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3Par (NYSE:PAR)
Q4 2019 Earnings Call
Mar 12, 2020, 2:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Good day, ladies and gentlemen, and welcome to the FY 2019 fourth quarter and year-end financial results. [Operator instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Chris Byrnes, vice president of business development. Please go ahead, sir.

Chris Byrnes -- Vice President of Business Development

Thank you, Laurie, and good afternoon. I'd also like to welcome you today to the call for PAR's 2019 fourth 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 in News section of our website at www.partech.com.

At this time, I'd like to take care of certain details in regards 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 worldwide 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?

Savneet Singh -- Chief Executive Officer and President

Thanks, Chris, and good afternoon to everyone, and thank you for joining us today to discuss our fourth-quarter 2019 results. To begin with, I want to take a minute and address concerns surrounding the coronavirus outbreak. We, like everyone, are closely monitoring the spread of the virus and the potential impact on our business and supply chain. Early in the virus' trajectory, PAR took a proactive step and accelerated inventory purchases and pulled forward previously ordered equipment in the event there was a supply disruption.

We continue to push vendors to accelerate their timeline and hope to build a strong safety stock. We believe building inventory is a smart use of capital in the event of a potential, longer-term disruption. Second, we have not experienced any material customer impact to date. This could change at any time, but our customers have not expressed any change in their plans yet.

We will continue to monitor this closely. Finally, we are monitoring all potential areas of impact on our business and are in in close contact with our suppliers and partners. We continue to invest in the safety of our employees and have strengthened our oversight, given the current concerns. Now to focus on our Q4 operations.

To begin with, I'm pleased to report that we completed the acquisition of Restaurant Magic at the end of the fourth quarter, and we are now in better positioned to continue to expand our wallet in the restaurant software space. We've been impressed with Restaurant Magic team and are excited about their pipeline and what both organizations can bring to each other. Now to review the fourth quarter. This afternoon, the company reported fourth-quarter revenues of $52.9 million compared to $46.7 million in the fourth quarter last year, a 13.4% increase.

This increase was primarily due to the increase of 25% in product revenues and a 9% increase in revenues associated with our government segment. We reported a GAAP net loss of $5.8 million and a loss per share of $0.35 in the quarter compared to a GAAP net loss of $6.2 million and a loss of $0.38 per share in last year's fourth quarter. On a non-GAAP basis, we reported a net loss of $4.1 million and a loss per share of $0.25 in the quarter. This compares to a non-GAAP net loss of $3.7 million and a $0.23 loss per share last year.

The non-GAAP adjustments are detailed in our press release. Now to review our segment performance. ARR for Brink at the end of Q4 was $19.2 million, an increase of $4.7 million and a 33% growth from a year ago, and a $1.3 million increase from the sequential third quarter. This ARR number is built off restaurants being invoiced as of December 15, 2019.

In the quarter, we completed implementation of 622 new stores. New bookings in the quarter totaled 913 sites, and our open order backlog now stands at 1,390 stores. We continue to win most competitive enterprise restaurant opportunities and are outpacing our competitors with our reputation and commitment to innovation. The dramatic increase in the open order store count is due to correcting the previous accounting procedure we had been using.

This correction gives a completely accurate number of stores booked and yet to be installed. Updating the previous quarter, Q3, our open order count improved at 1,099 stores at the end of September from the previously reported number of 682. It's also very important to note that a significant number of stores that we can anticipate in rolling out during Q4, delayed their bookings and some installs due to a hardware product sourcing issue. During the fourth quarter, we had challenges acquiring a specific hardware component from the supplier that negatively impacted our install in bookings for the quarter.

I'm happy to report that we have resolved this issue and have engaged with additional suppliers to ensure a more consistent supply chain for our customers, and we'll be signing up those affected customers in the next two quarters. We continue to experience high demand for our software solutions is expected to accelerate as 2020 progresses. Regarding churn, we ended the quarter on a positive note with an annualized rate of 4.7% for the quarter, in a 6.8% rate for all of 2019. The 4.7% is the lowest quarterly churn we've reported since 2016.

As I noted on last quarter's call, we are introducing a table service modular Brink that will immediately enhance our addressable market by two times. Traditional table service restaurants normally require a more detailed point-of-sale solution as their businesses are more complex. That complexity will drive higher subscription fees for our software solutions and deliver higher ARPU rates. Along with table service, the introduction of PAR payment services will be challenging the payment processing status quo by taking a simple, transparent and secure approach to payment processing.

