PAR Technology Corporation (PAR) Q1 2021 Earnings Report, Transcript and Summary

Good afternoon, ladies and gentlemen, and welcome to the fiscal year 2021 first-quarter financial results conference call. [Operator instructions] I would like to turn the call over to your host, Mr. Chris Byrnes, vice president of business development. Sir, you may begin.

Thank you, Sarah, and good afternoon. I’d also like to welcome you today to the call for PAR’s 2021 first-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 and news section of our website at www.partech.com. I also want to be sure all participants today have access to our earnings presentation and business review slide deck that we will use later in the call to better communicate the momentum in our software business. Individuals on the webcast should have access to the deck when they logged on to the call this afternoon. For those just dialing in on the conference call this afternoon, the presentation can be accessed on the investor page of our website, and we also included it as an attachment on the 8-K we filed this afternoon also. At this time, I’d like to take care of certain details in regard to the call today. Participants on the call should be aware that we are recording the call this afternoon, and it will be available for playback. Also, we are broadcasting the conference call via the World Wide Web, 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’d 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 is PAR’s CEO and president, Savneet Singh; and Bryan Menar, PAR’s chief financial officer. I’d now like to turn the call over to Savneet for the formal remarks portion of the call, which will be followed by general Q&A. Savneet?

Thanks, Chris. Good afternoon, everyone, and thank you for joining our call today. Following a strong finish to 2020, we posted what I believe to be our best Q1 to date, and our optimism continues to build around the coming quarters and years for our business. The progress being made to distribute COVID vaccines, the decline in infection numbers and the general reopening of the economy should lead to a strong 2021 for PAR. We began 2021 with strong bookings in Q1, continuing the strong momentum from Q4, and ended Q1 with our largest backlog of all time, which sets the groundwork for accelerated activations for the balance of 2021. While the last 12 months presented many difficult obstacles for PAR and our restaurant customers, many of those challenges created opportunities that PAR was well-positioned to take advantage of. We invested in our software platform, introduced new product innovations, added top talent to our team, completed a significant acquisition, and were able to improve our financial and competitive position. While we’ll touch on the financials a bit later, I want to touch on our recent acquisition of Punchh. I’m personally very excited about this deal, and Punchh is a game-changer for PAR and our customers. Punchh is a market-leading customer engagement platform that provides cutting-edge software applications, including loyalty, promotional campaigns and marketing artificial intelligence for the restaurant and retail industries. We signed and closed the acquisition simultaneously on April 8. Punchh has more than 200 brand customers, 40,000 customer locations, and currently has $53 million in contracted ARR and 115% net dollar retention. Punchh is a very high-quality business with a very high-quality team. On a pro forma basis, Punchh ended Q1 with approximately $35 million in ARR and continues to accelerate growth even with the headwinds of COVID. There are many reasons we are excited about this deal. Punchh extends PAR’s Cloud for enterprise restaurants. The addition of the industry-leading loyalty product now makes PAR a unified commerce cloud platform for enterprise restaurants, and our combined company further expands the industry’s largest integration ecosystem. This deal creates a unique opportunity to improve value within shared and targeted customers and significantly deepens our tech development team and increases our innovation horsepower. Adding Punchh positions PAR to fast-track new customer wins with integrated point-of-sale, back office, payment and guest engagement solutions, and is an exciting step in the evolution of both PAR and the restaurant industry. Customer loyalty and CRM SaaS has rapidly evolved from being a novelty for restaurants to now a business-critical form of managing the customer relationship and revenue generation for enterprise brands. Our existing PAR customers have been very positive regarding our acquisition of Punchh and look forward to reaping the benefits of the enterprise-class unified cloud commerce platform. Restaurants are living through a dramatic change in their operating and business models. Technology will be at the center of that change. It is a specific reason that we believe PAR’s new unified platform can and will be adopted by enterprise. As technology continues to be deployed within the restaurant and in-store environments become more and more complex, enterprise restaurants are seeking true technology partners to manage this complexity. There’s no question software required by restaurants will grow tremendously over the next decade. While software trends surging in restaurants, our company continues to focus on capital allocation and directing our researches on transactions, products and people that will have real impact upon our addressing this opportunity. Now, to briefly review the first-quarter reported numbers before Bryan gives further detail. In Q1, we reported revenues of $54.5 million. Today, we also reported a GAAP net loss of $8.3 million, or $0.38 per share compared to a GAAP net loss of $10.9 million, or $0.61 per share for the same period in 2020. On an adjusted basis, non-GAAP net loss for the first quarter of 2021 was $7.6 million, or a loss of $0.34 per share compared to a non-GAAP net loss of $4.7 million, or $0.26 per share for the same period in 2020. Now, moving to our business performance. If you jump to Slide 3 of the presentation, you’ll see a snapshot of Brink’s performance in Q1. I’m very pleased to report that we had 1,345 new store bookings in the quarter, an 85% improvement from Q1 in 2020. I think this metric more than any other truly