PAR Technology Corporation

Good afternoon, ladies and gentlemen, and welcome to the fiscal year 2020 third quarter financial results conference call. At this time, all participants are in listen-only mode. Later, we will conduct a question and answer session, and instructions will follow at that time. If anyone should require assistance during the conference, please press star zero on your touchtone telephone. As a reminder, this conference call is being recorded. I would like to turn the conference over to your host, Mr. Christopher Byrnes, Vice President of Business Development. Sir, you may begin.

Thank you, Sahara, and good morning, everyone. I'd also like to welcome you today to the call for PAR's 2020 Third Quarter Financial Results Review. The complete disclosure of our results can be found in our press release issued this morning, as well as in our related form 8-K Furnished to the SEC. To access the press release and the financial details, please see the Investor Relations and News section of our website at www.partec.com. I also want to be sure all participants today have access to our business review slide deck that we will use later in the call to better communicate the momentum in our software business. Individuals on the webcast should have access to the deck when they logged on to the call this morning. For those just dialing in on the conference call this morning, the presentation can be accessed on the investor page of our website, and we also included it as an attachment on the 8K we filed this morning. At this time, I'd like to take care of certain details in regards to the call today. Participants on today's call should be aware that we are recording the call this morning and it will be available for playback. Also, we are broadcasting the conference call via the World Wide Web, so please be advised if you ask a question, it will be included in both our live conference and any future use of the recording. I'd like to remind participants that this conference call includes forward-looking statements that reflect management's expectations based on currently available data. However, actual results are subject to future events and uncertainties. The information on this conference call related to projections or other forward-looking statements may be relied upon and subject to the safe harbor statement included in our earnings release this morning and in our annual and quarterly filings with the SEC. Joining me on the call today as part of CEO and President Savneet Singh, and Bryan Menar, PAR's Chief Financial Officer. I'd now like to turn the call over to Savneet for the formal remarks portion of the call, which will be followed by general Q&A. Savneet?

