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PAR Technology Corp (NYSE:PAR) Q2 2020 Earnings Conference Call August 7, 2020 9:00 AM ET

Company Participants

Christopher Byrnes - VP, Business & Financial Relations

Savneet Singh - CEO, President & Director

Bryan Menar - CFO, CAO & VP

Conference Call Participants

Andrew Scutt - ROTH Capital Partners

Samad Samana - Jefferies

George Sutton - Craig-Hallum

Mark Palmer - BTIG

Adam Wyden - ADW Capital Management

Brad Hathaway - Far View

Ishfaque Faruk - Sidoti & Company

Craig Irwin - Roth Capital

Operator

Ladies and gentlemen, thank you for standing by, and welcome to Par Technology's Fiscal Year 2020 Second Quarter Financial Results. [Operator Instructions].

Now, it's my pleasure to turn the call to Chris Byrnes, Vice President of Business Development. Please go ahead.

Christopher Byrnes

Thank you, Carmen, and good morning. I'd also like to welcome you all today to the call for PAR's 2020 second 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 results details, please see the Investor Relations and 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're recording the call this afternoon, and it will be available for playback. Also, we are broadcasting the conference call via the worldwide web, so please be advised if you ask a question, it will be included in both our live conference and any future use of recording.

I'd also like to remind participants that this conference call includes forward-looking statements that reflect management's expectations based on currently available data. However, actual results are subject to future events and 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 the earnings release this afternoon and in our annual and quarterly filings with the SEC.

Joining me on the call this morning 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

Thank you, Chris, and good morning everyone on the call today. I hope you and your families are well and safe. The last several months have presented incredible challenges to the world and our thoughts go out to all those impacted by the global pandemic.I'd especially like to thank our essential workers at PAR for their responsiveness and flexibility as they have continued to show up to serve our customers. Our ability to keep our operations team continuously running in the challenging environment is a significant accomplishment. It clearly demonstrates the power of our core values.

To begin, I want to let you know I'm very optimistic about the future of PAR. The COVID-19 pandemic has had a drastic impact, not only on our company, but on the restaurant industry as a whole. Fortunately, and by design, PAR Technology was in a strong market position to continue to provide value for our customers. Even in the most difficult of times this past quarter, we were able to book 814 new Brink customers, along with 209 new Restaurant Magic customers in the quarter and repeated favorable performance as second quarter last year, an amazing accomplishment.

Due to our focus within QSRs and Fast Casual restaurant, we witnessed that our customers were part of the restaurant segment that was able to maintain operations and take market share during this challenging time. These restaurants were well equipped with modern technology to quickly adjust their operations to curbside pickup, drive-thru, online ordering and delivery. Before diving into the results today, I wanted to step back and touch on 3 very important overarching aspects of our business. First, the Brink business is incredibly resilient. While, it's absolutely true that the restaurant business is a high failure rate business, Brink's focus on the enterprise customer is unique. This statistic is most evidenced by the fact that the end of July only 6% are Brink stores were closed due to COVID-19. Historically, our business has been a single digit annual churn business and we -- and as we emerge out of COVID-19, I expect us to continue to improve that metric.

Second, during our previous calls, I relayed to you the dynamic shifts underway in the restaurant industry from older on premise server based technology to cloud-based solution. As with other industries, we believe that once a cloud transformation takes hold, the wave does not stop. The last 4 months has dramatically accentuated this point. As restaurants dealt with the reality of diminished traffic, they had to quickly adopt to emerging digital trend to survive. Those restaurants who are agile and made the proper technology investments were able to quickly shift their business models to thrive. While the pandemic will not last forever, it's our belief that years of demand have been pulled forward for digital products. Pandemic or not, there is not a restaurant in the country that can survive without the enablement of a digital presence today. This presence will likely include strong integrations with third-party delivery, native online ordering, mobile application access, smart routing, curbside pickup and much more.

Third, our TAM is large, and Brink has yet to penetrate the vast majority of it. It's estimated that there are 700,000 to 1 million restaurants in the United States that use the point-of-sale product. Of that market, we estimate half of those units are addressable to PAR. Historically, we have been a single product company averaging $2,100 per store. That alone is a multibillion dollar addressable market. But as we talked about, we're expanding our ARPUs to the launch of new products, acquisitions of new categories and the payments business. While much of our resources over the last few quarters have been squarely focused on Brink development, in the coming quarters we'll begin to ramp up our upsell engine.

While we have not upsold significantly today, we are seeing a deep desire from our customer base to rationalize vendors. Restaurant businesses are looking for their point-of-sale players to take on more responsibility, not less. It's our estimate that the average enterprise restaurant spends $10,000 a year on recurring software products, and that amount continues to grow. Brink has only penetrated the very tip of that spend. As the Brink foundation solidifies, we believe we'll be able to continue to make additional features more available through our platform and solve many of the challenges our customers face today. This will lead to continued strong customer retention, and the beginning of what we believe can be industry leading net dollar retention.

Before I hand the call over to Bryan, I want to spend 1 minute defining our metrics. We report revenue in 3 buckets, product, contract and service. Product is our traditional hardware business. This encompasses point-of-sale terminals, drive-thru products and peripherals. Contract is 100% of our Government services revenue. Service is a combination of a recurring SaaS offerings, along with our traditional recurring service contracts associate with hardware sales and inflation services. Further, we disclosed metrics we think useful for investors to track our performance.

