PAR Technology Corp (PAR) 2017 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the PAR Technology Fiscal Year 2017 Third Quarter Financial Results. (Operator Instructions) As a reminder, this call will be recorded.

I would now like to introduce your host for today's conference, Mr. Christopher Byrnes, Vice President of Business and Financial Relations. You may begin.

Thank you, Katherine, and good afternoon. I'd also like to welcome you today to the call for PAR's third quarter 2017 financial results review. The complete disclosure of our results can be found in our press issued today, as well as in our related Form 8-K furnished to the SEC. To access the press release and the financial details, please see the Investor Relations and News section of our website at www.partech.com.

At this time, I'd like to take care of certain issues in regards to the call today. Participants on the call should be aware that we are recording the call this morning -- this afternoon, and it will be available for playback. Also, we are broadcasting the conference call via the World Wide Web, so please be advised. If you ask a question, it will be included in both our live conference and any future use of the recording.

I'd 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 our earnings release this afternoon and in our annual and quarterly filings with the SEC.

Joining me on the call today is PAR's President and CEO, Dr. Donald Foley; Bryan Menar, PAR's Chief Financial Officer; and Karen Sammon, Chief of Staff.

I'd now like to turn the call over to Don for the formal remarks portion of the call, which will be followed by general Q&A. Don?

Thank you, Chris. Good afternoon, everyone, and thank you for joining us today for PAR's Third Quarter 2017 Earnings Call. This year continues to be a transformational year, as we execute our strategic plan and move to a software-driven solutions company with a business model that yields consistent growth and margin improvement.

Before reviewing the financial numbers and providing the details behind the numbers, I want first to address our 8-K, which was filed on November 6. Todd Tyler and Paul Eurek, 2 of our independent directors, submitted their resignation from PAR's Board of Directors, effective at a later date. Mr. Tyler indicated that he will continue to serve until his replacement is found. Mr. Eurek indicated that he will continue to serve until the earlier of the date his replacement is found or December 31, 2017. Mr. Tyler stated in his letter of resignation why he resigned and PAR expressed its beliefs. At the end of June this year, Mr. Eurek retired from a successful career as President of Xpanxion. Paul Eurek indicated that his resignation from PAR was for personal reasons related to family. Both Mr. Eurek and Mr. Tyler continue to provide valuable and expert insight and recommendations with respect to our transformation. PAR, acting through its nominating and governance committee, has already begun the process of identifying and interviewing potential candidates for our board positions.

Now turning to our third quarter results from continuing operations. Our third quarter revenue is $48.9 million, a 20.4% decrease from third quarter 2016. Our third quarter GAAP net loss was $1.5 million compared to an income of $500,000 in the corresponding period last year. We reported a loss of $0.10 per share versus earnings of $0.03 per diluted share in last year's third quarter.

On an adjusted basis, the non-GAAP net loss was $900,000 compared to a non-GAAP net income of $1.6 million reported in Q3 2016. Non-GAAP loss per share was reported at $0.06 per share versus $0.10 earnings per diluted share in the same period last year. Our press release has a full reconciliation of our GAAP and non-GAAP results.

Before turning to our CFO, it is important to re-emphasize that our company experienced a significant shift of business, originally projected across the first 3 quarters into the first half of 2017. This is evidenced by the following 9-month results. Year-to-date revenue was $177 million, a 4.5% increase as compared to the first 9 months of 2016. GAAP results during this period, this 9-month period, resulted in $1.7 million net income compared to a net income of $634,000 from the same period last year. We reported $0.11 per diluted share in earnings versus earnings of $0.04 per diluted share for the first 9 months of 2016.

On an adjusted basis, non-GAAP net income was $3.8 million for the 9 months ended September 30 compared to non-GAAP net income of $3.1 million reported in the same period in 2016. Non-GAAP earnings per share reported a $0.24 per diluted share versus $0.20 earnings per diluted share in the same period last year.

As we discussed earlier in the year, PAR competed for and was awarded considerable hardware project work with our Tier 1 customers. The somewhat unpredictable nature of these hardware projects are both lucrative and challenging. Change management initiatives started in Q3 to address the deliberate shift in our business toward software solutions could not be accelerated fast enough to mitigate the shortfall in revenue in the third quarter.

