PAR TECHNOLOGY CORP - Quarter Report: 2024 June (Form 10-Q)

See accompanying notes to unaudited interim condensed consolidated financial statements

PAR TECHNOLOGY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,

	2024		2023		2024		2023
Revenues, net:
Hardware	$		$		$		$

Subscription service
Professional service

Total revenues, net
Cost of sales:
Hardware

Subscription service
Professional service

Total cost of sales
Gross margin
Operating expenses:
Sales and marketing
General and administrative
Research and development
Amortization of identifiable intangible assets
Adjustment to contingent consideration liability	()		()		()		()
Gain on insurance proceeds			()				()
Total operating expenses
Operating loss	()		()		()		()
Other (expense) income, net	()				()
Interest expense, net	()		()		()		()

Loss from continuing operations before (provision for) benefit from income taxes	()		()		()		()
(Provision for) benefit from income taxes	()		()				()
Net loss from continuing operations	()		()		()		()




Net income from discontinued operations
Net income (loss)	$		$	()	$		$	()

Net income (loss) per share (basic and diluted):
Continuing operations	$	()	$	()	$	()	$	()
Discontinued operations
Total	$		$	()	$		$	()

Weighted average shares outstanding (basic and diluted)

See accompanying notes to unaudited interim condensed consolidated financial statements

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PAR TECHNOLOGY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

(unaudited)


	Three Months Ended June 30,			Six Months Ended June 30,
	2024	2023		2024	2023
Net income (loss)	$	$	()	$	$	()
Other comprehensive income (loss), net of applicable tax:
Foreign currency translation adjustments	()	()		()	()
Comprehensive income (loss)	$	$	()	$	$	()

See accompanying notes to unaudited interim condensed consolidated financial statements

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PAR TECHNOLOGY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

(In thousands)

(unaudited)

Common Stock

Additional
Paid in
Capital

Accumulated Deficit

Accumulated
Other
Comprehensive
Loss

Treasury Stock

Total
Shareholders’
Equity

Amount

Balances at December 31, 2023

()

Issuance of common stock upon the exercise of stock options

—

Net issuance of restricted stock awards and restricted stock units

()

—

Issuance of common stock for acquisition (see Note 3)

—

Proceeds from private placement of common stock, net of issuance costs of $ million

—

Treasury stock acquired from employees upon vesting or forfeiture of restricted stock

—

()

Stock-based compensation

—

Foreign currency translation adjustments

—

()

—

()

Net loss

—

()

—

()

Balances at March 31, 2024

()

Issuance of common stock upon the exercise of stock options

—

Net issuance of restricted stock awards and restricted stock units

()

—

Treasury stock acquired from employees upon vesting or forfeiture of restricted stock

—

()

Issuance of common stock for employee stock purchase plan

—

Stock-based compensation

—

Foreign currency translation adjustments

—

()

—

()

Net income

—

Balances at June 30, 2024

()

See accompanying notes to unaudited interim condensed consolidated financial statements

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PAR TECHNOLOGY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

(In thousands)

(unaudited)

Common Stock

Additional
Paid in
Capital

Accumulated Deficit

Accumulated Other Comprehensive Loss

Treasury Stock

Total
Shareholders’
Equity

Amount

Balances at December 31, 2022

()

Issuance of common stock upon the exercise of stock options

—

Net issuance of restricted stock awards and restricted stock units

—

Treasury stock acquired from employees upon vesting or forfeiture of restricted stock

—

()

Stock-based compensation

—

Foreign currency translation adjustments

—

()

—

()

Net loss

—

()

—

()

Balances at March 31, 2023

()

Issuance of common stock upon the exercise of stock options

—

Net issuance of restricted stock awards and restricted stock units

—

Treasury stock acquired from employees upon vesting or forfeiture of restricted stock

—

()

Stock-based compensation

—

Foreign currency translation adjustments

—

()

—

()

Net loss

—

()

—

()

Balances at June 30, 2023

()

Reconciliation of cash and cash equivalents and cash held on behalf of customersCash and cash equivalents$ $ Cash held on behalf of customers Total cash and cash equivalents and cash held on behalf of customers$ $ Supplemental disclosures of cash flow information:Cash paid for interest$ $ Cash paid for income taxes Capitalized software recorded in accounts payable Capital expenditures in accounts payable Common stock issued for acquisition

The unaudited pro forma results presented above are for illustrative purposes only and do not reflect the realization of actual cost savings or any related integration costs. The unaudited pro forma results do not purport to be indicative of the results that would have been obtained, or to be a projection of results that may be obtained in the future. These unaudited pro forma results include certain adjustments, primarily due to increases in amortization expense due to the fair value adjustments of intangible assets, acquisition related costs and the impact of income taxes on the pro forma adjustments. $ million of acquisition costs have been reflected in the 2023 pro forma results.

Note 4 —

million, before customary post-closing adjustments based on PGSC’s indebtedness, working capital, cash, and transaction expenses at closing. At closing we entered into a transition services agreement with Booz Allen Hamilton ("TSA") pursuant to which the Company and Booz Allen Hamilton provide certain transitional services to each other as contemplated by and subject to the Purchase Agreement. The service period for the transitional services generally ends during the third quarter of 2025.

Additionally, on June 10, 2024, the Company announced that it had entered into an acquisition agreement for the sale of 100% of the issued and outstanding equity interests of Rome Research Corporation (“RRC”), a wholly-owned subsidiary of the Company. The sale was completed on July 1, 2024. Refer to “Note 15 – Subsequent Events” for additional information on the sale of RRC. The sale of PGSC and RRC comprise the sale of 100% of the Company's Government segment.

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million from the sale of PGSC for the three months ended June 30, 2024. Pursuant to the Purchase Agreement, within 120 days following the Closing Date Booz Allen Hamilton is required to deliver to the Company a closing statement setting forth its determination of net working capital and any resulting net working capital surplus or deficit. To the extent there is an adjustment to net working capital, as agreed to by the Company and Booz Allen Hamilton pursuant to the Purchase Agreement, any such change will be recorded as an adjustment to the gain on sale of discontinued operations for the period such change occurs.

As of June 30, 2024, the Company estimated the federal taxable gain on sale to be $ million, however, we expect to offset the taxable gain through the utilization of several tax benefits including $ million of our net operating loss carryforwards, $ million of our Section 163(j) interest expense limitation carryforwards, and $ million of our research and development tax credits. Additionally, the income tax associated with the gain will be impacted by the final allocation of the sales price, which may be materially different from the Company’s estimates. The impact of changes in estimated income tax (if any) will be recorded as an adjustment to discontinued operations in the period such change in estimate occurs.

The Company incurred expenses related to its disposition of PGSC of approximately $ million which are included in net income from discontinued operations in the condensed consolidated statements of operations.

The accounting requirements for reporting the disposition of PGSC and RRC as discontinued operations were met when the disposition of PGSC was completed and the sale of RRC was deemed probable. Accordingly, the historical results of PGSC and RRC have been presented as discontinued operations and, as such, have been excluded from continuing operations for all periods presented.