First, ARR is a measure of our annualized recurring revenue at the end of the quarter. This is 100% Brink and Restaurant Magic related. Second, bookings. Bookings are signed purchase orders. We take a very conservative view on bookings and a store is put into bookings only when we received a signed committed order. I believe this is the most important leading indicator of our business. Open order backlog. Simply put, this metric is the number of restaurants where we have a signed order that we have yet to install. Lastly, churn. Churn is dollar value of recurring revenue lost in the quarter, usually annualized. As we continue to grow our business, we'll continue to provide additional breakouts of new metrics to help you guide our performance.

I will now turn the call over to Bryan to review our Q2 financial performance.

Bryan Menar

Thank you, Savneet, and good morning, everyone. I would now like to take this opportunity to provide some additional details surrounding our second quarter results. We reported revenues of $45.7 million for the quarter, up 3% from $44.2 million reported for Q2 2019. Our net loss was $9 million or $0.49 loss per share for the quarter, versus a net loss of $1.1 million or $0.07 loss per share for Q2 2019. Unfavorable year-over-year results from operations was primarily driven by a tax benefit recorded in 2019 of $4.1 million related to the sale of the 2024 Notes. Other additional unfavorable performance was driven by increased R&D spending in Brink and Restaurant Magic, increased interest expense, and increased amortization related to the Restaurant Magic acquisition and Drive-Thru acquisition.

Operating segment revenues for the 3 months ended June 30, 2020 were $27.6 million for the Restaurant/Retail segment, a decrease of 2% from $28.3 million reported Q2 2019, and $18.1 million for the Government, an increase of 13% from $16 million reported for Q2 2019. Restaurant/Retail revenue for Q2 2020 by business line consisted of $15.4 million for Core, which includes $4 million for Drive-Thru; $12.2 million for Brink, which included $1.8 million for Restaurant Magic. Restaurant/Retail revenue for Q2 2019 was $18 million for Core; $9.3 million for Brink and $0.9 million for SureCheck.

Government revenue for Q2 2020 by business line consisted of $9.7 million for ISR; $8.1 million for Mission Systems and $0.2 million for product sales compared to Q2 2019 revenue of $7.3 million for ISR; $8.2 million for Mission Systems and $0.5 million for product sales. Product revenue for the quarter was $12.3 million, down $2.4 million, or 16% compared to Q2 2019. Our hardware sales in the Restaurant/Retail reporting segment were down versus prior year as a result of customers stalling their hardware refreshes and installations, as initial precautionary measures in response to COVID-19. Product revenue related to Brink for the quarter ended June 30, 2020 was $3.8 million, a decrease of 10% and $4.2 million recorded for the quarter ended June 30, 2019. Drive-Thru product revenue for the quarter ended June 30, 2020 was $3.5 million.

Service revenue for the quarter was $15.3 million, up $1.8 million or 13% compared to Q2 2019. The increase was primarily due to the addition of the Restaurant Magic business and the growth in Brink recurring software revenues. Service revenue associated with Brink includes recurring software revenue of $5.4 million, an increase of 35% from $4 million for the quarter ended June 30, 2019. Restaurant Magic service revenue includes recurring software revenue of $2.1 million. Contract revenue from our Government operating segment was $18.1 million, up to $2.1 million or 13% as compared to Q2 2019. A favorable increase was driven by contracts entered into during the first quarter of 2020 related to ISR. Contract backlogs totaled $130 million as of June 30, 2020 and trailing 12-month book-to-bill 0.7x.

In regards to GAAP margin performance for the quarter, product margin for the quarter was 19.1% compared to 22.5% in Q2 2019. The reduction in product margin was primarily due unfavorable overhead absorption with reduced revenue and increased freight costs in the beginning of the quarter this year. Service margin for the quarter was 35.2% compared to 25.2% in Q2 2019. The improvement in service margin was primarily due to shift in mix that resulted from our M&A activity with the Restaurant Magic acquisition, the Drive-Thru acquisition and the divestment of SureCheck. Government contract margin for the quarter was 7.4% compared to 10% in Q2 2019. The decrease in margin was primarily due to lower product service business line revenue, and increased investment in product services, compared to the quarter ended June 30, 2019.

Now, to operating expenses. GAAP SG&A was $10 million, up $0.9 million versus Q2 2019. The increase was primarily driven by an additional $0.7 million of SG&A expense from recently acquired Restaurant Magic and Drive-Thru businesses. Non-GAAP SG&A was $8.6 million, up $0.2 million versus Q2 2019. Non-GAAP SG&A adjustments for Q2 2020 included $1.1 million for equity-based compensation and $0.1 million related China/Singapore matter.

Research and Development expenses were $4.5 million, up $1.8 million versus Q2 2019. Driven by increased investment in Brink development of $3.2 million and $0.5 million of Restaurant Magic development, partially offset by the SureCheck divestiture and an increase in capitalized software. Now let's provide information on the company's cash flow and balance sheet position for the 6 months ended June 30, 2020. Cash used in operations was $13.6 million, an improvement of $1.5 million compared to the 3 months ended March 31, 2020. The increase in cash was result of reduction in net working capital needs. Cash used in investing activities was $4.6 million for the 6 months ended June 30, 2020 versus cash used of $3.3 million for the 6 months ended June 30, 2019. During the 6 months ended June 30, 2020, we capitalized $4.6 million in costs associated with investments in our Restaurant/Retail segment software platforms compared to $1.6 million for the same period in 2019. There was no material non-software CapEx costs for the 6 months ended June 30, 2020, down $1.7 million versus 2019 due to a decrease in costs associated with IT infrastructure.