I would now like to turn the call over to PAR's CFO, Bryan Menar, to give further details of our financial performance for the quarter.

Thank you, Don, and good afternoon, everyone. Product revenue for the quarter was $20.7 million, down $5.1 million, a 19.6% decrease compared to Q3 2016. During the quarter, decrease in product revenue was primary driven by a wind down of major project installations for our hardware solutions with our Tier 1 customers in our restaurant/retail segment.

Service revenue for the quarter was $13.3 million, up $0.7 million, a 5.5% increase compared to Q3 2016. We continue to expand our recurring revenue base, which includes both software-related services and hardware support contracts. Recurring revenue for the quarter was $9.3 million, up approximately $0.9 million, a 10.1% increase compared to Q3 2016, due to software up $1 million, offset by hardware support contracts, down $0.1 million.

Momentum continues with our deployments of Brink and SureCheck, noting a 111% increase of Software as a Service compared to prior year. We exited the quarter with approximately $6.6 million of annual recurring revenue from Software as a Service contracts.

Contracts revenue from our Government business was $14.9 million, down $8.2 million, a 35.5% decrease compared to Q3 2016. This decrease was driven by the wind down of a large multi-year contract within our program management contract offering. Contract backlog continues to be healthy, noting total backlog of over $110.2 million as of September 30, 2017.

In regards to margin performance for the quarter. Product margin for the quarter was 23.4% compared to 28.4% in Q3 2016. The margin included a $750,000 inventory reserve adjustment, resulting in a 360 basis-point decrease for the quarter. Service margin for the quarter was 24.1% compared to 28.9% in Q3 2016. The margin for Q3 2017 included an adjustment to service costs of $0.4 million, unfavorably impacting margin by 316 basis points.

Government contract margin for the quarter was 8.8% compared to 7% in Q3 2016. The favorable variance is the result of a shift in revenue mix from PMO to the higher value added contracts of Intelligence, Surveillance & Reconnaissance and Mission Support lines of business.

Now to review operating expenses. GAAP SG&A was $9.1 million, up $0.4 million versus Q3 2016. The increase was primarily due to investment in personnel to support the current and future growth in our Brink and SureCheck products. SG&A expenses for the Q3 2017 included $0.7 million related to the investigation of conduct at our China and Singapore offices.

Non-GAAP SG&A was $8.2 million, up $1 million versus Q3 2016. Research and development expenses were $2.7 million, down $0.2 million versus Q3 2016.

Now to provide information on the company's cash flow and balance sheet position. For the 9 months ended September 30, 2017, cash used by operations was $7.3 million, primarily driven by amortization of deferred revenue from customer deposits received in Q4 2016 for 2017 deployments. Cash used in investing activities was $7.2 million for the 9 months ended September 30, 2017, versus cash used of $4.7 million for the 9 months ended September 30, 2016. In the 9 months ended September 30, 2017, our capital expenditures of $3.5 million were primarily related to the implementation of our enterprise resource planning system and capital improvements made to our owned and leased properties. We capitalized $3.3 million in costs associated with investments in our restaurant/retail segment and software platforms.

Cash provided by financing activities was $6.8 million for the 9 months ended September 30, 2017, primarily driven by receipt of the final installment related to the 2015 sale of the hotel business unit, proceeds from the exercise of employee stock options and borrowings under our line of credit. As of September 30, 2017, the inventory balance was $26.7 million, an increase of $0.5 million for the 9 months ended September 30, 2017. Inventory turns were 4x for our domestic and international operations.

Accounts receivable decreased $2.3 million compared to December 31, 2016, reflecting the decrease in revenue versus Q4 2016, offset by an increase in days sales outstanding. Restaurant/retail segment days sales outstanding increased from 55 days as of December 2016, to 63 days as of September 2017. Government days sales outstanding were 43 days versus 44 days as of December 2016.

This concludes my formal remarks, and I'd like to turn it back to Don.