$ Other current assets Total current assets Noncurrent assets Total assets of discontinued operations$ $ Accounts payable Accrued salaries and benefits Accrued expenses Other current liabilities Total current liabilities Noncurrent liabilities Total liabilities of discontinued operations$ $

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$ $ $ Contract cost of sales()()()()Operating income from discontinued operations General and administrative expense ()()()Other expense, net()() ()Gain on sale of discontinued operations Income from discontinued operations before provision for income taxes Provision for income taxes()()()()Net income from discontinued operations$ $ $ $

In accordance with ASC Topic 205, Presentation of Financial Statements, the Company adjusted contract cost of sales to exclude corporate overhead allocated to discontinued operations for all periods presented.

$ $ $ Capital expenditures Stock-based compensation

Note 5 —

million and $ million, respectively, against accounts receivable.

$ Provisions Write-offs()()

- years years - years - years - years

Software costs placed into service during the three months ended June 30, 2024 and 2023, were $ million and $ million, respectively. Software costs placed into service during the six months ended June 30, 2024 and 2023, were $ million and $ million, respectively.

$ $ $ Amortization of internally developed software Amortization of identifiable intangible assets recorded in cost of sales Amortization expense recorded in operating expenses Impact of foreign currency translation on intangible assets()() ()

Note 8 —

$ $ Unamortized debt issuance cost()()()Total notes payable$ $ $

The following table summarizes information about the net carrying amounts of long-term debt as of December 31, 2023:

(in thousands)

2026 Notes

2027 Notes

Total

Principal amount of notes outstanding

Unamortized debt issuance cost

()

Total notes payable

$ $ $ Accretion of debt in interest expense Total interest expense$ $ $ $

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2025 2026 2027 2028 Thereafter Total$

Note 9 —

million through a private placement of PAR common stock. Pursuant to the Securities Purchase Agreement, PAR issued and sold shares of its common stock at a % discount to the Purchasers for a gross purchase price of approximately $ million ($ per share). Net proceeds from the Securities Purchase Agreement were approximately $ million, net of issuance costs of $ million.

On January 2, 2024, the Company entered into a consulting agreement with PAR Act III, LLC ("PAR Act III") pursuant to which PAR Act III provides the Company with strategic consulting, merger and acquisition technology due diligence, and other professional and expert services that may be requested from time to time by the Company’s Chief Executive Officer through April 8, 2026. In consideration for the services provided under the consulting agreement, the Company amended its common stock purchase warrant issued to PAR Act III on April 8, 2021 (the "Warrant") to extend the termination date of the Warrant to April 8, 2028, subject to the consulting agreement remaining in effect through April 8, 2026.

million based on using the Black-Scholes model with the following assumptions as of January 2, 2024:


	Original Warrant		Modified Warrant
Expected term	years		years
Risk free interest rate		%		%
Expected volatility		%		%
Expected dividend yield	None		None
Fair value (per warrant)	$		$

In connection with the Company's private placement of its common stock on March 7, 2024 to partially fund the Stuzo Acquisition, an additional shares of common stock are available for purchase under the Warrant, increasing the total to shares of common stock available for purchase at an exercise price of $ per share.

The Warrant is accounted for as stock-based compensation to non-employees pursuant to ASC Topic 718, Stock Compensation, by way of ASC Topic 815, Derivatives and Hedging, due to the Warrant extension being in exchange for consulting services. The issuance date fair value of the Warrant extension of $ million will be recognized as stock-based compensation expense ratably over the requisite service period for the Warrant extension ending April 8, 2026.

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Note 10 —

) million and $ million, was $ million and $ million for the three months ended June 30, 2024 and 2023, respectively. Stock-based compensation expense, net of forfeitures and adjustments of $ million and $ million, was $ million and $ million for the six months ended June 30, 2024 and 2023, respectively.

At June 30, 2024, the aggregate unrecognized compensation expense related to unvested equity awards was $ million, which is expected to be recognized as compensation expense in fiscal years 2024 through 2027.

$ Exercised() Canceled/forfeited() Outstanding at June 30, 2024 $

$ Granted Vested() Canceled/forfeited() Outstanding at June 30, 2024 $

shares of Company common stock were made available for purchase under the Company's 2021 Employee Stock Purchase Plan ("ESPP"), subject to adjustment as provided for in the ESPP. As of June 30, 2024, shares of common stock were purchased.

Note 11 —

anti-dilutive stock options outstanding compared to as of June 30, 2023. At June 30, 2024, there were anti-dilutive restricted stock units outstanding compared to as of June 30, 2023.

Note 12 —

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Note 13 —

$ $ $ International Total$ $ $ $

$ International Total$ $

% % % %Yum! Brands, Inc. % % % %Dairy Queen % % % %All Others % % % %Total % % % %

No other customer within "All Others" represented 10% or more of the Company’s total revenue for the three and six months ended June 30, 2024 or 2023.

Note 14 —

% Convertible Senior Notes due 2026 (the "2026 Notes") and % Convertible Senior Notes due 2027 (the "2027 Notes") at June 30, 2024 was $ million and $ million respectively. The estimated fair value of the 2026 Notes and 2027 Notes at December 31, 2023 was $ million and $ million respectively. The valuation techniques used to determine the fair value of the Company's long-term debt are classified in Level 2 of the fair value hierarchy as they are derived from broker quotations.

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million and $ million at June 30, 2024 and December 31, 2023, respectively, and is included in other assets on the condensed consolidated balance sheets. Amounts owed to employees participating in the deferred compensation plan at June 30, 2024 were $ million compared to $ million at December 31, 2023 and are included in other long-term liabilities on the condensed consolidated balance sheets.

The Company uses a Monte Carlo simulation of a discounted cash flow model to determine the fair value of the earn-out liability associated with the acquisition of MENU Technologies AG (the "MENU Acquisition"). Significant inputs used in the simulation are not observable in the market and thus the liability represents a Level 3 fair value measurement as defined in ASC 820. Ultimately, the liability will be equivalent to the amount paid, and the difference between the fair value estimate and amount paid will be recorded in earnings. The amount paid that is less than or equal to the liability on the acquisition date will be reflected as cash used in financing activities in the Company's condensed consolidated statements of cash flows. Any amount paid in excess of the liability on the acquisition date will be reflected as cash used in operating activities.

During the three months ended June 30, 2024, the Company determined that there would be no earn-out payment related to the MENU Acquisition. As such, the Company wrote off the remaining fair value of the earn-out liability.

$ Change in fair value of contingent consideration()()Balance at June 30$ $

The balance of the fair value of the liability was recorded within "Accrued expenses" in the condensed consolidated balance sheets. The change in fair value of contingent consideration was recorded within "Adjustment to contingent consideration liability" in the condensed consolidated statements of operations.

