PAR Technology Corp (PAR) 2015 Q3 法說會逐字稿

Good day, ladies and gentlemen and welcome to the PAR Technology Corporation fiscal year 2015 Third Quarter Financial Results Conference Call. At this time, all participants are in listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time.

(Operator Instructions)

And as a reminder this conference call is being recorded.

I'd now like to turn the conference over to Chris Byrnes, Vice President of Business and Investor Relations. You may begin.

Thanks, Latoya, and good morning, everyone. I'd like to welcome you to the call today for PAR's third quarter 2015 financial results review. At this time I want to remind participants on the call today that we recording the call this morning and it will be available for playback. Also we are broadcasting the conference call via the World Wide Web as well. 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.

Participating on the call with me today is PAR's CEO and President, Ron Casciano; and Mike Bartusek, the Company's Chief Financial Officer.

Today's call may include 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.

I'd now like to turn the call over to Ron Casciano for the formal remarks portion of our call, which will be followed by General Q&A. Ron.

Thank you, Chris. Good morning everyone. As always we appreciate your participation today. This call will focus on our third quarter results and our announcement today that we have sold our hotel, technology business PAR Springer-Miller systems.

After my formal remarks on our performance in the quarter and the divesture, Mike Bartusek, PAR's CFO will provide more extensive review of our third quarter financial performance.

To begin, after a lengthy and thorough review of strategic, options of our company to unlock shareholder value, this morning, we announced that we had divested PAR Springer-Miller Systems Inc to an affiliate of Constellation Software for $16.6 million with a possible addition of $1.5 million if certain financial targets are achieved.

Although we have seen progress in new product development, there was a prevailing sense and evidence in the lack of market demand by hotels of our cloud based property management technology. We've come to the conclusion that our company needs to focus upon our core businesses to be successful for the long term.

By sharpening our efforts on our strength and retail restaurants and government businesses, PAR is better positioned to introduce new value-added solutions and deliver higher operating margins. We are excited about this opportunity to focus on our core strength and drive profitable growth.

The sale also provides the company with the financial flexibility to address future requirements and opportunities involving both segments and will immediately strengthen our balance sheet.

Now, turning to our results for the quarter, this morning, we announced that the company reported third quarter revenues from continuing operations of $58.1 million compared to $52.6 million in the third quarter last year a 10.3% increase.

On a non-GAAP basis PAR reported net income from continuing operations of $1.7 million or a $0.11 earnings per diluted share in the quarter. This compares a non-GAAP net income from continuing operations of $1.1 million and $0.07 earnings per diluted share in Q3 last year.

We recorded GAAP net income from continuing operations is $1.3 million and earnings per diluted share of $0.08 in the quarter versus GAAP net income from continuing operations of 700,000 or earnings per diluted share of $0.04 last year.

On a year-to-date basis, non-GAAP EPS from continuing operations doubled to $0.26 per diluted share in 2015 versus $0.13 in 2014. I'm pleased to report that our restaurant retail technology business produced another strong quarter and grew revenues 11% over the prior year period.

Brink POS, our cloud data solution for restaurants continues to exceed our initial expectations. Since we acquired Brink we have more than doubled the number of restaurants installed with our cloud solution.

In regards to our point of diversification strategy in restaurants, we are winning new deals in non-traditional customers as evidenced with the signing of Pita Pit, a 500 plus store fast casual chain and also Pancho's a 65-plus store burrito chain in the quarter.

In addition, our sales pipeline is extremely strong with additional opportunities for Brink and we have high confidence that the win rate for this Cloud solution will continue to fast track.

Our new customers and the industry as a whole truly believes that the PAR Brink Solution is a game changer for restaurants and they feel strongly that PAR is a software innovator and technology leader. Our Tier 1 customer business also had a strong quarter, a large new customer was over 3,400 stores is currently deploying PAR systems.

Continued demand for McDonald's and Yum brands for our solutions in life cycle support also contributed to the revenue growth in the quarter. In line with our leadership position and innovation this past quarter, we introduced the EverServ 8000 Series platform, the company's eighth generation point of sale terminal.