Cash provided by financing activities from continuing operations was $49.1 million for the 6 months ended June 30, 2020, versus $64.9 million for the same period in 2019. The 6 months ended June 30, 2020, included the $120 million issuance of the 2026 Notes, partially offset by the repurchase of a majority of the 2024 Notes. The 6 months ended June 30, 2019, included the $80 million issuance of the 2024 Notes. As of June 30, 2020, the inventory balance was $26 million, an increase of $6.7 million from December 31, 2019. Inventory turns were 3x for our domestic and international operations. Accounts receivable of $38.2 million decreased $3.5 million compared to December 31, 2019. The receivable balance was broken down between the Government segment of $8.6 million and the Restaurant/Retail segment of $29.6 million.

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

Savneet Singh

Thanks, Bryan. Now to review our operating segment performance in the quarter. Just 2 quarters ago at the beginning of our fiscal year 2020, PAR had significant momentum. Our restaurant technology segment was accelerating new store bookings at historic highs and our growth accelerators, such as the investment in our software platform were poised to deliver our strongest growth rate in history. That all changed in mid-March as work-from-home was initiated, corporate business travel eliminated and our hospitality and restaurant industries were hit hard by quarantines and shelter in place policies. Even with all those headwinds, our restaurant solutions business went above and beyond for our customers and our market position. Evidenced by Brink recurring revenues growing by 35% over Q2 2019 and Restaurant Magic recurring revenues increasing by 15% in the same period, all achieved in the most challenging environment for restaurants in the industry's history.

ARR for Brink was $21.4 million at the end of June and ARR for Restaurant Magic was $7.4 million. We expect ARR to continue to climb up as new installations go live and COVID impacted stores reopen. As I recommended early -- as I commented earlier, it is worth repeating new bookings in the quarter totaled 814 sites, and our open order backlog now stands at 1,524 stores. We deployed 465 new restaurants in an extremely challenging environment and had an impressive non-COVID churn rate of 4.3%. At the end of June, even with COVID temporary churn, we had 10,280 Brink stores opened and using the solution to operate the restaurant.

We saw great momentum at the end of June that spilled into July, and we are very pleased to see the business environment improve for our customers and the restaurant industry as a whole. We are confident the worst is behind us and our trajectory of new store stores should improve for the balance of 2020. New bookings for Restaurant Magic totaled 209 stores and activations totaled 180 in the quarter. After churn, our installed base stands at 5,064 stores at the end of Q2 for Restaurant Magic. Our core business is being most impacted by the COVID-19 restrictions and the overall downturn in economic landscape. There have been disruptions as capital purchases are being postponed, and we are confident that these are not lost opportunities, but being pushed into second half of this year, depending on specific concepts and the timing of restrictions being reduced.

As we communicated in our Q1 call, we aggressively pushed forward with cost reduction initiatives to strengthen an already strong liquidity position and balance sheet as seen by our cash generation in Q2. All of those actions were critically important as product revenues in the second quarter were down 16% year-over-year, better than we originally expected and down 34% sequentially as capital purchases, principally hardware, were delayed. At the beginning of Q2, we thought this impact would have been dramatically more severe, and we are proud of how we endured this difficult period. The lower product volumes may continue over the next couple of quarters, but we do not expect conditions -- excuse me, but we do expect conditions to improve sequentially and expect a full recovery in 2021. Now, to review our Government segment. Our Government business again delivered a solid quarter, evidenced by the 13% increase in revenues compared to Q2 2019. Our backlog at the end of Q2 was $130 million. Our Intel Solutions business was a driving force behind the growth in the quarter as ISR revenues increased 34.3% from last year's Q2.

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. Before we go to Q&A, I want to leave you with the following thoughts. We're pleased with our Q2 performance during a challenging period for the world. This isn't the first difficulty we faced as a company. Every time we go through a moment like this, it helps us to learn, evolve and merge as a stronger company. I believe this time will be no different.

We've never seen a more pressing need for our products, and we know from that experience that restaurants that take advantage of this window to upscale and rescale, will rebound faster and stronger than their competitors. I'd like to thank our customers, our partners and our team members for their continued support.

And with that, I'll turn the call back over to the operator for Q&A.

Question-and-Answer Session

Operator

[Operator Instructions]. Our first question is from Andrew Scutt with ROTH Capital Partners.

Andrew Scutt

So my first question revolves around the white space conversion. So if business conditions kind of improved here, you'd said about 6% of your stores were closed of Brink customers in July. Do you guys have a greater visibility now into maybe capturing some of that white space that was available?

Savneet Singh

We're starting to. I think in July, we had a continued rebound that we saw in June, and I think August should be no different. I think as white space conversion will be a big part of our future for the rest of this year and 2021. A lot of it, actually, as a result of COVID. As I mentioned on the call, the conversations that we're having with our customers, I think, has pulled many years of demand forward, because many of these customers of ours that we had partially rolled out, look at their data and see that stores with Brink far overachieved those without Brink. And so there's an acceleration in those conversations, absolutely, and I think we'll see that in the next years -- the next few quarters and years to come.