$ Monte CarloRevenue volatility %

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Consolidated Results (continued):



	Six Months Ended June 30,				Percentage of total revenue				Increase (decrease)
(in thousands)	2024		2023		2024		2023		2024 vs 2023
Revenues, net:
Hardware	$	38,342	$	53,167	25.9	%	38.5	%	(27.9)	%

Subscription service	83,251		58,337		56.2	%	42.2	%	42.7	%
Professional service	26,630		26,609		18.0	%	19.3	%	0.1	%
Total revenues, net	$	148,223	$	138,113	100.0	%	100.0	%	7.3	%

Gross margin:
Hardware	$	8,633	$	9,460	5.8	%	6.8	%	(8.7)	%

Subscription service	43,616		27,179		29.4	%	19.7	%	60.5	%
Professional service	5,837		3,459		3.9	%	2.5	%	68.7	%
Total gross margin	$	58,086	$	40,098	39.2	%	29.0	%	44.9	%

Operating expenses:
Sales and marketing	$	20,737	$	19,473	14.0	%	14.1	%	6.5	%
General and administrative	50,544		35,401		34.1	%	25.6	%	42.8	%
Research and development	32,005		29,203		21.6	%	21.1	%	9.6	%
Amortization of identifiable intangible assets	2,878		929		1.9	%	0.7	%	> 200%
Adjustment to contingent consideration liability	(600)		(7,500)		(0.4)	%	(5.4)	%	(92.0)	%
Gain on insurance proceeds	—		(500)		—	%	(0.4)	%	(100.0)	%
Total operating expenses	$	105,564	$	77,006	71.2	%	55.8	%	37.1	%

Operating loss	$	(47,478)	$	(36,908)	(32.0)	%	(26.7)	%	28.6	%
Other (expense) income, net	(310)		146		(0.2)	%	0.1	%	(312.3)	%
Interest expense, net	(3,338)		(3,402)		(2.3)	%	(2.5)	%	(1.9)	%

Loss from continuing operations before benefit from (provision for) income taxes	(51,126)		(40,164)		(34.5)	%	(29.1)	%	27.3	%
Benefit from (provision for) income taxes	7,173		(698)		4.8	%	(0.5)	%	< 200%
Net loss from continuing operations	$	(43,953)	$	(40,862)	(29.7)	%	(29.6)	%	7.6	%
Net income from discontinued operations	79,855		5,255		53.9	%	3.8	%	> 200%
Net income (loss)	$	35,902	$	(35,607)	24.2	%	(25.8)	%	(200.8)	%

Revenues, Net


	Three Months Ended June 30,				Percentage of total revenue				Increase (decrease)
(in thousands)	2024		2023		2024		2023		2024 vs 2023
Hardware	$	20,116	$	26,390	25.7	%	38.0	%	(23.8)	%

Subscription service	44,872		30,372		57.4	%	43.7	%	47.7	%
Professional service	13,162		12,767		16.8	%	18.4	%	3.1	%
Total revenues, net	$	78,150	$	69,529	100.0	%	100.0	%	12.4	%

For the three months ended June 30, 2024 compared to the three months ended June 30, 2023

Total revenues were $78.2 million for the three months ended June 30, 2024, an increase of $8.6 million or

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12.4% compared to $69.5 million for the three months ended June 30, 2023.

Hardware revenues were $20.1 million for the three months ended June 30, 2024, a decrease of $6.3 million or 23.8% compared to $26.4 million for the three months ended June 30, 2023. The decrease primarily consists of decreases in hardware revenues from terminals of $2.8 million, kitchen display systems of $2.1 million, and peripherals (scanners, printers, and components) of $0.6 million. These decreases were all substantially driven by the timing of tier one enterprise customer hardware refresh cycles, onboarding of Operator Cloud customers buying hardware, and the Company's market launch of its next generation PAR headset.

Subscription service revenues were $44.9 million for the three months ended June 30, 2024, an increase of $14.5 million or 47.7% compared to $30.4 million for the three months ended June 30, 2023. The increase includes increased subscription service revenues from our Engagement Cloud services of $9.1 million, of which revenues of $10.1 million were contributed by the business and products that we acquired in the Stuzo Acquisition, and now sold under PAR Retail. Refer to “Note 3 – Acquisitions” of the notes to interim condensed consolidated financial statements in "Part I, Item 1. Financial Statements and Supplementary Data" of this Quarterly Report for additional information regarding Stuzo and the Stuzo Acquisition. Our Operator Cloud services increased $5.3 million driven by an 18.4% increase in active sites and a 14.0% increase in average revenue per site equally driven by cross-selling initiatives, upselling, and price increases.

Professional service revenues were $13.2 million for the three months ended June 30, 2024, an increase of $0.4 million or 3.1% from $12.8 million for the three months ended June 30, 2023. The increase was substantially driven by a $1.0 million increase in hardware repair services and a $0.5 million increase in field operations, partially offset by a $1.2 million decrease in installation services.


	Six Months Ended June 30,				Percentage of total revenue				Increase (decrease)
(in thousands)	2024		2023		2024		2023		2024 vs 2023
Hardware	$	38,342	$	53,167	25.9	%	38.5	%	(27.9)	%

Subscription service	83,251		58,337		56.2	%	42.2	%	42.7	%
Professional service	26,630		26,609		18.0	%	19.3	%	0.1	%
Total revenues, net	$	148,223	$	138,113	100.0	%	100.0	%	7.3	%

For the six months ended June 30, 2024 compared to the six months ended June 30, 2023

Total revenues were $148.2 million for the six months ended June 30, 2024, an increase of $10.1 million or 7.3% compared to $138.1 million for the six months ended June 30, 2023.

Hardware revenues were $38.3 million for the six months ended June 30, 2024, a decrease of $14.8 million or 27.9% compared to $53.2 million for the six months ended June 30, 2023. The decrease primarily consists of decreases in hardware revenues from terminals of $6.0 million, peripherals of $3.4 million, and kitchen display systems of $3.4 million. These decreases were all substantially driven by the timing of tier one enterprise customer hardware refresh cycles, onboarding of Operator Cloud customers buying hardware, and the Company's market launch of its next generation PAR headset.

Subscription service revenues were $83.3 million for the six months ended June 30, 2024, an increase of $24.9 million or 42.7% compared to $58.3 million for the six months ended June 30, 2023. The increase was substantially driven by increased subscription service revenues from our Engagement Cloud services of $13.6 million, of which revenues of $12.7 million were contributed by the business and products that we acquired in the Stuzo Acquisition, and now sold under PAR Retail. The residual increase of $0.9 million from our Engagement Cloud services was driven by a 3.9% organic increase in active sites. Our Operator Cloud services increased $11.2 million driven by a 19.7% increase in active sites and a 17.8% increase in average revenue per site equally driven by cross-selling initiatives, upselling, and price increases.

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Professional service revenues were $26.6 million for the six months ended June 30, 2024, which was relatively unchanged from $26.6 million for the six months ended June 30, 2023.

Gross Margin


	Three Months Ended June 30,				Gross Margin Percentage				Increase (decrease)
(in thousands)	2024		2023		2024		2023		2024 vs 2023
Hardware	$	4,577	$	5,064	22.8	%	19.2	%	3.6	%

Subscription service	23,831		13,139		53.1	%	43.3	%	9.8	%
Professional service	3,620		983		27.5	%	7.7	%	19.8	%
Total gross margin	32,028		19,186		41.0	%	27.6	%	13.4	%

For the three months ended June 30, 2024 compared to the three months ended June 30, 2023

Total gross margin as a percentage of revenue for the three months ended June 30, 2024, increased to 41.0% as compared to 27.6% for the three months ended June 30, 2023.

