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 June 30, 20202021
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)
| | | | | |
Delaware | 16-1434688 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| |
PAR Technology Park, 8383 Seneca Turnpike, New Hartford, New York 13413-4991 | |
(Address of principal executive offices, including zip code) | |
| |
(315) 738-0600 | |
(Registrant’s telephone number, including area code) | |
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | |
Title of each class | Trading Symbol | Name of each exchange on which registered |
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 þ 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 þ 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.
| | | | | | | | |
Large Accelerated Filer ☐ | Accelerated Filer þ |
Non-Accelerated Filer ☐ |
Smaller Reporting Company ☐ |
| Emerging Growth Company ☐ | |
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 þ
As of August 1, 2020, 18,250,6252, 2021, 25,857,858 shares of the registrant’s common stock, $0.02 par value, were outstanding.
PAR TECHNOLOGY CORPORATION
TABLE OF CONTENTS
PART I
FINANCIAL INFORMATION
| | | | | | | | |
Item Number
| | Page |
| | |
| | |
| | |
Item 1. | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
Item 2. | | |
| | |
Item 3. | | |
| | |
Item 4. | | |
| | |
PART II | | |
OTHER INFORMATION | | |
| | |
Item 1. | | |
| | |
Item 1A. | | |
| | |
Item 2. | | |
| | |
Item 6. | | 2933 |
| | |
| | |
"“PAR," "Brink” “Brink POS®," "PixelPoint®” “PixelPoint®," "PAR” “PAR EverServ®," "Restaurant” “Restaurant Magic®"”, “Data Central®”, and "Data Central®"“Punchh®” are trademarks of PAR Technology Corporation. This report may also contain trade names and trademarks of other companies. Our use of or reference to such other companies' trade names or trademarks is not intended to imply any endorsement or sponsorship by these companies of PAR Technology Corporation or its products or services.
Forward-Looking Statements
This Quarterly Report on Form 10-Q for the quarter ended June 30, 2021 (“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 our future operations, financial condition, financial results, business strategies and prospects. Forward-looking statements are generally identified by words such as “anticipate,” “believe,” “belief,” “continue,” “could,” “expect,” “estimate,” “intend,” “may,” “opportunity,” “plan,” “should,” “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 our control, which could cause our actual results to differ materially from those expressed in or implied by forward-looking statements, including forward-looking statements relating to and our expectations regarding our recent acquisition of Punchh Inc. and the anticipated benefits of such acquisition and the impact of the COVID-19 pandemic, including the new Delta variant, on our business, operations, and financial results. While we have taken and continue to take precautionary measures intended to minimize the impact of COVID-19 to our employees and to our business, there can be no assurances that these actions are sufficient and that additional actions will not be required. Factors that have adversely affected and may continue to adversely affect, and that could subsequently adversely impact, our business, operations and financial results due to the COVID-19 pandemic include: customer store closures; significant reductions or volatility in demand for our products and services; shortages of hardware materials and components, shipping delays and increased costs; canceled or delayed store implementations, decreased product adoptions and bookings; reduced or delayed software or hardware deployments and a reprioritization of investments in technology or point-of-sale infrastructure; delayed or payment defaults by customers; our ability to be agile in the execution of our business and strategies and our management of business continuity risks, including increased exposure to potential cybersecurity breaches and attacks, disruptions or delays in product assembly and fulfillment, and limitations on our selling and marketing efforts; our ability to successfully attract, hire and retain necessary qualified employees to develop and expand our business; and the possible impairment of goodwill and other intangible assets in the event of a significant decline in our financial performance. The extent to which the COVID-19 pandemic will continue to impact our business, operations, and financial results is uncertain and cannot be predicted, and there can be no assurance that the COVID-19 pandemic will not have a material and adverse effect on our business, operations and financial results during any quarter or year in which we are affected. Other factors, risks, trends, and uncertainties that could cause our actual results to differ materially from those expressed in or implied by forward-looking statements are described under Part I, Item 2. “Management's Discussion and Analysis of Financial Condition and Results of Operations”, Part II, Item 1A. “Risk Factors” and elsewhere in this Quarterly Report, in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, filed with the Securities and Exchange Commission (“SEC”) on March 16, 2021, in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, filed with the SEC on May 10, 2021, 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 AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, inIn thousands, except share and per share amounts)
| | | | | | | | | | | | | |
| | | | | |
Assets | June 30, 2020 | | December 31, 2019 | | |
Current assets: | | | | | |
Cash and cash equivalents | $ | 58,775 | | | $ | 28,036 | | | |
Accounts receivable – net | 38,236 | | | 41,774 | | | |
Inventories – net | 25,992 | | | 19,326 | | | |
| | | | | |
Other current assets | 4,167 | | | 4,427 | | | |
Total current assets | 127,170 | | | 93,563 | | | |
Property, plant and equipment – net | 13,503 | | | 14,351 | | | |
Goodwill | 41,214 | | | 41,386 | | | |
Intangible assets – net | 34,305 | | | 32,948 | | | |
Lease right-of-use assets | 2,445 | | | 3,017 | | | |
Other assets | 4,249 | | | 4,347 | | | |
Total Assets | $ | 222,886 | | | $ | 189,612 | | | |
Liabilities and Shareholders’ Equity | | | | | |
Current liabilities: | | | | | |
| | | | | |
Current portion of long-term debt | $ | 647 | | | $ | 630 | | | |
Accounts payable | 15,699 | | | 16,385 | | | |
Accrued salaries and benefits | 7,538 | | | 7,769 | | | |
Accrued expenses | 2,523 | | | 3,176 | | | |
Lease liabilities - current portion | 1,295 | | | 2,060 | | | |
Customer deposits and deferred service revenue | 9,625 | | | 12,084 | | | |
| | | | | |
| | | | | |
Total current liabilities | 37,327 | | | 42,104 | | | |
Lease liabilities - net of current portion | 1,235 | | | 1,021 | | | |
Deferred service revenue – non current | 3,937 | | | 3,916 | | | |
Long-term debt | 103,849 | | | 62,414 | | | |
Other long-term liabilities | 7,928 | | | 7,310 | | | |
Total liabilities | 154,276 | | | 116,765 | | | |
Commitments and contingencies | | | | | |
Shareholders’ Equity: | | | | | |
Preferred stock, $.02 par value, 1,000,000 shares authorized | — | | | — | | | |
Common stock, $.02 par value, 58,000,000 shares authorized; 19,295,313 and 18,360,205 shares issued, 18,245,225 and 16,629,177 outstanding at June 30, 2020 and December 31, 2019, respectively | 386 | | | 367 | | | |
Additional paid in capital | 107,540 | | | 94,372 | | | |
Accumulated deficit | (30,030) | | | (10,144) | | | |
Accumulated other comprehensive loss | (5,009) | | | (5,368) | | | |
Treasury stock, at cost, 1,050,088 shares and 1,731,028 shares at June 30, 2020 and December 31, 2019, respectively | (4,277) | | | (6,380) | | | |
Total shareholders’ equity | 68,610 | | | 72,847 | | | |
Total Liabilities and Shareholders’ Equity | $ | 222,886 | | | $ | 189,612 | | | |
(Unaudited) | | | | | | | | | | | | | |
Assets | June 30, 2021 | | December 31, 2020 | | |
Current assets: | | | | | |
Cash and cash equivalents | $ | 85,218 | | | $ | 180,686 | | | |
Accounts receivable – net | 45,248 | | | 42,980 | | | |
Inventories – net | 29,947 | | | 21,638 | | | |
Other current assets | 16,592 | | | 3,625 | | | |
Total current assets | 177,005 | | | 248,929 | | | |
Property, plant and equipment – net | 14,006 | | | 13,856 | | | |
Goodwill | 458,773 | | | 41,214 | | | |
Intangible assets – net | 130,726 | | | 33,121 | | | |
Lease right-of-use assets | 4,779 | | | 2,569 | | | |
Other assets | 12,386 | | | 4,060 | | | |
Total assets | $ | 797,675 | | | $ | 343,749 | | | |
Liabilities and Shareholders’ Equity | | | | | |
Current liabilities: | | | | | |
Current portion of long-term debt | $ | 685 | | | $ | 666 | | | |
Accounts payable | 21,822 | | | 12,791 | | | |
Accrued salaries and benefits | 16,225 | | | 13,190 | | | |
Accrued expenses | 5,172 | | | 2,606 | | | |
Lease liabilities – current portion | 1,865 | | | 1,200 | | | |
Customer deposits and deferred service revenue | 14,584 | | | 9,506 | | | |
Total current liabilities | 60,353 | | | 39,959 | | | |
Lease liabilities – net of current portion | 3,322 | | | 1,462 | | | |
Deferred service revenue – noncurrent | 5,234 | | | 3,082 | | | |
Long-term debt | 279,087 | | | 105,844 | | | |
Other long-term liabilities | 13,118 | | | 4,997 | | | |
Total liabilities | 361,114 | | | 155,344 | | | |
Commitments and contingencies (Note 11) | 0 | | 0 | | |
Shareholders’ equity: | | | | | |
Preferred stock, $.02 par value, 1,000,000 shares authorized | 0 | | | 0 | | | |
Common stock, $.02 par value, 58,000,000 shares authorized, 26,998,216 and 22,982,955 shares issued, 25,848,889 and 21,917,357 outstanding at June 30, 2021 and December 31, 2020, respectively | 540 | | | 459 | | | |
Additional paid in capital | 514,295 | | | 243,575 | | | |
Accumulated deficit | (64,933) | | | (46,706) | | | |
Accumulated other comprehensive loss | (3,883) | | | (3,936) | | | |
Treasury stock, at cost, 1,149,327 shares and 1,065,598 shares at June 30, 2021 and December 31, 2020, respectively | (9,458) | | | (4,987) | | | |
Total shareholders’ equity | 436,561 | | | 188,405 | | | |
Total Liabilities and Shareholders’ Equity | $ | 797,675 | | | $ | 343,749 | | | |
See accompanying notes to unaudited interim condensed consolidated financial statements
PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, inIn thousands, except share and per share amounts)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | Three Months Ended June 30, | | | Six Months Ended June 30, | | | Six Months Ended June 30, |
| | 2020 | | 2019 | | | 2020 | | 2019 | | 2021 | | 2020 | | 2021 | | 2020 |
Net revenues: | Net revenues: | | | | | | | | | Net revenues: | | | | | | | |
Product | Product | $ | 12,333 | | | $ | 14,728 | | | | $ | 30,967 | | | $ | 30,245 | | Product | $ | 23,939 | | | $ | 12,333 | | | $ | 42,495 | | | $ | 30,967 | |
Service | Service | 15,300 | | | 13,534 | | | | 34,075 | | | 27,577 | | Service | 27,185 | | | 15,300 | | | 45,213 | | | 34,075 | |
Contract | Contract | 18,058 | | | 15,985 | | | | 35,381 | | | 31,107 | | Contract | 17,826 | | | 18,058 | | | 35,709 | | | 35,381 | |
| | 45,691 | | | 44,247 | | | | 100,423 | | | 88,929 | | | 68,950 | | | 45,691 | | | 123,417 | | | 100,423 | |
Costs of sales: | Costs of sales: | | | | | | | | | Costs of sales: | | | | | | | |
Product | Product | 9,982 | | | 11,412 | | | | 24,887 | | | 22,653 | | Product | 18,487 | | | 9,982 | | | 33,372 | | | 24,887 | |
Service | Service | 9,912 | | | 10,118 | | | | 22,558 | | | 20,385 | | Service | 18,940 | | | 9,912 | | | 31,635 | | | 22,558 | |
Contract | Contract | 16,718 | | | 14,386 | | | | 32,852 | | | 28,036 | | Contract | 16,420 | | | 16,718 | | | 33,107 | | | 32,852 | |
| | 36,612 | | | 35,916 | | | | 80,297 | | | 71,074 | | | 53,847 | | | 36,612 | | | 98,114 | | | 80,297 | |
Gross margin | Gross margin | 9,079 | | | 8,331 | | | | 20,126 | | | 17,855 | | Gross margin | 15,103 | | | 9,079 | | | 25,303 | | | 20,126 | |
Operating expenses: | Operating expenses: | | | | | | | | | Operating expenses: | | | | | | | |
Selling, general and administrative | Selling, general and administrative | 10,049 | | | 9,059 | | | | 21,476 | | | 17,623 | | Selling, general and administrative | 22,946 | | | 10,049 | | | 37,483 | | | 21,476 | |
Research and development | Research and development | 4,538 | | | 2,725 | | | | 9,403 | | | 5,786 | | Research and development | 8,643 | | | 4,538 | | | 14,452 | | | 9,403 | |
Amortization of identifiable intangible assets | Amortization of identifiable intangible assets | 210 | | | — | | | | 420 | | | — | | Amortization of identifiable intangible assets | 489 | | | 210 | | | 764 | | | 420 | |
Gain on insurance proceeds | | Gain on insurance proceeds | 0 | | | 0 | | | (4,400) | | | 0 | |
| | 14,797 | | | 11,784 | | | | 31,299 | | | 23,409 | | | 32,078 | | | 14,797 | | | 48,299 | | | 31,299 | |
Operating loss | Operating loss | (5,718) | | | (3,453) | | | | (11,173) | | | (5,554) | | Operating loss | (16,975) | | | (5,718) | | | (22,996) | | | (11,173) | |
Other expense, net | (139) | | | (374) | | | | (764) | | | (804) | | |
Interest expense, net | (2,111) | | | (1,244) | | | | (4,083) | | | (1,390) | | |
Other expense – net | | Other expense – net | (341) | | | (139) | | | (392) | | | (764) | |
Loss on extinguishment of debt | Loss on extinguishment of debt | — | | | — | | | | (8,123) | | | — | | Loss on extinguishment of debt | 0 | | | 0 | | | 0 | | | (8,123) | |
Loss before benefit from (provision for) income taxes | (7,968) | | | (5,071) | | | | (24,143) | | | (7,748) | | |
(Provision for) benefit from income taxes | (1,008) | | | 3,962 | | | | 4,257 | | | 3,910 | | |
| Interest expense – net | | Interest expense – net | (4,937) | | | (2,111) | | | (7,097) | | | (4,083) | |
Loss before provision for income taxes | | Loss before provision for income taxes | (22,253) | | | (7,968) | | | (30,485) | | | (24,143) | |
Benefit from (provision for) income taxes | | Benefit from (provision for) income taxes | 12,297 | | | (1,008) | | | 12,258 | | | 4,257 | |
Net loss | Net loss | $ | (8,976) | | | $ | (1,109) | | | | $ | (19,886) | | | $ | (3,838) | | Net loss | $ | (9,956) | | | $ | (8,976) | | | $ | (18,227) | | | $ | (19,886) | |
Basic Earnings per Share: | | | | | | | | | |
Net loss | $ | (0.49) | | | $ | (0.07) | | | | $ | (1.10) | | | $ | (0.24) | | |
Diluted Earnings per Share: | | | | | | | | | |
Net loss | $ | (0.49) | | | $ | (0.07) | | | | $ | (1.10) | | | $ | (0.24) | | |
Weighted average shares outstanding: | | | | | | | | | |
Basic | 18,244 | | | 16,290 | | | | 18,092 | | | 16,085 | | |
Diluted | 18,244 | | | 16,290 | | | | 18,092 | | | 16,085 | | |
Net loss per share (basic and diluted) | | Net loss per share (basic and diluted) | $ | (0.39) | | | $ | (0.49) | | | $ | (0.77) | | | $ | (1.10) | |
Weighted average shares outstanding (basic and outstanding) | | Weighted average shares outstanding (basic and outstanding) | 25,484 | | 18,244 | | 23,716 | | 18,092 |
See accompanying notes to unaudited interim condensed consolidated financial statements
PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited, in thousands, except share and per share amounts)In thousands)
(Unaudited)
| | | Three Months Ended June 30, | | | Six Months Ended June 30, | | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2020 | | 2019 | | 2020 | | 2019 | | 2021 | | 2020 | | 2021 | | 2020 |
Net loss | Net loss | $ | (8,976) | | | $ | (1,109) | | | $ | (19,886) | | | $ | (3,838) | | Net loss | $ | (9,956) | | | $ | (8,976) | | | $ | (18,227) | | | $ | (19,886) | |
Other comprehensive income, net of applicable tax: | | | | | | | | |
Other comprehensive income loss, net of applicable tax: | | Other comprehensive income loss, net of applicable tax: | |
Foreign currency translation adjustments | Foreign currency translation adjustments | 158 | | | 131 | | | 359 | | | 121 | | Foreign currency translation adjustments | 355 | | | 158 | | | 53 | | | 359 | |
Comprehensive loss | Comprehensive loss | $ | (8,818) | | | $ | (978) | | | $ | (19,527) | | | $ | (3,717) | | Comprehensive loss | $ | (9,601) | | | $ | (8,818) | | | $ | (18,174) | | | $ | (19,527) | |
See accompanying notes to unaudited interim condensed consolidated financial statements
PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited, in thousands, except share and per share amounts)In thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common Stock | | Additional Paid in Capital | Accumulated deficit | Accumulated Other Comprehensive Loss | Treasury Stock | | Total Shareholders’ Equity |
| Shares | Amount | | | | Shares | Amount | |
| | | | | | | | |
Balances at December 31, 2019 | 18,360 | | $ | 367 | | $ | 94,372 | | $ | (10,144) | | $ | (5,368) | | 1,731 | | $ | (6,380) | | $ | 72,847 | |
Net loss | — | | — | | — | | (10,910) | | — | | — | | — | | (10,910) | |
Issuance of common stock upon the exercise of stock options | 2 | | — | | 30 | | — | | — | | | — | | 30 | |
Net issuance of restricted stock awards | 21 | | — | | — | | — | | — | | | — | | — | |
Treasury stock acquired from employees upon vesting or forfeiture of restricted stock | — | | — | | — | | — | | — | | 38 | | (524) | | (524) | |
Issuance of restricted stock for acquisition | 908 | | 19 | | — | | — | | — | | — | | — | | 19 | |
Equity component of redeemed 2024 convertible notes, net of deferred taxes and issuance costs | — | | — | | (7,988) | | — | | — | | (722) | | 2,435 | | (5,553) | |
Equity component of issued 2026 convertible notes, net of deferred taxes and issuance costs | — | | — | | 19,097 | | — | | — | | — | | — | | 19,097 | |
Stock-based compensation | — | | — | | 1,089 | | — | | — | | — | | — | | 1,089 | |
Foreign currency translation adjustments | — | | — | | — | | — | | 201 | | — | | — | | 201 | |
Balances at March 31, 2020 | 19,291 | | $ | 386 | | $ | 106,600 | | $ | (21,054) | | $ | (5,167) | | 1,047 | | $ | (4,469) | | $ | 76,296 | |
Net loss | — | | — | | — | | (8,976) | | — | | — | | — | | (8,976) | |
Issuance of common stock upon the exercise of stock options | 4 | | — | | 12 | | — | | — | | — | | — | | 12 | |
Treasury stock acquired from employees upon vesting or forfeiture of restricted stock | — | | — | | (195) | | — | | — | | 3 | | 192 | | (3) | |
Stock-based compensation | — | | — | | 1,123 | | — | | — | | — | | — | | 1,123 | |
Foreign currency translation adjustments | — | | — | | — | | — | | 158 | | — | | — | | 158 | |
Balances at June 30, 2020 | 19,295 | | 386 | | 107,540 | | (30,030) | | (5,009) | | 1,050 | | (4,277) | | 68,610 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common Stock | | Additional Paid in Capital | | Accumulated deficit | | Accumulated Other Comprehensive Loss | | Treasury Stock | | Total Shareholders’ Equity |
Shares | | Amount | | | | | Shares | | Amount | |
Balances at December 31, 2020 | 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 | 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 awards | 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 | |
