Summary
PAR Technology closed the third quarter of 2023 with faster top-line growth and a smaller loss. Revenue for the three months ended September 30, 2023 was $107.1 million, up 15.5% from the prior-year quarter. Year-to-date revenue was $308.1 million, up 19.4%. The net loss was $15.5 million, or $0.56 per diluted share, and it narrowed 27.3% from a year earlier. Over nine months the net loss was $51.1 million, or $1.86 per diluted share, an 8.4% narrowing.
The revenue mix moved toward government work. Contract revenue rose 57.4%, which the company tied to the ISR Solutions product line and continued Counter-small Unmanned Aircraft System task orders. Restaurant/Retail revenue edged up 0.5%. Hardware revenue fell 17.6% on lower sales volume for kitchen display systems and terminals, and professional service revenue slipped 2.8% on fewer hardware repair services. Subscription service revenue rose 24.6%, helped by a 21% increase in Operator Solutions active sites and a 20% increase in average revenue per site, plus a 5% increase in Guest Engagement average revenue per site.
Annual recurring revenue ended the quarter at $128.3 million, a 20.4% increase from a year earlier. Operator Solutions led the product lines with ARR up 38.3% and active sites up 21.0% to 22.5 thousand. Back Office ARR rose 20.8% and Guest Engagement ARR rose 8.2%. Guest Engagement active sites were 68.1 thousand, a 1.5% increase. Management reported roughly 1,000 Guest Engagement activations, 1,200 Operator Solutions activations and 400 Back Office activations in the quarter, along with about 1,100 Operator Solutions bookings. The headline win was the selection of Brink POS and MENU Link by Burger King for its North American traditional restaurants.
Gross profit for the quarter was $28.2 million, up 31.7%, and gross margin rose 3.2 percentage points to 26.3%. The nine-month picture was softer. Gross profit was $71.9 million, up 13.9%, while gross margin fell 1.1 percentage points to 23.3%. Subscription service margin gained from efficiency work in hosting and customer support, but adjusted subscription service gross margin, which excludes amortization of acquired and internally developed technology, slipped to 69% from 71% in the quarter. Contract margin weakened because the Air Force Research Laboratory Counter-small Unmanned Aircraft System contract carries a lower contracted margin than historical contracts. The nine-month subscription decline reflected the early-stage MENU product absorbing its initial growth.
Cost growth stayed contained. Selling, general and administrative expense fell 1.1% in the quarter, while research and development expense rose 14.1% in the quarter and 29.8% over nine months on added personnel for Guest Engagement and Operator Solutions. The operating loss narrowed 28.5% to $13.2 million, and operating margin improved 7.6 percentage points to negative 12.3%. Year to date the operating loss narrowed 5.6% to $44.7 million, with operating margin at negative 14.5%, up 3.8 percentage points. Non-GAAP results improved faster. Adjusted EBITDA was a loss of $2.6 million against a loss of $8.0 million, and adjusted net loss was $5.8 million, or $0.21 per share, against $11.9 million, or $0.44 per share. Operating cash flow was negative $5.7 million for the quarter, and the nine-month figure improved 44.9% to negative $18.5 million. Capital expenditures were $1.8 million for the quarter, up 479.2%.
Two contract-linked balance sheet lines weakened. Current deferred revenue was $10.07 million, down 20.7% from a year earlier, and remaining performance obligations were $12.4 million, down 26.3%. The company held $43.1 million of cash and cash equivalents and $36.7 million of short-term investments at September 30, 2023, and management expects that liquidity to cover operating needs for at least the next 12 months against $45.4 million of contractual obligations due in that window. The risks the company cites include unfavorable macroeconomic conditions such as recession, higher interest rates and inflation, component shortages and manufacturing disruptions, a competitive market for talent, and the early-stage MENU product weighing on subscription margin.
Forecast
No forward guidance in this quarter's filings.
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2023 | Q2 FY2023 | QoQ | Q3 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $107.1M | $100.5M | +6.6% | $92.8M | +15.5% |
| Gross profit | $28.2M | $20.5M | +37.3% | $21.4M | +31.7% |
| Gross margin | 26.3% | 20.4% | +5.9 pp | 23.1% | +3.2 pp |
| Research & development | $14.7M | $14.9M | -1.5% | $12.8M | +14.1% |
| Sales & marketing | $26.2M | $25.6M | +2.4% | $26.5M | -1.1% |
| Total operating expenses | $41.4M | $38.2M | +8.4% | $39.9M | +3.8% |
| Operating income (loss) | -$13.2M | -$17.7M | +25.3% | -$18.4M | +28.5% |
| Operating margin | -12.3% | -17.6% | +5.2 pp | -19.9% | +7.6 pp |
| Net income (loss) | -$15.5M | -$19.7M | +21.2% | -$21.3M | +27.3% |
| Net margin | -14.5% | -19.6% | +5.1 pp | -23.0% | +8.5 pp |
| Diluted EPS | -$0.56 | -$0.72 | +$0.16 | -$0.79 | +$0.23 |
Risks
Adjusted subscription service gross margin declined to 69% in the three months ended September 30, 2023 from 71% in the prior-year period, and to 67% for the nine months ended September 30, 2023 from 74% in the prior-year period, partly due to absorbing the initial growth of the early-stage MENU product. Subscription service gross margin also decreased for the nine months ended September 30, 2023 to 48.0% from 50.7%.
Contract revenues increased 57.4% in the three months ended September 30, 2023, driven by Government segment ISR Solutions revenue from continued Counter-small Unmanned Aircraft System task orders. Contract margin decreased to 7.9% from 10.4% in the prior-year quarter because the Air Force Research Laboratory C-sUAS contract has a lower contracted margin than historical contracts.
Deferred revenue decreased 20.7% to $10.1 million and remaining performance obligations decreased 26.3% to $12.4 million as of September 30, 2023 compared to September 30, 2022. These declines may indicate reduced contracted future revenue or shorter contract durations.
Hardware revenues decreased 17.6% in the three months ended September 30, 2023 compared to the three months ended September 30, 2022, driven by lower sales volume in kitchen display systems and terminals. This product line represented 24.1% of total revenue in the current quarter, down from 33.8%.
Operating cash flow was negative $18.5 million for the nine months ended September 30, 2023, although it improved compared to negative $33.6 million in the prior-year period. For the three months ended September 30, 2023, operating cash flow was negative $5.7 million, down 186.1% from negative $2.0 million in the prior-year quarter, and the company faces $45.4 million of total contractual obligations over the next 12 months.
Research and development expenses were $43.9 million for the nine months ended September 30, 2023, an increase of 29.8% compared to $33.8 million in the prior-year period, substantially driven by higher compensation costs and additional personnel. This spending growth could pressure profitability if revenue growth does not keep pace.
The nine months ended September 30, 2023 included a $7.5 million decrease to the fair value of contingent consideration liability for post-closing revenue-focused milestones from the MENU Acquisition, with no comparable adjustment in the prior-year period. If MENU integration or performance milestones do not materialize, results could be adversely affected.
SaaS KPIs
All quarters →Adjusted EBITDA
Subscription Service Revenue
Annual Recurring Revenue (ARR)
Adjusted Subscription Service Gross Margin
Summary, forecast, risks and KPIs are extracted from PAR TECHNOLOGY CORP's SEC filings for Q3 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 2, 2026.