Andrew Scutt

And then second question here, kind of a two partner. So I know you guys had a kind of a major national customer that paused installs due to COVID and was looking earlier in the quarter to restart installs in the coming weeks. So I was wondering if those installs have restarted? And then just lead-time for an install. I know normally, it's about 6 to 8 weeks. Is that still the normal timeframe with COVID pandemic still going on?

Savneet Singh

Great question. So I would say every customer paused in the heat of the pandemic. Business pretty much stopped, and that's why I think this quarter was so incredible and that we were still able to sign a number of stores in the midst of it. Again, more as a result of highlighting just how valuable these products are to customers and the demand going forward. And so, I think most customers have come back and started to install again, although it's not across the board. And with some of the spikes that we've seen in COVID in different states, it is still 6 to 8 weeks of a book-to-bill, but I think we'll see some elongation of that as COVID continues to stay high in the United States. And that our customers are -- while they are little more careful about how they roll out now and we'll do them partially versus whole. But in general, it's -- I don't think it's indicative of a long term trend, but more of a reaction to a state-by-state basis where cases may be high versus others where cases were declining, and they feel comfortable going back to a normal speed.

Operator

[Operator Instructions]. And our next question is from Samad Samana with Jefferies.

Samad Samana

First, Savneet, I just wanted to -- maybe not a question but a statement. We really appreciated your thoughtful letter to investors and to the company in early June. I think it was really helpful at a time when there was a lot of uncertainty, so just wanted to provide that feedback. But maybe first question on the quarter itself. That backlog number was up about 30% quarter-over-quarter, really nice, especially when we compare it relative to kind of the overall business. Maybe help us think about visibility into the backlog, and as you compare maybe over the last year, the timing of the backlog coming online, if there's been any difference? And just generally, what was helping that backlog increase from 1Q to 2Q?

Savneet Singh

Yes. Good question. So -- and thank you for the comment on the letter. So the growth in backlog is direct result of the states shutting down in April, May and parts of June, in that the demand for our products sort of spiked. The customer said, listen, we need to get digital solutions out there fast in order to respond to COVID. But many of them had very strict rules around entering stores or physical rollout. We sort of forget now, but back then, most restaurants and most businesses didn't allow non-employees in stores. And so the backlog rose because of the limitation in getting that out the door.

We're starting to see those restrictions removed and hence, starting to see installation start to pick up, which should continue to help us attack that backlog. A really important point to make here, though, is, our backlog is firm. Having looked at lots of software companies, our backlogs are committed signed purchase orders and so it's a very, very conservative view of backlog. And so we feel very confident in our ability to roll that out, given the commitment from the customer and ourselves.

But I think we'll see for the balance of 2020, the backlog to be relatively high, because you think bookings will continue to accelerate. And roll-offs, like I mentioned, on the last question, they'll continue. But, like I said, our customers are looking at little bit on a state-by-state basis. Given where COVID is spiking, they may slow down roll out there, accelerate slow up in states where COVID is low. So it's a little bit unpredictable given the virus. And so we're kind of playing dynamically. But I would expect both bookings and backlog to continue to grow for the balance of 2020.

Samad Samana

And then maybe just -- I know that for a lot of companies that we cover, it's difficult right now to look too far into the future. But, any change in just maybe the directional confidence that you have? And if I thought about what you talked about, maybe long term booking maybe at 1,000 bookings a quarter. Any change in -- forget 2020 maybe, but just the view that you guys can get back to that level as things stabilize or as the world sort of just returns to whatever the new normal is?

Savneet Singh

Yes. I think we have extreme confidence we'll get back to that level, and I think go well beyond that given -- in many ways, COVID has -- all its done is strengthened the case for our products, both to our existing customers where we have that large white space. With many of our large customers, we're not even halfway rolled out. And so there's 10,000, 12,000 stores that are under MSA that we haven't converted. I think we'll see a big acceleration of those stores, because as an example, we have one customer where we made up 1/3 or a halfway rolled out. In that one customer, if you were not on Brink, your store didn't have access to the mobile application. And so in a time like COVID, if you were the restaurant operator in that chain, that didn't have the mobile app, you really suffered versus those that had Brink and could access the mobile app. And so I think I feel extremely confident that we'll go well beyond our original targets now, because everyone went through that challenge of saying, I need to bring this mobile -- excuse me, this digital demand forward. So I feel extremely confident we'll go well beyond that.

From a timing perspective, whether it's this year or 2021, I can't --I don't know. But I think we feel supremely confident that it's -- whatever we thought the -- I guess, we're going to be, it will be larger, because the COVID has just highlighted how much the product is in need now.

Samad Samana

And then maybe switching gears a little bit. You mentioned that you'll be investing in cross-selling or ramping the cross-selling efforts here in short order. Can you help us maybe understand the go-to-market motion there? And if you'll need to either change the -- make additions to the sales organization and/or thinking about how you'll maybe partner to drive some of that? Just how should we think about the ramp of that cross-sell strategy?

Savneet Singh

Yes. So I would expect -- it's started first with our acquisition of Restaurant Magic, where we have started to go to our customers and offer them Restaurant Magic. And I would say, if we look at the pipeline of Restaurant Magic, over half the pipeline now has been -- come through the way of Brink. And so we've seen the ability of us to effectuate this -- the buying decisions of our customers. Very much tied to the fact that our customers are now asking their point-of-sale companies to take on more.