Thank you, Chris, and good morning to everyone on the call today. I hope you and your families are well and safe. As I communicated to you last quarter, the last several months have presented incredible challenges for our company and the global economy as a whole, and our thoughts go out to all those impacted by the global pandemic. Thank you for joining us. A notable highlight in our third quarter, and I want to mention it right at the top, was our more than $131 million equity offering that closed just this past week, a very important step for us that provides ample capacity to continue to drive our growth in the restaurant technology business. This offering was a milestone for us as it was our first straight equity offering since 1996. This capital raise provides us with liquidity and flexibility necessary to accelerate our growth initiatives, both through acquisition and specific internal investments. COVID-19 has shown the value of our current solutions, but also highlighted the dramatic need for a new product. We intend to be active in the M&A space as we continue to build out our software platform. We believe each additional product added will provide more incremental value to our customers, thereby making our platform stickier. Before Bryan gives details surrounding our Q3 numbers, I want to review with you our notable progress we've made in the software business. If you jump to slide three of the presentation, this is a snapshot of Brink's performance in Q3. I'm really pleased to report that we had 1,181 new store bookings in the quarter, a 45% improvement from the previous sequential quarter, and a 23% increase from Q3 last year. I think this metric, more than any other, truly demonstrates the momentum and velocity of our cloud point-of-sale offerings. Q3 Brink bookings were the most we've seen in all years and highlight how quickly enterprise restaurants are reacting to the COVID pandemic. Our customers have rushed to lock Brink in as they continue to address their operations to a technology-first world. As the slide shows, we reported ARR at $22.8 million, a 27% increase from the same quarter last year. As we accelerate activations coming out of Q3, we should continue to see an expansion in ARR. If you advance to slide 4, you can see that we have crossed the 11,000-store threshold with invoice stores, and our reported backlog at the end of Q3 was 1,977 stores yet to be installed. We installed 761 new brink stores in Q3, up 300 sites from Q2, and an 18% increase from Q3-19, a remarkable accomplishment during the pandemic. As our concepts continue to ease restrictions within their stores, we believe we'll be able to accelerate activations. This is all, of course, dependent on each concept's comfort and local geographic restrictions. On slide five, you can see the ARR waterfall of the last five quarters as we continue to grow ARR. I am proud of our incredibly low churn rate of 4.5% in Q3. This is the fourth consecutive quarter that our annualized churn rate is below 5%. It is a testament to the stickiness of our software offerings and the strength of our enterprise customers. Slide 6 shows the improvement in COVID-related churn and proves out the minimal impact that COVID has had on store closures in our TAM and the expiring strength of our customers. In Q3, 325 BRIN customers came back online from temporary churn. Not shown here, but important to note that Restaurant Magic also saw 174 customers come back online in Q3. Those metrics are very positive signs for our business. Slide 7 shows Restaurant Magic delivering a solid rebound from a challenging Q2 with bookings reported at 506, more than doubling the booking output in Q2. While Restaurant Magic was impacted more from temporary closures, the business has certainly started to come back. The average MRR for a new concept signed was $130, and ARR reported was $8.7 million, an 18% increase from the prior sequential quarter. This ARR figure includes waivers for temporary closed stores. Combined ARR with Brink and Restaurant Magic is now $31.5 million at the end of Q3. Slide 8 gives a current site count for Restaurant Magic with installed stores now totaling more than 5,700 restaurants as we went live with 600 new sites in Q3. On slide 9, we reported an approximate $3 million increase in Brink-related hardware revenues from the end of Q2. a 76% increase. We continue to see robust demand for the complete PAR solution and the capabilities it provides our customers. Our customers continue to rationalize vendors and we stand to benefit. Now to quickly review our product and hardware business in the quarter that is our point of sale platforms in the drive-thru communication assistance business. Product revenues in the quarter increased by 29% from Q3 2019 and recovered nicely with a 66% sequential increase from the COVID impact of Q2. As mentioned earlier, our integrated offerings and complete solutions continue to be adopted by our customers. I'm pleased to see the rebound in product sales from our Q2 number, and to deliver performance in a very challenged capital spend environment is nothing short of remarkable. Now to review our government segment. Our government business again delivered a solid quarter, evidenced by the nearly 13% increase in revenues compared to Q3-19. Our contract backlog at the end of Q2 was $162 million, increasing 25% in the last three months. Our Intel Solutions business was the driving force behind the growth in the quarter as ISR revenues increased 27% from last year's Q3. We continue to seek out contract opportunities where we can leverage our decades-long experience and performance excellence, specifically in value-added revenue contracts that include more direct labor and high-tech contract work within our Intel Solutions business line. Now some key takeaways on our company coming out of the quarter.

We've made fast progress implementing our strategic initiatives that will drive improved execution and accountability across our companies.

This is no more evident than our approach to the restaurant technology business that was previously siloed between our hardware and software business lines. Because of this segmenting, we cannot drive the benefits or best practices that clearly exist across our product portfolio, nor can we leverage customer insights and data across markets and products. We now have one business, the Restaurant Solutions Group, and are already benefiting from this sync-up. We have reorganized our brand marketing and marketing operations functions to deliver more impactful marketing plans utilizing common processes, technology, and data, and many more. and more effectively manage them year-round. Second, I'm excited to tell you that we recently released our transaction processing product, PAR Payment Services. PAR Payment, while still in beta, can become a large contributor to ARR growth in 2021. PAR Payment Services is an all-in-one payment processing solution. Restaurant operators have long been misled to sign opaque and complicated payment partnerships. PAR Payment Services was created to become the transparent and fair solution Our transaction services will give our operators the opportunity to take advantage of fantastic rates, a streamlined process, and the ability to offset hardware costs. Third, PAR's market position has never been stronger. While our incumbents focus on keeping their concepts, we work hard to expand ours. COVID-19 has dramatically increased our sales pipeline, and we expect this momentum to continue through 2021. While the virus may create hiccups, we believe the case has been made for our solutions. We are very far from our long-term goals, but we are seeing progress across all product lines. In summary, I have personally witnessed the strength of our restaurant customers and am confident that the portion of the restaurant technology we serve is strong and resilient during COVID. Our customers are forward-looking in their utilization of technology and are looking to drive efficiencies into their in-store operations. By fortune and by design, our concentration in quick service and fast casual restaurants has served us well as our customers have mature operating models, Strong brand recognition and financial backing to expand the incredibly difficult situation the pandemic has caused. Our customers are restaurants with multiple customer service points in counter service, drive-thru, and delivery. Many, if not all, of our customers have been able to return their business to almost pre-pandemic levels, and we are inspired by helping them navigate this difficult time. With our recent capital raise, we now have the currency to act quickly on strategic opportunities, specifically on acquisitions, and invest in organic growth as well. As always, I wish to thank all of our employees for their tireless work and dedication during such a challenging time, and we remain committed to the health and safety of our staff and customers. And with that, I'll turn the call over to Bryan for more details on Q3 numbers and then to take your questions.

