PAR Technology Corporation

This conference is scheduled to begin shortly. Please continue to stand by. Thank you for your patience. Again, today's conference is scheduled to begin shortly. Please continue to stand by. Thank you for your patience. Thank you. Thank you. Thank you. Thank you. Thank you. Good day and thank you for standing by. Welcome to the FY 2021 third quarter financial results conference 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 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your first speaker today, Chris Burns, Vice President of Business Development. Sir, please go ahead.

Thank you, Peter, and good afternoon. I'd also like to welcome you today to the call for PARS 2021 Third 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, AK Furnace to the SEC. To access the press release and the financial details, please see the investor relations page of our website at www.partec.com. I also want to be sure all participants today have access to our earnings presentation and business review slide deck 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 this afternoon, the presentation can be accessed again on the investor page of our website. And we also included it as an attachment on the 8-K we filed this afternoon. At this time, I'd like to take care of certain details in regards to the call. 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 streaming the conference call today on the internet, 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 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 a general Q&A. Savneet?

Thanks, Chris, and thanks to everyone for joining us to review PAR's third quarter results. There's a lot we want to share with all of you today in our prepared remarks, so let's get started. As a company, we delivered a strong third quarter. We reported total Q3 revenues of $77.9 million, a 42% increase from one year ago. This revenue was motivated across all business lines and specifically around our software recurring revenues, resulting in $82.5 million of live ARR at quarter end, and year-over-year growth of 35% when compared to Q3 last year, which includes Punch performance from Q3 2020. This increase was driven by a 46% growth in ARR by Punch and 29% from Brink from Q3 last year. What's very encouraging is that contracted ARR now totals approximately $97 million as of September 30th. Our strong results this quarter were driven by a high level of execution across the business and continued demand for PAR's unified commerce cloud platform. We have established strong momentum and have continued to build on that throughout 2021. In Q3, we activated 1,739 new Brink sites, a single quarter record for PAR. On a net basis after churn, Brink's active store count now totals nearly 14,900, a 35% increase from one year ago. Brink's bookings totaled 782 stores in the quarter as we manage supply chain issues plaguing the industry today. We expect bookings to rebound in Q4 and ARR growth to continue to accelerate sequentially as well. In Q3, we were successful in activating some of our oldest backlogs, many of whom were legacy price customers, which modestly brought down ARPU across our network of customers, both offset by very strong activations. We expect this impact to balance out next quarter as new customers are signed at higher subscription rates. Now turning to Punch. We continued to outperform with Punch and added more than 4,500 live sites in the quarter that now total more than 52,900, a 54% increase in the last 12 months. We signed 14 new customer logos in Q3 that included over 3,000 stores and went live with Jack in the Box and their network of restaurants. New mobile experience and pickup products are seeing traction from customers, and I also want to relay that we are beginning to see momentum within the C-store segment as the industry seeks a more robust loyalty solution. We added six important new integration partners in quarter, and our business outlook and pipeline remain very strong. Data Central added 168 stores in Q3, and we're beginning to see renewed interest in our leading back-office applications. Active sites now total almost 6,200, and ARR is at 9.1 million at the end of the quarter. Part payment services pipeline grew significantly in the quarter, and we expect to announce new wins in our next quarterly call. We're seeing payment success broadly in Brink, Punch, and non-existing part customers. Our product and hardware business continues to perform well in difficult and challenging environments. Product revenues in the quarter continue to strengthen year over year and improve sequentially as well. Product sales were reported at 30.3 million in this recently ended quarter, a 48% increase. The capital purchase environment for restaurants is always tricky, and that has been even more so with the pandemic and the global supply chain difficulty thrust upon several end markets. As I mentioned last quarter, we're not immune to these challenges around supply chain, and we've experienced some margin impact with the costs associated with the current realities, including the dramatic growth in shipping charges. We're taking direct steps to mitigate these issues, including price increases and other actions and already reported product margin improvements in Q3, which I expect to continue in Q4. Regarding the supply chain specifically, we'll continue to diligently manage our partners and vendors throughout any shortages, price inflation, and increase in freight charges. Now to briefly report on our government business. In the quarter, we reported revenues of $18 million, a 3% increase when compared to Q3 last year. Last week, we announced the largest award in our company history by 