Q2 2020 PAR Technology Corp Earnings Call

Ladies and gentlemen, thank you for standing by and welcome to par technologies fiscal year, Twentytwenty second quarter financial results.

Time, all participants are in listen only mode.

I guess speakers presentation, there will be a question answer session to ask a question doing that portion of the call. You want me to press Star one on your telephone please be advised to today's conference maybe recorded.

Require any further assistance. Please press star ends here now it's my pleasure to turn the call to create spent.

Vice President business development. Please go ahead.

Thank you Carmen and good morning.

I'd also like to welcome you all today to the call for parties 2022nd quarter financial results review.

The complete disclosure well results can be found in our press release issued this morning as well as you know related form 8-K furnished to the as you see.

To access the press release in the financial details Please city Investor Relations and new section of our website Www Dot Spartech Dot com.

At this time I'd like to take care of certain details in regards to the call. This morning.

Participants on the call should be aware that we're recording the call. This afternoon and it will be available for playback.

Also we are broadcasting the conference call via the worldwide web. So please be advised if you ask the question. It will be included in both are like conferences and any future years order.

I'd also like to remind participants that this conference call includes forward looking statements that reflect management's expectations based on currently available data.

However, actual results are subject to future events and on certain things.

The information on this topic, it's called related to projections or other forward looking statements may be relied upon and subject to the safe Harbor statement included in our earnings release, this morning, and in our annual and quarterly filings with the U.S.C.

Joining me on the call. This morning, as part of your own President 70, insane and Brian our parts Chief Financial Officer.

I'd now like to turn the call over except for the formal remarks portion of the call, which will be followed by general <unk>.

Neat.

Thank you, Chris and good morning, everyone on the call today I Hope you and your families are willing to say.

The last several months have presented incredible challenges the world not stocks go out all those impacted by the global condemn.

Especially like to thank our central workers at par for the response investment flexibility as they continue to show up to serve our customers.

Our ability to keep our operations team continues to see running the challenging environment because a significant accomplishment you clearly demonstrates the power of our core values.

To begin I want to let you know I'm very optimistic about the future for.

Kobin 19th pandemic has had a drastic impact not only our company, but on the restaurant industry as a whole.

Fortunately by design part technology was and is in a strong market position to continue to provide value for our customers.

Even the most difficult the times this past quarter, we were able to book 850, 814, new brink customers, along with 209, new restaurant magic customers in the quarter and repeat it became very favorable performance the second quarter last year.

An amazing accomplishment.

Due to our focus within Qs ours in fast casual restaurant, we witnessed that our customers were part of the restaurant segment that was able to maintain operations and take market share during this challenging time.

These restaurants were well equipped with modern technology to quickly adjust their operations are curbside pickup drive through online ordering and delivery.

Before diving into the results today I wanted just got back and touch on three very important or approaching aspects of our business.

First the brink business is incredibly resilient.

While it's absolutely true that the restaurant business is a high failure rate business brings focus on the enterprise customer is unique.

Just because most evidenced by the fact at the end of July only 6% or bring stores were closed you'd be cobot Nike.

Historically, our business is mid single digit annual churn business, and we and as we emerge out of covered 19, I expect us to continue to improve that metric.

Second during our previous calls I relate to you the dynamic shift underway in the restaurant industry from older on premise server based technology to cloud based solution.

Other industries, we believe that once the cloud transformation takes hold the wave does not stop.

The last four months has dramatically accentuates point.

That's restaurants dealt with the reality of diminished traffic they had to quickly adopt to emerging digital trends to survive. Those restaurants were agile and made the proper technology investments were able to quickly shifted business models to drive.

All the pandemic will not last forever, it's our belief that years of demand had been pulled forward for digital products.

Democrat not there's not a restaurant in the country that can survive without the enablement of a digital presence today.

This presents will likely include include strong integrations with third party delivery native online ordering mobile application access smart routing curbside pickup in much more.

Third our Tam is large and brink has yet to penetrate the vast majority of.

It's estimated that there were 700000 to 1 million restaurants in the United States, but you the point of sale product.

Oh that market, we estimate hospitals units our addressable to par.

Historically, we had been a single product company, averaging $2100 per store.

That alone is a multibillion dollar addressable market.

As we talked about we're expanding our ARPU the launch of new products.

She is a new categories and the payments business.

Well much of our resources over the last few quarters have been squarely focused on brink development in the coming quarters will begin to ramp up our up sell engine.

While we have not upsold significantly today, we're seeing a deep did I hear from our customer base to rationalize vendors restaurant businesses are looking for their point of sale players to take on more responsibility not less.

It's our estimate but the average enterprise restaurants spend $10000 a year on recurring software products not amount continues to grow.

I think it only penetrated the very tip of that spend.

As it brings foundation solidified we believe we'll be able to kick me well, we believe we'll be able to continue to make additional features more available through our platform in so many of the challenged our customers face today.

This will lead to continued strong customer retention and the beginning of what we believe can be industry, leading net dollar retention.

Before I hand, the call over to Brian I want to spend one minute defining our metrics.

We report revenue in three buckets.

Product contract service.

<unk> is our traditional hardware business. This encompasses point of sale terminals track your products and peripherals.

Contract, it's 100% of our government services revenue.

Service is a combination of a recurring SAS offerings, along with our traditional recurring service contracts, especially with Harvard said hardware sales and installation services.

Further we disclose metrics, we think useful for investors to track our performance.