Thank you, Savneet, and good morning, everyone. I would now like to take this opportunity to provide some additional details surrounding our third quarter results. We reported revenues of $54.8 million for the quarter, up 20.7%. and the $45.4 million reported for Q3 2019. Our net loss was $3.7 million or a $0.20 loss per share for the quarter versus a net loss of $5.9 million or a $0.36 loss per share for Q3 2019. Favorable year-over-year results from operations was driven by a 2.3% reduction in the earn-out liability associated with the Restaurant Magic acquisition and inorganic growth resulting from the drive-through and Restaurant Magic acquisitions, which absorbed our increased development technology costs associated with our restaurant retail segment software platforms and an increase in interest expense attributable to the 2026 notes. Restaurant retail segment revenues for the three months ended September 30, 2020, were $37.4 million, an increase of 25% from $29.8 million recorded for Q3 2019. The year-over-year increase was driven by inorganic growth resulting from drive-thru and Restaurant Magic acquisitions in addition to continued growth in our Brink business line. Restaurant retail revenue for Q3 2020 by business line consisted of $21 million for core, which included $5.7 million for drive-thru, $16.4 million for Brink, which included $2.2 million for Restaurant Magic. Restaurant retail revenue for Q3 2019 was $18.2 million for Core, $10.9 million for Brink, and $0.7 million for SureCheck. Government segment revenues for the three months ended September 30th, 2020 were $17.5 million, an increase of 13% from $15.5 million reported for Q3 2019, driven by continued growth in our ISR business line. Government revenues for Q3 2020 by business line consisted of $8.9 million for ISR, 8.1 million for mission systems and 0.5 million for product services compared to Q3 2019 revenue of 7.1 million for ISR and 8.4 million for mission systems. Product revenue for the quarter was 20.5 million, up 4.6 million or 29% compared to Q3 2019. The increase was driven by drive-thru sales and hardware sales related to brink installs. Product revenue related to Brent for the quarter ended September 30th, 2020 was $6.7 million, an increase of 31% from $5.1 million recorded for the quarter ended September 30th, 2019. Drive-through product revenue for the quarter ended September 30th, 2020 was $5.3 million. Service revenue for the quarter was $16.9 million, up $3 million, or 21.5% compared to Q3 2019. The increase was primarily due to the Restaurant Magic acquisition and growth in Brink recurring software revenues. Service revenue associated with Brink includes recurring software revenue of $5.6 million, an increase of 30% from $4.3 million for the quarter ended September 30, 2019. Restaurant Magic service revenue includes recurring software revenue of $2.2 million. Contract revenue from our government operating segment was $17.5 million, up $2 million were 21.5% as compared to Q3 2019. The favorable increase was driven by contracts entered into during the first half of 2020 relating to ISR. The contract backlog totaled $162 million as of September 30, 2020, and a trailing 12-month book-to-bill of 1X. In regards to gap margin performance for the quarter, product margin for the quarter was 21.9%. compared to 22.9% in Q3 2019. The reduction in product margins primarily due to unfavorable product mix. Service margin for the quarter was 33.3% compared to 32% in Q3 2019. The improvement in service margin was primarily due to a shift in mix that resulted from the restaurant magic acquisition. Government contract margin for the quarter was 9% compared to The increase in margin was primarily due to higher product service business line revenue and increased profitability across several contracts and mission systems compared to the quarter-ended September 30, 2019.

Now to operating expenses.