demonstrates the momentum and velocity of our cloud point-of-sale offering. A booking at PAR is a signed order from a store location pending rollout. The strong pace of Q1 Brink bookings highlights the continued growth in demand for modern software within the restaurant. As the Slide shows, we reported our ARR at $25.6 million, a 15.3% increase from the same quarter last year. As the pandemic continues to slow, we expect to see an acceleration in our activations as stores begin to open and normalize, and we return to our traditional activation pace. As restrictions have come down, we’ve seen activations pick back up, which will help us turning our signed backlog to revenue. I’m encouraged by the progress we’ve already seen in Q2. If you advance to Slide 4, you can see that we now have 12,141 active stores, and our reported backlog and open order number at the end of the first quarter was 3,327 stores yet to be installed. This record backlog set the foundation for a very strong 2021. Again, as activation rollouts continue to favorably impact restaurant customer traffic and reduce travel restrictions, we’ll see an acceleration in activations that will lower the backlog number and drive more normal book-to-bill pace. We installed 718 new Brink stores in Q1. We believe this is below where we want to be as installations earlier this year were being impacted by spikes in infections in specific regions and on state-mandated travel quarantines. We’ll continue to work with our customers regarding implementation schedules, along with enhancements to our safety protocols, to ensure our book-to-bill sequence is as seamless as possible. On Slide 5, you can see the ARR waterfall over the last five quarters as we continue to grow our ARR. Slide 6 shows the continued impact of COVID-related churn, and proves out the nominal impact that COVID had on store closures in our TAM and the inspiring strength of our customers. In Q1, COVID-related churn was 4% annualized of our overall base, and we’ll continue to work effectively for our customers to get back on and open their stores. These metrics are very positive signs for our business, and this is down from a peak of 15% during the early stages of the pandemic. Slide 7 shows Restaurant Magic bookings in the quarter were 231 and ARR was reported at $9 million. Combined ARR in Brink and Restaurant Magic is now $34.6 million at the end of the quarter. As I commented last quarter, Restaurant Magic and our Data Central application were impacted more by the pandemic than customer-facing technologies like Brink and Punchh. We’re encouraged by the sequential improvement and expect a more normal bookings pace as 2021 progresses and similar to our expected growth in activations in Q2. We expect Data Central to also accelerate. Now, to quickly review our product and hardware business in the quarter – that is, our point-of-sale platforms and drive-through communication systems business. Product revenues in the quarter were basically flat when compared to Q1 2020. Product sales were delayed in January and February due to increased COVID spread. As we are seeing favorable impact of a vaccine rollout improving capital purchase environment for restaurants, we’ll see higher sales throughout 2021. Now, let’s review our government segment. Our government business increased revenue by 3.2% compared to Q1 ‘20. Our contract backlog at the end of Q1 was $140 million as of March 31, 2021. Our Intel Solutions business was a driving force behind the growth in the quarter as ISR revenues increased 8.8% from last year’s Q1. We continue to seek out contract opportunities where we can leverage our decades-long experience and performance excellence, specifically in value-added revenue contracts that include more direct labor and high-tech contract work within our Intel Solutions business line. Now, some takeaways on our company coming out of Q1. Restaurants are looking for a unified commerce platform to handle the rapid growth in digital transformation. Today, restaurants suffer from dozens of siloed, different and disparate products that lack the modularity to make the solutions work. We’ve taken big steps in constructing that platform. Second, our acquisition of Punchh marries the guest to the transaction. Restaurants are realizing that they don’t need a singular loyalty program for their entire brand, but rather a loyalty program for each and every customer. With the growth of digital and off-premise ordering, restaurants now need to look at profitability and ROI at the guest level rather than the individual store level. Digital orders make it hard to measure ROI on a store basis. Guest engagement helps fill that hole. Third, with our strengthened balance sheet, we intend to continue our activity in the M&A space as we execute on our strategic initiatives. Our continued focus is on adding meaningful software products that will allow us to increase our subscription rates and add additional functionality and features for our restaurant customers. Early returns on the Punchh acquisition are very encouraging, and we are beyond excited to leverage their team’s experience across all of PAR. In summary, we start 2021 with considerable optimism. I want to reemphasize that we’ll continue to make bold bets, going forward, on future growth, and you can expect us to focus investments across product innovation, marketing and people initiatives. We believe this ambitious agenda at this time is warranted by the size of the market opportunity and where we stand today relative to it. In closing, I want to acknowledge the sacrifices being made by PAR employees across the globe in these difficult times. Specifically, our current thoughts are with our new Punchh colleagues based in India. India is presently in the midst of the worst phase of pandemic, and it’s rare now to find a family that is not impacted by the disease in that country. Even in the face of the most difficult conditions, our business in India continues, and our employees are finding creative ways to do their best for our company while ensuring that our customers get the top-class uninterrupted service that PAR and Punchh are known for. We truly thank them for that. And with that, I’ll turn the call over to Bryan for more details on the Q1 numbers, and then take your questions. Bryan?

