PAR Technology Corporation (NYSE:PAR) today announced its results for its second quarter ended June 30, 2018.

Summary of Fiscal 2018 Second Quarter and Year-to-Date Financial Results

  • Revenues were reported at $52.6 million for the second quarter of 2018, compared to $62.3 million for the same period in 2017, a 15.6% decrease.
  • GAAP net loss for the second quarter of 2018 was $1.3 million, or $0.08 loss per diluted share, a decrease from the GAAP net income of $2.0 million, or $0.12 earnings per diluted share reported for the same period in 2017.
  • Non-GAAP net loss for the second quarter of 2018 was $0.7 million, or $0.04 loss per diluted share, compared to non-GAAP net income of $2.6 million, or $0.16 earnings per diluted share, for the same period in 2017.
  • Revenues were reported at $108.2 million for the first six months of 2018, compared to $128.1 million for the same period in 2017, a 15.5% decrease.
  • GAAP net loss for the first six months of 2018 was $1.3 million, or $0.08 loss per diluted share, a decrease from the GAAP net income of $3.4 million, or $0.21 earnings per diluted share reported for the same period in 2017.
  • Non-GAAP net income for the first six months of 2018 was $0.0 million, or $0.00 per diluted share, compared to non-GAAP net income of $4.9 million, or $0.30 earnings per diluted share, for the same period in 2017.

A reconciliation and description of non-GAAP financial measures to corresponding GAAP financial measures are included in the tables at the end of this press release.

PAR Technology’s CEO & President, Dr. Donald H. Foley commented, “Over the past several quarters, we have made substantial investments in our Brink development, as well as our Brink sales and marketing teams, as we continue the transition to a software led solutions company. This quarter is no different. As evidence, our SaaS revenues increased 66% over the same quarter last year. Our Government segment had another strong quarter as revenues increased 22% over the same period in 2017 and we reported contract margins of 11.7% in the quarter.”

Conference Call.

There will be a conference call at 4:30 p.m. (Eastern) on August 8, 2018, during which the Company’s management will discuss the financial results for the second quarter ended June 30, 2018. To participate in the call, please call 844-419-5412, approximately 10 minutes in advance. No passcode is required to participate in the live call or to listen to the replay version. Individual & Institutional Investors will have the opportunity to listen to the conference call/event over the internet by visiting the Company’s website at www.partech.com/about-us/investors. Alternatively, listeners may access an archived version of the presentation call after 7:30 p.m. on August 8, 2018 through August 15, 2018 by dialing 855-859-2056 and using conference ID 9787478.

About PAR Technology Corporation.

PAR Technology Corporation's stock is traded on the New York Stock Exchange under the symbol “PAR”. PAR’s Restaurant/Retail segment has been a leading provider of restaurant and retail technology for more than 35 years. PAR offers management technology solutions for the full spectrum of restaurant operations, from large chain and independent table service restaurants to international quick service chains. PAR products can be found in retailers, cinemas, cruise lines, stadiums, and food service companies. PAR’s Government segment is a leader in providing computer-based system design, engineering and technical services to the Department of Defense and various federal agencies. For more information visit http://www.partech.com/about-us/investors or connect with us on Facebook and Twitter.

Forward-Looking Statements.

This press release includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements appear throughout this press release, including express or implied forward-looking statements relating to our expectations regarding anticipated financial performance, customer and product opportunities, and assumptions as to future events. Forward-looking statements are subject to a variety of risks and uncertainties, many of which are beyond the Company’s control, that could cause actual results to differ materially from those contemplated in these statements. Factors that could cause actual results to differ materially, include: delays in new product development and/or product introduction; changes in customer base and product, and service demands, including changes in product or service demands by the two customers from whom a significant portion of our revenue is derived; risks associated with the internal investigation into conduct at our China and Singapore offices, including sanctions and fines that may be imposed by the U.S. Department of Justice, the Securities and Exchange Commission (“SEC”), and other governmental authorities; and the other risk factors discussed in our most recent Annual Report on Form 10-K and other filings with the SEC. The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as may be required under applicable securities law.

