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What changed in PAR TECHNOLOGY CORP's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of PAR TECHNOLOGY CORP's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+293 added−320 removedSource: 10-K (2024-02-27) vs 10-K (2023-03-01)

Top changes in PAR TECHNOLOGY CORP's 2023 10-K

293 paragraphs added · 320 removed · 240 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

55 edited+12 added−12 removed27 unchanged
Biggest changeOur competitive advantages include: our unified experience product and service offerings, open integration platform, cloud delivery model based on modern architecture, enterprise grade solutions, purpose-built hardware, advanced development capabilities, extensive domain knowledge and expertise, excellent product reliability, a direct sales team, and responsive customer service and support.
Biggest changeWhile we believe our open integration platform, omnichannel cloud-based software and hardware solutions, with enterprise-grade products and purpose-built hardware, combined with our advanced development capabilities, extensive domain knowledge and expertise, excellent product reliability, direct sales team, and responsive customer service and support, are competitive advantages, the rapid and increased adoption of new technologies (including artificial intelligence), introduction of new product and service offerings, and aggressive pricing are among some of the factors and strategies that can affect our ability to successfully compete.
Our mission is to enable personalized experiences that connect people to the brands, meals, and moments they love; and, our strategy to achieve this mission is grounded in delivering a unified experience across our comprehensive suite of subscription services, hardware, and professional services that simplifies our customers' operations, elevates their customer engagement, and propels their continued success.
Our mission is to enable personalized experiences that connect people to the brands, meals, and moments they love; and our strategy to achieve this mission is grounded in delivering a unified experience across our comprehensive suite of subscription services, hardware, and professional services that simplifies our customers' operations, elevates their customer engagement, and drives their continued success.
Approximately 60% of our footprint is outside the continental U.S. with contracts in Europe, Middle East, Africa, Australia, and U.S. commonwealths and territories in the Pacific and Caribbean. PAR Government has strong and enduring relationships with a diverse set of customers throughout the DoD, IC, and other federal agencies.
Approximately 70% of our footprint is outside the continental U.S. with contracts in Europe, Middle East, Africa, Australia, and U.S. commonwealths and territories in the Pacific and Caribbean. PAR Government has strong and enduring relationships with a diverse set of customers throughout the DoD, IC, and other federal agencies.
Our SaaS solutions are extensible and built on open application programming interfaces (“API”) enabling integration by more than 400 integration partners, including leading industry brands, to extend the reach and capabilities of our SaaS solutions and those of our integration partners.
Our SaaS solutions are extensible and built on open application programming interfaces (“API”) enabling integration by more than 500 integration partners, including leading industry brands, to extend the reach and capabilities of our SaaS solutions and those of our integration partners.
In-Store Peripherals We partner with numerous vendors that offer in-store peripherals, including kitchen display systems, payment devices, cash drawers, and printers, allowing us to deliver a comprehensive and completely integrated hardware solution. 4 Table of Contents Professional services We provide a comprehensive portfolio of support services to our customers, including hardware repair, installation and implementation, training, and on-site and technical support.
We partner with numerous vendors that offer in-store peripherals, including kitchen display systems, payment devices, cash drawers, and printers, allowing us to deliver a comprehensive and completely integrated hardware solution. Professional services We provide a comprehensive portfolio of support services to our customers, including hardware repair, installation and implementation, training, and on-site and technical support. Hardware repair.
We are actively engaged in the development of applications that support teams with real-time, tactical edge (mobile) situational awareness and distributed communications needs. PAR's ISR group has a strong legacy in the advanced research, development, and productization of geospatial information assurance technology involving 6 Table of Contents steganography, steganography analysis, digital watermarking, and digital media forensics.
We are actively engaged in the development of applications that support teams with real-time, tactical edge (mobile) situational awareness and distributed communications needs. PAR's ISR group has a strong legacy in the advanced research, development, and productization of geospatial information assurance technology involving steganography, steganography analysis, digital watermarking, and digital media forensics.
Back Office , offering back-of-house operator solutions: Data Central, a back-office solution that leverages business intelligence and automation technologies to manage labor, food costs, and inventory, as well as perform enterprise reporting.
Back Office , offering back-of-house operator solutions: DATA CENTRAL, a back-office solution that leverages business intelligence and automation technologies to manage labor, food costs, and inventory, and perform enterprise reporting.
Currently we offer two types of software products. The geospatial visualization ("GV") image processing suite is used by the international defense and intelligence community to analyze still and video imagery. A second product line, Situation-X (“Sit-X”), provides cloud-native interconnectivity for mobile platform situational awareness solutions used by government and private organizations to manage rapid response teams or deployed field units.
Currently we offer three software products. The geospatial visualization ("GV") image processing suite is used by the international defense and intelligence community to analyze still and video imagery. A second product line, Situation-X (“Sit-X”), provides cloud-native interconnectivity for mobile platform situational awareness solutions used by government and private organizations to manage rapid response teams or deployed field units.
Our mission is to create an environment that reflects our values of speed, ownership, focus and winning togethe r where our employees thrive. Our strategy is to seek to hire the best talent, give them the 9 Table of Contents responsibility and authority they deserve, and let them make the decisions on how to best execute.
Our mission is to create an environment that reflects our values of speed, ownership, focus and winning togethe r where our employees thrive. Our strategy is to seek to hire the best talent, give them the responsibility and authority they deserve, and let them make the decisions on how to best execute.
Operator Solutions , offering front-of-house operator solutions: Brink POS, an open cloud, point-of-sale solution that provides operators with the tools to seamlessly integrate with multiple product offerings - including self-ordering kiosks, kitchen video systems, and enterprise reporting - through PAR's ecosystem of integration partners.
Operator Solutions , offering front-of-house operator solutions: BRINK POS, an open cloud, point-of-sale solution that provides operators with tools to seamlessly integrate with multiple product offerings - including kiosks, kitchen video systems, and enterprise reporting - through PAR's ecosystem of integration partners.
PAR hardware terminals - EverServ 600, Phase, and Helix - and tablets are durable and highly functioning, scalable, and easily integrated, offering customers competitive performance at a cost-conscious price.
PAR hardware terminals - PAR WAVE, EVERSERV 600, and PAR PHASE - and tablets are durable and highly functioning, scalable, and easily integrated, offering customers competitive performance at a cost-conscious price.
Licensable software products focus on serving analysts and operators who seek highly accurate and timely information with both temporal and geospatial context. Product utility spans the modern battlefield from rear echelon analyst cell to the field operations center to the mobile devices and displays carried by infantryman at the very forward edge of a battlespace.
Licensable software products focus on serving analysts and operators who seek highly accurate and timely information with both temporal and geospatial context. Product utility spans the modern battlefield from rear echelon analyst cell to the field operations 7 Table of Contents center to tactical mobile devices and displays carried by infantryman at the very forward edge of a battlespace.
Within our ISR contract portfolio we compete based on the technical talent and accomplishments of our development staff, approach to software development, and program management teams who have earned a reputation for rapid solutioning of leading edge software solutions.
Within our ISR contract portfolio we compete based on the technical talent and accomplishments of our development staff, approach to software development, and program management teams who have earned a reputation for rapid solutioning of leading edge software applications and platforms.
Data Central provides our customers with the necessary tools to achieve peak operational and financial efficiency; it serves as the central hub of restaurant intelligence by collecting information from POS, inventory, supply, payroll and accounting systems to provide actionable insights and a comprehensive view of a restaurant’s operations.
Data Central provides customers with the necessary tools to achieve peak operational and financial efficiency; it serves as the central hub of restaurant intelligence by collecting information from point-of-sale, inventory, supply, payroll and accounting systems to provide actionable insights and a comprehensive view of a restaurant’s operations.
We also rely on a combination of confidentiality and assignment-of-invention agreements with our employees and consultants, and enter into confidentiality and licensing agreements with our customers and other third parties with whom we have strategic 8 Table of Contents relationships.
We also rely on a combination of confidentiality and assignment-of-invention agreements with our employees and consultants, and enter into confidentiality and licensing agreements with our customers and other third parties with whom we have strategic relationships.
We believe our use and reliance on intellectual property laws and our agreements and licenses protect and maintain our rights in our intellectual property; however, there can be no assurance that our patents, trademarks, and other intellectual property rights will not be challenged, invalidated, or circumvented; that others will not assert intellectual property rights in technologies that are relevant to our business; or that our intellectual property rights will give us a competitive advantage.
We believe our use and reliance on intellectual property laws and our agreements and licenses 8 Table of Contents protect and maintain our rights in our intellectual property; however, there can be no assurance that our trademarks, copyrights, patents, and other intellectual property rights will not be challenged, invalidated, or circumvented; that others will not assert intellectual property rights in technologies that are relevant to our business; or that our intellectual property rights will give us a competitive advantage.
Understanding the “pulse” of our employees through engagement surveys is critical to inform our actions with respect to integrating areas of opportunity in our employee engagement, retention and total rewards programs.
Understanding 9 Table of Contents the “pulse” of our employees through engagement surveys is critical to inform our actions with respect to integrating areas of opportunity in our employee engagement, retention and total rewards programs.
For a discussion of risks associated with intellectual property, refer to the Risk Factor—" Assertions by third parties of infringement or other violation by us of their intellectual property rights could result in significant costs and substantially harm our business, financial conditions, results of operations and cash flows " in "Part I, Item 1A.
For a discussion of risks associated with intellectual property, refer to the Risk Factor—" Assertions by third parties of infringement or other violations by us of their intellectual property rights could result in significant costs and materially and adversely harm our business, financial conditions, results of operations and cash flows " in "Part I, Item 1A.
Most of our larger customers have several approved suppliers of software and hardware similar to one or more of our products.
Many of our larger customers have several approved suppliers of software and hardware similar to one or more of our products.
Our strong relationships and on-site presence with our customers enables PAR Government to develop substantive customer and technical domain knowledge, translate mission understanding into exemplary program execution, and create continued demand for PAR Government’s services. 7 Table of Contents Commercial Software PAR Government’s commercial software business draws on decades of research and development (“R&D”), image processing and geospatial information systems ("GIS") experience.
Our strong relationships and on-site presence with our customers aides our efforts to develop substantive customer and technical domain knowledge, translate mission understanding into exemplary program execution, and create continued demand for PAR Government’s services. Commercial Software PAR Government’s commercial software business draws on decades of research and development (“R&D”), image processing and geospatial information systems ("GIS") experience.
Our wireless headsets for drive-thru order-taking provide our customers with another means to deliver their products and serve their customers. The PAR G5 ® headsets provide clear audio, all-day battery life, and an ergonomic fit. PAR's drive-thru timer systems provide crew and managers near-real-time feedback to improve speed of service and meet performance targets.
Our wireless headsets for drive-thru order-taking provide our customers with another means to deliver their products and serve their customers. The PAR G5 ® headset 4 Table of Contents provides clear audio, all-day battery life, and an ergonomic fit. PAR's drive-thru timer systems provide crew and managers near-real-time feedback to improve speed of service and meet performance targets. In-Store Peripherals.
Our employee-first strategy is designed to provide a diverse, inclusive and safe environment where our employees enjoy coming to work each day to support our customers and grow our business. As of December 31, 2022, we had 1,719 full-time employees and 36 part-time employees.
Our employee-first strategy is designed to provide a diverse, inclusive and safe environment where our employees enjoy coming to work each day to support our customers and grow our business. As of December 31, 2023, we had 1,802 full-time employees and 39 part-time employees.
Our focus on retaining talent is rooted in our employee-first strategy and includes investments in employee engagement, diverse talent sourcing tools, talent management systems, and development. We continue to make appropriate adjustments to ensure competitive compensation, including the implementation of a pay transparency initiative to ensure equity and fairness.
Our focus on retaining talent is rooted in our employee-first strategy and includes investments in employee engagement, diverse talent sourcing tools, talent management systems, and development. We continue to make appropriate adjustments to ensure competitive compensation, including the implementation of a pay transparency initiative to ensure equity and fairness. Available Information Our website is located at https://partech.com .
Our ISR group members are: • experienced developers and subject-matter experts in the DoD full motion video; • developers of geospatial and imagery data management, visualization, and exploitation solutions; • designers and developers of very large-scale data science and multi-media analysis systems; • leading the development of technologies to train and test artificial intelligence systems; • designers of mobile computing applications for Android, iOS, and Windows; • architects and integrators of advanced C-sUAS systems-of-systems; • builders of solutions for privacy, compliance and governance for sensitive customer data; and • developers of geospatial information system solutions.
Our ISR group members are: • experienced developers and subject-matter experts in the DoD full motion video; • developers of geospatial and imagery data management, visualization, and exploitation solutions; • designers and developers of large-scale data science and multi-media analysis systems; • leading the development of technologies to train and test artificial intelligence systems; • designers of mobile, tactical situational awareness applications for Android, iOS, and Windows; • architects and integrators of advanced C-sUAS systems-of-systems; • builders of solutions for privacy, compliance and governance for sensitive customer data; and • experienced in the development of live, virtual, constructive training for tactical operations.
Risk Factors", which is incorporated herein by reference. Government Regulation We are subject to a variety of laws and regulations in the United States and other jurisdictions that involve matters central to the business of our Restaurant/Retail segment, including privacy, data security and personal information, content, data retention and deletion; relating to the formation, administration and performance of U.S.
Government Regulation We are subject to a variety of laws and regulations in the United States and other jurisdictions that involve matters central to the business of our Restaurant/Retail segment, including privacy, data security and personal information, content, data retention and deletion and our Government segment, including the formation, administration and performance of U.S.
We continuously strive to enhance and expand the unified experience to be able to provide full integration of data points that drive guest satisfaction and operational efficiencies for the restaurant enterprises across our offerings, which currently includes point-of-sale, loyalty, back office, digital ordering, delivery, and payments processing. 3 Table of Contents Products and Services Subscription services Our subscription services consist of software-as-a-service ("SaaS") solutions, related software support, and transaction-based payment processing services, and are grouped into three categories: Guest Engagement , offering customer facing solutions: Punchh, an enterprise-grade customer loyalty and engagement solution that enables our customers to deliver personalized promotions to their customers to increase customer lifetime value and same-store sales.
We continuously strive to enhance and expand our omnichannel solutions to provide full integration of data points that drive guest satisfaction and operational efficiencies for restaurant enterprises across our offerings. 3 Table of Contents Products and Services Subscription services Our subscription services consist of software-as-a-service ("SaaS") solutions, related software support, and transaction-based payment processing services, and are grouped into three categories: Guest Engagement , offering customer facing solutions: PUNCHH, an enterprise-grade customer loyalty and engagement solution that enables customers to deliver personalized promotions to their customers to increase customer lifetime value and same-store sales.