Thank you, Savneet, and good afternoon, everyone. Product revenue in the quarter was $18.6 million, consistent with the $18.6 million reported in Q1 2020. Service revenue that includes revenue from our subscription software was reported at $18 million, a decrease of $0.8 million, or 4.3% from the $18.8 million reported in Q1 2020. The decrease was driven by a $1.8 million decrease in implementation revenue, partially offset by $0.9 million increase in software revenue. The company continues to expand our recurring revenue base, which includes both software-related services and hardware support contracts. In total, the recurring software revenue streams contributed $1.2 million of the increase in service revenue. The company continues to gain momentum of its deployment of Brink POS and Restaurant Magic’s Data Central applications, noting a $1.1 million, or 18% increase in software-as-a-service revenue as compared to Q1 2020. The quarter ended March 31, 2021 marked the 1-year anniversary of COVID-related restrictions on restaurants. Those restrictions impacted the pace at which we were able to roll out our new sites. Of the $18 million of service revenue reported in Q1 2021, $14.9 million, or 83% is comprised of recurring revenue contracts as compared to $13 million, or 69% of service revenue in Q1 2020. Contract revenue from our government business was $17.9 million, an increase of $0.6 million, or 3.5%, from the $17.3 million recorded in the first quarter of 2020. This is the result of an increase in the value-add ISR contract and subcontract revenues. Contract backlog continues to be significant, noting a total backlog of over $140 million as of March 31, 2021. Now, turning to margins. Product margin for the quarter was 19.8% versus 20% in Q1 2020. Service margin for the quarter was 29.6% compared to 32.6% recorded in the first quarter of 2020. The decrease in margin is primarily due to the decrease in implementation revenue and increase in software-related costs. Government contract margins were 6.7% as compared to 6.9% for the first quarter of 2020. This decrease was driven by our mission systems line of business impacted by higher labor costs compared to the first quarter of 2020. GAAP SG&A was $14.5 million, an increase of $2.9 million from the $11.6 million recorded in Q1 2020. The increase was primarily due to $1.1 million of variable compensation and $0.7 million of acquisition costs related to our acquisition of Punchh on April 8, 2021. Net R&D was $5.8 million, up $0.9 million, or 18% from the $4.9 million recorded in Q1 2020. The increase is driven by additional software investments from our Brink and Restaurant Magic’s Data Central product line. Also included in operating expenses for the three months ended March 31, 2021 was $4.4 million of proceeds received for a one-time recovery of a legacy matter. There was no comparable reduction to expense for the first quarter of 2020. Now, to provide information on the company’s cash flow and balance sheet position. For the 3 months ended March 31, 2021, cash used in operating activities was $3.4 million versus $15.1 million for the three months ended March 31, 2020, primarily due to improvements in working capital requirements. Cash used in investing activities was $1.7 million for the three months ended March 31, 2021 versus 2 million for the three months ended March 31, 2020. Capitalized software for the three months ended March 31, 2021 was $1.5 million of associated with investments for various hospitality software platforms versus the $1.9 million for the three months ended March 31, 2020. Cash used by financing activities was $2.1 million for the three months ended March 31, 2021. During the three months ended March 31, 2020, we received net proceeds of 49.5 million from the 120 million issuance of the 2026 notes, offset by the repurchase of a majority of the 2024 notes. Inventory increased from December 31, 2020 by $3.7 million in preparation for planned installations with some of our enterprise customers. Accounts receivable decreased $4.3 million compared to December 31, 2020 due to continued improvement in the restaurant and retail accounts receivable. Days outstanding improved within restaurants and retail from 74 days at December 31, 2020 to 63 days at March 31, 2021. Days outstanding increased within government from 51 days at December 31, 2020, to 54 days at March 31, 2021. This concludes my formal remarks, and we’ll now move to Q&A.

