PAR Technology Corporation

Hello, good day. This is your conference operator speaking. Today's conference is scheduled to begin momentarily. Until that time, your lines will again be placed on hold. Again, this is your conference operator. Today's conference is scheduled to begin momentarily. Until that time, your lines will again be placed on hold. Thank you for your patience. Thank you. Good day and thank you for standing by. Welcome to the Power Technology Fiscal Year 2021 Second Quarter Financial Results Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star then the number one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to your first speaker for today, Mr. Chris Burns, Vice President of Business Development. Please go ahead.

Thank you, RJ, and good afternoon. I'd also like to welcome you today to the call for PAR's 2021 Second Quarter 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. 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 this call this afternoon and 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, They'll 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 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 Brian Minar, 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?

Thanks, Chris, and good afternoon, everyone, and thank you for joining our call today. To begin, I first want to welcome the Punch team and shareholders to par. Together, our firms are working quickly towards building a unified commerce platform. I'm pleased to report on our continued progress in this quarter as we reported sequential and strong year-over-year growth in our business and see strong momentum within our bring business lines early in Q3. First, to update you on the Punch acquisition and our success in the first three months post-closing, and we'll move on to review the quarter's results. As you know, we completed the acquisition of Punch during the second quarter on April 8th. With a purchase price of approximately $500 million, plus the assumption of stock-based compensation, Punch was by far our largest acquisition to date. Punch is a leading provider of loyalty and customer experience solutions that serves approximately 40 of the largest 100 restaurant companies. We believe that the combination of Punch and PAR provides tremendous opportunities for incremental growth in both business lines. The combined... is a market leader in providing a unified commerce cloud platform for large enterprise restaurants. We plan to use Punch's technology suite to expand our customer reach. We also have an opportunity to leverage Punch's strong brand and customer relationships to deliver the par platform at the enterprise level for restaurants. We discussed our vision for those opportunities on our investor call in early May. I'm pleased with the progress we've made towards the initial objectives in the three months that Punch has been a part of PAR. Our teams have prioritized our opportunities and are very engaged, working well together in a regular cadence. Our pre-acquisition impressions regarding the dependability of the backlog came true, and the high degree of compatibility between the cultures of the two organizations has thus far proven to be accurate. Our product teams have begun to work together, and we are excited as we learn more about each company's strengths and how complementary they are. We'll quickly be on combined roadmaps, combining guest, transaction, payment, and back-office. The goal is to deliver a platform to our customers that can run their restaurant, but also give our customers control over their destiny. They can build on top, configure, or integrate on top of. While restaurant technology has proliferated tremendously over the last few years, most restaurant companies have yet to truly mark a win in their technological journey. Said differently, while restaurant technology companies have won, the restaurant operator has not. We aim to change that. Together, Punch and the entire PAR platform can now provide the most expansive set of capabilities for enterprise restaurants. As a result of those capabilities, we saw demand for our platform offerings grow. As I cited earlier, restaurants are in the midst of a remarkable bounce back of their business from the hardships caused by the COVID pandemic. Many of PAR's restaurant customers are experiencing record growth in same-store sales, foot traffic, and average ticket price. These conditions provide an environment of investment for restaurant and technology at the top of that list. Now to briefly review the second quarter reported numbers before Brian gives further details. In Q2, we reported revenues of $69 million, a 51% increase from one year ago. Today, we also reported a gap net loss of $10 million, or $0.39 loss per share, compared to a gap net loss of $9 million, or $0.29 loss per share from the same period in 2020. On an adjusted basis, non-gap net loss for the second quarter of 2021 was $9.2 million, or $0.36 loss per share compared to a non-GAAP net loss of $4 million or $0.21 loss per share for the same period in 2020. Now moving to our business performance. We reported ARR of $76.7 million, a 166% increase aided by the acquisition of Punch. The growth is led by Punch and Brink, with