3Par (PAR) Q3 2020 Earnings Call Transcript

3Par (PAR 3.54%)
Q3 2020 Earnings Call
Nov 06, 2020, 9:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good afternoon, ladies and gentlemen, and welcome to the fiscal-year 2020 third-quarter financial results conference call. [Operator instructions] I would like to turn the conference over to your host, Mr. Christopher Byrnes, vice president of business development. Sir, you may begin.

Christopher Byrnes -- Vice President of Business Development and Investor Relations

Thank you, Sarah, and good morning, everyone. I'd also like to welcome you today to the call for PAR's 2020 third-quarter financial results review. The complete disclosure of our results can be found in our press release issued this morning 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 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 morning. For those just dialing in on the conference call this morning, 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 morning. At this time, I'd like to take care of certain details in regards to the call today.

Participants on today's call should be aware that we are recording the call this morning, 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 morning 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

Thank you, Chris, and good morning to everyone on the call today. I hope you and your families are well and safe. As I communicated to you last quarter, the last several months have presented incredible challenges for our company and the global economy as a whole. And our thoughts go out to all those impacted by the global pandemic.

I continue to be incredibly proud of the PAR and our employee commitments to helping our customers thrive during these challenged times. Under the cover of a challenged economic environment, PAR recorded one of its strongest quarters in history with near record bookings, record backlog and a strong rebound in hardware sales. In Q3, we grew our revenues 21% compared to last year's third quarter, and I'm happy to report to you that I feel extremely confident about the future of our company. A notable highlight in our third quarter, and I want to mention it right at the top, was our more than $131 million equity offering that closed just this past week, a very important step for us that provides ample capacity to continue to drive our growth in the restaurant technology business.

This offering was a milestone for us as it was our first straight equity offering since 1996. This capital raise provides us with liquidity and flexibility necessary to accelerate our growth initiatives, both through acquisition and specific internal investments. COVID-19 has shown the value of our current solutions but also highlighted a dramatic need for a new product. We intend to be active in the M&A space as we continue to build out our software platform.

We believe each additional product added will provide more incremental value to our customers, thereby making our platform stickier. Before Bryan gives details surrounding our Q3 numbers, I want to review with you our notable progress we've made in the software business. If you jump to Slide 3 of the presentation, this is a snapshot of Brink's performance in Q3. I'm really pleased to report that we had 1,181 new store bookings in the quarter, a 45% improvement from the previous sequential quarter and a 23% increase from Q3 last year.

I think this metric more than any other truly demonstrates the momentum and velocity of our cloud point-of-sale offerings. Q3 Brink bookings were the most we've seen in the last few years and highlight how quickly enterprise restaurants are reacting to the COVID pandemic. Our customers have rushed to lock Brink in as they continue to address their operations to a technology-first world. As the slide shows, we reported ARR at $22.8 million, a 27% increase from the same quarter last year.

As we accelerate activations coming out of Q3, we should continue to see an expansion in ARR. If you advance the Slide 4, you can see that we have crossed the 11,000 store threshold in voice stores in our reported backlog at the end of Q3 was 1,977 stores yet to be installed. We installed 761 new Brink stores in Q3, up 300 sites from Q2, an 18% increase from Q3 '19, a remarkable accomplishment during pandemic. As our concepts continue to ease restrictions within their stores, we believe we'll be able to accelerate activations.

This is all of course dependent on each concept's comfort and local geographic restrictions. On Slide 5, you can see the ARR waterfall over the last five quarters as we continue to grow ARR. I am proud of our incredibly low churn rate of four and a half percent in Q3. This is the fourth consecutive quarter that our annualized churn rate is below 5% and a testament to the stickiness of our software offerings and the strength of our enterprise customers.

Slide 6 shows the improvement in COVID-related churn and proves out the minimal impact that COVID has had on store closures in our TAM and the expiring strength of our customers. In Q3, 325 Brink customers came back online from temporary churn. Not shown here but important to note that Restaurant Magic also saw 174 customers come back online in Q3. Both metrics are very positive signs for our business.

Slide 7 shows Restaurant Magic delivering a solid rebound from a challenging Q2, with bookings reported at 506, more than doubling the booking output in Q2. While Restaurant Magic was impacted more from temporary closures, the business has certainly come -- has started to come back. The average MRR for new concept signed was $130 and ARR reported was $8.7 million, an 18% increase from the prior sequential quarter. This ARR figure includes waivers for temporary closed stores.