Thanks, Bryan. A bit more color and insight behind our financials, starting with our Government business, consistent with previous remarks in the last few quarters. We are in the midst of transforming our contract base, away from the high pass-through revenue and low-margin contracts, associated with our program management office line of business to the more sustainable, value-added contracts within the ISR and mission systems lines of business. As stated, our overall contract revenue for the quarter was down 35.5%. ISR associated revenues for the quarter were up 10.6%, and the margins improved year-over-year from 7% to 8.8%.

Since our last call, we announced new subcontract awards of $11.9 million at Tinker Air Force Base in Oklahoma, and $7.4 million for work at Warner Robins Air Force Base. Our multi-year contract backlog at the end of the third quarter stands at $110.2 million.

Now turning to PAR's Restaurant and Retail segment. Revenues for the quarter decreased by 11.5% year-over-year. As I noted above, we reported a significantly higher pace of project business from Tier 1 customers, primarily McDonald's, in the first half of 2017, the highly anticipated release of McDonald's mobile application, growth projects that started as early as late third quarter 2016 and had been planned to extend over the first 3 quarters of 2017. The effect of the acceleration into the first half, coupled with the impact of higher Q3 2016 revenue, contributed to our performance in Q3 2017.

PAR's Brink and SureCheck cloud platforms continue on their positive trajectory, as evidenced by the more than doubling of our Software as a Service revenue from last year's third quarter. SaaS revenue grew 111%. Software related revenues increased by more than 54% in a year-over-year comparison, and recurring revenues now comprise 27% of the Restaurant/Retail segment.

In the quarter, Brink added 389 new customer sites, a 7% increase from the third quarter 2016, and now has an install base of 3,649 restaurant sites. The total installed base number is an 85% increase from the end of Q3 2016. Brink's monthly recurring revenue at the end of the quarter increased 69% from the third quarter a year ago, and rose 6% sequentially from the second quarter.

As I mentioned last quarter, we had signed a major Tier 1 concept. Today, I am proud to announce that, that major Tier 1 concept is Arby's. Arby's joins the PAR [point] family, the past quarter signing of a master services agreement, which provides for the deployment of 1,050 corporate-owned stores in 2018 and Arby's corporate support for PAR to expand Brink into their network of over 2,300 franchise stores. I am also pleased to announce that Smoothie King selected the complete Brink solution, software, hardware and service for their more than 800 sites. During the quarter, and with the introduction of our customer success team, we did take time to focus on the health of our current base of clients, including software upgrades that increase functionality and improve performance in a cloud environment. Additionally, the necessary focus on Brink's newly signed major accounts contributed to the temporary de-acceleration in deployments of Brink sites in Q3. Anticipate an increase in Q4 for both bookings and deployments of new customers, as our pipeline continues to be strong.

We continue to have success in the emerging fast casual sector. And since our last call, announced that California Tortilla, a popular burrito chain with more than 50 locations with an aggressive growth plan of adding new additional sites, selected Brink. Further, we have worked hard to increase business with smaller chains and our channel partners have noted a 75% increase in channel sales year-over-year.

We continue to focus on building out Brink's customer base and innovate around our portfolio to accelerate growth and store count and monthly recurring revenue. As for the market landscape, we are seeing increased competition from both traditional and new companies. We are optimistic that our true cloud solution, designed for multiunit operators, is in the lead position for growth, as we execute our plan into 2018 and beyond.

Now, regarding our SureCheck solution. We are seeing an increase in market interest in food safety and workforce efficiency solutions. Although starting from a small base, SureCheck's domestic revenues rose 15% in the third quarter when compared to Q3 2016, and 22% growth year-to-date for the first 9 months.

Separate from our largest customers, Walmart and Wegmans, we have installed more than 680 additional new devices this year, producing nearly $40,000 in monthly recurring revenue. SureCheck now has over, including Walmart and Wegmans, 18,000 device clients; devices being the hardware, clients being the software, making over 36 million observations per month. We have an aggressive growth plan in 2018 to increase our deployed device count by approximately 10% and our longer-term goal is to double the current number of device clients by the end of 2020. Devices and clients for new customers averaged $50 per device.