First there are as a measure of our annualized recurring revenue at the end of the quarter. This is 100% break in restaurant magic related.

Second bookings bookings are signed purchase orders, we take a very conservative view on bookings in the stores put into bookings only when we received he signed committed order I.

I believe this is the most important leading indicator of our business.

[laughter] open order backlog.

Simply put this metric is a number of restaurants, where we have assigned order that we have yet to install.

Lastly, churn churn is a dollar value of recurring revenue loss in the quarter usually annualized.

As we continue to grow our business will continue to provide additional breakouts of new metrics to help you got to performance.

I'll now turn the call over to Brian to review, our Q2 financial performance.

Thank you suddenly and good morning, everyone I.

I would now like to take this opportunity to provides additional details surrounding or second quarter results.

We reported revenues.

5.7 billion for the quarter.

3% from 44.2 million reported for Q2 2019.

Our net loss was 9 million were 49 cents loss per share for the quarter versus a net loss of 1.1 million or seven cents loss per share for Q2 2019.

Unfavorable year over year results from operations was primarily driven by a tax benefit recorded in 2019, a 4.1 million related to the sale in 2024 notes.

[laughter] other additional something performance was driven by increased R&D spending and bring in restaurant magic.

Increased interest expense.

An increased amortization related to the restaurant magic acquisition and drive through acquisition.

Operating segment revenues for the three months ended June Thirtyth 2020 <unk>.

27.6 million so the restaurant retail segment.

Decrease of 2% and 28.3 million reported Q2 2019.

And 18.1 billion government.

An increase of 13% of 16 million reported for Q2 2019.

Restaurant retail revenue for Q2 2020 by business line consisted of.

15.4 billion for core, which is 4 million for dry through.

<unk> point 2 million for Brent, which included 1.8 million for restaurant match.

Restaurant retail revenue for Q2, 2019 was 18 million for core 9.3 million for brain and point 9 million for sure check.

Government revenue for Q2 2020 by business line consisted of 9.7 million SAR.

<unk> point 1 billion for mission systems, and point 2 million for product sales.

Parity Q2 2019 revenue.

7.3 million for eyesore, he quit 2 million from mission systems, and put 5 million for chronic cells.

Product revenue for the quarter was 12.3 million down 2.4 million or 16% compared to Q2 2019.

Our hardware sales in the restaurant.

Segment were down versus prior year as result of customer still under hardware refreshes and installations.

The initial precautionary measures in response to cope with 19.

Product revenue related to bring the quarter ended June 32020 was 3.8 million a decrease of 10% and 4.2 million recorded for the quarter ended June Thirtyth 2019.

Right through product revenue for the quarter ended June Thirtyth 2020 was 3.5 million.

Service revenue for the quarter was 15.3 million <unk> 1.8 billion was 13% compared to Q2 2019.

Increase was primarily due to the addition of the restaurant magic business and the growth in Blink recurring software revenues.

Service revenue associated with spring includes recurring software revenue 5.4 million.

Increase of 35% from 4 million for the quarter ended June 32019.

Restaurant Magic service revenue includes recurring software revenue of 2.1 million.

Contract revenue from our government operating segment was 18.1 million up 2.1 billion, 13% as compared to Q2 2019.

The favorable increase was driven by contracts entered into during the first quarter 2020 related to eyesore.

Contract backlog totaled 130 million as of June Thirtyth 2020 that trailing 12 month book to Bill <unk> 0.7.

In regards to GAAP margin performance for the quarter.

Product margins for the quarter was 19.1% compared to 22.5% in Q2 2019.

The reduction in product margin was primarily due to unfavorable overhead absorption was reduced revenue increased freight costs at the beginning of the quarter. This year.

Service margins for the quarter was 35.2% compared to 25.2% in Q2 2019.

The improvement in service margin was primarily due to shifts in mix that resulted from our M&A activity.

Restaurant Magic acquisition, the drive through acquisition and the divestment I'm sure check.

Government contract margins for the quarter was 7.4% compared to 10% in Q2 2019.

The decrease in margin was primarily due to lower product service business line revenue, an increase investment products services compared to the quarter ended June Thirtyth 2019.

No the operating expenses.

Yesterday was 10 million <unk> point 9 million versus Q2 2019.

The increase was primarily driven by additional point 7 billion estimate expense recently acquired restaurant magic and drive through businesses.

Non-GAAP SG Nay was 8.6 million Oh point 2 million versus Q2 2019.

Non-GAAP SGT adjustments for Q2 2000 Troy.

Who did 1.1 billion equity based compensation and point 1 billion related to try to Singapore manner.

Research and development expenses were 4.5 million up 1.8 million versus Q2 2019.

Combined increased investment brink development, a 3.2 9.5 million a restaurant magic development.

Partially offset by the short trips that messenger and an increase in capitalized software.

Now to provide information on the company's cash flow and balance sheet position for the six month ended June Thirtyth 2020.

She was operations was 13.6 million an improvement of 1.5 million compared to the three months ended March 31st 2020.

The increase in cash was result of reduction net working capital needs.

Cash use investing activities was 4.6 million for the six month ended June 32020 versus cashews, a 3.3 million for the six month ended June 32019.

During the six month ended June 30 to 2020, we capitalize 4.6 million cost associated with investments in a restaurant retail segment software platforms compared to 1.6 million for the same period 2019.

There was no material non software cabots cost for the six month ended June Thirtyth 2020.

