PAR TECHNOLOGY CORP Q3 FY2021 earnings

PAR Technology reported third-quarter revenue of $77.9 million, up 42.0% from the prior-year quarter, and nine-month revenue of $201.3 million, up 29.6%. The April 2021 Punchh acquisition lifted the software and services lines that carry the recurring business. The mix shift toward services continued, with service revenue up 75.0%, product revenue up 48.0%, and Government contract revenue, the smallest of the three lines, up 3.1%.

Gross profit was $18.2 million, up 56.1%, and gross margin expanded 2.1 percentage points to 23.4%. Everything below the gross line went the wrong way. Operating loss widened to $14.1 million, and net loss widened to $31.9 million, or $1.23 per diluted share. Nine-month net loss widened to $50.2 million, or $2.05 per share. The quarter absorbed an $11.9 million loss on extinguishment of debt tied to repaying the Owl Rock Term Loan, plus heavier interest expense after the Punchh financing. Selling, general and administrative expense rose 106.1% and research and development rose 140.4%, both lifted by Punchh and by added investment in the software platform.

Non-GAAP measures show a smaller but still widening loss. Adjusted EBITDA was a loss of $4.0 million, compared with positive adjusted EBITDA of $0.1 million a year earlier, and the nine-month adjusted EBITDA loss was $12.9 million versus a loss of $3.8 million. Adjusted net loss was $9.3 million, or $0.36 per share, compared with $2.4 million, or $0.11 per share. Cash generation remains the weak spot. Operating cash flow was negative $43.6 million for the nine months, a deeper outflow than a year earlier. Capital expenditures were $0.3 million in the quarter, down 34.9%, while the Punchh purchase consumed $374.7 million of cash during the nine months.

Recurring revenue is the centerpiece of the story. Annual recurring revenue ended the quarter at $82.5 million, up 34.9% from $61.2 million a year earlier. Punchh ARR was $44.0 million, Brink POS was $29.5 million, and Data Central was $9.1 million. Contracted ARR, which counts signed sites that have not yet gone live, reached roughly $97 million, with Punchh at $63.3 million and Brink POS at $33.5 million. Brink POS booked its largest activation quarter ever, with 1,739 sites going live, 782 bookings, and an open order backlog of 2,032 sites. Active billed Brink sites totaled 14,861 restaurants, and Punchh activations reached 4,559 sites, leaving 52,935 active Punchh locations.

The government segment won a $490.4 million indefinite-delivery/indefinite-quantity contract from the U.S. Air Force for counter-small unmanned aircraft systems software, hardware, and technical documentation. Management described it as the largest task order vehicle in company history, and framed it as a source of revenue growth and backlog for years to come. The balance sheet looks sturdier as well. Cash and cash equivalents were $200.3 million at September 30, 2021, up from $180.7 million at December 31, 2020, after a September stock offering of 982,143 shares at $56.00 per share and an issuance of $265.0 million of 1.50% convertible notes due 2027. Contractual debt obligations total $517.2 million.

Forward demand looks intact. Deferred revenue was $15.5 million, up 40.0%, and remaining performance obligations were $20.6 million, up 80.1%. The filing flags supply chain disruption, rising material costs, intense competition for qualified personnel, higher compensation costs, and the ongoing COVID-19 pandemic, including the Delta variant, as risks to the restaurant business. Integration of Punchh, the amortization tied to acquired intangibles, and earn-out accounting all remain in play. The near-term test is whether the software mix keeps lifting gross margin while spending and debt service run well above the current profit line.