First, we are developing video streaming and replication technologies to enable unmanned aerial vehicle operators to share video outputs across their entire team in real time. Second, we are developing capabilities for tactical edge mobile device users to search and retrieve available satellite data from the growing commercial space-based remote sensing markets.
First, we are further developing video streaming and replication technologies to enable unmanned aerial vehicle operators to manage video outputs from multiple video feeds real time. Second, we are developing capabilities for tactical edge mobile device users to search and retrieve available satellite data from the growing commercial space-based remote sensing markets.
Available Information Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Exchange Act are available, free of charge, on our website at https://www.partech.com/investor-relations/ as soon as reasonably practicable after we electronically file such material with, or furnish to, the SEC.
Our Annual Reports on Form 10-K, Proxy Statements on Schedule 14A, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to such reports and statements filed or furnished by us pursuant to the Exchange Act are available, free of charge, on our website at https://partech.com/investor-relations/ as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.
PAR's ISR group also provides systems engineering support and software-based solutions to the DoD research and development laboratories, intelligence customers, and operational commands. Our internal expertise ranges from theoretical and experimental studies to development and fielding of operational capabilities.
Additionally, we provide integration, testing and operational readiness support in line with these competencies. PAR's ISR group also provides systems engineering support and software-based solutions to the DoD research and development laboratories, intelligence customers, and operational commands. Our internal expertise ranges from theoretical and experimental studies to development and fielding of operational capabilities.
Hardware repair. We offer depot repair, warranty, and overnight–Advanced Exchange –services from our offices in San Diego, California, Mississauga, Ontario, and our corporate headquarters in New Hartford, New York. Installation and implementation. We offer hardware installation and software implementation services. Training.
We offer depot repair, warranty, and overnight Advanced Exchange services from our offices in San Diego, California, Mississauga, Ontario, and our corporate headquarters in New Hartford, New York. Installation and implementation. We offer hardware installation and software implementation services. Training. We offer complete application training to customers’ in-store staff and provide technical training to our customers’ information systems personnel.
Our U.S. employee population consists of 28% ethnically diverse employees and 27% women. Globally, our workforce consists of 25% women. Employee Engagement and Talent Management/Development: Consistent with our employee-first strategy, we believe that our employees should have the opportunity to have a forum to communicate their feedback, concerns and suggestions. We conduct semi-annual employee net promoter engagement surveys.
Employee Engagement and Talent Management/Development: Consistent with our employee-first strategy, we believe that our employees should have the opportunity to have a forum to communicate their feedback, concerns and suggestions. We conduct semi-annual employee net promoter engagement surveys.
For additional information about government regulation and laws applicable to our business, refer to the risks described under “Risks Associated with the Regulation of our Business" and " Risks Associated with our Government Segment " in "Part I, Item 1A. Risk Factors".
For additional information about government regulation and laws applicable to our business, refer to the risks described under “Risks Related to Our Business and Operations" and " Risks Associated with our Government Segment " in "Part I, Item 1A. Risk Factors". Human Capital We prioritize finding, developing and rewarding extraordinary talent.
Talent Acquisition and Attrition : PAR works diligently to attract the best talent from a diverse range of sources to meet the current and future demands of our business.
We regularly assess our facilities to ensure compliance with our health and safety guidelines and regulatory requirements. Talent Acquisition and Attrition : PAR works diligently to attract the best talent from a diverse range of sources to meet the current and future demands of our business.
Many of the products and components used by us are at times subject to industry-wide shortage and significant pricing fluctuations; additionally, we have experienced a shortage in the number of suppliers and those suppliers' availability of certain products and components, for example, certain batteries, chipsets, or hardware devices, which can also result in significant price fluctuations.
We have experienced a shortage in the number of suppliers and those suppliers' availability of certain products and components, for example, certain batteries, chipsets, or hardware devices, which has, and can again, result in significant fluctuations in the price of products and components.
Our substantive, in-depth expertise in these domains enables us to provide government customers and industry partners with key technologies that support a variety of applications ranging from strategic enterprise systems to tactical in-the-field dismounted users. Additionally, we provide integration, testing and operational readiness support in line with these competencies.
Our core competencies reside in mobile geospatial applications; counter, small, unmanned aerial systems ("C-sUAS"); and data science offerings. Our substantive, in-depth expertise in these domains enables us to provide government customers and industry partners with key technologies that support a variety of applications ranging from strategic enterprise systems to tactical in-the-field dismounted users.
Item 1. BUSINESS The Company PAR Technology Corporation (NYSE: PAR), through its wholly owned subsidiaries – ParTech, Inc. (“ParTech”) and PAR Government Systems Corporation (“PAR Government”), operates in two distinct reporting segments, Restaurant/Retail and Government. Restaurant/Retail Segment We provide leading technology platforms to the restaurant and retail industries, with more than 500 customers and more than 70,000 active restaurant locations.
Item 1. BUSINESS The Company PAR Technology Corporation (NYSE: PAR), through its consolidated subsidiaries – ParTech, Inc. (“ParTech”) and PAR Government Systems Corporation (“PAR Government”), operates in two distinct reporting segments, Restaurant/Retail and Government. Restaurant/Retail Segment We provide leading omnichannel cloud-based software and hardware solutions to the restaurant and retail industries.
We offer complete application training to our customers’ in-store staff and provide technical training to our customers’ information systems personnel. On-site and technical support. We offer on-site support in the continental U.S. through our field tech service network. We offer 24-hour help desk support from our diagnostic service centers located in New Hartford, New York and Tampa, Florida.
On-site and technical support. We offer on-site support in the continental U.S. through our field tech service network, and 24-hour help desk support from our diagnostic service centers located in New Hartford, New York and Tampa, Florida. Outside of the continental U.S., we provide our professional services either directly or through authorized providers.
Punchh seamlessly integrates with our customers’ existing systems, providing AI-powered tools to deliver omnichannel loyalty experiences and campaigns to engage their customers, create real-time 360-degree insights and drive repeat purchases and higher average spend. MENU, an omnichannel digital ordering solution that offers our customers seamless order and pay and delivery solutions.
Punchh seamlessly integrates with our customers’ existing systems, providing AI-powered tools to deliver omnichannel loyalty experiences and campaigns to engage their customers, create real-time 360-degree insights and drive repeat purchases and higher average spend. MENU, an eCommerce platform for global restaurant brands, powering all digital customer touchpoints from mobile, web, kiosk to delivery marketplaces.
To mitigate these risks, we do from time to time increase our inventory levels of scarce products and components and adjust our pricing, while maintaining competitive pricing, to properly reflect market conditions. Research and Development Continuous product research, innovation, and product development are an integral part of our business.
To mitigate these risks, we have expanded our supplier network and, we have in the past, and may in the future, increase our inventory levels of scarce products and components and adjust our pricing to reflect market conditions. Research and Development Product research, innovation, and product development are an integral part of our business.
In addition, we obtain contracts by submitting unsolicited proposals against publicly identified government requirements which are selected on merit for further development and funding. Although well positioned in our markets, competition for government contracts is intense. Many of our competitors are large corporations that have substantially greater financial resources and broader capabilities in management technology.
Although well positioned in our markets, competition for government contracts is intense. Many of our competitors are large corporations that have substantially greater financial resources and broader capabilities in management technology.
Government contracts within our Government segment; and regulating the operations of our business, including employee matters, import and export controls, trade restrictions, anti-corruption and bribery. A failure, or alleged failure, by us to comply with any of these laws or regulations could have a material adverse effect on our business, financial condition, and results of operations.
A failure, or alleged failure, by us to comply with any of these laws or regulations could have a material adverse effect on our business, financial condition, and results of operations.
We have developed and nurtured long-term relationships with several of the largest brands in the Restaurant/Retail segment, two of which represent, in total, 22.0% of our total revenues. We have been an approved provider of restaurant technology systems and related support services to McDonald’s Corporation and their franchisees since 1980 and an approved supplier to Yum! Brands, Inc. since 1983.
We have longstanding relationships with several of the largest brands in the Restaurant/Retail segment, including as an approved provider of restaurant technology solutions and related support to McDonald's Corporation and its franchisees since 1980 and to Yum! Brands since 1983; these two brands represent 17% of our total revenue.
PAR Payment Services, our transaction-based payment processing services, and PAR Pay, a SaaS solution for payment devices, when combined, offer a comprehensive payment processing solution that allows our customers to accept a variety of methods of payment including debit and credit cards, mobile, and gift cards.
Combined, they offer a comprehensive payment processing solution that allows our customers to accept a variety of payments methods including debit and credit cards, near-field communication ("NFC") contactless, mobile devices, digital wallets and gift cards.
These enabling technologies are used to provide increased protection and security of geospatial data. PAR’s ISR group integrates and tests a broad range of government and industry research and development solutions. The group is expanding through the development and implementation of C-sUAS systems in support of force protection efforts.
These enabling 6 Table of Contents technologies are used to provide increased protection and security of geospatial data and are increasingly applied to the identification of fabricated deep-fake media. PAR’s ISR group integrates and tests a broad range of government and industry research and development solutions.
Talent assessments enable us to identify individuals that are ready for promotion and areas of development across our core competencies. In 2022, we invested in refining our talent management systems and in 2023 are expanding our talent development platform to increase our investment in the core competency development for all of our employees.
Talent assessments enable us to identify individuals that are ready for promotion and areas of development across our core competencies.
Additionally, we provide support services for satellite command and control, communication, and information technology ("IT") systems at several DoD facilities worldwide. The Government segment has three principal contract offerings: intelligence, surveillance, and reconnaissance solutions, mission systems operations and maintenance, and commercial software products for use in analytic and operational environments that leverage geospatial intelligence data.
The Government segment has three principal contract offerings: intelligence, surveillance, and reconnaissance solutions, mission systems operations and maintenance, and commercial software products for use in analytic and operational environments that leverage geospatial intelligence data. Intelligence, Surveillance, and Reconnaissance ("ISR") PAR's ISR group provides a variety of IC support services, systems integration, situational awareness solutions, and mission readiness support.
Furthermore, we expect that our industry will continue to attract new market entrants, including smaller emerging companies that could introduce new product and service offerings.
Additionally, we face competition from companies who have greater financial and technical resources, more relevant product and service offerings, and larger established customer bases. Furthermore, we expect that our industry will continue to attract new market entrants, including smaller emerging companies.
Additionally, we design, integrate, and operate antenna data collection solutions for experimentation, demonstration, and test support. We also provide technical engineering and analysis services to intelligence community customers, supporting development and deployment of advanced prototypes and quick reaction systems, including applications for high performance computing platforms (e.g., Cray exascale computers).
We also provide technical engineering and analysis services to intelligence community customers, supporting development and deployment of advanced prototypes and quick reaction systems, including applications for high performance computing platforms (e.g., Cray exascale computers). Mission Systems ("MS") PAR's MS group provides a wide range of technical and operational services to sustain mission critical components of the DoD's Information Network (“DoDIN”).
We are excited to have launched our first external DEI website and we continue to make investments in our DEI initiatives in 2023. To evaluate and assess the effectiveness of our DEI program, we track the ethnic and gender diversity of our U.S. employee population and gender diversity of our global employee population.
To evaluate and assess the effectiveness of our DEI program, we track the ethnic and gender diversity of our U.S. employee population and gender diversity of our global employee population. Our U.S. employee population consists of 27% ethnically diverse employees and 28% women. Globally, our workforce consists of 26% women.
We also engage sales representatives and resellers to sell our hardware products and certain of our subscription services to the independent restaurant category and non-food service markets, such as retail and convenience stores, amusement parks, movie theaters, cruise lines, spas, casinos, and other ticketing and entertainment venues.
Markets and Distribution We sell our products and services to enterprise restaurants, franchisees, and other restaurant outlets and to convenience stores and other retail customers, including amusement parks, movie theaters, cruise lines, spas, casinos, and other ticketing and entertainment venues through dedicated internal sales teams and channel partners.
We continued to make significant investments in our DEI program in 2022, including the expansion of our DEI team, launching Company wide DEI training, expanding our employee resource group footprint to foster an inclusive workplace that aligns with our values, and launching additional employee surveys to better understand the diversity of our employee population to inform our strategy.
We continued to make significant investments in our DEI program in 2023, including setting our first multi-year diversity representation goals, launching our educational “Celebrate You” speaker series, expanding our employee resource group footprint, and continuing to gather employee feedback via surveys to better understand the diversity and sense of inclusion of our employee population to inform our DEI strategy.
The SEC also maintains a website that contains our reports filed or furnished with the SEC. The address of the SEC website is https://www.sec.go v . The information posted on or accessible through our website is not incorporated into this Annual Report or in any other report or document we file with the SEC. 10 Table of Contents
Our Corporate Governance Guidelines, Board of Directors’ committee charters and Code of Conduct are also available, free of charge, at https://partech.com/investor-relations / . The information posted on or accessible through our website is not incorporated into this Annual Report or in any other report or document we file with the SEC.
Research and development expenses were $48.6 million, $34.6 million, and $19.3 million, for the years ended December 31, 2022, 2021, and 2020, respectively. Government Segment PAR’s Government segment provides technical expertise and development of advanced systems and software solutions for the U.S. Department of Defense ("DoD"), the intelligence community ("IC") and other federal agencies.
Government Segment PAR’s Government segment provides technical expertise and development of advanced systems and software solutions for the U.S. Department of Defense ("DoD"), the intelligence community ("IC") and other federal agencies. Additionally, we provide support services for satellite command and control, communication, and information technology ("IT") systems at several DoD facilities worldwide.
Customers include global geospatial software providers, NATO partners, public safety organizations, and select U.S. intelligence agencies. Markets and Competition PAR Government obtains contracts through a mix of competitive proposals and technical paper submissions in response to solicitations from government organizations and prime contractors.
Markets and Competition PAR Government obtains contracts through a mix of competitive proposals and technical paper submissions in response to solicitations from government organizations and prime contractors. In addition, we obtain contracts by submitting unsolicited proposals against publicly identified government requirements which are selected on merit for further development and funding.
Health and Safety: The health and safety of our employees in the workplace is of utmost importance to us. We regularly assess our facilities to ensure compliance with our health and safety guidelines and regulatory requirements.
In 2024 we will continue to invest in training and development tools and resources such as our career framework and PAR leadership academy for all of our employees. Health and Safety: The health and safety of our employees in the workplace is of utmost importance to us.
Removed
MENU is the most recent addition to PAR's unified experience offering; acquired as part of our acquisition of MENU Technologies A.G. ("MENU") in the third quarter of 2022 (the "MENU Acquisition").
Added
Our product and service offerings include point-of-sale, customer engagement and loyalty, digital ordering and delivery, operational intelligence technologies, payment processing, hardware, and related technologies, solutions, and services. Our omnichannel solutions are used by more than 700 restaurant customers and can be found in more than 70,000 active restaurant locations.