1.7 billion versus 2019 due to decrease in costs associated with GE infrastructure.

Cash provided by financing activities from continuing operations was 49.1 billion for the six month ended June 32020.

Versus 64.9 million same period in 2019.

Six months ended June 32020 included 120 million issuance of the 2026 notes, partially offset by the repurchase of a majority of 2020 windows.

Six months ended June Thirtyth 2019 included the 80 million issuance of the 2024 notes.

As of June 32020 inventory balance was 26 million. It an increase of 6.7 million from December 31st 2019.

Inventory turns were three times, where domestic international operations.

Accounts receivable 38.2 million decreased 3.5 million compared to December 31st 2019.

Receivable balances broken down between the government segment of the point 6 million.

And the restaurant retail segment of 29.6 billion.

I would now like to turn the call back over to 70.

Thanks, Brian.

Now to review, our operating segment performance in the quarter.

Just two quarters ago at the beginning of our fiscal year 2020, part had significant momentum a restaurant technology segment was accelerating you sort of bookings at historic highs and our growth accelerates accelerators, such as the investment in our software platforms were poised to deliver our strongest growth rate in history.

That will change in mid March as work from home was initiated corporate business travel eliminated inner hospitality in restaurant industry is for hit hard by quarantined shelter in place policies.

Even with all those headwinds our restaurant solutions business went above and beyond for our customers and our market position.

Evidenced by brink recurring revenues growing by 35% for Q2 2019 in restaurant magic recurring revenues, increasing by 15% in the same period all achieved in the most challenging environment for restaurants in industries history.

Hey are they are for brink was 21.4 million at the end of June and Air for restaurant Magic was 7.4 million.

We expect a art to continue to climb up as new installations go live in co bat Colgate impacted stores reopened.

They recommended early as I commented earlier in its worth repeating new bookings in the quarter totaled 814 sites in our open order backlog now stands at 1500 24 stores.

We deployed 465, new restaurants in extremely challenging environment and had an impressive noncovered churn rate of 4.3%.

At the end of June even with Kobe temporary churn, we had 10280 bring stores open and using the solution to operate the restaurant.

We saw growth great momentum at the end of June that spilled into July and we're very pleased to see the business environment prepare customers and the restaurant industry as a whole.

We are confident the worst is behind us and our trajectory of new store stores should improve in the balance of 2020.

New bookings for restaurant Magic totaled 209 stores and activation totaled 180 in the quarter.

After churn our installed base stands at 5064 stores at the end of Q2 for restaurant match.

Our core business is being most impacted by the coated 19 restrictions and the overall downturn economic landscape.

There have been disruptions as capital purchase or be capital purchases are being postponed and we're confident that these are not lost opportunities being pushed into second half of this year, depending on specific concepts in the timing of restrictions being reduced.

As we communicated in our Q1 called we aggressively push forward would cost reduction initiatives to strengthen an already strong liquidity position and balance sheet as seen by our cash generation in Q2.

All of those actions are critically important as product revenues in the second quarter were down 16% year over year better than we originally expected and down 34% sequentially as capital purchases principally hardware were delayed.

At the beginning of Q2, we got this impact what had been dramatically more severe and we're proud of how we enjoyed this difficult period.

The lower product volumes may continue over the next couple of quarters, but we do not expect condition, we excuse me, but we do expect conditions improve sequentially and expect that full recovery in 2021.

Now to review our government segment.

Our government business again delivered a solid quarter evidenced by the 13% increase in revenues compared to Q2 2019.

Backlog at the end of Q2 was $130 million.

Our Intel solutions business with the driving force behind the growth in the quarter as I saw revenues increased 34.3% from last year's Q2.

We continue to seek out contract opportunities, where we can leverage or decades long experience in performance excellence, specifically and value added revenue contracts that include more direct labor and high Tech contract work in our until solutions business line.

Before we go to queuing I want to leave you with the falling thoughts.

We're pleased with our Q2 performance during a challenging period for the world.

This is the first difficulty we face as a company every time, we go through a moment like this it helps us learn evolving Merck and stronger company.

I believe this time will be no different.

We've never seen a more pressing need for products and we know from Mcspirit front that experience that restaurant that take advantage of this window to upscale and re scale, we've done faster and stronger than their competitors.

I'd like to thank our customers our partners and our team members for their continued support.

Now I'll turn the call back over to the operator for keeping it.

Thank you, Sir and I felt reminder, ladies and gentlemen to ask a question you will need to press star one on your telephone to withdraw your question press the pound or hash key.

Standby, we've compiled it can't name Boston.

Our first question is from Andrew Good with Roth Capital Partners. Please go ahead.

Hi, good morning, and congrats on the quarter.

Thanks, My first question Yep Yep, that's my first question.

Revolves around the white space conversion, so with business conditions kind of improved here, yes, it or about 6% of your stores were closed bring customers. In July do you guys have a greater visibility now into maybe capturing some of that white space. It was available.

We're starting to I think you know in July we had to continue rebound that we saw in June and I think I wish it should be no different I think as Whitespace conversion will will be a big part of our future for the rest of this year and 2021, a lot of they actually as the result of Kobin.

As I mentioned the call the conversations that we're having to their customers.

I I think it's cold many years of demand forward because many of these customers of ours that we had partially rolled out look at their data and see that stores with brink far overachieved those outbreak and so there's an acceleration in those conversations absolutely and I think what we'll see that a in the next.

Your next the next few quarters in years to come.

