PAR Technology Corporation

Ladies and gentlemen, thank you for standing by, and welcome to the PAR Technology 2020 Fourth Quarter and Year-End Financial Results Review Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question at that time, please press star then 1 on your touch-tone telephone. As a reminder, today's conference call is being recorded. I would now turn the conference over to your host, Mr. Chris Burns, Vice President of Business Development. Sir, you may begin.

Thank you, Valerie, and good afternoon to everyone. I'd also like to welcome you today to the call for PAR's 2020 fourth quarter and year-end financial results review. The complete disclosure of our results can be found in our press release issued this afternoon, as well as in our related Form 8K 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.partech.com. I also want to ensure that all participants today have access to our earnings presentation and 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 afternoon. For those just dialing in on the conference call, 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 afternoon. At this time, I'd like to take care of certain details in regards to the call today. Participants on the call should be aware that we are recording the call this afternoon, 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 also 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 afternoon and in our annual and quarterly filings with the SEC. Joining me on the call today is PAR's 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 afternoon to everyone on the call today. I hope you and your families are well and healthy during these challenging times. As I communicated to you last quarter, 2020 presented incredible challenges for our company and the global economy as a whole, and I've thought about all those impacted by the global pandemic. As I look back on 2020, I feel humbled at how hard our team worked to not only deliver our plan, but serve our customers. Our focus on long-term return, customer obsession, and product development helped us end the year on a high note. We ended 2020 with the best bookings quarter in the company's history, continuing the strong momentum from Q3. We entered a year with the largest backlog in our history, which should set the foundation for a very strong 2021. This rapid growth has encouraged us to continue to invest heavily into our product, and for the first time in my tenure, make investments in sales and marketing. While the year presented a myriad of challenges, we view many of these challenges as creating opportunities that PAR is well positioned to take advantage of. Our financial position is stronger than it was a year ago, with more than $180 million in cash on our balance sheet at year end. While we'll touch on the financials a bit later, I want to highlight up front on our EBITDA performance in 2020. As many of you know, capital allocation is a discipline at PAR owned by all. During the crisis, we radically changed our spend, deciding to focus almost all of our investment into our software product growth. This drove our results later in the year. The early-on struggles of the pandemic, the almost full shutdown of our business for seven weeks, and our continued investment into R&D investment in software, our reported EBITDA came in at around a loss of $13 million, a remarkable feat when you realize that 2020 represented the most difficult operating period for restaurants in history. Our company tightened our belts early on and positioned the company to reduce cash burn without sacrificing the ability to accelerate our strategic investments regarding products and people. Our client base is large and diverse, with thousands of restaurants around the globe using PAR products and services. That customer base represents our greatest asset for both future sales opportunities and the dependable revenue stream it currently produces. Restaurants are living through a dramatic change in their operating and business models. Technology will be at the center of that change. We are building at PAR the platform to lean into this change. There is no question that the volume of software purchased by restaurants will grow tremendously over the next decades. Now to briefly review the fourth quarter reported numbers before Bryan gives further detail. In Q4, we reported revenues of $58.5 million, an increase of 10.6% when compared to Q4 2019. We saw revenue growth across all of our segments. Today, we also reported a gap net loss of $13 million, or $0.60 per share, compared to a gap net loss of $5.8 million, or $0.35 per share, in the same period in 2019. On an adjusted basis, non-GAAP net loss for the fourth quarter of 2020 was $8 million or $0.37 per share, compared to a GAAP net loss of $3.8 million or $0.23 per share in the same period in 2019. Now moving to our business performance. If you jump to slide three of the presentation, you'll see a snapshot of Brinks' performance in Q4. I'm very pleased to report that we had a record 1,525 new store bookings in the quarter, a 67% improvement from Q4 in 2019, and a 29% increase in the sequential Q3. I think this metric, more than any other, truly demonstrates momentum and velocity of our cloud point of sale software offering. Q4 Brink bookings were the highest number of signed orders in a quarter in our history and highlights the dramatic demand for the Brink product. As the slide shows, we reported ARR 24.7 million, a 29% increase from the same quarter last year. As the pandemic continues to slow down, we expect to see an acceleration in our activations as stores begin to open and normalize to our traditional activation pace. Said differently, as stores open, our ARR should accelerate