And so this is a bit of a change from the past where historically, restaurant companies may have felt comfortable managing 12 or 13 different software products, today, they're really looking for someone to kind of help them guide that IT transformation. So that sales notion is being tested right now with Restaurant Magic, and we've done it with the exact same sales force we have today. But there's no doubt we'll continue to add to that sales force as we add more products.

And then our next growth will happen with our payments business, which will start processing transactions at the end of this quarter and really start to ramp in Q4. And for that business, we'll distribute it to the exact same sales reps we have today, but adding product specialists. So from an infrastructure perspective, I think you'll see us continue to add to our sales team as we add more stores. The specialists will come in and sort of support the individual product lines.

And so we run every upsell as its own individual product. And so that every line will have a product manager and product specialist, helping in that sales force. So I think they would be no different than if you were look at the sort of traditional ERP sales businesses where you've got one sales rep per customer, but that sales rep then surpasses product specialist to push through the additional products.

Operator

And our next question comes from George Sutton with Craig-Hallum.

George Sutton

Savneet, obviously, Drive-Thru is a very important -- increasingly important area for the QSRs. Can you talk about exactly how you're attacking that opportunity?

Savneet Singh

Sure. So Drive-Thru absolutely come to the forefront of our customers' minds. And I think our acquisition was very lucky from a timing perspective. So we've seen very significant growth in Drive-Thru in May, June in July as well. And so we have restructured our team to be far more aggressive there. We will be launching a new set of products by the end of this year. And so it's receiving continued focus and interest from us. A lot of our Drive-Thru revenues in Q2 came towards the end of that, and so we crammed in quite a bit of revenue towards the end of Q2, and I think that momentum will continue in Q3. And then as we launch our new products within Drive-Thru by the end of the year, I think that will take us up another level.

George Sutton

You continue to talk about the value of having Brink versus not having Brink. I'm curious if there's been any further quantification of that benefits? And where that stands?

Savneet Singh

So we don't quantify it because it's by customer and every customer has different data. But I think all we can say is that, as our customers have come back to us and suggested that on average, a store that had a modern infrastructure versus one that didn't -- that the word I used was significant difference. And that may be driven by everything from a store that had Brink was able to have very strong third-party delivery integrations or it might be a store that had Brink was able to launch an online ordering application or a mobile application. So we don't have, I think, categorical data, but I think what we have is a lot of confidence from our customers that those that had modern technology significantly outperformed those that didn't.

George Sutton

Lastly, we did pick up a DARPA win, about $12 million, and it sort of brought to mind the potential for a strategic option there. Any move closer there? Or where does that process stand in your view?

Savneet Singh

Sure. We can't comment on potential acquisitions or divestitures. But I think we taken these accounts, I mean, in the past, which is -- there's not a long term strategic fit between a Government services business and a point-of-sale business. And so we will look to that. And I think the strength in the Government business is only a good thing as we look to potentially have a transaction at some point.

Operator

Our next question comes from Mark Palmer with BTIG.

Mark Palmer

You mentioned that the payment product is set to be unveiled toward the end of the third quarter ramping up into the fourth quarter. Can you talk a little bit about what's gone into the preparations along those lines, especially insofar as the environment you're going to be launching into is different than the one that you had originally thought you were launching into?

Savneet Singh

Sure. So earlier when we were launching, we were focused much more on table service, pay at the table customers where there is a very large -- call it, large spread like opportunity for us. Obviously, in post-COVID that market dried up significantly. And so we've adjusted our product significantly to now target our more traditional, call it, Fast Casual customer base. And so the changes we've made have been everything from what hardware products do we associate into that transaction?

Obviously, if people aren't dining, we're not -- no longer working with pay at the table devices. But what products can we tie into that Fast Casual market? How do we tie that in the future to online ordering and processing? So it's been a very quick revamp of this product. And that includes everything from who we decided to partner with on the payment facilitator to our risk models. And we feel very confident that we're -- that we've sort of adjusted fairly quickly and confident revenue will start coming in.

Operator

[Operator Instructions]. Our next question is from Adam Wyden with ADW Capital.

Adam Wyden

I don't think the restaurant industry has seen a more challenging period in the history of mankind. So I'm glad you have good customers. I'm glad you guys were able to not only install units, but also book a decent amount. So I have a couple of housekeeping questions and some bigger questions. But first question is, you guys have talked in the past about being able to install units like mail order. I know Toast has been able to send people -- program terminals and train people over YouTube. And you guys have talked a little bit about being able to move forward with the solution that you guys don't actually have to enter the restaurant. Have you guys been able to make any progress on that front?

Savneet Singh

Yes. We call it self-install. So we continue to make progress on that. And I think it's obviously growing. It will be a longer-term transition for us in the sense that the customers we're rolling out today are customers we signed and made deals within planned translation quarters ago. And so it will continue to be a part of what we're doing. The challenge being that with the enterprise customer, once we've created a process, a set of approved vendors, to change that is sometimes more risk than convincing to do a self-install. So it's progressing. And I think as states have reopened, I don't think it will be a long term bottleneck for us.

Adam Wyden

My second question is kind of an elaboration of Mark's question on payment. I know you initially targeted table service. But now you're in this unique position where you're seeing the companies -- the restaurants that have Brink versus the ones that don't. And clearly, a huge percentage of your base has got drive-thru and carryout like Arby's and Dairy Queen and CKE and Five Guys and all the QSRS, which has made your business super robust and low churn. I mean, thinking about the business going forward, as you look to capture white space, or I guess, they call it white space. As you look to kind of convert people that don't already have it, or a new customer -- I think on some level, there's this thought that there's a constraint around CapEx and buying new terminals. And I think you've edified that it's not that expensive, $5,000-$10,000.