About Non-GAAP Financial Measures

The Company reports its financial results in accordance with GAAP. However, non-GAAP adjusted financial measures, as set forth in the reconciliation tables below, are provided because management uses these non-GAAP financial measures in evaluating the results of the Company's continuing operations and believes this information provides investors supplemental insight into underlying business trends and operating results. These non-GAAP financial measures are not based on any comprehensive set of accounting rules or principles and should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP. In addition, these non-GAAP financial measures should be read in conjunction with the Company’s financial statements prepared in accordance with GAAP.

The Company's results of operations are impacted by certain non-recurring charges, including equity based compensation, acquisition related expenditures, expense relating to the internal investigation into conduct in China and Singapore and the SEC subpoena, and other non-recurring charges that may not be indicative of the Company’s financial performance. Management believes that adjusting its operating expenses, operating income, net earnings and diluted earnings per share to remove non-recurring charges provides a useful perspective with respect to our operating results and provides supplemental information to both management and investors by removing items that are difficult to predict and are often unanticipated. While the Company believes the adjustments provide a useful comparison, the reconciliations of non-GAAP financial measures to corresponding GAAP measures should be carefully evaluated.

 

PAR TECHNOLOGY CORPORATION

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

(Unaudited)

      Assets June 30, 2018 December 31, 2017 Current assets: Cash and cash equivalents $ 8,678 $ 6,600 Accounts receivable-net 33,418 30,077 Inventories-net 26,748 21,746 Other current assets 4,179   4,209   Total current assets 73,023 62,632 Property, plant and equipment – net 11,877 10,755 Deferred income taxes 14,170 13,809 Goodwill 11,051 11,051 Intangible assets – net 12,504 12,070 Other assets 4,590   4,307   Total Assets $ 127,215   $ 114,624   Liabilities and Shareholders’ Equity Current liabilities: Current portion of long-term debt $ 183 $ 195 Borrowings of line of credit 5,841 950 Accounts payable 21,072 14,332 Accrued salaries and benefits 6,153 6,275 Accrued expenses 2,775 3,926 Customer deposits and deferred service revenue 11,236 10,241 Other current liabilities 3,000   —   Total current liabilities 50,260 35,919 Long-term debt 101 185 Deferred revenue 4,783 2,668 Other long-term liabilities 3,380   6,866   Total liabilities 58,524   45,638   Commitments and contingencies Shareholders’ Equity: Preferred stock, $.02 par value, 1,000,000 shares authorized — —

Common stock, $.02 par value, 29,000,000 shares authorized; 17,885,159 and17,677,161 shares issued, 16,177,050 and 15,969,052 outstanding at June 30,2018 and December 31, 2017, respectively

357 354 Capital in excess of par value 49,508 48,349 Retained earnings 28,294 29,549 Accumulated other comprehensive loss (3,632 ) (3,430 ) Treasury stock, at cost, 1,708,109 shares (5,836 ) (5,836 ) Total shareholders’ equity 68,691   68,986   Total Liabilities and Shareholders’ Equity $ 127,215   $ 114,624      

PAR TECHNOLOGY CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(Unaudited)