GAAP SG&A was $10.5 million, up $1 million versus Q3 2019. The increase was primarily driven by an additional $0.9 million of SG&A expense from recent Restaurant Magic and Drive-Thru acquisitions. Research and development expenses are $4.2 million, up $0.8 million versus Q3 2019, driven by increased investment in brink development of $1.5 million and $0.6 million for Restaurant Magic development, partially offset by the SureCheck divestiture and an increase in capitalization of developed technology. now to provide information on the company's cash flow and balance sheet position for the nine months ended September 30th, 2020. Cash use and operations is $14.4 million versus cash use of $9.9 million for the nine months ended September 30th, 2019. The variance was driven by an increase in strategic procurement of inventory and a decrease in customer deposits. Inventory levels were strategically increased earlier in the year to support the rollout of projects for Brink and to mitigate potential risk of supply chain disruption due to COVID-19 pandemic. Cash used in investing activities was 6.9 million for the nine months ended September 30th, 2020, versus cash used of 11.6 million for the nine months ended September 30th, 2019. During the nine months ended September 30th, 2020, we capitalized 6.4 million for developed technology costs associated with the restaurant retail segment software platforms. compared to 2.3 million for the same period in 2019. Non-software CapEx costs for the nine months ended September 30, 2020 were down 8.9 million versus 2019 as the nine months ended September 30, 2019 included a $7 million investment for the drive-through acquisition and also costs associated with IT infrastructure. Cash provided by financing activities for the continuing operations is 48.7 million for the nine months ended September 30, 2020 versus $65 million for the same period in 2019. The nine months ended September 30, 2020 included the $120 million issuance of the 2026 notes, partially offset by the repurchase of the majority of the 2024 notes. The nine months ended September 30, 2019 included the $80 million issuance of the 2024 notes. As of September 30, 2020, the inventory balance was $27.1 million, an increase of $7.8 million from December 31, 2019. Inventory returns were 3x for domestic and international operations. Accounts receivable of $40.1 million decreased $1.7 million compared to December 31, 2019. Receivable balance is broken down between the government segment of $7.9 million and the restaurant retail segment of $32.2 million. I will now turn the call back to the operator for Q&A.

Ladies and gentlemen, if you have a question at this time, please press the star and then the number one key on your touch-tone telephone. If your question has been answered or you wish to remove yourself from the queue, please press the pound key. Again, ladies and gentlemen, if you have a question at this time, please press the star and then the number one key on your touch-tone telephone. Your first question comes from the line of Samad Samana from Jeffreys. You may ask your question.

Hi, good morning. Thanks for taking my questions. Good to see the solid trends continue in a tough environment. Savneet, maybe first question just on Brink. Bookings was, again, better than our expectations. I know that this time last year the company talked about maybe 1,000 plus units per quarter. I know that there's still a lot of uncertainty, but how should we think about maybe what's been driving some of that strong bookings performance? And do you think that the new run rate going forward can be above that 1,000 level as the world normalizes? Maybe just a little comment there.

Good question. So I think the growth in bookings is – Partially tied to us getting our product in order and a lot of the investments we made over the last 12 to 16 months where we dramatically increased R&D efforts to retool our product. In many ways, we are servicing the demand that's existed. When I came to the company, we cut down our sales growth almost by half the focus on product. In many ways, we're getting the benefit of having held off on taking some of that demand and focusing on product. The second part of it is very clear, which is COVID. COVID has absolutely made an impact on our customers. First, those customers that we've already signed that are still rolling out have accelerated their desires to book with us. And then second, potentially new customers. So I think it's twofold. One is us starting to be more agile and get in front of things as opposed to holding off on sales. And then two, it's COVID. As far as what a new potential run rate could be, Thank you very much.

You know, I know that we're over a year into the 3M acquisition and the Restaurant Magic acquisition. And I guess, you know, one of the things I wonder is 3M, I think, brought you some larger logos. Any proof points on maybe being able to capture any customers within that installed base? And then same question on the Restaurant Magic side, maybe how's the cross-selling machine working?