[Operator instructions] First question comes from the line of Samad Samana from Jefferies. Your line is open. You may ask a question.

Hi good evening, and thanks for taking my questions. So maybe, Savneet, first, just as we look at the bookings number, I mean, that still is basically just a hair shy of the record levels we saw in 4Q. Can you maybe help us understand what’s driving that sustained strength? Normally in 1Q, you see a little bit of a seasonal downtick, and then you mentioned cases spiking. So just how should we think about the bookings in the quarter? And were there any particularly large deals that accounted for a meaningful portion of that record, or near-record level number?

No large deal that sort of swung it. It’s that continued momentum, Q3, Q4, just continue to have amazing momentum. I would say that one of the things that I think we’ve gotten really good at is, after we sign a large logo, we’ve gotten much better at signing up the stores, to carve up the whale, if you will. So historically, it’s taken us two, three years to roll out a big concept. Now, it’s coming much earlier. I actually think that, as these COVID restrictions have come down and we see our activations pick back up, which will obviously drive ARR, it will also help us, I think, on the bookings side because, as that backlog comes down, I think we can push even more aggressively on these existing logos that we haven’t totally penetrated yet.

And then, I’m going to apologize for making you do a bit of a math question here. But if I just think back to last quarter, I think you’d mentioned that Brink ARR growth should continue to accelerate. And in this quarter, it actually decelerated against the prior year. So maybe just help us think about what the shape of that should look like. I know it’s tough to pin down because you can’t control social distancing regulations in a pandemic. But just maybe help us think about how we should think about that acceleration on a full-year basis, just given the quarter-to-quarter variance, we might see.