The hardware platform uses innovative industrial design and the latest Intel processor technology to maximize performance and improve guest experience. The 8000 delivers enhanced performance to reduce customer wait times and increase throughput of orders.

PAR SureCheck Solutions, again made significant progress in the quarter and we delivered software enhancements to Wal-mart and in turn upgraded all 5000 domestic stores to the most recent version of the SureCheck platform. This customer's commitment to our technology is steadfast both here and abroad. Walmart International continues to rollout SureCheck including stores in Canada, U.K., China, Chile and Mexico.

The expansion of SureCheck internationally is expected to continue well into 2016 and beyond. With the strong and growing pipeline SureCheck is a key element in our overall strategy of growing recurring revenues with software sales and software related services.

Now turning to our government business, our government segment also delivered a solid quarter, we continue to see strength in this segment as non-GAAP income from operations grew 23% and revenue increased 9.5% from the prior year's third quarter.

The company won contracts with the ceiling value of nearly $90 million in the quarter, the industry practice regarding indefinite delivery, indefinite quantity booked only $46 million of that in the quarter, the backlog at the end of Q3 grew to $98.1 million from $73.5 million in Q2, the growth is being driven by both our business lines Intel Solutions and Mission Systems.

Driving the increase in Intel Solutions is the expanded task orders with the ATAC program and sustained success in our extended business development efforts in the Wright Patterson Air Force Base in Ohio. On the Mission Systems side, we have been successful in retaining, expanding and modifying several existing contracts. We're growing this business by providing value to PAR's operational excellence targeting improved margins while insuring customer satisfaction.

I would now like to turn the call over to Mike Bartusek to review our financials in further detail. Mike?

Thanks Ron and good morning, everyone.

Product revenue in the quarter was $24.4 million, an increase of $2.9 million and a 13.6% compared to the third quarter of 2014. During the quarter the increase in revenue was driven by multiple sources, regions, and product lines. Highlights for the quarter includes strong growth within the company's international markets noting a 24.6% increase over 2014.

The company's domestic operations accelerated deployments to a large new Tier 1 customer. The majority of the increase within the PARs international markets was driven by the company's largest global customers as they continue to upgrade their technology platforms. Service revenue was higher during the quarter, generating a $11.6 million versus a $11 million in 2014 noting 5.5% growth.

The increase in revenue was primarily driven by sales of software related services associated with the company's Brink and PixelPoint software solutions. In addition service revenue generated by the company's hardware repair center has increased compared to prior year driven by a higher volume of contracts. The company's recurring revenue base represents both hardware support and software related service contracts.

Software related service continues to grow driving a 10% increase in revenue on a sequential basis and over 20% for the year. Overall recurring revenue represents 21% or $7.7 million of total hospitality revenue during the quarter.

Contract revenue for our government business was favorable year-over-year increasing $1.9 million or 9.5% to $22 million from $20.1 million in the third quarter of 2014. The increase from Q3, 2014 is mostly due to activity within the companies ISR contracts.

Contract backlog continues to be significant noting total backlog of over $98 million as of September 30. Product margin for the quarter was 28.6% versus 34.5% in Q3, 2014. The decrease in product margin percentage primarily relates to a large deployment of our Pixel software in 2014 for a specific customer that didn't reoccur in 2015 and an increase demand from our lower margin product mix as compared to 2014.

Service margin for the quarter was 28.5% and increase of 670 basis points from the 21.8% reported in the third quarter of last year. Service margins have been favorably impacted by an increase in software related services during the period primarily driven by SaaS revenue and professional services.

Government contract margins increased 119 basis points to 7.5% as compared to 6.4% for the third quarter 2014. This increase is the result of a favorable contract mix with the high volume of revenue earned through a higher margin contracts. Non-GAAP SG&A was $6.6 million a decrease of 431,000 from Q3 of 2014. This reflects our continued cost reduction efforts.

R&D expense was $2.7 million up from the $2.2 million recorded during Q3 of 2014. The majority of the increase is due to the company's acquisition of Brink and other investments within our software portfolio.

Now to provide information on the company's cash flow and balance sheet position. Cash provided by continuing operations during nine months ended September 30 was $2.3 million, mostly due to add-back of non-cash charges offset by changes in networking capital requirements.