| | | | | | | | | | | | | | | |
PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited, in thousands, except share and per share amounts)
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common Stock | | Additional paid in capital | Retained Earnings (accumulated deficit) | Accumulated Other Comprehensive Loss | Treasury Stock | | Total Shareholders’ Equity |
| Shares | Amount | | | | Shares | Amount | |
| | | | | | | | |
Balances at December 31, 2018 | 17,878 | | $ | 357 | | $ | 50,251 | | $ | 5,427 | | $ | (4,253) | | 1,708 | | $ | (5,836) | | $ | 45,946 | |
| | | | | | | | |
Net loss | — | | — | | — | | (2,729) | | — | | — | | — | | (2,729) | |
Issuance of common stock upon the exercise of stock options | 78 | | — | | 30 | | — | | — | | — | | — | | 30 | |
Stock-based compensation | — | | — | | 248 | | — | | — | | — | | — | | 248 | |
Foreign currency translation adjustments | — | | — | | — | | — | | (10) | | — | | — | | (10) | |
Balances at March 31, 2019 | 17,956 | | $ | 357 | | $ | 50,529 | | $ | 2,698 | | $ | (4,263) | | 1,708 | | $ | (5,836) | | $ | 43,485 | |
Net loss | | | | (1,109) | | | | | (1,109) | |
Issuance of common stock upon the exercise of stock options | 79 | | 3 | | 210 | | | | | | $ | 213 | |
Stock-based compensation | | | 602 | | | | | | 602 | |
Foreign currency translation adjustments | | | | | 131 | | | | $ | 131 | |
Convertible notes conversion discount (net of taxes $4.1 million and issuance costs of $1.1 million)
| | | 12,465 | | | | | | 12,465 | |
Balances at June 30, 2019 | 18,035 | | 360 | | 63,806 | | 1,589 | | (4,132) | | 1,708 | | (5,836) | | 55,787 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
See accompanying notes to unaudited interim condensed consolidated financial statements
PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSCHANGES IN SHAREHOLDERS' EQUITY (Continued)
(Unaudited, in thousands, except share and per share amounts)In thousands)
| | | | | | | | | | | | | |
| Six Months Ended June 30, | | | | |
| 2020 | | 2019 | | |
Cash flows from operating activities: | | | | | |
Net loss | $ | (19,886) | | | $ | (3,838) | | | |
Adjustments to reconcile net loss to net cash used in operating activities: | | | | | |
Depreciation, amortization and accretion | 6,700 | | | 3,121 | | | |
Current expected credit losses | 978 | | | 397 | | | |
Provision for obsolete inventory | 1,439 | | | (522) | | | |
Stock-based compensation | 2,212 | | | 850 | | | |
Loss on debt extinguishment | 8,123 | | | — | | | |
Deferred income tax | (4,408) | | | (4,065) | | | |
Changes in operating assets and liabilities: | | | | | |
Accounts receivable | 2,560 | | | (284) | | | |
Inventories | (8,105) | | | 1,876 | | | |
Other current assets | 260 | | | (3,406) | | | |
Other assets | 119 | | | 150 | | | |
Accounts payable | (931) | | | (2,208) | | | |
Accrued salaries and benefits | (231) | | | (240) | | | |
Accrued expenses | (652) | | | 2,840 | | | |
Customer deposits and deferred service revenue | (2,438) | | | 1,548 | | | |
Other long-term liabilities | 618 | | | (2,760) | | | |
Net cash used in operating activities | (13,642) | | | (6,541) | | | |
Cash flows from investing activities: | | | | | |
Settlement of working capital for acquisitions | 172 | | | — | | | |
Capital expenditures | (188) | | | (1,693) | | | |
Capitalization of software costs | (4,613) | | | (1,624) | | | |
Net cash used in investing activities | (4,629) | | | (3,317) | | | |
Cash flows from financing activities: | | | | | |
Payments of long-term debt | (313) | | | — | | | |
Payment of contingent consideration | — | | | (2,550) | | | |
Payments of bank borrowings | — | | | (17,459) | | | |
Proceeds from bank borrowings | — | | | 9,640 | | | |
Payments for the extinguishment of notes payable | (66,250) | | | — | | | |
Proceeds from notes payable, net of issuance costs | 115,916 | | | 75,039 | | | |
Treasury stock acquired from employees upon vesting or forfeiture of restricted stock | (332) | | | — | | | |
Proceeds from exercise of stock options
| 42 | | | 243 | | | |
Net cash provided by financing activities | 49,063 | | | 64,913 | | | |
Effect of exchange rate changes on cash and cash equivalents | (53) | | | 121 | | | |
Net increase in cash and cash equivalents | 30,739 | | | 55,176 | | | |
Cash and cash equivalents at beginning of period | 28,036 | | | 3,485 | | | |
Cash and equivalents at end of period | $ | 58,775 | | | $ | 58,661 | | | |
Supplemental disclosures of cash flow information: | | | | | |
Cash paid for interest | $ | 1,262 | | | $ | 153 | | | |
Income taxes, net of refunds | 10 | | | 125 | | | |
| | | | | |
Capitalized software recorded in accounts payable | 245 | | | — | | | |
(Unaudited) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common Stock | | Additional Paid in Capital | | Accumulated deficit | | Accumulated Other Comprehensive Loss | | Treasury Stock | | Total Shareholders’ Equity |
Shares | | Amount | | | | | Shares | | Amount | |
Balances at December 31, 2019 | 18,360 | | | $ | 367 | | | $ | 94,372 | | | $ | (10,144) | | | $ | (5,368) | | | 1,731 | | | $ | (6,380) | | | $ | 72,847 | |
Issuance of common stock upon the exercise of stock options | 2 | | | — | | | 30 | | | — | | | — | | | | | — | | | 30 | |
Net issuance of restricted stock awards | 21 | | | — | | | — | | | — | | | — | | | | | — | | | — | |
Treasury stock acquired from employees upon vesting or forfeiture of restricted stock | — | | | — | | | — | | | — | | | — | | | 38 | | | (524) | | | (524) | |
Issuance of restricted stock for acquisition | 908 | | | 19 | | | — | | | — | | | — | | | — | | | — | | | 19 | |
Equity component of redeemed 2024 convertible notes (net of deferred taxes of $1.8 million) | | | | | (7,988) | | | | | | | (722) | | | 2,435 | | | (5,553) | |
Equity component of issued 2026 convertible notes (net of deferred taxes of $6.2 million and issuance costs of $0.9 million) | — | | | — | | | 19,097 | | | — | | | — | | | — | | | — | | | 19,097 | |
Stock-based compensation | — | | | — | | | 1,089 | | | — | | | — | | | — | | | — | | | 1,089 | |
Foreign currency translation adjustments | — | | | — | | | — | | | — | | | 201 | | | — | | | — | | | 201�� | |
Net loss | — | | | — | | | — | | | (10,910) | | | — | | | — | | | — | | | (10,910) | |
Balances at March 31, 2020 | 19,291 | | | $ | 386 | | | $ | 106,600 | | | $ | (21,054) | | | $ | (5,167) | | | 1,047 | | | $ | (4,469) | | | $ | 76,296 | |
Issuance of common stock upon the exercise of stock options | 4 | | | — | | | 12 | | | — | | | — | | | — | | | — | | | 12 | |
Treasury stock acquired from employees upon vesting or forfeiture of restricted stock | — | | | — | | | (195) | | | — | | | — | | | 3 | | | 192 | | | (3) | |
Stock-based compensation | — | | | — | | | 1,123 | | | — | | | — | | | — | | | — | | | 1,123 | |
Foreign currency translation adjustments | — | | | — | | | — | | | — | | | 158 | | | — | | | — | | | 158 | |
Net loss | — | | | — | | | — | | | (8,976) | | | — | | | — | | | — | | | (8,976) | |
Balances at June 30, 2020 | 19,295 | | | $ | 386 | | | $ | 107,540 | | | $ | (30,030) | | | $ | (5,009) | | | 1,050 | | | $ | (4,277) | | | $ | 68,610 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
See accompanying notes to unaudited interim condensed consolidated financial statements
PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| | | | | | | | | | | | | |
| Six Months Ended June 30, |
| 2021 | | 2020 | | |
Cash flows from operating activities: | | | | | |
Net loss | $ | (18,227) | | | $ | (19,886) | | | |
Adjustments to reconcile net loss to net cash (used in) provided by operating activities: | | | | | |
Depreciation and amortization | 8,870 | | | 4,537 | | | |
Accretion of debt in interest expense | 2,917 | | | 2,163 | | | |
Current expected credit losses | 922 | | | 978 | | | |
Provision for obsolete inventory | 511 | | | 1,439 | | | |
Stock-based compensation | 5,571 | | | 2,212 | | | |
Loss on debt extinguishment | 0 | | | 8,123 | | | |
| | | | | |
Deferred income tax | (12,360) | | | (4,408) | | | |
Changes in operating assets and liabilities, net of acquisition: | | | | | |
Accounts receivable | 7,065 | | | 2,560 | | | |
Inventories | (8,765) | | | (8,105) | | | |
Other current assets | (11,049) | | | 260 | | | |
Other assets | (1,525) | | | 119 | | | |
Accounts payable | 4,933 | | | (931) | | | |
Accrued salaries and benefits | (1,276) | | | (231) | | | |
Accrued expenses | (6,345) | | | (652) | | | |
Customer deposits and deferred service revenue | (3,901) | | | (2,438) | | | |
Other long-term liabilities | (399) | | | 618 | | | |
Net cash used in operating activities | (33,058) | | | (13,642) | | | |
Cash flows from investing activities: | | | | | |
Settlement of working capital for acquisitions | 0 | | | 172 | | | |
Cash paid for acquisition, net of cash acquired | (377,263) | | | 0 | | | |
Capital expenditures | (600) | | | (188) | | | |
Capitalization of software costs | (3,838) | | | (4,613) | | | |
Net cash used in investing activities | (381,701) | | | (4,629) | | | |
Cash flows from financing activities: | | | | | |
Principal payments of long-term debt | (3,643) | | | (313) | | | |
Payments for the extinguishment of notes payable | 0 | | | (66,250) | | | |
Proceeds from common stock issuance | 160,000 | | | 0 | | | |
Payments for common stock issuance costs | (4,314) | | | 0 | | | |
Proceeds from debt issuance, net of original issue discount | 176,385 | | | 115,916 | | | |
Payments for debt issuance costs | (5,711) | | | 0 | | | |
Treasury stock acquired from employees upon vesting or forfeiture of restricted stock | (3,987) | | | (332) | | | |
Proceeds from exercise of stock options | 617 | | | 42 | | | |
Net cash provided by financing activities | 319,347 | | | 49,063 | | | |
Effect of exchange rate changes on cash and cash equivalents | (56) | | | (53) | | | |
Net (decrease) increase in cash and cash equivalents | (95,468) | | | 30,739 | | | |
Cash and cash equivalents at beginning of period | 180,686 | | | 28,036 | | | |
Cash and equivalents at end of period | $ | 85,218 | | | $ | 58,775 | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
See accompanying notes to unaudited interim condensed consolidated financial statement
PAR TECHNOLOGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(In thousands)
(Unaudited)
| | | | | | | | | | | | | |
Supplemental disclosures of cash flow information: | | | | | |
Cash paid during the period for: | | | | | |
Cash paid for interest | $ | 3,724 | | | $ | 1,262 | | | |
Cash taxes paid, net of refunds | 58 | | | 10 | | | |
Capitalized software recorded in accounts payable | 73 | | | 245 | | | |
Capital expenditures in accounts payable | 20 | | | 0 | | | |
Tax withholding in accrued salaries and benefits related to treasury stock acquired from employees | 482 | | | 0 | | | |
Common stock issued for acquisition | 108,659 | | | 0 | | | |
Acquisition consideration not yet settled | 1,001 | | | 0 | | | |
See accompanying notes to unaudited interim condensed consolidated financial statements
PAR TECHNOLOGY CORPORATION
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 — Basis of presentationPresentation
The accompanying unaudited interim condensed consolidated financial statements ("(“financial statements"statements”) of PAR Technology Corporation andthrough its consolidated subsidiaries (the(collectively, the “Company”, “PAR”, "we"“we”, "us", "our"“us” or “our Company”) have been prepared in accordance with U.S.accounting principles generally accepted accounting principlesin 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.statements as promulgated by the Securities and Exchange Commission (“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 on Form 10-Q (“Quarterlyfor the quarter ended June 30, 2021 (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, 2019,2020 filed with the Securities and Exchange Commission (“SEC”)SEC on March 16, 2020.2021 (“2020 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, valuation allowances for receivables, inventories, and measurement of contingent consideration at fair value. Actual results could differ from these estimates. The Company's estimates are subject to uncertainties, including those associated with the ongoing COVID-19 pandemic, which cannot be predicted. There can be no assurance that the COVID-19 pandemic will not have a material adverse effect on the Company's estimates.
The Company operates in 2 distinct reporting segments, Restaurant/Retail and Government. The Company’s chief operating decision maker is the Company’s Chief Executive Officer. The Restaurant/Retail reporting segment provides point-of-sale (POS)(“POS”) software and hardware, loyalty software, back-office software, and integrated technical solutions to the restaurant and retail industries. The Government reporting segment provides intelligence, surveillance, and reconnaissance solutions and mission systems support to the United States Department of Defense and other Federal agencies. In addition, theThe financial statements also include corporate and eliminations,operations, which isare comprised of enterprise-wide functional departments.
Additionally,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.
The Company maintained bank balances that, at times, exceeded the Company has reclassified certain costs and expenses infederally insured limit during the condensed consolidated statement of operations for the three and six months ended June 30, 2020, amounting2021. The Company has not experienced losses relating to $0.2 millionthese deposits and $0.5 million, respectively, from amortization of intangible assetsmanagement does not believe that the Company is exposed to cost of serviceany significant credit risk with respect to cost of service to conform to current period presentation. These reclassifications had no effect on previously reported total costs and operating expenses and net loss.these amounts.
UseCash and cash equivalents consist of Estimatesthe following (in thousands):
| | | | | | | | | | | |
| June 30, 2021 | | December 31, 2020 |
Cash and cash equivalents | | | |
Cash | $ | 60,413 | | | $ | 59,700 | |
Money market funds | 24,805 | | | 120,986 | |
Total cash and cash equivalents | $ | 85,218 | | | $ | 180,686 | |
PreparationGain 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; there were 0 additional insurance proceeds were received during the three months ended June 30, 2021.
Other Long-Term Liabilities
Other long-term liabilities represent amounts owed to employees that participate in the Company’s deferred compensation plan and the long-term portion of the financial statementsCoronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) deferred payroll taxes. The amount owed to employees participating in conformity with GAAP requires management to make estimatesthe deferred compensation plan was $2.8 million at June 30, 2021 and assumptions that affectDecember 31, 2020. Additionally, indemnification and net deferred tax liabilities resulting from the reported amountsPunchh Acquisition of assetsapproximately $6.0 million and liabilities and disclosure of contingent assets and liabilities at$2.5 million, respectively, are presented within other long-term liabilities. (See “Note 3 — Acquisition” for additional information.)
Under the dateCARES Act employers can defer payment of the financial statementsemployer portion of social security taxes through the end of 2020, with 50% of the deferred amount due December 31, 2021 and the reported amountsremaining 50% due December 31, 2022. As permitted under the CARES Act, the Company deferred payment of revenuethe employer portion of social security taxes through the end of 2020. As of June 30, 2021 and expensesDecember 31, 2020, the Company deferred a total of $2.8 million of payroll taxes during 2020, to be paid equally in the reporting period.fourth quarters of 2021 and 2022. The current portion of the deferred payroll taxes was $1.4 million at June 30, 2021 and December 31, 2020 and was included within accrued salaries and benefits and $1.4 million in other long-term liabilities on the consolidated balance sheet.
Recently Adopted Accounting Pronouncements
In June 2016,December 2019, the Financial Accounting Standards Board (the FASB)(“FASB”) issued Accounting Standards Update ("ASU"(“ASU”) 2016-13, "Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments." ASU 2016-13 requires the measurement of all expected credit losses for financial assets held at the reporting date, based on historical experience, current conditions, and reasonable and supportable forecasts. In addition, ASU 2016-13 amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. The Company adopted ASU 2016-13 effective January 1, 2020, and the application of the standard had no material impact on the Company's financial statements for the three and six months ended June 30, 2020.
In January 2017, the FASB issued ASU 2017-04, “Intangibles - Goodwill and Other (Topic 350) - Simplifying the Test for Goodwill Impairment.” ASU 2017-04 eliminates Step 2 from the goodwill impairment test which required entities to compute the implied fair value of goodwill. Under ASU 2017-04, an entity should perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not
exceed the total amount of goodwill allocated to that reporting unit. The Company adopted ASU 2017-04 effective January 1, 2020, and the application of the standard had no material impact on the Company's financial statements for the three and six months ended June 30, 2020.
In August 2018, the FASB issued ASU 2018-13, “Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement.” ASU 2018-13 modifies the fair value measurement disclosures with the primary focus to improve effectiveness of disclosures in the notes to the financial statements that is most important to the users. ASU 2018-13 modifies the required disclosures related to the valuation techniques and inputs used, uncertainty in measurement, and changes in measurements applied. The Company adopted ASU 2018-13 effective January 1, 2020, and the application of the standard had no material impact on the Company's financial statements for the three and six months ended June 30, 2020.
In August 2018, the FASB issued ASU 2018-15, “Intangibles – Goodwill and Other (Topic 350) - Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract.” ASU 2018-15 provides guidance on the measurement of costs for internal-use software during the design, development, and implementation stages for customers in a cloud hosting arrangement. ASU 2018-15 also requires the capitalized costs associated with the design, development and implementation of cloud hosted arrangements to be amortized over the term of the hosting arrangement. The Company adopted ASU 2018-15 effective January 1, 2020, and the application of the standard had no material impact on the Company's financial statements for the three and six months ended June 30, 2020.