This afternoon, I am pleased to announce that SureCheck was recently selected by the Turning Stone Resort and Casino (sic) [Turning Stone Resort Casino]. SureCheck is in the process of being deployed in all on-site restaurants and catering kitchens at the resort and plans to expand into other commercial properties owned by The Oneida Nation, including Maple Leaf Market, its new brand of convenience stores, and the second gaming facility, Yellow Brick Road Casino.

In summary, we expect Q4 to be improved over Q3, and we'll continue to see a shift toward our innovative software solutions. Our clear vision and product road map to the future, our enterprise software for restaurants and retail outlets is a competitive advantage for PAR, and positions us well for continued growth. All of us at PAR appreciate your participation today, on today's call, and we look forward to providing updates to you throughout the coming quarters as we continue to successfully execute our strategic plan.

I would like now to proceed to the question-and-answer portion of the call.

(Operator Instructions) And our first question comes from Howard Brous with Wunder Securities (sic) [Wunderlich Securities].

Wunderlich Securities. First of all, Don, Karen, I want to congratulate you on your Tier 1 contract with Arby's and the additional 800 sites with Smoothie. I have a good number of questions on the quarter. Wondered, first of all, when is the Q coming out, Bryan?

It would be, actually, probably in about 15 minutes.

Well, then, okay. I'd like to defer a lot of the questions I have on the Q, until sometime the next couple of days. And certainly, I have a few questions on the announcement that you made last week. But I do have really one specific question. You started on SureCheck, and one of the big questions I have is margins. Where do we stand in terms of potential margins? Again, we've discussed Brink. We understand what the potential margins are and the growth. Can you give us a little bit more granularity with SureCheck in terms of margins? And I do know that Wegmans and Walmart is at different margin than what you're getting in additional contracts -- go ahead.

(technical difficulty)

Sorry, we have...

Yes, we have some background noise. So Bryan, you can take this?

Correct. So in regards to the SureCheck, we need to have enough critical mass to really gain on the margins in that business. But looking at combined, the goal, where we have in regards to the margin of that business from a rate, looking at software, hardware and services, it was more roughly 50% range, just north of 50%. Right now, we're not there, obviously, as we're going through getting more critical mass to absorb that.

Bryan, that's margin on the software or is that combined margin...

Combined, combined, combined.

And hardware, software and services?

Correct, software and services.

At what point in time with SureCheck do you think you'll gather enough mass, ex Walmart and Wegmans, because that's a different margin. That's not correct -- is that not correct?

Correct in regards to the fact that, right, it's moving more -- the more higher-margin in regards to the outside, those 2 spaces. Howard, to give you a forecast out of when exactly we'd hit that, I think, would be (inaudible).

I'm not looking for a forecast of specific numbers, but when do you gather mass? Is it 2018? Is it 2019? When can we look forward to looking at a number? Because you've given us numbers in Brink.

Sure.

Yes. This is Karen. I would expect that we would start to see really critical mass start to build up in the second half of '19. We're going to start -- we've added to our sales force. Our investment in SureCheck, is being moderated in R&D, and we're putting our efforts into the sales organization, and we found in this year that the contribution from the sales individual that we had really contributed that 690 that we have year-to-date, and we'll have a good solid year with him this year. So as we've added a couple more salespeople, we expect that we'll be able to grow the device count with the sales team in 2018, but to get to "critical mass," I would think that would be more in the mid-2019 time frame. But we're going to keep you apprised of how we're doing, be transparent with a number of devices that we add, and how they're contributing from an MRR perspective and what that looks like as we project forward.

(Operator Instructions) And our next question comes from Jon Hook with Voss Capital.

I have a few questions here. I guess, when you're thinking about the new board members, can you give us some idea what kind of individuals you're looking for? And have you considered maybe expanding past 5 board members giving us a relatively small board and it seems like there's quite a bit going on between the transition to software, and then continuing to deal with that China, Singapore issue?

