Q3 2021 PAR Technology Corp Earnings Call
Good afternoon, ladies and gentlemen, this is the operator today's conference is scheduled to begin shortly please continue to standby. Thank you for your patience again todays conference is scheduled to begin shortly please continue to standby. Thank you for your patience.
[music].
Good day, and thank you for standing by and welcome to the FY 2021 third quarter financial results Conference call.
At this time all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session.
Ask a question during the session you will need to press star one on your telephone. Please be advised that today's conference is being recorded if you require any further assistance. Please press star zero I would now like to hand, the conference over to your first speaker today, Chris Byrnes, Vice President of business development. Sir. Please go ahead.
Thank you Peter and good afternoon, I'd also like to welcome you today to the call for part of 2021 third quarter financial results review.
The complete disclosure of our results can be found in our press release issued this afternoon as well as in our related form 8-K furnished to the SEC.
To access the press release and the financial details. Please see the Investor Relations page of our website at Www Dot <unk> Dot com.
I also wanted to be sure all participants today have access to our earnings presentation and business review slide deck to better communicate the momentum in our software business.
Individuals on the webcast should have access to the debt when they logged onto the call. This afternoon for those just dialing in on the conference call. This afternoon and the presentation can be accessed again on the Investor page of our website and we also included as an attachment on the 8-K, we filed this afternoon.
At this time I would like to take care of certain details in regards to the call participants on the call should be aware that we're recording the call. This afternoon and it will be available for playback also were extremely the conference call today on the Internet. So please be advised if you ask a question. It will be included in both our live conference and any future use of the recording.
I would 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 uncertainties. The information on this conference call 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 afternoon and in our annual and quarterly filings with the SEC.
Joining me on the call today as part of a CEO and President <unk> Singh and Bryan Mannar Par's Chief Financial Officer.
Now I'd like to turn the call over to <unk> for the formal remarks portion of the call, which will be followed by general Q&A 70.
Thanks, Chris and thanks to everyone for joining us to review <unk> third quarter results.
Theres a lot last year with all of you today in our prepared remarks, so let's get started.
As a company we delivered strong we delivered a strong third quarter reporting total Q2 revenues of $77 9 million or 42% increase from one year ago.
This revenue was motivated across all business lines and specifically around our software recurring revenues, resulting in $82 5 million of <unk> at quarter end and year over year growth of 35% when compared to Q3 last year, which includes a nice performance from Q3 2020.
This increase was driven by a 46% growth.
And 29% from Q3 last year.
So very encouraging is that contracted era now totaled approximately $97 million as of September 30.
Our strong results this quarter were driven by a high level of execution across the business and continued demand for <unk> unified Commerce cloud platform.
We have established strong momentum and have continued to build on that throughout 2021.
Q3, we activated seven 539, new brink sites.
Quarter record for par.
On a net basis that the churn brings active store count now totals nearly 14935% increase from one year ago.
Brink bookings totaled 780 stores in the quarter as we managed supply chain issues plaguing the industry today.
This rebound in Q4, and AOR growth to continue to accelerate sequentially as well.
In Q3, we were successful in activating some of our oldest backlog many of whom were legacy price customers, which modestly brought down our appeal across our network customers was offset by very strong Activations. We expect this impact to balance out next quarter as new customers signed at higher subscription rates.
Now turning to punch with continued outperformance and added more than 2500 lifestyles in the quarter. The now titled total more than 52954% increase in the last 12 months.
We signed 14, new customer logos in Q3 that include over 3000 stores and went live with Jack in the box and their network of restaurants new.
New mobile experience and pick up products are seeing traction from customers and I also want to relay that we are beginning to see momentum within the C store segment as the industry seeks out a more robust loyalty solution. We added six important new integration partners in the quarter and our business outlook and pipeline remained very strong.
Data Central added 168 stores in Q3, and we are beginning to see renewed interest in our leading back office application.
<unk> now total almost 6200 and <unk> is at $9 1 million at the end of the quarter.
Our payment services pipeline grew significantly in the quarter and we expect to announce new wins in our next quarterly call. We've seen payment success broadly in brink punched in non existing for our customers.
Our product and hybrid business, our product hardware business continues to perform well in difficult and challenging environment.