Restaurants pay just one bill for multiple services in part, easy to understand pricing model will eliminate the hidden fees common with other payment processor arrangements. Unlike other vendors, PAR will guarantee rates for the term of the contract, ensuring restaurants to have a clear picture of what is included and what is not. Our hope is to be a clean sheet in a market filled with many overcharging. We've been encouraged by our early customer feedback and expect payments to grow to be a substantial portion of PAR's business in the coming years.

As a platform company, our business includes significant attachment of hardware and life cycle support revenues. Hardware revenues associated with our Brink deployments grew almost 90% from Q4 2018 as the integrated PAR solution continues to be valued by restaurant owners and operators. Now to review our hardware and services business. Our recently acquired Drive-Thru Communication business performed better than our expectations to date.

We have built a strong and innovative team that is driving growth in the new business and product development areas. In Q4, we hosted our kickoff partner event and were able to renew strong relationships with our top resellers. We've been successful early on in signing new businesses and extending service renewals with large customers. We have successfully transitioned manufacturing away from 3M, and we are seeing solid progress and opportunities surrounding artificial intelligence in building out the drive-thru of the future in partnership with Brink.

Our relationship with our Tier 1 clients among larger organizations is strong, and our core business and strategic account teams continue to be industry leaders in delivering hardware and critical services in some of the world's largest restaurant companies. Stepping out of the quarter, I feel confident that the continued investment in R&D in our newly Brink management, our newly built Brink management team will lead to a strong acceleration of growth. While our team has not been together long, every new member of the team has raised the bar for the rest of us, and we're seeing significant improvement in product, sales and operations. Now to review our Government segments.

Our Government business delivered a solid quarter, evidenced by the 9.1% increase in revenues compared to Q4 2018. Our backlog at the end of Q4 is a solid $148 million. Our Intel solutions business was a driving force behind the growth in the quarter, as ISR revenues increased 52.2% from one year ago. We have confidence our backlog will provide a base for an improved 2020.

We continue to see contract opportunities where we can leverage our expertise in industry known performance excellence, specifically in value-added revenue contracts that include more direct labor and high-tech contract work within our Intel solutions business line. Before Bryan reviews our numbers in the quarter, I thought it may be helpful if I laid out a framework on why we believe PAR is potentially better positioned than others to withstand the impact of the coronavirus outbreak. First, PAR's market of customers has historically been, and likely will continue to be, heavily weighted to the QSR and Fast Casual market. This market generally performs better in a slowing economy as customers tend to shift toward these concepts.

In addition, these franchise-based businesses tend to withstand prices better, as their business models tend to be more mature and they enjoy brand recognition. Second, there is the potential that the viruses spread will highlight the need for accelerated digital and drive-thru spend. As restaurants brace for slowing table service traffic, we expect off-premise dining, online ordering and delivery to become of higher priority, all of which require a modern point-of-sale product. Restaurants will need to find ways to serve customers in this new environment, while managing labor cost and their own supply chains.

We think this all highlights the continued need for technology investment. Moreover, as consumers avoid physical restaurants, the drive-thru will likely receive increased attention. This should benefit PAR's suite of solutions. Third, we expect valuations of potential M&A targets to become more attractive in this market.

During the last year, we've seen several high-quality businesses who are living on the expectation of the next venture run. If those rounds don't materialize, PAR is in a very favorable position to sweep in on specific deals. Moreover PAR's position as the point of entry into the restaurant will become more and more valuable. In closing, with all that is occurring on a macro basis, we remain focused on the opportunity that enable long-term sustainable growth for our business.

We expect to accomplish this by delivering innovative technology solutions that create modern and exceptional experiences for our customers, all fueled by an engaged and happy team. That concludes my formal remarks, and I'll now turn the call over to Bryan for a more detailed reporting on the quarter's financials. And then we'll open the call to Q&A. Bryan?

Bryan Menar -- Chief Financial Officer

Thank you, Savneet, and good afternoon, everyone. I would now like to take this opportunity to provide some additional details surrounding our fourth-quarter results. As Savneet previously stated, we reported revenues of $52.9 million for the quarter, up 13% from $46.7 million reported in Q4 2018. Our net loss was $5.8 million or a lost of $0.35 per diluted share for the quarter versus a net loss of $6.2 million or a loss of $0.38 per diluted share for Q4 2018.