8X. The U.S. Air Force Research Laboratory Information Directorate awarded a single award of $490.4 million, IDIQ contract, for counter-small unmanned aircraft system work on software, hardware, and technical documentation. This award has a contract term of six years and an additional two-year order of performance beyond the original six years. We'll recognize revenue as task orders are assigned, but we are seeing immediate impact upon contract backlog that grew to $192 million at the end of Q3, a meaningful $51 million increase from three months ago. We are gratified by the confidence the Air Force has shown in PAR with this award, and we have always prided ourselves on the critical role we play in supporting our operational customers and their requirements. Let me now talk a bit about where we see things going forward from a business perspective. Last week, we spent time meeting with dozens of customers and partners. I love hearing directly from our customers and users, which we call our voice of the customer sessions, because it helps us to validate and sharpen our strategic plan, as well as providing the PAR team with direct feedback on the trends and issues our customers are seeing today. The foundational belief of our thesis is built on the idea of creating a unified commerce platform, one that delivers power back into the hands of the restaurant. Today, we see many restaurant tech companies winning at the expense of restaurants rather than in service to them. We believe technology should be built to serve operators and their end customers. But today, in our industry, it's become extractive. The challenge is rooted not in something dubious, but from a structural flaw in the restaurant technology stack. the absence of an integrated platform. Dozens of disparate applications are being cobbled together in the hope of building a simple and beautiful experience. But unfortunately, that premise has challenged the experience of operators and their customers' experience is suboptimal. As a result, the job of the restaurant CIO today has become one of getting dozens of different products to work seamlessly rather than focusing on growing market share and delivering differentiated guest experiences. What is perhaps worse, is that all the operational and customer data insights that might otherwise be available to the brands is being trapped in the silos of these disparate applications. This is the problem PAR is working to solve and the greatest opportunity for our clients. We're moving from a world of bodies to bits. Historically, every challenge of a restaurant was solved by the addition of more labor. If you have too many cars in your drive-thru lane, you send out a line buster. If you have too many orders, you add a line chef. Too many quality issues, you add a spot checker. Every challenge could be solved with more bodies. but in a world where restaurants are expected to not only deliver great in-store experiences and also deliver Amazon-like digital experiences off-premise, the model of running multiple platforms breaks down. Enterprise restaurants need a truly unified platform to make this work, and this is what we are building at PAR, one that natively brings all transactions in-store and off-premise along with all customer data into a unified open cloud platform with enterprise scale. Our goal is to be the foundational technology that provides our customers the organizations we are built to serve with the ability to fulfill their own technology destinies and to build differentiation and competitive advantage through unique experiences. Such technologies remain open to working with other vendors and allow our clients to choose which features to turn on and off to build their own proprietary capabilities and to manage and support their own implementations. We're at the inception of this vision. Our new CPTO, Raju Malhotra, is driving this platform vision, and I have immense confidence in his abilities to deliver on transforming PowerPunch and DataCentral. Alongside this internal development is a highly focused M&A program narrowing in on a couple key gaps we are looking to fulfill in short order as witnessed by our recent capital raise. While all markets are competitive, PAR occupies a very unique place. We service a customer base above the size of where most of the venture capital has flown into restaurant technology. On a daily basis, we compete against more traditional competitors, from those that are still building on-premise to those who believe that a platform is the equivalent of a bundled solution. Our ability to grow in this market is completely supply-driven, not demand. Our ability to grow at current levels is driven by store count. Today, we're at around 15,000 stores of a tan that's almost 30x the size. Yet our ability to grow at higher rates will be driven by the deployment of new products. This is the next leg of our transformation and our major focus in 2022. In closing, I'd like to thank the entire PAR team for their contributions. At PAR, we live by four values. One, speed. We like to say we look for those who don't wait for the elevator. Two, ownership. We look for those that are owners and not renters of PAR, people who treat PAR like their own car and not a rental car. Three is focus. We always try to remember that 80-20 wins. And four is winning together. This is the belief that all stakeholders of PAR must win, our team, our customers, our suppliers, our community, and our shareholders. We take these values seriously, and every day we work hard to develop and hire on these values so that we can deliver for all stakeholders. With that, I'd like to hand it off to Brian, who will review our financial performance in greater detail.