Revenues in the quarter continued to strengthen year over year improved sequentially as well.
Product sales were reported at $30 3 million in this recently ended quarter, a 48% increase the capital purchase environment for restaurants is always tricky and that has been even more so with the pandemic and the global supply chain difficulties thrust upon several end markets as.
As I mentioned last quarter, we are not immune to these challenges around supply chain and we've experienced some margin impact with the costs associated with the current realities, including the dramatic growth in shipping charges.
Direct steps to mitigate these issues, including price increases and other actions already reported and already reported product margin improvements in Q3.
Expect to continue in Q4.
Regarding the supply chain, specifically, we will continue to diligently manage our partners and vendors throughout any shortages price inflation and increase in freight charges.
Now to briefly report on our government business in the quarter, we reported revenues of $18 million, a 3% increase when compared to Q3 last year.
Last week, we announced our the largest award in our company history by IDEXX.
The U S Air Force Research Laboratory information Directorate awarded a single award of $490 4 million IQ contract for counter small unmanned aircraft system work on software hardware and technical documentation.
This award is a contract term of six years and an additional two year period of order.
Two year order performance beyond the original six years with.
We will recognize revenue as task orders are assigned and and but we are seeing immediate impact upon contract backlog that grew to $192 million at the end of Q3 and meaningful $51 million increase from three months ago.
Gratified by the confidence the Air Force has shown in par with this award and we have and we've always prided ourselves on the critical role we play in supporting our operational customers and their requirements.
Let me now talk a bit about where we see things going and going forward for the business from a business perspective.
Last week, we spent time meeting with dozens of customers and partners I love hearing directly from our customers and users, which will which we call our voice of the customer sessions, because it helps us to validate and sharpen our strategic plan as well as providing the par team with direct feedback on the trends and issues our customers are seeing today.
The foundation of belief of our thesis is built on the idea of creating a unified commerce platform.
<unk> delivers power back into the hands of the restaurants.
Today, we see many restaurant tech companies, winning at the expense of restaurants, rather than in service to them.
We believe technology should be built to serve operators and their end customers, but today in our industry, it's become extractive.
Challenge is rooted not in something dubious, but from a structural flaw in the restaurant technology stack the absence of an integrated platform.
Dozens of different disparate applications are being cobbled together in the hope of building, a simple and beautiful experience, but unfortunately, our premise has challenged experienced operators and their customers experienced a suboptimal.
As a result, the job of the restaurants here CIO today has become one of getting dozens of different products to work seamlessly rather than focusing on growing market share and delivering differentiated guest experiences.
Well, it's perhaps worth is that all of the operational and customer data insights that might otherwise be available to brands as being trapped in the silos at these disparate applications.
This is a problem part is working to solve and the greatest opportunity for our clients. We're moving from a world of bodies to bit historically every challenge of a restaurant with cell by the addition of more labor.
If you have too many cars in your drive Thru Lane, you send out a line Buster.
If you have too many orders you had align chess.
Any quality issues you added spot checker.
Every challenge can be solved with more bodies.
In a world where restaurants are expected to not only deliver a great in store experiences and also deliver Amazon like digital experiences off premise the model of running multiple platforms breaks down.
Enterprise restaurants, being a truly unified platform to make this work and this is what we are building at par.
That natively brings all transactions in store and off premise along with all customer data into a unified open cloud platform with enterprise scale.
Our goal is to be the foundational technology that provides our customers. The organizations. We are built to serve with the ability to fill their own technology technology destiny and to build differentiation and competitive advantage through unique experiences.
Such technologies remain open to working with other vendors and allow our clients to choose which features to turn on and off to build their own proprietary capabilities into manage and support their own limitations.
With the exception of decision are new CPT O. Rajiv Malhotra is driving this platform vision I have immense confidence in his abilities to deliver on transforming power punch and data central.
Alongside this internal development is a highly focused M&A program narrowing in on a couple of key gaps we're looking to fulfill in short order as witnessed by a recent capital raise.
While all markets are competitive power occupies a very unique place we service our customer base above the size of our most of the venture capitalist flown into restaurant technology on a daily basis, we compete against more traditional competitors from those that are still building on premise to those who believe that our platform is the equivalent of a bundled solution.
