Summary
PAR Technology posted 18.2% revenue growth in the second quarter of fiscal 2023, with total revenue of $100.5 million for the three months ended June 30, 2023, up from $85.1 million in the same quarter a year earlier. Revenue for the six months ended June 30, 2023 was $201.0 million, up 21.5% from $165.4 million. The mix moved toward recurring and government work. Subscription service revenue rose 31.2% and contract revenue rose 48.2% on continued counter-small unmanned aircraft system task orders in the Government segment, while hardware revenue fell 7.0% on lower terminal sales volume. Annual recurring revenue, a non-GAAP key performance indicator, reached $122.5 million at June 30, 2023, up 24.3% from $98.6 million. Guest Engagement accounted for $60.9 million of that, Operator Solutions for $50.0 million and Back Office for $11.6 million.
Profitability moved the other way. Gross profit was $20.53 million for the quarter, down 2.8% from $21.12 million a year earlier, and gross margin fell to 20.4% from 24.8%. For the six months ended June 30, 2023, gross profit was $43.72 million, up 4.8%, but gross margin slipped to 21.8% from 25.2%. Management tied the subscription pressure to absorbing the early-stage MENU and PAR Payment Services products, and adjusted subscription service gross margin, a non-GAAP measure, was 61% in the quarter against 76% a year earlier.
The operating loss widened. The GAAP operating loss was $17.65 million for the quarter, compared with a loss of $16.10 million a year earlier. For the six months ended June 30, 2023, the operating loss was $31.52 million against $28.91 million. Operating margin was -17.6% for the quarter, up from -18.9%, and -15.7% year to date, up from -17.5%. Net loss was $19.70 million for the quarter, or $0.72 per diluted share, compared with a net loss of $18.85 million, or $0.70 per diluted share. The year-to-date net loss was $35.61 million, or $1.30 per diluted share, against $34.50 million, or $1.27 per diluted share. A reduction in the MENU contingent consideration liability and a gain on insurance proceeds kept expenses from rising faster. Adjusted EBITDA, a non-GAAP measure, was a loss of $9.9 million against a loss of $5.8 million a year earlier, and adjusted net loss was $14.1 million compared with $9.8 million.
Cash generation turned positive. Operating cash flow was $3.95 million in the quarter, up from an outflow of $10.39 million a year earlier, while the year-to-date operating cash flow outflow narrowed to $12.80 million from $31.59 million. Capital expenditures were $2.41 million for the quarter, up from $0.22 million, and $3.24 million for the six months ended June 30, 2023. Deferred revenue, current portion, was $11.35 million, down 17.5% from a year earlier, and remaining performance obligations fell 23.5% to $14.15 million. Active sites expanded across all three categories, to 70.5 thousand for Guest Engagement, 21.5 thousand for Operator Solutions and 7.2 thousand for Back Office, with roughly 1,100 Operator Solutions activations in the quarter.
Management did not provide quantitative guidance for the third quarter or for the full fiscal year. Its comments pointed instead to spending behind emerging business lines to support scaling in the second half of 2023 and through 2024, a cost profile visible in the quarter, when research and development expense rose 47.4% while selling, general and administrative expense fell 2.9%. The filing's risk list leans macro: recession or slowed economic growth, bank failures and other banking disruptions, higher interest rates, inflation, and shifts in consumer confidence and discretionary spending; geopolitical events such as the Russia-Ukraine war and rising China-Taiwan tensions; competition for talent; component shortages and manufacturing or logistics disruptions; international operations; and internal control over financial reporting. Contract margin compression from the Air Force Research Laboratory counter-small unmanned aircraft system contract, which carries a lower contracted margin than historical work and ran into rate overruns, is the nearer-term worry. Management states that available cash and short-term investments should cover operating needs for at least the next 12 months, and total contractual obligations over that span are $52.8 million, including $21.6 million of principal and interest on the Senior Notes.
Forecast
No forward guidance in this quarter's filings.