Great. Thank you and then second question here kind of a two parter. So I know you guys had a kind of major national customer that that paused installs due to coated and was looking earlier in the quarter to restart installs in the coming weeks. So I was wondering if a those installers have restarted and.

Then just lead time for installing now normally it's about six to eight weeks is that still a normal timeframe with.

Well the pandemic still going on.

Oh, Great question, So yeah, I would say every customer pause.

He said the pandemic.

But that's pretty much yes stopped and that's I think this quarter was with so incredible and that we were still able to sign a number of stores are missing. It again more of the result of highlighting just how valuable these products are to customers and the demand pulling forward and so.

I think most most customers have come back and started to install again, although it's not across the board in with some of the spikes that we've seen and covered in different states.

It is still 68 weeks of the book to Bill, but I think we'll see some elongation of that it's cold. It continues to stay high in the United States in that.

Our customers are while there are a little more careful about how they roll out now and we'll do then partially versus hole, but in general its I don't think it's indicative of the long term trend, but more of an reaction to a state by state basis, where cases, maybe high versus others, where kids are declining and they feel comfortable going back to normal speed.

That makes sense, thanks, again and congrats on the quarter.

Thank you and ladies and gentlemen, a reminder to ask a question do you need to press star one on your telephone.

And our next question is from some not tomorrow not with Jefferies. Please go ahead.

Hi, good morning, Thanks for a thanks for taking my questions. A first I mean I just wanted to add maybe not a question. My statement, we really appreciate and your thoughtful letter to investors and to the company in early June I think is really helpful. At a time when there is a lot of uncertainty. So just wanted to provide that feedback, but yeah, maybe first question.

On the quarter itself.

No that backlog number was up about 30% quarter over quarter really nice, especially the only compare relative to kind of the the overall business maybe help us think about visibility into the backlog and as you compare maybe over the last year did the timing of the backlog coming online if there's been any dip.

Friends and just generally what was helping that backlog increased from one could you give.

Yeah, you concussion. So thank you for the comments on letters so.

They did the growth in backlog is a direct result of the state shutting down and in April April may and parts of June and that.

The demand for our products are despite customer said listen we need to get digital solutions out there faster to respond to cope with but many of them had a very strict rules around entering stores or physical rollout.

You know, we shouldn't forget now but back then.

Most restaurants and most businesses didn't allow not employees in stores and so the backlog rose because of the limitation and getting that out the door, we're starting to see those restrictions removed and starting to see installation starts to pick up which should continue to help us attack that backlog.

A really important point to make here, though is our backlog is firm and you know having looked at lots of suffer companies. Our backlogs are committed signed purchase orders and so it's a very very conservative view, a backlog on and so we feel very confident ability to to roll that out given the commitment from the customer and ourselves.

But I think we'll see for the balance of 2020.

On the backlog to be relatively high because I do think bookings will continue to accelerate and roll off like I mentioned on the last question they'll continue but like I said, our customers are looking a little bit on state by state basis, given workover. Despite thing they may slow down real up there accelerate throw off in states where companies low so it's a little bit unpredictable.

On getting the virus.

And so we're kind of playing it dynamically, but I would expect both bookings and backlog to continue to grow for the balance of 2020.

Great. That's really helpful. And then maybe just you know I know that for a lot of companies.

That would coverage, it's difficult right now that too far into the future but.

Any change in just maybe that the directional competence that you have and you know if I thought about what you had talked about maybe long term booking maybe it thousands and thousands bookings a quarter or any change in forget 2020, maybe but just the the view that you guys can get back that level of things stabilize or as the way.

I'll follow suit returns to whatever the new normalize.

Yeah, I think we had extreme confidence, we'll get back at levels and and I think go well beyond that given you know in many ways covert has always done this trend indicates for a product both to our existing customers, where we have that large white space you know with many of our large customers, we're not even halfway rolled out and so yeah. There's.

10, 12000 stores that are under I must say that we haven't converted I think we'll see a big acceleration of those stores because as an example.

We have a a one customer where you know we made a third or the halfway rolled out in.

In that one customer if you were not on brink your store didn't have access to mobile application and so in a timely coded if if you were at the restaurant operator in that in that chain that didn't have the mobile app you really suffered versus those that had drinking could access in the lab and so I think I feel extremely confident that the but that that well.

Go well beyond our original targets now because everyone went through that challenge of thing I need to bring this mobile. This this excuse me this digital demand for it so I feel extremely confident will go well beyond that from accounting perspective.

You know whether this year 2021, I can't guarantee I don't know, but I think we feel supremely confident that it it whatever we thought that you're going to be it will be larger because the cove. It. It's just highlighted how much the product is a need now.

Great and then maybe switching gears a little bit yeah, you mentioned that you'll be investing and cross selling are ramping down the cross selling efforts here in short order campus, maybe understand that go to market motion there and if you will need to either change the it make additions to the sales are going.

Innovation and or thinking about how how youre maybe partner to drive some of that just how should we think about the ramp of that cross sell strategy.

Yeah. So you know I would expect.

It's started yeah first with our acquisition of restaurant Magic or where we have started to go to our customers and often in restaurant magic and I would say if we look at the pipeline of restaurant magic.

Over half the pipeline now has been come through the way of brink and so we've seen the ability of us to effectuate the buying decisions of our customers I'm very much tied to the fact that our customers are now asking their point of sale companies to take on more and so this is a bit of it a change from the past where historically restaurant companies may.