Removed
Outside of the continental U.S., we provide our professional services either directly or through authorized providers. Markets and Distribution Our customers are primarily enterprise restaurants, franchisees, and other restaurant outlets in the quick service, fast casual, and table service categories, located in the continental U.S. We sell our products and services through dedicated internal sales teams and channel partners.
Added
MENU provides restaurant brands with the tools they need to grow their digital business, manage orders from all channels and for all order types, orchestrate their delivery operations, and fully control their digital experience to retain a direct customer relationship.
Removed
While we believe we compete favorably, we expect competition in the restaurant and retail markets to continue, including aggressive pricing, increased introductions of new products and services, and technological advancements by competitors. We face competition from companies who have greater financial and technical resources, more relevant product and service offerings, and larger established customer bases.
Added
PAR PAYMENT SERVICES, our merchant services business that enables electronic payment and processing services for businesses of all sizes to accept electronic payments online or in-person. Par Pay is the front-end technology that reads payment cards and sends customer information to the merchant acquiring bank for processing.
Removed
We continuously evaluate customer needs and new technologies to enable us to develop innovative and relevant products, in addition to creating enhancements to our unified experience service and product offerings and existing products that improve and/or add to their functionality, performance, operation, and integration capabilities.
Added
Many of the products and components used by us have been, and may in the future be, subject to industry-wide shortage and significant pricing fluctuations.
Removed
Intelligence, Surveillance, and Reconnaissance ("ISR") PAR's ISR group provides a variety of intelligence analysis, systems integration, and situational awareness solutions. Our core competencies reside in mobile geospatial applications; counter, small, unmanned aircraft surveillance systems ("C-sUAS"); and data science offerings.
Added
We continuously evaluate customer needs and new technologies to enable us to develop innovative and relevant products and product enhancements. Research and development expenses were $58.4 million, $48.6 million, and $34.6 million, for the years ended December 31, 2023, 2022, and 2021, respectively.
Removed
Mission Systems ("MS") PAR's MS group provides a wide range of technical and operational services to sustain mission critical components of the DoD's Information Network (“DoDIN”).
Added
The group is expanding through the development and implementation of C-sUAS systems in support of force protection efforts. Additionally, we design, integrate, and operate antenna data collection solutions for experimentation, demonstration, and test support.
Removed
Cybersecurity Our cybersecurity program is designed to protect against unauthorized access to information, and includes encryption, data masking technology, data loss prevention technology, authentication technology, entitlement management, access control, anti-malware software, and transmission of data over private networks. PAR utilizes the Center for Internet Security (CIS) Critical Security Controls as a framework for managing its cybersecurity program.
Added
Customers include global geospatial software providers, NATO partners, public safety organizations, and select U.S. intelligence agencies. Third, we offer GVStreamer software which enables real-time routing of video streams from a single camera source to multiple consumption endpoints and includes video management capabilities.
Removed
The CIS framework outlines 18 critical control areas relating to organizational security and provides effective methodologies, guidelines and industry standard best practices to develop and manage a comprehensive cybersecurity program.
Added
Initiated to support livestreaming of unmanned aerial system (UAS) video to multiple end users (beyond a single control station), this capability also enables fixed video camera system relays and routing with minimized time delay for use in tactical applications. Finally, we are a certified reseller of Samsung mobile devices running their tactical edition (TE) operating system.
Removed
Additionally, we are certified by various international security certifications and standards and have adopted best practices from industry leading frameworks (in addition to the CIS framework) and standard bearers, such as the Payment Card Industry Data Security Standard, the California Consumer Privacy Act, and the General Data Protection Regulation.
Added
Risk Factors", which is incorporated herein by reference.
Removed
We also regularly obtain system and organization control (SOC) reports - SOC 1 and SOC 2 - for multiple products. Our technology systems are regularly reviewed and assessed.
Added
Government contracts; as well as U.S. and foreign laws and regulations that impact the operations of our business, including employee matters, import and export controls, trade restrictions, anti-corruption and bribery.
Removed
Our internal audit team conducts regularly scheduled audits of our IT and business systems; we routinely engage with a reputable, objective, and licensed auditor to comprehensively assess our controls, capabilities, and programs against stringent standards; we monitor our external exposure through a third-party service; and make changes and updates to our systems as we deem necessary.
Added
In 2023, we continued to invest in our annual talent roadmap for all employees, including expanding our annual 360 feedback experience to all full-time employees and facilitating an updated talent review of director level and above employees with our executive team to better understand the landscape of our talent globally.
Removed
All PAR employees are mandated to complete annual security awareness training and participate in additional security related training on a regular basis, and the audit committee of our board of directors is provided quarterly reports on PAR’s cybersecurity program. Human Capital We prioritize finding, developing and rewarding extraordinary talent.
Added
The SEC also maintains a website at http://www.sec.gov that contains reports, proxy statements and other information regarding SEC registrants, including PAR.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

83 edited+32 added−19 removed66 unchanged
Biggest changeFactors that could affect the price of PAR common stock include but are not necessarily limited to the following: • uncertainties, volatility, and economic disruption created by macroeconomic and geopolitical events and by the COVID-19 pandemic on our business, our customers, the industries in which we operate, and the global economy; • actual or anticipated fluctuations in our financial condition and results of operations; • the performance and prospects of major customers; • our quarterly or annual financial results or those of other companies operating in our industries; • the lack of earnings guidance; • investor perception of us and the industries in which we operate; • the contents of published research reports about us or the industries in which we operate or the failure of securities analysts to cover our common stock; • any increased indebtedness we may incur in the future; • actions by institutional shareholders; • operating and stock performance of other companies that investors deem comparable to us (and changes in their market valuations) and overall performance of the equity markets; • announcements by us or our competitors of significant contracts, acquisitions, dispositions, strategic relationships, or capital commitments; and • litigation and governmental investigations. 22 Table of Contents Our bylaws designate the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our shareholders, and the federal district courts as the exclusive forum for Securities Act claims, which could limit our shareholders’ ability to obtain what some shareholders believe to be a favorable judicial forum for disputes with us or our directors, officers, other employees, or agents.
Biggest changeA number of factors can impact the trading price of our common stock, including: • the impact of uncertainties, volatility, and economic disruption created by macroeconomic conditions and geopolitical events, including, inflation, recession, interest rate fluctuations, actual or anticipated military or political conflicts (including the Russian-Ukraine war, tensions with China and between China and Taiwan, the Israel-Hamas conflict and other hostilities in the Middle East) and global pandemics (such as COVID-19) or other public health crises, on our business, our customers, and the industries in which we operate; • actual or anticipated fluctuations in our financial condition and results of operations (including, shortfalls or changes in expectations about, our revenue, margins, earnings, Annualized Recurring Revenue (“ARR”), sales of our product and service offerings or other key performance metrics; • the performance and prospects of major customers; • our quarterly or annual financial results or those of other companies operating in our industries; • the lack of earnings guidance; 22 Table of Contents • investor perception of us and the industries in which we operate; • the contents of published research reports about us or the industries in which we operate or the failure of securities analysts to cover our common stock; • any increased indebtedness we may incur in the future; • actions by institutional shareholders; • operating and stock performance of other companies that investors deem comparable to us (and changes in their market valuations) and overall performance of the equity markets; • announcements by us or our competitors of significant contracts, acquisitions, dispositions, strategic relationships, or capital commitments; and • litigation and governmental investigations.
Acquisition transactions are subject to risks including: • the diversion of our management’s time and focus from operating PAR’s business; • difficulties in obtaining required regulatory or stakeholder approvals; • equity or debt financing transactions to finance an acquisition, including potential dilution from the issuance of our capital stock or the incurrence of additional debt or the failure to obtain satisfactory financing terms; • the failure of our due diligence to identify significant issues associated with or arising out of an acquisition transaction, including issues related to the acquisition target (such as quality of product or technology and financial reporting, accounting practices, and internal controls) or country specific laws and regulations; • our inability to fully realize the expected financial or strategic benefits of an acquisition transaction including within the timeframe we expected; • unforeseen costs, cost overruns, or unanticipated investments; • failure to successfully integrate and further develop the acquired business, product, or technology; • employee retention costs and expenses, including compensation and benefit costs and retention payments to executive officers and key employees; • difficulties coordinating and managing geographically separate organizations, and with foreign acquisitions, the need to integrate operations across different cultures and languages and to comply with country specific laws and regulations; • difficulties entering geographic markets or new market segments in which we have no or limited experience; • cybersecurity and data security and protection related considerations, controls and exposures; • inability to retain existing customers and suppliers on terms similar to, or better than, those in place with the acquired business; • assumed and unknown liabilities; and • failure to maintain our internal controls and systems.
Acquisition transactions are subject to risks including: • the diversion of our management’s time and focus from operating PAR’s business; • difficulties in obtaining required regulatory or stakeholder approvals; • equity or debt financing transactions to finance an acquisition, including potential dilution from the issuance of our capital stock or the incurrence of additional debt or the failure to obtain satisfactory financing terms; • the failure of our due diligence to identify significant issues associated with or arising out of an acquisition transaction, including issues related to the acquisition target (such as quality of product or technology and financial reporting, accounting practices, and internal controls) or country specific laws and regulations; • our inability to fully realize the expected financial or strategic benefits of an acquisition transaction including within the timeframe we expected; • unforeseen costs, cost overruns, or unanticipated investments; • failure to successfully integrate and further develop the acquired business, product, or technology; • employee retention costs and expenses, including compensation and benefit costs and retention payments to executive officers and key employees; • difficulties coordinating and managing geographically separate organizations, and with foreign acquisitions, the need to integrate operations across different cultures and languages and to comply with country specific laws and regulations; • difficulties entering geographic markets or new market segments in which we have no or limited experience; • cybersecurity and data security and protection related considerations, controls and exposures; • inability to retain customers and suppliers of the acquired business, and on terms similar to, or better than, those in place with the acquired business; • assumed and unknown liabilities; and • failure to maintain our internal controls and systems.
Most of our suppliers of products and components are located internationally, including in South Korea, China, and Taiwan, and are susceptible to hostilities in those regions and increased trade barriers and tariffs, which could increase the cost or availability of certain products and components to us that we may not be able to offset.
Most of our suppliers of products and components are located internationally, including in South Korea, China, and Taiwan, and are susceptible to hostilities in those regions and trade barriers and tariffs, which could increase the cost or availability of certain products and components to us that we may not be able to offset.
Our ability to deliver our subscription services in a timely, secure, and reliable manner to our customers depends on the protection of the information we store with these third-party cloud providers, as well as the maintenance of third-party network infrastructures.
Our ability to deliver our subscription services in a timely, secure, and reliable manner to our customers depends on the protection of the information we store with our third-party cloud providers, as well as the maintenance of third-party network infrastructures.
The GDPR imposes substantial fines for breaches of data protection requirements, which can be up to four percent of annual worldwide revenues or 20 million Euros, whichever is greater. • various state data privacy and data protection laws, including the California Consumer Privacy Act (CCPA), as amended by the California Privacy Rights Act (CPRA), the Illinois Biometric Information Privacy Act (BIPA), the Virginia Consumer Data Protection Act, the Colorado Privacy Act, the Utah Consumer Privacy Act, Connecticut’s Act Concerning Personal Information Privacy and Online Monitoring, the New York SHIELD Act, and the regulations implementing these laws, establish data privacy rights to their respective residents (including in California, where residents have a private right of action for violations of the CCPA and CPRA) and regulate how we may collect, use, process and store personal data.
The GDPR and the UK GDPR impose substantial fines for breaches of data protection requirements, which can be up to four percent of annual worldwide revenues or 20 million Euros, whichever is greater. • various state data privacy and data protection laws, including the California Consumer Privacy Act ("CCPA"), as amended by the California Privacy Rights Act ("CPRA"), the Illinois Biometric Information Privacy Act ("BIPA"), the Virginia Consumer Data Protection Act, the Colorado Privacy Act, the Utah Consumer Privacy Act, Connecticut’s Act Concerning Personal Information Privacy and Online Monitoring, the New York SHIELD Act, and the regulations implementing these laws, establish data privacy rights to their respective residents (including in California, where residents have a private right of action for violations of the CCPA and CPRA) and regulate how we may collect, use, process and store personal data.
For example, our certificate of incorporation and bylaws, collectively: • authorize the issuance of undesignated preferred stock that could be issued by our board of directors to thwart a takeover attempt; • provide that vacancies on our board of directors, including vacancies resulting from an enlargement of our board of directors, may be filled only by a majority vote of directors then in office; • permits only the board of directors, or the chairman of the board of directors or the president pursuant to a resolution approved by a majority of the then authorized number of our directors to call special meetings of shareholders; • prohibit shareholder action by written consent except by unanimous written consent of all shareholders; and • establish advance notice requirements for nominations of candidates for elections as directors or to bring other business before an annual meeting of our shareholders.
For example, our certificate of incorporation and bylaws, collectively: • authorize the issuance of undesignated preferred stock that could be issued by our board of directors to thwart a takeover attempt; • provide that vacancies on our board of directors, including vacancies resulting from an enlargement of our board of directors, may be filled only by a majority vote of directors then in office; • permits only the board of directors, or the chairman of the board of directors or the president pursuant to a resolution approved by a majority of the then authorized number of our directors to call special meetings of shareholders; • prohibit shareholder action by written consent except by unanimous written consent of all shareholders; and 23 Table of Contents • establish advance notice requirements for nominations of candidates for elections as directors or to bring other business before an annual meeting of our shareholders.
These laws and regulations are evolving and the application, interpretation, and enforcement of these laws and regulations are often uncertain; nevertheless, our failure or perceived failure to adequately address data privacy and data protection concerns, or to comply with applicable laws and regulations could damage our reputation, discourage current or potential customers from using our products and services, and result in costly governmental investigations, enforcement actions or litigations, breach of contract claims, indemnity obligations, additional insurance costs, complaints by private individuals, and/or the payment of penalties to consumers or governmental entities, any one or all of which could have a material and adverse effect our business, financial condition, results of operations and cash flows.
These laws and regulations are evolving and the application, interpretation, and enforcement of these laws and regulations are often uncertain; nevertheless, our failure or perceived failure to adequately address data privacy and data protection concerns, or to comply with applicable laws and regulations could damage our reputation, discourage current or potential customers from using our products and services, and result in costly governmental investigations, enforcement actions or litigations, breach of contract claims, indemnity obligations, additional insurance costs, complaints by private individuals, and/or the payment of penalties to consumers or governmental entities, which could have a material and adverse effect our business, financial condition, results of operations and cash flows.