alongside our bookings. If you advance the slide forward, you can see that we now have 11,722 active stores and our reported backlog at the end of Q4 was 2,546 stores yet to be installed. Entering 2021 with over 2,500 stores in signed backlog sets the foundation for a very strong year. Again, as our customers begin to open, we'll see an acceleration in activations that should help bring this backlog down. We installed 885 new bring stores in Q4, a 42% increase from Q4 2019, a remarkable accomplishment during the pandemic. We'll continue to work with our customers regarding implementation schedules along with the enhanced in-store safety protocols to ensure our book-to-bill sequence is as seamless as possible. On slide five, you can see AR waterfall over the last five quarters as we continue to grow ARR. I'm proud of our consistently annualized low churn rate of 5% in Q4. This is the fifth consecutive quarter that our annual churn rate has been at or below 5% and is a testament to the stickiness of our software offerings and the strength of our enterprise customers. To date, we have yet to lose a customer exceeding 50 stores. 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 inspiring strength of our customers. In Q4, COVID-related churn was at a low of 3% of our overall base, and we will continue to work and assist these affected customers to get back online and open their stores. These metrics are very positive signs for our business. Slide 7 shows restaurant magic being impacted in the quarter due to the pandemic, and the spike of infections in Q4. Bookings reported in the quarter were 146 and ARR was reported $8.8 million. Combined ARR with Brink and Restaurant Magic is now $33.5 million at the end of Q4. Slide 8 gives a current site count for Restaurant Magic with install stores now totaling 5,900. On slide 9, we reported an approximate $1.5 million increase in Brink-related hardware revenues from the end of Q4 last year, a 22% increase. We continue to see robust demand for the complete PAR solution of Software, Hardware, and Services and the capabilities it provides our customers. We're encouraged by our continued strong performance and look to expand our market share consistently. Now to quickly review our product and hardware business in the quarter that is our point of sale platform and drive through communications business. Product revenues in the quarter increased by 8% from Q4 2019 and has been performing well during a very difficult COVID environment. As I briefly mentioned earlier, our integrated offerings and complete solution continues to be adopted by customers. I am pleased to see the performance in product sales from our Q4 number and to deliver this performance in a very challenged capital-spend environment is nothing short of remarkable. Now to review our government segment. Our government business delivered a solid quarter, evidenced by the 6.5% increase in revenues compared to Q4 2019. Our contract backlog at the end of Q4 was $151 million as of December 31, 2020. Our Intel Solutions business was the driving force behind the growth in the quarter, as ISR revenues increased 12% from last year's Q4. We continue to seek out contract opportunities where we can leverage our decades-long experience and our performance excellence, specifically in value-added revenue contracts that include more direct labor and high-tech contract work within our ISR business line. Now some takeaways on our company coming out of 2020. Restaurants are looking for a platform to handle the rapid growth and digital transformation. Today, restaurants suffer from dozens of different and disparate products, siloed and locking the modularity to make the solution work. We are building that connected platform. Par Payment Services, our new all-in-one payment processing solution, continues to be introduced in the marketplace. Although we are very early in this initiative, I'm confident over time this will be a long-term driver of revenue growth for our company. Par Payment Services will give our operators the opportunity to take advantage of fantastic rates, a streamlined process, and the ability to offset harbor costs. With our strength and balance sheet, we intend to be active in the M&A space as we continue to build out our software platform. All our focus is on adding additional software products that are feature function rich and will allow us to increase our subscription rates and make us stickier with the customers. In an average month, the Brink API is pinged almost 500 million times. This rich data set gives PAR a unique angle to valued partners and future acquisitions. To recap, the last two years have been a consistent period of change for PAR. Our team, our business, our products, and most importantly, our culture have changed dramatically. We have withstood a global pandemic, acquired new businesses, invested in our products, and have pushed our boundaries further than ever before. We've added hundreds of talented employees, which has created an energized environment and built on our storied history. I now feel strongly our company is ready to set the stage and define what the restaurant of the future will look, sound, and feel like. For too long, technology has been a zero-sum game for restaurants, creating a wedge between them and their guests. We're confident the changes we made at PAR set the foundation to bridge that gap. As always, I'd like to thank our PAR employees, partners, and customers for their commitment to our business and hard work in helping us achieve such extraordinary success during these challenging times of the pandemic. And with that, I'll turn the call over to Bryan for more details on the Q4 numbers and then take your questions. Bryan?