Our ability to grow in this market is completely supply driven not demand.
Our ability to grow at current levels almost.
Basically what kind of levels is driven by store count today, we're around 15000 stores of a Tam that's almost 30 exercise yet our ability to grow at higher rates will be driven by the deployment of new products. This is the next leg of our transformation and our major focus in 2022.
In closing I'd like to thank the entire park team for their contributions at par we live by four values.
One speed, we'd like to say, we look for those who don't wait for the elevator.
<unk> ownership, we look for those that are owners not renters at par people, who treat part of like their own car and auto rental car.
Three is focus we always try to remember the 80 20 wins.
And for US winning together this is the belief that all stakeholders are par must win our team our customers our suppliers our community and our shareholders.
We take these values seriously and everyday we worked hard to develop and higher on these values. So that we can deliver for all stakeholders.
With that I'd like to hand, it off to Brian who will review our financial performance in greater detail Brian.
Thank you Stephanie.
Good afternoon, everyone.
Total revenues were $77 9 million for the three months ended September 32021, an increase of 42% compared to the three months ended September 32020.
Net loss for the third quarter of 2021 was $31 9 million or $1 23 loss per share compared to a net loss of $33 7 million or <unk> <unk> loss per share reported for the same period in 2020.
Adjusted net loss for the third quarter of 2021 was $9 3 million or <unk> 36.
Loss per share compared to an adjusted net loss of $2 4 million or <unk> 11 loss per share for the same period in 2020.
Product revenue in the quarter was $30 3 million, an increase of $9 8 million or 48% from the $20 5 million reported in the prior year.
The strong growth was primarily driven by hardware refresh investments by our domestic and international tier one accounts and part from delayed hardware refreshes in 2020 due to COVID-19.
Service revenues that includes revenue streams from our subscription software was reported at $29 5 million, an increase of $12 6 million or <unk>, 75% from the $16 9 million recorded in the prior year the.
The increase was primarily driven by revenues from punch of $9 7 million and an increase of $1 8 million for other software revenue and.
And <unk> 8 million for repair services.
The company continues to expand our recurring revenue base, which includes both software related services and hardware support contracts and total recurring revenue streams contributed $11 million of the increase in service revenue.
The $12 5 billion of service revenue reported in Q3 2021 $25 million is comprised of recurring revenue contracts as compared to $14 million in Q3 2020.
Contract revenue from our government business was $18 million, an increase of <unk> 5 million or 3% from the $17 5 million reported in the third quarter of 2020.
The increase in contract revenues was driven by a <unk> 7 million increase in our ISR solutions product line, partially offset by <unk> 3 million decrease in our product services product line.
Contract backlog as Hemi mentioned continues to be significant noting a total backlog of $192 million as of September 30th.
$51 million increase from Q2 of this year.
Now turning to margins.
Product margin for the quarter was 24, 8% versus 21, 9% in Q3 2020.
The increase in margin was primarily due to favorable product mix and favorable absorption of overhead costs due to increased sales.
Service margin for the quarter was 29, 6% compared to 33, 3% reported in the third quarter of 2012 the.
The decrease in margins was driven by an increase in amortization expense for acquired developed technology of $2 9 million recognized as a result of the <unk> acquisition and incremental costs incurred while transitioning our field operations organization.
Service margin during the three months ended September 32021.
Included $3 7 million of amortization of acquired intangible assets compared to <unk> 9 million during the three months ended September 32020.
Excluding the amortization of acquired intangible assets service margin for the three months ended September 32021 was 42, 3%.
Compared to 38, 5% for the three months ended September 32020.
Government contract margins were 10, 9% as compared.
Compared to 9% for the third quarter of 2020.
The increase was due to improved margins in both ISR and mission systems product lines.
GAAP SG&A was $21 7 million, an increase of $5 9 million from $10 5 million reported in Q3 2020.
These numbers include stock based compensation and the increase was primarily driven by $7 2 million and total punch operational expenses of which $1 9 million in stock based compensation.
Other drivers included an increase of 2 million in corporate expenses.
$6 million of variable compensation and put $4 million for sales and marketing.