I don’t think we’re going to have the quarter-to-quarter variance anymore unless COVID picks back up. I think us having 3,300 stores in backlog creates a really, really strong foundation for 2021. It will be hard for us to screw it up in interest. So I think you’ll see acceleration in Q2, again, providing the pandemic doesn’t come back. We’ve already seen, as I mentioned, activations picking up. And I think that will continue in Q3 and hopefully Q4. So I think this will be the low point because I don’t expect COVID to come back, and these restrictions that we had in January and February were pretty significant. And so, that really limited what we could do. I think we’ll see really nice expansion in Q2 and in Q3. What does that mean dimensionally by the end of the year? I think our ARR growth by the end of the year should be in line where we’ve been historically. And again, I think just having that backlog – and these are signed orders. These aren’t looking with – we’ve got to go build software for. These are orders that are signed to be rolled out. So I expect, by the end of the year, we’re back to our more traditional growth that we’ve had over the prior years.

And Samad, I would just add one other piece to what Savneet mentioned there, right? You mentioned the year-over-year growth, with this year being, in essence, end of March of this year was the 1 year from the restrictions hitting last year. And so, this will be our toughest lapping period in regards to post-COVID as last year, Q2 of last year, as you recall, we basically had a pause on installations in Q2 of last year.

And then just switching gears maybe on Punchh, I know it hasn’t been that long since the acquisition was announced. But have you had maybe any interesting early reactions from either your existing customers and feedback on, hey, that was really interesting, we were looking at it or vice versa, where maybe Punchh customers that weren’t using PAR suddenly are taking your phone call? Anything in that regard would be interesting, as well.

So categorically, I’d say that the feedback was very positive. I think a lot of our customers understood the industrial logic of it. I think they have a lot of respect for the Punchh team’s ability to get product and ship it quickly. And obviously, they know PAR well, so categorically is very positive. Specifically, we’ve had a number of customers that I think that sort of weren’t deep in the pipeline that came because, hey, this is really interesting, let’s take a good look at PAR. And then, we’ve had a category of customer that I’d say has slept on PAR. I don’t think they knew all the change that was happening, and this sort of brought them into the funnel as well. I’d think the best news, though, that we didn’t have any massive customer anger. We didn’t have any customers think we were coming in to screw them. And so, in general, it was very positive. Our customers have been really supportive. And obviously, I think, living through the pandemic, they understand the why behind this, which makes it so much easier.

And then, Bryan, this one might be for you, but I know that you’re not giving guidance, but when should we think about, or how should we think about Punchh impacting the numbers, going forward? And will that be broken out separately, like Restaurant Magic is, or will it all be integrated together in one recurring revenue line? Just kind of getting out ahead of that.

What you’re going to see in the 10-Q that’s going to be coming out in the MD&A section is we are breaking out now away from where we had product lines in the past, where you saw Core and Brink and looked at all the various different revenue streams related to those customers that they have had those products. So now, we’re actually going to be having in there within the segment revenue, you’re going to see pure just hardware, software and services. And so, the Punchh side of it will be rolling up into the software component and a little bit into the services. Both software and then services rolls into the services line on the financials. So you’re going to be able to see a little more transparency going forward now.

Great. I’ll turn it over to the next person, but thanks again for taking my questions, and invested in that strong bookings’ performance

Our next question comes from the line of Stephen Sheldon from William Blair. Your line is open, you may ask a question.

Hi. Thanks. I wanted to dig a little deeper on the visibility you have into the pace of activations for Brink as we think about the next few quarters. I know you expect them to pick up, but can you maybe just help frame expectations around what we should expect in terms of the activation cadence over the next few quarters, if you have visibility into that?