      Three Months EndedJune 30,   Six Months EndedJune 30, 2018   2017   2018   2017 Net revenues: Product $ 20,883 $ 32,682 $ 47,207 $ 69,888 Service 13,944 15,034 27,140 29,377 Contract 17,744   14,545     33,885   28,861   52,571   62,261     108,232   128,126   Costs of sales: Product 15,339 24,389 34,779 51,961 Service 10,205 10,397 19,752 20,872 Contract 15,667   12,909     30,494   25,656   41,211   47,695     85,025   98,489   Gross margin 11,360 14,566 23,207 29,637 Operating expenses: Selling, general and administrative 9,020 8,917 17,620 18,527 Research and development 3,222 2,653 6,090 5,632 Amortization of identifiable intangible assets 242   242     483   483   12,484   11,812     24,193   24,642   Operating (loss) income from continuing operations (1,124 ) 2,754 (986 ) 4,995 Other (expense) / income, net (384 ) 54 (335 ) (194 ) Interest expense, net (78 ) (13 )   (119 ) (45 ) (Loss) income from continuing operations before provision for income taxes (1,586 ) 2,795 (1,440 ) 4,756 Benefit from / (provision for) income taxes 263   (818 )   185   (1,515 ) (Loss) income from continuing operations (1,323 ) 1,977 (1,255 ) 3,241 Discontinued operations Income from discontinued operations (net of tax) —   —     —   183   Net (loss) income $ (1,323 ) $ 1,977     $ (1,255 ) $ 3,424   Basic Earnings per Share: (Loss) income from continuing operations (0.08 ) 0.12 (0.08 ) 0.20 Income from discontinued operations —   —     —   0.01   Net (loss) income $ (0.08 ) $ 0.12     $ (0.08 ) $ 0.21   Diluted Earnings per Share: (Loss) income from continuing operations (0.08 ) 0.12 (0.08 ) 0.20 Income from discontinued operations —   —     —   0.01   Net (loss) income $ (0.08 ) $ 0.12     $ (0.08 ) $ 0.21   Weighted average shares outstanding Basic 16,330   15,919     15,993   15,893   Diluted 16,330   16,179     15,993   16,146            

PAR TECHNOLOGY CORPORATION

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL RESULTS

(in thousands, except per share and per share data)

(Unaudited)

  For the three months ended June 30, 2018   For the three months ended June 30, 2017 Reported basis (GAAP)     Adjustments   Comparable basis (Non-GAAP)   Reported basis (GAAP)   Adjustments   Comparable basis (Non-GAAP) Net revenues $ 52,571 $ —   $ 52,571 $ 62,261 $ —   $ 62,261 Costs of sales 41,211   —     41,211   47,695 —     47,695 Gross margin 11,360 — 11,360 14,566 — 14,566 Operating Expenses: Selling, general and administrative 9,020 641 8,379 8,917 671 8,246 Research and development 3,222 — 3,222 2,653 — 2,653 Acquisition amortization 242   242     —   242 242     — Total operating expenses 12,484 883 11,601 11,812 913 10,899 Operating (loss) income from continuing operations (1,124 ) 883 (241) 2,754 913 3,667 Other (expense) income, net (384 ) — (384) 54 — 54 Interest expense, net (78 ) —     (78)   (13) —     (13) (Loss) income from continuing operations before provision for income taxes (1,586 ) 883 (703) 2,795 913 3,708 Benefit from / (provision for) income taxes 263   (212 )   51   (818) (338 )   (1,156) (Loss) income from continuing operations (1,323 ) 671     (652)   1,977 575     2,552 Income from discontinued operations, (net of tax) —   —   —   — —   — Net (loss) income (1,323 ) (652)   1,977 2,552 (Loss) income per diluted share from continuing operations (0.08 ) (0.04)   0.12 0.16 Income per diluted share from discontinuing operations 0.00   0.00   0.00 0.00 (Loss) income per diluted share $ (0.08 ) $ (0.04)   $ 0.12 $ 0.16  

During the second quarter of 2018, the Company recorded $314,000 of expenses related to the Company’s internal investigation into conduct at its China and Singapore offices and the SEC subpoena. Additionally, $250,000 of equity based compensation charges were recorded during the second quarter of 2018. There were $77,000 of severance expenses recorded in the second quarter related to the closing of the Company's facility in France. The Company recognized amortization of acquired intangible assets of $242,000 related to the Company’s 2014 acquisition of Brink Software, Inc. ("Brink"). The benefit from income tax was decreased by 24%, or $212,000, to reflect the tax impact from non-GAAP adjustments.