Our quarter-over-quarter field performance was primarily driven by continued growth in Brink POS revenue, including related SaaS, hardware and support services and the introduction of our recently acquired drive-thru product line. Operating segment revenues for the year ended December 31, 2019, were $35.6 million for the Restaurant/Retail reporting segment, an increase of 16% from $30.8 million reported in Q4 2018. And $17.3 million for the Government reporting segment, an increase of 9% from $15.9 million reported for Q4 2018. Restaurant/Retail revenue for Q4 2019 by business line consisted of: $23.4 million for core, $11.7 million for Brink; and partial period revenue of $0.3 million for Restaurant Magic for the 12 days post close of our year-end acquisition; and $0.3 million for the one-month of revenue related to SureCheck prior to the divestiture at the end of October 2019.

Restaurant/Retail revenue for Q4 2018 by business line was $22.5 million for core, $6.9 million for Brink and $1.4 million for SureCheck. Government revenue for Q4 2019 by business line consisted of $8.9 million for ISR, $8.3 million for mission systems compared to Q4 2018 revenue by business line of $5.9 million for ISR, $9.8 million for mission systems and $0.2 million for product sales. Product revenue for the quarter was $20.2 million, up $4.1 million or 25% compared to Q4 2018. Our hardware sales in the Restaurant/Retail reporting segment were up versus prior year, mainly driven by $2.7 million in sales of the recently acquired asset of 3M's Drive-Thru product line and a $2.5 million increase in brink hardware as compared to Q4 2018.

Service revenue for the quarter was $15.5 million, up $0.8 million or 5% compared to Q4 2018. The increase was primarily due to a $1.1 million or 41% increase in Brink SaaS. We finished the year with Brink annual recurring revenue of $19.2 million as compared to $14.5 million in 2018. Contract revenue from our Government operating segment was $17.3 million, up $1.4 million or 9% as compared to Q4 2018.

This increase was driven by a $3.1 million increase in our ISR business line. The contract backlog, as Savneet said, continuos to be healthy, noting a total backlog of over $148 million as of December 31, 2019, and a trailing 12-month book-to-bill of 1.2. In regards to GAAP margin performance for the quarter. Product margin for the quarter was 19.5% compared to 14.1% in Q4 2018.

The improvement in product margin was primarily due to a $1 million write-off for SureCheck hardware in Q4 2018 partially offset by unfavorable offering mix as a result of an increased percentage of peripheral sales in Q4 2019. Non-GAAP margin was 18.1% as compared to 20.5% in Q4 2018. Service margin for the quarter was 33.9% and compared to 17.5% in Q4 2018. The improvement in service margin was primarily due to a $1.6 million impairment for SureCheck software in Q4 2018.

In addition to favorable offering mix as a result of the growth in Brink Saas. The non-GAAP margin was 33.4% as compared to 28.3% in Q4 2018. Government contract margin for the quarter was 9.9% compared to 11.9% in Q4 2018. The decrease in margin was primarily due to a strong margin quarter in Q4 2018 from our Mission Systems business line.

Now to operating expenses. GAAP SG&A was $9.9 million, up $0.5 million versus Q4 2018. The increase is due to additional investments in Brink POS sales and marketing and increased equity incentive compensation partially offset by decreases in core sales and marketing. Non GAAP SG&A was $8.8 million, down $0.1 million versus Q4 2018.

Non GAAP SG&A adjustments for Q4 2019 included $0.2 million related to investigation of conduct in our China and Singapore offices and $0.9 million for equity-based compensation as compared to $0.2 million and $0.3 million, respectively, in Q4 2018. Research and development expenses were $4.1 million, up $0.8 million versus Q4 2018 driven by increased investment in brink development of $1.2 million. Now to provide information on the company's cash flow and balance sheet position for the 12 months ended December 31, 2019. Cash used in operations was $16.1 million primarily driven by net operating loss in addition to a $5 million increase in net working capital needs resulting from an increase in receivables late in the year tied to our ERP transition.