Net R&D was $10 1 million, an increase of $5 9 million or 140% from the $4 2 million recorded in Q3 2020.
The increase is driven primarily by $2 2 million for punch and $2 7 million related to additional investments in our existing product development organization.
Net interest expense was $5 4 million compared to $2 2 million recorded in Q3 2020 the.
The increase was primarily driven by the owl rock term loan.
Net interest expense for the quarter included $2 1 million of noncash accretion of debt discount and amortization of issuance costs compared to $1 1 million for the same period last year.
In Q3, 2021, we recorded a loss on extinguishment of debt of $11 9 million as a result of a repayment of the <unk> term loan.
There was no loss on extinguishment of debt during Q3 2020.
Now to provide information on the company's cash flow and balance sheet position.
For the nine months ended September 32021 cash used in operating activities was $43 6 million versus $14 4 million for the prior year.
Cash used for the nine months ended September 32021 was primarily driven by an increase in net loss net of noncash charges.
Digital net working capital requirements, driven by an increasingly crude compensation and an increase in other current assets.
Kris and other current assets reflects an increase in our prepaid assets as the company took advantage of repricing opportunities with key strategic partners.
Cash used in investing activities was $381 1 million for the nine months ended September 32021.
Versus $6 9 million for the nine months ended September 32020.
Investing activities during the nine months ended September 32021 included $374 7 million of cash consideration in connection with the <unk> acquisition.
Capitalized software for the nine months ended September 32021 was $5 5 million was associated with the investments with various restaurant software platforms versus $6 4 million for the nine months ended September 32012.
Cash provided by financing activities was $444 3 million for the nine months ended September 32021.
Versus $48 7 million for the prior year.
On April eight 2021, we received net proceeds of $155 7 million from the private placement of common stock of <unk> LLC.
Funds and accounts advised by T. Rowe price Associates. In addition to net proceeds of $177 million from the owl rock term loan.
On September 17 2021.
Net proceeds of $256 8 million from our offering of the 2027 notes and.
And $52 5 million from our equity offering.
We used approximately $187 million of the proceeds of these offerings to repay the term loan in full.
Repayment of the all workloads in exchange for our convertible debentures will result in a $5 $5 million annual reduction in cash interest.
During the nine months ended September 32020, we received net proceeds of $49 5 million from our offering of the 2026 notes, which reflects our use of $66 3 million to purchase a majority of the 2024 notes.
Inventory increase from December 31, 2020.
At $12 4 million.
We increased our inventory on hand to mitigate supply chain shortages and delays will ensure we can meet our enterprise customers' demand for installations.
Accounts receivable increased $5 9 million compared to December 31, 2020, due to increased sales volume.
Days sales outstanding improved within restaurants, and retail from 74 days at December 31, 2020.
To 50 days at September 32021.
This is tremendous progress complements our team's hard work and management's focus on operational excellence.
Days sales outstanding increased within government from 51 days at December 31, 2020 to 55 days at September 30.
2021.
This concludes my formal remarks, and we will now move to Q&A.
As a reminder to ask a question you will need to press star one on your attached one phone.
Again that is star then the number one.
Your question press the pound key.
Please standby, while we compile the Q&A roster.
And your first question will come from George Sutton with Craig Hallum. Your line is open.
Thank you this is Adam on for George on Great results guys.
In the past you've talked about par par payments and the potential for it to potentially become one of your largest revenue segments would love to get an update on your thinking from what <unk> seen early on.
What the initial feedback has been so far.
We're feeling.
Very good about it that the pipeline grew tremendously in Q4, sorry Q.
Q3, and I think on our next quarterly call, we able to announce some of the logos that we expect to sign so we didn't really give up momentum there and then I think we've just started the push of using our payments product within punch customers.
So we're seeing.
One or two test customers I think should lead to quite a bit more and then I think surprisingly with oxy.
Found a couple of non existing brink customer nonprint customer excuse me, who we expect to contract payments product that will also be a good shoe impressed then sell brinker constitute so pipeline grew across all three of those categories and in the next call I think we will have some exciting announcements.
And then with respect to 2022 being a year focused on product would love to get your updated thoughts post raise on <unk>.