The company used cash within investing activities to pay the $3 million guaranteed payment to Brink and investments for capital expenditures of $1.5 million and capitalized software of $1.5 million. Additionally the company decreased is borrowings on its line of credit by $1.6 million. Inventory decreased from December 31, 2014 mostly relating to the deployment of inventory to new customers.

Additionally accounts receivable decreased compared to December 31 primarily due to timing of collections from revenue associated with the hospitality segment. Days outstanding remained consistent with 12, 31 for hospitality and government at 55 and 42 days respectively.

This concludes my formal remarks and I'd like to turn it back to Ron for his closing comments.

Thank you, Mike. In summary we are making strong progress in our businesses with new customer and contract wins and those efforts are now showing up in our results. Our new business pipeline is growing with customers adopting our hardware services and cloud software offerings.

With our recent divesture of our hotel technology business along with the sustained momentum within our core businesses the entire PAR team is focused and committed to maximizing shareholder value. We are embarking on an exciting new chapter in history of our company and look forward to updating you as we progress and work to close the fourth quarter and set up a strong fiscal 2016.

As always we want to thank our employees for their dedication, focus and hard work as they strived to achieve our performance goals.

With that we'll be pleased to take your questions. Thank you.

Thank you. (Operator Instructions) And our first question is from Anthony Hammill of Broadview Capital Management. Your line is open.

Good morning gentlemen and congratulations on everything that's quite a lot of good news in one morning. So let's just start with the divestiture and congratulations and thanks to you guys and to the Board for embarking on this. Can you talk a bit about the process, was this an inbound inquiry from Constellation or was this a process that you embarked on either on your own or with the help of advisors? Maybe you can just tell us as much as you can about when this started, how it happened and what if this is a process what else maybe on the table?

Sure Anthony and good morning to you. Anthony, as you know we started the process as we continue to update our strategy and did a strategic review of all our businesses with the Board as we do on an ongoing basis, we use outside financial advisors in part to help us with reaching our decision and then we hired an investment banker Houlihan & Lokey to go out and test the waters in the market and to gauge the interest and we ended up doing the deal with Constellation.

Right. And was Houlihan & Lokey tasked simply with selling Springer-Miller or they given a broader mandate to consider strategic alternatives?

The scope of their mandate was just on the hotel segment.

Very good, OK. And when did that start in terms of when we're they first engaged?

It was the marketing effort started earlier this year.

Earlier this year. OK.

So it's an extensive process and concluded yesterday.

Right. And so that has closed meaning the check is in the bank, the firms of the earn out, just call it earn out, what's the timeframe there and is there any way you can handicap the likelihood of extra cash coming in?

The $1.5 million earn out begins in 2016 it's $500,000 a year for three years based on certain financial targets.

OK. And are there anyways you can say if that's a high likelihood, if high earnings gone in or?

I'm not going to speculate it at this time, Anthony, but we're it's certainly a possibly as we look to the outlook and have confidence that Constellation's brands will do a good job.

Very good, OK and upon -- so it's -- as of the end of the quarter was considered discontinued operations, when the books close on Q4, are you expecting there to be an impairment or a gain on sale and if there is an impairment will that provide a --what sort of tax yield will that provide?

Anthony as we recorded the transaction in the Q3 results we were required to write down some of the intangible assets in Q3 and that number is reflected in the loss on discontinued ops. And looking for Q4, the primary activity in discontinued ops will be the month plus of normal operating activity that took place before the close of the deal.

OK, all right. So the -- and the numbers you give, the $16.6, are those the net proceeds after banking fees or those that is the gross sales?

That's the gross sales price.

Right OK, OK. So Q4 will have a small amount of discontinued operations but should be a relatively clean quarter in terms of one-off costs of exiting the business and severance amount or there -- thought there could be additional?

No, there might be any true ups different things but primarily to be one month plus of the normal operating activities that you will see.

All right, OK and just couple others and then I'll get jump back in the queue. The restaurant business is mentioned and again there a lot of information to absorb but a large customer I believe 3,400 stores which you didn't name and understand you may not be able to do that, is that a new customer you referring to or is that an existing customer.