This compares with cash used in operating activities of $3.8 million for the 12 months ended December 31, 2018. Cash used from investing activities was $24.5 million for the 12 months ended December 31, 2019, versus cash used of $6.7 million for the 12 months ended December 31, 2018. During the 12 months ended December 31, 2019, we used $13 million of cash for the Restaurant Magic acquisition, $7.5 million for the Drive-Thru acquisition and received $2.5 million for the divestiture of the SureCheck assets. In the 12 months ended December 31, 2019, we also capitalized $4.1 million in costs associated with investments in our Restaurant/Retail segment software platforms in line with the same period in 2018.

Non-software capex costs were $2.5 million for the 12 months ended December 31, 2019, down $1.5 million versus 2018 due to a decrease in costs associated with the implementation of our new ERP system and IT infrastructure. Cash provided by financing activities from continuing operations was $65.9 million for the year ended December 31, 2019 versus $7.3 million for the year ended December 31, 2018. The increase was primarily driven by proceeds from the 2024 notes net of issuance costs and repayment in full of all amounts outstanding under the credit agreement partially offset by the final payment related to the conclusion of the Brink acquisition. As of December 31, 2019, inventory balance was $19.3 million, a decrease of $3.4 million from December 31, 2018 and a decrease of $0.2 million from September 30, 2019.

And Inventory turns were three times for our domestic and four times for international operations. Accounts receivable of $41.8 million increased $15.5 million or 59% compared to December 31, 2018. The receivable balance was broken down between Government segment of $11 million and Restaurant/Retail segment of $30.8 million. The increase in Restaurant/Retail accounts receivables driven by invoice timing in Q4 weighted toward the second half of the quarter as a result of the ERP migration, in the beginning of the quarter.

Additionally, both operating segments experienced increased revenue in Q4 2019 versus Q4 2018, and the acquisition of Restaurant Magic increased receivables by $1 million. Restaurant/Retail segment days sales outstanding increased from 52 days as of December 2018 to 77 days as December 2019 due to the ERP timing. Government days sales outstanding increased from 45 days as of December 2018 to 58 days as of December 2019. That concludes our remarks.

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

Chris Byrnes -- Vice President of Business Development

Thanks, Bryan. Laurie, I think we're ready for Q&A now.

Questions & Answers:


Operator

[Operator instructions] We have a question from Samad Samana from Jefferies.

Samad Samana -- Jefferies -- Analyst

Great. Hi. Good evening and thanks for taking my questions. I guess, maybe, I know you touched on kind of the broader environment during the call.

But if I could maybe double-click on that. How should we think about maybe how your QSR customers are thinking about store openings, store closings or prioritizing kind of technological advancements during a time like this. Just help them maybe understand how we should think about customer behavior a little bit better just during volatile times like this?

Savneet Singh -- Chief Executive Officer and President

Sure. I think all we know is that we've been told so far. And what I can tell you, our QSR customers have not yet pulled back on their plans with us. And as you know, their plans are with us are very much tied to new store openings or rollout.

So we haven't seen an impact quite yet. And I think, as I mentioned during the call, in the premise of it being QSR, probably helps us there. I think a good analog might be 2008 where you saw QSR and fast casual, be relatively resilient during a tough time. And so if that happens again, which I think there's are that it could, the pool that we fish in is a little bit, call it, more shallow than others.

And so we should feel more resilient given that those are the customers we serve very well. Second, I think it's clear with the virus that traffic to table service restaurants should drop off significantly, and that too should potentially be a boost to QSR restaurants drive-those focused restaurants. But I think it forces every restaurant to have a robust plan around digital ordering, online ordering, third-party delivery, native delivery, off-premise eating, labor, inventory management and all those initiatives require a modern point-of-sale system. And so I think if there's a global recession, nothing will really truly offset that, but I think this definitely helps mitigate it, because I think that spend will still be prioritized.

Samad Samana -- Jefferies -- Analyst

OK. That's helpful. And then I mean I know during the quarter or recently company filed that, kind of, contract for you, and i know that's a question some investors had brought up to us. I'm curious if you've noticed anything in terms of when you're dealing with larger enterprise customers, I know it's a little bit of a weird question, but has that had any type of impact now that or especially maybe on the employee side at the company itself as well? Now that they know that you're going to be there for somewhat of the long haul.

And has that had any type of impact?

Savneet Singh -- Chief Executive Officer and President

No. In fact, I think the employees, the team, our customers knew that I was sort of all in and very committed to the journey. So I think more it's people than anything else.