Sure. Sure. So I think the cross-line machine is working extremely well on the restaurant magic side, more so because that's a software product that we can bundle or quickly add on to new customers. When a restaurant is upgrading its point of sale, it tends to look to upgrade many other aspects of its restaurant, sort of saying, hey, if we're going to upgrade the biggest and most important product, we might as well take this time to upgrade other products. And so we've seen tremendous pipeline synergy there. by bringing Restaurant Magic into the Brink sales process. And as I mentioned in my remarks, as we continue to sort of come under one roof and move silos between organizations, I think that will continue. And you'll see that happen for a long time. So we're seeing really, really strong. I would suspect well over 50% of the pipeline and probably bookings of Restaurant Magic are a direct result of the Brink sales team. And so I think the synergy there is really clear. which also gives us a lot of confidence to look at other acquisitions and follow the same playbook. On the drive-through side, I think we are still – I would say we've seen great synergy from customers that we had signed on different sides of the fence. So if we had signed a large logo on our Point of Sale hardware business, we would quickly get the drive-through business approved over there to cross-sell. Vice versa, it's a little bit harder, and so I think what we've seen is we've seen absolutely the pipeline grow through the addition of resellers that sell other products plus logos that we have on the hardware side but it's not nearly as strong as the restaurant magic side basically primarily because we can almost staple on the back office product at this time of sale whereas the drive-thru process is less of an RFP process and more of a consumable business.

Great and maybe just one last one for me before I turn it over to my peers but Just on payments, I know it's early days, but, you know, we've been asked a lot by investors how we think about what the economics of that looks like. So if you could just maybe dig into how we compare, you know, we see the published rates for some of your peers or your competitors. So maybe just help us understand what PAR's economic opportunity there is. And then realistically, what percentage of the base do you think may one day want to use PAR for payments to you?

So I think the way that we've modeled it so far is if you sort of take what could be an average cross-section of customers, I believe it will double the ARPU of that client. So as we are in the enterprise, it's not so much a basis point discussion. We're not charging 3%, and we're not getting charged 2.5% and marking up 3%. In the enterprise, it's a per-transaction basis, which is pretty standard in our area. and so if we look at the average cross-section of a customer based on volume, size and concept, it's about doubling, a little more than doubling our ARPU. So if the average ARPU today is $2,000 to $2,100, I think we'll double it for a concept that takes on payments. So I think that's the simplest way of thinking about what we can drive from it and obviously very nice margin coming off of that. As far as what percentage of our base, I think we are still figuring that out. It wouldn't surprise me if it's Thank you for joining us. The ability to offset that capital expense of hardware is important in a world like today. And so I think we'll have a little bit of data after Q4. We'll have a lot of data after Q1. And we can probably give you some attachment rates on new bookings and then an attachment rate on, you know, already installed source.

Great. Thanks for taking all my questions and hope all of you are well and great to see the good results. Thank you. Thanks, Matt.

Again, ladies and gentlemen, if you have questions at this time, please press star and then the number one key on your touchdown telephone. Your next question comes from the line of George Sutton from Craig Hallam. Your line is open.

Good morning. This is Adam on for George. Thanks for taking our questions. Savneet, I found it particularly interesting your statement in the script while incumbents focus on keeping their concepts, we're focused on keeping ours. I was hoping you could provide a little more detail in terms of what you're seeing from the incumbents and how the end market is reacting to those moves.

Sure. So I think what we're seeing from incumbents is a lot of what we expected. They have very big established and slow-moving products that are incredibly hard to move. Now, these are good, stable, high-quality products, but they are tough products to convert to become agile and cloud-enabled. And so what we've seen are a couple things. One, we've seen a lot of branding. Hey, we've got a cloud product, too. It's really great. Oftentimes, we think that is a masking of actually what's in the product because, again, like I said, moving such an enormous product that's got 20 years of code in it to a modern architecture is very, very hard. And so we see a lot of masking. The second thing we see is that a lot of the entrenchment with the existing customers is trying to come at price. And what we've noticed is that if an incumbent feels like they're at risk, the first thing they do is cut price. Now, we have not actually seen that work in most of the large concepts we've gone to. And in fact, I think it highlights the quality of our product. So those are the two things we see how the incumbents are reacting. Outside of that, we see some incumbents thinking about things of saying, hey, let me go buy up channel partners as a way to stay fresh in the market. Others, I think, are looking at saying how they can bundle payments to keep the customer sticky. But in general, I don't see a tremendous investment into product, and that's what would scare me most. In the end, a product-led company will win because in a world where technology is a driving force of change, you need great product. And I think that's the lead that we hope to expand and build on.

Great. And in terms of the beta test for par payments, is there any feedback you could share with us from what you've heard from customers so far?