Combined ARR with Brink and Restaurant Magic is now $31.5 million at the end of Q3. Slide 8 gives the current site count for Restaurant Magic with installed stores now totaling more than 5,700 restaurants as we went live with 600 new sites in Q3. On Slide 9, we reported an approximately $3 million increase in Brink-related hardware revenues from the end of Q2, a 76% increase. We continue to see robust demand for the complete power solution and the capabilities it provides our customers.

Our customers continue to rationalize vendors, and we stand to benefit. Now, to quickly review our product in hardware business in the quarter that is our point-of-sale platforms in the drive-thru communication systems business. Product revenues in the quarter increased by 29% from Q3 '19 and recovered nicely with a 66% sequential increase from the COVID impact of Q2. As mentioned earlier, our integrated offerings in complete solutions continue to be adopted by our customers.

I'm pleased with the rebound in product sales from our Q2 number, and to deliver performance in its very challenged capital spend environment is nothing short of remarkable. Now, to review our government segment. Our government business again delivered a solid quarter, evidenced by the nearly 13% increase in revenues compared to Q3 '19. Our contract backlog at the end of Q2 was $162 million, increasing 25% in the last three months.

Our Intel Solutions business was the driving force behind the growth in the quarter as ISR revenues increased 27% from last year's Q3. We continue to seek out contract opportunities where we can leverage our decade-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 key takeaways on our company coming out of the quarter. We made fast progress implementing our strategic initiatives that will drive improved execution and accountability across our company.

This is no more evident than our approach to the restaurant technology business and that was previously siloed between our hardware and software business lines. Because of this segmenting, we cannot drive the benefit or best practices that clearly exist across our product portfolio, nor could we leverage customer insights and data across markets and products. Now we now have one business, the restaurant solutions group, and are already benefiting from the sync up. We have reorganized our brand marketing and marketing operations functions to deliver more impactful marketing plans, utilizing common processes, technology and data, while allowing us to deliver more quantifiable value out of our marketing spend.

We've also begun the reorganization of our sales teams to focus on specific end markets. These new structures include specific roles for redevelopment, account management and customer success. Essentials of both of these initiatives and improved deeper understanding of our customer behaviors and designing ways to provide them value and engage with them year round. I believe this will provide us some greater insight to what our customers care about and their in-store requirements which will allow us to be more targeted in how we market and sell our solutions to them and more effectively manage them year around.

Second, I'm excited to tell you that we recently released our transaction processing product, PAR payment services. PAR Payment, while still beta, can become a large contributor to ARR growth in 2021. PAR payment services is an all-in one payment processing solution. Restaurant operators have long been misled to sign opaque and complicated payment partnerships.

PAR payment services was created to become the transparent and fair solution. Our transaction services will give our operators the opportunity to take advantage of fantastic rates, a streamlined process and the ability to offset hardware costs. Third, PAR's market position has never been stronger. While our incumbents focused on keeping their concepts, we work hard to expand ours.

COVID-19 has dramatically increased our sales pipeline, and we expect this momentum to continue through 2021. While the virus may create hiccups, we believe the case has been made for our solutions. We are very far from our long-term goals, but we are seeing progress across all product lines. In summary, I have personally witnessed the strength of our restaurant customers, and I'm confident that the portion of the restaurant technology we serve is strong and resilient during COVID.

Our customers are forward-looking in our utilization of technology and are looking to drive efficiencies into their in-store operations. By fortune and by design, our concentration in quick service and fast casual restaurants have served us well as our customers have mature operating models, strong brand recognition and financial backing to expand the incredibly difficult situation that pandemic has caused. Our customers and restaurants at multiple customer service points encounter service drive-through and delivery. Many, if not all of our customers have been able to return to their business -- return their business to almost pre-pandemic levels, and we're inspired by helping them navigate this difficult time.

With our recent capital raise, we now have the currency to act quickly on strategic opportunities specifically on acquisitions and investing in organic growth as well. As always, I wish to thank all of our employees for their tireless work and dedication during such a challenging time and remain committed to the health and safety of our staff and customers. And with that, I'll turn the call over to Bryan for more details on Q3 numbers and then to take your questions.

Bryan Menar -- Chief Financial Officer

Thank you, Savneet, and good morning, everyone. I would now like to take this opportunity to provide some additional details surrounding our third-quarter results. We reported revenues of $54.8 million for the quarter, up 20.7% from the $45.4 million reported for Q3 2019. Our net loss was $3.7 million or a $0.20 loss per share for the quarter versus a net loss of $5.9 million or a $0.36 loss per share for Q3 2019.