Internal versus external development, and then how the disorder management projects going and what else you think might fall on that internal roadmap.
Great Yeah, just what I mentioned is coming out in Q1, very very excited and we've got.
Pilot customer already lined up so it will have great feedback and iterate quickly to drive revenue.
And that's a big.
I think in your release, which is really the beginning of the.
Our foray into building the platform I talked about in the call.
We'll certainly look to be acquisitive, we raise money on that premise and we've got a couple of key holds we're looking at and so we've got a very very active.
<unk>.
That works on this.
So.
We will build both organically and inorganically.
Our goal is really to have the discussion with platform done by the end of next year, but start selling the platform.
To answer that.
Great. Thank you.
And your next question will come from Stephen Sheldon with William Blair. Your line is open.
Hi, This is actually Pat Mcinally on for Stephen Butz.
I wanted to ask how the recent air force contract.
One impacts your thoughts on what you plan to do it.
The government business over the near term.
Just your thoughts on that going forward.
Obviously, I can't say anything too specific but I would say it certainly makes the business more attractive.
Which gives us optionality on what we want to do and.
Certainly makes the business more valuable.
Okay. Okay.
Okay.
And then I'll also wanted to ask about the arcades hardware Pls that you recently announced and just how that ties into the general hardware software strategy.
How it might be complementary to the existing brink offering.
Yes, absolutely.
One of our interior design terminal.
It's gotten really strong customer feedback so far and I think the tie is twofold one is.
Frank.
Runs on on really anything Thats out there any windows devices.
I think where syntactic, but we do think that Frank on our own devices looks a little bit better, particularly on <unk>.
Design, if you look at the phase, it's a beautiful product, it's not sort of a copycat products and bring quirks really elegantly there, but it also allows us to service it better. So you have got a challenge with the product you can ship it back advanced exchange warranty, so and so forth that it allows us to give our customers the full solution, which more and more of them want.
What we're finding is similar to our thesis on software our customers don't want to.
Theres not enough value in them having.
A different hardware vendor if they have different hardware contract since their fortunes. So you're seeing move into things like has hardware as a service.
Put together so.
I think it helps and obviously, we have new products and market. It helps build exciting with customers because.
While enterprise customers are.
There are different there's still that excitement of getting your device just like when your products can offer consumer things.
That's very helpful. Thanks, Amit.
Again, if you would like to ask a question that is star one on your telephone keypad.
Again that is star then the number one.
Your next question will come from Samad Samana with Jefferies. Your line is open.
At all so I guess, that's not great guidance, because there's no guidance, but.
I think that from an internal perspective, we just feel really convicted in the belief that.
Our vision of unified Commerce platform is the way that industry is growing and so I think a lot of our success will be driven so much more by our customers adopting that idea, where it's sort of an easy tell which is.
Talk to any restaurant.
<unk> and and they'll tell you their life is managing vendors, it's not about building great experiences and we're really trying to keep that power back to them and and I think that's actually was driving will drive our internal forecasts, but without question, we're not living in the world, where the delta various spikes in Activations fall off a cliff we feel like we're kind of at a level, where we've got great visibility.
But.
That can all changes so that's what we have learned in the last year.
Great guys. Thank you on a congrats on the corner of the quarter.
Your next question will come from Andrea So there's chrome with Sidoti Your line is open.
Yes, hi, Thank you for taking my question congratulations on the strong corner.
Just curious to add further punch you you mentioned you had 14 year novels is that new levels to park technologies that long is compassion and a result of them cross selling.
It's a mix.
Right on top of my head, but it's definitely a mixed we absolutely saw had customers that we brought from brink over to punch and then we had net new logos.
So.
Very healthy mix.
Okay. Thank you and then also what are you seeing in magic and now when we see these inflationary environment and labor costs going off and everything and then right on food prices have gone up that you would think there would be a stronger.
Stronger demand for the companies to undo restaurants to run that MS. Smith me.
Yeah, we are seeing that and you're going to and I think that's why we saw it could rebound here that I think will continue.
Making it more of a priority. It also allows us to sell more within restaurant magic.
There are parts of us are magic that.
Modules that specifically address labor efficiency, even think like scheduling that we don't sell today.
A lot of it will create some more modular extension for us there but.
