated financial statement and the notes thereto included under
Part II, Item 8 of the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 2020 filed with the SEC on March 16, 2021 ("2020 Annual
Report"). See also, "Forward-Looking Statements".

Overview

PAR Technology Corporation operates in two distinct reporting segments: Restaurant/Retail and Government. Our Restaurant/Retail segment provides point-of-sale ("POS") software and hardware, back-office software, and integrated technical solutions to the retail and restaurant industries. Our Government segment provides intelligence, surveillance, and reconnaissance solutions ("ISR") and mission systems support to the Department of Defense ("DoD") and other Federal agencies.

                                       20
--------------------------------------------------------------------------------
  Table of Contents
Our Restaurant/Retail segment is a leading provider of POS software, systems,
and services to the restaurant and retail industries. Our promise is to deliver
the solutions that connect people to the restaurants, meals, and moments they
love. We provide multi-unit and individual restaurants, franchisees, and
enterprise customers in the three major restaurant categories: fast casual,
quick serve, and table service, a fully integrated cloud solution, with our
leading Brink POS cloud software and our point-of-sale hardware for the
front-of-house, our leading back-office cloud software - Data Central - for the
back-of-house, and our wireless headsets for drive-thru order taking.

The Brink POS is an open solution offering customers the opportunity to
integrate with third party products and in-house systems. In support of our
customers need to quickly adapt to changing market conditions, we claim the
largest integration ecosystem - 200+ partners across various product solution
categories including mobile/online ordering, self-ordering kiosks, loyalty
programs, kitchen video systems, guest surveys, enterprise reporting, and other
solutions relevant to our customers' businesses, including our cloud-based
back-office solution - Data Central. These integration capabilities enables
restaurants to increase visits, customer check size, improve operational
efficiency, and most importantly, position them to win in an ever changing and
challenging market.

Our open architecture POS platforms are optimized to host our POS software
applications, as well as many third-party POS applications, and are compatible
with a variety of peripheral devices. We partner with numerous vendors that
offer complementary in-store peripherals, such as cash drawers, card readers and
printers and kitchen video systems, allowing us to deliver a completely
integrated solution through one vendor.

We believe our software, hardware and integrated solutions uniquely position us
to be a leader in assisting customers to innovate and improve their in-store
operations in a rapidly changing and challenging market, particularly in light
of the continued impacts of the COVID-19 pandemic on the restaurant industry.
Our continued success and growth will depend upon our ability to advance and
create new technology, products and services to meet customer demands, as well
as deploy capital and resources that uniquely deliver customer value. This
includes the development and introduction of new products and services, targeted
acquisitions and a constant review of internal spend.

PAR's Government segment provides technical expertise in contract development of
advanced systems and software solutions for the DoD and other Federal agencies,
as well as satellite, communication, and IT mission systems support at a number
of U.S. Government facilities both in the U.S. and worldwide. The Government
segment is focused on two principal offerings, intelligence solutions and
mission systems contract support, with additional revenue from a small number of
licensed software products for use in analytic and operational environments that
leverage geospatial intelligence data. We believe our highly relevant technical
competencies, intellectual property, and investments in new technologies provide
opportunities to offer systems integration, products, and highly-specialized
service solutions to the U.S. DoD and other Federal agencies. The general
uncertainty in U.S. defense total workforce policies (military, civilian, and
contract), procurement cycles, and spending levels for the next several years
are factors we monitor as we develop and implement our business strategy for our
Government segment.

COVID 19 Update

The COVID-19 pandemic continues to cause significant disruption to the U.S. and
global economies. While certain foreign jurisdictions, such as Canada and
Europe, have re-imposed lockdowns and curfews in 2021, a number of localities in
the U.S. have eased restrictions in the first quarter of 2021 and the U.S.
economy continues to show signs of recovery. Although our business began
experiencing the impact of the COVID-19 in the second quarter of 2020, we have
seen improvements in our financial results as markets have strengthened and
businesses have gained confidence in the progress to control the pandemic in the
U.S. Beginning in the second half of 2020 through the quarter ended March 31,
2021, revenue has been in line with or above prior year results, our annual
recurring revenue has increased quarter-over-quarter, and we have booked at
least 1,181 new Brink POS sites in each of the last three quarters. Our
Government business continues to not be materially impacted by the COVID-19
pandemic.

We continue to monitor the effects and potential effects of the COVID-19
pandemic on all aspects of our business, however it is difficult to predict the
full impact of the COVID-19 pandemic on our business in future periods. The
pandemic may affect our Restaurant/Retail business in certain ways, including
causing disruptions in our supply chain, increasing payment defaults by
customers, causing reductions or delays in software or hardware deployments and
curtailing customer demand, any of which could adversely impact our business,
operations, financial condition and financial results.