Favorable year-over-year results from operations was driven by a 2.3% reduction in the earn-out liability associated with the Restaurant Magic acquisition and inorganic growth resulting from the drive-thru and Restaurant Magic acquisitions which absorbed our increased development technology costs associated with our restaurant retail segment software platforms and an increase in interest expense attributable to 2026 notes. Restaurant retail segment revenues for the three months ended September 30, 2020, were $37.4 million, an increase of 25% from $29.8 million reported for Q3 2019. The year-over-year increase was driven by inorganic growth resulting from drive-thru and Restaurant Magic acquisitions in addition to continued growth in our Brink business line. restaurant retail revenue for Q3 2020 by business line consisted of $21 million for core which included $5.7 million for drive-thru, $16.4 million for Brink which included $2.2 million for Restaurant Magic.

restaurant retail revenue for Q3 2019 was $18.2 million for core, $10.9 million for Brink and $0.7 million for SureCheck. Government segment revenues for the three months ended September 30, 2020, were $17.5 million, an increase of 13% and $15.5 million reported for Q3 2019 driven by continued growth in our ISR business line. government revenues for Q3 2020 by business line consisted of $8.9 million for ISR, $8.1 million for mission systems and $0.5 million for product services compared to Q3 2019 revenue of $7.1 million for ISR and $8.4 million for mission systems. Product revenue for the quarter was $20.5 million, up $4.6 million or 29% compared to Q3 2019.

The increase was driven by drive-thru sales and hardware sales related to Brink installs. Product revenue related to Brink for the quarter ended September 30, 2020, was $6.7 million, an increase of 31% from $5.1 million recorded for the quarter ended September 30, 2019. drive-thru product revenue for the quarter ended September 30, 2020, was $5.3 million. Service revenue for the quarter was $16.9 million, up $3 million or 21.5% compared to Q3 2019.

The increase was primarily due to the Restaurant Magic acquisition and growth in Brink recurring software revenues. Service revenue associated with Brink includes recurring software revenue of $5.6 million, an increase of 30% from $4.3 million for the quarter ended September 30, 2019. Restaurant Magic service revenue includes recurring software revenue of $2.2 million. Contract revenue from our government operating segment was $17.5 million, up $2 million or 21.5% as compared to Q3 2019.

The favorable increase was driven by contracts entered into during the first half of 2020 relating to ISR. Contract backlog totaled $162 million as of September 30, 2020, and a trailing 12-month book-to-bill of 1x. In regards to GAAP margin performance for the quarter. Product margin for the quarter was 21.9% compared to 22.9% in Q3 2019.

The reduction in product margin was primarily due to unfavorable product mix. Service margin for the quarter was 33.3% compared to 32% in Q2 -- in Q3 2019. The improvement in service margin was primarily due to a shift in mix that resulted from the Restaurant Magic acquisition. Government contract margin for the quarter was 9% compared to 5.8% in Q3 2019.

The increase in margin was primarily due to higher product service business line revenue and increased profitability across several contracts and mission systems compared to the quarter ended September 30, 2019. Now to operating expenses. GAAP SG&A was $10.5 million, up $1 million versus Q3 2019. The increase was primarily driven by an additional $0.9 million of SG&A expense from recent Restaurant Magic and drive-thru acquisitions.

Research and development expenses were $4.2 million, up $0.8 million versus Q3 2019 driven by increased investment in Brink development of $1.5 million and $0.6 million for Restaurant Magic development partially offset by the SureCheck divestiture and an increase in capitalization of developed technology. Now, to provide information on the company's cash flow and balance sheet position for the nine months ended September 30, 2020. Cash used in operations was $14.4 million versus cash used of $9.9 million for the nine months ended September 30, 2019. The variance was driven by an increase in strategic procurement of inventory and a decrease in customer deposits.

Inventory levels were strategically increased earlier in the year to support the rollout of projects for Brink and to mitigate potential risk of supply chain disruption due to COVID-19 pandemic. Cash used in investing activities was $6.9 million for the nine months ended September 30, 2020, versus cash used of $11.6 million for the nine months ended September 30, 2019. During the nine months ended September 30, 2020, we capitalized $6.4 million for developed technology costs associated with our restaurant retail segment software platforms compared to $2.3 million for the same period in 2019. Non-software capex costs for the nine months ended September 30, 2020, were down $8.9 million versus 2019 as the nine months ended September 30, 2019, included a $7 million investment for the drive-thru acquisition and also costs associated with IT infrastructure.