Hardware margin as a percentage of hardware revenue for the three months ended June 30, 2024, increased to 22.8% as compared to 19.2% for the three months ended June 30, 2023. The increase in margin primarily consisted of increased margins from terminals and kitchen display systems, both substantially driven by price increases.

Subscription service margin as a percentage of subscription service revenue for the three months ended June 30, 2024, increased to 53.1% as compared to 43.3% for the three months ended June 30, 2023. The increase was substantially driven by a continued focus on efficiency improvements with our hosting and customer support costs as well as improved margins stemming from post-acquisition operations of PAR Retail.

Professional service margin as a percentage of professional service revenue for the three months ended June 30, 2024, increased to 27.5% as compared to 7.7% for the three months ended June 30, 2023. The increase primarily consists of increases in margins for hardware service repair and field operations.


	Six Months Ended June 30,				Gross Margin Percentage				Increase (decrease)
(in thousands)	2024		2023		2024		2023		2024 vs 2023
Hardware	$	8,633	$	9,460	22.5	%	17.8	%	4.7	%

Subscription service	43,616		27,179		52.4	%	46.6	%	5.8	%
Professional service	5,837		3,459		21.9	%	13.0	%	8.9	%
Total gross margin	58,086		40,098		39.2	%	29.0	%	10.2	%

For the six months ended June 30, 2024 compared to the six months ended June 30, 2023

Total gross margin as a percentage of revenue for the six months ended June 30, 2024, increased to 39.2% as compared to 29.0% for the six months ended June 30, 2023.

Hardware margin as a percentage of hardware revenue for the six months ended June 30, 2024, increased to 22.5% as compared to 17.8% for the six months ended June 30, 2023. The increase in margin primarily consisted of improved inventory management resulting in lower excess and obsolescent inventory charges, and improved margins from terminals and kitchen display systems, primarily driven by price increases.

Subscription service margin as a percentage of subscription service revenue for the six months ended June 30, 2024, increased to 52.4% as compared to 46.6% for the six months ended June 30, 2023. The increase was substantially driven by a continued focus on efficiency improvements with our hosting and customer support costs as well as improved margins stemming from post-acquisition operations of PAR Retail.

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Professional service margin as a percentage of professional service revenue for the six months ended June 30, 2024, increased to 21.9% as compared to 13.0% for the six months ended June 30, 2023. The increase primarily consists of an increase in margin for hardware service repair and field operations.

Sales and Marketing Expense ("S&M")


	Three Months Ended June 30,				Percentage of total revenue				Increase (decrease)
(in thousands)	2024		2023		2024		2023		2024 vs 2023
Sales and marketing	$	9,811	$	10,075	12.6	%	14.5	%	(2.6)	%

For the three months ended June 30, 2024 compared to the three months ended June 30, 2023

S&M expenses were $9.8 million for the three months ended June 30, 2024, a decrease of $0.3 million or 2.6% compared to $10.1 million for the three months ended June 30, 2023. The decrease primarily consists of a decrease in organic S&M expense of $1.1 million due to decreases in marketing expense and commissions, partially offset by an increase in inorganic S&M expense of $0.8 million stemming from post-acquisition operations of PAR Retail.


	Six Months Ended June 30,				Percentage of total revenue				Increase (decrease)
(in thousands)	2024		2023		2024		2023		2024 vs 2023
Sales and marketing	$	20,737	$	19,473	14.0	%	14.1	%	6.5	%

For the six months ended June 30, 2024 compared to the six months ended June 30, 2023

S&M expenses were $20.7 million for the six months ended June 30, 2024, an increase of $1.3 million or 6.5% compared to $19.5 million for the six months ended June 30, 2023. The increase primarily consists of an increase in inorganic S&M expense of $1.0 million stemming from post-acquisition operations of PAR Retail. Organic S&M expense remained flat for the six months ended June 30, 2024 compared to the six months ended June 30, 2023.

General and Administrative Expense ("G&A")


	Three Months Ended June 30,				Percentage of total revenue				Increase (decrease)
(in thousands)	2024		2023		2024		2023		2024 vs 2023
General and administrative	$	25,369	$	16,434	32.5	%	23.6	%	54.4	%

For the three months ended June 30, 2024 compared to the three months ended June 30, 2023

G&A expenses were $25.4 million for the three months ended June 30, 2024, an increase of $8.9 million or 54.4% compared to $16.4 million for the three months ended June 30, 2023. The increase primarily consists of a $2.7 million increase in stock-based compensation and a $1.7 million increase in costs related to transaction due diligence, which are both classified as non-GAAP adjustments for management reporting. Please refer to "Non-GAAP Financial Measures" below for additional information regarding non-GAAP adjustments.

The residual increase was primarily driven by inorganic G&A expense of $1.2 million stemming from post-acquisition operations of PAR Retail and higher organic compensation costs of $2.2 million.

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	Six Months Ended June 30,				Percentage of total revenue				Increase (decrease)
(in thousands)	2024		2023		2024		2023		2024 vs 2023
General and administrative	$	50,544	$	35,401	34.1	%	25.6	%	42.8	%

For the six months ended June 30, 2024 compared to the six months ended June 30, 2023

G&A expenses were $50.5 million for the six months ended June 30, 2024, an increase of $15.1 million or 42.8% compared to $35.4 million for the six months ended June 30, 2023. The increase primarily consists of increases of $5.0 million in costs related to transaction due diligence, $4.5 million in stock-based compensation, $0.6 million in severance, and $0.5 million in depreciation and amortization, which are classified as non-GAAP adjustments for management reporting. Please refer to "Non-GAAP Financial Measures" below for additional information regarding non-GAAP adjustments.

The residual increase was primarily driven by inorganic G&A expense of $1.5 million stemming from post-acquisition operations of PAR Retail and higher organic compensation costs of $2.5 million.

Research and Development Expenses ("R&D")


	Three Months Ended June 30,				Percentage of total revenue				Increase (decrease)
(in thousands)	2024		2023		2024		2023		2024 vs 2023
Research and development	$	16,237	$	14,888	20.8	%	21.4	%	9.1	%

For the three months ended June 30, 2024 compared to the three months ended June 30, 2023

R&D expenses were $16.2 million for the three months ended June 30, 2024, an increase of $1.3 million or 9.1% compared to $14.9 million for the three months ended June 30, 2023. The increase primarily consists of an increase in inorganic R&D expense of $2.3 million driven by post-acquisition operations of PAR Retail, partially offset by a decrease in organic R&D expense for our other Engagement Cloud offerings of $0.8 million as we right sized our headcount associated with our early stage product offerings.