To be felt and they felt comfortable managing 12 or 13 different software product today, they're really looking for someone to kind of helping guide that that I see transformation. So that feel that sales motions being tested right now we restaurant magic and we've done it with the exact same salesforce, we have today, but there's no doubt we will continue to I'd add to that Salesforce as we add more product.

And then our next growth will happen with our payments business, which will start processing transactions at the end of this quarter and it really settlement in Q4 and for that business.

Distributed to the exact same sales if we have today, but adding product specialists. So from a infrastructure perspective, I think you'll see us continue to add to our sales team as as we add more stores the specialists will come in and sort of support the individual product lines and so we run every every upsells its own individual product and so that every every line item.

Product manager and probably specialists, helping insist that fell four so I think it'd be no different than if you were looking to sort of traditional ERP sell businesses, where you've got to one sales rep per customer, but that's held back then so best product specialists that to push through the additional products.

Great I appreciate you taking a multiple questions from me and I'll turn it over to the next person. Thank you again.

Thank you and our next question comes from George Sutton with Craig Hallum. Please go ahead.

Thank you all saw need obviously drive through is a very.

And poor increasingly important area for the QSR can you talk about exactly how you're attacking that opportunity.

Sure so.

Yes, absolutely come to the forefront of our customers mines and.

And I think our acquisition was very lucky from accounting perspective, So we've seen a very significant growth and drive through in a you know may June and July as well.

And so we have restructured our team to be far more aggressive there we will be launching a new set of products by the end of this year and so it is receiving continue focusing in interest from US a lot of our our drive to revenues in Q2 came towards the end of that and so we kind of and quite a bit of revenue towards the end of Q.

Thank you and I think that momentum will continue in Q3, and then as we launch our new products and then drive through back into the year I think that will take us up another level.

[noise] you I continue to talk about the value of having a break versus not having brink I'm curious if there's been any further quantification of that benefit and where that stands.

So we don't quantify because it's by customer a in every customer has a different data, but I I think all we can say that as our customers have come back to us and suggested that you know on average at store that had a modern infrastructure versus one that didn't that you know the word out uses be with significant difference.

And that may be driven by everything from a store that had brink was able to have a very strong third party libbey integrations or it might be a sort of had bring was able to launch.

A an online ordering application or mobile application. So we don't have I think chemical categorical data, but I think what we had a lot of college my customers that knows that had modern technology significantly outperformed those that's it.

[noise] Lastly, we did pick up a DARPA win.

But $12 million and it sort of brought to mind the potential for a strategic option there any move closer there where does that process step in your view.

Sure, we can't comment on potential acquisitions or divestitures, but I think you know weve taken its accounts you'd be in the past which is.

You know, there's not a long term success between government services business and on the point of sale business.

And so we will look to that and I think it's strengthen the government business is only a good thing as we looked at essentially have a transaction at some point.

Okay. That's it for me thank you.

[noise]. Thank you. Our next question comes from Mark Palmer with T.I. Gene. Please go ahead.

Yes. Good morning, Thanks, very much for taking my question.

You mentioned that the even product is set to be unbilled toward the end of third quarter ramping up into the fourth quarter can you talk a little bit about what's gone into the preparations along those lines, especially insofar as the environment, you're gonna be launching into is different than the one that you had a rich.

Generally thought you were launching here.

Sure. So early on we're launching we are focused much more on table service at the table customers, where there's a very large call it low spread like opportunity.

For us, obviously and post coded that market dried up significantly and so weve adjusted our products significantly to now target are more traditional call it fast casual customer base.

And so the changes we've made have been everything from what hardware products do we associate a into that transaction, obviously, if people aren't dining <unk>, we're not no longer you know working with pay the table devices, but what products can we or tie into that fast casual market. How do we tie that in the future online ordering and processing. So it's been a.

A very quick a revamp on this product.

And then because everything from who we decided to partner with on the payment facilitator to our risk model and it and we feel very confident were that we sort of adjusted very quickly and covenant revenue will start coming in.

Great. Thanks very much.

Thank you and I, sorry mines, and ladies and gentlemen, if you have a question just press Star then one to getting that can't.

Our next question Adam Wyden with 18 W. capital. Please go ahead.

Hey, guys. Congratulations on a terrific quarter I don't think the restaurant industry has seen a more challenging period in the history of mankind. So I'm glad you have good customers I'm glad you guys were able to.

Not only install units, but also book a decent amount side of a couple housekeeping questions on some bigger question, but first question you guys talked in the past about being able to installed units like mail order I know toast has been able to send people you know program terminals and train people the you tube and.

You guys have talked a little bit about you know being able to move forward with a solution that you guys will actually have to enter the restaurant and he has been able to make any progress on that front.

Yeah, we call it self install so yeah, we continue to make progress on that and I think.

No it's obviously growing.

And you know it it will be a longer term transition for us in the sense that the customers. We're rolling out today are customers, we signed and May deals would and plans for installation quarters ago and so it will continue to be a part of what we're doing on the challenge being that the enterprise customer once you've created the process instead of a true vendors.

You change that is sometimes more recent convincing to do a self install so it's progressing and I think as states of reopened I don't I don't think it'll be a long term bottleneck for us.

Got it Okay. My second question is kind of an elaboration of Oh Mark's question on payment you know I know you initially targeted table service, but now you're in this unique position, where you're seeing the companies the restaurants that have bring versus the ones that don't and clearly you know huge percentage of your base has got drive Ku and Ka.