Cash provided by financing activities for the continuing operations is $48.7 million for the nine months ended September 30, 2020, versus $65 million for the same period in 2019. The nine months ended September 30, 2020, included the $120 million issuance of the 2026 notes partially offset by the repurchase of the majority of the 2024 notes. The nine months ended September 30, 2019, included the $80 million issuance of the 2024 notes. As of September 30, 2020, the inventory balance was $27.1 million, an increase of $7.8 million from December 31, 2019.

Inventory turns were 3x for our domestic and international operations. Accounts receivable of $40.1 million decreased $1.7 million compared to December 31, 2019. Receivable balance is broken down between the government segment of $7.9 million and the restaurant retail segment of $32.2 million. I will now turn the call back to the operator for Q&A.

Questions & Answers:

Operator

[Operator instructions] Your first question comes from the line of Samad Samana from Jefferies. You may ask your question.

Samad Samana -- Jefferies -- Analyst

Hi. Good morning. Thanks for taking my questionss. Good to see the solid trends continue in a tough environment.

So maybe first question just on Brink. Bookings was again better than our expectations. I know that this time last year, the company talked about maybe 1,000-plus units per quarter. I know that we're -- there's still a lot of uncertainty, but how should we think about maybe what's been driving some of that strong bookings performance? And do you think that the new run rate going forward can be above that 1,000 level as the world normalizes? Maybe just a little color there.

Savneet Singh -- Chief Executive Officer and President

Good question. So I think the growth in bookings is partially tied to us getting our product in order and a lot of the investments we made over the last 12 to 16 months where we've dramatically increased R&D efforts to retool our product. In many ways, we are servicing the demand that's existed. When I came to the company, we cut down our sales growth almost by half the focus on products.

And so many ways, we're sort of getting the benefit of having held off on taking some of that demand and focus on product. The second part of it is very clear which is COVID. COVID has absolutely made an impact on our customers. First, those customers that we've already signed that are still rolling out and have accelerated their desires to book with us, and then second, potentially new customers.

So I think it's twofold. One is us starting to be more agile and get in front of things as opposed to holding off on sales. And then two, it's COVID. As far as what a new potential run rate could be, I think we still need another quarter to see how things shake up with the virus.

I do believe very confidently that we'll accelerate beyond what we've suggested in the past, over next year and the years to come. But I think we're cautious in Q4 -- we're cautious with the virus. But I would be surprised if we didn't clear that hurdle at the very least, and I do think we're getting to the point now where I think we can start thinking well beyond that.

Samad Samana -- Jefferies -- Analyst

Great. That's helpful. And then I know that we're over a year into the 3M acquisition and the Restaurant Magic acquisition. And I guess one of the things I wonder is 3M I think brought you some larger logos.

Any proof points on maybe being able to capture any customers within that installed base or -- and then the same question on the Restaurant Magic side, maybe how's the cross-selling machine working?

Savneet Singh -- Chief Executive Officer and President

Sure. So I think the cross-selling machine is working extremely well on the Restaurant Magic side, more so because that's a software product that we can bundle or quickly add on to new customers. When a restaurant is upgrading its point of sale, it tends to look to upgrade many other aspects of its restaurant, sort of saying, hey, if we're going to upgrade the most -- the biggest and most important product, we might still take this time to upgrade other products. And so we've seen tremendous pipeline synergy by bringing Restaurant Magic into the Brink sales process.

And as I mentioned in my remarks, as we continue to sort of come under one roof and move silos between the organizations, I think that will continue. And you'll see that happen for a long time. So we're seeing really, really strong, I would suspect well over 50% of the pipeline and probably bookings of Restaurant Magic are a direct result of the Brink sales team. And so I think the synergy there is really clear which also gives us a lot of confidence to look at other acquisitions and follow the same playbook.

On the drive-thru side, I think we are still -- we see -- I would say, we've seen great synergy from customers that we had signed on different sides of the fence. So if we had signed a large logo on our point-of-sale hardware business, we would quickly get the drive-thru business approved over there to cross-sell. Vice versa is a little bit harder. And so I think what we've seen is we've seen absolutely the pipeline grow through the addition of resellers that sell other products plus logos that we have on the hardware side, but it's not nearly as strong as the Restaurant Magic side basically -- primarily because we can almost staple on the back-office product at this time of sale.

Whereas the drive-thru process is less of an RFP process and more of a consumables business.