I mean, have you started to pair your payment solution with discounted hardware or free hardware or -- I mean, because if you look at your peer group -- and I mean, we see this in other industries. I mean, I just bought an iPhone 11. It was $1,300 MSRP and AT&T is giving it to me for, I don't know, $20 a month or free. I mean, I don't even know. But I got a 13 -- I walked out with a $1,300 device, and I'm playing with it and doing high-k videos and this and that.

I mean, I would think that if I'm a guy whose revenues are constrained and I can't have 3 people manning the terminals, and I can basically get Brink from you, fire a bunch of people that are managing the carryout delivery and basically finance the entire cost of the payings contract that they're already giving to somebody else.

I mean, I would think that when I look at your peer group, almost 100% penetrated with payment, and you guys as this payment facilitator are saying, if you're able to basically mask your peer group, I mean, you should have 100% payment. And not only that, you've also -- you can also lead with that and that you've got the balance sheet to basically finance hardware and all the rest.

I mean, I would think that you guys should be chomping at the bit, given that the rest of your peer group have a 4:1 ratio payment as SaaS. I mean this could be a step function move in your business. I mean, can you talk a little bit about all that?

Savneet Singh

Yes, I think we agree. We see that in world of COVID where budgets are tight and insecurity is high, the ability to -- for us to create recurring revenue out of hardware CapEx is something that our customers want, and we'll push out. And there's no doubt in my mind that when we go to our customers and offer them Brink -- offer them payments, and oftentimes at the same price or better than what they've had elsewhere. And offer them ability to spread their hardware payments over time by taking a payments contract, I feel very, very confident that, that is an attractive solution for them today and more so than it was before COVID.

Adam Wyden

I mean, look, obviously, we follow the industry closely, and we talk to channel partners and people in the industry. It's our understanding just from doing research that you guys have already kind of made progress and maybe even signed a couple of customers in joint payment hardware -- kind of payment hardware, Brink builds. Can you talk a little bit about maybe some of those customer wins that you've already been able to secure?

Savneet Singh

We can't, unfortunately until they're released. Our contracts require a joint cooperation on them. But what I'll say is 2 things. One, we've absolutely signed customers we find very attracted during COVID and expect to sign more in the coming weeks and months here. But second, I would say that our future pipeline of large logos has never been larger. The conversations we've had with dozen plus stores chains now is far bigger than it was last quarter, the quarter before and all of last year. And so that doesn't mean anything for 2020, but it absolutely means something for 2021 and 2022, which is where a lot of our confidence is coming from and that the long term pipeline, if you will, is far deeper now than it was before COVID.

Adam Wyden

Third question is kind of a twofer. It sounds like you're super confident. You guys feel like this is a turning point in the industry. And you're seeing this in a lot of industries, you saw it with Carvana or where you kind of -- or even Wayfair, where you have the -- the COVID has created this turning point where it's creating a consumer behavior change. And I think Brink and carryout and delivery in QSR is in the same bucket. I mean, I think if we read a statistic where 1/3 of the restaurants nationally might close permanently, and they're largely smaller table service and kind of different types of restaurants, bars and this and that. I mean, given the economy, a lot of that traffic is going to flow through to the QSR, and that's going to manifest itself in higher comps and higher needs for labor efficiencies and all the rest. So it sounds like this is "COVID stock", yet the stock is down 10% today.

It's really hard for me to see why up here, like Lightspeed, which has higher churn is growing slower. It guided to flat sequential growth. You're obviously guiding for more. It trades at 21x ARR. We trade at a fraction of that. I mean, I feel like this is kind of like how do you do. We have the same conversation every quarter, and the market keeps pushing back the value realization that you guys are executing. I mean, can you talk to me about what you're willing to do to kind of give it to everybody and kind of narrow that gap? I mean, you guys bought Restaurant Magic last year. Clearly, you've indicated that you want to buy other modules, arguably larger ones. So you need your cost of capital to do that, and you don't have it. I mean, what's -- what do you think you can do to kind of give it back to everybody?

Savneet Singh

So, listen, I think I look at that in a few buckets. The first part is, our ability to execute. And I think relative to all the companies you mentioned, plus every other company that sells point-of-sale software to any type of retail industry, I don't think anyone had better results than we did. And so I feel extremely confident that we're performing, call it, above where others are. And I think I feel equally confident that all those companies on the future and our ability execute on our future. So I think first we need to execute.

Second, I think we've talked about this before, but continue to tell that story. I think we're continue to make efforts to be more transparent on our numbers, more transparent on what those numbers mean. And focusing people on these metrics that really matter, i.e., our booking is growing, our expectation of ARR growth -- to continue to grow during COVID. And so I think that will happen. As it relates to M&A, we've been very upfront and honest that we keep active M&A conversations going all the time. And we do believe that there are a number of strategic fits for our product line. And as you said, it's a bit reflective and that our ability to do a transaction requires us to have sort of a flywheel between our stock price and our ability to issue shares.

But I think our goal is, far in a ways to first execute. Second, to get the word out there that we exist, that we are performing at this time and that we're delivering results. And I'm not so much sure what else we can do. But I think as long as we execute, as long as we get the word out there, things should catch up themselves.