I think on yet.
<unk>, we seen us on logic is completely driven by the point that you mentioned.
That that's really what's pointer.
Okay, and then just lastly on the supply chain.
It seemed like you build up some inventory to be able to contain.
<unk> with installments.
How much.
What are you seeing any in the supply chain currently is it easier to becoming worse or.
I would say.
A few quarters ago, the better by the end of the year I would say, it's not getting worse, but.
It's kind of plotlines in this area where if.
If you said, hey, Annie installed fiber in the stores.
In December we would say that can be very hard for us to get that here and.
Now being ourselves and particularly for large custom orders are now Q.
Q4, with normally sorry, excuse me in mid Q1, because the visibility early on the challenges around shipping.
Getting cargo capacity later it was around chip now it's around LCD ltd's screens, so it's sort of.
Renew has to be a challenging environment, but I think one of the smartest things. We did this year from a capital allocation perspective, as we advanced purchased deposits down.
And I think we're the only company I should wait to do that which allowed us to the hill a lot of the products. The heart of the product sales that you thought that great growth in when others weren't didn't have supplied available.
But.
Our standpoint from Q2 Q3, we saw no change and I know changes no visibility of it getting better or worse.
Okay. Thank you that was not for me.
Again, if you would still like to ask a question you May press star one on your telephone.
And your next question will come from there, Adam White and with a W. Agw capital.
Hey, guys. Thanks for taking my call just.
Just kind of revisiting the the government.
You know contract.
It sounds like you guys were talking about the backlog increasing by 50 million I mean, how.
How do we think about that incremental profitability I mean, this is or do we expect to earn similar margins. I mean is it fair to assume that this contract overtime kind of doubles, the government business or how should we think about it.
Yeah. So.
The margin of this contract should be very similar to our existing directly indirect flavor margins. So we don't expect it to swing margins.
Any which way.
I noticed on your profitability. Obviously, you took some adjustments for the banking bills, but you guys lost about $4 million in the quarter.
Which given the scope of sauce on the growth I mean, it looks like you guys are gonna be profitable a lot sooner than than the market expects I mean, I remember a time when I was buying shares in government was worth more than the entire market cap I mean, you know.
It seems like the business has gotten scale, but it you know between hardware and SaaS that you guys could probably.
Diverse this and I I read something in terms of record at many multiples 13 times for defense contracting businesses I mean.
Why why would you guys wait I guess is what I'm, saying like I guess, you guys had communicated that.
That you guys had to get this contract under your belt and this is something that you guys are kind of been waiting for for the last two years or so I mean.
Obviously, you're not going to give it away, but I mean is there any reason today why you wouldn't move with it given that the contracts behind you would multiples are at record highs.
So what if anything forward looking but I would say in the past we've talked about wanting to win this contract and so I sort of go to those comments. He said in the past, which is and I think.
I think people understand now kind of why we had some pause given this.
The enormous scale of this contract.
But but I will say the forward looking ahead, so we've kind of communicate in the path of this was an important part of our process.
Right and I guess, you guys feel more confident I mean, obviously from a profitability standpoint, you guys are probably ahead of schedule, so that would probably make it easier in some capacity would it not.
Yeah, I don't think we've ever looked at it as doing it the profitability I think we've always looked at it as well.
It's a business that has very little management distraction and let's get it if we were on the verge of a large contract it would be silly for us to sell given how how valuable that one contract is right. This one contract could could grow a backlog beyond the existing backlog right in a very short period of time.
And so it's sort of us as much as it doesn't make sense for us to be under that sort of giving money away and so we didn't think it made sense.
We look at our business.
Very cleanly and don't think approximately restaurant business would have any impact we've got plenty of liquidity and we're pleased to also excoa M&A strategy and so.
We've kept it not because we wanted the cash flow, but because.
There was just leaving a ton of money on the table.
Sure.
So so just going back to it I mean, if you look at the business kind of pre Covid Q1 2020 you.
Guys did you know call. It you guys were on pace for like doing close to 1700, Activations and or 1800, and you kind of got through that and that's that's really powerful and exciting I mean, you know.
Today, you know you're still burdened I I would think from some COVID-19 restrictions and states and being able to get in and obviously from the semiconductor shortage in supply.