Sorry out like you know arby's, and dairy Queen and CKD and five guys and all the QSR as which as you know made your business Super robust and low churn I mean thinking about the business going forward as you look to capture white space or I guess, they called white space.

As you look to kind of convert people that don't already habit or a new customer I think on some level. You know there's this you know this thought that there was a constraint around capex and you know buying new terminals I think you've identified that it's not that expensive fighting Rand I mean have you started to pay.

Your payment solution with discounts in hardware or you know free hardware or I mean, because if you look at your peer group.

And now that we see this and other industries I mean, I just bought an iPhone 11, Oh. It was a 1300 dollar MSRP and you know 18 T is giving it to me for you know I don't know 20 Bucks a month or free I mean, I don't even know, but I got a 13 I walked out with the 1300 dollar device and I'm, playing with it and doing high K videos mismatched I mean, I would think that you know upon.

A guy whose revenues are constrained and I can't have three people. Many in the terminals and that you know I can basically get bring from you fire a bunch of people that are manning the carry out and delivery and basically you know a basic refinancing entire cost with the payments contracted the already giving to somebody else I mean I would think.

When I look at your peer group you know almost 100% penetrated the payment and you know you guys at the same facilitating the thing is if you're able to basically math you know your peer group I mean, you should have 100% payment and not only that you're you've also you can also lead with that in that you know you've got the balance sheet to basically finance hardware and all.

The last I mean, I would think that you know you guys should be chomping at the bit you know given that the rest of your peer group how before to one ratio payments are SAS I mean this this could be a step function you know moving your business I mean can you talk a little bit about all that.

Yeah, I think we agree or we see that you know world the coded where budgets are tight and insecurity as high the ability to for us to create recurring revenue out of hardware I Capex, it's something that our customers want and we'll push out and there's no doubt in my mind that when we go to our customers and offer them brink.

And then payments and oftentimes at the same price or better than what they have elsewhere and often the ability to spread their hardware payments over time by taking payments contract I feel very very confident that that'd be an attractive solution for them today and more so than it was before kogas.

Right, Yeah, I mean look it's obviously you know we follow the industry closely and you talk to channel partners and people in the industry. It's it's our understanding just doing research that you guys have already kind of made progress and maybe even signed a couple of customers and enjoying payment hardware you know kind of payment hardware break deals can you talk a little bit about maybe some of those festival ones.

So you've already been able to secure.

We can't unfortunately till they they released.

Our contracts require joined cooperation on them, but well what I'll say, it's a two things one we've absolutely sign you know.

Customers, we find very attracted during covered and expect to sign more on in the coming weeks and months here, but second I would say that are our future pipeline of large logos has never been larger or the conversations we've had with thousand plus store chain that now is far bigger than it was last quarter to quarter before and and all of last year and so that doesn't mean.

Mean anything for 2020, but absolutely mean, something for 2021, and 2022, which is where a lot of our confidence is coming from and that meet the long term pipeline. If you will is far deeper now than it was before covered.

Okay third third question, it's kind of a two for you know it sounds like you're Super confident you guys feel like this isn't a turning point in the industry and like you're seeing this whole lot of industries, you saw with Alibaba, where you kind of even Wayfair, where you have the cobot has created this turning point. We're you know, it's creating a consumer behavior change.

I think brink and carry out in delivering QSR isn't the same bucket I mean, I think if we run a statistic one third of the restaurants nationally like close permanently on the largely smaller a table service and and you know kind of different types of restaurants bars and this amount I mean, you know given the economy a lot of that traffic has been a gun to flow through to the QSR.

Sorry, that's going to manifest itself and higher comps and higher needs for labor efficiencies and all the rest. So it sounds like you know this is quote unquote kogan stock yet the stock down 10% today, it's really hard for me to see why appear like Lightspeed, which has higher churn is growing slower it guided to flat sequential growth you're obviously.

Got it for more it trades at 21 times. They are we trade at a fraction of that I mean, you know I feel like this is kind of like you know how do you do you know we have the same conversation every quarter in the market keeps pushing back you know the value realization you guys were executing can you talk to me about what you're willing to do that kind of give it to everybody and and kind of narrowed that.

Yeah, I mean, you guys bought restaurant Magic last year, clearly you've indicated that you want to buy other modules arguably larger ones. So you need your cost of capital to do that and you don't habit I mean, what's what do you think you can do the kind of give it back to everybody.

So you know listen I think I look at then if you back in the first part is our ability to execute and I think relative to all the time as you mentioned plus every other company that sells point of sale suffered any type of retail industry. I don't think anyone had better results than we did.

And so I feel extremely confident that were performing call it above above where where others are and I think I feel equally pumping that's all those companies on the future.

Yeah, it's gonna future. So I think first week execute second I think we've talked about this before but continuing to tell that story I think we're continuing efforts to be more transparent on our numbers more transparent on what those numbers mean and and and focusing people on these metrics that really matter I eat or bookings growing our expectation.

Our growth to continue to grow Genco bid.

And so I think that will happen as it relates to M&A you know we've been very upfront honestly, we keep talking M&A conversations going all the time when we do believe that there are a number of strategic fits for for our product line.

And as you said, it's a bit reflected in our ability to do a transaction requires us to.

You know.

Have a sort of a a flywheel between our stock price and our ability to issue shares, but I think our goal is not find ways to first execute second to get the word out there that we exist that we are performing at the time and that we're delivering results and and and I'm not sitting up so much or what else, we can do but I think.