	Six Months Ended June 30,				Percentage of total revenue				Increase (decrease)
(in thousands)	2024		2023		2024		2023		2024 vs 2023
Research and development	$	32,005	$	29,203	21.6	%	21.1	%	9.6	%

For the six months ended June 30, 2024 compared to the six months ended June 30, 2023

R&D expenses were $32.0 million for the six months ended June 30, 2024, an increase of $2.8 million or 9.6% compared to $29.2 million for the six months ended June 30, 2023. The increase primarily consists of an increase in inorganic R&D expense of $2.9 million driven by post-acquisition operations of PAR Retail. Organic R&D expense remained flat for the six months ended June 30, 2024 compared to the six months ended June 30, 2023.

Other Operating Expenses


	Three Months Ended June 30,				Percentage of total revenue				Increase (decrease)
(in thousands)	2024		2023		2024		2023		2024 vs 2023
Amortization of identifiable intangible assets	$	1,946	$	465	2.5	%	0.7	%	> 200%
Adjustment to contingent consideration liability	(600)		(2,300)		(0.8)	%	(3.3)	%	(73.9)	%
Gain on insurance proceeds	—		(500)		—	%	(0.7)	%	(100.0)	%

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For the three months ended June 30, 2024 compared to the three months ended June 30, 2023

Amortization of identifiable intangible assets was $1.9 million for the three months ended June 30, 2024, an increase of $1.5 million as compared to $0.5 million for the three months ended June 30, 2023. The increase primarily consists of an increase in amortizable intangible assets stemming from the Stuzo Acquisition.

Included in operating expenses for the three months ended June 30, 2024, was a $0.6 million decrease to the fair value of the contingent consideration liability for certain post-closing revenue focused milestones from the MENU Acquisition compared to a $2.3 million decrease for the three months ended June 30, 2023.

Gain on insurance proceeds was $0.5 million for the three months ended June 30, 2023, which consists of $0.5 million in proceeds received from the settlement of a legacy insurance claim. There was no comparable gain for the three months ended June 30, 2024.


	Six Months Ended June 30,				Percentage of total revenue				Increase (decrease)
(in thousands)	2024		2023		2024		2023		2024 vs 2023
Amortization of identifiable intangible assets	$	2,878	$	929	1.9	%	0.7	%	> 200%
Adjustment to contingent consideration liability	(600)		(7,500)		(0.4)	%	(5.4)	%	(92.0)	%
Gain on insurance proceeds	—		(500)		—	%	(0.4)	%	(100.0)	%

For the six months ended June 30, 2024 compared to the six months ended June 30, 2023

Amortization of identifiable intangible assets was $2.9 million for the six months ended June 30, 2024, an increase of $1.9 million as compared to $0.9 million for the six months ended June 30, 2023. The increase was primarily driven by an increase in amortizable intangible assets stemming from the Stuzo Acquisition.

Included in operating expenses for the six months ended June 30, 2024, was a $0.6 million decrease to the fair value of the contingent consideration liability for certain post-closing revenue focused milestones from the MENU Acquisition compared to a $7.5 million decrease for the six months ended June 30, 2023.

Gain on insurance proceeds was $0.5 million for the six months ended June 30, 2023, which consists of $0.5 million in proceeds received from the settlement of a legacy insurance claim. There was no comparable gain for the six months ended June 30, 2024.

Other (Expense) Income, Net


	Three Months Ended June 30,				Percentage of total revenue				Increase (decrease)
(in thousands)	2024		2023		2024		2023		2024 vs 2023
Other (expense) income, net	$	(610)	$	155	(0.8)	%	0.2	%	(493.5)	%

For the three months ended June 30, 2024 compared to the three months ended June 30, 2023

Other (expense) income, net was $(0.6) million for the three months ended June 30, 2024, a decrease of $0.8 million compared to $0.2 million for the three months ended June 30, 2023. Other (expense) income, net primarily consists of rental income, net of applicable expenses, foreign currency transactions gains and losses and other non-operating income/expenses. The change was substantially driven by increases in sales and use tax expense and other miscellaneous expenses.

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	Six Months Ended June 30,				Percentage of total revenue				Increase (decrease)
(in thousands)	2024		2023		2024		2023		2024 vs 2023
Other (expense) income, net	$	(310)	$	146	(0.2)	%	0.1	%	(312.3)	%

For the six months ended June 30, 2024 compared to the six months ended June 30, 2023

Other (expense) income, net was $(0.3) million for the six months ended June 30, 2024, a decrease of $0.5 million compared to $0.1 million for the six months ended June 30, 2023. Other (expense) income, net primarily consists of rental income, net of applicable expenses, foreign currency transactions gains and losses and other non-operating income/expenses. The change was substantially driven by increases in sales and use tax expense and other miscellaneous expenses.

Interest Expense, Net


	Three Months Ended June 30,				Percentage of total revenue				Increase (decrease)
(in thousands)	2024		2023		2024		2023		2024 vs 2023
Interest expense, net	$	(1,630)	$	(1,735)	(2.1)	%	(2.5)	%	(6.1)	%

For the three months ended June 30, 2024 compared to the three months ended June 30, 2023

Interest expense, net was relatively unchanged at $1.6 million for the three months ended June 30, 2024 as compared to $1.7 million for the three months ended June 30, 2023.


	Six Months Ended June 30,				Percentage of total revenue				Increase (decrease)
(in thousands)	2024		2023		2024		2023		2024 vs 2023
Interest expense, net	$	(3,338)	$	(3,402)	(2.3)	%	(2.5)	%	(1.9)	%

For the six months ended June 30, 2024 compared to the six months ended June 30, 2023

Interest expense, net was relatively unchanged at $3.3 million for the six months ended June 30, 2024 as compared to $3.4 million for the six months ended June 30, 2023.

Taxes


	Three Months Ended June 30,				Percentage of total revenue				Increase (decrease)
(in thousands)	2024		2023		2024		2023		2024 vs 2023
Provision for income taxes	$	(612)	$	(383)	(0.8)	%	(0.6)	%	59.8	%

For the three months ended June 30, 2024 compared to the three months ended June 30, 2023

Provision for income taxes was $0.6 million for the three months ended June 30, 2024, an increase of $0.2 million as compared to $0.4 million for the three months ended June 30, 2023. The change was substantially driven by an increase in foreign jurisdiction tax obligations.

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	Six Months Ended June 30,				Percentage of total revenue				Increase (decrease)
(in thousands)	2024		2023		2024		2023		2024 vs 2023
Benefit from (provision for) income taxes	$	7,173	$	(698)	4.8	%	(0.5)	%	(1127.7)	%

For the six months ended June 30, 2024 compared to the six months ended June 30, 2023

Benefit from (provision for) income taxes was $7.2 million for the six months ended June 30, 2024, an increase of $7.9 million as compared to $(0.7) million for the six months ended June 30, 2023. The change was substantially driven by a reduction of the Company’s valuation allowance which resulted from the establishment of deferred tax liabilities related to the Stuzo Acquisition.