It's very early. I mean, we're three or four weeks into the first customer, maybe a little more than that. And so the first set of stores has gone great. I think it's sort of proven out our belief that we can execute on this business and get it out there. And now we're sort of refining the sales motion. We'll expand the beta and expand the beta. but it's probably, it's just way too early given how small the sample set is.

And then last question from me, I know you've spent a lot of time in terms of trying to be thoughtful in how you build out the sales organization. Any detail around exactly what you think you're going to be doing that's going to make a large impact would be helpful.

Sure, so the first thing is we are using one sales force to sell our products and I think What we've seen, you know, clearly from the data I just gave on Restaurant Magic and elsewhere, that we believe there's going to be great synergy there because now our customers have one point of contact instead of three or four. And our ability to make deals is far improved because you don't have to go to four different people to figure out what you should price a bundle or a product at. And so the first thing is, I think, coming with that one voice under what we call one part. The second thing we've done is dramatically changed our brand marketing. And I think, I guess, as the investment community, you'll start to see that in the next, and a few weeks or months here as we completely redo PAR's branding externally. That branding has done, I think, a lot with our customers to change how they perceive us, how they look at us. And so we tool our brand messaging, our brand promise, and I think thinking of PAR as a software-first company has done a lot. Third is around how we compensate and train our team. We take, you know, HR really serious, but we do it in a very data-driven way. Every sales employee, every employee is marked on all sorts of attributes and we look to really reward top performers and really encourage that behavior. We spend a lot of time thinking about how compensation can create the right behaviors across the organization. Last is, I think COVID has allowed us to acquire some great talent that fell out of a job in the heat of COVID that we think was great talent. We picked up some talent that You know, I think ahead of schedule, which we're seeing the benefits of.

Again, ladies and gentlemen, if you have questions at this time, please press star and then the number one key on your touchstone telephone. Your next question comes from the line of Adam Whedon from ADW Capital. Your line is open.

Hey, guys. I think I've been waiting three years for a quarter like this. I didn't think I'd get it in the middle of a global pandemic, but I'm not surprised. You know, when you study businesses, you know, it... Businesses tend to take off when they're satisfying the need and clearly this is a need and your hardware sales are clearly there and people are buying hardware and they recognize they need it to stay fit and they clearly need SaaS and that's reflected in your booking. So just a couple questions here. On the deal front, you know, you guys raised all this money. You just saw Lightspeed take a huge bite. They bought something for, God knows, $400 million or something like that. And it was $150 in cash and a significant amount in stock. And it certainly moved the needle. And that's certainly not the last deal they've, you know, the first deal they've done. They've done a number of other deals. How do you think about kind of the universe of deals, pricing, and what they can do to the business? Because to me, it kind of feels like, you know, when you run the math on bookings, you're kind of getting close to $40 million in ARR end of the year. And there's some pretty chunky assets out there. There's Punch. There's Compete. There's a lot of stuff in Loyalty where, you know, these are nice businesses, but they don't have the gravitas or the brand that you guys have to land a Dairy Queen or a Dunkin'. It almost kind of feels like the marriage you had with Restaurant Magic is the template and a marriage with like a punch or a computer or something larger that's 30, 40 million an hour where you can do the same thing you did, which is take their business, take their technology and plug in your sales team and relationships and brand. to kind of, you know, take this thing to the next level. Can you talk a little bit about pricing, types of targets, you know, order of magnitude types of deals you're looking? Because with 150 cash, you might be able to take down something, you know, equal to Brink Restaurant Magic.