So, I think before the pandemic, we sort of suggested that we kind of want our bookings and activations to kind of match. And at the time, we say, hey, should be around 1,000. I think we’ll definitely get back to that, and hopefully well beyond that as the restrictions continue to come off. We’ve seen our restaurant customers now in the month of April, now May, lighting up more and more, which will help us accelerate. The second thing we’ve done is I think we’ve put some of our best people on this problem to really say, hey, how do we make this go faster? How do we what we do to make it bigger, better? So like I said, I think this is a trough. This was the last – I think Q2 2021 will be the first quarter that we haven’t had immense restrictions. We still have some chains of ours that are limiting what we do until they get to the point that they can lift restrictions. But for the most part, this is the first quarter since the pandemic happened that we can really push activations like we did before the pandemic. So I’d expect us to get back to at least where we were pre-pandemic and hopefully, accelerate beyond that as things get better and better.

And then, what traction have you seen so far on the payment’s facilitation side? How interested do your existing customers seem to be about exploring using your pay fac capabilities?

Yes. I think my hope is, by the end of the year, we have real traction. I think we’ve learned a lot early on. I think we’ve actually been excited by some of the receptivity we had from some larger chains. The key thing I think we’ve learned is our ability to package hardware and the rest of our services at the time of payments is very powerful to the end customer. We can provide more ROI, provide them a lower cost of ownership. And so, that’s really what we’re working on. And so, while we’re still real early, we had our sales kickoff was in February. I’m pretty encouraged by what we’re seeing. And as I said, it will take us some time to get into these deals. Payment deals are on average three years. But we are seeing good progress. And particularly when we sell the full solution, hardware, software and payments, I think we’re making it hard for customers to say no. So we’re early, but I’m encouraged. And then, I think the other part of payment that will be exciting was how do we think about leveraging payments with what we have at Punchh and what we’re building in the future where, historically, selling payments from point of sale, your real value is, again, the ability to package or bundle solutions. But when you’re the front-end guest solution, you actually kind of control the payment flow, so it puts us in a different conversation.

Great. Thank you.

[Operator instructions] Our next question comes from the line of George Sutton from Craig-Hallum. Your line is open, you may ask your question.

Thank you. Savneet, just another way to ask about the backlog of sites who install and the opportunity there. Can you just give us a sense of what your structural ability to implement would be if there were no COVID restrictions, your team was free to do as much as they could do? How significant could that be?

So it’s all about us staffing and get in front of it. So I think could we do a thousand a quarter? Of course. We’re could do that. Could we do 1,500? Absolutely. Can we do 2,000? We could. We’d have to sort of hire more rounded, and then so on and so forth. So it’s very manageable for us to do this, and we are staffing up in advance of that. So we’ve made some hires specifically to prepare that activation. Again, as we’ve seen that activation pick up this month, you can see on our website we push for it. So I expect, whatever that cadence we need to get to, we can get to. And today, I’d say, where do we max out? It’s probably 1,000, 2,000 a quarter. Where it is sort of depends, but that wouldn’t be the worry. I think we can step up for that quickly.

On the Restaurant Magic side, so if we think about what Chipotle and others are saying about the cost of labor, when we think about supply chain costs going up, Restaurant Magic seems like an ideal solution as part of your equation. I’m curious if you’re using that more as a lead weapon, or how the reception is going relative to the Restaurant Magic piece of the business.

It’s more of a pull there. So we pull that through. And I think one of the things we’re excited for is, if you think about our Q2 and Q3, with the pandemic restrictions easing, it’s pretty amazing that we’ll be able to accelerate activations and also accelerate Restaurant Magic, which got hit during the pandemic harder than Brink. So I expect this to be hitting on all cylinders, but that product is much more of a pull-through. When we sell Brink, it’s a lot easier to pull that through. So Brink is more to lead-in.

And then final question relative to how you’ve discussed those units that have up – really the Brink offering versus those units that don’t have the Brink offering within the same brand. Can you give us any update there from an ROI or a perceived ROI perspective?