That was a new customer that we signed up earlier in the year and we've been deploying the systems to them for the last few quarters. They had a significant impact on the revenue growth in Q3 and unfortunately like many large customers they sometimes don't always let you use their name in the press release so, but it was a big impact on the quarter so obviously we have to comment on it.

OK and that was through the Legacy offering was that a Brink customer?

No, that was a Legacy offering, that was a primarily our Legacy hardware products.

OK and that revenue was, that contract is essentially fully deployed as of the end of the Q3 or is there still some.

No, I'll go through the end of Q1 based on the current roll out schedule.

Right, OK and then in the government business, again good growth there and even better on the margin side, is that the change in mix and the elevated backlog is the margin profile of Q3 a new normal or is there still can be we back 100 basis points up, 100 basis points down as on as we go quarter-to-quarter.

Yes, that we used to say that the government margin could swing between 5% and 6% from quarter to quarter. Its usually on the north end of that and it was, obviously over 7% this quarter so, let's say between 6 and 7 is, something that we should expect so. It's been trending up over the last few years.

Right and so that sounds like from your comments about that's a sustainably higher margin business then perhaps it, it has been.

Well, it all depends on the future mix of contracts.

But your contract base now in the backlog it's a, you're happy with the margin profile.

Yes, it's pretty good.

Very good.

Yeah, we had good bookings quarter there.

OK, and in terms of the you have I think it was $3 million in that at the end of the quarter and now you're going to be flush with cash and obviously you are not going to identify exactly you going to do with the money because if you did you would probably put in the press release, but what is the process to identify the best use of that capital and how far long are you in that process or is that yet to begin.

Well, we're still in the very early stages as we develop our strategy and plans for 2016 beyond. It will give us more, more flexibility in whatever strategic options we want to explore including may be some M&A activity or investments in our, on core software products so, we're just beginning to a evaluate that so it's still early Antony.

Right, and then in terms of the product mix ATRIO which was a huge drain on R&D with little to no revenue associated with is now gone. So that, certainly from a reported earnings basis and profitability basis we're looking at in much cleaner business going forward. Are there any other major sources of R&D right now which are on products or services that are necessarily reflected in revenue or -- SureCheck obviously have some R&D but that is now - project.

Yes, the main R&D expenditure at this point going forward will be, SureCheck and Brink. We just completed new hardware development with our new 8000 hardware platform. So, we recently came out with SureCheck advantage, a new hardware device for our SureCheck offering. So those are - we'll continue to optimize and invest at the right levels they continued to make sure we can grow those product lines as the core of the restaurant business.

Right, but the products sent and offering right now is stands is in as the whole looks like it's more up to date than perhaps it has been over the last couple of years. And I know you guys wanted to give guidance but I would hope it's safe to say that the days of $15 million plus a year in R&D are behind the company, and again you grow substantially to get back there?

Yes if you just look at the ratios prior to the divestiture R&D was somewhere around 7% of total revenue in the third quarter on a continuing Ops basis we're at 4.7%. So it shows that the R&D spend now is developing our current portfolio which we're realizing revenue on. So the payback is started, as you mentioned, the payback on ATRIO was slow in coming and was costing us a significant investment in R&D. So it will be lot more revenue associated with the current R&D burn going forward.

All right. OK, well I just would like to end off by again saying congratulations for getting the deal done and now being in charge of a profitable growing more simplistic and easy to understand business. And I think the interest in the stock this morning and the volume and the fact that I had to wait on hold to get on this conference call which has never happened before an indication that people like what they see. So again congratulations on good job on the quarter.

Thanks Anthony, thanks.

Thank you. (Operator Instructions) And the next question is from Gary Siperstein of Elliot Rose Asset Management. Your line is open.

Hi guys. Good morning.

Good morning Gary.

And Mike welcome to the board.

Thank you.

Congratulations, it was a wonderful quarter and piggybacking what Anthony said it was nice to see the divestiture. Ron, and some of this might be a little repetitive from Anthony but I just want to get a little more clarity. So you've been in the restructuring mode for a good maybe six months now and we had charges in Q2 and Q3 related to that separate from the hotel divestiture.