Samad Samana -- Jefferies -- Analyst

Great. And maybe just one last one for me before I turn it over to my peers. But just on payments. I know it's early days, but we've been asked a lot by investors how we think about what the economics of that look like.

So if you could just maybe dig into how we compare -- we see the published rates for some of your peers or your competitors. So maybe just help us understand what PAR's economic opportunity there is. And then realistically, what percentage of the base do you think may one day want to use more PAR for payments too?

Savneet Singh -- Chief Executive Officer and President

So I think the way that we've modeled it so far is if you sort of take what could be an average cross-section of customers, I believe it will double the ARPU of that client. So as we are in the enterprise, it's not so much a basis point discussion. We're not charging 3% -- and we're not getting charged 2.5% and marketing 3%. We are -- in the enterprise, we are much -- with a per transaction basis which is pretty standard in our area.

And so if we look at the average cross-section of a customer base of volume size and concept, it's about doubling -- a little more than doubling our ARPU. So if the average ARPU today is to 2,000 and 2,100, I think we can -- will double it for a concept that takes on payments. So I think that's the simplest way of thinking about our -- what we can drive from it. And obviously, very nice margin coming off of that.

As far as what percentage of our base, I think we are still figuring that out. It wouldn't surprise me if it's one day, half our new bookings took payments. It wouldn't surprise me if that number goes as low as 20%. I think we are testing in, and there isn't a great analog because most of our competitors historically haven't sold payments aggressively to this market.

So we feel encouraged by what we've seen so far, but I think it's too early to give you any thought of it's going to be 20% or 50%, we just don't quite know. But what we are seeing is that COVID should also help drive this because the ability to offset that capital expense of hardware is important in a world like today. And so we'll -- I think we'll have a little bit of data after Q4. We'll have a lot of data after Q1, and we can probably give you some attachment rates on new bookings and then an attachment rate on already installed source.

Samad Samana -- Jefferies -- Analyst

Great. Thanks for taking all my questions. And hope all of you are well and great to see good results. Thank you.

Savneet Singh -- Chief Executive Officer and President

Thanks, Samad.

Operator

[Operator instructions] Your next question comes from the line of George Sutton from Craig-Hallum. You may ask your question.

Unknown speaker

Good morning. This is Adam on for George. Thanks for taking our questions. Savneet, I found it particularly interesting in your statement in the script while incumbents focused on their -- keeping their concepts, we're focused on keeping ours.

I was hoping you could provide a little more detail in terms of what you're seeing from the incumbents and how the end market is reacting to that, those moves.

Savneet Singh -- Chief Executive Officer and President

Sure. So I think what we're seeing from incumbents is a lot of the -- a lot of what we expected. They have very big, established and fun-moving products that are incredibly hard to move. Now, these are good, stable, high-quality products, but they are tough products convert to become agile and cloud-enabled.

And so what we've seen are a couple of things. One, we've seen a lot of branding. Hey, we've got a cloud product too. It's really great.

Oftentimes, we think that is a masking of actually what's in the product because again like I said, moving at such an enormous product that's got 20 years of code in it to a modern architecture that's very, very hard. And so we see a lot of masking. The second thing we see is that a lot of the entrenchment with the existing customers is trying to come at price. And what we've noticed is that if an incumbent feels like they're at risk, the first thing they do is cut price.

Now we have not actually seen that work in most of the large concepts we've gone to. And in fact, I think it highlights the quality of our product. So those are the two things we see how the incumbents are reacting. Outside of that, we see some incumbents thinking about things of saying, hey, let me go buy -- channel partners as a way to stay fresh in the market.

Others I think are looking at saying how they can bundle payments to keep the customer sticky. But in general, I don't see a tremendous investment to product, and that's what would scare me most. In the end, a product-led company will win because in a world where technology is a driving force of change, you need great product. And I think that's the lead that we hope to expand and build on.

Unknown speaker

Great. And in terms of the beta test for PAR payments, is there any feedback you could share with us from what you've heard from customers so far?

Savneet Singh -- Chief Executive Officer and President

It's very early. I mean, we're three or four weeks into the first customer, maybe more than that. And so the first set of stores has gone great. I think it's sort of proven out our belief that we can execute on this business and get it out there.

And now we're sort of refining the sales motion. We'll expand the beta and expand beta. But it's probably -- it's just way too early given how small but effective that is.

Unknown speaker

And then last question for me. I know you've spent a lot of time in terms of trying to be thoughtful in how you build out the sales organization. Any detail around exactly what you think you're going to be doing that's going to make a large impact would be helpful.