Samad Samana -- Jefferies -- Analyst

OK. So just an investor. It's just us, we care. The Restaurant Magic acquisition, I know the company talked about the different customer bases last quarter.

Could you give us maybe an update on the cross-selling strategy there and maybe initial customer feedback? now that the acquisition has been closed for about three months?

Savneet Singh -- Chief Executive Officer and President

Sure. So I think the customer feedback's been fantastic. I think a lot of this is driven that restaurant organizations are continuing trying to find ways to simplify their organization and they had a challenging time managing so many vendors. And so, I think, they like that they're arguably the two most important products in the restaurant are the back office and the point-of-sale and having that under one roof, I think, simplifies their experience.

And so we've had really strong reception from our customers. As it relates to, sort of, going in together. We have a nice pipeline of joint customers we're going after. And I think the teams are working very well together.

And I look forward to sort of sharing some of those wins down the road. But without question, a number of customers are obviously looking for us to work much closely together and the Brink team has really been able to increase the speed of referral, if you will, to the Restaurant Magic side.

Samad Samana -- Jefferies -- Analyst

Great. And then maybe one last one for me, and then I'll pass the baton along. I know that the company did a few acquisitions in 2019. And obviously, in times like this, there's dislocations.

How should we think about maybe M&A opportunities with PAR being a publicly traded company with a healthy balance sheet? How should we think about your own, maybe strategic M&A opportunities in this type of environment?

Savneet Singh -- Chief Executive Officer and President

Sure. So I think from an M&A perspective, I think we're in a fantastic place. We completed our capital raise right at the close to the peak of the market. So we extended our balance sheet which gives us a lot of comfort to continue the investments we're making and potentially be more aggressive on the M&A side.

We've been really transparent that we think that there's a great opportunity for us to own more of the wallet share of restaurant software spend. And this should accelerate that. There we looked at dozens of deals, to be frank, that we'd love to have gone deep on and taking a swing at but I think multiples were just never given a margin of safety to really get into. I really do believe that's going to change with this busy cycle, hopefully, slowing down a bit, gives us the opportunity to be more aggressive.

And I think not all, but some of our competitors will be in a more challenging financial situation, which will probably remove competition for some of these deals. And so I think it could be very, very beneficial for us.

Samad Samana -- Jefferies -- Analyst

Great. That's really helpful. I'll pass it along to my peers on the call. Thanks for taking my questions.

Operator

Your next question comes from the line of Ishfaque Faruk from Sidoti & Co. Please ask your question.

Ishfaque Faruk -- Sidoti and Company -- Analyst

Couple questions. First of all for the [Inaudible] further [Inaudible] I mean [Inaudible] you expect add around 1,000 or so bringing [Inaudible] forward? Or do you think you expect in [Inaudible] past due to the current situation.

Savneet Singh -- Chief Executive Officer and President

Ishfaque you're cutting here now, I think I answered the question. So the question was, do we still expect to hit around 1,000 bookings per quarter. I think we should be directionally there going forward. As we said in the transcript, we had a hardware component issue that we wouldn't well past that number in Q4.

It's not for a hardware component issue. I think, hopefully, we're in there. But much of our quarter is really determined by the last two weeks of the year. And so we'll see how the quarter shapes up, but the macro environment obviously has a big impact on us.

But we feel like very confident on what we think for the year, we can hit. But short term, we don't know. But I'd say, broadly, will we continue to sort of talk along as we've been doing, I feel confident. And as I said all along, I really feel extremely confident about the back half of the year.

Ishfaque Faruk -- Sidoti and Company -- Analyst

Got it. Right. And the [Inaudible] side. You mentioned that you guys are ready to [Inaudible], with the [Inaudible] environment, do you [Inaudible] to the timing of to start more broadly [Inaudible] maybe?

Savneet Singh -- Chief Executive Officer and President

Ishfaque, we're certainly having a hard time hearing you, but is the question timing of table service?

Ishfaque Faruk -- Sidoti and Company -- Analyst

For a broader rollout basically.

Savneet Singh -- Chief Executive Officer and President

Got it. So we're still probably a couple of months lakefront bought rollout. We've gotten to the point where that we feel confident about the product, the team. And so you could think of it as we've got early customer traction, we're going to work it out with them.