Recent Developments


•On April 8, 2021, we acquired Punchh Inc ("Punchh") for approximately $500
million paid in cash and shares of PAR common stock to Punchh shareholders. The
cash consideration for the acquisition was primarily financed with a combination
of equity and debt. Refer to the "Liquidity and Capital Resource" section of
Management's Discussion
                                       21
--------------------------------------------------------------------------------
  Table of Contents
and Analysis for additional acquisition financing information. The acquisition
enabled us to take an important step in executing our strategy to be the leading
unified commerce cloud platform for restaurants and retailers. The addition of
Punchh's loyalty and customer engagement platform positions us to offer
integrated point-of-sale, back office, payment and customer engagement solutions
across channels. Refer to Note 13 - "Subsequent Event" for additional
information.

Condensed Consolidated Results of Operations - Three months ended March 31, 2021 Compared to Three months ended March 31, 2020


We reported consolidated revenues of $54.5 million for the quarter ended
March 31, 2021, a decrease of 0.5% from $54.7 million recorded for the quarter
ended March 31, 2020. Our net loss from operations was $8.3 million, or $0.38
per diluted share, for the first quarter of 2021, compared to a net loss
of $10.9 million, or $0.61 per diluted share, for the first quarter of 2020.

Product revenues were $18.6 million for the quarter ended March 31, 2021, comparable with the $18.6 million recorded for the quarter ended March 31, 2020.

Service revenues were $18.0 million for the quarter ended March 31, 2021, a decrease of 4.3% from the $18.8 million recorded for the quarter ended March 31, 2020, primarily driven by a $1.8 million decrease in implementation revenue partially offset by $0.9 million increase in software revenue.


Contract revenues were $17.9 million for the quarter ended March 31, 2021, an
increase of 3.5% or $0.6 million from $17.3 million recorded for the quarter
ended March 31, 2020. The favorable increase in contract revenue was driven by
stronger backlog in our intelligence, surveillance, and reconnaissance ("ISR")
solutions product line entering 2021.

Product margins for the quarter ended March 31, 2021 were 19.8%, compared to
20.0%, recorded for the quarter ended March 31, 2020. The decrease in margin is
primarily due to increased overheads costs.

Service margins for the quarter ended March 31, 2021 were 29.6%, compared to 32.6% recorded for the quarter ended March 31, 2020, primarily driven by a decrease in implementation revenue and increase in software related costs.


Contract margins for the quarter ended March 31, 2021 were 6.7%, compared to
6.9% for the quarter ended March 31, 2020, primarily due to reduced revenues in
Mission Systems and higher labor costs compared to the quarter ended March 31,
2020.

Selling, general, and administrative expenses increased to $14.5 million for the
quarter ended March 31, 2021 from $11.6 million for the quarter ended March 31,
2020, an increase of 24.9%. The increase was primarily driven by a $1.1 million
increase in variable compensation and $0.7 million in acquisition costs related
to our acquisition of Punchh, Inc on April 8th, 2021.

Research and development expenses were $5.8 million for the quarter ended March 31, 2021, an increase of $0.9 million from $4.9 million for the quarter ended March 31, 2020, driven primarily by an increase in Brink POS and Data Central development.


For the quarters ended March 31, 2021 and March 31, 2020, we recorded $0.3
million and $0.2 million, respectively of amortization expense associated with
acquired identifiable non-developed technology intangible assets and recorded as
cost of sales within service costs of sales.

Also included in operating expense for the three-months ended March 31, 2021 was
a $4.4 million gain on insurance proceeds received in connection with the
Company's settlement of a legacy claim. There was no comparable reduction to
expense for the three months ended March 31, 2020.

In other expense, net, we recorded $0.1 million for the quarter ended March 31,
2021, compared to other expense, net, of $0.4 million recorded for the quarter
ended March 31, 2020.

In interest expense, net, we recorded $2.2 million for the quarter ended
March 31, 2021, compared to $2.0 million recorded for the quarter ended
March 31, 2020. This increase was primarily driven by an increase in the balance
of convertible debt and associated interest expense related to the 2026 Notes
issued in the first quarter of 2020. Interest expense, net includes $1.2 million
of non-cash accretion of debt discount and amortization of issuance costs for
the three months ended March 31, 2021 compared with $1.0 million for the same
period last year.
                                       22

--------------------------------------------------------------------------------

Table of Contents

Segment Revenue by Product Line are set forth below:

                                                    Three Months Ended March 31                  $                    %
(in thousands)                                       2021                   2020              variance            variance
 Restaurant/Retail
Hardware                                       $       17,835          $    18,137          $    (302)                   (2) %
Software                                                7,876                6,944                932                    13  %
Services                                               10,873               12,328             (1,455)                  (12) %
Total Restaurant Retail*                       $       36,584          $    37,409          $    (825)                   (2) %

Government

Intelligence, surveillance, and reconnaissance $ 9,547 $

 8,772          $     775                     9  %
Mission systems                                         8,131                8,448               (317)                   (4) %
Product sales                                             205                  103                102                    99  %
Total Government                               $       17,883          $    17,323          $     560                     3  %

Total Net Revenue                              $       54,467          $    54,732          $    (265)                 (0.5) %


Liquidity and Capital Resources


For the three months ended March 31, 2021 our primary source of liquidity was
existing cash and cash equivalents generated through financing transactions in
2020. Cash used in operating activities was $3.4 million for the three months
ended March 31, 2021, compared to $15.1 million for the three months ended
March 31, 2020. This variance was driven primarily by improvements in working
capital requirements.