Do we feel the fourth quarter everything else, I know you're going to continue to work on cost cutting forever, but should we expect the charges in each quarter to start diminishing as the facility consolidation, your footprint consolidation, personnel consolidation comes to an end and then it's more dotting the I's, crossing the T's, which might not -- which might help you save money but it won't show up in special charges?

Yes Gary, in our next few quarters in the short term - well first let me back up, first as you said we're always looking to cut cost where we can, streamline operations but we're not expecting any large restructuring charges in the next couple of quarters.

OK. Super.

And obviously we announced the earlier one earlier this year and the hotel divestiture was -- is a significant impact on the bottom line, so next couple of quarters will be nothing significant.

Got it. Super. And can you tell us what the hotel division Springer-Miller and ATRIO, what that division was losing per quarter, which won't be losing anymore now that it's gone?

Well it was losing significant amount of money, we haven't disclosed the pieces yet, you'll see it in the footnotes. It was on a GAAP basis, about $1.5 million a quarter.

Wow OK, I mean that's $0.10, that's huge.

Yes.

Yes. I mean that's going to be a significant savings going forward per quarter, wonderful. And I know Anthony tried to get some clarity on the gain or loss you're going to show, so the $16.5 million, I know you developed ATRIO internally and you expense that's you went. So to determine the gain or loss on the transaction does it go back to the Springer-Miller acquisition price less depreciation and amortization.

Well with that getting too detailed in there Gary, as I mentioned earlier the write-down of some of the intangible assets basically takes care of the gain or loss on the transactions so on Q4 that were not expecting any significant true up to that amount other than as I said the normal operating results for the month of October plus a few days.

Got it, OK. And Ron again responding the Anthony you talked about the $16.5 million was before the expenses of closing with the Houlihan Lokey and, can you tell us how much cash went on the balance sheet at closing was it $13 million, was it $14 million?

The dealer called for $12.1 million to be paid at closing that's the amount we received yesterday. The balance is typical, there's always a whole back on these deals has due in 18 months.

OK, that's 18 months on the differential of separate from the $1.5 million burn out?

Yes.

OK. And then to the government business, so you mentioned some significant wins I guess in the quarter, but I don't think there are any was it all fully announced in the quarter or were something in that because this -- IQ.

No, the particular customer that we're not allowed to have an announcible event. That's all I can say, but it was a significant win in the quarter Gary in the ISR area and

Yes.

So was as you and you saw had a major impact on the backlog and will have a continuing favorable impact going forward on a government business.

OK, so...

The very nice one.

Like on the restaurant side sometimes you just can't announce, you can't and say -- say we got we want to contract from a government, prime contractor you can even say that.

They wouldn't let us say anything but

OK. And then you increase in the backlog.

I am sorry?

I appreciative that. So on the backlog increase I think you have said again I apologize if I didn't hear it or right it down fast enough, but sequentially the backlog went from $73.5 million to $98.1.

Yes.

Is that what you said A and then B so, that was what you were allowed to put in the backlog exclusive of the IDIQ total amount, I mean how does that work?

A portion of the IDIQ goes into the backlog when we get the task order under that contract. But, the total ceiling value of the contract doesn't go in there until the task orders come in. So, the actual, if you wanted to account the whole ceiling value the backlog would be substantially higher but industry practice doesn't do at that way.

OK, so what it would be, in other words so you want from $73.5 million to $98 million so about $25 million increase, but that's as you just demonstrated doesn't include the total potential value what would the total potential value be?

Well, don't want to say Gary specifically, I haven't done the exact math, but the ceiling value is $90 million. We have booked $46 million in backlogs, so you can take the difference of the $45 million it's always it's not in the backlog yet. Yes, if you get to assume that they spend the ceiling amount at the end of the day, which you know.

Yes.

We certainly are anticipating, but it's not given.

Right. OK thank you. And then on the hardware order that you're shipping, you mentioned it was a new tier 1, which is away from you prior tier 1's Yum and McDonald's 3400 stores. So they're not let you tell us, at this point anyways, who they are, but what makes a company a tier 1? I mean in other words can give us, give me four, five other examples of substantive restaurant companies that would be considered tier 1?