Adam Wyden

Yes. I mean, look, what I would say here is that, like I think the payments lever to me -- I mean, I think, historically, it's been a challenge and I think maybe the old management team didn't really have the wherewithal or knowledge. And maybe that was a blessing on some level, because the company was so product-focused and was able to produce a really great product even without the balance sheet. But now you have the product, you've basically done your -- whatever, your conversion or I forget what it's called, the thing that the move, where you guys are able to do upgrades faster and you solve a lot of the R&D issues. So now you've got that a well-oiled machine, and you have a great balance sheet and a great team. I mean, I would think now that now that you've accomplished all of that, if you're able to implement a 3:1 payment ratio like the peer group, I mean, it would be incredible. And I think it would really step function the company and even today without --

Savneet Singh

Yes, I mean -- yes, sorry to cut you out. I mean, listen, I think I have never been more excited about the opportunity we have in front of us. The idea that we were able to have closed as many bookings in Q2 as Q1, I think, was nothing I ever dreamed about. The idea that we even got installs done in Q2 when nothing was getting done for 2 months of that quarter, I think, it's just shocking to me. At the same time, I look at where we are, and I mean what I said at the beginning, which is, well, this is a very tip of the iceberg, right? We are 10,000-ish restaurants out of hundreds of thousands of opportunity. And in addition, we haven't touched payments, which can be our largest revenue stream one day. But we also haven't penetrated just a very obvious, which is we sell the best enterprise point-of-sale product in the world, and we have just begun that go-to-market.

And I've said this before, and I'll say this again. During my tenure, almost 0 of the focus has been on sales and marketing. It's been focused on product and development, getting our product, that foundation that I mentioned correct. So we can scale. And as I mentioned, as we start to turn the engines -- the focus of management to sales, marketing, we will execute there as well as anybody else in the world, and I have that expectation of our team. And we have not taken COVID as an excuse by any means. Our management targets are the same as they were when we started, and we take sort of a no excuse attitude to that.

And then I think lastly, the quality of the team is drastically different. We -- the Brink team is almost 100% different from what it was a year ago. And I think from a quality perspective, we've continued to add talent that I never would have dreamed of hiring just 6 months ago. And so I don't know what that means for Q3, but I do know that as we expand, these things compound and compound and compound over time.

Adam Wyden

No, that's good. I mean, look, I think when I look at it like qualitatively, when I look at like kind of -- I call them COVID stocks and non-COVID stocks. Look, I'm not a technology investor, as you know, and probably everyone on this call knows that I invest in all types of things. And so when I look at opportunities, I look at them from the frame of how does this opportunity exist relative to other -- any other opportunity than any other industry. And when I look at other companies, whether it be Carvana or Wayfair or Peloton or Nautilus or any company. I mean, I looked at this and I put PAR, Brink restaurant management right in the forefront of, like, hey, we're COVID beneficiary. No one is going to sit at a table service restaurant or incrementally that incremental person is going to want to order delivery? Because remember, I'm sitting here in Florida. I moved to Florida. I order on Grubhub and Seamless web 3 times a day, whereas in New York, I used to walk outside of my apartment and go and grab food. And so that consumer behavior is not going to change.

People are going to get used to ordering food on their phone as opposed to just like they got used to buying stuff on Wayfair, Amazon or Carvana. And like I look at PAR, I'm like, this is a freaking COVID stock. This is a COVID stock. You guys are a direct beneficiary of COVID. Toast fired their entire enterprise sales force. Oracle and NCR, sleepy old companies, they are not devoting resources. I mean I don't want to be hyperbolic and say this is the next Amazon, because it's not. But like you guys own enterprise restaurants and like all the money in dollars and mind shares coming into your category and you got no one fighting with you. I mean it -- I mean, especially from an international perspective. I mean, Dairy Queen has international units, a lot of the companies that you deal with like Work and Inspire. These guys have big global footprints and their teams are being decided domestically.

I mean, when you look at Toast, it's 2, 3 restaurants. If you win a big RFP for -- Restaurant Magic is doing business with, what do you call it, the Restaurant Brands, who's got Burger King and Popeyes. I mean, these are big groups that have huge international operations. And if the CIO represents domestic deployment, that CIO is also global, and they represent international deployment. So like, I'm with you, I'm just kind of banging my head against the wall and trying to understand why people are buying square with 7---

Savneet Singh

And I think we'll get there, Adam. We've got two more questions -- two more people in the queue there. Perfect, thanks Adam.

Operator

Our next question comes from Brad Hathaway with Far View.

Brad Hathaway

Just want to ask broadly on the competitive environment. I mean, obviously, we saw some retrenchment from Toast and some of the other players earlier. And I'm wondering if you're seeing any more kind of activity or what you're seeing maybe from the legacy guys? I guess, is there increased competitive intensity? Or has it continued to kind of be a little lighter? Just curious as to what you're seeing there.

Savneet Singh

Yes. I think the competitive intensity is definitely lighter where it was before, particularly, I'd say, on price. I think a year ago, our win rates were extremely high. Where it was frustrating was that the competitive intensity with people coming in trying to undercut by price. A lot of those companies, I don't see them nearly as active anymore, and so it's going to very much help our ability to maintain price. Relative to the legacy players, I don't think we've seen a drastic difference one way or the other way. I certainly haven't seen them say, this is our moment to come back and be there for you. And that's the void that we're trying to fulfill for our customers. So I think we feel pretty good about the competitive environment today. And I think, to be frank, the moves that we're making, it wouldn't have mattered, but certainly, this has helped.