So there’s absolutely a perceived ROI. I think one of the most exciting things we’ve seen is that some of the change we signed in the last quarter or so, the pace at which we are assigning new stores is much faster than anything we’ve done in the past. And that’s going to continue. So I think that’s just us, honestly, having gotten smarter about how we sell that product, which is, as you said, very ROI-based. We come in and we say, hey, here’s why this makes sense. Here’s what we’ve learned. And I think all the time, it’s just being smart about how we think about incentives, right? So – I’m just making this up. If we said, hey, you get a month of SaaS free for booking in the next couple of months it’s extremely ROI-positive for PAR because, if they wait a year of install versus doing now, we make that money back in spades. So I think we’ve gotten a lot smarter about how we kind of, again, sign up those stores. And we saw it really play really well in Q1.

All right. Thank you.

Our next question comes from the line of Anja Soderstrom from Sidoti. Your line is open.

Hi. Thank you for taking my questions. Actually, some of them have already been asked. But in terms of the Punchh integration and the sales team there, how big is that sales team? And how is that integration going with the cross-selling and upselling in terms of training and ramping that up?

Sure, absolutely. And it’s relatively small, about a dozen or so quota-carrying folks. We’re really early into this. So we’ve worked on what’s going to be our playbook to cross-sell, what’s our playbook for cross-account collaboration. We’re really excited. I mean, I think, as I mentioned, when we told our customers there was quite a bit that came in, some customers that we weren’t expecting; just thinking through the last month, there’s a number of accounts where I’m actively involved from the, quote-unquote, PAR side and vice versa. So it’s been incredibly positive early goings. As we move forward, we’ll see much deeper collaboration because we’ll have it better mapped out, where is the overlap, where are the places we need to push Punchh, where are the places we need to push brink and the other products that we have. So I think that, of all the things that happened in integration, that will be the part that we have the most success in because, again, we’re very much answering a customer need as opposed to creating a need.

Okay. Thank you.

[Operator Instructions] Your last question comes from the line of Adam Wyden from ADW Capital. Your line is open. You may ask your question.

Hey. Congratulations on pulling It’s super-exciting, and obviously love to see the strength in the backlog. So my question is, if you look back kind of the history of the company when it was super-hairy and I got involved, the company had no capital. We got you in there. You had to solve all the tech debt. You were on pace to have your best bookings quarter, and then this COVID happened. And if anything, obviously, now everyone realizes they need that. But you’ve kind of solved all the tech debt. You talked a little bit about kind of getting the implementation team up, so you can start activating it at, whatever – 1,000, 1,500, 2,000. Although I think during Arby’s with Karen, I think we probably activated close to 2,000 units in a quarter. You made a comment that you thought that the company, by the end of this year, would be able to get back to historical organic growth rates. I mean, just to try to put some parameters around that, I mean, is that like a 50% to 100% ARR growth kind of exiting this year? Is that what you think you can get to?

We don’t give guidance, but I think, historically, our business has grown at that 40, 50% clip. And I think we’ve got the potential to do that depending on how we execute and COVID staying where it is. I think underwriting that for 2021 is very much completely tied to our ability to roll out this backlog, right? I mean, if we didn’t sign any more stores for the rest of the year and just roll out our backlog, we’d be very close to hitting those targets. And so, I’ve never been more optimistic about our ability to drive ARR growth from what we’ve got signed already, and it’d just be a matter of executing. And I think, obviously, adding Punchh just helps us continue that acceleration. So again, I hope this is our last COVID-impacted quarter, where the bookings aren’t so far ahead of the activations, and I think it will be. And so, yes, I think we should be able to get to a relatively exciting growth rate because there’s so much already signed. We don’t need to sell too much the rest of the year. That’s going to hit a relatively high ARR growth number.