Sure. Let me first actually take it from a different angle, which is product. I think we look at our first lens is product, which is, you know, by adding on a new product, are we creating something better for the customer? I think that that's where we start because in the end, you know, we could potentially engineer an M&A transaction, but if it doesn't drive value to the customer from a product perspective, it'll give a short-term, short-term, short-term will feel good, long-term will feel pain. I think the product part of it excites us the most. There's no doubt that restaurants have made technology their priority going forward and this pandemic just accelerated that to levels we didn't expect for a couple of years. and so when I think about it, I think about what are the products that we have that accelerate that future? How do we make every restaurant like an Amazon Go store? How do we make every restaurant feel like the technology is ambient and just in the background such that you can build that connection between you and your guest? And so as we think about things like online ordering, loyalty, I think over time they all become one and I think we want to be at the forefront of that. And so we first look at it from a product perspective. Hey, does this product actually create that value to that customer? Is it building that platform we talked about? that gives the guest the experience and the customer the experience, and in the end makes us have a very sticky, high-quality product. Second, to your point, absolutely, I think the transactions we've done have highlighted that there is great synergy in acquiring something and selling it to the same vertical. We've seen that happen twice now, and I think it's given us a lot of confidence we could do it again and prove to our customers that this makes sense. And so absolutely, we feel encouraged to that, and partly that's why we did our equity offering was to support that initiative because we've seen it work twice now. And then lastly, I think from a business market perspective, I think we can make a deal creative for shareholders but really build that vertical SaaS company for the hospitality industry. I don't think anyone has done that quite yet, and so we're looking for those assets that give us that product edge that I talked about but also add to our growth, add to our product initiative, and financially make us hopefully more attractive.

Yeah, I mean, look, from our perspective, you guys are basically on the precipice. I mean, when I look at your size and scale, if you guys are close to 40 at the end of this year and you grow another 50 to 100 next year, kind of next year you're looking at something that looks like 60 to 80 and probably without payments. You know, payments gets, you know, it's upside. But, like, you get over $100 million in ARR. I mean, this, you know, the peer group in that kind of ARR threshold are trading with your level of moat and your level of product differentiation are trading 30 times revenue. I mean, this is a $3 billion company next year potentially. and that's without a deal. So, I mean, with the deal, I think you really are kind of at the point now where you've got, you know, you could have the scale to really be a vertical, you know, kind of a true best-in-class vertical SaaS player in the restaurant space because it looks like, at least with Lightspeed, they're acquiring companies, but they're not, they don't really have a vertical, right? It's a little bit of restaurant, a little bit of retail, a little bit of CRM, but it's kind of flying around, whereas you know in the restaurant space specifically QSR there's so much there's so much wallet share that can that can belong and I think when I look at some of these smaller players they don't have 40 years of serving these customers they're not going to land the Dunkin Donuts they could land 100 or 200 unit customer but they're not going to land a 14,000 and you know the combination of our expertise with customer service and hardware and then you know bring you know it it it uh you know to us it's super exciting as it relates to building the mode of the business so I'm very excited about the deal component of this business. You know going back to Samad's question on you know kind of install cadence you know when we first got involved in this company you know Karen Salmon was talking about 2,500 units a quarter now we both know that there was significant tech debt and that you know they we were kind of slapping things together and it wasn't you know a recipe for for kind of long-term success. So we took the short-term pain to kind of resolve our R&D issues and capital issues and give customers what they want. Now, when I think about it, we're kind of two years, you know, kind of, you know, when I say, you know, pre-Savneet, post-Savneet, we're kind of two years into post-Savneet, and obviously we're starting to see the real traction, which is super exciting. But when I think about, you know, the capital, the ARR base, the successful acquisitions, I mean, is there any reason why, like, at some point next year we can't see that 2,500 unit quarter? I mean, we got bookings at 1,200, and from what I understand, you know, some chains are still not letting us even in. So, I mean, is it unrealistic to think that, you know, we could get to the 2,000, 2,500 number at some point next year, especially considering the vaccine is going to be here in the next kind of four to six weeks, hopefully?

Yeah. You know, I don't know. I think the trajectory is that way. I think we see these bookings accelerating nicely. But, you know, as you said, if the vaccine is here and the concern around COVID subsides, I absolutely feel there's a chance we can make that happen. You know, with the vaccine, I think it'll probably take us a little bit longer because there's no doubt that, you know, we feel the direct result. But in the end, I think that we are well on the path to getting to those numbers. And like I said on the call, A lot of the growth is COVID, but it's also because we had held back on our sales and marketing initiatives. We haven't added to our sales force until the last quarter or two. In the two years you referenced, our sales head count has been down, not up, yet we've continued to grow nicely. As we pull on the marketing lever, I think it seems very feasible we can stretch our numbers.