Yes. This is Don. I can take that one. Certainly, adding experience in the public domain is extraordinarily important to us. We'd like people that have -- by the way, our criteria is all based on balance. So besides adding public domain, we like to have some board members that have had experience in transitioning larger companies, okay? And -- so that's another criteria that we have. As far as expanding the board, the answer to that is: it is a definite consideration, a definite consideration.

Okay. I guess, maybe outside of the board space, have you thought about -- it's a real challenge I would imagine going from a pure hardware to software company and doing a hyper growth, I guess, with Brink, have you thought about bringing in more software management into the senior-level outside of the board, but more on like a C-level position?

Well, we've actually thought about bringing in a board [match], it's another criteria that we're looking at quite actively. One of the candidates was even a CTO of a very large corporation, successful corporation. We feel very comfortable with our current CTO of our restaurant business.

No, Jon. We (inaudible) have met Chas Wurster. He joined us in April, late April of this year, and so we've added Chas to our team. He came from Qualcomm, he's got deep experience in the mobility and cloud solutions. And so he's had experience doing start-ups, all the way through major organizations. And so he really knows how to scale software teams, and we're really confident that he's going to be impactful. As a matter of fact, we've seen the impact, the positive impact, of his contribution already.

Great. And just sticking with the board for a second. I guess, talking to a number of investors over the last week and, I guess, we were trying to just get an understanding, some kind of understanding, of what the fundamental disagreement was between the Co-Founder, Mr. Sammon, and your board member, Todd Tyler. Is there any more color you can add to that?

The 8-K says it all.

Okay. So your ERP implementation, can you give us any update on where that is?

Sure. Earlier this year, we actually went live with our -- the CRM module that we were using for Microsoft, and then we are now planning on for the ledger modules to be going live towards the end -- at the end of Q1, and then incorporating, integrating in for our service business fees especially to be able to really support the growth of Brink, integrating that in by the middle of next year in regards to connecting the CRM and the AX ledger modules.

Okay. And is there any more, I guess, detail on the ERP implementation in terms of how it could impact operating costs?

We -- that's what we continue on looking at from an organizational change management perspective by each area and by each department. And -- so there's things that we can actually even do, I think, beforehand. I would look at how our teams are set up. One of the things that we've looked at -- has to do with [what] the ERP implementation is, what are some of the processes that have been put in place for a while here that we can actually undo and help to kind of enable streamline, what we're doing is not just ERP implementation. So there's things that we're looking at, that would actually go into effect prior to go-live, which will start helping us out. And then in addition to that, we'll be able to look at additional cost savings that we can have post go-live.

Okay. That's helpful. I guess, turning to Brink for a second. Obviously, seen very good success and from everyone we've talked to, it's a clear industry leader. I guess -- could you talk a little bit about some of the goals that you've set for 2017 and 2018? What would be the kind of things that would have to happen for you to get to those goals at this point or either meet them, miss them or beat them? And then making it -- like a little -- breaking it down a little further, what are kind of some of the puts and takes on kind of the average restaurant -- average revenue per restaurant? I assume Tier 1s are coming in maybe a little lower, but you're also developing additional products so could you -- any help with that will be helpful.

Jon, the goals that we had for Brink that we've been articulating is that we wanted to end the year with roughly 5,000 restaurants. Where we sit today with nearly 3,700 makes that objective challenging to get to. But to put it into context, we had, as you know, we had Arby's and Smoothie King and a few other big accounts that joined the PAR family earlier this year, and -- so we spent a little bit of -- we had a little bit of a slowdown in Q3 as we prepared for deployments with those accounts. And we took a step back to do a big upgrade for our existing customers at the end of Q2, which had us spend more time focusing on them in Q3. That said, Q4 is stronger and -- but to get to the 5,000, it's not going to be achievable. We also said that we're -- the other goal for this year was, we were going to get to the Tier 1s. We've done that, it's increasing our bookings for -- in Q4 going into Q1, and the -- and then to the first half of 2018. So we're confident that we're going to continue the acceleration, that we've got good pipeline, we've got good backlog and that we're going to continue our objective to get to the 10,000 sites by the end of 2018, and that remains our focus and that is our objective. And then with regard to the average ASP for the restaurants, you're generally correct that big Tier 1s have buying power and we do anticipate that the MRR will come down for our base platform, our base solution that we offer. Offsetting -- actually, augmenting that -- is the -- will be the introduction of new modules that we'll bring to market. We'll be bringing them to market in the early parts of '18, with the uptake of those products within the year. So I expect they will start to see more of a positive impact of those modules later in the year. But I think, from the MRR perspective, we're going to see it come down to the 1 45, 1 50 range.