We've been selling cable service for years and years. This is sort of a revamp product that we feel extremely confident about. And so we're in conversations with a mix of small organizations and then a couple of very, very large organizations. So it's still very early in what we're doing, but we feel really confident on the quality of the product.

And as we've mentioned before, a lot of our entry in the table service was driven by either large customers requesting us to do that, or our channel partners really pushing that. So we feel it's a very exciting business for us. We're just at the beginning of it. And hopefully, the next quarter, we can talk about traction.

Operator

[Operator Instructions] Your next question comes from the line of Adam Wyden from ADW Capital. Please ask your question.

Adam Wyden -- ADW Capital -- Analyst

Hey. Savneet, so yes, look, it's an interesting time that we're all in. I think people are asking a lot of questions. I think it's been a pretty long journey over the last couple of years here.

It feels like, kind of, where we are, where we started, but we're not. So I guess my question to you is, a lot of short-sellers are out there saying that, yes, no one's going to install any software if restaurants are not open. They're not making any money. In the past, you talked about giving people hardware in exchange for SaaS and payments.

In some of our channel checks, it became evident that you might have signed a couple of these contracts recently. You've got this robust balance sheet. I mean can you talk a little bit about how you can kind of accelerate deployment? I mean because it seems at some level of the bottlenecks been that people, you said you couldn't get the hardware, but you got the hardware. I mean, sometimes, the bottleneck is getting the guy to pay for it.

I mean can you talk about the initiatives that you're doing in terms of giving people the hardware or discounting the hardware in exchange for payments and SaaS, like your peers are doing? And maybe talk a little bit about how that gives you confidence in your backlog relative to kind of what other people are saying?

Savneet Singh -- Chief Executive Officer and President

Sure. So I'd first say that we get to see sort of pullback from the industry. Obviously, if it happens, it happens. And that's why we feel there's some reasons that there's some tailwinds to protect it.

But specifically to the hardware question, absolutely, we've built out a payments business and one of the advantages of having a payments module is it allows you to be more creative on how you structure deals to your end customers. And so by building on a new recurring revenue stream, we can be more flexible in how we price out our hardware. And so it's a tool that, frankly, we've needed in our back pocket to accelerate growth, particularly in the table service market. And I think what we've been encouraged by early on in our conversations about payments, is that some of our larger customers, who we just never would have expected to even have a conversation have been the ones actually very excited about it.

Adam Wyden -- ADW Capital -- Analyst

Let me ask you a question. I mean in this world where you have everybody shorting steamrolls and [Inaudible] and people saying they're never going to go to a restaurant again. And we know that people go to restaurants. Even if they don't go, if they go less, people are going to eat, people are not going to sit in their homes.

I mean even if your restaurant sales are down, your profits are down, I mean why on earth would you not take this opportunity when business is slower, to take this software that's going to allow you to be more efficient, cut costs and get delivery, and it doesn't cost you anything. Because I mean at the end of the day, if you're taking Brink, will only cost to you effectively is the SaaS, but it's really the hardware. And so my question to you is like, if you're in a situation where you're getting the hardware heavily discounted or free, like, why would you not take the product in a down economy, it's only going to bolster efficiency and potential sales? I mean, I guess, I'm just trying to understand that. I mean that seems like a silver bullet on some level.

Savneet Singh -- Chief Executive Officer and President

I think the ROI for Brink is always high. I think the ROI now, if I was a restaurant operator, is even higher. Not having online ordering, not having third-party delivery across all accounts, not having off-premise dining, not having sort of creative ways to manage or drive-thru. I find it hard to think that they wouldn't want to continue to make that investment.

They haven't done that yet. Given what you talked about, which is, maybe not everyone will go to a restaurant and so they want to pick up, they want the delivery. I think that in all down economies, there's a pullback in spend, but there are certain areas that you'd invest in to hopefully offset some of the revenue loss that you're going through the small business. This is one of those areas I expect them to go after.

And as you suggested, if we can mitigate some of that hardware cost or all of it at times, I think it's a no-brainer, which is why, I think, today, we haven't had lots of customers pulling back from us yet, but I think we'll see as this virus continues its trajectory.

Adam Wyden -- ADW Capital -- Analyst

Yes. I mean, look I guess, at the end of the day, like, even if the government were to mandate restaurant closures, right, that still wouldn't preclude you guys from doing implementations and stuff like that. I mean I just come back to the same point, which is that, like if it doesn't cost them anything to do it. I guess it really just comes down to like counterparty risk on your part, like you're making an investment in them, if you're going to give them the hardware that they're going to stay in business and get the revenues.