Cash used in investing activities was $1.7 million for the three months ended
March 31, 2021 compared to $2.0 million for the three months ended March 31,
2020. Investing activities during the three months ended March 31, 2021 included
capital expenditures of $1.5 million for developed technology costs associated
with our Restaurant/Retail segment software platforms compared to $1.9 million
for software platforms for the quarter ended March 31, 2020.

Cash used in financing activities was $2.1 million for the three months ended
March 31, 2021, compared to cash provided by financing activities of $49.4
million for the three months ended March 31, 2020. During the three months ended
March 31, 2020, we received net proceeds of $49.5 million from the $120.0
million issuance of the 2026 Notes offset by the repurchase of a majority of the
2024 Notes.

On April 8, 2021, we entered into a merger agreement with Punchh Inc., Punchh
survived the merger becoming our wholly owned subsidiary. In connection with the
merger, we paid former Punchh stockholders an aggregate of approximately (i)
$390.0 million in cash (the "Cash Consideration"), and (ii) 1,594,202 shares of
our common stock. To partially fund the Cash Consideration, we entered into a
credit agreement with the lenders thereto and Owl Rock First Lien Master Fund,
L.P. as administrative agent and collateral agent that provides for a term loan
in an initial aggregate principal amount of $180.0 million, and securities
purchase agreements with each of PAR Act III, LLC, and certain funds and
accounts advised by T. Rowe Price Associates, Inc., acting as investment adviser
to raise approximately $160.0 million through a private placement of our common
stock. The credit facility matures four years from the date of the credit
agreement, and the outstanding loans thereunder bear interest currently at a
rate equal to the Eurocurrency rate plus a margin of 4.75%. The remainder of the
Cash Consideration was provided from our cash and cash equivalent accounts.
Total cash used from our balance sheet for the merger including transaction
costs was approximately $66.0 million. Refer to Part I, Refer to Note 13 -
"Subsequent Event" for additional information.

We expect our available cash and cash equivalents will be sufficient to meet our
operating needs for the next 12 months. Our actual cash needs will depend on
many factors, including our rate of revenue growth, growth of our SaaS revenues,
the timing and extent of spending to support our product development efforts,
the timing of introductions of new products and enhancements to existing
products, market acceptance of our products, and the factors described above in
this Part I, Item 2. "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and elsewhere in this Quarterly Report for
the fiscal period ended March 31, 2021, and in the 2020 Annual Report and our
other filings with the SEC.

                                       23
--------------------------------------------------------------------------------
  Table of Contents
Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements or obligations.

Contractual Obligations

As of March 31, 2021, there were no material changes in our contractual obligations from those reported in our 2020 Annual Report.

Critical Accounting Policies and Estimates


Our condensed consolidated financial statements are based on the application of
accounting principles generally accepted in the United States of America
("GAAP"). GAAP requires the use of estimates, assumptions, judgments and
subjective interpretations of accounting principles that have an impact on the
assets, liabilities, revenue, and expense amounts reported. We believe our use
of estimates and underlying accounting assumptions adhere to GAAP and are
consistently applied. Valuations based on estimates are reviewed for
reasonableness and adequacy on a consistent basis. Primary areas where financial
information is subject to the use of estimates, assumptions and the application
of judgment include revenue recognition, accounts receivable, inventories,
accounting for business combinations, contingent consideration, goodwill and
intangible assets, and taxes. Our critical accounting policies have not changed
materially from the discussion of those policies included under "Critical
Accounting Policies and Estimates" in the 2020 Annual Report.

© Edgar Online, source Glimpses

All news about PAR TECHNOLOGY CORPORATION
06/11PAR TECHNOLOGY  : Online Ordering and Loyalty Platform Provider Appfront Joins P..
BU
06/10PAR TECHNOLOGY  : Files Shelf for Up to 1.5 Million Common Shares on Behalf of S..
MT
06/08PAR TECHNOLOGY  : Why Restaurants Need to Embrace the Omnichannel Experience
PU
06/08PAR TECHNOLOGY  : Video-Technology Provider Glimpse Joins PAR Technology's Brink..
BU
06/08PAR TECHNOLOGY CORP  : Submission of Matters to a Vote of Security Holders (form..
AQ
06/04PAR TECHNOLOGY  : How QR Codes Improve Restaurant Operations
PU
06/03CLUCKING DELICIOUS : The Chicken Sandwich Wars Heat Up
PU
05/26ICYMI : 2021 Fast Casual Top 100 Movers & Shakers Awards
PU
05/26PAR TECHNOLOGY  : Employee Rewards App Provider Onaroll Joins PAR Technology's B..
BU
05/24PAR TECHNOLOGY CORPORATION  : to Participate in the BTIG Restaurant Technology F..
BU
More news