Okay. So that 20 million -- I mean, you talked about 10,000 sites -- 20 million, is it still like the laser goal you guys are honing it on?

It is our goal. So we -- yes, it still remains our goal. I think, our goal for the ARR was like 19 6 or something like that. But it remains -- when -- with the number of stores that remains in our line of sight. We got to get the stores in and implemented, early in the year to be able to achieve that. Again, our backlog in bookings looks good. We continue to have a product that the industry is demanding. We've got -- it's fully featured, we're doing a lot of innovation around the solution, and we're going to continue to march toward our goals.

Okay. One more real quick, and then I'll hand the line off. You talked earlier about a couple of Tier 1s that were either close to being signed or had been signed -- is there any -- Arby's is obviously great, and Smoothie King. Is there any other color you can share about the pipeline, I mean, it's strong but are close to negotiation or close to finishing up negotiations?

We are working with other large clients that are in different stages of negotiation. Review of our product, it runs the gamut. So there's a few that are in our pipeline that hopefully we'll be announcing in the next quarter or so.

Including some that are in pilot.

Okay, got it. That's helpful. Sorry, I did have one more. So you've talked several times about the Government business having strategic optionality, and I know you're kind of transforming it, but it seems like -- you were looking at kind of some of the Government service businesses that are trading in the 12 to 15x EBIT range. I know you don't have some of the IP that some of those companies have, but I guess -- what is holding back from kind of a divestiture of the Government business at this point? And is there any other color you can add on that?

Same as I said last quarter, we -- the board, it does take a look at it. We believe it's a valuable asset, it certainly generates consistent cash, and we've looked at it from quarter-to-quarter.

Have you looked at kind of some of the current metrics that some of these companies are having? I mean, they're very -- they are about 10-year all-time high multiples, I guess, if you're going to sell it, now might be the time. I guess, what is -- what would be holding you back?

Certainly, the decrease in revenue. Actually, like a hockey stick, although the revenue that is decreasing is the part that's not valuable, it's the pass-through revenue. Where we win a contract, we buy somebody else's product, and we forward deploy it. But it would be nice if we had an increasing hockey stick in both revenue and profit at the time that the multiples are high and we'll just continuously evaluate. It is a very valuable asset.

And our next question comes from Joe Vidich with Manalapan Oracle Capital Management.

Yes, I have a few follow-up questions on what those guys were asking. With regard to the Government business, I was just wondering if you had what you'd consider a base level going forward?

Base level in regards to...

Quarterly or annual run rate that you think is recurring with that business?

Well, to give you a little bit more color in regards to what we've seen over the past 3 quarters, right? So as we've reported in last 3 quarters, the revenue decrease in regards to the PMO. We are now to the point now from a lapping perspective, going forward, that will not be an impact prioritization at the same time, we've been seeing the ISR business continue to grow, continue to build the relationships within that space. And so that growth that will not have the offset that we've seen in regards to the PMO. So this is what we're kind of expecting to happen during the course of the year, and now it's a matter of, at the same time, we're able to do that without actually, materially impacting the actual margin contribution from that business, I think it's actually down about $300,000 year-over-year, with a decrease of I think roughly around $8 million in regards to -- or $5 million in regards to the revenue this quarter. So from a go-forward standpoint, we believe the revenue decrease is going to (inaudible). We're going to see the growth come back into that business with more value-added higher-margin. And (inaudible) these margins are not your margins, where from a Government standpoint your middle-single digits to your higher-single digits close to -- at some points, double-digits depending -- low double-digits, depending upon the way you are in some of these contracts. So we do expect to see some growth both from the top line and bottom line.