Data Central still in a period of recovery. Adjusting for Punch's Q2 2020 contribution, the combined ARR growth would be around 42.5%. The underlying growth at Punch in Q2 continued the strong momentum we saw in Q1. Brink growth this quarter was notable as we activated 1,099 new stores this quarter, solid performance in the face of several challenges in the hardware supply chain. More important, though, is the velocity of activations in Brink exiting Q2 that should lay the foundation for strong ARR growth through the second half of the year. We're seeing record activations and expect and hope that to continue. In Q2, we reported brink ARR of $27.6 million, a 29% increase from Q2 2020. This growth came from improved activation, and as I mentioned earlier, the exit velocity was very strong. At the end of Q2, we now have 13,234 active stores, and our reported open order backlog number within the second quarter was over 3,100 stores yet to be installed. Brink bookings for Q2 came in at 1,012, a 24% increase from Q2 2020. Bookings are a signed purchase order and continue to be a significant KPR for our company that demonstrates the velocity of our business. It's important to point out this metric is not totally linear from quarter to quarter as order patterns from customer to customer vary, but our pipeline is deep not only with signed customers but also new customers as well. While lower than the number reported in Q1, I'm very confident in our pipeline. Turning to Punch. Their contribution to Q2 results is as of April 8th, and as expected, they did not disappoint. Our Punch product line added 2,774 new live sites in Q2 and now has a total of nearly 48,400 sites at the end of June, a 56% increase in live sites over the last 12 months. Punch's ARR at the end of Q2 was reported at $40.3 million, a 61% year-over-year increase and a 4.4 million increase since just the end of Q1. Contracted ARR at the end of Q2 totaled $16.5 million, a significant number that proves the value and demand for loyalty and customer experience by restaurants. We're extremely pleased and fortunate to have added this industry leader to the PAR platform. Data Central, our back-office software acquired in the Restaurant Magic transaction, saw improved bookings in the quarter at 346, a 67% increase from last year's Q2, and ARR reported at 8.8. Combined ARR with Brink and Restaurant Magic is now $36.4 million at the end of Q2. As I mentioned last quarter, we continue to see some near-term weakness in demand for non-customer-facing technology in restaurants. I'm encouraged by the bookings improvement within Data Central and expect more normal bookings pace as 2021 progresses. And similar to our expected growth in Brink activations for the back half, we expect Data Central to also improve as 2021 plays out. Now to quickly review our product business in the quarter, that is our point-of-sale hardware and drive-through communication systems business. Product revenues in the quarter improved dramatically from the COVID-impacted Q2 2020 quarter. Product sales were reported at $23.9 million in this recently ended quarter, a 94% increase. As we are seeing favorable impact of vaccine rollouts and improving capital purchase environment for restaurants, we will continue to see higher sales throughout 2021. Important to note, the current industry-wide challenges such as supply chain constraints, price inflation, and significant increases to freight and logistic costs require ongoing management and vigilance. We've experienced a margin impact with the cost associated with the current supply chain realities, including dramatic growth in shipping charges. To mitigate this pain, we've put through price increases and other addressable actions and are already seeing margin improvements in Q3, which I hope to continue to Q4. While we don't know how long supply chain challenges will exist, our customers have stayed committed to us and allowed us to pass on parts of this challenge to them. Now to review our government segment. Our government business reported revenues of $17.8 million. a minor decrease of 1% when compared to Q2 of last year. Our contract backlog at the end of Q2 was $141.6 million. We continue to seek out contract opportunities where we can leverage our decades-long experience with performance excellence, specifically in value-added revenue contracts that include more direct labor and high-tech contract work with our Intel Solutions business line. In summary, we have considerable optimism as the entire restaurant industry is in the midst of record store sales and customer traffic levels. We had a busy and active second quarter. We closed on a transformative acquisition with Punch, announced large new customers, and the new customer pipeline continues to be strong. Looking towards the second half of 2021, we anticipate accelerated deployments in Q3 and Q4 of Brink, which should drive strong ARR growth. Given the success of the Punch acquisition, we will look to continue to build out our platform both organically and inorganically that will increase our subscription rates and make us more attractive to more customers. And with that, I'll turn the call over to Brian for more details on the Q1 numbers and then take your questions.