You know I I know you don't give forward looking guidance, but I mean, you know.
I I guess the question is like what would what would could you communicate a little bit about what the organic growth you expect out of these assets in kind of a normal environment and something that would be suitable to use. So people can kind of think about you know you know a multiyear kind of growth trajectory in terms of like what your expectation is obvious.
<unk> Kobe can happen things can happen, but I mean, you know kind of like what your cost of capital is from a growth perspective.
When you acquired the asset you operate assets.
So there's a lot in that question so.
Think from our cost of capital perspective, right, we were very conscious that.
We've used our stock to acquire businesses and or raise capital by businesses and.
We are sensitive to that it does change the deal dynamics, if we don't feel that there is when.
When they're.
And so we're pretty.
Careful there.
From an activation perspective.
I think we feel like we did a great job this quarter.
And we expect to continue to do a great job.
I don't think these double overnight I think.
But we feel really good about how many we pull through this quarter and.
Excited about next quarter is that this quarter had a significant amount as we mentioned on our transcript of our legacy deals deals signed in two.
16 or 17.
Very favorable pricing.
And as we go forward, we are now moving into our deals that are sort of artificial price point or higher so.
We'll see the benefit of that as well.
I mean.
Getting to you know kind of ambitious I mean, if if Kobe continues to obey do you think that the.
The Punjab, she's different but I mean, do you think that break can return to doing a couple thousand a quarter is that unreasonable I mean, if if if the kind of supply chain semi conduct yourself debates and kind of the COVID-19 restrictions kind of cool down I mean does that.
Is that an unreasonable outcome.
I don't think it's unreasonable.
If we've got these restrictions and it was particularly supply chain.
And we continue to build a pipeline, which we feel pretty good about so.
I expect it to continue to grow at these rates are more for the next couple of years.
Exclusive of M&A and I do think that as we look at M&A very much do focus on something that's accretive to growth.
<unk>.
Probably because it will color too.
Last question I'll, let you go if you read toast S. One they basically talk about you know the the the investment you know in the restaurant industry of about $80 billion to $100 billion and if you think about that.
Not that much of that is being spent annually on hardware because hardware lives a long time, and so you kind of toast kind of has a back of the envelope calculation of somewhere between 60 and $80000 of software spend per store and obviously, we haven't captured that I mean.
Is I mean, when you think about the timbre is that unreasonable that longterm that that's kind of be addressable market for par within their existing vehicles.
I think what we've always said is that R. Tim of enterprise.
Tier one tier two tier three tooth aircraft casual is about half the restaurant market United States.
Whether that 700000 radio doesn't restaurants is to be debated and we've always believed that.
Going back a couple of years ago from brink being at the time $2000.
Per year that there is a clear path for us here from 2000 to 10 based on what we see in front of US right and so we've taken it up from 2000, we added data central which is about 1500, we added punch, which is a thousand to 1500.
And.
And then we come out with disorder management system, a couple more of our product enhancements acquisitions in payments in your.
Really is clearly worth 10000.
But for me, it's exciting a lot of what I was suggesting an remarks from the call is that we're at the inception of this this transformation of the restaurant and all of a sudden restaurants have this unfair proposition of like having a great experience and then you're like Hey, We also wants you to Amazon Dot com and that is a really tough tough thing without a lot more product a lot more software and without a unified.
My form and so today, that's how we look at it but I wouldn't be surprised if it changed a lot given how fast the market's movie and that would certainly probably means more sense.
Right. Yeah have you guys explored you guys talk about hitting hitting pinging. Your API I mean have you guys explored adding a transactional element to it where other people plug into your point of sale and and you start.
Paying for paying per transaction I mean, I just there's so much people are accessing our system. So much I just I wonder if there's more in terms of either selling back the date or charging to access the API, because you're looking at $2 million restaurant.
If you know you know charging $40000 a store across all subject doesn't seem that crazy if a drink if it brings people the efficiencies I mean clearly the software is is driving a lot of efficiency at the restaurant. So I'm curious how you think about other kind of revenue mechanisms.