It was also an R&D and integration bottleneck, too. We had to deploy our old engineers to basically become agile and basically do, I forget what the things called, I'm forgetting, my mind's blanking, but we basically had to repair the infrastructure so we could do updates more quickly. And so now that we're kind of on the tail end of that, we have the R&D resources, too, to kind of integrate multiple chains at the same time, which we weren't before, right? I mean, that's that's a major change as well. The reality of this isn't a sales driven culture. The sales are being driven by the fact that we have the brand. No one else is integrating and Enterprise successfully. So, I mean, the reality is we don't need, you know, a 10,000 unit sales force on the street, you know, giving people free hockey tickets because there's only one place to go. We just have to have, you know, the resources to do it, right? I mean, this is less about sales and more about, you know, having the engineering resources to basically support all the different chains at the same time, right?

Yeah, absolutely. I mean, engineering is where our spend is gone and will continue to go. It's where we were, you know, we made a lot of, and many more, you know, shortcuts that we have to pay the price for. And as we come out of that and continue to invest, it builds our moat because, as I mentioned, I think our market position has never been stronger because we're not competing against, you know, Silicon Valley. And, you know, there's no arrogance and hubris, but we're competing against, you know, the old version of Silicon Valley. And I think that's just a great space for us to be. And if we can continue that investment in product and R&D, that moat increases, you because we're not, again, we're not competing against the next Stanford grad to disrupt us. And so I think as we can, we'll continue to make that product investment. But into your point, absolutely us becoming agile and starting to get product out the door has changed the tone with our customers and our potential future customers.

Right, it's a nice balance because basically the CTOs and a lot of the people that are doing technology, it's a long sales cycle. They want to get to know the technology. They want to do business with someone like Brink or Parr, but unlike Microsoft or Aloha, we have the product. So we basically marry the customer service and hardware culture with the product, which to me is an excellent recipe. So it's super exciting. I mean, I think I'm happy I waited three years because I think the best is yet to come. Last question. So I'm not sure if you saw the press release about Checkmate, but Inspired Brands made an investment in Checkmate, which is an online ordering platform that we integrate with. And it looks like they're going to be implementing in Arby's, Sonic, Jimmy John's, and basically all of the Inspired Brands. and so that's interesting because that's a fledgling little company that doesn't have a lot of kind of resources at least compared to Brink. I mean it's a great technology and obviously we'll share in that revenue share so that should be lucrative to us but I mean now you're seeing Rourke buying Dunkin'. I mean, can you talk a little bit about, you know, and not to mention, in order to use Checkmate, you need to have cloud software. I'm not sure that Sonic and Jimmy Johns are on the cloud yet. Can you talk a little bit about Sonic, Jimmy Johns, the prospect for Duncan maybe down the road? Because, you know, this partnership with RORC is pretty nice. I mean, we've got Arby's, we've got CKE, I mean... We're working towards hopefully getting some of those other brands. Can you talk a little bit about the prospects there? Because I think that's a partnership that we've been working on for many years and there's some pretty big logos there.

We can't comment on potential future logos. I can't really comment on it too much. All I can say is our ability to execute for the customers we have allows us to expand our footprint within these customers. As we continue to get better There's no reason for that not to happen because I think any multi-brand operator would suggest that having one technology stack to manage their operations is better than two, better than three, better than four, better than five. And so we can execute on the promises we've given. There's no reason we can't expand our footprint. And to me, it's just a matter of when, not if, and all predicated on our ability to execute.

Yeah, I mean, I think what's most interesting to us, and, you know, I think someone sent us a picture or something that looks like you guys might even be piloting with Taco Bell on Brinker Restaurant Magic. So I think someone saw the hardware there. So that's super exciting on our front. I mean, what's interesting to us is that, like, normally in a normal competitive landscape, right, there's someone else, right? It's like you can buy a Mac, you can buy a PC. I mean, there really isn't a real – another – and many more. To me, it's really exciting to be in business with the company that is the only one integrating. It's not for lack of dollars. Toast has spent tons of dollars on enterprise. I don't know what Mike Gross and NCR are doing, but it's certainly not for lack of dollars. It's really great to have a product that is in a league of its own.

Great quarter.

It's been a bumpy journey, but I think that the The trajectory is up and to the right from here, so I appreciate all your hard work, and I'll get back in the queue. Thanks, Adam.

I am showing the further question at this time. I would now like to turn the conference back to CEO Savneet Singh.

Thanks, everybody, for joining. We look forward to updating you on our Q4 results in a few months.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation and have a wonderful day. You may all disconnect.