I think its but as long as we execute once you get the word out there I think should catch up in itself.

Yeah, I mean look at what I would say here is that like I think the payments lever to me I mean, I think historically, it's been a challenging I think you know maybe all the old management team didn't really have the wherewithal or knowledge and maybe that was a blessing on some level because the company was so product focus than it was able to produce a really.

Great product, even without the balance sheet, but now you have the product you basically done here or whatever your conversion or what I forget what it's called the thing that the move where are you guys are able to do upgrades faster and you saw a lot of the R&D issue. So now you've got that well oiled machine and you have a great balance sheet.

Need and great team I mean, I would think now that are now that you've accomplished all of that you know a you know if you're able to implement a three to one payment ratio like the peer group I mean, if it would be incredible and you know I think it would it would really step function. The company yeah, I mean, they went out.

Yes, Okay, and I mean, I was I think I've never been more excited about the opportunity we have in front of US right that the idea that we were able to you know have close any bookings in Q2 in Q1, I think with nothing I ever dreamed about the idea that we haven't got installed done in Q2. When you know nothing was getting done for two months of that quarter. Its you know I think just a shocking to me at the same time.

I look at what were we are and I mean, what I said in the beginning which is we're just at the very tip of the iceberg right. We are 10000 ish restaurants out of hundreds of thousands of opportunity and in addition, we haven't touched payments, which you can be our largest let me see Monday, but we also having it penetrated or just a very obvious which is we sell the best.

The price point of sale product in the World and we had just begun that go to market and I've said it before when I say again during my tenure almost zero. The focus has been on sales and marketing has been focused on product in development getting our product that foundation that I mentioned correct. So we can scale and as I mentioned as we start to.

During the engine and the focus of management to sales marketing, we will execute there as well as anybody else in the world and I have execution of our team and we have not taken you know covered as an excuse by any means you know our management targets at the same as they work when we started and we take it sort of a new excuse attitude to that and then I think lastly, the quality of the team is dress.

To be different you know we bring team is almost a 100% different from where it was a year ago and I think from a quality perspective, we continue to add talent that I never would have dreamed of hiring just six months ago, and so I don't know what that means for call. It Q3, but I do know that as we expand these these things compound it can kind of compound over time.

Right Yeah, no only that that's that's good I mean look I think you know when I when I look it is like qualitatively you know when I when I look at like kind of I called Kogan stocks and non common stocks you know look I'm not a technology investor as you know and probably everyone. On this call knows that I've invested all types of things you know and so when I look at opportunities I look at them from the frame of how does this.

Opportunity.

Exists relative to other any other opportunity in any other industry and when I look at other companies, whether it be carvalho, wayfair or pellet, Tom or Nautilus or any company I mean I looked at this one I put you know Paul brink restaurant magic right in the forefront of like Hey, We're Cobra beneficiary no one is going to sit on the table service restaurant.

Our incrementally that incremental person is going to want to order delivery because remember you know I'm sitting here in Florida, I moved to Florida, I order on Grubhub and seamless web three times a day, whereas in New York I used to walk outside of my apartment in bone graft food and so that consumer behavior is not going to change people are gonna get used you know ordering food on their phone as opposed to just like they got used to buy.

Good stuff on Wayfair, Amazon Carvana, and like I look at par and I'm like this is a brick and Covance. Todd. This is a common stock you guys are a direct benefits you're coded coast filed their entire and I'll play Salesforce Oracle and MCR Sleepy old companies that are not devoting resources. I mean, you know I don't I don't want to be hyperbolic and say this is the next Amazon because it's not like you guys own enterprise.

I was restaurants and like you know all the money in dollars and mindshare is coming into your category and you've got no. One fighting with you I mean, it's I mean, especially from an international perspective dairy Queen does international units a lot of and a lot of the companies that you deal with like a work in inspired.

Global footprints and you know there there their teams are being decided domestically I mean, when you look at Telos, it's going to three restaurants, you know if you win a big RFP for you know restaurant Magic is doing business with you know I'm you know with a wouldn't call list a restaurant brands has got Burger King and Popeye's me. These are big groups that have huge international operations.

The CIO represents a you know domestic deployment you know that CIO. It was also global and they represent international deployment. So like you know I'm with you I I'm, just kind of being my head against the wall and and trying to understand why people are buying square with some but I I guess involving Doug.

I I think we'll get there and we got two more questions tumor okay. That's it.

Thank you.

Perfect. Thanks.

Thank you. Our next question comes from Brad Hathaway with Servier. Please go ahead.

Hey, guys. Congrats again on a a good quarter a tough environment just wanted to ask broadly on the competitive environment. I mean, obviously, we saw some retrenchment from toast and some of the other players are there and I'm sorry, I'm wondering if you're seeing any more kind of activity or what you're seeing maybe from the legacy you guys are you either increased competitive.

Intensity or has it could you just got to do you a little lighter I just curious is what you're seeing there.

Yeah, I think the kind of intensity is definitely lighter where it wasn't for a particularly say on price I think.

You know a year ago, you know our win rates were extremely high where it was frustrating was that the competitive intensity would with people coming in trying to undercut by price a lot of those companies you know I don't see then nearly as active anymore and it's it's going to a very much help our ability to maintain price.

Relative to the legacy players I don't think we've seen a drastic difference one way or the way I certainly haven't seen than say this is our moment to come come back and be therefore, you and that's the boy that we're trying to fill for our customers. So I think we feel pretty good about competitive environment today, and and I think.