Yeah. So it was in the short run we've got a couple of seating levers right. We've got a new product disorder management systems, We've got payments as I mentioned, we're going to have to hopefully tonight's announcements come out, but we've also put through our first price increases on break in 10 years and so we'll have.
Dry price and as we talked about on other calls.
Having a new API product launching that is transactional so the way I look at part is.
We're not in a.
Demand constrained environment, we've been in a supply Qatari environment, where we as part had been unable to fulfill all the demand of our customers, yes, and so we've solve that first or M&A, but now to organic product build and that's where like the engine us.
Let's all excited because I'd say, we're two and half years into this journey and maybe a little more than now and the first year and a half plus was just getting the product stable getting the trust of our customers. The next year was getting them. The motion together and then obviously COVID-19 kind of threw a curve ball and now it's about monetizing at the benefit of our customers. The key part of unified Commerce platform is not.
We're trying to extract in bundle a bunch of products and cram it down your throat, we're actually trying to give you a platform to take that back in and I think we're taking a left turn on the industry is turning right where restaurants tech companies have gone to the complete other way, it's like bundle bundle bundle extract extract extract but they haven't actually built something that the restaurants value I challenge anybody on this call anywhere to go find a restaurant manager a restaurant.
The job is better he says Roy is better and it says that the lifestyle of the restaurant employees is better now than it wasn't about all this technology is extremely hard to find that case and so the technology has become extractive. It hasn't been built to serve the actual constituents and so while it's a meta point.
It's what we believe in and if we can build out and so so much of this journey is about giving them that platform. So it's a long answer but it's the way we look at the world.
Last thing I'll get lost one in there.
With toast recently going public a lot of people have said you know what is the difference between pardon toast and you know obviously I've studied did develop relationships across the ecosystem. I mean can you comment about you know a little bit about NCR abandoning abandoning their aloha product and you know basically that.
No large enterprises.
Put out an RFP and actually given it to anybody else I mean, because I think it's I think it's all clear to a lot of new people to the story that.
Like you said this is a supply can straighten out a demand constraint and then the large logos that aren't integrating brink, it's not like they're going somewhere else. It's just they they they have been elected to kind of cross the rubicon yet on par has been prioritized them. I mean, if you really important to kind of explain to people to the technical moat that the par universe is built.
So I think I will talk about anybody typically they will talk about a categorically, which is we have some by this very special space, which is all of the dollars that are flown into the space is primarily focused on the small small business the restaurants down market and it makes a kind of sense right. You can claim a bunch of payments and product to a small restaurant and they don't really know and you're making $10000 a box.
We are in the enterprise market, where it's par and then primarily legacy products. These are products like I said that are almost half of them are on kindness right. So they haven't really cut at the time or are they sort of have been instructed to your customers where the trust is not there and so we've been very lucky that we kind of swim in this pool, where our competitors are not silicon.
Yes, I am sure they are coming but they are not broken down yet.
And so we've been able to take care of it continued grow partly because it's a product but also because the competition is quite we know what's exciting about our end market is that they are not at $10000 a box yet, but it's coming because they are the ones who could use this technology. Today. There are single there are restaurants that exist.
Large restaurants are outspending medium restaurants by so much that is creating massive disparity and so technology listings where criticism already there.
And what sort of fill that void, but to answer your question, specifically amazing companies in restaurants technology very few of them in the category that we plan and very few of the ones that are in our category is actually looking to grow and expand and make the commitment R&D that we are.
Right, which makes you guys attractive as a lemonade player because you can buy these little companies and give them the resources and the sales and distribution I mean, if you look at punch in restaurant Magic. I mean, these are companies, where you can deploy resources and help leverage you're 40 years worth of relationships.
Exactly right and that's what we've done and we're just at the beginning right because now we've worked through a lot of the challenges that.
Wrote it down and and we sort of feel like we're hitting that moment of acceleration.
Okay, well look I've I've on this thing for four years and I look forward to opening up for the next 40 years, So keep up the good work.
Thanks, Adam Thanks, everybody.
And I'm seeing no further questions at this time I don't know had it back over to something to sing for any closing statements.
Thank you everyone for joining look forward to updating you on our queue for results next quarter. Thank you.
This concludes today's conference call. Thank you for participating you may now disconnect.
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