Net Income from Discontinued Operations


	Three Months Ended June 30,				Percentage of total revenue				Increase (decrease)
(in thousands)	2024		2023		2024		2023		2024 vs 2023
Net income from discontinued operations	$	77,777	$	2,137	99.5	%	3.1	%	> 200%

For the three months ended June 30, 2024 compared to the three months ended June 30, 2023

Net income from discontinued operations was $77.8 million for the three months ended June 30, 2024, an increase of $75.6 million as compared to $2.1 million for the three months ended June 30, 2023. The increase was substantially driven by a $76.8 million gain from the sale of PGSC. The residual amount represents PGSC and RRC operating income, offset by a provision for income taxes relating to the gain from the sale of PGSC.


	Six Months Ended June 30,				Percentage of total revenue				Increase (decrease)
(in thousands)	2024		2023		2024		2023		2024 vs 2023
Net income from discontinued operations	$	79,855	$	5,255	53.9	%	3.8	%	> 200%

For the six months ended June 30, 2024 compared to the six months ended June 30, 2023

Net income from discontinued operations was $79.9 million for the six months ended June 30, 2024, an increase of $74.6 million as compared to $5.3 million for the six months ended June 30, 2023. The increase was substantially driven by a $76.8 million gain from the sale of PGSC. The residual amount represents PGSC and RRC operating income, offset by a provision for income taxes relating to the gain from the sale of PGSC.

Key Performance Indicators and Non-GAAP Financial Measures:

We monitor certain key performance indicators and non-GAAP financial measures in the evaluation and management of our business; certain key performance indicators and non-GAAP financial measures are provided in this Quarterly Report because we believe they are useful in facilitating period-to-period comparisons of our business performance. Key performance indicators and non-GAAP financial measures do not reflect and should be viewed independently of our financial performance determined in accordance with GAAP. Key performance indicators and non-GAAP financial measures are not forecasts or indicators of future or expected results and should not have undue reliance placed upon them by investors.

Key Performance Indicators

Within this Quarterly Report the Company makes reference to annual recurring revenue, or ARR, and active sites, which are both key performance indicators. The Company uses ARR and active sites as key performance indicators of the scale of our subscription services for both new and existing customers.

ARR is the annualized revenue from our subscription services, which includes subscription fees for our SaaS solutions and related support, managed platform development services, and transaction-based fees for payment processing services. We generally calculate ARR by annualizing the monthly recurring revenue for all

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active sites as of the last day of each month for the respective reporting period. ARR is an operating measure, it does not reflect our revenue determined in accordance with GAAP, and ARR should be viewed independently of, and not combined with or substituted for, our revenue and other financial information determined in accordance with GAAP. Further, ARR is not a forecast of future revenue and investors should not place undue reliance on ARR as an indicator of our future or expected results.

Active sites represent locations active on our subscription services as of the last day of the respective reporting period.

Our key performance indicators ARR and active sites are presented as two subscription service product lines: Engagement Cloud (Punchh, PAR Retail, and MENU) and Operator Cloud (Brink POS, PAR Payment Services, PAR Pay, and Data Central).

Annual Recurring Revenue


	As of June 30,				Increase (decrease)
(in thousands)	2024		2023		2024 vs 2023
Engagement Cloud:
Organic	67,577		60,893		11.0	%
Inorganic	40,356		—		—	%
Total Engagement Cloud*	107,933		60,893		77.3	%
Operator Cloud	84,235		61,601		36.7	%
Total	$	192,168	$	122,494	56.9	%

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Non-GAAP Adjustment	Definition	Usefulness to management and investors
Stock-based compensation	Stock-based compensation consists of charges related to our employee equity incentive plans.	We exclude stock-based compensation because these non-cash charges are not viewed by management as part of our core operating performance. This adjustment facilitates a useful evaluation of our current operating performance as well as comparisons to past and competitor operating results.
Contingent consideration	Adjustment reflects a non-cash reduction to the fair market value of the contingent consideration liability related to the MENU Acquisition.	We exclude changes to the fair market value of our contingent consideration liability because management does not view these non-cash, non-recurring charges as part of our core operating performance. This adjustment facilitates a useful evaluation of our current operating performance as well as comparisons to past and competitor operating results.
Transaction costs	Adjustment reflects non-recurring professional fees incurred in transaction due diligence, including costs incurred in the acquisitions of Stuzo and TASK.	We exclude professional fees incurred in corporate development because management does not view these non-recurring charges, which are inconsistent in size and are significantly impacted by the timing and valuation of our transactions, as part of our core operating performance. This adjustment facilitates a useful evaluation of our current operating performance, comparisons to past and competitor operating results, and additional means to evaluate expense trends.
Gain on insurance proceeds	Adjustment reflects the gain on insurance proceeds due to the settlement of a legacy claim.	We exclude these non-recurring adjustments because these costs do not reflect our core operating performance. These adjustments facilitate a useful evaluation of our current operating performance as well as comparisons to past and competitor operating results.
Severance	Adjustment reflects the severance included in cost of sales, sales and marketing expense, general and administrative expense, and research and development expense.
Discontinued operations	Adjustment reflects income from discontinued operations related to the disposition of our Government segment.
Other expense (income), net	Adjustment reflects foreign currency transaction gains and losses, rental income and losses, and other non-recurring expenses recorded in other expense (income), net, in the accompanying statements of operations.
(Provision for) benefit from income taxes	Adjustment reflects a partial release of our deferred tax asset valuation allowance resulting from the Stuzo Acquisition.	We exclude these non-cash and non-recurring adjustments for purposes of calculating non-GAAP diluted net loss per share because these costs do not reflect our core operating performance. These adjustments facilitate a useful evaluation of our current operating performance, comparisons to past and competitor operating results, and additional means to evaluate expense trends.
Non-cash interest	Adjustment reflects non-cash amortization of issuance costs related to the Company's long-term debt.
Acquired intangible assets amortization	Adjustment reflects amortization expense of acquired developed technology included within cost of sales and amortization expense of acquired intangible assets.

The tables below provide reconciliations between net income (loss) and adjusted EBITDA, diluted net income (loss) per share and non-GAAP diluted net loss per share, and subscription service gross margin percentage and non-GAAP subscription service gross margin percentage.

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(in thousands)	Three Months Ended June 30,				Six Months Ended June 30,
Reconciliation of Net Income (Loss) to Adjusted EBITDA	2024		2023		2024		2023











Net income (loss)	$	54,190	$	(19,702)	$	35,902	$	(35,607)
Discontinued operations	(77,777)		(2,137)		(79,855)		(5,255)
Net loss from continuing operations	(23,587)		(21,839)		(43,953)		(40,862)
Provision for (benefit from) income taxes	612		383		(7,173)		698
Interest expense, net	1,630		1,735		3,338		3,402
Depreciation and amortization	8,834		6,817		16,127		13,584

Stock-based compensation	6,286		3,601		10,696		6,609
Contingent consideration	(600)		(2,300)		(600)		(7,500)
Transaction costs	1,573		—		4,978		—
Gain on insurance proceeds	—		(500)		—		(500)
Severance	294		—		1,728		253
Other expense (income), net	610		(155)		310		(146)
Adjusted EBITDA	$	(4,348)	$	(12,258)	$	(14,549)	$	(24,462)