Recently Issued Accounting Pronouncements Not Yet Adopted
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): "SimplifyingSimplifying the Accounting for Income Taxes"Taxes, which is intended to simplify various requirements related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and clarifies and amends existing guidance to improve consistent application. The Company adopted ASU 2019-12 effective January 1, 2021, and the application of the standard had no material impact on the Company's financial statements for the six months ended June 30, 2021.
Accounting Pronouncements Not Yet Adopted
In August 2020, the FASB issued 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), which is intended to reduce the number of accounting models for convertible debt instruments and convertible preferred stock, and amend guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. ASU 2020-06 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020,2021, with early adoption permitted. The Company is currently assessing the impact of this standard on its financial statements.
With the exception of the new standards discussed above, there were no other recent accounting pronouncements or changes in accounting pronouncements during the three and six months ended June 30, 20202021 that are of significance or potential significance to the Company, as compared to the recent accounting pronouncements described in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2019.
Company.
Note 2 -— Revenue Recognition
OurThe Company's revenue is derived from Softwaresoftware as a Service (SaaS)service (“SaaS”), hardware and software sales, software activation, hardware support, installations, maintenance and professional services. Accounting Standards Codification ("ASC"(“ASC”) 606: "RevenueTopic 606: Revenue from Contracts with Customers" Customers requires usthe 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.
WeThe Company evaluated the potential performance obligations within ourits Restaurant/Retail reporting segment and evaluated whether each performance obligation met the ASC Topic 606 criteria to be considered a distinct performance obligations.obligation. Revenue in the Restaurant/Retail reporting segment is recognized at a point in time for 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 customer. Additionally, revenue in the Restaurant/Retail reporting segment relating to SaaS, ourthe Company's Advanced Exchange hardware Advanced Exchange,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. OurThe Company’s support services are stand-ready obligations that are provided over the life of the contract, generally 12 months. We offerThe Company offers installation services to ourits customers for hardware and software for which wethe Company primarily hirehires third-party contractors to install the equipment on ourthe Company's behalf. We pay third-partyThe Company pays third party contractors an installation service fees at mutuallyfee based on an hourly rate agreed rates.to by the Company and contractor. When third-partythird party installers are used, we determinethe Company determines whether the nature of ourits performance obligations is to provide the specified goods
or services ourselvesitself (principal) or to arrange for a third-party to provide the goods or services (agent). In directthe Company's customer arrangements, we have discretion over our pricing; we arethe Company is primarily responsible for providing a good or service; and we haveservice, has inventory risk before the good or service is transferred to the customer. Ascustomer, and discretion in establishing prices; as a result, we havethe Company has concluded that we areit is the principal in the arrangement and recordrecords installation revenue on a gross basis.
Our contractsThe 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.date, depending on the Company's terms with the customer. The primary method used to estimate a stand-alone selling price, is by referring to the price that we chargethe Company charges for thatthe particular good or service when we sell itsold by the Company separately under similar circumstances to similar customers. The Company determines stand-alone selling priceprices as follows: hardware, software (on-premises and SaaS) and software activation (which is a one-time(one-time fee charged at the initial offering of software)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 including(referred to as Advanced Exchange,Exchange), installation, and maintenance;maintenance, software upgrades;upgrades, and professional services including project management,(project management) is recognized by using an expected cost plus margin.
OurThe Company's revenue in the Government reporting segment is generally recognized over time as control of products or services is generally transferred continuously to ourits customers. While revenueRevenue generated by the Government reporting segment is predominantly related to services, we do generateservices; provided, however, revenue from salesis also generated through the sale of materials, software, hardware, and maintenance. For the Government reporting segment cost plus fixed fee contract portfolio, revenue is recognized over time using costs incurred as of a determinationto date to measure progress toward satisfying ourthe Company's performance obligations. Incurred costs representcost 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 and programs involve the use of various techniquesjudgment to estimate the total contract revenue and costs. For long-term fixed price contracts, we estimatethe Company estimates the profit on a contract as the difference between the total estimated revenue and expected costs to complete athe contract, and recognize itthat 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; the cost and availability of materials; and the performance of subcontractors. Revenue and profit in future periods of contract performance are recognized using the sameaforesaid assumptions, adjusted for estimatedand adjusting the estimate of costs to complete a contract. Once the services provided are determined to be distinct or not distinct, we evaluatethe Company evaluates how to allocate the transaction price. Generally, the Government reporting segment does not sell the same good or service to similar customers and the contract performance obligations are unique to each government contract.solicitation. The performance obligations are typically not distinct; however, indistinct. In cases where there are distinct performance obligations, the transaction price iswould be allocated to each performance obligation ratably,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 when to recognize revenue we analyzerecognition, the Company analyzes whether ourits performance obligations in ourunder Government contracts are satisfied over a period of time or at a point in time. In general, ourthe Company's performance obligations are satisfied over a period of time. However,time; however, there may be circumstances where the latter or both scenarios could apply to a contract.
We generally anticipate receipt ofThe Company usually expects payment within 30 to 90 days from the datesatisfaction of service.its performance obligation. None of ourthe Company's contracts as of December 31, 2019June 30, 2021 or June 30, 2020 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 subsequent toafter June 30, 20202021 and June 30, 2019,2020, respectively, for work that has not yet been performed. The activity of outstanding performance obligations as isit relates to customer deposits and deferred service revenue is as follows:
| | | | | | | | |
(in thousands) | 2020 | 2019 |
Beginning balance - January 1 | $ | 16,000 | | $ | 14,134 | |
Change in deferred revenue | (430) | | (327) | |
Changes in customer deposits | (2,008) | | 1,272 | |
Ending balance - June 30 | $ | 13,562 | | $ | 15,079 | |
| | | | | | | | | | | |
(in thousands) | 2021 | | 2020 |
Beginning balance - January 1 | $ | 11,082 | | | $ | 12,486 | |
Acquired deferred revenue (Note 3) | 11,125 | | | 0 | |
Recognition of deferred revenue | (11,437) | | | (7,727) | |
Deferral of revenue | 7,321 | | | 7,268 | |
Ending balance - June 30 | $ | 18,091 | | | $ | 12,027 | |
The above table excludes customer deposits of $1.7 million and $1.5 million for the six months ended June 30, 2021 and 2020, 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 to be recognized within the next twelve months.
In the Restaurant/Retail reporting segment most performance obligations over one year are relatedrelate to service and support contracts, approximately 73%71% of which we expectthe Company expects to fulfill within the one-year periodone year. The Company expects to fulfill 100% of support and 100%service contracts within 60 months. At June 30, 20202021 and December 31, 2019,2020, transaction prices allocated to future performance obligations were $10.5$18.1 million and $10.9$11.1 million, respectively.
During the three months ended June 30, 2021 and 2020, and June 30, 2019, wethe Company recognized revenue of $8.8 million and $3.6 million, and $3.9 million,
respectively, which are included in the contract liabilities at the beginning of the respectiveeach such period. During the six months ended June 30, 2021 and 2020, and June 30, 2019, wethe Company recognized revenue of $11.4 million and $7.7 million, and $9.0 million, respectively, which are included in the contract liabilities at the beginning of the respectiveeach such period.
TheIn the Government segment, the value of existing contracts in the Government reporting segment at June 30, 2021, net of amounts relating to work performed to that date, was approximately $141.2 million, of which $32.1 million was funded, and at December 31, 2020, net of amounts relating to work performed to that date, was approximately $129.6$150.5 million, of which $35.5 million was funded, and at December 31, 2019, net of amounts relating to work performed to that date, was approximately $148.7 million, of which $32.8$27.8 million was funded. The value of existing contracts in the Government segment, net of amounts relating to work performed to that dateat June 30, 2021, are expected to be recognized as revenue over time as follows (in thousands):
| | | | | |
Next 12 Months | $ | 56,45867,995 | |
Months 13-24 | 32,64439,101 | |
Months 25-36 | 24,82122,647 | |
Thereafter | 15,69011,464 | |
TOTAL | $ | 129,613141,207 | |
Disaggregated Revenue
The Company disaggregates revenue from customer contracts with customers by major product groupline for each of its reporting segment. Thesegments because the Company believes this methodit best depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. Disaggregation of revenue for the three and six months ended June 30, 2020 and June 30, 2019 is as follows:
| | | | | | | | | | | |
(in thousands) | Three months ended June 30, 2020 | | |
| Restaurant/Retail - Point in Time | Restaurant/Retail - Over Time | Government - Over Time |
Restaurant/Retail | $ | 19,820 | | $ | 7,813 | | $ | — | |
| | | |
Mission Systems | $ | — | | $ | — | | $ | 8,087 | |
ISR Solutions | $ | — | | $ | — | | $ | 9,971 | |
TOTAL | $ | 19,820 | | $ | 7,813 | | $ | 18,058 | |
| | | | | | | | | | | |
(in thousands) | Three months ended June 30, 2019 | | |
| Restaurant/Retail - Point in Time | Restaurant/Retail - Over Time | Government - Over Time |
Restaurant/Retail | $ | 21,503 | | $ | 5,829 | | $ | — | |
Grocery | 283 | | 647 | | — | |
Mission Systems | — | | — | | 8,192 | |
ISR Solutions | — | | — | | 7,793 | |
TOTAL | $ | 21,786 | | $ | 6,476 | | $ | 15,985 | |
| | | | | | | | | | | |
(in thousands) | Six months ended June 30, 2020 | | |
| Restaurant/Retail - Point in Time | Restaurant/Retail - Over Time | Government - Over Time |
Restaurant/Retail | $ | 47,635 | | $ | 17,407 | | $ | — | |
| | | |
Mission Systems | — | | — | | 16,535 | |
ISR Solutions | — | | — | | 18,846 | |
TOTAL | $ | 47,635 | | $ | 17,407 | | $ | 35,381 | |
| | | | | | | | | | | |
(in thousands) | Six months ended June 30, 2019 | | |
| Restaurant/Retail - Point in Time | Restaurant/Retail - Over Time | Government - Over Time |
Restaurant/Retail | $ | 43,880 | | $ | 11,579 | | $ | — | |
Grocery | 732 | | 1,631 | | — | |
Mission Systems | — | | — | | 16,738 | |
ISR Solutions | — | | — | | 14,369 | |
TOTAL | $ | 44,612 | | $ | 13,210 | | $ | 31,107 | |
Disaggregation of revenue is as follows (in thousands): | | | | | | | | | | | | | | | | | |
| Three months ended June 30, 2021 |
| Restaurant/Retail point in time | | Restaurant/Retail over time | | Government over time |
Hardware | $ | 23,355 | | | $ | 0 | | | $ | 0 | |
Software | 294 | | | 14,806 | | | 0 | |
Service | 5,462 | | | 7,207 | | | 0 | |
Mission Systems | 0 | | | 0 | | | 9,284 | |
ISR Solutions | 0 | | | 0 | | | 8,338 | |
Product | 0 | | | 0 | | | 204 | |
TOTAL | $ | 29,111 | | | $ | 22,013 | | | $ | 17,826 | |
| | | | | | | | | | | | | | | | | |
| Three months ended June 30, 2020 |
| Restaurant/Retail point in time | | Restaurant/Retail over time | | Government over time |
Hardware | $ | 12,104 | | | $ | 0 | | | $ | 0 | |
Software | 624 | | | 7,232 | | | 0 | |
Service | 2,170 | | | 5,503 | | | 0 | |
Mission Systems | 0 | | | 0 | | | 8,087 | |
ISR Solutions | 0 | | | 0 | | | 9,742 | |
Product | 0 | | | 0 | | | 229 | |
TOTAL | $ | 14,898 | | | $ | 12,735 | | | $ | 18,058 | |
The Company has reclassified the prior year information in the above table to conform to the current year presentation; Restaurant/Retail of $27.6 million is presented across hardware, software and service, and ISR solutions of $9.9 million is presented across ISR solutions and product.
| | | | | | | | | | | | | | | | | |
| Six months ended June 30, 2021 |
| Restaurant/Retail point in time | | Restaurant/Retail over time | | Government over time |
Hardware | $ | 41,190 | | | $ | 0 | | | $ | 0 | |
Software | 537 | | | 22,439 | | | 0 | |
Service | 8,874 | | | 14,668 | | | 0 | |
Mission Systems | 0 | | | 0 | | | 18,831 | |
ISR Solutions | 0 | | | 0 | | | 16,469 | |
Product | 0 | | | 0 | | | 409 | |
TOTAL | $ | 50,601 | | | $ | 37,107 | | | $ | 35,709 | |
| | | | | | | | | | | | | | | | | |
| Six months ended June 30, 2020 |
| Restaurant/Retail point in time | | Restaurant/Retail over time | | Government over time |
Hardware | $ | 30,241 | | | $ | 0 | | | $ | 0 | |
Software | 1,186 | | | 14,618 | | | 0 | |
Service | 7,112 | | | 11,885 | | | 0 | |
Mission Systems | 0 | | | 0 | | | 16,535 | |
ISR Solutions | 0 | | | 0 | | | 18,514 | |
Product | 0 | | 0 | | 332 | |
TOTAL | $ | 38,539 | | | $ | 26,503 | | | $ | 35,381 | |
The Company has reclassified the prior year information in the above table to conform to the current year presentation; Restaurant/Retail of $65.0 million is presented across hardware, software and service, and ISR solutions of $18.8 million is presented across ISR solutions and product.
Practical Expedients and Exemptions
The Company generally expenses sales commissions when incurred because the amortization period iswould be less than one year or the total amount of commissions is immaterial. We record these expensesCommissions are recorded in selling, general and administrative in the condensed consolidated statements of operations.
Weexpenses. The Company elected to exclude from the transaction price measurement, all taxes assessed by a governmental authorityauthorities 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
Drive-Thru Acquisition
Effective September 30, 2019,On April 8, 2021 (the “Closing Date”), the Company, through its wholly-ownedParTech, Inc., and Sliver Merger Sub, Inc., a wholly owned subsidiary of ParTech, Inc. ("ParTech"(“Merger Sub”), acquired assetsentered into an Agreement and Plan of 3M Company's Drive-Thru Communications Systems business, includingMerger (the “Merger Agreement”) with Punchh Inc. (“Punchh”), and Fortis Advisors LLC, solely in its capacity as the XT-1initial Stockholder Representative. Pursuant to the Merger Agreement, on April 8, 2021, Merger Sub merged with and G5 headset systems, contractsinto Punchh (the “Merger”), with Punchh surviving the Merger and intellectual property associatedbecoming a wholly owned subsidiary of the Company (“Punchh Acquisition”). Punchh is a leader in SaaS-based customer loyalty and engagement solutions. With this acquisition, the Company offers its customers a unified commerce cloud platform with the business,Brink POS cloud software for a purchase price of $8.4 million (total fair value of assets were $8.4 million including $1.2 million in developed technology, $3.6 million of customer relationships,front-of-house, Data Central for back-office cloud software, PAR Pay and $2.4 million of goodwill, net of warranty liability of $1.4 million, resulting in cash paid of $7.0 million) (the "Drive-Thru Acquisition").PAR Payment Services for payment solutions, and Punchh for loyalty and engagement software.
Restaurant Magic AcquisitionIn connection with the Merger, the Company paid former Punchh equity holders approximately $509.6 million (including holders of vested options and warrants) consisting of approximately (i) $400.9 million in cash (the “Cash Consideration”), and (ii) 1,493,130 shares of the Company's common stock, in each case subject to certain adjustments (including customary adjustments for Punchh cash, debt, debt-like items, and net working capital at closing) for 100% of the equity interests in Punchh. An additional 101,072 shares of the Company's common stock are reserved for options granted as replacement awards for fully vested unexercised awards assumed in connection with the Merger. Further, the Company incurred acquisition related expenses of approximately $3.4 million. Consideration for total common shares issued and reserved of 1,594,202 was determined using a fair value share price of $68.00 (“Equity Consideration”), representing total Equity Consideration of $108.7 million. Approximately $1.1 million of the Cash Consideration had not yet settled as of June 30, 2021.
Effective December 18, 2019,In connection with, and to partially fund the Cash Consideration for, the Merger, on April 8, 2021, the Company, together with certain of its U.S. Subsidiaries, as guarantors, entered into a credit agreement 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”), that provides for a term loan in an initial aggregate principal amount of $180.0 million; and (ii) securities purchase agreements (the “Purchase Agreements”) with each of PAR Act III, LLC (“Act III”), and certain funds and accounts advised by 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 ParTech, acquired 100%a private placement of the limited liability company interests of AccSys LLC (f/k/Company's common stock. The Company also issued to Act III a AccSys, Inc., and otherwise known as Restaurant Magic) in base consideration of approximately $42.8 million, of which approximately $12.8 million was paid in cash, which reflects a $0.2 million favorable working capital adjustment finalized in the second quarter of 2020, $27.5 million was paid in restrictedwarrant (the “Warrant”) to purchase 500,000 shares of Companythe Company's common stock (issued in January 2020)with an exercise price of $76.50 per share and $2.0 million was paid by delivery of a subordinated promissory note (the "Restaurant Magic Acquisition"). The sellers have the opportunity through 2022 to earn additional purchase price consideration subject to the achievement of certain post-closing revenue focused milestones (“Earn-Out”). As of December 31, 2019 and June 30, 2020, the value of the Earn-Out based on a Monte Carlo simulation was $3.3 million. The Earn-Out, if any, will be payable 50% in cash or subordinated promissory notes, or a combination of both, at the Company's election, and 50% in restricted shares of Company common stock. This Earn-out has no maximum payment.five year exercise period.
Additionally, on the Closing Date approximately $6.0 million of the Cash Consideration was deposited into a third party escrow fund, to be held for up to 18-months following the Closing Date, to fund (i) potential payment obligations of Punchh equity holders with respect to post-closing adjustments to the Cash and Equity Consideration and (ii) potential post-closing indemnification obligations of Punchh equity holders, in each case in accordance with the terms of the Merger Agreement. The Company issued restricted stock unitsrecognized indemnification assets and liabilities of approximately $6.0 million to other assets and other long-term liabilities, respectively, to account for amounts deposited into the third party escrow fund.
Allocation of Acquisition Consideration
The Punchh Acquisition was accounted for as a business combination in connectionaccordance with its assumption of awards granted by Restaurant Magic to its employeesASC Topic 805, Business Combinations. Accordingly, assets acquired and contractors prior toliabilities assumed in the closing of the acquisition.