Moreover, many positions in our Government segment require security clearances, which can be difficult and time-consuming to obtain, resulting in increased competition for such uniquely qualified individuals, and could significantly delay or prevent our Government segment from achieving its business and/or development objectives, and could materially harm our Government business.
Moreover, many positions in our Government segment require security clearances, which can be difficult and time-consuming to obtain, resulting in increased competition for these uniquely qualified individuals, and could significantly delay or prevent our Government segment from achieving its business and/or development objectives, and could materially harm our Government business.
Further, in some instances, we are dependent on sole-source suppliers for certain of our products and components, which may subject us to other significant risks, including higher prices, reduced control over product or component delivery schedules, or inadequate inventory.
Further, in some instances, we are dependent on single-source suppliers for certain of our products and components, which may subject us to other significant risks, including higher prices, reduced control over product or component delivery schedules, or inadequate inventory.
Future sales of our common stock or other securities could depress the price of our common stock and could result in dilution to our existing shareholders.
Future sales of our common stock or other securities could depress the price of our common stock and could result in dilution to our shareholders.
We face extensive competition in our markets, and our failure to compete effectively could result in price reductions and/or decreased demand for our products and services, which could materially and adversely affect our ability to achieve and sustain profitability and harm our business, financial condition, and results of operations.
Risks Related to Our Business and Operations We face extensive competition in our markets, and our failure to compete effectively could result in decreased demand for our products and services and/or price reductions, which could materially and adversely affect our ability to achieve and sustain profitability and harm our business, financial condition, and results of operations.
If we fail to realize expected benefits or synergies from our acquisitions, such as cost-savings and earnings accretion, or if we decrease our liquidity by using a significant portion of our available cash to finance acquisitions, incur additional indebtedness or issue additional equity securities to finance acquisitions or incur or assume unanticipated liabilities, losses or costs associated with our acquisitions, our business, financial condition, results of operations, and cash flows could be materially and adversely affected.
If we fail to realize expected benefits or synergies from our acquisitions, such as cost-savings and earnings accretion, or if we decrease our liquidity by using a significant portion of our available cash to finance acquisitions, incur additional indebtedness or issue additional equity securities to finance acquisitions or incur or assume 13 Table of Contents unanticipated liabilities, losses or costs associated with our acquisitions, our business, financial condition, results of operations, and cash flows could be materially and adversely affected.
Item 1A. RISK FACTORS The following risk factors could have a material adverse effect on our business, financial condition, results of operations, cash flows and stock price, and could cause our future results to be materially different than we currently anticipate. These risk factors should be read in conjunction with "Part II, Item 7.
Item 1A. RISK FACTORS The following risk factors could have a material adverse effect on our business, results of operations, financial condition, cash flows and stock price, and could cause our future results to be materially different than we currently anticipate. These risk factors should be read in conjunction with “Part I, Item I, Business,” "Part II, Item 7.
Furthermore, certain of our suppliers could decide to discontinue business with us or limit the allocation of products and components to us, which could result in our inability to fill our supply needs, jeopardizing our ability to fulfill our 13 Table of Contents contractual obligations, which could in turn, result in a decrease in sales and cash flows, contract penalties or terminations, and damage to customer relationships and our reputation.
Furthermore, certain of our suppliers could decide to discontinue business with us or limit the allocation of products and components to us, which could result in our inability to fill our supply needs, jeopardizing our ability to fulfill our contractual obligations, which could in turn, result in a decrease in sales and cash flows, contract penalties or terminations, and damage to customer relationships and our reputation.
We have and likely will in the future issue and sell shares of common stock or other securities to raise capital or issue securities for other purposes, including in connection with acquisitions of other businesses or other strategic transactions.
We have and likely will in the future issue and sell shares of common stock or other securities to raise capital or issue securities for a variety of purposes, including in connection with acquisitions of other businesses or other strategic transactions.
Despite testing by us, our products or product updates may contain coding, configuration or manufacturing errors that can negatively impact their functionality, performance, operation, and integration capabilities, and expose us to product liability, performance issues, warranty claims, and harm to our reputation, which could adversely affect our business, financial condition, results of operations, and cash flows.
Our products or product updates may contain coding, configuration or manufacturing errors that can negatively impact their functionality, performance, operation, and integration capabilities, and expose us to product liability, performance issues, warranty claims, and harm to our reputation, which could adversely affect our business, financial condition, results of operations, and cash flows.
The extent, duration, and consequences of the turbulent U.S. and global economic conditions and geopolitical tensions and events are uncertain and could exacerbate other risk factors that we identify in this Annual Report.
The extent, duration, and actual consequences of U.S. and global economic conditions and geopolitical tensions and events are uncertain and could exacerbate other risk factors that we identify in this Annual Report.
Such events have caused, and in the future could result in, the disruption of access to or the operation of our cloud applications and information technology systems or the servers, cloud computing platforms and cloud applications of our third-party providers.
Such events have caused, and in the future could result in, the disruption of access to or the interruption of the operation of our cloud applications and information technology systems, or the cloud computing platforms and cloud applications of our third-party providers.
Government priorities, including “insourcing” of previously contracted support services, and the realignment of funds to other non-defense-related programs may reduce the amount of funds available to defense-related and other programs in our core service areas. Our Government segment is subject to reviews, audits, and cost adjustments by the U.S.
A realignment of funds with changed U.S. Government priorities, including “insourcing” of previously contracted support services, and the realignment of funds to other non-defense-related programs may reduce the amount of funds available to defense-related and other programs in our core service areas. Our Government segment is subject to reviews, audits, and cost adjustments by the U.S.
Global privacy legislation, enforcement, and policy activity are rapidly expanding and creating a complex data privacy and data protection compliance environment and the potential for significant liability in the event of a data breach.
Global privacy legislation, enforcement, and policy activity are rapidly expanding and creating a complex data privacy and data protection compliance environment and the potential for significant liability in the event of a data incident.
We believe that our products do not infringe the intellectual property rights of third parties; however, we cannot assure that third parties will not assert infringement or misappropriation claims against us with respect to our current or future products, or that any such assertions will not require us to enter into royalty arrangements or settlement agreements, or result in costly litigation or in our being unable to use certain intellectual property.
We believe that our products and services do not infringe the intellectual property rights of third parties; however, we cannot guarantee that third parties will not assert infringement or misappropriation claims against us with respect to our current or future products and services, or that any such assertions will not require us to enter into royalty arrangements or settlement agreements, or result in costly litigation or in our being unable to use certain intellectual property.
Our future success depends on our ability to anticipate and identify changes in customer needs and/or relevant technologies, quickly respond to customer requirements, and rapidly and effectively introduce new and innovative products, features, and functions, while maintaining the integrity, quality, and competitiveness of our existing products.
Our future success depends on our ability to anticipate and identify changes in customer needs and/or relevant 10 Table of Contents technologies, quickly respond to customer requirements, and rapidly and effectively introduce new and innovative products, features, and functions, while maintaining the integrity, quality, and competitiveness of our existing products.
If we fail in these efforts, our business, financial condition, and results of operations could suffer, and our ability to achieve and sustain profitability adversely impacted. 16 Table of Contents Our Government segment has been focused on niche offerings reflecting its expertise, primarily in the areas of ISR, systems engineering and evaluation, satellite and telecommunications services, and management technology/systems services.
If we fail in these efforts, our business, financial condition, and results of operations could suffer, and our ability to achieve and sustain profitability could be adversely impacted. Our Government segment has been focused on niche offerings reflecting its expertise, primarily in the areas of ISR, systems engineering and evaluation, satellite and telecommunications services, and management technology/systems services.
For the year ended December 31, 2022, total consolidated revenues of 26% were derived from contracts to provide technical expertise to government organizations and prime contractors. In any given year, the majority of our government contracting activity is associated with the DoD. Contracts with the U.S.
For the year ended December 31, 2023, total consolidated revenues of 33% were derived from contracts to provide technical expertise to government organizations and prime contractors. In any given year, the majority of our government contracting activity is associated with the DoD. Contracts with the U.S.
For the years ended December 31, 2022, 2021, and 2020, 5.5%, 7.3%, and 8.5%, respectively, of our total consolidated revenues were derived from sales outside of the United States.
For the years ended December 31, 2023, 2022, and 2021, 5.7%, 5.5%, and 7.3%, respectively, of our total consolidated revenues were derived from sales outside of the United States.
Furthermore, the implementation processes create change management risks that require effective internal controls to mitigate. Our failure to maintain an effective internal control environment could have a material adverse effect on our ability to accurately and timely report our financial results.
Furthermore, the implementation processes of these new systems may create change management risks that require effective internal controls to mitigate. Our failure to maintain an effective internal control environment could have a material adverse effect on our ability to accurately and timely report our financial results.
In addition, our business is exposed to health epidemics and pandemics (like the COVID-19 pandemic), war, terrorism, civil insurrection or social unrest, and other significant business interruptions that could lead to disruption, instability and volatility in the global 18 Table of Contents economy and negatively impact us, and our suppliers, partners, and customers.
In addition, our business is exposed to pandemics (like the COVID-19 pandemic), war, terrorism, civil insurrection or social unrest, and other significant business interruptions that could lead to disruption, instability and volatility in the global economy and negatively impact us, our suppliers, partners, and customers.
If our operating subsidiaries are unable to generate sufficient cash flow from operations to service our debt under the Senior Notes, we may be required to adopt one or more alternatives to secure cash flow, such as selling assets or obtaining additional equity capital on terms that may be onerous or highly dilutive.
If our operating subsidiaries are unable to generate sufficient cash flow from operations to service our debt under the Senior Notes, we may be required to adopt one or more alternatives to secure cash flow, such as selling assets or obtaining additional capital; any sale of assets or transaction to raise capital could be on terms that may be onerous or highly dilutive.
The loss of one of these customer's purchases of hardware and professional services, or a significant reduction, delay, or 12 Table of Contents cancellation of purchases of hardware and professional services by one of these customers, could materially and adversely affect our business, results of operations, and cash flows.
The loss of one of these customers’ purchases of hardware and professional services, or a significant reduction, delay, or cancellation of purchases of hardware and professional services by one of these customers, could materially and adversely affect our business, results of operations, and cash flows.
We cannot assure that we will be successful in achieving or sustaining profitability in the future, among other things: • our investments in the development of new products and new features for our existing products, may require more investment than planned or our new products or new features may not achieve the expected commercial success and generate additional revenue or advance the growth of our business; and • we may not be able to control expenses at the levels planned due to internal and external factors, such as a recession or slowed economic growth, inflationary pressures, and geopolitical events, many of which are beyond our control.
We cannot assure that we will be successful in achieving or sustaining profitability in the future, among other things: • our investments in new products and new features for our existing products, may require more investment than planned or our new products or new features may not achieve the expected commercial success and generate additional revenue or advance the growth of our business; • we may not realize the anticipated revenue contributions or operational synergies of our acquired businesses or achieve our targeted growth rates or improve our market share; and • we may not be able to control expenses at the levels planned due to internal and external factors, such as a recession or slowed economic growth, inflationary pressures, and geopolitical events, many of which are beyond our control.
The markets for our subscription services and hardware products are characterized by rapid technological advances, intense competition among existing and emerging competitors, fluid and evolving industry practices, disruptive technology developments, and frequent new product introductions, and any one of these factors could create downward pressure on pricing and gross margins and could adversely affect sales to our existing customers, as well as our ability to attract and sell to new customers.
The markets for our subscription services and hardware products are characterized by rapid technological advances, intense competition among existing and emerging competitors, fluid and evolving industry practices, disruptive technology developments (including artificial intelligence), and frequent new product introductions; any one of these factors, including that one or more of our competitors may successfully use and deploy products incorporating artificial intelligence, could create downward pressure on pricing and gross margins and could adversely affect sales to our existing customers, as well as our ability to attract and sell to new customers.
Our information technology systems or those of our service providers could be subject to cyberattacks or other security incidents, which could result in operational disruptions, costly governmental investigations or litigation and other adverse consequences that could have a material adverse effect on our business, financial condition, results of operations and cash flows .
Risks Related to Cyber Security, Data Privacy, and Intellectual Property Our cloud applications and information technology systems or those of our service providers could be subject to cyberattacks or other security incidents, which could result in operational disruptions, costly governmental investigations or litigation and other adverse consequences that could have a material adverse effect on our business, financial condition, results of operations and cash flows .
There are risks related to our information technology systems, which could have a material adverse effect on our business, financial condition, results of operations, and cash flows .
Any of these events could have a material adverse effect on our business, financial condition, results of operations, and cash flows. 16 Table of Contents There are risks related to our information technology systems, which could have a material adverse effect on our business, financial condition, results of operations, and cash flows .
Bribery Act and other anti-corruption regulations, and other regulatory or contractual limitations on our ability to sell our products and services in certain foreign markets, and the risks and costs of non-compliance with such laws and regulations, including fines, penalties, criminal sanctions against us, our officers or employees, prohibitions on the conduct of our business, and damage to our reputation; • import and export license requirements, tariffs, trade agreements, taxes and other trade barriers and trade protection measures; • increased risks of unfair or corrupt business practices in certain geographies and of improper or fraudulent sales arrangements that may impact financial results and result in restatements of financial statements and irregularities in financial statements; • reduced protection of our intellectual property rights in certain countries and practical difficulties and costs of enforcing those rights abroad; • difficulties in managing international employees and exposure to different employment practices and labor laws; • compliance with the laws of numerous foreign taxing jurisdictions and overlapping of different tax regimes; • sales and customer service challenges associated with operating in different countries; • difficulties in receiving payments from different geographies, including difficulties associated with currency fluctuations, payment cycles, transfer of funds, or collecting accounts receivable; and • increased management, travel, infrastructure, and legal compliance costs associated with having international operations.
Bribery Act and other anti-corruption regulations, and other regulatory or contractual limitations on our ability to sell our products and services in certain foreign markets, and the risks and costs of non-compliance with such laws and regulations, including fines, penalties, criminal sanctions against us, our officers or employees, prohibitions on the conduct of our business, and damage to our reputation; • compliance by international employees with accounting practices generally accepted in the United States, including adherence to our accounting policies and internal controls; • increased financial accounting and reporting burdens and complexities; • government sanctions that may interfere with our ability to sell into certain countries; • import and export license requirements, tariffs, trade agreements, taxes and other trade barriers and trade protection measures; • increased risks of unfair or corrupt business practices in certain geographies and of improper or fraudulent sales arrangements that may impact financial results and result in restatements of financial statements and irregularities in financial statements; • reduced protection of our intellectual property rights in certain countries and practical difficulties and costs of enforcing those rights abroad; • difficulties in managing international employees and exposure to different employment practices and local labor conditions and regulations, including labor issues faced by suppliers or immigration and labor laws which may adversely impact our access to technical and professional talent; • compliance with the laws of numerous foreign taxing jurisdictions and overlapping of different tax regimes; • sales and customer service challenges associated with operating in different countries; • difficulties in receiving payments from different geographies, including difficulties associated with currency fluctuations, payment cycles, transfer of funds, or collecting accounts receivable; and • increased management, travel, infrastructure, and legal compliance costs associated with having international operations.