Okay, that's great. With regard to the Brink backlog of devices, your target is 10,000 install -- to be have 10,000 installed by the end of 2018. I was just wondering, are all those currently in backlog? Or what percentage of that is in backlog?

No. Not all of it is in backlog. We do have line of sight to -- between our current business and book business and expect the growth of our current customers, and then customers that we're working with. So we have line of sight that gets us towards that number, being able to -- that is our goal that we set for ourselves. Right now, we're sitting right around 3,700 sites, and we believe that we can -- we believe that we can make up the -- some of that distance, and it really depends on how well we can deploy our current customers in the first half of this year. We keep you apprised of all those sites that we deploy and the bookings and our pipeline.

As a matter of fact, I think -- I'm very partial to a metric as it combines the number of sites times the monthly recurring revenue, is the best metric, we may begin in 2018 reporting that way. We have plans, as Karen mentioned, to add the some features in our roadmap. And so I'm hoping that in 2018, we can begin reporting, not only the number of sites, but the annual recurring revenue.

Right. And you may have said this, but I think I might have missed this, how many SureCheck devices do you currently have deployed?

Currently, we have 18,000 SureCheck devices deployed in, I think, 27 countries.

And I believe you were saying -- what was the number you were giving for the number of devices you want to be deployed by 2020, was that the year?

Double that number, 36,000.

Our next question comes from Jonathan Reichek with Brasada Capital.

First, on Brink. Since you guys have the deceleration deployments in the third quarter, does that mean that -- should I think about fourth quarter maybe being the best quarter of the year for installs for you?

The fourth quarter is shaping up to be a good quarter. So we have initiated deployments with our Tier 1s and -- so we've initiated our deployments with our Tier 1s, we've had a pickup up with our existing accounts in the fourth quarter and bookings are strong. That would be a safe assumption.

Okay, okay. And then on 2018, so it sounds like you're going to have a record number of deployments or installs. Do you have -- I guess -- do you have enough people to [heal] that? Can you kind of talk about how you guys are handling that?

Yes, that's a great question. So execution is key for us. We have been building up both our internal teams and our partnerships to be able to deploy. Some of our -- deployments are handled differently by different customers, some of them execute themselves. Arby's, for example, will implement their own stores with their own people and then they've contracted out to do that, that work themselves. Others of our customers require PAR to do the installations and deployments, and then we leverage partners to be able to accommodate that. But execution is really critical, and it requires that our internal teams are -- that the portals are set up, in order to process all the orders that our organization is able to fulfill, our installation partners are ready to go. We've had some good practice with big accounts like Five Guys and the deployment of their 13,000 sites, we're probably 1,000 -- we've done about 1,000 of their sites. So we only have been able to scale up to be able to accommodate an accelerated deployment, but that is -- execution is key.

Okay. And then last question. Can you help me understand why a deceleration in deployments at Brink in the third quarter, you say it's because I think of new sales, but why are they related? I would think it's different people, development on each side?

There are -- 2 things happened. We brought on some new -- these new big customers, and when you bring them back on -- those expectations that are set earlier in the year, we've been working on these contracts for some time. And so expectations are set about when they're going to be ready to go, when we are going to be ready to go, what functionality they require in the software. And so the anticipation was that we were going to continue with the pilots and add sites on, and things happened. So we learned things through the pilots, which is exactly what you want to do, and sometimes there's a slowdown and in this case, there was in the third quarter. Compounding that, was a big release that we did in the late second quarter, it required a lot of focus as we upgraded all of our different customers, and we've got hundreds of different customers now. And so upgrading all of them and turning our attention to make sure that all of their functionality and their cloud solutions were operating well, it required our attention. And so you can't grow without having a happy base, and so we turned some of our attention to working to make sure that that base was happy. So it was a combination of those 2 things that temporarily decelerated our deployment and now, we're back on track.

Okay. So those issues are -- you're past that, it sounds like?

They are behind us.

And I'm showing no further questions at this time. I would like to turn the call back to Mr. Donald Foley for any closing remarks.

Now, I'd like to thank all of you for taking your valuable time to join us today.

Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program. You may all disconnect. Everyone, have a great day.