ThePunchh Acquisition were accounted for at their preliminarily determined respective fair values assigned to the acquired assets and assumed liabilities presented in the table below areas of April 8, 2021. The preliminary fair value determinations were based on ourmanagement'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 of the reporting date: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 |
Developed technologyCash | $ | 16,40022,714 | |
Accounts receivable | 10,214 | |
Property and equipment | 592 | |
Right of use lease assets | 2,473 | |
Developed technology | 88,200 | |
Customer relationships | 1,1007,500 | |
Indemnification assets | 5,950 | |
Trade name | 9005,800 | |
TangiblePrepaid and other acquired assets | 1,3442,764 | |
Goodwill | 27,773417,559 | |
Total assets | 47,517563,766 | |
Accounts payable and accrued expenses | 62915,827 | |
Deferred revenue | 71511,125 | |
Earn out liabilityLoan payables | 3,3403,508 | |
Right of use lease liabilities | 2,787 | |
Indemnification liabilities | 5,950 | |
Deferred taxes | 14,930 | |
Consideration paid | $ | 42,833509,639 | |
Intangible Assets
The Company identified three acquired intangible assets in the Punchh Acquisition: developed technology; customer relationships; and, the Punchh trade name. The preliminary fair value of developed technology and customer relationship intangible assets were determined utilizing the “multi-period excess earnings method”, which is predicated upon the calculation of the net present value of after-tax net cash flows respectively attributable to each asset. The preliminary fair value of the Punchh trade name intangible was determined utilizing the “relief from royalty” approach, which is a form of the income approach that attributes savings incurred from not having to pay a royalty for the use of an asset. The estimated useful life of these identifiable intangible assets was preliminarily determined to be indefinite for the Punchh trade name and seven years for both the developed technology and customer relationships intangible assets.
Goodwill
Goodwill represents the excess of consideration transferred for the fair value of net identifiable assets acquired and is tested for impairment at least annually. It is not deductible for income tax purposes.
Deferred Revenue
Deferred revenue acquired in the Punchh Acquisition was fair valued to determined allocation of consideration transferred to assume the liability. The preliminary fair value was determined utilizing the “bottom-up” approach, which is a form of the income approach that measures the liability as the direct, incremental costs to fulfill the legal obligation, plus a reasonable profit margin for the services being delivered.
Loans Payable
Loan liabilities assumed in the Punchh Acquisition were primarily comprised of Punchh's $3.3 million CARES Act Paycheck Protection Program loan. The Company extinguished all assumed loan payables, including the assumed CARES Act loan, through repayment of the loans on the Closing Date.
Right-of-Use Lease Assets and Liabilities
The Company assumed real property leases in the Punchh Acquisition related to office space in California, Texas and India and have accounted for these leases as Operating Leases in accordance with ASC 842, Leases. The assumed leases have lease terms that run through 2021 to 2026. Valuation specialists were utilized by the Company to appraise the assumed leases against competitive market rates to determine the fair value of the lease liabilities assumed, which identified a $0.3 million unfavorable
lease liability that the Company recognized as part of the lease right of use asset. The income approach was applied to value the identified unfavorable lease liability.
Deferred Taxes
The Company determined the deferred tax position to be recorded at the time of the Punchh Acquisition in accordance with ASC 740, Income Taxes, resulting in recognition of deferred tax liabilities for future reversing of taxable temporary differences primarily for intangible assets and deferred tax assets primarily relating to net operating losses as of the Closing Date. A valuation allowance was also recorded against certain recognized deferred tax assets based on an evaluation of the realizability of the identified assets. These recognized deferred tax assets, liabilities and valuation allowance resulted in a preliminary net deferred tax liability of $14.9 million relating to the Punchh Acquisition.
The net deferred tax liability relating to the Punchh Acquisition was determined by the Company to provide future taxable temporary differences that allow for the Company to utilize certain previously fully reserved deferred tax assets. Accordingly, the Company recognized a reduction to its valuation allowance in the three months ended June 30, 2021, resulting in a net tax benefit of $12.4 million for the period.
Unaudited Pro Forma Financial Information
For the three and six months ended June 30, 2020,2021, the Drive-Thru Acquisition and Restaurant MagicPunchh Acquisition resulted in additional revenues of $4.0 million and $1.8 million, respectively. For the six months ended June 30, 2020, the Drive-Thru Acquisition and Restaurant Magic Acquisition resulted in additional revenues of $7.5 million and $4.0 million, respectively.$8.1 million. The Company has determined it is impractical to report the amounts of net loss for the Drive-Thru and Restaurant Magic acquisition for each entityPunchh Acquisition for the three and six months ended June 30, 2020.2021. The following unaudited pro forma financial information presents our results as ifof operations are not necessarily indicative of the Drive-Thruresults that would have occurred had the Punchh Acquisition and Restaurant Magic Acquisition had occurred January 1, 2019:
| | | | | | | | | | | |
(in thousands) | Three months ended June 30, 2019 | | Six months ended June 30, 2019 |
Total revenue | $ | 50,921 | | | $ | 102,274 | |
Net income | $ | 1,044 | | | $ | 781 | |
been consummated at the beginning of the periods presented, nor are they necessarily indicative of any future consolidated operating results.
Note 4 — Divestiture
Sale of SureCheck
During the second quarter of 2019, ParTech entered into an asset purchase agreement to sell substantially all of the assets relating to the SureCheck product group withinThe following table summarizes the Company's Restaurant/Retail reporting segment. The sale does not qualify for treatment as a discontinued operation, and therefore, the SureCheck product group is included in the Company’s continuing operations for all periods presented.unaudited pro forma operating results:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | Six months ended June 30, |
(in thousands) | 2021 | | 2020 | | 2021 | | 2020 |
Total revenue | $ | 69,602 | | | $ | 51,727 | | | $ | 132,137 | | | $ | 112,829 | |
Net loss | $ | (10,355) | | | $ | (11,592) | | | $ | (21,447) | | | $ | (26,197) | |
Note 54 — Accounts Receivable, Net
The Company’s net accounts receivable, net,receivables consists of:of (in thousands):
| (in thousands) | June 30, 2020 | | December 31, 2019 | | |
Government reporting segment: | | | | | |
| | | June 30, 2021 | | December 31, 2020 |
Government segment: | | Government segment: | | | |
Billed | Billed | $ | 9,091 | | | $ | 11,608 | | | Billed | $ | 10,809 | | | $ | 11,225 | |
Advanced billings | Advanced billings | (491) | | | (608) | | | Advanced billings | 0 | | | (948) | |
| | 8,600 | | | 11,000 | | | | 10,809 | | | 10,277 | |
| Restaurant/Retail reporting segment: | 29,636 | | | 30,774 | | | |
Restaurant/Retail segment: | | Restaurant/Retail segment: | 34,439 | | | 32,703 | |
Accounts receivable - net | Accounts receivable - net | $ | 38,236 | | | $ | 41,774 | | | Accounts receivable - net | $ | 45,248 | | | $ | 42,980 | |
At June 30, 20202021 and December 31, 2019,2020, the Company'sCompany had current, expected credit loss was $2.0of $1.9 million and $1.8$1.4 million, respectively, against the accounts receivable for the Restaurant/Retail reporting segment. The changes
Changes in the current, expected credit loss during the six months ended June 30, 2020 were as follows:
| (in thousands) | (in thousands) | 2020 | 2019 | (in thousands) | 2021 | | 2020 |
Beginning balance - January 1 | $ | 1,849 | | $ | 1,351 | | |
Beginning Balance - January 1 | | Beginning Balance - January 1 | $ | 1,416 | | | $ | 1,849 | |
Provisions | Provisions | 972 | | 477 | | Provisions | 922 | | | 972 | |
Write-offs | Write-offs | (773) | | (120) | | Write-offs | (394) | | | (773) | |
Recoveries | Recoveries | $ | — | | $ | — | | Recoveries | (15) | | | 0 | |
Ending balance - June 30 | $ | 2,048 | | $ | 1,708 | | |
Ending Balance - June 30 | | Ending Balance - June 30 | $ | 1,929 | | | $ | 2,048 | |
ReceivablesAccounts receivables recorded as of June 30, 20202021 and December 31, 2019 all2020 represent unconditional rights to payments from customers.
Note 65 — Inventories, Net
Inventories are primarily used in the manufacture maintenance and service of products within the Restaurant/Retail reporting segment.products. The components of inventories,inventory, net consistof reserves, consisted of the following:
| (in thousands) | (in thousands) | June 30, 2020 | | December 31, 2019 | | (in thousands) | June 30, 2021 | | December 31, 2020 | |
Finished goods | Finished goods | $ | 13,495 | | | $ | 8,320 | | | Finished goods | $ | 15,482 | | | $ | 12,747 | | |
| Work in process | | Work in process | 238 | | | 16 | | |
Component parts | Component parts | 7,672 | | | 6,768 | | | Component parts | 11,484 | | | 6,105 | | |
Service parts | Service parts | 4,825 | | | 4,238 | | | Service parts | 2,743 | | | 2,770 | | |
| $ | 25,992 | | | $ | 19,326 | | | |
Inventories, net | | Inventories, net | $ | 29,947 | | | $ | 21,638 | | |
At June 30, 20202021 and December 31, 2019,2020, the Company had inventoryexcess and obsolescence reserves of $11.7$12.4 million and $9.6$12.0 million, respectively, against inventories used in the Restaurant/Retail reporting segment, which relate primarily to service parts.
inventories.
Note 76 — Identifiable Intangible Assets and Goodwill
IdentifiableThe Company's identifiable intangible assets represent intangible assets acquired by the Company in connection with its acquisition of Brink Software Inc. ("Brink Acquisition"), the Drive-Thru Acquisition and the Restaurant Magic Acquisition,from acquisitions and software development costs. The Company capitalizes certain costs related to the development of its software 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 costs when the software is substantially complete and ready for its intended use, including the completion of all significant testing. These costs are amortized on a straight-line basis over the estimated useful life of the related asset, generally estimated to be three to five 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 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 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 platform, 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 for software used in its Restaurant/Retail reporting segment. Software development costs incurred prior to establishing technological feasibility are charged to operations and included in research and development costs. The technological feasibility of a software product is established when the Company has completed all planning, designing, coding,capitalizes and testing activities necessary to establish that the software product meets its design specifications, including functionality, features, and technical performance requirements. Software development costs incurred after establishing technological feasibility of software sold as a perpetual license, as defined within ASC 985-20, "Software – Costs of Software to be sold, Leased, or Marketed", are capitalized and amortized on a product-by-product basis when the software product is available for general release to customers. amortizes could change in future periods.
Included in "Acquired and internally developed software costs" in the table belowidentifiable intangible assets are approximately $3.5$3.0 million and $2.5$6.5 million of costs related to software products that have not satisfied the general release threshold as of June 30, 20202021 and December 31, 2019,2020, respectively. These software products are expected to satisfy the general release thresholdwill be ready for their intended use within the next 12 months. Software development costs are also capitalized in accordance with ASC 350-40, “Intangibles - Goodwill and Other - Internal - Use Software,” and are amortized over the expected benefit period, which generally ranges from three to five years. Software development costs capitalizedplaced into service during the three months ended June 30, 2021 and 2020 and June 30, 2019 were $2.6$2.7 million and $0.6$2.6 million, respectively. Software development costs capitalizedplaced into service during the six months ended June 30, 2021 and 2020 were $7.5 million and June 30, 2019 were $4.3 million, and $1.6 million, respectively.
Annual amortization charged to cost of sales is computed using the straight-line method over the remaining estimated economic life of software products,the product, generally three to five years. Amortization of capitalized software development costs from continuing operations for the three months ended June 30, 2021 and 2020 and June 30, 2019 were $1.5$5.0 million and $0.7$1.5 million, respectively. Amortization of capitalized software development costs from continuing operations for the six months ended June 30, 2021 and 2020 and June 30, 2019 were $3.1$7.0 million and $1.5$3.1 million, respectively.
For the three month period ended June 30, 2020, $0.8 million and $0.2 million were recorded in cost of service and amortization of intangible assets, respectively, compared to $0.2 million in cost of service for the three months ended June 30, 2019. For the six month period ended June 30, 2020, $1.7 million and $0.4 million were recorded in cost of service and
amortization of intangible assets, respectively, compared to $0.4 million in cost of service for the six months ended June 30, 2019.
The components of identifiable intangible assets are:
| (in thousands) | (in thousands) | June 30, 2020 | | December 31, 2019 | | | Estimated Useful Life | (in thousands) | June 30, 2021 | | December 31, 2020 | | | Estimated useful life |
Acquired and internally developed software costs | Acquired and internally developed software costs | $ | 39,961 | | | $ | 36,137 | | | | 3 - 5 years | Acquired and internally developed software costs | $ | 135,875 | | | $ | 40,170 | | | | 3 - 7 years |
Customer relationships | Customer relationships | 4,860 | | | 4,860 | | | | 7 years | Customer relationships | 12,360 | | | 4,860 | | | | 7 years |
Trade names | | Trade names | 1,410 | | | 1,410 | | | | 2 - 5 years |
Non-competition agreements | Non-competition agreements | 30 | | | 30 | | | | 1 year | Non-competition agreements | 30 | | | 30 | | | | 1 year |
| | 44,851 | | | 41,027 | | | | | | 149,675 | | | 46,470 | | | | |
Less accumulated amortization | Less accumulated amortization | (15,948) | | | (12,389) | | | | | Less accumulated amortization | (28,127) | | | (20,265) | | | | |
| | $ | 28,903 | | | $ | 28,638 | | | | | | 121,548 | | | 26,205 | | | | |
Internally developed software costs not meeting general release threshold | 3,592 | | | 2,500 | | | | |
Internally developed software costs not yet ready for its intended use | | Internally developed software costs not yet ready for its intended use | 2,978 | | | 6,516 | | | | |
Trademarks, trade names (non-amortizable) | Trademarks, trade names (non-amortizable) | 1,810 | | | 1,810 | | | | | Trademarks, trade names (non-amortizable) | 6,200 | | | 400 | | | | |
| | $ | 34,305 | | | $ | 32,948 | | | | | | $ | 130,726 | | | $ | 33,121 | | | | |
The expected future amortization of intangible assets, assuming straight-line amortization of capitalized software development costs and acquisition related intangibles, and excluding software costs not meeting the general release threshold, is as follows (in thousands):
| 2020, remaining | $ | 3,623 | | |
2021 | 6,872 | | |
2021, remaining | | 2021, remaining | $ | 11,630 | |
2022 | 2022 | 5,539 | | 2022 | 21,889 | |
2023 | 2023 | 3,581 | | 2023 | 19,881 | |
2024 | 2024 | 3,186 | | 2024 | 17,281 | |
2025 | | 2025 | 16,857 | |
Thereafter | Thereafter | 6,102 | | Thereafter | 34,010 | |
Total | Total | $ | 28,903 | | Total | $ | 121,548 | |
The Company operates in 2 reporting segments, Restaurant/Retail and Government, which are also the Company's identified reporting units.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, or organically acquired, are available to support the value of the goodwill. The amount of goodwill
Goodwill carried by the Restaurant/Retail and Government segments were $41.2 million and $41.4 million at June 30, 2020 and December 31, 2019, respectively. The Company recognized additions to goodwillis as part of the Drive-Thru Acquisition and Restaurant Magic Acquisition as indicated in Note 3; in June 2020 a $0.2 million favorable working capital adjustment was recognized related to the Restaurant Magic Acquisition. NaN impairment charges were recorded for the periods ended June 30, 2020 or June 30, 2019.follows:
| | | | | |
(in thousands) | |
Beginning balance - December 31, 2020 | $ | 41,214 | |
Punchh Acquisition | 417,559 | |
Ending balance - June 30, 2021 | $ | 458,773 | |
Note 87 — Debt
Convertible Senior Notes
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"“2024 Notes”). The 2024 Notes were sold pursuant to an indenture, dated April 15, 2019, (the "2024 Indenture"), between the Company and The Bank of New York Mellon Trust Company, N.A., as Trustee.Trustee (the “2024 Indenture”). 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.
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"“2026 Notes” and, together with the 2024 Notes, the "Notes"“Notes”). The 2026 Notes were sold pursuant to an indenture, dated February 10, 2020 (the "2026 Indenture"“2026 Indenture” and, together with the 2024 Indenture, the "Indentures"“Indentures”), 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 April 15,February 10, 2020. Unless earlier converted, redeemed or repurchased, the 2026 Notes mature on April 15, 2026.
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 sharesstock 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 the equity, component, 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. The transaction resulted in a loss on settlement of convertible notes of $8.1 million, which is recorded as a Loss on extinguishment of debt in the Company’s unaudited interim condensed consolidated statementstatements of operations. The loss represents the difference between (i) the fair value of the liability component and (ii) the sum of the carrying value of the debt component and any unamortized debt issuance costs at the time of settlement.
The carrying amount of the liability component 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 and 2026 Notes is 10.24%was 10.2% and 7.33%7.3%, respectively.
The Notes are senior, unsecured obligations of the Company. The 2024 Notes and the 2026 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 and October 15, 2025, 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 and the 2026 Notes are convertible into Company common stock at an initial conversion rate of 23.2722 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.
In accordance with ASC Topic 470-20 "Debt Debt with Conversion and Other Options — Beneficial Conversion Features"Features, the initial measurement of the 2024 Notes at fair value resulted in a liability of $62.4 million and as such, the calculated discount resulted in an implied value of the convertible feature recognized in Additional Paidadditional paid in Capitalcapital of $17.6 million. In accordance with ASC 470-20,million; and the initial measurement of the 2026 Notes at fair value resulted in a liability of $93.8 million and as such, the calculated discount resulted in an implied value of the convertible feature recognized in Additional Paidadditional paid in Capitalcapital of $26.2 million. Issuance costs for the transactionsNotes amounted to $4.9 million and $4.2 million for the 2024 Notes and 2026 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 $3.1$3.3 million and $1.1$0.9 million to the debt toand equity components, respectively.
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).
In connection with the sale of the 2026 Notes, the Company recorded an income tax benefit of $4.4 million in the first six months of 2020 as a result of the creation of a deferred tax liability associated with the portion of the 2026 Notes that was classified within stockholders'shareholders' equity. While GAAP requires the offset of the deferred tax liability to be recorded in additional paid-inpaid in capital, consistent with the equity portion of the 2026 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 $4.4 million, reflected as an income tax benefit in the first six months of 2020.
Credit Facility
In connection with, and to partially fund the Cash Consideration for the Punchh Acquisition, on April 8, 2021, the Company entered into the Owl Rock Credit Agreement. The Owl Rock Credit Agreement provides for a term loan in the initial aggregate principal amount of $180.0 million (the “Credit Facility” and, the loans thereunder, the “Term Loan”). Issuance costs, which included a 2% Original Issue Discount, amounted to $9.3 million with net proceeds amounting to $170.7 million. The Credit
Facility may be increased by up to $25.0 million, plus an additional unlimited amount subject to compliance with a first lien net annual recurring revenue leverage ratio test of 2.10 to 1.00.
The Term Loan matures on April 8, 2025 and bear interest at a rate equal to either a base rate plus a margin of 3.75% or a Eurocurrency rate plus a margin of 4.75%, as selected by the Company. Voluntary prepayments of the Term Loan, as well as certain mandatory prepayments of the Term Loan, require payment of a prepayment premium of 2.0% during the first year of the Credit Facility and 1.0% during the second and third year of the Credit Facility. The Term Loan is secured by a first lien on substantially all of the Company's and the subsidiary guarantors' assets.