During the second quarter of 2017, the Company recorded charges within selling, general and administrative of $605,000 related to the Company’s internal investigation into conduct at its China and Singapore offices and the SEC subpoena. In addition, $5,000 of expenses related to the implementation of a new ERP system, and $61,000 of equity based compensation charges were recorded during the second quarter of 2017. The Company recognized amortization of acquired intangible assets of $242,000 related to the Company’s acquisition of Brink. The provision for income tax was increased by 37%, or $338,000, to reflect the tax impact from non-GAAP adjustments.

     

PAR TECHNOLOGY CORPORATION

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL RESULTS

(in thousands, except per share and per share data)

(Unaudited)

  For the six months ended June 30, 2018 For the six months ended June 30, 2017 Reported basis (GAAP)   Adjustments   Comparable basis (Non-GAAP)   Reported basis (GAAP)   Adjustments   Comparable basis (Non-GAAP) Net revenues $ 108,232 $ —   $ 108,232 $ 128,126 $ —   $ 128,126 Costs of sales 85,025 —     85,025   98,489 —     98,489 Gross margin 23,207 — 23,207 29,637 — 29,637 Operating Expenses: Selling, general and administrative 17,620 1,119 16,501 18,527 1,855 16,672 Research and development 6,090 — 6,090 5,632 — 5,632 Acquisition amortization 483 483     —   483 483     — Total operating expenses 24,193 1,602 22,591 24,642 2,338 22,304 Operating (loss) income from continuing operations (986) 1,602 616 4,995 2,338 7,333 Other expense, net (335) — (335) (194) — (194) Interest expense, net (119) —     (119)   (45) —     (45) (Loss) income from continuing operations before provision for income taxes (1,440) 1,602 162 4,756 2,338 7,094 Benefit from / (provision for) income taxes 185 (384 )   (199)   (1,515) (865 )   (2,380) (Loss) income from continuing operations (1,255) 1,218     (37)   3,241 1,473     4,714 Income from discontinued operations, (net of tax) — —   —   183 —   183 Net (loss) income (1,255) (37)   3,424 4,897 (Loss) income per diluted share from continuing operations (0.08) 0.00   0.20 0.29 Income per diluted share from discontinuing operations 0.00 0.00   0.01 0.01 (Loss) income per diluted share $ (0.08) $ 0.00   $ 0.21 $ 0.30        

During the six months ended June 30, 2018, the Company recorded $611,000 of expenses related to the Company’s internal investigation into conduct at its China and Singapore offices and the SEC subpoena. Additionally, $431,000 of equity based compensation charges were recorded during the first six months of 2018. There were $77,000 of severance expenses recorded in the first six months of 2018 related to the closing of the Company's facility in France. The Company recognized amortization of acquired intangible assets of $483,000 related to the Company’s 2014 acquisition of Brink. The benefit from income tax was decreased by 24%, or $384,000, to reflect the tax impact from non-GAAP adjustments.

During the six months ended June 30, 2017, the Company recorded charges within selling, general and administrative of $1,567,000 related to the Company’s internal investigation into conduct at its China and Singapore offices and the SEC subpoena, and $21,000 of legacy charges related to the Company’s former chief financial officer’s unauthorized transfers of Company funds. In addition, $29,000 of expenses related to the implementation of a new ERP system, and $238,000 of equity based compensation charges were recorded during the six months ended June 30, 2017. The Company recognized amortization of acquired intangible assets of $483,000 related to the Company’s acquisition of Brink. The benefit from income tax was increased by 37%, or $865,000, to reflect the tax impact from non-GAAP adjustments.

PAR Technology CorporationChristopher R. Byrnes, 315-738-0600 ext. 6226cbyrnes@partech.comwww.partech.com

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