In 2022, we began the implementation of new enterprise performance management and equity administration systems and the process of combining our customer relationship management (CRM) and enterprise resource planning (ERP) systems onto single pre-existing CRM and ERP systems, all of which are intended to improve the efficiency and effectiveness of the Company’s operations by streamlining information flow.
We are in the process of implementing new enterprise performance management and equity administration systems and combining our customer relationship management (CRM) and enterprise resource planning (ERP) systems into a single pre-existing CRM and ERP system, all of which are intended to improve the efficiency and effectiveness of our operations by streamlining information flow.
A sustained loss of the software development services provided by international employees and third-party consultants could negatively impact our software development efforts, adversely affect our competitive position, harm our reputation, impede our ability to achieve and maintain profitability, and negatively impact our business, financial condition, and results of operations.
A sustained loss of the software development services provided by international employees and third-party consultants could negatively impact our software development efforts, adversely affect our competitive position, harm our reputation, impede our ability to achieve and maintain profitability, and negatively impact our business, financial condition, and results of operations. 14 Table of Contents Natural disasters, pandemics, or other natural or manmade disasters or outbreaks could negatively impact our business and operations.
A material failure or disruption of our cloud applications or information technology systems or those of our third-party providers could result in operational disruptions, unauthorized access or misappropriation of information, interruption of systems availability or denial of access to applications or information required by our customers to conduct their businesses, which in turn could result in costly governmental investigations and litigation, breach of contract claims, indemnity obligations, and reputational damage, which could have a material adverse effect on our business, financial condition, results of operations, and cash flows.
A material failure or disruption in our operations due to such an attack could result in unauthorized access, data loss, misappropriation of information, interruption of systems availability or denial of access to applications or information required by our customers to conduct their businesses, which in turn could result in costly governmental investigations and litigation, breach of contract claims, indemnity obligations, and reputational damage, which could have a material adverse effect on our business, financial condition, results of operations, and cash flows.
Revenues from our Restaurant/Retail segment constituted 73.7% of our total consolidated revenues for the year ended December 31, 2022. Aggregate sales of primarily hardware and professional services to the two customers and their respective franchisees constituted 22.0% of our consolidated revenues for the year ended December 31, 2022.
Revenues from our Restaurant/Retail segment constituted 67% of our total consolidated revenues for the year ended December 31, 2023. Aggregate sales of primarily hardware and professional services to the two customers and their respective franchisees constituted 17% of our consolidated revenues for the year ended December 31, 2023.
Moreover, these provisions may inhibit increases in the market price of our common stock that may result from takeover attempts or speculation.
Moreover, these provisions may inhibit increases in the market price of our common stock that may result from takeover attempts or speculation. Item 1B. UNRESOLVED STAFF COMMENTS None.
As of December 31, 2022, we had $398.8 million of aggregate principal amount outstanding under the 4.500% Convertible Senior Notes due 2024 (the “2024 Notes”), 2.875% Convertible Senior Notes due 2026 (the “2026 Notes”), and the 1.50% Convertible Senior Notes due 2027 (the “2027 Notes”, and together with the 2024 Notes and 2026 Notes, the “Senior Notes”).
As of December 31, 2023, we had $385.0 million of aggregate principal amount outstanding under our 2.875% Convertible Senior Notes due 2026 (the “2026 Notes”) and 1.50% Convertible Senior Notes due 2027 (the “2027 Notes”, and together with the 2026 Notes, the “Senior Notes”).
Our goodwill was approximately $486.8 million at December 31, 2022 and our intangibles were $111.1 million at December 31, 2022. Identifiable intangible assets are primarily a result of business acquisitions and internally developed capitalized software.
Our goodwill was approximately $489.7 million at December 31, 2023 and our intangibles were $94.9 million at December 31, 2023. Identifiable intangible assets are primarily a result of business acquisitions and internally developed capitalized software.
For example, • the European Union’s General Data Protection Regulation (GDPR) imposes requirements relating to the purpose for the processing of personal data, the information provided to individuals regarding the processing of their personal data, the security, confidentiality, minimization, and retention of personal data, notifications in the event of personal data breaches and the use of third-party processors.
For example: • the GDPR and the United Kingdom’s Data Protection Act 2018 ("UK-GDPR"), impose requirements relating to the processing of personal data, the information provided to individuals regarding the processing of their personal data, the security, confidentiality, minimization, and retention of personal data, notifications in the event of personal data breaches and the use of third-party processors.
If the manner and timing of how we fix identified security defects and vulnerabilities to our subscription services is wrong or the manner and timing of how our third-party cloud providers or third-party network providers fix defects and vulnerabilities in their systems is wrong, or our customers do not implement or timely implement security updates or version upgrades provided by us or other third-party providers, then the information technology systems of our customers may be left vulnerable to delays or disruptions of access to or the operation of our subscription services or third-party providers’ software and systems.
If the manner and timing of how we fix identified security defects and vulnerabilities to our cloud applications and information technology systems is wrong or the manner and timing of how our third-party service providers/integrators, or third-party network providers fix defects and vulnerabilities in their cloud applications and information technology systems is wrong, or our customers do not implement or timely implement security updates or version upgrades provided by us or our third-party service 15 Table of Contents providers\integrators, then our and our third-party service providers\integrators cloud applications and information technology systems, and the information technology systems of our customers may be left vulnerable to delays and disruptions to access, which may result in our customer’s being unable to conduct their businesses.
Despite our cybersecurity program and controls and other security measures designed and executed to detect and prevent unauthorized access and usage, our cloud applications, our servers and other information technology systems, and the cloud computing platforms on which our cloud applications and data are stored or processed, are vulnerable to cyber-attacks, including computer viruses, distributed denial of services attacks, malware, social engineering, and other means used to obtain unauthorized access by malicious actors, including nation-states and their agents.
Despite our cybersecurity program and the technical and organizational security measures we use to detect and prevent unauthorized access and usage, our cloud applications and information technology systems, and the third-party cloud computing platforms on which our cloud applications and data are stored or processed, are vulnerable to cyber-attacks, including computer viruses, distributed denial of services attacks, malware, social engineering, credential-based attacks, supply chain attacks and other attacks which may result in unauthorized access by malicious actors, including nation-states and their agents.
Unchecked security defects or vulnerabilities, whether caused by malicious actors or otherwise, may result in a material failure of our subscription services, substantial service disruptions, unauthorized access or denial of access or misappropriation of information, which in turn could result in breach of contract claims, indemnity obligations, governmental investigations and penalties, or reputational damage, any one of which could have a material and adverse effect on our business, financial condition, results of operations and cash flows.
Unchecked security defects or vulnerabilities, may result in a material failure of our or our third-party providers\integrators cloud applications and information technology systems, substantial service disruptions, unauthorized access or denial of access, data loss or misappropriation of information, which in turn could result in breach of contract claims, indemnity obligations, governmental investigations and penalties, and reputational damage, which could have a material and adverse effect on our business, financial condition, results of operations and cash flows.
Additional information about our impairment testing is contained in "Note 1 – Summary of Significant Accounting Policies" of the notes to consolidated financial statements in "Part II, Item 8. Financial Statements and Supplementary Data" of this Annual Report.
Additional information about our impairment testing is contained in "Note 1 – Summary of Significant Accounting Policies" of the notes to consolidated financial statements in "Part II, Item 8. Financial Statements and Supplementary Data" of this Annual Report. Ineffective internal controls could have a material adverse effect on our business, financial conditions, and results of operations .
If a government investigation uncovers improper or illegal activities, we may be subject to civil and criminal penalties and administrative sanctions, including termination of contracts, forfeitures of profits, suspension of payments, fines, and suspension or debarment from doing business 21 Table of Contents with the federal government.
If a government investigation uncovers improper or illegal activities, we may be subject to civil and criminal penalties and administrative sanctions, including termination of contracts, forfeitures of profits, suspension of payments, fines, and suspension or debarment from doing business with the federal government. In addition, we could suffer serious reputational harm if allegations of impropriety were made against us.
Government contracts; • compliance with the FCPA or U.S. export control regulations, which apply when we engage in international work; and • laws, regulations, and executive orders restricting the use and dissemination of information classified for national security purposes and the export of certain products and technical data. 20 Table of Contents Failure to comply with these or other laws and regulations could result in contract termination, loss of security clearances, suspension, or debarment from contracting with the U.S.
Government contracts; • compliance with the FCPA or U.S. export control regulations, which apply when we engage in international work; and • laws, regulations, and executive orders restricting the use and dissemination of information classified for national security purposes and the export of certain products and technical data.
Risks Associated with our Convertible Senior Notes and Future Indebtedness We may not have sufficient cash flow from our operating subsidiaries to pay our debt, which may seriously harm our business .
We may not have sufficient cash flow from our operating subsidiaries to pay our debt, which may seriously harm our business .
Our indebtedness under the Senior Notes, could, among other consequences: • increase the impact of adverse changes in the U.S. and global markets - generally, and in our industries, on our business, financial condition and results of operations; • restrict or limit our agility to plan and react to changes in our business and our industries; • place us at a disadvantage compared to our competitors who have less debt; and • limit our ability to borrow additional amounts to fund acquisitions, for working capital, and for other general corporate purposes.
Our indebtedness under the Senior Notes, could, among other things, restrict or limit our ability to plan and react to changes in our business and our industries; place us at a disadvantage compared to our competitors who have less debt; and limit our ability to borrow additional amounts to fund acquisitions, for working capital, and for other general corporate purposes. 20 Table of Contents A conversion of the Senior Notes, or a fundamental change under the Senior Notes, if triggered, may materially and adversely affect our financial condition and results of operations .
This volatility may impair our ability to finance strategic transactions using our common stock, and could result in losses for our shareholders . A number of factors can impact the trading price of our common stock, many of which are outside our control.
The trading price of our common stock may experience price and volume volatility, which could impair our ability to finance strategic transactions using our common stock and could result in losses for our shareholders .
We experience cyber-attacks and other attempts to gain unauthorized access to our cloud applications and information technology systems on a regular basis, and we anticipate that we will continue to be subject to such attempts as cyber-attacks become increasingly more sophisticated, frequent, and difficult to predict and protect against.
We experience cyber-attacks and other attempts to gain unauthorized access to our cloud applications and information technology systems on a regular basis, and we anticipate that we will continue to be subject to such attempts as we continue to expand the products and services we offer to customers.
If our costs under either of these types of contracts were to exceed the contract ceiling, or are not allowable under the provisions of the contract or applicable regulations, we may not be reimbursed for 100% of our associated costs.
In some cases, costs under either of these types of contracts have exceeded the contract ceiling, or are not allowable under the provisions of the contract or applicable regulations. In these cases, we have not been reimbursed for 100% of our associated costs.
In such an event of default, holders of the Senior Notes with the defaulted indebtedness could elect to declare all principal, together with accrued and unpaid interest, due and payable, which would materially and adversely affect our financial condition and results of operations. 17 Table of Contents Risks Associated with the Regulation of our Business Our failure to maintain adequate internal controls could have a material adverse effect on our business, financial conditions, and results of operations .
In such an event of default, holders of the Senior Notes with the defaulted indebtedness could elect to declare all principal, together with accrued and unpaid interest, due and payable, which would materially and adversely affect our financial condition and results of operations.
Risks Associated with Ownership of our Common Stock We have not paid dividends in the past and we do not anticipate paying dividends in the foreseeable future. We have never paid dividends on our common stock and have no plans to pay dividends on our common stock in the foreseeable future.
We have never paid dividends on our common stock and have no plans to pay dividends on our common stock in the foreseeable future.
A conversion of the Senior Notes, or a fundamental change under the Senior Notes, if triggered, may materially and adversely affect our financial condition and results of operations . If a fundamental change occurs, holders of the Senior Notes may require us to repurchase all or a portion of their Senior Notes in cash.
If a fundamental change occurs, holders of the Senior Notes may require us to repurchase all or a portion of their Senior Notes in cash.
The majority of revenues derived from government contracts for the year ended December 31, 2022 were based on fixed-price or cost-plus fixed fee contracts, with most of the remaining balance derived from time and material contracts and a small portion derived from commercialized product licensing. 19 Table of Contents While fixed-price contracts allow us to benefit from cost savings, they also expose us to the risk of cost overruns.
Revenues derived from government contracts for the year ended December 31, 2023 were based on approximately 57% cost-plus fixed fee contracts and approximately 34% fixed price contracts, with most of the remaining balance derived from time and material contracts and a small portion derived from commercialized product licensing.
We rely on third-party cloud and network infrastructure providers to deliver our subscription services, and any interruptions or delays in their services could harm our reputation and business.
Moreover, our failure to meet our commitments could result in customer dissatisfaction, reputational harm, or the loss of customers, and adversely affect our business and results of operations. We rely on third-party cloud and network infrastructure providers to deliver our subscription services, and any interruptions or delays in their services could harm our reputation and business.
While we have remediated these material weaknesses, if we fail to maintain effective internal controls, our ability to record, process, summarize and report financial information accurately and within the time periods specified in the rules and forms of the SEC could be adversely affected.
If we fail to maintain the adequacy of our internal controls, including any failure to implement required new or improved controls, or if we experience difficulties in their implementation, our ability to record, process, summarize and report financial information accurately and within the time periods specified in the rules and forms of the SEC could be adversely affected.
The restaurant/retail industries depend on consumer discretionary spending. Our customers are impacted by consumer confidence, which is influenced, in part, by general economic conditions, and effects consumer discretionary spending.
Our customers are impacted by consumer confidence, which is influenced, in part, by general economic conditions, which may negatively affect consumer discretionary spending.
Government may face restrictions from new legislation or regulations, as well as pressure from U.S. Government employees and their unions, on the nature and amount of services the U.S. Government may obtain from private contractors. These changes could impair our ability to obtain new contracts or contracts under which we currently perform when those contracts are up for recompete.
Government may face restrictions from new legislation or regulations, as well as pressure from U.S. Government employees and their unions, on the nature and amount of services the U.S. Government may obtain from private contractors.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Consolidated Financial Statements and related notes in "Part II, Item 8. Financial Statements and Supplementary Data” of this Annual Report. Macroeconomic and Geopolitical Risks Macroeconomic conditions and geopolitical events could have a material adverse effect on our business, financial condition, results of operations, and cash flows .
Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Consolidated Financial Statements and related notes in "Part II, Item 8. Financial Statements and Supplementary Data” of this Annual Report.
Any of these events could have a material adverse effect on our business, financial condition, results of operations, and cash flows. 15 Table of Contents Risks Associated with the Growth of our Business Acquisitions are an element of our growth strategy, which subjects us to risks commonly associated with acquisition transactions, which could materially and adversely affect our business, financial condition, results of operations, and cash flows.
Acquisitions are an element of our growth strategy, which subjects us to risks commonly associated with acquisition transactions, which could materially and adversely affect our business, financial condition, results of operations, and cash flows. We expect to continue to expand our business through acquisitions of complementary companies, products, and technologies.
If we fail to achieve and sustain profitability, our financial condition could be materially and adversely impacted and the market price of our common stock could decline.
If we fail to achieve and sustain profitability, our financial condition could be materially and adversely impacted and the market price of our common stock could decline. For the year ended December 31, 2023, two customers account for a significant portion of our revenues in the Restaurant/Retail segment.
For us to achieve profitability, we must operate our business consistent with our capital allocation strategy, which focuses on the allocation of our capital to revenue generating activities, including the development of new products and new features for our existing products, while controlling expenses.
We have incurred operating losses in each of the last several years, including for the year ended December 31, 2023. For us to achieve profitability, we must operate our business consistent with our capital allocation strategy, which focuses on the allocation of our capital to revenue generating activities, while controlling expenses.
If the initial estimates we use for calculating the contract price are incorrect, we can incur losses on those contracts. In addition, some of our governmental contracts have provisions relating to cost controls, and audit rights and if we fail to meet the terms specified in those contracts, then we may not realize the full benefit of the contracts.
In addition, some of our governmental contracts have provisions relating to cost controls, and audit rights and if we fail to meet the terms specified in those contracts, then we may not realize the full benefit of the contracts. Lower earnings caused by cost overruns would have an adverse effect on our financial results.
These price increases could make us less competitive, result in reduced sales, and loss of potential new customers, and cause damage to our reputation and relationships with our customers, which could have a negative impact on our business, financial condition, and results of operations.
These price increases could make us less competitive, result in reduced sales, and loss of potential new customers, and cause damage to our reputation and relationships with our customers, which could have a negative impact on our business, financial condition, and results of operations. 12 Table of Contents Inventory management is also an area of focus as we balance the need to maintain strategic inventory levels to ensure competitive lead times against the risk of product and component inventory shortages and customer requirements.
Increased labor costs could negatively impact our financial condition and results of operations due to direct labor costs, as well as the impact of increased labor costs on our customers’ and, in turn, its influence on our customers’ investment choices, including whether and when to invest in our products and services. • Changes in consumer confidence .
Labor costs, including wages and costs of benefits, remain higher than pre-COVID. High labor costs have a direct negative impact on our results of operations and could negatively influence our customers’ investment choices, including whether and when to invest in our products and services.
Any interruptions or delays in these services, including those which may be caused by natural disasters or malicious actors, may result in substantial service disruptions, which could damage our reputation, cause us to lose existing customers, expose us to liability, or otherwise harm our business.
Interruptions or delays in these services, including those which may be caused by natural disasters or malicious actors, have, and may in the future, result in service disruptions, resulting in our failure to meet service level commitments or milestones, exposing us liability, reputational damage, and potential loss of customers.
Any new contracting methods could be costly or administratively difficult for us to implement, and as a result, could harm our financial condition and results of operations. A realignment of funds with changed U.S.
These changes could continue to impair our ability to obtain new contracts or retain existing contracts under which we currently perform when those contracts are up for recompete. Any new contracting methods could be costly or administratively difficult for us to implement, and as a result, could harm our financial condition and results of operations.
Further, the worldwide uncertainty, volatility, and economic disruption created by COVID-19 could exacerbate other risk factors that we identify in this Annual Report. Risks Associated with the Operation of our Business We may not be able to achieve profitability, which could have a material adverse effect on our financial condition and the trading price of our common stock .
Each of these results could have a material adverse effect on our business, financial condition, results of operations, and liquidity. 19 Table of Contents Financial Related Risks We may not be able to achieve profitability, which could have a material adverse effect on our financial condition and the trading price of our common stock .
Government, civil and/or criminal fines, and penalties. Any such consequences could have a material adverse effect on our reputation, financial condition, results of operations, and liquidity. We cannot guarantee that our Government segment's estimated contract backlog will result in actual revenue.
Failure to comply with these or other laws and regulations could result in contract termination, loss of security clearances, suspension, or debarment from contracting with the U.S. Government, civil and/or criminal fines, and penalties. Any such consequences could have a material adverse effect on our reputation, financial condition, results of operations, and liquidity.
Our subscription services are inherently subject to security defects and vulnerabilities due to new technologies and as a result of new techniques developed by malicious actors.
Our cloud applications and information technology systems and those of our third-party service providers/integrators and customers are inherently subject to security defects and vulnerabilities due to the release of new technologies and new techniques developed by malicious actors.
Transactions involving newly issued common stock or other securities convertible into our common stock, if converted, could result in dilution, possibly substantial, to our existing shareholders. The trading price of our common stock has experienced significant price and volume volatility and is expected to continue to experience significant volatility in the foreseeable future.
Transactions involving newly issued common stock or other securities convertible into our common stock, if converted, could result in dilution, possibly substantial, to our shareholders. Dilution may have a negative impact on the price of our common stock if investors react unfavorably to a transaction or if the dilution causes a significant decrease in our earnings per share.
We may also incur significant costs for using alternative providers or equipment to deliver our subscription services or taking other actions to mitigate any prolonged service disruptions.
We may also incur significant costs to use alternative providers or equipment to deliver our subscription services or taking other actions to mitigate any prolonged service disruptions. Any such alternatives could be more difficult or costly to replace than what we currently license, and integration of alternatives into our information technology system could require significant work and resources and delays.
Any such consequence or other negative effect could have a material adverse effect on our business, financial condition, and results of operations. Our international operations subject us to additional risks that can adversely affect our business, financial condition, and results of operations .
Any such consequence or other negative effect could have a material adverse effect on our business, financial condition, and results of operations. 21 Table of Contents Risks Related to the Ownership of our Common Stock We have not paid dividends in the past and we do not anticipate paying dividends in the foreseeable future.
Any such alternatives could be more difficult or costly to replace than what we currently license, and integration of alternatives into our information technology system could require significant work and resources and delays. 14 Table of Contents Security defects and vulnerabilities could result in claims of liability against us, damage our reputation, or otherwise materially harm our business, financial condition, results of operations, and cash flows.
Security defects and vulnerabilities in our cloud applications and information technology systems or those of our service providers, integrators, and customers could result in claims of liability against us, damage our reputation, or otherwise materially harm our business, financial condition, results of operations, and cash flows.
Macroeconomic conditions, such as a U.S. or global recession or slowed economic growth, the rise in interest rates, inflation in costs of goods, services, and labor, and a decrease in consumer confidence and discretionary spending, could materially and adversely impact demand for our products and services, our ability to perform our contractual obligations, and successfully execute our operational and growth strategies. • Cost of products and components .
Economic instability or regulatory or political conditions, including inflation, recession or slowed economic growth, elevated or fluctuating interest rates, or actual or anticipated military or political conflicts (including the Russian-Ukraine war, tensions with China and between China and Taiwan, the Israel-Hamas conflict and other hostilities in the Middle East) in the United States and in other countries and regions in which we, our customers, suppliers, and our other third-party providers conduct business, and the impact of such conditions or insecurities, including inflated costs of goods, services, and labor, and muted or decreased consumer confidence and discretionary spending, could materially and adversely impact the cost and demand for our products and services, our ability to perform our contractual obligations, and execute our operational and growth strategies. • Cost of products and components .
Our international operations subject us to a variety of risks and challenges, including: • compliance by international employees with accounting practices generally accepted in the United States, including adherence to our accounting policies and internal controls; • increased financial accounting and reporting burdens and complexities; • government sanctions that may interfere with our ability to sell into certain countries; • the burdens and costs of complying with a wide variety of laws and legal standards governing our foreign operations, including the General Data Protection Regulation (“GDPR”) in the European Union, the U.S.
Our international operations subject us to a variety of risks and challenges, including: • compliance with a variety of local laws and regulations governing our foreign operations, including the General Data Protection Regulation (“GDPR”) in the European Union, the U.S. Foreign Corrupt Practices Act of 1977, as amended, the U.K.
Even though prior incidents did not have a material adverse effect on our systems and operations, there can be no assurance that the same will be the case in the future. In particular, the shift to widespread remote working conditions increases the opportunities available to cybersecurity criminals, and, as such, the risk of a cyber-attack potentially occurring is increased.
Even though prior events did not have a material adverse effect on our cloud applications and information technology systems or the cloud computing platforms and cloud applications of our third-party providers/integrators and our operations, there can be no guarantee that the same will be the case in the future.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeOur Restaurant/Retail segment also uses this space to assemble certain of our hardware products and for research and development, sales, and professional services. The Government segment's principal offices were located in 31,900 square feet of leased office space at 421 Ridge Street, Rome, New York, from which it conducted sales, administrative, and research and development activities.
Biggest changeOur Restaurant/Retail segment also uses this space to assemble certain of our hardware products and for research and development, sales, and professional services. The Government segment's principal offices are located in 13,324 square feet of leased office space at 160 Brooks Road, Second Floor, Rome, New York from which it conducts sales, administrative, and research and development activities.
In addition to these principal properties, we have leasehold interests in small office spaces located in Australia, Canada, India, United Arab Emirates, England, Switzerland, Serbia, Spain, Brazil, and other locations within the U.S. We are currently operating in a substantially remote work environment and believe our current facilities are adequate for our present needs.
In addition to these principal properties, we have leasehold interests in small office spaces located in Australia, Canada, India, United Arab Emirates, England, Switzerland, Serbia, Spain, and other locations within the U.S. We are currently operating in a substantially remote work environment and believe our current facilities are adequate for our present needs.
Item 2. PROPERTIES Our principal executive offices are located in 200,600 square feet of owned office space at 8383 Seneca Turnpike, New Hartford, New York, from which we operate out of 180,900 square feet and lease the remaining space to third parties.
Item 2. PROPERTIES Our principal executive offices are located in 208,700 square feet of owned office space at 8383 Seneca Turnpike, New Hartford, New York, from which we operate out of 180,900 square feet and lease the remaining space to third parties.
Removed
In February 2023, the Government segment's principal offices moved to 13,324 square feet of leased office space at 160 Brooks Road, Second Floor, from which it conducts sales, administrative, and research and development activities.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeWhen we withhold these shares, we are required to remit to the appropriate taxing authorities the market price of the awards withheld, which could be deemed a purchase of shares by us on the date of withholding.
Biggest changeWhen we withhold these shares, we are required to remit to the appropriate taxing authorities the market price of the awards withheld, which could be deemed a purchase of shares by us on the date of withholding. For the three months ended December 31, 2023, there were no shares withheld.
The actual number of holders of our common stock is greater than this number of record holders, and includes shareholders who are beneficial owners, but whose shares are held in street name by brokers, banks, and other nominees. Dividend Policy We have never paid cash dividends on our common stock.
The actual number of holders of our common stock is greater than this number of record holders, and includes shareholders who are beneficial owners, but whose shares are held in street name by brokers, banks, and other nominees. 25 Table of Contents Dividend Policy We have never paid cash dividends on our common stock.
Historical stock price performance should not be relied upon as an indication of future stock price performance. Item 6. RESERVED Not applicable 25 Table of Contents
Historical stock price performance should not be relied upon as an indication of future stock price performance. 26 Table of Contents Item 6. RESERVED Not applicable.
The performance graph shows the cumulative total shareholder return on our common stock compared to the cumulative total shareholder return on the Russell 2000 index and the Russell 2000 Technology index, a published peer industry group of 204 companies on an annual basis.
Performance Graph The performance graph below shows the cumulative total shareholder return on our common stock compared to the cumulative total shareholder return on the Russell 2000 index and the Russell 2000 Technology index, a published peer industry group of 190 companies on an annual basis.
The performance graph assumes the investment of $100 on December 31, 2017 in our common stock, the Russell 2000 and the Russell 2000 Technology indices. The cumulative total shareholder returns shown below represent the value that such investments would have had on December 31, 2022 (assuming reinvestment of all dividends).
The performance graph assumes the investment of $100 on December 31, 2018 in our common stock, the Russell 2000 and the Russell 2000 Technology indices. The cumulative total shareholder returns shown below represent the value that such investments would have had on December 31, 2023 (assuming reinvestment of all dividends).
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Trading Market Our common stock is listed on the New York Stock Exchange under the symbol “PAR”. According to the records of our transfer agent, as of February 27, 2023, there were 540 holders of record of our common stock.
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Trading Market Our common stock is listed on the New York Stock Exchange under the symbol “PAR”. According to the records of our transfer agent, as of February 23, 2024, there were 267 holders of record of our common stock.
Removed
For the three months ended December 31, 2022, there were 24,100 shares withheld. 24 Table of Contents The table below presents information regarding the Company’s purchases of its equity securities during the periods indicated.