Savneet Singh -- Chief Executive Officer and President

Sure. So the first thing is we are using one sales force to sell our products. And I think what we've seen clearly from the data I just gave on Restaurant Magic and elsewhere that we believe there will be great synergy there because now our customers have one point of contact instead of three or four, and our ability to make deals as far improved because you don't have to go to four different people to figure out what you should price -- bundle our product at. And so the first thing is I think coming with that one voice under what we call one PAR.

The second thing we've done is dramatically changed our brand marketing. And I think I guess as the investment get in, you'll start to see that in the next a few weeks or a month here as we completely renewed PAR's branding externally. That branding has done I think a lot with our customers to change how they perceive us, how they look at us. And so we retool our brand messaging, our brand promise.

And I think thinking at PAR as a software first company has done a lot. Third is around how we compensate and train our team. We take HR really serious, but we do it in a very data-driven way. And so every sales employee -- every employee is marked on all such of attributes, and we look to really reward top performers and really encourage that behavior.

And so we spend a lot of time thinking about how compensation can create the right behaviors across the organization. And then last is I think we are -- COVID allowed us to acquire some great talent that fell out of a job in the heat of COVID that we think was great talent. And so we picked up some talent that I think ahead of schedule which we're seeing the benefits of.

Operator

[Operator instructions] Your next question comes from the line of Adam Wyden from ADW Capital. Your line is open.

Adam Wyden -- ADW Capital -- Analyst

Hey, guys. I think I've been waiting three years for a quarter like this. I didn't think I get it in the middle of a global pandemic, but I'm not surprised. It's when you study businesses, it -- businesses tend to take off when they're satisfying them even.

Clearly, this is a need. Your hardware sales are clearly there, and people are, I mean, are buying hardware, and they recognize they need it to stay fit, and they clearly need SaaS, and that's reflected in your bookings. So just a couple of questions here. On the deal front, you guys raised all this money.

You just saw Lightspeed take a huge bite. They bought something for, God knows, $400 million or something like that, with $115 million cash and a significant amount of stock, and it certainly moved the needle. And that's certainly not the last deal they -- first deal they've done. They've done a number of other deals.

How do you think about kind of the universe of deals, pricing and what they can do to the business? Because to me, it kind of feels like when you run the math on bookings, you're kind of getting close to $40 million in ARR end of the year, and there's some pretty chunky assets out there. There's punch. There's compete. There's a lot of stuff in loyalty where these are nice businesses, but they don't have the gravitas or the brand that you guys have to land the Dairy Queen or a Dunkin'.

And so like it almost kind of feels like the marriage you have with Restaurant Magic is the template and a marriage with like a punch or a compete or something larger that's $30 million, $40 million in ARR, where you can do the same thing you did which is take their business, take their technology and plug in your sales team and relationships and brand to kind of take this thing to the next level. Can you talk a little bit about pricing, types of targets order of magnitude, types of deals you're looking? Because with $150 million of cash, you might be able to take down something equal to Brink, Restaurant Magic?

Savneet Singh -- Chief Executive Officer and President

Sure. Let me first take it from a different angle which is product. I think we look at our first lens product which is by adding on a new product, are we creating something better for the customer? I think that that's where we start because in the end, look at financial engineer an M&A transaction, but it doesn't do drive value to the customer from a product perspective, it'll get a short term, we feel good; long term, we feel pain. I think the product part would excite us the most.

There's no doubt that restaurants have made technology their priority going forward, and this pandemic just accelerated that to levels we can expect for a couple of years. And so if you -- and so when I think about it, I think about what are the products that we have that accelerates that future? How do we make every restaurant like in Amazon Go store? How do we make every restaurant feel like the technology is ambient and just in the background such that you can build that connection between you and your guests? And so as we think about things like online ordering, loyalty, I think over time, they all become one. And I think we want to be at the forefront of that. And so we first look at it from a product where like, hey, I can -- does this product actually create that value to that customer? Is it building that platform we've talked about? That gives the guest the experience and the customer experience, and in the end makes us to have a very sticky, high-quality product.

Second, to your point, absolutely, I think the transactions we've done have highlighted that there is great synergy in acquiring something and selling it to the same vertical. We've seen that happen twice now. And I think it's given us a lot of confidence we could do it again and prove to our customers that this makes sense. And so absolutely, we feel encouraged that.