Under the Owl Rock Credit Agreement, the Company is required to maintain liquidity of at least $20.0 million and a first lien net annual recurring revenue leverage ratio of no greater than the level set forth in the Credit Facility for the relevant quarter, which starts at 2.60 to 1.00 and declines over time to 1.30 to 1.00.
The Owl Rock Credit Agreement contains customary representations and warranties and affirmative and negative covenants, including covenants that restrict the Company and certain of its subsidiaries ability to incur additional indebtedness, incur or permit to exist liens on assets, make investments and acquisitions, consolidate or merge, engage in asset sales and pay dividends, of which the Company was in compliance for the three months ended June 30, 2021. Obligations under the Owl Rock Credit Agreement may be accelerated upon certain customary events of default (subject to grace or cure periods, as appropriate).
The following table summarizes information about the net carrying amounts of the 2024 Notes and 2026 Notesthe Credit Facility as of June 30, 2020:2021:
| | | | | | | | |
(in thousands) | 2024 Notes | 2026 Notes |
Principal amount of 2024 Notes outstanding | $ | 13,750 | | $ | 120,000 | |
Unamortized discount (including unamortized debt issuance cost) | (3,055) | | (27,884) | |
Total long-term portion of notes payable | $ | 10,695 | | $ | 92,116 | |
| | | | | | | | | | | | | | | | | |
(in thousands) | 2024 Notes | | 2026 Notes | | Owl Rock Credit Agreement |
Principal amount of notes outstanding | $ | 13,750 | | | $ | 120,000 | | | $ | 180,000 | |
Unamortized discount and unamortized debt issuance cost | (2,271) | | | (23,962) | | | (8,789) | |
Total long-term portion of notes payable | $ | 11,479 | | | $ | 96,038 | | | $ | 171,211 | |
The following tabletables summarizes interest expense recognized on the 2024 Notes and 2026 Notes:on the Credit Facility:
| | | | | | | | | Three months ended June 30, |
(in thousands) | (in thousands) | Three Months Ended June 30, 2020 | | (in thousands) | 2021 | | 2020 |
| 2020 | 2019 | |
Contractual interest expense | Contractual interest expense | $ | 1,000 | | $ | 498 | | Contractual interest expense | $ | 3,196 | | | $ | 1,000 | |
Amortization of debt issuance costs and discount | Amortization of debt issuance costs and discount | 1,102 | | 746 | | Amortization of debt issuance costs and discount | 1,737 | | | 1,102 | |
Total interest expense | Total interest expense | $ | 2,102 | | $ | 1,244 | | Total interest expense | $ | 4,933 | | | $ | 2,102 | |
| | | | | | | | |
(in thousands) | Six Months Ended June 30, | |
| 2020 | 2019 |
Contractual interest expense | $ | 2,015 | | $ | 644 | |
Amortization of debt issuance costs and discount | 2,059 | | 746 | |
Total interest expense | $ | 4,074 | | $ | 1,390 | |
| | |
The following table summarizes the future principal payments for the 2024 Notes and 2026 Notes (in thousands):
| | | | | |
2020, remaining | $ | — | |
2021 | — | |
2022 | — | |
2023 | — | |
2024 | 13,750 | |
Thereafter | 120,000 | |
| $ | 133,750 | |
| | | | | | | | | | | |
| Six months ended June 30, |
(in thousands) | 2021 | | 2020 |
Contractual interest expense | $ | 4,213 | | | $ | 2,015 | |
Amortization of debt issuance costs and discount | 2,917 | | | 2,059 | |
Total interest expense | $ | 7,130 | | | $ | 4,074 | |
In connection with the Restaurant Magic Acquisition, see Note 3 - Acquisitions,acquisition of AccSys, LLC (otherwise known as “Restaurant Magic”) in December 2019, the Company entered into a $2.0 million was paid by delivery of a subordinated promissory note. The note bears interest at 4.5%5.75% per annum, with monthly payments of principal and interest in the amount of $60,391$60.6 thousand payable beginning January 15, 2020 through maturity on December 15, 2022. As of June 30, 2020,2021, the outstanding balance of the subordinated promissory note was $1.7$1.0 million of which $0.6$0.7 million was in the current portion of long-term debt.
The Company'sfollowing table summarizes the future minimum principal payments are $0.3 million, $0.7 million and $0.7 million for the remainderas of 2020,June 30, 2021 and 2022, respectively.(in thousands):
| | | | | |
2021, remaining | $ | 338 | |
2022 | 705 | |
2023 | 0 | |
2024 | 13,750 | |
2025 | 180,000 | |
Thereafter | 120,000 | |
Total | $ | 314,793 | |
Note 8 — Common Stock
In connection with, and to partially fund the Cash Consideration of the Punchh Acquisition, on April 8, 2021, the Company entered into the Purchase Agreements with Act III and 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 also issued to Act III a warrant to purchase 500,000 shares of common stock with an exercise price of $76.50 per share and five year exercise period (the “Warrant”). The Warrant is accounted for as an equity instrument pursuant to ASC 815, Derivatives and Hedging, due to the Warrant contractually permitting only settlement in non-redeemable common shares upon exercise. Issuance date fair value of the Warrant was determined to be $14.3 million based on using the Black-Scholes model with the following assumptions:
| | | | | |
Expected term | 5.0 years |
Risk free interest rate | 0.85 | % |
Expected volatility | 53.78 | % |
Expected dividend yield | None |
Fair value (per warrant) | $ | 28.65 | |
The Company also issued 1,493,130 of its common stock as part of the Equity Consideration of the Punchh Acquisition. See “Note 3 — Acquisition” for additional information about the Punchh Acquisition.
On October 5, 2020, the Company completed an underwritten public offering (the “Secondary Offering”) of 3,350,000 shares of common stock at a price to the public of $38.00 per share, resulting in $121.8 million of proceeds, net of underwriting discounts and commissions and offering expenses payable by the Company. In connection with the Secondary Offering, the Company granted Jeffries LLC, the underwriter of the offering, a 30 day option to purchase up to an additional 502,500 shares of common stock at the same public offering price, less underwriting discounts and commissions. On November 3, 2020, Jeffries, LLC partially exercised its option and purchased 266,022 shares of common stock, resulting in an additional $9.6 million of proceeds, net of underwriting discounts and commissions and offering expenses payable by the Company.
Note 9 — Stock BasedStock-Based Compensation
The Company applies the fair value recognition provisions of ASC Topic 718: "Stock Compensation"718: Stock Compensation. The Company recorded stock basedStock-based compensation expense, net of $2.2 millionforfeitures of $64.0 thousand and $0.9 million$27.0 thousand for the six month periodsthree months ended June 30, 2021 and 2020, respectively, and stock-based compensation expense, net of forfeitures of $107.0 thousand and $32.0 thousand for six months ended June 30, 2019, respectively. The Company2021 and 2020, respectively, was recorded stock based compensationin the following line items in the condensed consolidated statements of $1.1 million and $0.6 millionoperations for the three month periodsand six months ended June 30, 2020 and June 30, 2019, respectively. 30:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | Six months ended June 30, |
| 2021 | | 2020 | | 2021 | | 2020 |
Cost of sales - contracts | $ | 116 | | | $ | 101 | | | $ | 184 | | | $ | 199 | |
Selling, general and administrative | 4,135 | | | 1,022 | | | 5,387 | | | 2,013 | |
Total stock-based compensation expense | $ | 4,251 | | | $ | 1,123 | | | $ | 5,571 | | | $ | 2,212 | |
At June 30, 2020,2021, the aggregate unrecognized compensation expense related to unvested equity awards was $8.9$39.2 million, (net of estimated forfeitures), which is expected to be recognized as compensation expense in fiscal years 20202021 through 2023.2024.
A summary of stock option activity for the six months ended June 30, 2020:2021 is below:
| | | | | | | | | | | |
(in thousands) | Options Outstanding | | Weighted Average Exercise Price |
Outstanding at January 1, 2020 | 410 | | | 14.50 | |
Granted | 587 | | | 12.64 | |
Exercised | (6) | | | 10.16 | |
Forfeited and cancelled | (63) | | | 7.49 | |
Outstanding at June 30, 2020 | 928 | | | 13.83 | |
| | | | | | | | | | | |
(in thousands, except for exercise price) | Options outstanding | | Weighted average exercise price |
Outstanding at January 1, 2021 | 957 | | | $ | 14.29 | |
Granted | 563 | | | 7.79 | |
Exercised | (54) | | | 10.70 | |
Canceled/forfeited | (63) | | | 13.64 | |
Outstanding at June 30, 2021 | 1,403 | | | $ | 11.83 | |
16The fair value of options at the date of the grant was estimated using the Black-Scholes model with the following assumptions for the six months ended June 30, 2021:
| | | | | |
Weighted average expected term | 3.1 years |
Weighted average risk-free interest rate | 0.4 | % |
Weighted average expected volatility | 56.5 | % |
Expected dividend yield | None |
Estimated fair value (per share) | $ | 60.47 |
A summary of non-vestedunvested restricted stock activity for the six months ended June 30, 2020:2021 is below:
| | | | | | | | | | | |
(in thousands) | Restricted Stock Awards | | Weighted Average Award Value |
Outstanding at Balance at January 1, 2020 | 171 | | | 23.53 | |
Granted | 21 | | | 29.19 | |
Vested | (122) | | | 25.82 | |
Forfeited and cancelled | (40) | | | 15.35 | |
Outstanding at June 30, 2020 | 30 | | | 29.30 | |
| | | | | | | | | | | |
(in thousands, except for award value) | Restricted Stock Awards | | Weighted average award value |
Outstanding at January 1, 2021 | 61 | | | $ | 25.62 | |
Granted | 2 | | | 22.36 | |
Vested | (34) | | | 24.81 | |
Canceled/forfeited | (1) | | | 20.94 | |
Outstanding at June 30, 2021 | 28 | | | $ | 26.51 | |
A summary of non-vestedunvested restricted stock units ("RSU"(“RSU”) activity for the six months ended June 30, 2020:2021 is below:
| | | | | | | | | | | |
(in thousands) | RSU Awards | | Weighted Average Award Value |
Outstanding at Balance at January 1, 2020 | — | | | — | |
Granted | 360 | | | 12.64 | |
Vested | — | | | — | |
Forfeited and cancelled | — | | | — | |
Outstanding at June 30, 2020 | 360 | | | 12.64 | |
| | | | | | | | | | | |
(in thousands, except for award value) | RSU Awards | | Weighted average award value |
Outstanding at January 1, 2021 | 427 | | | $ | 15.46 | |
Granted | 149 | | | 67.24 | |
Vested | (115) | | | 17.08 | |
Canceled/forfeited | (4) | | | 66.82 | |
Outstanding at June 30, 2021 | 457 | | | $ | 31.39 | |
Note 10 — Net loss per shareLoss Per Share
Earnings per share areis calculated in accordance with ASC Topic 260: "EarningsEarnings per Share"Share, which specifies the computation, presentation and disclosure requirements for earnings per share (EPS)(“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. For the six months endedAt June 30, 2020,2021, there were 928,0001,403,000 anti-dilutive stock options outstanding compared to 469,000928,000 as of June 30, 2019. 2020. At June 30, 2021 there were 457,000 anti-dilutive restricted stock units compared to 427,000 as of June 30, 2020.
The potential dilutive effecteffects of the 2024 Notes and the 2026 Notes conversion features (See Note 8 - Debt) were excluded from the diluted net loss per share as of June 30, 20202021 and June 30, 2019.2020. Potential shares from the 2024 Notes and the 2026 Notes conversion features at their respective initial maximum
conversion pricesrates of $28.5546.4037 per share and $42.9730.8356 per share are approximately 481,548638,051 and 2,792,664,3,700,272, respectively. See “Note 7 — Debt” for additional information about the Notes.
The following isAs discussed in “Note 3 — Acquisition”, the Company issued to Act III a reconciliation of the weighted average ofWarrant to purchase 500,000 shares of common stock outstanding forwith an exercise price of $76.50 per share and were excluded from the basic and diluted EPS computations:net loss per share as of June 30, 2021 due to their anti-dilutive impact.
| | | | | | | | | | | | | | | | | | | | | | | | | |
(in thousands, except per share data) | Three Months Ended June 30, | | | | | | Six Months Ended June 30, | | |
| 2020 | | 2019 | | | | 2020 | | 2019 |
Net loss | $ | (8,976) | | | $ | (1,109) | | | | | $ | (19,886) | | | $ | (3,838) | |
| | | | | | | | | |
Basic: | | | | | | | | | |
Shares outstanding at beginning of period | 18,244 | | | 16,044 | | | | | 16,629 | | | 16,041 | |
Weighted average shares issued during the period, net | — | | | 246 | | | | | 1,463 | | | 44 | |
Weighted average common shares, basic | 18,244 | | | 16,290 | | | | | 18,092 | | | 16,085 | |
Net loss per common share, basic | $ | (0.49) | | | $ | (0.07) | | | | | $ | (1.10) | | | $ | (0.24) | |
Diluted: | | | | | | | | | |
Weighted average common shares, basic | 18,244 | | | 16,290 | | | | | 18,092 | | | 16,085 | |
| | | | | | | | | |
Weighted average common shares, diluted | 18,244 | | | 16,290 | | | | | 18,092 | | | 16,085 | |
Net loss per common share, diluted | $ | (0.49) | | | $ | (0.07) | | | | | $ | (1.10) | | | $ | (0.24) | |
Note 11 — 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.
The Company is a party to a proceeding filed byOn March 21, 2019, Kandice Neals on behalf of herself and others similarly situated (the "Neals Plaintiff"“Neals Plaintiff”) filed a complaint against the Company on March 21, 2019PAR Technology Corporation in the Circuit Court of Cook County, Illinois County Department, Chancery Division. The complaint asserted that the CompanyPAR Technology Corporation 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 Neals lawsuit was removed to the Federal District Court for the Northern District of Illinois (the District Court"“District Court”) and was subsequently dismissed on December 19, 2019 without prejudice. On January 15, 2020, the Neals Plaintiff filed an amended complaint against ParTech, Inc. with the District Court. On January 29, 2020, ParTech, Inc. filed its answer and affirmative defenses to the amended complaint. The Company believes the Nealsthat this lawsuit is without merit. The Company doesCompany’s estimated liability for this complaint is not currently believe an accrual is appropriate, but will continuematerial and related contingencies are not expected to monitorhave a material effect on the lawsuit to provide for probable and estimable losses.Company’s financial statements.
In 2016, the Company's Audit Committee commenced an internal investigation into conduct at the Company's China and Singapore offices and voluntarily notified the SEC and the U.S. Department of Justice ("DOJ"(“DOJ”) of the internal investigation. Following the conclusion of the Audit Committee's internal investigation, the Company voluntarily reported the relevant findings of the investigation to the China and Singapore authorities. In early April 2019, the SEC notified the Company that based on current information, it did not intend to recommend an enforcement action against the Company; shortly thereafter, the DOJ advised that it did not intend to separately proceed. Based on discussions withThe Company was recently notified that the Singaporean authority a penalty relatedhas determined not to this matterassess further penalties. The Company is probable;unable to predict what actions the Company’s estimated liability for this penalty is not material and related contingencies are not expected to have a material effect on the Company’s financial statements.
Chinese agencies might take.
Note 12 — Segment and Related Information
The Company operatesis organized in 2 distinct reporting segments, Restaurant/Retail and Government. The Company’s chiefManagement views the Restaurant/Retail and Government segments separately in operating decision maker isits business, as the Company’s Chief Executive Officer. products and services are different for each segment.
The Restaurant/Retail segment provides point-of-sale (POS)is a provider of software, systems and hardware, back-office software, and integrated technical solutionsservices 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) a fully integrated cloud solution with its Brink POS cloud software and POS hardware for the front-of-house, its back-office cloud software Data Central for the back-of-house, its loyalty and customer engagement platform - Punchh, and its wireless headsets for drive-thru order taking. This segment also offers a comprehensive portfolio of services to support its customer' technology and hardware requirements before, during and after software and/or hardware deployments. The Government segment provides intelligence, surveillance, and reconnaissanceperforms complex technical studies, analysis, experiments, develops innovative solutions, and mission systemsprovides on-site engineering in support to the United States Department of Defenseadvanced defense, security and other Federal agencies. In addition, the financial statements include corporateaerospace systems. This segment also provides expert on-site services for operating and eliminations, which is comprised of enterprise-wide functional departments.maintaining U.S. Government-owned communication assets.
Information noted as “Other” primarily relates to the Company’s corporate home office operations.