Removed
Period Total Number of Shares Withheld Average Price Paid Per Share October 1, 2022 - October 31, 2022 41 $ 27.47 November 1, 2022 - November 30, 2022 4,753 $ 24.37 December 1, 2022 - December 31, 2022 19,306 $ 24.80 Total 24,100 Performance Graph The performance graph shall not be deemed “soliciting material” or to be “filed” with the SEC for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any of our filings under the Securities Act or the Exchange Act.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe tables below provide reconciliations between net loss and EBITDA, adjusted EBITDA, and adjusted net loss, as well as between diluted net loss per share and adjusted diluted net loss per share. 35 Table of Contents Year Ended December 31, in thousands 2022 2021 2020 Reconciliation of Net Loss to EBITDA and Adjusted EBITDA Net loss $ (69,319) $ (75,799) $ (36,562) Provision for (benefit from) income taxes 1,252 (9,424) (2,986) Interest expense 8,811 18,147 8,287 Depreciation and amortization 26,095 21,421 10,097 EBITDA $ (33,161) $ (45,655) $ (21,164) Stock-based compensation expense (1) 13,426 14,615 4,251 Regulatory matters (2) 415 50 126 Contingent consideration (3) (4,400) — (3,340) Litigation expense (4) 525 790 — Acquisition costs (5) 1,300 3,612 — Gain on insurance proceeds (6) — (4,400) — Severance (7) 525 — 359 Loss on extinguishment of debt (8) — 11,916 8,123 Impairment loss (9) 1,301 — — Other expense – net (10) 1,224 1,279 (808) Adjusted EBITDA $ (18,845) $ (17,793) $ (12,453) 1 Adjustments reflect total stock-based compensation expense for the years ended December 31, 2022, 2021 and 2020 of $13.4 million, $14.6 million and $4.3 million respectively. 2 Adjustment reflects non-recurring expenses related to our efforts to resolve regulatory matters of $0.4 million for the year ended December 31, 2022, and $0.1 million for the each of the years ended December 31, 2021 and 2020. 3 Adjustments reflect non-cash changes to the fair market value of the contingent consideration liability of $4.4 million related to the MENU Acquisition and $3.3 million related to the Data Central Acquisition as of the years ended December 31, 2022 and 2020, respectively. 4 Adjustment reflects settlement expenses for legal matters of $0.5 million and $0.8 million for the years ended December 31, 2022 and 2021, respectively. 5 Adjustment reflects the expenses incurred in the MENU Acquisition of $1.3 million and Punchh Acquisition of $3.6 million for the years ended December 31, 2022 and 2021, respectively. 6 Adjustment represents the gain on insurance stemming from a legacy claim of $4.4 million for the year ended December 31, 2021. 7 Adjustment reflects the severance included in gross margin, selling, general and administrative expense and research and development expense of $0.5 million and $0.4 million for the years ended December 31, 2022 and 2020, respectively. 8 Adjustment reflects loss on extinguishment of debt of $11.9 million related to the repayment of the Owl Rock Term Loan during the year ended December 31, 2021, and $8.1 million related to the repurchase of approximately $66.3 million of the 2024 Notes for the year ended December 31, 2020. 9 Adjustment reflects impairment loss included in research and development expense of $1.3 million related to the impairment of internally developed software costs not meeting the general release threshold as a result of acquiring go-to-market software in the MENU Acquisition. 10 Adjustment reflects foreign currency transaction gains and losses, rental income and losses, and other non-recurring expenses recorded in other expense, net in the accompanying statements of operations. 36 Table of Contents Year Ended December 31, in thousands 2022 2021 2020 Reconciliation of Net Loss/Diluted Net Loss per share to Adjusted Net Loss/Adjusted Diluted Loss per Share: Net loss / diluted earnings per share $ (69,319) $ (2.55) $ (75,799) $ (3.02) $ (36,562) $ (1.92) Provision for (benefit from) income taxes (1) — — (10,417) (0.42) (3,265) (0.17) Non-cash interest expense (2) 1,997 0.07 8,727 0.35 4,355 0.23 Acquired intangible assets amortization (3) 17,111 0.63 13,802 0.55 4,558 0.24 Stock-based compensation expense (4) 13,426 0.49 14,615 0.58 4,251 0.22 Regulatory matters (5) 415 0.02 50 — 126 0.01 Contingent consideration (6) (4,400) (0.16) — — (3,340) (0.18) Litigation expense (7) 525 0.02 790 0.03 — — Acquisition costs (8) 1,300 0.05 3,612 0.14 — — Gain on insurance proceeds (9) — — (4,400) (0.18) — — Severance (10) 525 0.02 — — 359 0.02 Loss on extinguishment of debt (11) — — 11,916 0.47 8,123 0.43 Impairment loss (12) 1,301 0.05 — — — — Other expense – net (13) 1,224 0.05 1,279 0.05 (808) (0.04) Adjusted net loss/diluted loss per share $ (35,895) $ (1.32) $ (35,825) $ (1.43) $ (22,203) $ (1.17) Weighted average common shares outstanding 27,152 25,088 19,014 1 Adjustment reflects a partial release of our deferred tax asset valuation allowance of $10.4 million related to the Punchh Acquisition for the year ended December 31, 2021; and a reduction to the benefit of income taxes of $3.3 million for the year ended December 31, 2020 related to the issuance of the 2026 Notes and partial repurchase of the 2024 Notes.
Biggest changeThe tables below provide reconciliations between net loss and EBITDA, adjusted EBITDA, and adjusted net loss, as well as between diluted net loss per share and adjusted diluted net loss per share. 34 Table of Contents Year Ended December 31, in thousands 2023 2022 2021 Reconciliation of Net Loss to EBITDA and Adjusted EBITDA Net loss $ (69,752) $ (69,319) $ (75,799) Provision for (benefit from) income taxes 1,988 1,252 (9,424) Interest expense 6,931 8,811 18,147 Depreciation and amortization 27,481 26,095 21,421 EBITDA $ (33,352) $ (33,161) $ (45,655) Stock-based compensation expense (1) 14,427 13,426 14,615 Regulatory matters (2) — 415 50 Contingent consideration (3) (9,200) (4,400) — Litigation expense (4) (808) 525 790 Transaction costs (5) 2,273 1,300 3,612 Gain on insurance proceeds (6) (500) — (4,400) Severance (7) 253 525 — Loss on extinguishment of debt (8) 635 — 11,916 Impairment loss (9) — 1,301 — Other expense – net (10) 489 1,224 1,279 Adjusted EBITDA $ (25,783) $ (18,845) $ (17,793) 1 Adjustments reflect total stock-based compensation expense for the years ended December 31, 2023, 2022 and 2021 of $14.4 million, $13.4 million and $14.6 million, respectively. 2 Adjustment reflects non-recurring expenses related to our efforts to resolve regulatory matters of $0.4 million and $0.1 million for the years ended December 31, 2022 and 2021, respectively. 3 Adjustments reflect non-cash reductions to the fair market value of the contingent consideration liability of $9.2 million and $4.4 million related to the MENU Acquisition as of the years ended December 31, 2023 and 2022, respectively. 4 Adjustment reflects the release of a loss contingency for a legal matter of $0.8 million for the year ended December 31, 2023 and settlement expenses for legal matters of $0.5 million and $0.8 million for the years ended December 31, 2022 and 2021, respectively. 5 Adjustment reflects non-recurring professional fees incurred in transaction due diligence of $2.3 million for the year ended December 31, 2023, and acquisition expenses incurred in the MENU Acquisition of $1.3 million and Punchh Acquisition of $3.6 million for the years ended December 31, 2022 and 2021, respectively. 6 Adjustment represents the gain on insurance stemming from a legacy claim of $0.5 million and $4.4 million for the years ended December 31, 2023 and 2021, respectively. 7 Adjustment reflects the severance included in general and administrative expense and research and development expense of $0.3 million and $0.5 million for the years ended December 31, 2023 and 2022, respectively. 8 Adjustment reflects loss on extinguishment of debt of $0.6 million related to the induced conversion of the 2024 Notes during the year ended December 31, 2023, and $11.9 million related to the repayment of the Owl Rock Term Loan during the year ended December 31, 2021. 9 Adjustment reflects impairment loss included in research and development expense related to the impairment of internally developed software costs not meeting the general release threshold as a result of acquiring go-to-market software in the MENU Acquisition. 10 Adjustment reflects foreign currency transaction gains and losses, rental income and losses, and other non-recurring expenses recorded in other expense, net in the accompanying statements of operations. 35 Table of Contents Year Ended December 31, in thousands 2023 2022 2021 Reconciliation of Net Loss/Diluted Net Loss per share to Adjusted Net Loss/Adjusted Diluted Loss per Share: Net loss / diluted earnings per share $ (69,752) $ (2.53) $ (69,319) $ (2.55) $ (75,799) $ (3.02) Provision for (benefit from) income taxes (1) — — — — (10,417) (0.42) Non-cash interest expense (2) 2,093 0.08 1,997 0.07 8,727 0.35 Acquired intangible assets amortization (3) 18,074 0.66 17,111 0.63 13,802 0.55 Stock-based compensation expense (4) 14,427 0.52 13,426 0.49 14,615 0.58 Regulatory matters (5) — — 415 0.02 50 — Contingent consideration (6) (9,200) (0.33) (4,400) (0.16) — — Litigation expense (7) (808) (0.03) 525 0.02 790 0.03 Transaction costs (8) 2,273 0.08 1,300 0.05 3,612 0.14 Gain on insurance proceeds (9) (500) (0.02) — — (4,400) (0.18) Severance (10) 253 0.01 525 0.02 — — Loss on extinguishment of debt (11) 635 0.02 — — 11,916 0.47 Impairment loss (12) — — 1,301 0.05 — — Other expense – net (13) 489 0.02 1,224 0.05 1,279 0.05 Adjusted net loss/diluted loss per share $ (42,016) $ (1.52) $ (35,895) $ (1.32) $ (35,825) $ (1.43) Weighted average common shares outstanding 27,552 27,152 25,088 1 Adjustment reflects a partial release of our deferred tax asset valuation allowance of $10.4 million related to the Punchh Acquisition for the year ended December 31, 2021.
Other (expense) income, net substantially includes rental income, net of applicable expenses, foreign currency transactions gains and losses and other non-operating income/expenses. The change was substantially driven by sales and use tax expense and other miscellaneous expenses.
Other expense, net substantially includes rental income, net of applicable expenses, foreign currency transactions gains and losses and other non-operating income (expense). The change was substantially driven by sales and use tax expense and other miscellaneous expenses.
Adjusted net loss/adjusted diluted net loss per share represents net loss and net loss per share excluding amortization of acquired intangible assets, certain non-cash and non-recurring charges, including stock-based compensation, acquisition expense, certain pending litigation expenses and other non-recurring charges that may not be indicative of our financial performance.
Adjusted net loss and adjusted diluted net loss per share represents net loss and net loss per share excluding amortization of acquired intangible assets, certain non-cash and non-recurring charges, including stock-based compensation, acquisition expense, certain pending litigation expenses and other non-recurring charges that may not be indicative of our financial performance.
Management believes that adjusting its net loss and diluted loss per share to remove non-recurring charges provides a useful perspective with respect to the Company's results of operations and provides supplemental information to both management and investors by removing items that are difficult to predict and are often unanticipated.
Management believes that adjusting its net loss and diluted net loss per share to remove non-recurring charges provides a useful perspective with respect to the Company's results of operations and provides supplemental information to both management and investors by removing items that are difficult to predict and are often unanticipated.
Additionally, we are obligated to comply with certain payment card network operating rules and contractual obligations under the terms of out registration as a payment facilitator and as a master merchant under our third-party acquiring payment processor agreements which make us liable for the costs of processing the transactions for our customers and chargebacks and other financial losses if such amounts cannot be recovered from the restaurant.
Additionally, we are obligated to comply with certain payment card network operating rules and contractual obligations under the terms of our registration as a payment facilitator and as a master merchant under our third-party acquiring payment processor agreements which make us liable for the costs of processing the transactions for our customers and chargebacks and other financial losses if such amounts cannot be recovered from the restaurant.
We allocate all variable fees earned from transaction-based revenue to this performance obligation on the basis that is is consistent with the ASC 606 allocation objectives. Our transaction-based payment processing contracts are primarily layered rate contracts.
We allocate all variable fees earned from transaction-based revenue to this performance obligation on the basis that it is consistent with the ASC 606 allocation objectives. Our transaction-based payment processing contracts are primarily layered rate contracts.
The Company offers installation services to its customers for hardware and software for which the Company primarily hires third-party contractors to install the equipment on the Company's behalf. The Company pays third-party contractors an installation service fee based on an hourly rate agreed to by the Company and contractor.
The Company offers installation services to its customers for hardware for which the Company primarily hires third-party contractors to install the equipment on the Company's behalf. The Company pays third-party contractors an installation service fee based on an hourly rate agreed to by the Company and contractor.
ARR is an operating measure, does not reflect our revenue determined in accordance with GAAP, and should be viewed independently of, and not combined with or substituted for, our revenue and other financial information determined in accordance with GAAP.
ARR is an operating measure, it does not reflect our revenue determined in accordance with GAAP, and ARR should be viewed independently of, and not combined with or substituted for, our revenue and other financial information determined in accordance with GAAP.
Subscription Service Our subscription services consist of revenue from our SaaS solutions, related software support, and transaction-based payment processing services. 39 Table of Contents SaaS solutions SaaS solution revenues consist of subscription fees from customers for access to our SaaS solutions and third party SaaS solutions and are recognized ratably over the contract period, commencing when the subscription service is made available to the customer, as the customer simultaneously receives and consumes the benefits of the Company’s performance obligations.
Subscription Service Our subscription services consist of revenue from our SaaS solutions, related software support, and transaction-based payment processing services. 38 Table of Contents SaaS solutions SaaS solution revenues consist of subscription fees from customers for access to our SaaS solutions and third party SaaS solutions and are recognized ratably over the contract period, commencing when the subscription service is made available to the customer, as the customer simultaneously receives and consumes the benefits of the Company’s performance obligations.
Software support Software support revenues includes fees from customers from the sales of varying levels of basic support services which are “stand-ready obligations” satisfied over time on the basis that the customer consumes and receives a benefit from having access to the Company's support resources, when and as needed, throughout the contract term, which is generally 12 months.
Software support Software support revenues include fees from customers from the sales of varying levels of basic support services which are “stand-ready obligations” satisfied over time on the basis that the customer consumes and receives a benefit from having access to the Company's support resources, when and as needed, throughout the contract term, which is generally 12 months.
For this reason, the support services are recognized ratably over the contract term since the Company satisfies its obligation to stand ready by performing these services each day. 40 Table of Contents Installations Installation revenue is recognized point in time. Installation revenue is recognized when installation is complete and the customer obtains control of the related asset.
For this reason, the support services are recognized ratably over the contract term since the Company satisfies its obligation to stand ready by performing these services each day. 39 Table of Contents Installations Installation revenue is recognized point in time. Installation revenue is recognized when installation is complete and the customer obtains control of the related asset.
Hardware Hardware revenue consists of hardware product sales and is recognized as a point in time revenue. Revenue on these items are recognized when the customer obtains control of the asset in accordance with the terms of sale. This generally occurs upon delivery, upon installation, or upon delivery to a third-party carrier for onward delivery to customer.
Hardware Hardware revenue consists of hardware product sales and is recognized as a point in time revenue. Revenue on these items are recognized when the customer obtains control of the asset in accordance with the terms of sale. This generally occurs upon delivery to a third-party carrier for onward delivery to customer.
For this reason, the basic support services are recognized ratably over the contract term since the Company satisfies its obligation to stand ready by performing these services each day. Transaction-based payment processing Transaction-based payment processing revenues includes transaction-based payment processing services for customers which are charged a transaction fee for payment processing.
For this reason, the basic support services are recognized ratably over the contract term since the Company satisfies its obligation to stand ready by performing these services each day. Transaction-based payment processing Transaction-based payment processing revenues include transaction-based payment processing services for customers which are charged a transaction fee for payment processing.
These conditions may result in an impairment charge in future periods. We reconciled the aggregate estimated fair value of the reporting units to our market capitalization noting no goodwill impairment was recorded during the years ended December 31, 2022 or 2021.