(in thousands, except per share amounts)	Three Months Ended June 30,				Six Months Ended June 30,
Reconciliation between GAAP and Non-GAAP Diluted Net Income (Loss) per share	2024		2023		2024		2023

























Diluted net income (loss) per share	$	1.60	$	(0.72)	$	1.09	$	(1.30)
Discontinued operations	(2.29)		(0.08)		(2.42)		(0.19)
Diluted net loss per share from continuing operations	(0.69)		(0.80)		(1.33)		(1.49)
Provision for (benefit from) income taxes	0.01		—		(0.23)		—
Non-cash interest	0.02		0.02		0.03		0.04
Acquired intangible assets amortization	0.20		0.16		0.36		0.32
Stock-based compensation	0.18		0.13		0.32		0.24
Contingent consideration	(0.02)		(0.08)		(0.02)		(0.27)
Transaction costs	0.05		—		0.15		—
Gain on insurance proceeds	—		(0.02)		—		(0.02)
Severance	0.01		—		0.05		0.01
Other expense (income), net	0.02		(0.01)		0.01		(0.01)
Non-GAAP diluted net loss per share	$	(0.23)	$	(0.60)	$	(0.66)	$	(1.18)

Diluted weighted average shares outstanding	34,015		27,357		32,935		27,381


	Three Months Ended June 30,				Six Months Ended June 30,
Reconciliation between GAAP and Non-GAAP Subscription Service Gross Margin Percentage	2024		2023		2024		2023






Subscription Service Gross Margin Percentage	53.1	%	43.3	%	52.4	%	46.6	%
Depreciation and amortization	13.1	%	17.4	%	13.4	%	18.8	%
Stock-based compensation	0.2	%	0.2	%	0.2	%	0.2	%
Severance	—	%	—	%	0.1	%	—	%
Non-GAAP Subscription Service Gross Margin Percentage	66.4	%	60.9	%	66.1	%	65.6	%

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LIQUIDITY AND CAPITAL RESOURCES

Our primary sources of liquidity are cash and cash equivalents and short-term investments. As of June 30, 2024, we had cash and cash equivalents of $114.9 million and short-term investments of $27.5 million. Cash and cash equivalents consist of highly liquid investments with maturities of 90 days or less, including money market funds. Short-term investments are held-to-maturity investment securities consisting of investment-grade interest bearing instruments, primarily treasury bills and notes, which are stated at amortized cost.

Cash used in operating activities was $37.4 million for the six months ended June 30, 2024, compared to $12.8 million for the six months ended June 30, 2023. Cash used in operating activities for the six months ended June 30, 2024 primarily consisted of a net loss from continuing operations net of non cash charges of $21.2 million and additional net working capital requirements substantially driven by an increase in accounts receivable of $8.0 million resulting from revenue growth.

Cash used in investing activities was $72.9 million for the six months ended June 30, 2024 compared to $6.2 million for the six months ended June 30, 2023. Cash used in investing activities during the six months ended June 30, 2024 included $166.3 million of cash consideration paid in connection with the Stuzo Acquisition (net of cash acquired) and capital expenditures of $2.7 million for developed technology costs associated with our software platforms, partially offset by $87.1 million of cash consideration received in connection with the disposition of PGSC and $9.4 million of proceeds from net sales of short-term held-to-maturity investments.

Cash provided by financing activities was $191.5 million for the six months ended June 30, 2024, compared to cash used in financing activities of $2.5 million for the six months ended June 30, 2023. Cash provided by financing activities during the six months ended June 30, 2024 primarily consisted of a private placement of common stock of $194.5 million (net of issuance costs). We do not have any off-balance sheet arrangements or obligations.

We expect our available cash and cash equivalents will be sufficient to meet our operating needs for at least the next 12 months. Over the next 12 months our total contractual obligations are $44.6 million, consisting of purchase commitments for normal operations (purchase of inventory, software licensing, use of external labor, and third-party cloud services) of $36.1 million, principal and interest payments on long-term debt of $7.4 million and facility lease obligations of $1.1 million. We expect to fund such commitments with cash provided by operating activities and our sources of liquidity.

Our non-current contractual obligations are $442.7 million, consisting of purchase commitments for normal operations (purchase of inventory, software licensing, use of external labor, and third-party cloud services) of $43.4 million, interest payments of $12.0 million and principal payments of $385.0 million related to long-term debt, and facility leases of $2.3 million. Refer to “Note 8 – Debt” of the notes to interim condensed consolidated financial statements in "Part I, Item 1. Financial Statements and Supplementary Data" of this Quarterly Report for additional information.

Our actual cash needs will depend on many factors, including our rate of revenue growth, growth of our SaaS revenues, the timing and extent of spending to support our product development and acquisition integration efforts, the timing of introductions of new products and enhancements to existing products, market acceptance of our products, and the factors described above in "Part I, Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations”, elsewhere in this Quarterly Report, in the 2023 Annual Report, and in our other filings with the SEC.

From time to time, we may seek to raise additional capital through equity, equity-linked, and debt financing arrangements. In addition, our board of directors and management regularly evaluate our business, strategy, and financial plans and prospects. As part of this evaluation, the board of directors and management periodically consider strategic alternatives to maximize value for our shareholders, including strategic transactions such as an acquisition, or a sale or spin-off of non-strategic company assets or businesses. We cannot provide assurance that any additional financing or strategic alternatives will be available to us on acceptable terms or at all.

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our financial statements are based on the application of accounting principles generally accepted in the United States of America. GAAP requires the use of estimates, assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenue, and expense amounts reported. We believe our use of estimates and underlying accounting assumptions adhere to GAAP and are consistently applied. Valuations based on estimates are reviewed for reasonableness and adequacy on a consistent basis. Significant items subject to these estimates and assumptions include revenue recognition, stock-based compensation, the recognition and measurement of assets acquired and liabilities assumed in business combinations at fair value, the carrying amount of property, plant, and equipment including right-to-use assets and liabilities, identifiable intangible assets and goodwill, valuation allowances for receivables, valuation of excess and obsolete inventories, and measurement of contingent consideration at fair value. Actual results could differ from these estimates. Our estimates are subject to uncertainties, including those associated with market conditions, risks and trends. Refer to "Part II, Item 1A. Risk Factors" of this Quarterly Report for additional information. Our critical accounting policies have not changed materially from the discussion of those policies included under “Critical Accounting Policies and Estimates” in our 2023 Annual Report.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Foreign Currency Exchange Risk

Our primary exposures relate to certain non-dollar denominated sales and operating expenses in Canada, Europe, Asia, and Australia. These primary currencies are the Great British Pound, the Euro, the Swiss Franc, the Serbian Dinar, the Australian dollar, the Singapore dollar, the Canadian dollar, the Indian Rupee and the Chinese Renminbi. Accordingly, changes in exchange rates may negatively affect our revenue and net income (loss) as expressed in U.S. dollars. We also have foreign currency risk related to foreign currency transactions and monetary assets and liabilities, including intercompany balances denominated in currencies that are not the functional currency. We have experienced and will continue to experience fluctuations in our net income (loss) as a result of gains (losses) on these foreign currency transactions and the remeasurement of monetary assets and liabilities. As of June 30, 2024, the impact of foreign currency exchange rate changes on our revenues and net income (loss) was not material. The volatility of exchange rates depends on many factors that we cannot forecast with reliable accuracy.