We classified tier 1's as our restaurant chain it has over 2,000 stores. This particular customer has two concepts. There is about 20 or so restaurant companies in the Tier 1 category.

OK. Are we shipping hardware to both concepts, or only one concept?

Yes to both of them.

To both of them, OK. And you said a total of 3,400 stores, you said shipments will go through Q1 of 2016, so will we have completed the 3,400 stores by the end of Q1?

Most of them Gary, that's a current roll out schedule.

And have they say there is never -- I'm sorry.

We're still attempting and talking about press release, but at this time they're have taken a position there you want to be silent, which we respect that.

OK. Got it.

I'll just say Gary we're talking I said there is about 20 Tier 1 restaurants, chains out there, we're in about 11 of them.

OK.

Yes, I'm sorry you had another question.

Yes, so moving over to SureCheck, you mentioned Walmart International roll out. So historically we had previously completed the domestic roll out and now the international rollout is ongoing? That's question one and then question two is, you mentioned 5,000 international stores, will that be totally shipped calendar 2016 or does that go into 2017?

First of all Gary the 5,000 stores were the domestic stores that we're already deployed in.

OK, OK.

International roll out in those five countries will be substantially completed in 2016.

And do you have a number on the number of locations?

I don't have it in top of my head, have the...

OK. And then moving towards Brink, on the Five Guys roll out, I don't recall company owned stores versus franchisees, can you give us A, do we include -- do we have business with both, are we the recommended vendor for the franchisees? And B. how many, just remind me how many total stores Five Guys has, and then how many we have rolled out so far? And is it expected to be fully shipped in 2016 or is that a multiyear deal?

Sure Gary of the 1200, 1300 stores that they have about 300 are corporate, we're the preferred vendor to the franchisee community as well. The roll out schedule has been delayed versus our earlier view of it. Five Guys, at their request, has slowed it down as they deal with some internal task regarding integration of other modules and some other things. It will pick up in earnest in 2016 and by the end of 2016, we hope it will be complete.

So it's unfortunate that a push has pushed, those things happen all the time and we deal with them, but the good news is we had a successful third quarter with very little contribution from the Five Guys roll out, so it's something that we're looking forward.

Super.

We only have about 55 Guys stores deployed to date, out of the 1200, 1300?

That's wonderful, Ron. So you did $0.11 in the quarter without much...

Without much from franchise, right.

So the fourth quarter and calendar 2016, so those five quarters will have more contribution from Brink on top of what you've already done organically?

Yes not so much in Q4 but it will be in 2016.

2016, OK. And I don't know if this is more for Mike, but at some point are you guys going to break out the Cloud revenue, the subscription, the monthly subscription part of the business, I know Mike you had mentioned 21% is recurring in the quarter, is that the figure or is that SureCheck and Brink and historical ATRIO, can you give me a little more color on that?

Well it doesn't include ATRIO, essentially those other products and we do in the future hope in 2016 to start reporting some more detail, more information about the, that line item.

OK, super. And do we have a sort of tax provision in the quarter. Do we have is that more international I thought we had a small amount of NOLs offset domestic income and am I wrong on that? And if there is an NOL with it also covers some of the possible capital taxation result as the in light of the hotel sale?

Yes, Gary the book tax provision is based on the current year calculation and doesn't take really take into consideration of prior year NOLs. But when we file our tax return we do have significant NOLs and we will be paying very, very little tax, Federal tax in the U.S. on our 2015 results including any amounts owed on the, the taxable gain on the transaction. So from a cash position we won't be writing any big checks for taxes.

OK, super. And do you know of the top of you Ron with the size of the NOL is?

It's about $30 million pretax and it's on the balance sheet to 34% of that approximately, Gary, that we have put on the balance at the after-tax amount. But, basically the next $30 million of pretax income in the U.S. we have NOL's to offset it.

Wonderful OK, so they might not be any domestic taxation for at least a year or two

But there's something else that's called alternate, alternate minimum tax, but we won't talk about that - a very small number.

Ok. And, with the 16 or you don't the 12 or whatever the proceeds are would you guys consider you know it's been the long dry spell for your shareholders would you consider a dividend and/or buyback in addition to may be additional M&A cloud, M&A stuff?