Brad Hathaway

I mean, obviously, as you've said, everyone in the restaurant industry seems to see that cloud is the future here. Do you see any increased kind of development or effort from the legacy guys to say, oh, we really need to shift to cloud and really make that a priority?

Savneet Singh

I think they all get it. They all see the changes happening. There's no doubt that they don't see that the base churning. But I think it's the innovative, so I know it's a tough thing to do. I'll give you one -- just sort of anecdote or one way to think about it is. Many of these legacy customers -- excuse me, competitors can come in, they can revitalize the product, but what they can't revitalize is trust. And in many cases, these -- they've had these customers for 10, 15, 20 years and have a relatively long reputation of not doing well by the customer, not being them there for support and services, charging them excess for payments. And so, I think, a lot of this is also just customers saying, listen, I don't care if you've moved to a cloud product or not, I want to go with someone that I trust and I haven't had this problem with. So not only do they have to climb the product wall, I think they have to climb the trust wall, which is a lot harder. Thanks Brad.

Operator

Our next question comes from Ishfaque Faruk with Sidoti & Company.

Ishfaque Faruk

A couple of questions from me. First of all, on Toast. Obviously, with the Toast getting rid of much of their enterprise group, could you tell me a little bit more about how you guys are doing maybe ever since the last few months, ever since that happened? And are you seeing maybe increased customer interest for Brink and Restaurant Magic on -- after that?

Savneet Singh

So I think we're seeing significant customer interest in the last few months, more as a result of the COVID world than anything else. I don't think any of that is result of a change from any of -- a number of our competitors. Our -- as we said many times, the companies that we compete most aggressively are the legacy providers. Also, I have immense respect for Toast and all of the competitors that have come up. But more often than not, they're not who we're competing with, particularly as we get to the final rounds of a large deal. It's almost always the larger Oracle, NCRs of the world than it is a small company. So it hasn't -- I don't think it's had a drastic impact on our pipeline by any means, but certainly helps.

Ishfaque Faruk

And on the -- maybe on the payments opportunity, would COVID and some of the -- your smaller restaurants, obviously, you focus on the enterprise piece. But with some of your smaller restaurants seeing some tough times in the restaurant industry in the current environment. Are you going to be pushing maybe your payments ambitions a little behind schedule from what you've initially planned?

Savneet Singh

So they are absolutely behind schedule from we started in the beginning of the year, but they're very much on schedule to where they are -- or as -- after we changed. In the beginning of the year, there's no question, Ishfaque, that we had a very robust plans for our channel and our cable service products to go after payments. And that's the market, I'd say it's easiest to penetrate, because they have the largest hardware CapEx that we can offset. A table service restaurant may spend $20,000 upgrading their hardware, if we can offset that, our value prop is very high, and that's where we wanted to focus. COVID happened and we had to quickly change the go-to-market, because selling into small restaurants or table service didn't really was an option. So now as we get to September and our moves processing, I think we have adjusted to focus more on our traditional Fast Casual business. And we've now got, I think, a strong go-to-market, an extremely strong team. I think not only did we change the product, we also changed the team there.

So I, absolutely, expect we'll start having real -- very nice volumes starting in -- starting this quarter, but really in our Q4. And I think that will continue as one of the other callers have highlighted that. There's no doubt that offsetting CapEx of hardware is more attractive today than it was in February.

Operator

Our next question is from Craig Irwin with Roth Capital.

Craig Irwin

Most of my question has already been asked. But Savneet, can you maybe update us on what the peak installs were over the last 90, 100 days? I mean, what was the peak number of installs during any single week? And how does that compare versus your pre-COVID peak installs? And would you attribute all of that gap to COVID? Or is there some of this uncertainty in the customer base now that might be working to the downside versus the upside? Or is this really just a capacity issue right now?

Savneet Singh

So it's a great question. So I'd say the way I look at it is last 2 weeks of March, April, extremely low set of installs. Everything is shut down. Started to pick up in May. And by June, I think we were installing, I'd say anywhere from 50 to 60 go-lives in a week and growing. And so it's not so much today, a capacity issue as it is working very closely with our customers to align on the go-live date. So, today, our ability to get our 1,500 stores in backlog to work that down, will be much more tied to our customers saying, hey, go live in this state now and start launching versus us having a capacity constraint.

So it's more of customers. And that's why I said, if there was no COVID, I would tell you, gosh, we'd be well beyond 1,000 stores a quarter relatively easily. With COVID, we're a little more tepid, because we've seen -- example, we had a chain that said, hey, no installs in Florida, so things come down. So it's a little bit unpredictable, but still trajectory is very, very strong.

Craig Irwin

So then how have things trended in -- you mentioned June. July is behind us now. Have we seen a little bit of a tick up? Or are things sort of bouncing along at the same levels?

Savneet Singh

So we had a very big pick up the second -- two weeks of June, and that's continued in July. Thank, Craig.

Operator

And this concludes our Q&A session for today. I would like to turn the call back to Savneet Singh for his final remarks.

Savneet Singh

Thanks, everybody, for joining the call. We look forward to updating you in the near future.

Operator

And with that, ladies and gentlemen, we thank you for participating in today's conference. You may now disconnect. Have a wonderful day.

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