But I mean if you're doing business with big chains, right? Like, it seems like a pretty good risk-adjusted return, which comes to my next question, which is, we talked about M&A. I mean the stock here is at $15. I'm just going to do, what I call, a convenience store map. So 15 times $17.2 million, that's $258 million that converts at $43 million.

I don't know what your net debt is, I haven't checked your balance sheet, but it's probably on the measure of around $30 million. If you've got Government's worth at least 100 and hardware at least 100, that's $88 million. And at least kind of by my back of the envelope math, with Restaurant Magic and kind of the previous thing, you were supposed to kind of exit the year around 50 or around an hour, which means you're basically paying less than two times ARR for Brink. Now we can play with the numbers around a little bit, and this and that.

But I mean, it seems unlikely that there is anything that you can buy at two times ARR. So maybe this is a little bit like Lee Cooper the Wyndham call, but like so this is getting kind of outrageous and the short-sellers are kind of giving it to us. And as a long-term shareholder, I mean, I want to be rewarded for taking the pain and taking the journey with you. I mean what type of initiatives, I mean let's say, tomorrow, the stock market is down 10%.

This thing trades $10. I mean we're going down 25% every day. I mean you did 25% of a day for four days, it's not going to be a 0. I mean what are you going to do for our shareholders to make sure that we're being compensated for the journey, because I know you lose your family up there.

You got this comp package, you want to make money like the rest of us. I mean what kind of confidence can you give to investors that you're going to protect us and really reward us for being on the journey with you?

Savneet Singh -- Chief Executive Officer and President

So listen, I think the best thing we can do is continue to execute our plan, which is to make our investment in Brink so that we can continue to the reacceleration of Brink organic growth. And as I suggested, obviously, we're very active in looking at M&A opportunities right now. So I guess, and I think we feel stronger than our competitors at this moment in time, so we want to take advantage of that and be aggressive during this time of year. So I think...

Adam Wyden -- ADW Capital -- Analyst

Well, I was talking about like share repurchase. So right now, the stock is at $15.

Savneet Singh -- Chief Executive Officer and President

Sure.

Adam Wyden -- ADW Capital -- Analyst

Say tomorrow, it trades at $10. I mean you raised a ton of money, you could do an accelerated share repurchase and share it by a third.

Savneet Singh -- Chief Executive Officer and President

Absolutely.

Adam Wyden -- ADW Capital -- Analyst

I mea you almost have a moral obligation to do it, right? I mean, right now, the stock market is basically put a double barrel shock on your head until you're dead. You're dead. Restaurants are dead, Savneet's saying PAR Technology's restaurants are dead and that you guys aren't worth the paper that you're printing on. And my question to you is that fortunes get made buying fear.

And so if you have a confidence in this business, and this stock is $10 tomorrow, which is totally could be, like what are you going to do to protect the shareholders because you just raised $129 million at 43. We're at $10. Why are you not doing an accelerated share repurchase putting $30 million in the stock at 1$0. If you have really confidence in the backlog, do you have an obligation to do it.

Savneet Singh -- Chief Executive Officer and President

Sure. I think we would look at it, stock at $10 would obviously look at all opportunities to create value, and we would make the argument of how we look at our valuation like the return of buying back shares versus doing an acquisition, we're staying the course, and we will constantly keep doing that math and making sure that we're maximizing every dollar investment?

Adam Wyden -- ADW Capital -- Analyst

Yes. Look, I know you have it. But like, I guess, my question to you is like, if you're going to do M&A, you need a cost of capital. And right now, it seems very hard at today.

I mean, I guess, what I'm going with this, is that these prices, it doesn't feel like you can do any M&A when you're trading at two times when Brink is trading at two times revenue. So my question...

Savneet Singh -- Chief Executive Officer and President

Yes. I think we understand, I totally agree with you, and we understand the dynamic of our share price is many ways, part of our cost of capital. And so listen, we are a week or two into this steep decline. And so we'll constantly evaluate what's the best way to create shareholder value.

We are obsessed with it. The team has invested behind it. And if the stock isn't $10, or whatever prices the stock is, you would take it incredibly seriously. But we need to weigh that against the other options that we have out there.