You know to be Frank the moves that we're making it wouldn't it mattered, but certainly doesn't help.

Great. Okay. So weve, obviously as you said every one of the restaurant. She seems just fee that you know crowded future here.

Do you see any increased kind of development or effort from the legacy Guy. It's Oh, we really need to stricter crowded really big data priority.

Yeah, I think they all get it they all seem to change is happening there's no doubt that they don't they don't see that the base turning on but I think it's it's universal I know, it's a tough thing to do I'll give you one when you know sort of anecdote or when we think about is you know many of these legacy customers actually to competitors can.

Come in they can revitalizing the product, but when they can't revitalize is trust and in many cases. These they'd had these customers for 10, 15, 20 years and have relatively long reputation of I'm not doing well by the customer not being there for support services, a you know charging them except for for payments and so I.

I think a lot of this is also just customers, saying, let's I I don't care, if you've moved to a cloud or not I I'm I want to go with someone that I that I Trust and I haven't had this problem with so you know not only did have declined a product while I think they have to climb the trust wall, which is a lot harder.

That's great. Thanks for an update and looking forward to see breaking the rest of part about.

Thanks.

Thanks, Brett.

Thank you. Our next question comes in Frac, if I work with Sidoti and company. Please go ahead.

Hi, Good morning, guys. A couple of questions from me I'll first a follow on doorstop, obviously, what's dorst getting rid of much of their enterprise group.

Could you tell me a little bit more about how you guys are doing maybe.

Ever since the last few months ever since that happened and are you seeing maybe increased customer interest for a brink and restaurant magic on the after that.

So I think we're seeing significant customer interest.

In the last few months more the result of the.

Kobin World and then than anything else.

I don't think any of that is result of the change from I can anyone of our competitors.

Our as we've said many times that becomes the customer if the company that we compete most aggressively are the legacy providers.

And I have immense respect for the toast and all all the competitors.

And that have come up but more not they're not who were competing with particularly as it gets the final rounds of a large deal. It's almost always the larger horrible nprs world than it is a small company. So it hasn't I don't think it had a drastic impact on our our pipeline by any means but certainly helps.

Yep.

Okay.

On the on the maybe on the Bemis opportunity.

I would.

Covered and some of the us.

Smaller restaurants, obviously, you focus on the enterprise beach, but as well how much worse from Warner restaurants.

Thank God.

Some tough times in the restaurant industry and the garden.

Arm and are you going to be pushing maybe your bement ambitions Hello behind schedule from what you initially planned.

So there are absolutely behind schedule from where we thought in the beginning of year, but they're very much on schedule for where they are as after we changed in the beginning of the year. There's no question. Your stock that we had and very robust plans for our channel and our cable service products.

To go after payment and that's the market that's easy to penetrate because they have the largest hardware capex that we can offset it tables or restaurant may spend $20000 up being a catheter hardware, if we can offset that.

I was very high enough, where you wanted to focus.

Covered happen and we had to quickly change the go to market because selling into small restaurants or cable servicenow as an option. So now.

As we get to September and our our moves processing I think we have adjusted to focus more on our traditional fast casual business and we've now got I think a strong go to market and extremely song strong team and I think not only did we change the product. We also change the team there.

So I.

I, absolutely second start having real very nice volume starting in and starting this quarter, but really in Q4 and I think that will continue as I've said one of the other close as highlighted that.

Theres no doubt that offsetting capex of hardware is more attractive today than it was.

In February.

No.

All right guys. That's it from me thank you.

Thank you. Our next question is from correct Air win with Roth Capital. Please go ahead.

Hi, Thanks, most of my question has already been asked.

But should meet can you maybe update us on what the peak installs were over the last Uh huh.

9100 days I mean, what was the peak number of installed string any single week and how does that compare versus your pre Kobe <unk>, a pique installments and would you attribute all of that gap to covert or is there. Some of this uncertainty in the customer base now.

That might be working on to that to the downside versus the upside.

Or are you know or is this really just capacity issue right now.

So it's a it's a great question. So I'd say the way I look at it is you know last two weeks of March April.

Streamlines low set of installs right everything shutdown I started pick up in May and by June I think we were installing you know I see anywhere from 50 to 60.

Go lives.

In a week and growing.

And so it's it's not so much today a capacity issue as it is working very closely with our customers to a lie on the go live date, so today, our ability to get our 1500 stores in backlog.

Worked that down will be much more tied to our customers, saying Hey go live in the state now in start launching versus us having a capacity constraints. So its more of the customers and as I said, if there was no covered I would tell you gosh, we'd be well beyond you know thousand stores a quarter relatively easily with covidien were a little more tepid because.

We've seen.

Well, we had a chain if they know installed in Florida, Phil things come down so, it's a little bit unpredictable, but still trajectory very very strong.

Okay. So then how things trended in he mentioned change.

July is behind US now we have we seen little bit of it ticked up or things sort of bouncing along at the same levels.

It to the we've got a very big pick up the second two weeks of June and that's continued in July.

Okay excellent congratulations congrats on a strong core thanks.

Thanks, Greg.

Thank you and this comfort Tatiana session for today I would like to turn the call back to seven meeting so he's finally month.

Thanks, everybody for joining the call I wouldn't for its updating you in the near future.

And with that ladies and gentlemen, we thank you for participating in today's conference.

Now disconnect have a wonderful day [noise].

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