Information as to the Company’s reporting segments is set forth below (in thousands).in the tables below:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | | | | | Six Months Ended June 30, | | |
| 2020 | | 2019 | | | | 2020 | | 2019 |
Revenues: | | | | | | | | | |
Restaurant/Retail | $ | 27,633 | | | $ | 28,262 | | | | | $ | 65,042 | | | $ | 57,822 | |
Government | 18,058 | | | 15,985 | | | | | 35,381 | | | 31,107 | |
Total | $ | 45,691 | | | $ | 44,247 | | | | | $ | 100,423 | | | $ | 88,929 | |
| | | | | | | | | |
Operating loss: | | | | | | | | | |
Restaurant/Retail | $ | (7,697) | | | $ | (4,615) | | | | | $ | (13,767) | | | $ | (7,597) | |
Government | 1,349 | | | 1,518 | | | | | 2,528 | | | 2,881 | |
Other | 630 | | | (356) | | | | | 66 | | | (838) | |
Total | (5,718) | | | (3,453) | | | | | (11,173) | | | (5,554) | |
Other expense | (139) | | | (374) | | | | | (764) | | | (804) | |
Interest expense, net | (2,111) | | | (1,244) | | | | | (4,083) | | | (1,390) | |
Loss on extinguishment of debt | — | | | — | | | | | (8,123) | | | — | |
Loss before provision for income taxes | $ | (7,968) | | | $ | (5,071) | | | | | $ | (24,143) | | | $ | (7,748) | |
| | | | | | | | | |
Depreciation, amortization and accretion: | | | | | | | | | |
Restaurant/Retail | $ | 1,951 | | | $ | 1,201 | | | | | $ | 3,806 | | | $ | 2,069 | |
Government | 40 | | | 18 | | | | | 56 | | | 37 | |
Other | 1,567 | | | 890 | | | | | 2,838 | | | 1,015 | |
Total | $ | 3,558 | | | $ | 2,109 | | | | | $ | 6,700 | | | $ | 3,121 | |
| | | | | | | | | |
Capital expenditures including software costs: | | | | | | | | | |
Restaurant/Retail | $ | 2,783 | | | $ | 778 | | | | | $ | 4,490 | | | $ | 1,841 | |
Government | 223 | | | — | | | | | 434 | | | 176 | |
Other | — | | | 616 | | | | | 122 | | | 1,300 | |
Total | $ | 3,006 | | | $ | 1,394 | | | | | $ | 5,046 | | | $ | 3,317 | |
| | | | | | | | | |
Revenues by country: | | | | | | | | | |
United States | $ | 44,626 | | | $ | 41,657 | | | | | $ | 97,257 | | | $ | 83,582 | |
Other Countries | 1,065 | | | 2,590 | | | | | 3,166 | | | 5,347 | |
Total | $ | 45,691 | | | $ | 44,247 | | | | | $ | 100,423 | | | $ | 88,929 | |
Information as to the Company’s segments (continued):
| | | | | | | | | | | | | | | | | | | | | | | |
(in thousands) | Three months ended June 30, | | Six months ended June 30, |
| 2021 | | 2020 | | 2021 | | 2020 |
Net Revenues: | | | | | | | |
Restaurant/Retail | $ | 51,124 | | | $ | 27,633 | | | $ | 87,708 | | | $ | 65,042 | |
Government | 17,826 | | | 18,058 | | | 35,709 | | | 35,381 | |
Total | $ | 68,950 | | | $ | 45,691 | | | $ | 123,417 | | | $ | 100,423 | |
| | | | | | | |
Operating loss: | | | | | | | |
Restaurant/Retail | $ | (15,968) | | | $ | (7,697) | | | $ | (25,252) | | | $ | (13,767) | |
Government | 1,405 | | | 1,349 | | | 2,595 | | | 2,528 | |
Other | (2,412) | | | 630 | | | (339) | | | 66 | |
Total | (16,975) | | | (5,718) | | | (22,996) | | | (11,173) | |
Other expense, net | (341) | | | (139) | | | (392) | | | (764) | |
Interest expense, net | (4,937) | | | (2,111) | | | (7,097) | | | (4,083) | |
Loss on extinguishment of debt | 0 | | | 0 | | | 0 | | | (8,123) | |
Loss before benefit from income taxes | $ | (22,253) | | | $ | (7,968) | | | $ | (30,485) | | | $ | (24,143) | |
| | | | | | | |
Depreciation, amortization and accretion: | | | | | | | |
Restaurant/Retail | $ | 5,527 | | | $ | 1,951 | | | $ | 7,956 | | | $ | 3,806 | |
Government | 197 | | | 40 | | | 233 | | | 56 | |
Other | 2,073 | | | 1,567 | | | 3,598 | | | 2,838 | |
Total | $ | 7,797 | | | $ | 3,558 | | | $ | 11,787 | | | $ | 6,700 | |
| | | | | | | |
Capital expenditures including software costs: | | | | | | | |
Restaurant/Retail | $ | 2,965 | | | $ | 2,783 | | | $ | 3,697 | | | $ | 4,490 | |
Government | 302 | | | 223 | | | 453 | | | 434 | |
Other | 231 | | | 0 | | | 288 | | | 122 | |
Total | $ | 3,498 | | | $ | 3,006 | | | $ | 4,438 | | | $ | 5,046 | |
| | | | | | | |
Revenues by country: | | | | | | | |
United States | $ | 64,127 | | | $ | 44,626 | | | $ | 114,730 | | | $ | 97,257 | |
Other Countries | 4,823 | | | 1,065 | | | 8,687 | | | 3,166 | |
Total | $ | 68,950 | | | $ | 45,691 | | | $ | 123,417 | | | $ | 100,423 | |
The following table represents identifiable long-lived assets by reporting segment (in thousands).
| | | | | | | | | | | | | |
| June 30, 2020 | | December 31, 2019 | | |
Restaurant/Retail | $ | 1,776 | | | $ | 1,987 | | | |
Government | 241 | | | 272 | | | |
Other | 11,486 | | | 12,093 | | | |
Total | $ | 13,503 | | | $ | 14,352 | | | |
segment.
The following table represents identifiable long-lived assets by country based on the location of the assets (in thousands).
| | | | | | | | | | | | | |
| June 30, 2020 | | December 31, 2019 | | |
United States | $ | 13,424 | | | $ | 14,260 | | | |
Other Countries | 79 | | | 92 | | | |
Total | $ | 13,503 | | | $ | 14,352 | | | |
| | | | | | | | | | | |
(in thousands) | June 30, 2021 | | December 31, 2020 |
Restaurant/Retail | $ | 706,141 | | | $ | 140,606 | |
Government | 13,775 | | | 13,150 | |
Other | 77,759 | | | 189,993 | |
Total | $ | 797,675 | | | $ | 343,749 | |
The following table represents identifiable long-lived tangible assets by country based on the location of the assets.
| | | | | | | | | | | |
(in thousands) | June 30, 2021 | | December 31, 2020 |
United States | $ | 189,129 | | | $ | 250,275 | |
Other Countries | 14,268 | | | 16,570 | |
Total | $ | 203,397 | | | $ | 266,845 | |
The following table represents goodwill by reporting segment (in thousands).segment.
| | | | | | | | | | | | | |
| June 30, 2020 | | December 31, 2019 | | |
Restaurant/Retail | $ | 40,478 | | | $ | 40,650 | | | |
Government | 736 | | | 736 | | | |
Total | $ | 41,214 | | | $ | 41,386 | | | |
| | | | | | | | | | | |
(in thousands) | June 30, 2021 | | December 31, 2020 |
Restaurant/Retail | $ | 458,037 | | | $ | 40,478 | |
Government | 736 | | | 736 | |
Total | $ | 458,773 | | | $ | 41,214 | |
Customers comprising 10% or more of the Company’s total revenues by reporting segment are summarized as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | | | | | Six Months Ended June 30, | | |
| 2020 | | 2019 | | | | 2020 | | 2019 |
Restaurant/Retail reporting segment: | | | | | | | | | |
McDonald’s Corporation | 9 | % | | 10 | % | | | | 9 | % | | 10 | % |
Yum! Brands, Inc. | 10 | % | | 13 | % | | | | 11 | % | | 13 | % |
Dairy Queen | 11 | % | | 7 | % | | | | 14 | % | | 7 | % |
Government reporting segment: | | | | | | | | | |
U.S. Department of Defense | 40 | % | | 36 | % | | | | 35 | % | | 35 | % |
All Others | 30 | % | | 34 | % | | | | 31 | % | | 35 | % |
| 100 | % | | 100 | % | | | | 100 | % | | 100 | % |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | Six months ended June 30, |
| 2021 | | 2020 | | 2021 | | 2020 |
Restaurant/Retail reporting segment: | | | | | | | |
Dairy Queen | 6 | % | | 11 | % | | 7 | % | | 14 | % |
Yum! Brands, Inc. | 11 | % | | 10 | % | | 11 | % | | 11 | % |
| | | | | | | |
| | | | | | | |
Government reporting segment: | | | | | | | |
U.S. Department of Defense | 26 | % | | 40 | % | | 29 | % | | 35 | % |
All Others | 57 | % | | 39 | % | | 53 | % | | 40 | % |
| 100 | % | | 100 | % | | 100 | % | | 100 | % |
No other customer within All Others represented 10% ofor more of the Company’s total revenue for the three and six months ended June 30, 20202021 or 2019. The above table should be read in conjunction with the revised table presented in Note 12 of the Quarterly Report on Form 10-Q, filed with the SEC on May 11, 2020.
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, trade receivables, trade payables, debt instruments and deferred compensation assets and liabilities. The carrying amounts of cash and cash equivalents, trade receivables and trade payables as of June 30, 20202021 and December 31, 20192020 were considered representative of their fair values. The estimated fair value of the 2024 Notes and 2026 Notes was $15.0 million and $112.1 million, respectively, at June 30, 2020. 2021 was $33.7 million and $217.5 million, respectively. The valuation techniques used to determine the fair value of the 2024 Notes and the 2026 Notes are classified within Level 2 of the fair value hierarchy. The estimated fair value of the Owl Rock Credit Agreement at June 30, 2021 was $177.1 million. The valuation techniques used to determine the fair value of the Owl Rock Credit Agreement 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 theplan participants. The deferred compensation liabilities are classified within Level 2, the fair value classification as defined under FASB ASC Topic 820: "FairFair Value Measurements"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 June 30, 20202021 was $2.9$2.6 million compared to $3.2$2.8 million at December 31, 20192020 and is included in other long-term liabilities on the balance sheets.
As it relates to theThe Company's Level 3 contingent consideration associated with the Restaurant Magic Acquisition we may use various valuation techniques depending on the terms and conditions of the contingent consideration, includingliability had a Monte-Carlo simulation. This simulation uses probability distribution for each significant input to produce hundreds or thousands of possible outcomes and the results are analyzed to determine probabilities of different outcomes occurring, as such it is classified as Level 3. Significant increases or decreases to these inputs in isolation would result in a significantly higher or lower liability with a higher liability. Ultimately, the liability will be equivalent to the amount paid, and the difference between the fair value estimateof $0 at June 30, 2021 and amount paid will be recorded in earnings. The amount paid that is less than or equal to the liability on the acquisition date is reflected as cash used in financing activities in our consolidated statements of cash flows. Any amount paid in excess of the liability on the acquisition date is reflected as cash used in operating activities. The Restaurant Magic Acquisition resulted in a liability for the contingent consideration being recorded in the amount of $3.3 million during 2019. The liability for the contingent consideration was established at the time of the acquisition and is evaluated quarterly based on additional information as it becomes available. Any change in the fair value adjustment is recorded in the earnings of that period.
December 31, 2020.
The following table presents a summary of changes inprovides quantitative information associated with the fair value measurement of the Company’s Level 3 assetsliability for contingent consideration at June 30, 2021 and liabilities that are measured at fair value on a recurring basis, and are recorded as a component of other long-term liabilities on the consolidated balance sheet (in thousands):December 31, 2020.
| | | | | |
(in thousands) | Level 3 Inputs |
| Liabilities |
| |
| |
| |
| |
Balance at December 31, 2019 | $ | 3,340 | |
New level 3 liability | — | |
Total gains (losses) reported in earnings | — | |
Settlement of Level 3 liabilities | — | |
Balance at June 30, 2020 | $ | 3,340 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Contingency Type | | Maximum Payout (undiscounted) (in thousands) | | Fair Value | | Valuation Technique | | Unobservable Inputs | | Weighted Average or Range |
Revenue-based payments | | $ | 1,965 | | | $ | 0 | | | Monte Carlo | | Revenue volatility | | 25.0 | % |
| | | | | | | | Discount rate | | 14.0 | % |
| | | | | | | | Projected year(s) of payment | | 2021-2022 |
| | | | | |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
When used in this Quarterly Report on Form 10-Q (“Quarterly Report”), the terms the “Company”, “PAR”, “Company,” “we,”“we”, “us” and “our” meanor “our Company” 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 ourthe Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2019.2020 filed with the SEC on March 16, 2021 (“2020 Annual Report”). See also, “Forward-Looking Statements” below.
Forward-Looking Statements
This Quarterly Report contains “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”), Section 27A of the Securities Act of 1933, as amended ("Securities Act"), and the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not historical in nature, but rather are predictive of our future operations, financial condition, business strategies and prospects. Forward-looking statements are generally identified by words such as "anticipate," "believe," "belief," "continue," "could," "expect," "estimate," "intend," "may," "opportunity," "plan," "should," "will," "would," "will likely result," and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties, many of which are beyond our control, which could cause our actual results to differ materially from those expressed in, or implied by, the forward-looking statements, including forward-looking statements relating to our expectations regarding the impact of the COVID-19 pandemic on our business, operations, financial condition, and financial results. Factors that could cause or contribute to such differences include, but are not limited to, those described below in this Part I, Item 2. "Management's Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere in this Quarterly Report and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 and our other filings with the Securities and Exchange Commission. 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..
Overview
PAR Technology Corporation operates in two distinct businesses: ourreporting segments: Restaurant/Retail businessand Government. Our Restaurant/Retail segment provides point-of-sale (POS)(“POS”) software and hardware, back-office software, and integrated technical solutions to the retail and restaurant industries; our
to the retail and restaurant industries. Our Government businesssegment provides intelligence, surveillance, and reconnaissance solutions (“ISR”) and mission systems support to the U.S. Department of Defense ("DoD"(“DoD”) and other Federal agencies.
We are
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,categories a fully integrated cloud solution,solution. In April 2021, we acquired Punchh Inc. (“Punchh”), a leader in SaaS-based customer loyalty and engagement solutions. With this acquisition, we offer our customers a unified commerce cloud platform, empowering quick service, fast casual, and table service restaurants with operational efficiencies, by combining our leading Brink POS®POS cloud software and our point-of-sale hardware for the front-of-house, our leadingData Central back-office cloud software, - Data Central® -our PAR Pay and PAR Payment Services and now Punchh loyalty software. Our unified commerce cloud platform is further extended with our compatible point-of-sale hardware and drive-thru solutions. Our open API also allows for integration with the back-of-house, and our wireless headsets for drive-thru order taking.world's leading restaurant technology platforms.
The Brink POS® solution offers customers an integration ecosystem, providing access to industry trends and features, including mobile/on-line ordering, self-ordering kiosks, loyalty programs, kitchen video systems, guest surveys, enterprise reporting, and other features relevant to our customers’ businesses, including Restaurant Magic's cloud, SaaS back-office applications - Data Central®. Data Central® provides restaurants with the necessary tools to achieve peak operational and financial efficiency and integrates information from POS, inventory, supply, payroll, and accounting systems to provide a comprehensive view of a restaurant's operations.
We believe our cloud solutions, hardware offerings and services uniquely positions us to be a leader in helping to digitize the modern restaurant. Our continued success and growth will depend upon our ability to successfully deploy capital to where it earns its highest return. This includes the development and introduction of new products and product enhancements, targeted acquisitions and a constant review of internal spend. We have spent extensive time building a culture of intense rigor around capital allocation and we believe it will be a key part of our future success.
OurPAR's Government businesssegment provides technical expertise in contract development of advanced systems and software solutions for the U.S. 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. Our strategyThe Government segment is to build upon our Government business' sustained performancefocused on existing service contracts, coupledtwo principal offerings, intelligence solutions and mission systems contract support, with investmentsadditional revenue from a small number of licensed software products for use in enhanced business development capabilities. We believe we are well positioned to realize continued renewals of expiring contractsanalytic and extensions of existing contracts, and to secure service and solution contracts in expanded areas within the U.S. DoD and other Federal agencies.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 business.
Recent Developments Affecting Our Businesssegment.
COVID-19 Update
Over the past few months, theThe COVID-19 pandemic has continuedcontinues to spread throughout the U.S. and the world and has resulted in authorities implementing numerous measurespresent challenges to contain the virus, including travel bans, travel restrictions, quarantines, shelter-in-place orders, and business limitations and shutdowns. We are unable to accurately predict the full impact that COVID-19 will have on our results of operations and financial condition due to numerous uncertainties, including the duration and severity of the pandemic and related containment measures. Our adherence to these containment measures has impacted our day-to-day operations and could disrupt our business and operations, as well as that of our key customers, suppliers (including contract manufacturers) and other counterparties, for an indefinite period of time.
During the quarter, our Restaurant/Retail reporting segment began experiencing the impact of the COVID-19 pandemic due to its impact on our restaurant and retail customers and their response, including site closures, changes in product and service offerings and delivery formats, and delayed product adoptions and installations. April and May were impacted the most primarily due to a pause in a majority of the Brink POS® installations and temporary site closures. Monthly recurring software fees were not charged to sites that were temporarily closed. By June, installations commenced and as of July 30, 2020 site closures were down to 6% when compared to March 15, 2020.
Wewe continue to perform a number ofmonitor and respond to with actions to mitigate the impact of the virus ondisruption to our employeesoperations and business. To support the healthto protect our profitability. The operations and safetyresults of our employees, we suspended all non-essential travel for our employees, the vast majority of our non-manufacturing employees continue to work-from-home, and augmented shifts for our manufacturing employees are still in place. Additionally, early in the second quarter of 2020, we reduced discretionary costs, implemented a hiring freeze on non-essential positions, we reduced the size of our workforce, and temporarily furloughed employees and temporarily reduced the salaries of others in our Restaurant/Retail reporting segment and in
the Company's corporate group. Hiring for critical roles commenced in June to supportGovernment business demands as we exited the quarter.
As allowed under the Coronavirus Aid, Relief and Economic Security Act, as amended (the "CARES Act"), we are deferring payment of the employer portion of Social Security taxes through the end of 2020. The amount of the cumulative deferral at the end of 2020 is currently estimated to be $1.8 million to $2.2 million, of which 50% is payable on each of December 31, 2021 and December 31, 2022. As of June 28, 2020, we deferred $0.6 million of social security taxes, which is included in other long-term liabilities in the consolidated balance sheets
Whilehas not been materially impacted by the COVID-19 pandemic has not had a material adverse impact on our Government reporting segment to date, we have continued our work-from-home for all non-essential employees and on-site operations are accomplished through telework and a staggered staffing approach that achieves the intent and benefits of social distancing. For contracts requiring specialized equipment, we established an off-site lab environment that permits the safe continuation of development and testing activities until government facilities fully reopen.
Significant uncertainty still exists regarding the magnitude, phasing and duration of the impact of the COVID-19 pandemic; therefore, we cannot predict at this time the full extent of its impact on our business, operations, and financial condition in future periods.pandemic.
Recent Developments
•On April 8, 2021, we acquired Punchh for approximately $509.6 million (“Purchase Consideration”). We financed a portion of the cash Purchase Consideration through a combination of equity and debt, which included proceeds from the sale of $160.0 million of the Company's common stock and a $180.0 million senior secured term loan under a credit agreement. See “Note 3 — Acquisition”, for a description of the Punchh Acquisition. The “Liquidity and Capital Resources” section of Management's Discussion and Analysis of Financial Condition and Results of Operations provide additional information about how we financed the Punchh Acquisition.
Condensed Consolidated Results of Operations —
Three months endedMonths Ended June 30, 20202021 Compared to Three months endedMonths Ended June 30, 20192020
We reported consolidated revenues of $45.7$69.0 million for the quarter ended June 30, 2020,2021, an increase of 3.4%$23.3 million from $44.2$45.7 million recorded for the quarter ended June 30, 2019.2020. Our net loss from continuing operations was $10.0 million, or $0.39 per diluted share, for the second quarter of 2021, compared to a net loss of $9.0 million, or $0.49 per diluted share, for the second quarter of 2020 versus net loss of $1.1 million, or $0.07 per diluted share, for the second quarter of 2019. The unfavorable comparison is driven mainly by a tax benefit recorded in 2019 of $4.0 million related to a reduction of the deferred tax valuation allowance that arose due to the recording of a deferred tax liability created as a result of the accounting for the sale of the 2024 Notes. Our year-over-year unfavorable performance was also driven by increased research & development ("R&D") spending, increased interest expense related to sale of the 2026 Notes and resulting refinance of the 2024 Notes, and increased depreciation and amortization expense related to the Restaurant Magic Acquisition and Drive-Thru Acquisition.