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2023 | Q1 FY2023 | QoQ | Q2 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $100.5M | $100.4M | +0.1% | $85.1M | +18.2% |
| Gross profit | $20.5M | $23.2M | -11.5% | $21.1M | -2.8% |
| Gross margin | 20.4% | 23.1% | -2.7 pp | 24.8% | -4.4 pp |
| Research & development | $14.9M | $14.3M | +4.0% | $10.1M | +47.4% |
| Sales & marketing | $25.6M | $27.5M | -6.7% | $26.4M | -2.9% |
| Total operating expenses | $38.2M | $37.1M | +3.0% | $37.2M | +2.6% |
| Operating income (loss) | -$17.7M | -$13.9M | -27.3% | -$16.1M | -9.7% |
| Operating margin | -17.6% | -13.8% | -3.8 pp | -18.9% | +1.4 pp |
| Net income (loss) | -$19.7M | -$15.9M | -23.9% | -$18.8M | -4.5% |
| Net margin | -19.6% | -15.8% | -3.8 pp | -22.1% | +2.5 pp |
| Diluted EPS | -$0.72 | -$0.58 | -$0.14 | -$0.70 | -$0.02 |
Risks
Total gross margin fell to 20.4% for the quarter ended June 30, 2023, down from 24.8% a year earlier, as subscription service margin dropped to 43.3% from 53.9% due to absorbing the initial growth of MENU and PAR Payment Services, both early stage products. Adjusted subscription service gross margin declined to 65% for the six months ended June 30, 2023 from 75% a year earlier.
Contract margin decreased to 4.3% for the quarter ended June 30, 2023 from 11.1% a year earlier, driven by the Air Force Research Laboratory Counter-small Unmanned Aircraft System contract within the ISR Solutions product line carrying a lower contracted margin than historical contracts, plus rate overruns from direct labor not materializing. Government contract revenues rose 48.2% in the quarter, so the margin pressure scales with revenue growth.
Government segment results are increasingly dependent on Counter-small Unmanned Aircraft System task orders, with ISR Solutions revenue up 142.1% in the quarter to $21.5 million while Mission Systems revenue fell 21.5% to $9.2 million. Reliance on DoD and intelligence community contract awards and task order timing concentrates revenue risk.
The company recorded a $7.5 million year-to-date reduction and a $2.3 million quarterly reduction to the fair value of the MENU Acquisition contingent consideration tied to post-closing revenue-focused milestones, indicating those revenue targets are not being achieved. MENU also added $2.2 million of SG&A and $4.3 million of R&D expense year to date, pressuring profitability.
Deferred revenue (current portion) declined 17.5% to $11.4 million versus the prior-year quarter, and remaining performance obligations declined 23.5% to $14.2 million over the same comparison. These forward-looking balances moving down may signal softening committed subscription and contract backlog even as reported revenue rose 18.2% in the quarter.
Loss from operations widened to $17.7 million for the quarter, or 9.7% wider than the prior-year quarter, and net loss widened 4.5% to $19.7 million, as R&D expense increased 47.4% and total operating expenses rose. Diluted loss per share widened to $0.72 from $0.70.
Cash used in operating activities was $12.8 million for the six months ended June 30, 2023, and total contractual obligations over the next 12 months are $52.8 million, including $21.6 million of principal and interest payments on the Senior Notes. Funded with $44.2 million of cash and $41.2 million of short-term investments, leaving limited cushion if cash usage continues.
Hardware revenues decreased 7.0% to $26.4 million for the quarter ended June 30, 2023, driven substantially by a decrease in sales volume of terminals. Hardware is the largest single product line at 26.2% of total revenue, so terminal demand softness directly weighs on consolidated growth.
SaaS KPIs
All quarters →ARR
Adjusted Subscription Service Gross Margin
Summary, forecast, risks and KPIs are extracted from PAR TECHNOLOGY CORP's SEC filings for Q2 FY2023 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 1, 2026.