Interest Rate Risk

As of June 30, 2024, we had $120.0 million, and $265.0 million in aggregate principal amount outstanding on the 2026 Notes and the 2027 Notes, respectively.

We carry the long-term debt at face value less amortized debt issuance costs on the condensed consolidated balance sheets. Since the long-term debt bears interest at fixed rates, we have no financial statement risk associated with changes in interest rates. However, the fair value of the long-term debt changes when the market price of our common stock fluctuates or interest rates change.

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Item 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of June 30, 2024. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of June 30, 2024.

Changes in Internal Control Over Financial Reporting

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, did not identify changes that occurred in our internal control over financial reporting during the quarter ended June 30, 2024, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Part II - OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

The information in Note 12 – "Commitments and Contingencies” of the notes to the financial statements in Part I, Item 1. "Financial Statements" is incorporated herein by reference. We do not believe that we have any pending litigation that would have a material adverse effect on our financial condition or results of operations.

Item 1A. RISK FACTORS

The risks described in the Part I, Item 1A. "Risk Factors” section of our 2023 Annual Report could materially and adversely affect our business, financial condition, and results of operations, and the trading price of our common stock could decline. Except as modified, updated, or supplemented below, the Risk Factors section in our 2023 Annual Report remains current in all material respects. Refer also to the other information set forth in this Quarterly Report, including in the sections "Forward-Looking Statements," Part I, Item 2. "Management's Discussion and Analysis of Financial Condition and Results of Operations," and Part 1, Item 1. "Financial Statements (unaudited)."

We may not have sufficient cash flow from our operating subsidiaries to pay our debt, which may seriously harm our business.

As of June 30, 2024, we had $385.0 million of aggregate principal amount outstanding under our 2.875% Convertible Senior Notes due 2026 (the “2026 Notes”) and 1.50% Convertible Senior Notes due 2027 (the “2027 Notes”, and together with the 2026 Notes, the “Senior Notes”). On July 5, 2024, we entered into the Credit Agreement which provided for a $90.0 million term loan (the "Credit Facility"). Our ability to make scheduled payments or to refinance the Senior Notes and Credit Facility depends on our performance, which is subject to economic, financial, competitive, geopolitical, and other factors that may be beyond our control. If our operating subsidiaries are unable to generate sufficient cash flow from operations to service our debt under the Senior Notes and Credit Facility, we may be required to adopt one or more alternatives to secure cash flow, such as selling assets or obtaining additional capital; any sale of assets or transaction to raise capital could be on terms that may be onerous or highly dilutive. Our ability to raise funds through debt or equity issuances and otherwise access the credit and capital markets at the times and in the amounts needed and on acceptable terms will depend on our financial condition and the condition of the capital markets at such time. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default under the indentures governing the Senior Notes, the Credit Agreement governing the Credit Facility and other debt obligations.

Our indebtedness under the Senior Notes and Credit Facility, could, among other things, restrict or limit our ability to plan and react to changes in our business and our industries; place us at a disadvantage compared to our competitors who have less debt; and limit our ability to borrow additional amounts to fund acquisitions, for working capital, and for other general corporate purposes.

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The covenants in the Credit Agreement that govern our Credit Facility may limit our operating and financial flexibility.

The covenants in the Credit Agreement limit our ability to:

•incur debt and liens;

•make investments, loans and advances;

•consummate a merger or consolidation;

•sell, lease, assign, transfer or otherwise dispose of property;

•declare or pay dividends;

•prepay, redeem or repurchase debt;

•engage in affiliate transactions;

•change our business; and

•terminate or modify our organizational documents.

Under the Credit Agreement, the Company is required to maintain liquidity of at least $20 million and a first lien net annual recurring revenue leverage ratio of no greater than 1.25 to 1.00.

These covenants may limit our ability to make strategic acquisitions, fund investments or otherwise engage in other business activities that could be in our interest.

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On June 12, 2024, the Company issued 11,018 shares of its common stock, representing an issuance date fair value of $0.5 million, as a stock award to a former employee in connection with the sale of PGSC. The shares of common stock were issued without registration in a private transaction exempt from registration pursuant to Section 4(a)(2) of the Securities Act.

Under our equity incentive plan, employees may elect to have us withhold shares to satisfy minimum statutory federal, state and local tax withholding obligations arising from the vesting of their restricted stock and restricted stock units. When we withhold these shares, we are required to remit to the appropriate taxing authorities the market price of the shares withheld, which could be deemed a purchase of shares by us on the date of withholding. For the three months ended June 30, 2024, 4,684 shares were withheld.

The table below presents information regarding the Company's purchases of its common stock for the time periods presented.


Period	Total Number of Shares Withheld	Average Price Paid Per Share
April 1, 2024 - April 30, 2024	—	$	—
May 1, 2024 - May 31, 2024	—	$	—
June 1, 2024 - June 30, 2024	4,684	$	45.26
Total	4,684	$	45.26

Item 5. OTHER INFORMATION

During the three months ended June 30, 2024, none of the Company’s directors or officers (as defined in Rule 16a-1(f) of the Exchange Act) , modified, or a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement” (as defined in Item 408 of Regulation S-K).

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Item 6. EXHIBITS

Exhibit
Number

Incorporated by reference into

this Quarterly Report on Form 10-Q

Date
Filed or
Furnished

Exhibit Description

Form

Exhibit No.

2.1

Stock Purchase Agreement, dated June 7, 2024, by and among Booz Allen Hamilton Inc., PAR Government Systems Corporation, and PAR Technology Corporation

Form 8-K (File No.001-09720)

2.1

6/10/2024

3.1

Restated Certificate of Incorporation, as currently in effect

Form 8-K (File No.001-09720)

3.2

6/6/2024

3.2

Amended and Restated Bylaws, as currently in effect

Form 8-K (File No.001-09720)

3.1

2/14/2024

10.1

Amended and Restated PAR Technology Corporation, 2015 Equity Incentive Plan, as amended June 3, 2024

Filed herewith

31.1

Certification of Principal Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended

Filed herewith

31.2

Certification of Principal Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended

Filed herewith

32.1

Certification of Principal Executive Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350

Furnished herewith

32.2

Certification of Principal Financial Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350

Furnished herewith

101.INS

Inline XBRL Instance Document

Filed herewith

101.SCH

Inline XBRL Taxonomy Extension Schema Document

Filed herewith

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

Filed herewith

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

Filed herewith

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

Filed herewith

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

Filed herewith

104

Cover Page Interactive Data File (embedded within the Inline XBRL document)

Filed herewith

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		PAR TECHNOLOGY CORPORATION
		(Registrant)

Date:	August 8, 2024	/s/ Bryan A. Menar
		Bryan A. Menar
		Chief Financial Officer
		(Principal Financial Officer)

PAR TECHNOLOGY CORP - Quarter Report: 2024 June (Form 10-Q)

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