Operating segment revenue is set forth below:
| | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, | | $ | % |
(in thousands) | | 2020 | 2019 | variance | variance |
Restaurant/Retail | | | | | |
Core * | | $ | 15,394 | | $ | 18,028 | | (2,634) | | (15) | % |
Brink ** | | 12,235 | | 9,304 | | 2,931 | | 32 | % |
SureCheck | | 4 | | 930 | | (926) | | (100) | % |
Total Restaurant Retail | | $ | 27,633 | | $ | 28,262 | | $ | (629) | | (2) | % |
| | | | | |
Government | | | | | |
Intelligence, surveillance, and reconnaissance | | $ | 9,741 | | $ | 7,256 | | 2,485 | | 34 | % |
Mission Systems | | 8,088 | | 8,192 | | (104) | | (1) | % |
Product Sales | | 229 | | 537 | | (308) | | (57) | % |
Total Government | | $ | 18,058 | | $ | 15,985 | | $ | 2,073 | | 13 | % |
* CORE includes $4.0 million of Drive-Thru revenue for 2020
** Brink includes $1.8 million of Restaurant Magic revenue for 20202020.
Product revenues were $12.3$23.9 million for the quarter ended June 30, 2020, a decrease2021, an increase of 16.3%94.1% from $14.7the $12.3 million recorded for the quarter ended June 30, 2019, primarily2020. This was our strongest quarter compared to the prior trailing twelve quarters starting with the quarter ended June 30, 2018. The growth was driven by a decreasemultiple factors including continued growth in drive-thru and kitchen display systems, hardware refresh investments by some of $2.4 million inour Tier 1 accounts and hardware revenue driven fromassociated with our Core customers, as hardware refreshment stalled as a resultrollout of COVID-19 responses. Drive-thru product revenue forBrink POS to new customers. The increase versus the quarter ended June 30, 2020 was $3.5 million. Product revenuealso driven by low sales volumes during the quarter ended June 30, 2020 as a result of COVID-19 related to Brinkrestrictions at our customers' locations.
Service revenues were $27.2 million for the quarter ended June 30, 2020 was $3.8 million, a decrease2021, an increase of
10% 77.8% from $4.2the $15.3 million recorded for the quarter ended June 30, 2019. The unfavorable Brink product revenue results are directly related to2020, primarily driven by revenues from the postponementoperations of installations in AprilPunchh of $8.1 million and May as our customers took precautionary measures in response to the COVID-19 pandemic.increases of $1.7 million from implementations, and $1.7 million from other software revenue.
Contract revenues were $15.3$17.8 million for the quarter ended June 30, 2021, a decrease of 1.7% or $0.3 million from $18.1 million recorded for the quarter ended June 30, 2020. The decrease in contract revenues was driven by a $0.5 million decrease in our ISR solutions product line partially offset by a $0.3 million increase in our mission systems product line.
Product margins for the quarter ended June 30, 2021 were 22.8%, compared to 19.1%, recorded for the quarter ended June 30, 2020. The increase in margin was primarily due to more effective absorption of overhead fixed costs, compared to the quarter ended June 30, 2020 which experienced historically low revenue volume. The favorable impact from absorption was partially offset by higher material costs.
Service margins for the quarter ended June 30, 2021 were 30.3%,compared to 35.2% recorded for the quarter ended June 30, 2020, primarily driven by an increase in amortization expense for acquired developed technology of $2.9 million recognized as a result of the Punchh Acquisition and incremental costs incurred while transitioning our field operations organization.
Contract margins for the quarter ended June 30, 2021 were 7.9%, compared to 7.4% for the quarter ended June 30, 2020, primarily due to productivity improvements on existing contracts.
Selling, general, and administrative expenses increased to $22.9 million for the quarter ended June 30, 2021 from $10.0 million for the quarter ended June 30, 2020, an increase of 13.3% or $1.8128.4%. The increase was primarily driven by $9.5 million in total Punchh related expenses of which $2.7 million are acquisition related costs and $6.8 million are operational expenses. Punchh operational expenses included $2.5 million for stock-based compensation. Other drivers included increases of $0.8 million for sales and marketing, $0.6 million from $13.5variable compensation, a $0.7 million recorded for the quarter ended June 30, 2019, primarily due to the addition of the Restaurant Magic businessincrease in internal technology infrastructure costs, and the growtha $0.6 million increase in Brink recurring software revenues. Service revenue associated with Brink includes recurring software revenue of $5.4 million, an increase of 35.0% from $4.0 million recorded for the quarter ended June 30, 2019. Restaurant Magic service revenue includes recurring software revenue of $2.1 million. Drive-thru service revenue for the quarter ended June 30, 2020 was $0.4 million.corporate management expenses.
Contract revenuesResearch and development expenses were $18.1$8.6 million for the quarter ended June 30, 2020,2021, an increase of 13.1% or $2.1$4.1 million from $16.0 million recorded for the quarter ended June 30, 2019. The favorable increase in revenue was driven by contracts entered into during the first quarter of 2020 relating to intelligence, surveillance, and reconnaissance ("ISR") solutions, with $8.0 million more in backlog compared to the first quarter of 2019.
Product margins for the quarter ended June 30, 2020 were 19.1%, compared to 22.5%, recorded for the quarter ended June 30, 2019, primarily due to unfavorable overhead absorption with reduced revenue and increased freight costs in the beginning of the quarter.
Service margins for the quarter ended June 30, 2020 were 35.2%, compared to 25.2% recorded for the quarter ended June 30, 2019, primarily driven by a shift in mix that resulted from our M&A activity with the Restaurant Magic Acquisition, the Drive-Thru Acquisition and divestment of Surecheck.
Contract margins for the quarter ended June 30, 2020 were 7.4%, compared to 10.0% for the quarter ended June 30, 2019, primarily due to lower product services revenue and increased business development investment in product services compared to the quarter ended June 30, 2019.
Selling, general and administrative ("SG&A") expenses increased to $10.0 million for the quarter ended June 30, 2020 from $9.1 million for the quarter ended June 30, 2019, an increase of 9.9%. The increase was primarily driven by an additional $0.7 million of SG&A expense from recently acquired Restaurant Magic and Drive-Thru businesses.
R&D expenses were $4.5 million for the quarter ended June 30, 2020, andriven primarily by $2.9 million for Punchh and $0.9 million related to additional investments in our existing product development organization.
For the quarters ended June 30, 2021 and 2020, we recorded $0.5 million and $0.2 million, respectively, of amortization expense associated with acquired identifiable non-developed technology intangible assets. The increase was driven by intangible assets recognized as part of $1.8 million from $2.7the Punchh Acquisition.
In other expense, net, we recorded $0.3 million for the quarter ended June 30, 2019, driven by an increase2021, compared to other expense, net, of $3.2$0.1 million in Brink development and $0.5 millionrecorded for Restaurant Magic development, partially offset by the SureCheck divestiture and an increase in capitalized software.quarter ended June 30, 2020.
For the quarter ended June 30, 2020, we recorded $0.22021 interest expense, net, was $4.9 million, of amortization expense associated with identifiable non-developed technology intangible assets acquired in the Drive-Thru Acquisition and the Restaurant Magic Acquisition, compared to $0.0 million for the quarter ended June 30, 2019. Amortization expense associated with identifiable developed technology intangible assets are accounted for as cost of sales within service costs of sales.
In other expense, net, we recorded $0.1 million for the quarter ended June 30, 2020, compared to other expense, net, of $0.4$2.1 million recorded for the quarter ended June 30, 2019. This decrease was driven by foreign currency fair value adjustments.
In2020. The increase in interest expense net, we recorded $2.1 million for the quarter ended June 30, 2020, compared to $1.2 million recorded for the quarter ended June 30, 2019. This increase was primarily driven by interest related to the 2024 Notes and 2026 Notes, whichTerm Loan under the Owl Rock Credit Agreement. Interest expense, net includes $1.2$1.7 million of non-cash accretion of debt discount and amortization of issuance costs for the three months ended June 30, 2020.2021 compared with $1.1 million for the same period last year.
Net tax benefit of $12.3 million for the three months ended June 30, 2021 is driven by a $12.3 million partial release of the Company's deferred taxed asset valuation allowance resulting from the deferred tax liabilities recognized in conjunction with the Punchh Acquisition. Net tax provision of $1.0 million for the quarterthree months ended June 30, 2020 iswas driven by thea $1.0 million adjustment to the deferred tax benefit recorded in the first quarter ended March 31, 2020 for the 2026 Notes issuance. The net tax benefit of $4.0 million for the quarter ended June 30, 2019 was driven by the $4.1 million deferred tax benefit impact of the 2024 Notes issuance in April 2019.
Segment Revenue by Product Line are set forth below:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | $ | | % |
(in thousands) | 2021 | | 2020 | | variance | | variance |
Restaurant/Retail | | | | | | | |
Hardware | $ | 23,355 | | | $ | 12,129 | | | $ | 11,226 | | | 93 | % |
Software | 15,100 | | | 5,977 | | | 9,123 | | | 153 | % |
Services | 12,669 | | | 9,527 | | | 3,142 | | | 33 | % |
Total Restaurant Retail | $ | 51,124 | | | $ | 27,633 | | | $ | 23,491 | | | 85 | % |
| | | | | | | |
Government | | | | | | | |
Intelligence, Surveillance, and Reconnaissance | $ | 9,284 | | | $ | 9,741 | | | $ | (457) | | | (5) | % |
Mission Systems | 8,338 | | | 8,088 | | | 250 | | | 3 | % |
Product Services | 204 | | | 229 | | | (25) | | | (11) | % |
Total Government | $ | 17,826 | | | $ | 18,058 | | | $ | (232) | | | (1) | % |
| | | | | | | |
Total Net Revenue | $ | 68,950 | | | $ | 45,691 | | | $ | 23,259 | | | 51 | % |
Condensed Consolidated Results of Operations —
Six Months Ended June 30, 20202021 Compared to Six Months Ended June 30, 2019
2020
We reported consolidated revenues of $100.4$123.4 million for the six months ended June 30, 2020,2021, an increase of 12.9%$23.0 million from $88.9$100.4 million recorded for the six months ended June 30, 2019.2020. Our net loss from continuing operations was $18.2 million, or $0.77 per diluted share, for the six months ended June 30, 2021, compared to a net loss of $19.9 million, or $1.10 per diluted share, for the six months ended June 30, 2020 versus net loss of $3.82020.
Product revenues were $42.5 million or $0.24 per diluted share, for the six months ended June 30, 2019. Our year-over-year unfavorable performance2021, an increase of 37.1% from the $31.0 million recorded for the six months ended June 30, 2020. The increase was driven by continued growth in drive-thru and kitchen display systems, hardware refresh investments by some of our Tier 1 legacy accounts and hardware revenue associated with our rollout of Brink POS to new customers. Another driver of the increase was the low sales volumes during the six months ended June 30, 2020 as a result of COVID-19 related restrictions at our customers' locations.
Service revenues were $45.2 million for the six months ended June 30, 2021, an increase of 32.6% from the $34.1 million recorded for the six months ended June 30, 2020, primarily driven by corporate financing
charges, including an $8.1revenues from the operations of Punchh of $8.3 million loss on extinguishmentand increases of debt related to the partial repurchase of the 2024 Notes, an additional $1.8$0.7 million of interest expense related to the 2024 and the 2026 Notes, increased investment in sales, marketing and R&D within the Restaurant/Retail operating segment, and increased depreciation and amortization expense related to the Restaurant Magic Acquisition and Drive-Thru Acquisition.for repair services, $2.5 million for other software revenue.
Operating segment revenue is set forth below:
| | | | | | | | | | | | | | | | | |
| | Six months ended June 30, | | $ | % |
(in thousands) | | 2020 | 2019 | variance | variance |
Restaurant/Retail | | | | | |
Core * | | $ | 35,250 | | $ | 36,679 | | (1,429) | | (4) | % |
Brink ** | | 29,775 | | 18,781 | | 10,994 | | 59 | % |
SureCheck | | 17 | | 2,363 | | (2,346) | | (99) | % |
Total Restaurant Retail | | $ | 65,042 | | $ | 57,823 | | $ | 7,219 | | 12 | % |
| | | | | |
Government | | | | | |
Intelligence, surveillance, and reconnaissance | | $ | 18,514 | | $ | 13,546 | | 4,968 | | 37 | % |
Mission Systems | | 16,535 | | 16,733 | | (198) | | (1) | % |
Product Sales | | 332 | | 828 | | (496) | | (60) | % |
Total Government | | $ | 35,381 | | $ | 31,107 | | $ | 4,274 | | 14 | % |
* CORE includes $7.5Contract revenues were $35.7 million for the six months ended June 30, 2021, an increase of Drive-Thru revenue0.8% or $0.3 million from $35.4 million recorded for the six months ended June 30, 2020,
** Brink includes $4.0 million of Restaurant Magic revenue for 2020 driven by ISR solutions product line revenues.
Product revenuesmargins for the six months ended June 30, 2021 were $31.021.5%, compared to 19.6%, recorded for the six months ended June 30, 2020. The increase is primarily due to more effective absorption of overhead fixed costs as we experienced low volumes during the quarter ended June 30, 2020 as a result of COVID-19 related restrictions at our customers' locations. The favorable impact from absorption was partially offset by higher material costs.
Service margins for the six months ended June 30, 2021 were 30.0%,compared to 33.8% recorded for the six months ended June 30, 2020, primarily driven by a $5.5 million increase in software related costs including $2.9 million of amortization from acquired developed technology as a result of the Punchh Acquisition and incremental costs incurred while transitioning our field operations organization.
Contract margins for the six months ended June 30, 2021 were 7.3%, compared to 7.1% for the six months ended June 30, 2020, primarily due to productivity improvements on existing ISR contracts and improved margins in Product Services.
Selling, general, and administrative expenses increased to $37.5 million for the quarter ended June 30, 2021 from $21.5 million for the six months ended June 30, 2020, an increase of 2.6% from $30.2 million recorded for the six months ended June 30, 2019,74.5%. The increase was primarily driven by increased hardware attachment associated with installations attributable to Brink$10.2 million in total Punchh related expenses of which $3.4 million are acquisition related costs and hardware $6.8 million are operational expenses. Punchh operational expenses included $2.5 million for stock-based compensation. Other drivers included increases of $0.6 million for
sales and marketing, $1.1 million from our new Drive-Thru product line. Product revenue related to Brink for the six months ended June 30, 2020 was $10.5variable compensation, a $1.0 million an increase of 20% from $8.8in internal technology infrastructure costs, and a $1.1 million recorded for the six months ended June 30, 2019. Drive-thru product revenue for the six months ended June 30, 2020 was $4.0 million.increase in corporate management expenses.
Service revenuesResearch and development expenses were $34.1$14.5 million for the six months ended June 30, 2020,2021, an increase of 23.6%$5.1 million from $27.6 million recorded for the six months ended June 30, 2019, primarily due to growth in recurring software and hardware installation revenues. Service revenue associated with Brink includes recurring software revenue of $10.7 million, an increase of 37% from $7.8 million recorded for the six months ended June 30, 2019. Restaurant Magic service revenue includes recurring software revenue of $4.1 million.
Contract revenues were $35.4 million for the six months ended June 30, 2020, an increase of 13.8% from $31.1 million recorded for the six months ended June 30, 2019. The favorable increase in revenue was driven by our intelligence, surveillance, and reconnaissance ("ISR") solutions line of business, with $8.0 million more in backlog at the beginning of the year compared to 2019.
Product margins for the six months ended June 30, 2020 were 19.6%, compared to 25.1%, recorded for the six months ended June 30, 2019, primarily due to unfavorable overhead absorption with reduced revenue and increased freight costs as we accelerated supply chain to accommodate strategic inventory.
Service margins for the six months ended June 30, 2020 were 33.8%, compared to 26.1% recorded for the six months ended June 30, 2019, primarily driven by a shift in mix that resulted from our M&A activity with the Restaurant Magic Acquisition, Drive-Thru Acquisition and divestment in Surecheck.
Contract margins for the six months ended June 30, 2020 were 7.1%, compared to 9.9% for the six months ended June 30, 2019, primarily due to lower product services revenue and increased business development investment in product services compared to the six months ended June 30, 2019.
Selling, general and administrative ("SG&A") expenses increased to $21.5 million for the six months ended June 30, 2020 from $17.6 million for the six months ended June 30, 2019, an increase of 22.2%. The increase was primarily driven by $1.9 million
of expenses associated with recently acquired Restaurant Magic and Drive-Thru businesses and increased depreciation costs associated with recently implemented enterprise resource planning ("ERP") system.
R&D expenses were $9.4 million for the six months ended June 30, 2020, an increase of $3.6 million from $5.8driven primarily by $2.8 million for the six months ended June 30, 2019, driven by an increase of $5.0Punchh and $2.0 million related to additional investments in Brink development and $0.9 million in Restaurant Magic development, partially offset by the divestiture of SureCheck and an increase in capitalized software.our existing software product development.
For the six months ended June 30, 2021 and 2020, we recorded $0.8 million and $0.4 million, respectively of amortization expense associated with acquired identifiable non-developed technology intangible assets. The increase was driven by intangible assets acquiredrecognized as part of the Punchh Acquisition.
Also included in operating expense for the Drive-Thru Acquisition andsix months ended June 30, 2021 was a $4.4 million gain on insurance proceeds received in connection with our settlement of a legacy claim. There was no comparable reduction to expense for the Restaurant Magic Acquisition, compared to $0.0six months ended June 30, 2020.
In other expense, net, we recorded $0.4 million for the six months ended June 30, 2019.
In interest2021, compared to other expense, net, we recorded $4.1 million for the six months ended June 30, 2020, compared to $1.4of $0.8 million recorded for the six months ended June 30, 2019.2020.
For the six months ended June 30, 2021, interest expense, net was $7.1 million, as compared to $4.1 million recorded for the six months ended June 30, 2020. This increase was primarily driven by interest related to the 2024 Notes andTerm Loan under the 2026 Notes, whichOwl Rock Credit Agreement. Interest expense, net includes $2.1$2.9 million of non-cash accretion of debt discount and amortization of issuance costs for the six months ended June 30, 2020,2021 compared to $0.6with $2.1 million for the same period last year.
Net tax benefit of $12.3 million for the six months ended June 30, 2019.
Loss on extinguishment of debt of $8.12021 is driven by a $12.3 million for the six months ended June 30, 2020, as a resultpartial release of the settlement of $66.3 million of 2024 NotesCompany's deferred taxed asset valuation allowance resulting from the deferred tax liabilities recognized in conjunction with the first quarter.
NetPunchh Acquisition. The net tax benefit of $4.3 million for the six months ended June 30, 2020 iswas driven by the $4.4 million deferred tax benefit impact of the 2026 Notes issuance in the first quarter. The net tax benefit of $3.9 million for the six months ended June 30, 2019 was drivenissuance.