I would say, dividend is not under consideration Gary. The board always discusses a lot of things including buybacks. At this time that's not anticipated, as I said earlier we are looking to take the proceeds and invest in our technology of SureCheck and Brink and do some look at some other strategic options and fill our products portfolio maybe some M&A, but its' very early in the process yet. And we're continuing to evaluate.

All right, when you talk about strategic, possible strategic M&A what are the holes you'd like to fill in the restaurant business on the product side that might be at the top you wish list for ultimate M&A.

Well I won't get that specific Gary but, that's what we're look at. We look at our existing product portfolio and see what gaps we have, what the market is for those gaps and we make a decision.

OK, and on your facility can you jut refresh me your corporate headquarters and facility. How many acres, how many square feet what's it on the books for, are you utilizing all of it or in light of the different restructuring is some of that getting ready to be leased out, and/or would you have a consider to sale-leaseback of that.

Gary, our corporate facilities we own in total about 43 acres. Our main headquarters building is little over 200,000 square feet. We occupy a little over half of that, rent out some of the remainder and are looking to fill the rest of the space either with the expansion or other tenants. It's on the books for small amount, it was purchased a long time ago. Not considering a sale-leaseback at this time.

Any guesstimate on what it's worth today?

I am not going to speculate on that Gary. We haven't and I guess we haven't looked that area in a while, there's nothing contemplated in the near future so.

OK.

The real estate market changes all the times so.

Absolutely, so and just a couple more and then I will give someone else a chance. On investor relations, IR so now you have two solid operating quarters in a row, two quarters in a row of sales growth and if we annualize the $0.11 just are on that's $0.44, 25P gets it to $0.10 or $0.11 bucks a share.

And I don't think that's piggish in light of the EPS comparisons being your EPS growth rate was 100% and there is more to come as you continue to add to that monthly subscription income with additional wins and additional roll outs as were discussed.

So granted we have a government and hardware piece which might diminish the PE devaluation somewhat, but as you guys know most public Cloud only companies, and a lot of them are still losing money but they trade at two times, three times sales and here are with an $80 million, $90 million enterprise value doing $0.25 billion business possibly on our way to $300 million, it seems like we are crazily undervalued. Can you tell us what the plan is on investors relations?

Hi Gary, it's Chris here.

Hi, Chris.

I think we're going to probably ramp up activities where appropriate, we certainly have been having ongoing dialogs with new perspective funds. We're certainly hoping that the reaction from the positive news coming out today only kind of fuels that further. And we're certainly talking to the sell side and the buy side and making sure that we're kind of knocking on the right doors at the right time that people -- that this is within their kind of sphere of investment vehicles. And so I think you'll notice I think increased activities in that particular area.

OK. And Chris are there any conferences coming up between now and year end or into the first quarter?

Few Gary, they tend -- once the holidays kick in, there might be one or two that we can garner an invitation to before the holidays start, but certainly as you're aware January and February timeframe is very busy and that's specific arena and I would expect us to be quite busy presenting in certain opportunities.

OK. And then last question actually it's more of a comment but now with hotel and hotel related divested, if you guys could -- now that you're doing wonderfully in restaurants and have momentum and it's very exciting growth, if you could sell or spin off government and become a pure play hospitality company with the major growth coming from the Cloud and subscription base even with a hardware portion of the business like I described earlier.

I mean just one-time sales would get you guys -- granted sales would be $250 million it would be that less the government portion, but one, one and half time sales is still probably cheaper than every other subscription Cloud company out there and that would easily get you north of 10 bucks. So as you're a largest shareholder.

I just want to go on the record for you guys and the board that I still recommend divesting government and putting are you focus on what you've been doing a spectacular job on and I think will get an appropriate valuation from the street, thank you very much and congratulations.

Thanks. Thank you very much for your questions, Gary. Good talking with you.

Thanks.

Thank you. (Operator Instructions) And I'm not showing any further questions at this time. I'll turn the call back over for any closing remarks.

OK. Well thank you everyone for participating and everyone have a good day. Good bye, thank you.

Thank you. And ladies and gentlemen this concludes today's conference. You may now disconnect. Good day.