And we will constantly do that.

Adam Wyden -- ADW Capital -- Analyst

Yes. I mean, look, it's at $15 today, I mean I don't know where it is tomorrow. But I mean even at $15, like I'm thinking about it, and I'm saying it myself. It's two times.

You're paying like two times revenue for Brink. And I think on some level, right, I think you know, like we had the tech debt. We had issues with the engineers. I mean, look, all the types of things that you can do to drive organic growth, like the payments, like the hardware solution, all of these things were things that kind of took time to spool up.

And so now it's kind of spooled up, growth should accelerate. And I guess my question is you wish bottle harm on humanity and the viruses terrible, but like is presenting an opportunity where people are saying, look, I can just shoot any hospitality stock in the world, right? They shooting them all. And the question is...

Savneet Singh -- Chief Executive Officer and President

Yes. Yes. So listen, I think we look at — we have the exact same perspective and view, is if there's an opportunity, we'll be aggressive in taking it. And I think we've shown we've done that a lot in the last year, and we'll continue to do that.

Adam Wyden -- ADW Capital -- Analyst

Yes. I mean, look, honestly...

Savneet Singh -- Chief Executive Officer and President

There's obviously limits on what we can say publicly we can say publicly. And so that's all I can really say about this.

Adam Wyden -- ADW Capital -- Analyst

OK. Sounds fine. All right. Well, look, I think you're doing a great job, and I'm very happy with the initiatives.

I guess it's kind of like we're in the twilight zone. I just think it's kind of been saying that over the last three years, we made all this progress, but it's just not reflected. So I tell all CEOs, when the market gives you these opportunities, you kind of have an obligation to shareholders, right? And if you can take the share count from $17 to $10, we're all going to make a lot of money on the other side of this, but like you can't squatter those types of opportunities.

Operator

[Operator instructions] Your next question is from James Murray. Your line is now open.

Unknown speaker

Thank you. Could you give a little color about PAR pay? because it's my understanding there's a lot of low-hanging fruit that could make a lot of money for us quickly.

Savneet Singh -- Chief Executive Officer and President

Sure. So I'll just correct the terminology. It's more PAR payment services. PAR Pay as a module of PAR payment services.

But in general, the idea is for part provides payment services to restaurants such that when a transaction is swiped at the restaurant that runs through our own payment facilitator as opposed to referring that business to a third-party. And it's a model that has tried and tested by essentially every one of our competitors except for PAR. And why we believe this could be addition to our revenue is that we're not recreating the wheel here. We're very much leveraging the work that's been done by every other firm out here, and I think our are sort of unique add here is that we've made an incredibly seamless with the customer.

We made it incredibly transparent, no hidden fees, none of the sort of list of potential behavior that has scared people away from partnering payments. And most importantly, as we've gone out to our customers, we continue to be excited about their interest in the product. And so the way to think about it is every time you swipe card at the restaurant, PAR will make a fixed fee on every single one of those swipes. In return for doing the proximity of that transaction.

And so the revenue we expect is that in certain restaurants and maybe a small, if it's a very large concept as, call it, increasing our recurring revenue by 10%, but other restaurants, it could increase our revenue up well over 100%. And so it's a big range of what we can make on it, and we get to have the data source. I think guys you here's how we sort of look at it going forward. But as we get out there, this next quarter or two, we'll have some good data to share.

Unknown speaker

So you're basically at zero traction right now when it comes to a signed customer?

Savneet Singh -- Chief Executive Officer and President

I can't comment on that. So I can say that we would not have made the investment into the product and the partnership, and we do not believe there is customer demand.

Unknown speaker

Thank you.

Operator

There are no further questions at this time. I will turn the call over back to Mr. Savneet for his closing remarks.

Savneet Singh -- Chief Executive Officer and President

Thank you, everyone, for joining. We look forward to updating you in the coming weeks.

Operator

[Operator signoff]

Duration: 43 minutes

Call participants:

Chris Byrnes -- Vice President of Business Development

Savneet Singh -- Chief Executive Officer and President

Bryan Menar -- Chief Financial Officer

Samad Samana -- Jefferies -- Analyst

Ishfaque Faruk -- Sidoti and Company -- Analyst

Adam Wyden -- ADW Capital -- Analyst

Unknown speaker

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