Segment Revenue by the $4.1 million deferred tax benefit impact of the 2024 Notes issuance in April 2019.Product Line are set forth below:
| | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, | | $ | | % |
(in thousands) | 2021 | | 2020 | | variance | | variance |
Restaurant/Retail | | | | | | | |
Hardware | $ | 41,190 | | | $ | 30,266 | | | $ | 10,924 | | | 36 | % |
Software | 22,976 | | | 12,921 | | | 10,055 | | | 78 | % |
Services | 23,542 | | | 21,855 | | | 1,687 | | | 8 | % |
Total Restaurant Retail* | $ | 87,708 | | | $ | 65,042 | | | $ | 22,666 | | | 35 | % |
| | | | | | | |
Government | | | | | | | |
Intelligence, Surveillance, and Reconnaissance | $ | 18,831 | | | $ | 18,514 | | | $ | 317 | | | 2 | % |
Mission Systems | 16,469 | | | 16,535 | | | (66) | | | — | % |
Product Services | 409 | | | 332 | | | 77 | | | 23 | % |
Total Government | $ | 35,709 | | | $ | 35,381 | | | $ | 328 | | | 1 | % |
| | | | | | | |
Total Net Revenue | $ | 123,417 | | | $ | 100,423 | | | $ | 22,994 | | | 23 | % |
Liquidity and Capital Resources
For the six months ended June 30, 2020 the Company’s2021 our primary source of liquidity was its sale of the 2026 Notes.existing cash and cash equivalents generated through financing transactions in 2020 and 2021. Cash used in operating activities was $33.1 million for the six months ended June 30, 2021, compared to $13.6 million for the six months ended June 30, 2020, compared to $6.5 million2020. Cash used for the six months ended June 30, 2019. The variance2021 was primarily driven by net operating losses, net of non-cash charges and additional net working capital requirements primarily driven by an increase in net lossinventory of $8.8 million and net working capital needs for the first quarter of 2020 as a result of an increase in strategic procurementother current assets of inventory,$11.0 million. The increase in other current assets reflected an increase in our prepaid assets for annual insurance premiums, and annual variable compensation, and decrease in customer deposits. Inventory levels were strategically increased to support the roll out of projects for Brink and to mitigate risk of supply chain disruption due to the COVID-19 pandemic.assets.
Cash used in investing activities was $381.7 million for the six months ended June 30, 2021 compared to $4.6 million for the six months ended June 30, 2020 compared to $3.3 million for the six months ended June 30, 2019.2020. Investing activities during the six months ended June 30, 20202021 included $377.3 million of cash consideration in connection with the Punchh Acquisition (net of cash acquired) and capital expenditures of $4.6$3.8 million infor
developed technology costs associated with investments in our Restaurant/Retail reporting segment software platforms compared to $1.6$4.6 million for software platforms and $1.7for the quarter ended June 30, 2020.
Cash provided from financing activities was $319.3 million for implementation of our ERP system for the six months ended June 30, 2019.
Cash2021, compared to cash provided by financing activities wasof $49.1 million for the six months ended June 30, 2020, compared to cash provided by financing activities of $64.9 million for2020. During the six months ended June 30, 2019. The2021, we received net proceeds of $155.7 million from the private placement of our common stock to PAR Act III, LLC and certain funds and accounts advised by T. Rowe Price Associates, Inc., acting as the investment advisor and net proceeds of $170.7 million from the Term Loan under the Owl Rock Credit Agreement. During the six months ended June 30, 2020, includedwe received net proceeds of $49.7 million from the $120$120.0 million issuance of the 2026 Notes partially offset by the repurchase of a majority of the 2024 Notes. The six months ended June 30, 2019 included the $80 million issuance of the 2024 Notes.
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“Management's Discussion and Analysis of Financial Condition and Results of Operations"Operations” and elsewhere in this Quarterly Report and in our Annual Report on Form 10-K for the fiscal yearperiod ended December 31, 2019June 30, 2021, and in the 2020 Annual Report and our other filings with the Securities and Exchange Commission.
SEC.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements or obligations.
Contractual Obligations
Contractual Obligations
As of June 30, 2021, we had the following contractual obligations:
The following table summarizes our contractual obligations at June 30, 2020 and the effect such obligations are expected to have on our liquidity and cash flow in future periods.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(in thousands) | Payments Due by Period | | | | | | | | |
| Total | | Less Than 1 Year | | 1-3 Years | | 4-5 Years | | More Than 5 Years |
Operating lease obligations | $ | 2,544 | | | $ | 505 | | | $ | 1,924 | | | $ | 75 | | | $ | 40 | |
Other purchase obligations | 13,074 | | | 12,131 | | | 943 | | | | |
Debt obligations | 135,440 | | | 647 | | | 1,043 | | | 13,750 | | | 120,000 | |
| $ | 151,058 | | | $ | 13,283 | | | $ | 3,910 | | | $ | 13,825 | | | $ | 120,040 | |
The commitments in the table above consist of lease payments for our San Diego, California office, Ontario, Canada office, our other United States locations, and our international locations. The debt obligations include the 2024 Notes, the 2026 Notes and the subordinated promissory note related to the Restaurant Magic Acquisition. The contractual commitment amounts in the table above are associated with agreements that are enforceable and legally binding. Obligations under contracts that we can cancel without significant penalty are not included in the table above.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(in thousands) | Payments due by period |
Total | | Less Than 1 Year | | 1-3 Years | | 4-5 Years | | More Than 5 Years |
Operating lease obligations | $ | 5,186 | | | $ | 1,864 | | | $ | 2,541 | | | $ | 781 | | | $ | — | |
Other purchase obligations | 32,207 | | | 31,592 | | | 615 | | | — | | | — | |
Debt obligations | 367,435 | | | 13,519 | | | 40,633 | | | 313,283 | | | — | |
| $ | 404,828 | | | $ | 46,975 | | | $ | 43,789 | | | $ | 314,064 | | | $ | — | |
Critical Accounting Policies and Estimates
Our condensed consolidated financial statements are based on the application of U.S.accounting principles generally accepted accounting principlesin 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, equity compensation, the recognition of right-to-use assets and liabilities, goodwill and intangible assets, the measurement of liabilities and equity recognized for outstanding convertible notes and taxes. Our critical accounting policies have not changed materially from the discussion of those policies included under “Critical Accounting Policies and Estimates” in ourthe 2020 Annual Report on Form 10-K for the year ended December 31, 2019.Report.
| | | | | |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
Not Required.Foreign Currency Exchange Risk
Our primary exposures relate to certain non-dollar denominated sales and operating expenses in Europe and Asia. These primary currencies are the Great British Pound, the Euro, the Australian dollar, the Singapore dollar and the Chinese Renminbi. Accordingly, changes in exchange rates may negatively affect our revenue and net income (loss) as expressed in U.S. dollars. We also have foreign currency risk related to foreign currency transactions and monetary assets and liabilities, including intercompany balances denominated in currencies that are not the functional currency. We have experienced and will continue to experience fluctuations in our net income (loss) as a result of gains (losses) on these foreign currency transactions and the remeasurement of monetary assets and liabilities. As of June 30, 2021, the impact of foreign currency exchange rate changes on our revenues and net income (loss) have not been material. The volatility of exchange rates depends on many factors that we cannot forecast with reliable accuracy.
Interest Rate Risk
As of June 30, 2021, we had $13.8 million, $120.0 million, and $180.0 million in aggregate principal amount of the 2024 Notes, the 2026 Notes, and the Owl Rock Credit Agreement outstanding, respectively.
We carry the Notes at face value less amortized discount on the consolidated balance sheet. Since the Notes bear interest at fixed rates, we have no financial statement risk associated with changes in interest rates. However, the fair value of the Notes changes when the market price of our stock fluctuates or interest rates change.
The Owl Rock Credit Agreement contains a variable interest rate with a floor of 5.25%, presenting interest rate exposure in an increasing rate environment.
| | | | | |
Item 4. | Controls and Procedures |
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of June 30, 2020.2021. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of June 30, 2020.such date due to material weaknesses in our internal control over financial reporting previously identified in Item 9A. “Controls and Procedures” of our 2020 Annual Report.
Remediation Efforts to Address the Material Weaknesses
Our remediation efforts previously identified in Item 9A. “Controls and Procedures” of our 2020 Annual Report to address the identified material weaknesses are ongoing as we continue to implement and document necessary policies, procedures, and internal controls. While we believe the steps taken to date and those planned for future implementation will improve the effectiveness of our internal control over financial reporting, we have not completed all remediation efforts. The material weaknesses cannot be considered remediated until applicable controls have operated for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.
Changes in Internal Control Over Financial Reporting.
During the three months ended June 30, 2021, the Company's internal controls over financial reporting expanded to include those inherited from the Punchh Acquisition, which are currently under evaluation by management. There were no additional changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended June 30, 20202021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Part II - Other InformationOTHER INFORMATION
The information in Note 11 – Contingencies, to the financial statements, is responsive to this Item and is incorporated by reference herein.
The risks described in the “Risk Factors” section of our 2020 Annual Report, on Form 10-K for the fiscal year ended December 31, 2019, as amended and supplemented by the risks described in the “Risk Factors” section of our Quarterly Report on Form 10-Q for the quarter ended March 31, 20202021, remain current in all material respects, including the discussions ofand are amended and further supplemented by this Quarterly Report.
Risks Associated with the COVID-19 Pandemic
The COVID-19 pandemic has had and itsis expected to continue to have an adverse effect on our business, operations, financial condition and financial results as further discussed in this Quarterly Report. We continue to actively manage our business to respond tofor the uncertainties and risks created by the COVID-19 pandemic and the continuously evolving science and government and consumer responses. State and local governments in certain regions of the United States have been easing restrictions previously implemented in response to the COVID-19 pandemic, while other areas of the United States have experienced increased numbers of COVID-19 infections and uncertainty as to government and consumer response, demonstrating that theforeseeable future.
The COVID-19 pandemic continues to present significant risk to our business, operations, and financial results. The extent of the impact of the COVID-19 pandemic on our business, operations, and financial results, including our ability to execute our near-term and long-term business strategies and initiatives, will depend on future developments, which are uncertain and cannot be fluid with uncertaintiespredicted. Even as governmental restrictions are being lifted and risks remainingmarkets reopen, there are resurgences of COVID-19 outbreaks, including the new Delta variant, in thecertain U.S. states and elsewhere.in other countries. The extent to which the COVID-19 pandemicU.S., individual states, or other countries will continuereinstitute or issue new restrictions in response to impactthese resurgences or how consumers will respond is unclear; and, whether our business, operations, financial condition and financial results depends on future developments that are uncertain and difficultthose of our customers will again be faced with challenges similar to predict; there can be no assurance that thethose in 2020, including store closures or reduced services, delayed or canceled store implementations, decreased product adoptions and bookings, new or extended shelter-in-place orders, travel restrictions, and mandated business closures, payment delays or defaults and bankruptcies is uncertain.
The COVID-19 pandemic will nothas resulted in global supply chain shortages, that we expect to continue toin the foreseeable future, which could have a material and adverse effect on our business, results of operations, and financial results.
As we have previously cautioned, we source certain of our hardware products and related materials, product assemblies, and components from third parties, including sole-source suppliers for certain of our assembly components and hardware products. We did take steps early in the COVID-19 pandemic (and we continue to take steps) to mitigate its impact on our supply chain; however, the global causal linkage of the COVID-19 pandemic has created an unprecedented demand for materials and component parts used in our hardware products, which has led to significant global supply change shortages for such materials and components and associated escalating prices. Compounding the impact of the supply shortages is reduced ground and air transportation capacities. We have experienced significant price increases for materials and component parts and in associated transportation costs. Late in the quarter ended June 30, 2021, we increased our hardware product prices to offset some of the increased costs. These price increases could make us less competitive, result in reduced sales, loss of potential new customers, and cause damage to our reputation and relationships with our current customers, which could have a negative impact on our business, results during any quarterof operations and financial results. Moreover, we may not be able to source materials or yearcomponent parts when required, expanding the impact of the supply shortage and possibly resulting in longer lead times for delivery, which could negatively impact our ability to satisfactorily and timely complete our customer obligations. We could also incur additional costs and delays in addressing this type of problem.
Risks Associated with the Growth of our Business
The Punchh Acquisition involves a number of risks that could adversely affect our business, financial condition, and results of operations.
On April 8, 2021, we are affected.acquired Punchh Inc., a leader in SaaS-based customer loyalty and engagement solutions, pursuant to the terms of an Agreement and Plan of Merger Agreement dated on even date therewith. In addition to the factors described in Part I, Item 1A, “Risk Factors - Our inability to identify and complete future acquisitions and/or integrate acquired businesses could have a material adverse effect on our business, financial condition, and results of operations” of our 2020 Annual Report, the Punchh Acquisition involves certain risks and uncertainties, including
•Difficulties and/or delays in integrating Punchh’s operations, technologies, and systems;
•The distraction and/or diversion of resources and management’s attention to transition or integration activities involving Punchh, could delay or impede our execution of other business strategies and our and Punchh’s in-process research and development and product innovations;
•Difficulty providing bundled or complementary products to our and Punchh’s customers and expanding our customer base;
•Being subject to unfavorable revenue recognition or other accounting treatment as a result of Punchh’s business practices;
•Incurring a significant amount of debt to finance the Punchh Acquisition, which increased our debt service requirements, expense, and leverage; and
•The assumption of equity awards granted by Punchh pre-merger, which may more rapidly deplete shares of the Company’s common stock available under our equity incentive plans.
Our failure to successfully integrate and operate Punchh and realize the expected benefits of the Punchh Acquisition, due to these or other factors, could have a material adverse effect on our business, financial condition, and results of operations.
Risks Associated with our Convertible Senior Notes and Indebtedness
Servicing the additional indebtedness incurred in connection with the Punchh Acquisition will require a significant amount of cash, and we may not have sufficient cash flow from our operating subsidiaries to pay our debt.
The additional indebtedness we incurred in connection with the Punchh Acquisition will require a significant amount of cash, which could adversely affect our financial condition and results of operations. We acquired Punchh for $509.6 million (the “Purchase Consideration”); $180.0 million of the Purchase Consideration was funded with proceeds from a senior secured term loan, the “Term Loan”, under a credit agreement, dated April 8, 2021, with Owl Rock First Lien Master Fund, L.P., as administrative and collateral agent, and the other lenders party thereto from time to time. As of June 30, 2021, we had $314.8 million aggregate amount of debt, $180.0 million aggregate principal amount outstanding under the Term Loan and $134.8 million aggregate principal amount of the 2024 and 2026 Notes outstanding. Our ability to make scheduled payments on the principal of, to pay interest on, or to refinance our debt, including the 2024 Notes and the 2026 Notes and now, the Term Loan, depends on our future performance, which is subject to economic, financial, competitive, and other factors beyond our control. Moreover, our aggregate indebtedness, together with other financial obligations or contractual commitments, could have other significant consequences, including:
•increasing the impact of adverse changes in the U.S. and global markets - generally, and in our industries, on our business, financial condition and operating results;
•restricting or limiting our agility to plan and react to changes in our business and our industries;
•placing us at a disadvantage compared to our competitors who have less debt; and
•limiting our ability to borrow additional amounts to fund acquisitions, for working capital, and for other general corporate purposes.
| | | | | |
Item 2. | Unregistered Sales of Equity Securities and Use Ofof Proceeds |
Under our equity incentive plan, employees may elect to have us withhold shares to satisfy minimum statutory federal, state and local tax withholding obligations arising from the vesting of their restricted stock.stock and restricted stock units. When we withhold these shares, we are required to remit to the appropriate taxing authorities the market price of the shares withheld, which could be deemed a purchase of shares by us on the date of withholding. For the three and six months ended June 30, 2020, 30,3982021, 7,136 shares were purchasedwithheld at an average price of $17.58$69.65 per share.
| | | | | | | | | | | | | | |
Exhibit Number | | Incorporated by reference into | | | | | | | | | | | | | | | Exhibit Number | | Incorporated by reference into this Quarterly Report on Form 10-Q | Date Filed or Furnished | Exhibit Description | Form | Exhibit No. | 2.1* | | Form 8-K (File No. 001-09720) | 2.1 | 4/8/2021 | 3.1 | | 10-K | 3.1 | 3/16/2021 | 3.2 | | 10-Q | 4.1 | 5/11/2020 | 10.1 | | Form 8-K (File No. 001-09720) | 10.1 | 4/8/2021 | 10.2* | | Form 8-K (File No. 001-09720) | 10.2 | 4/8/2021 | 10.3* | | Form 8-K (File No. 001-09720) | 10.3 | 4/8/2021 | 10.4 | | Form 8-K (File No. 001-09720) | 10.7 | 4/8/2021 | 10.5 | | S-8 (File No. 333-255214) | 99.1 | 4/13/2021 | 10.6 | | S-8 (File No. 333-255214) | 99.2 | 4/13/2021 | 10.7 | | S-8 (File No. 333-255214) | 99.3 | 4/13/2021 | 10.8 | | S-8 (File No. 333-255214) | 99.4 | 4/13/2021 | 10.9 | | S-8 (File No. 333-256915) | 99.5 | 6/9/2021 | 31.1 | | | | Filed herewith | 31.2 | | | | Filed herewith | 32.1 | | | | Furnished herewith | 32.2 | | | | Furnished herewith | 101.INS | XBRL Instance Document | | | Filed herewith | 101.SCH | XBRL Taxonomy Extension Schema Document | | | Filed herewith | 101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | | | Filed herewith | 101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | | | Filed herewith | 101.LAB | XBRL Taxonomy Extension Label Linkbase Document | | | Filed herewith | 101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | | | Filed herewith | 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) | | | Filed herewith |
* The schedules and exhibits to such agreement have been omitted pursuant to Item 601(a)(5) of Regulation S-K. this Quarterly Report on Form 10-Q
| | Date Filed or Furnished |
| Exhibit Description | Form | Exhibit No. | |
3(i) | | Form S-8 (File No.333-239230) | 4.1 | 6/17/2020 |
10.1 ††
| | Form S-8 (File No.333-239230) | 99.1 | 6/17/2020 |
10.2 ††
| |
| | Filed herewith |
10.3 ††
| | | | Filed herewith |
| | | | |
| | | | |
31.1 | | | | Filed herewith |
31.2 | | | | Filed herewith |
32.1 | | | | Furnished herewith |
32.2 | | | | Furnished herewith |
101.INS | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | | | Filed herewith |
101.SCH | Inline XBRL Taxonomy Extension Schema Document | | | Filed herewith |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | | | Filed herewith |
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | | | Filed herewith |
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | | | Filed herewith |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | | | Filed herewith |
104 | Cover Page Interactive Data File - the cover page from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2020 is formatted in Inline XBRL. | | | Filed herewith |
†† Indicates management contract or compensatory plan or arrangement.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| | | | | | | | |
| | PAR TECHNOLOGY CORPORATION |
| | (Registrant) |
| | |
Date: | August 7, 20209, 2021 | /s/ Bryan A. Menar |
| | Bryan A. Menar |
| | Chief Financial and Accounting Officer |
| | (Principal Financial and Accounting Officer) |