And partly, that's why we did our equity offering was to support that initiative because it feels -- we've seen it work twice now. And then lastly, I think from a business market perspective, I think we can make a deal accretive for shareholders but really build that vertical SaaS company for the hospitality industry. I don't think anyone has done that quite yet. And so we're looking for those assets that give us that product edge that I talked about but also add to our growth, add to our product initiatives and financially make us hopefully more attractive.

Adam Wyden -- ADW Capital -- Analyst

Yeah. I mean, look, I mean, from our perspective, you guys are basically on the precipice. I mean, when I look at your size and scale, you guys are close to 40 at the end of this year and you grow another 50 to 100 next year. Kind of next year, you're looking at something that looks like 60 to 80, and probably without payments, payments get -- it's upside.

But like you get over $100 million in ARR, I mean, this -- your -- the peer group in that -- in that kind of ARR threshold, they're trading with your level of load and your level of product differentiation or trading at 30 times revenue. I mean, this is a $3 billion company next year potentially, and that's without a deal. So I mean, with the deal, I think you really are kind of at the point now where you've got -- you could have the scale to really be a vertical -- kind of a true best-in-class vertical SaaS player in the restaurant space because it looks like at least with Lightspeed, they're acquiring companies, but they're not -- they don't really have a vertical, right? It's a little bit of restaurant, a little bit of retail, a little bit of CRM, but it's kind of flying around. Whereas in the restaurant space, specifically QSR, there's so much wallet share that can belong.

And I think when I look at some of these smaller players, they don't have 40 years of serving these customers. They're not going to land to Dunkin' Donuts. They can land 100 or 200 unit customer, but they're not going only into 14,000. And the combination of our expertise with customer service and hardware and then Brink, it -- to us, it's super exciting as it relates to building the mode of the business.

So I'm very excited about the deal component of this business. Going back to Samad's question on kind of install cadence, when we first got involved in this company. Karen Salmon was talking about 2,500 units a quarter. Now we both know that there was significant tech debt and that we were kind of slapping things together.

And it wasn't a recipe for kind of long-term success. So we took the short-term pain to kind of resolve our R&D issues and capital issues and give customers what they want. Now, when I think about it, we're kind of two years -- kind of, when I say pre-Savneet, post-Savneet, we're kind of two years into post-Savneet. And obviously, we're starting to see the real traction which is super exciting.

But when I think about capital, the ARR base, the successful acquisitions, I mean, is there any reason why, like, at some point next year, we can't see that 2,500 unit quarter? I mean, we got bookings at 1,200. And from what I understand, some chains are still not letting us even in. So I mean, is it unrealistic to think that we could get to the 2,000, 2,500 number at some point next year, especially considering the vaccine is going to be here in the next kind of four to six weeks, hopefully?

Savneet Singh -- Chief Executive Officer and President

I don't know. I think we're clearly -- the trajectory is that way. I think we see these bookings accelerating nicely. But as you said, the vaccine this year and the concern around COVID is concise.

I absolutely feel there's a chance we can make that happen. With the vaccine, I think it'll probably take us a little bit longer because there's no doubt that we feel the result. But in the end, I think that we are well on the path to getting to those numbers. And like I said on the call, a lot of the growth is COVID is also because we had held back on our sales and marketing initiatives, and we haven't added to our sales force until the last quarter or two.

In the two years, you referenced, I mean, our sales headcount has been down, not up, yet we've continued to grow nicely. So as we pull on the sale -- the marketing level, I think it seems very feasible we can stretch our numbers. It was also an R&D and integration bottleneck too. We didn't have -- we had to deploy our old engineers to basically become agile and basically do -- I forget what the things called, I'm forgetting my mind blanking, but we basically had to repair the infrastructure so we could do updates more quickly.

The -- and so now that we're kind of on the tail end of that, we have the R&D resources too, to kind of integrate multiple chains at the same time which we did -- we weren't before, right? I mean, that's a major change as well. I mean, that's -- I mean, the reality, this isn't a sales driven culture, right? I mean, the sales are being driven by the fact that we have the brand, right? Like no one else is integrating enterprise successfully. So I mean, the reality is we don't need a 10,000 unit sales force on the Street, giving people free hockey tickets because there's only one place to go. We just have to have the resources to do it, right? I mean, this is less about sales and more about having the engineering resources to basically support all the different chains at the same time, right?

Bryan Menar -- Chief Financial Officer

Yes. Absolutely. I mean, engineering is where our spend has gone and will continue to go. It's where we were -- we made a lot of shortcuts that we had to pay the price for.