And then my follow-up question is, look, I’ve obviously been in this company for a long time. We were sitting with a large franchisee, call it, about 100 units of what I would call a Tier 1 chain that is probably larger than anything you already have. And we were sitting there, and they said, Well, we hate changing our point-of-sale because, every single time we change, it’s $50,000 of hardware. And, well, we both know that it’s not 50. It’s probably 6, 7, 8, 9, 10 , which maybe is an education program. But when I said to them, well, what if PAR could give you the hardware for free, would you do it? And they said, yes. And I guess my question – really, it’s kind of a threefold question. But, I mean, if I look at the success of Punchh, right, to me, it feels like Punchh integrated with restaurant chains that basically said, look, we’re going to guarantee you this ARR. Now, they’re doing that through running the software expense for a lot of these chains through the loyalty funds, these ad funds where the franchisee is already paying in the dollars. I guess, my question to you is you have a finite amount of implementations. What do you see as kind of innovation in terms of rollout to Brink and Restaurant Magic vis-a-vis having these chains put it into the loyalty funds, or making people take it with payment, or even just prioritizing who you’re integrating with based on price? I mean, it feels like we shouldn’t be waiting on everybody else. This is a product that everybody needs. And so, how do we think about kind of prioritizing the chains that are going to pay us the most ARPU and guarantee us the stores, innovation in terms of payment, either through payment processing or running it through the loyalty fund? I mean, it’s clear, like you said, everyone needs this. I don’t want to sound like a jerk, but when someone says, "What’s the ROI?" I mean, I don’t know if anyone on this call knows, but we were personally invested in Checkmate, and we think it’s a wonderful asset. But, I mean, people are paying $100 a month, $1,200 a year that, arguably, generates anywhere from 60 to 100,000 in EBITDA per location based on reduced food waste. I mean, the fact that people are even asking if there’s an ROI is kind of insane. So to me, this is like how do we educate the consumer that they need this and that the return is multiples on itself, and then making people do it faster and making it easier, right, making it easier, whether it’s through payment or loyalty fund? How do you think about those things?

Yes. So listen, I think it’s well under way, right? I mean, the bookings that we have are very much the result of getting out there and letting the story be known and understanding where we are. The addition of Punchh, we’ll accelerate that because, now, it’s coming in and solving a much bigger problem, that end-to-end unified commerce platform. So I think it’s well under way. I mean, bookings are the best indicator for the health of our business. If our bookings were challenged, I would be nervous, and they’re not. Again, Q1 is our best Q1. And so, I think it’s well under way, and I think it’s happening. And I think, specifically to the larger chains it sounds like that you met, you know, I would say I always thought they would take longer to kind of morph the cloud because of the legacy infrastructure they have and how hard and potentially painful that is. But I think the ROI now is so significant, whether it be the ability to have better online ordering, better loyalty, better kitchen, so on and so forth, but to do all the things that they are desperately looking to do and they’re doing, and having it on a modern platform. I’d be shocked if it wasn’t priority one or two on every CEO and CIO’s list at every large chain. So I think that that’s all under way, and we’ll see more and more larger and larger chains kind of make that switch and make that decision. And again, we benefit a lot from Punchh being in a lot of these brands already and us already having a point of contact and a product that drives significant ROI.

Look, Punchh being in with Yum! Brands and Taco Bell and all of these great companies is great. I mean, look, I don’t know if it’s lost on you, but McDonald’s says they’re putting up dynamic yield. I mean, they were the forerunner in terms of investment in restaurant tech. Now, they’re basically taking a step back. And for those of us who’ve studied this company, PAR was basically formed on developing the modern point-of-sale system for McDonald’s. So, look, if anyone’s in pole position to sign on McDonald’s, it’s us. So, look. I’m super-excited. Dairy Queen’s 5,300. I’m looking forward to the first 10,000-unit chain and taking over the rest.

So thank you for working hard, and that’s it for me.

I am showing no further question at this time. I would like to turn the conference back to Mr. Savneet Singh for closing remarks.

Thank you, everyone, for joining. We look forward to talking to you next quarter.

Ladies and gentlemen this concludes today’s conference call. Thank you for your participation. Have a wonderful day. You may now disconnect.