And as we come out of that and continue to invest, it builds our moat because, as I mentioned, I think our market position has never been stronger because we're not competing against Silicon Valley. And there's no areas of hubris that we're competing against the old versus Silicon Valley, and I think that's just -- that's a great space for us to be. And we can continue that investment in product in R&D, that moat increases because we're not -- again, we're not competing against the next Stanford grad and disrupt us. And so I think as we -- we'll continue to make that product investment, and to your point, absolutely us becoming agile and starting to get product out the door has changed the tone with our customers and our potential future customers.

Adam Wyden -- ADW Capital -- Analyst

Right. It's a nice balance because basically, the CTOs and a lot of the people that are doing technology, it's a long sales cycle. They want to get to know the technology. They want to do business with someone like Brink, but -- or PAR.

But unlike Micros or Aloha, we have the product. So we basically marry the customer service and hardware culture with the product which, to me, is an excellent recipe. So it's super exciting. I mean, I think I'm happy I waited three years because I think the best is yet to come.

Last question. So I'm not sure if you saw in the press release about CheckMate, but inspired brands made investment in CheckMate which is an online ordering platform that we integrate with. And it looks like they're going to be implementing in RBs, Sonic, Jimmy John's and basically all of the inspired brands. And so that's interesting because that's a fledging little company that doesn't have a lot of kind of resources at least compared to Brink.

I mean it's a great technology, and obviously we'll share in that revenue share. So that should be lucrative to us. But I mean, now you're seeing Walk by Dunkin'. I mean, can you talk a little bit about -- and not to mention, in order to use Checkmate, you need to have cloud software.

I'm not sure that Sonic and Jimmy John's are on the cloud yet. Can you talk a little bit about Sonic, Jimmy John's, the prospect for Dunkin' may be down the road because this partnership with Rourke is pretty nice. I mean, we've got RBs. We've got CKE.

I mean, we're working toward, hopefully, getting some of those other brands. Can you talk a little bit about kind of the prospects there? Because I think that's a partnership that we've been working on for many years, and there's some pretty big logos there.

Savneet Singh -- Chief Executive Officer and President

So we can't comment on potential future logos. And so I can't really comment on it too much. All I can say is our ability to execute for the customers we have allows us to expand our footprint within these customers. And as we continue to get better, there's no reason that not to happen because I think any multibrand operator would suggest that having one technology stack to manage our operations is better than two, better than three, better than four, better than five.

And so we can execute on the promises we've given there's no reason we can expand our footprint. And it's just -- to me, it's just a matter of when, not if, and all predicated on our ability to execute.

Adam Wyden -- ADW Capital -- Analyst

Yeah. I mean, I think what's most interesting to us, and I think we -- someone sent us a picture or something, that looks like you guys might even be piloting with Taco Bell on Brink or Restaurant Magic. So think someone saw the hardware there. So that's super exciting on our front.

I mean, what's interesting to us is that, like, normally in a normal competitive landscape, right, there's someone else, right? It's like you can buy a Mac. You can buy a big PC. I mean, there really isn't a real another cloud -- fully cloud product, right? Aloha has kind of a hybrid cloud, but there really is not a fully cloud alternative. That's basically PC-based, right? I mean, you have Antos which is an Android-based, but like they haven't really integrated in one of these big chains.

So like, to me, it's really exciting to be in business with kind of the company that is the only one integrating. And it's not for lack of dollars. I mean, Toast is spent tons of dollars on enterprise, and I don't know what Micros and NCR are doing. But it's certainly not for a lack of dollars.

So it's really great to have a product that is kind of in a league of its own. So great quarter. Really, really -- it's been a bumpy journey, but I think that the trajectory is up and to the right from here. So I appreciate all your hard work, and I'll get back in the queue.

Savneet Singh -- Chief Executive Officer and President

Thanks, Adam.

Operator

I am showing no further question at this time. I would now like to turn the conference back to CEO Savneet Singh.

Savneet Singh -- Chief Executive Officer and President

Thanks, everybody, for joining. We look forward to updating you on our Q4 results in a few months.

Operator

[Operator signoff]

Duration: 47 minutes

Call participants:

Christopher Byrnes -- Vice President of Business Development and Investor Relations

Savneet Singh -- Chief Executive Officer and President

Bryan Menar -- Chief Financial Officer

Samad Samana -- Jefferies -- Analyst

Unknown speaker

Adam Wyden -- ADW Capital -- Analyst

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