These conditions may result in an impairment charge in future periods. We reconciled the aggregate estimated fair value of the reporting units to our market capitalization noting no goodwill impairment was recorded during the years ended December 31, 2023 or 2022.
Item 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our audited consolidated financial statements and the notes thereto included under "Part II, Item 8. Financial Statements and Supplementary Data" of this Annual Report.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our audited consolidated financial statements and the notes thereto included under "Part II, Item 8. Financial Statements and Supplementary Data" of this Annual Report.
Overall, the projected revenue growth rates ultimately trend to an estimated long term growth rate of 3.0%. We use gross margin estimates that are reflective of expected increased recurring subscription service revenue from that is expected to exceed historical gross margins.
Overall, the projected revenue growth rates ultimately trend to an estimated long term growth rate of 3%. We use gross margin estimates that are reflective of expected increased recurring subscription service revenue that is expected to exceed historical gross margins.
Long-term fixed price contracts involve the use of judgment to estimate the total contract revenue and costs. For long-term fixed price contracts, the Company estimates the profit on a contract as the difference between the total estimated revenue and expected costs to complete the contract, and recognize that profit over the life of the contract.
Long-term fixed price contracts involve the use of judgment to estimate the total contract revenue and costs. For long-term fixed price contracts, the Company estimates the profit on a contract as the difference between the total estimated revenue and expected costs to complete the contract, and recognizes that profit over the life of the contract.
Key Performance Indicators and Non-GAAP Financial Measures: We monitor certain key performance indicators and non-GAAP financial measures in the evaluation and management of our business; certain key performance indicators and non-GAAP financial measures are provided in this Annual Report as we believe they are useful in facilitating period-to-period comparisons of our business performance.
Key Performance Indicators and Non-GAAP Financial Measures: We monitor certain key performance indicators and non-GAAP financial measures in the evaluation and management of our business; certain key performance indicators and non-GAAP financial measures are provided in this Annual Report because we believe they are useful in facilitating period-to-period comparisons of our business performance.
The Company is presenting adjusted subscription service gross margin, adjusted EBITDA and adjusted net loss because we believe that these financial measures provide supplemental information that may be useful to investors in evaluating the Company's core business operating results and comparing such results to other similar companies.
The Company is presenting adjusted subscription service gross margin, adjusted EBITDA, adjusted net loss, and adjusted diluted net loss per share because we believe that these financial measures provide supplemental information that may be useful to investors in evaluating the Company's core business operating results and comparing such results to other similar companies.
Estimates of operating expenses, working capital requirements and depreciation and amortization expense used for the Restaurant/Retail reporting unit are generally consistent with actual historical amounts, adjusted to reflect our continued investment and projected revenue growth 43 Table of Contents from our core technology platforms.
Estimates of operating expenses, working capital requirements and depreciation and amortization expense used for the Restaurant/Retail reporting unit are generally consistent with actual historical amounts, adjusted to reflect our continued investment and projected revenue growth from our core technology platforms.
Recent Accounting Pronouncements Not Yet Adopted Refer to “Note 1 – Summary of Significant Accounting Policies” of the notes to consolidated financial statements in "Part II, Item 8. Financial Statements and Supplementary Data" of this Annual Report for details.
Recent Accounting Pronouncements Not Yet Adopted Refer to “Note 1 – Summary of Significant Accounting Policies” of the notes to consolidated financial statements in "Part II, Item 8. Financial Statements and Supplementary Data" of this Annual Report for details. 42 Table of Contents
Excluding the amortization of acquired and internally developed technology, adjusted subscription service gross margin was 73% compared to 66% for the years ended December 31, 2022 and 2021, respectively (refer to "Non-GAAP Financial Measures" below for important information regarding adjusted subscription service gross margin, a non-GAAP financial measure).
Excluding the amortization of acquired and internally developed technology, adjusted subscription service gross margin was 66.1% compared to 73.3% for the years ended December 31, 2023 and 2022, respectively (refer to "Non-GAAP Financial Measures" below for important information regarding adjusted subscription service gross margin, a non-GAAP financial measure).
Short-term investments are held-to-maturity investment securities consisting of investment-grade interest bearing instruments, primarily treasury bills and notes, which are stated at amortized cost. Cash used in operating activities was $43.1 million for the year ended December 31, 2022, compared to $53.2 million for the year ended December 31, 2021.
Short-term investments are held-to-maturity investment securities consisting of investment-grade interest bearing instruments, primarily treasury bills and notes, which are stated at amortized cost. Cash used in operating activities was $17.1 million for the year ended December 31, 2023, compared to $43.1 million for the year ended December 31, 2022.
We believe utilization of actual historical results adjusted to reflect our continued investment in our products is an appropriate basis supporting the fair value of the Restaurant/Retail reporting unit. Finally, we use a discount rate of approximately 14.0% for the Restaurant/Retail reporting unit.
We believe utilization of actual historical results adjusted to reflect our continued investment in our products is an appropriate basis supporting the fair value of the Restaurant/Retail reporting unit. Finally, we use a discount rate of 13% for the Restaurant/Retail reporting unit.
Our actual cash needs will depend on many factors, including our rate of revenue growth, growth of our subscription service revenues, the timing and extent of spending to support our product development efforts, the timing of introductions of new products and enhancements to existing products, market acceptance of our products, and the factors described above in this "Part II, Item 7.
Our actual cash needs will depend on many factors, including our rate of revenue and ARR growth, the timing and extent of spending to support our product development and corporate development efforts, the timing of introductions of new products and enhancements to existing products, market acceptance of our products, and the factors described above in this Part II, Item 7.
Significant items subject to such estimates and assumptions include revenue recognition, stock-based compensation, the recognition and measurement of assets acquired and liabilities assumed in business combinations at fair value, the carrying amount of property, plant and equipment including right-to-use assets and liabilities, identifiable intangible assets and goodwill, the measurement of liabilities and equity recognized for outstanding convertible notes, valuation allowances for receivables, inventories, and measurement of contingent consideration at fair value.
Significant items subject to such estimates and assumptions include revenue recognition, stock-based compensation, the recognition and measurement of assets acquired and liabilities assumed in business combinations at fair value, the carrying amount of property, plant and equipment including right-to-use assets and liabilities, identifiable intangible assets and goodwill, valuation allowances for receivables, valuation of excess and obsolete inventories, and measurement of contingent consideration at fair value.
The income tax effect of the below adjustments were not tax-effected due to the valuation allowance on all of our net deferred tax assets. 2 Adjustment reflects non-cash accretion of interest expense and amortization of issuance costs related to the Senior Notes and the Owl Rock Term Loan of $2.0 million, $8.7 million, and $4.4 million for the years ended December 31, 2022, 2021, and 2020, respectively. 3 Adjustment reflects amortization expense of acquired developed technology within gross margin of $15.2 million, $12.0 million, and $3.5 million for the years ended December 31, 2022, 2021, and 2020, respectively; and amortization expense of acquired intangible assets of $1.9 million, $1.8 million, and $1.1 million for the years ended December 31, 2022, 2021, and 2020, respectively. 4 Adjustments reflect total stock-based compensation expense for the years ended December 31, 2022, 2021 and 2020 of $13.4 million, $14.6 million and $4.3 million respectively. 5 Adjustment reflects non-recurring expenses related to our efforts to resolve a regulatory matters of $0.4 million for the year ended December 31, 2022 and $0.1 million for each of the years ended December 31, 2021 and 2020. 6 Adjustments reflect non-cash changes to the fair market value of the contingent consideration liability of $4.4 million related to the MENU Acquisition and $3.3 million related to the Data Central Acquisition as of the years ended December 31, 2022 and 2020, respectively. 7 Adjustment reflects settlement expenses for legal matters of $0.5 million and $0.8 million for the years ended December 31, 2022 and 2021, respectively. 8 Adjustment reflects the expenses incurred in the MENU Acquisition of $1.3 million and Punchh Acquisition of $3.6 million for the years ended December 31, 2022 and 2021, respectively. 9 Adjustment represents the gain on insurance stemming from a legacy claim of $4.4 million for the year ended December 31, 2021. 10 Adjustment reflects the severance included in gross margin, selling, general and administrative expense and research and development expense of $0.5 million and $0.4 million for the years ended December 31, 2022 and 2020, respectively. 11 Adjustment reflects loss on extinguishment of debt of $11.9 million related to the repayment of the Owl Rock Term Loan during the year ended December 31, 2021, and $8.1 million to the repurchase of approximately $66.3 million of the 2024 Notes for the year ended December 31, 2020. 12 Adjustment reflects impairment loss included in research and development expense of $1.3 million related to the impairment of internally developed software costs not meeting the general release threshold as a result of acquiring go-to-market software in the MENU Acquisition. 13 Adjustment reflects foreign currency transaction gains and losses, rental income and losses, and other non-recurring expenses recorded in other expense, net in the accompanying statements of operations. 37 Table of Contents LIQUIDITY AND CAPITAL RESOURCES Our primary sources of liquidity are cash and cash equivalents and short-term investments.
The income tax effect of the below adjustments were not tax-effected due to the valuation allowance on all of our net deferred tax assets. 2 Adjustment reflects non-cash accretion of interest expense and amortization of issuance costs related to the 2024 Notes, Senior Notes, and the Owl Rock Term Loan of $2.1 million, $2.0 million, and $8.7 million for the years ended December 31, 2023, 2022, and 2021, respectively. 3 Adjustment reflects amortization expense of acquired developed technology within cost of sales of $16.2 million, $15.2 million, and $12.0 million for the years ended December 31, 2023, 2022, and 2021, respectively; and amortization expense of acquired intangible assets of $1.9 million, $1.9 million, and $1.8 million for the years ended December 31, 2023, 2022, and 2021, respectively. 4 Adjustments reflect total stock-based compensation expense for the years ended December 31, 2023, 2022 and 2021 of $14.4 million, $13.4 million and $14.6 million respectively. 5 Adjustment reflects non-recurring expenses related to our efforts to resolve regulatory matters of $0.4 million and $0.1 million for the years ended December 31, 2022 and 2021, respectively. 6 Adjustments reflect non-cash reductions to the fair market value of the contingent consideration liability of $9.2 million and $4.4 million related to the MENU Acquisition for the years ended December 31, 2023 and 2022, respectively. 7 Adjustment reflects the release of a loss contingency for a legal matter of $0.8 million for the year ended December 31, 2023 and settlement expenses for legal matters of $0.5 million and $0.8 million for the years ended December 31, 2022 and 2021, respectively. 8 Adjustment reflects non-recurring professional fees incurred in transaction due diligence of $2.3 million for the year ended December 31, 2023 and acquisition expenses incurred in the MENU Acquisition of $1.3 million and Punchh Acquisition of $3.6 million for the years ended December 31, 2022 and 2021, respectively. 9 Adjustment represents the gain on insurance stemming from a legacy claim of $0.5 million and $4.4 million for the years ended December 31, 2023 and 2021, respectively. 10 Adjustment reflects the severance included in general and administrative expense and research and development expense of $0.3 million and $0.5 million for the years ended December 31, 2023 and 2022, respectively. 11 Adjustment reflects loss on extinguishment of debt of $0.6 million related to the induced conversion of the 2024 Notes during the year ended December 31, 2023, and $11.9 million related to the repayment of the Owl Rock Term Loan during the year ended December 31, 2021. 12 Adjustment reflects impairment loss included in research and development expense related to the impairment of internally developed software costs not meeting the general release threshold as a result of acquiring go-to-market software in the MENU Acquisition. 13 Adjustment reflects foreign currency transaction gains and losses, rental income and losses, and other non-recurring expenses recorded in other expense, net in the accompanying statements of operations. 36 Table of Contents LIQUIDITY AND CAPITAL RESOURCES Our primary sources of liquidity are cash and cash equivalents and short-term investments.
Other Operating Expenses: Amortization of Intangible Assets / Contingent Consideration / Insurance Proceeds Year Ended December 31, Percentage of total revenue Increase (decrease) in thousands 2022 2021 2020 2022 2021 2020 2022 vs 2021 2021 vs 2020 Amortization of identifiable intangible assets $ 1,863 $ 1,825 $ 1,163 0.5 % 0.6 % 0.5 % 2.1 % 56.9 % Adjustment to contingent consideration liability (4,400) — (3,340) (1.2) % — % (1.6) % N/A (100.0) % Gain on insurance proceeds $ — $ (4,400) $ — — % (1.6) % — % (100.0) % N/A For the Year Ended December 31, 2022 Compared to the Year Ended December 31, 2021 Amortization of identifiable intangible assets was $1.9 million for the year ended December 31, 2022, which remained relatively unchanged as compared to $1.8 million for the year ended December 31, 2021.
Other Operating Expenses: Amortization of Intangible Assets / Contingent Consideration / Insurance Proceeds Year Ended December 31, Percentage of total revenue Increase (decrease) in thousands 2023 2022 2021 2023 2022 2021 2023 vs 2022 2022 vs 2021 Amortization of identifiable intangible assets $ 1,858 $ 1,863 $ 1,825 0.4 % 0.5 % 0.6 % (0.3) % 2.1 % Adjustment to contingent consideration liability (9,200) (4,400) — (2.2) % (1.2) % — % 109.1 % N/A Gain on insurance proceeds $ (500) $ — $ (4,400) (0.1) % — % (1.6) % N/A (100.0) % For the Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022 Amortization of identifiable intangible assets was $1.9 million for the year ended December 31, 2023, which remained relatively unchanged as compared to $1.9 million for the year ended December 31, 2022.
Gain on insurance proceeds was $4.4 million for the year ended December 31, 2021, in connection with our settlement of a legacy claim. There was no comparable gain for the year ended December 31, 2022 .
Gain on insurance proceeds was $0.5 million for the year ended December 31, 2023, in connection with our settlement of a legacy claim. There was no comparable gain for the year ended December 31, 2022 .
Interest Expense, Net Year Ended December 31, Percentage of total revenue Increase (decrease) in thousands 2022 2021 2020 2022 2021 2020 2022 vs 2021 2021 vs 2020 Interest expense, net $ (8,811) $ (18,147) $ (8,287) (2.5) % (6.4) % (3.9) % (51.4) % 119.0 % For the Year Ended December 31, 2022 Compared to the Year Ended December 31, 2021 Interest expense, net was $8.8 million for the year ended December 31, 2022, a decrease of $9.3 million or 51.4% as compared to $18.1 million for the year ended December 31, 2021.
Interest Expense, Net Year Ended December 31, Percentage of total revenue Increase (decrease) in thousands 2023 2022 2021 2023 2022 2021 2023 vs 2022 2022 vs 2021 Interest expense, net $ (6,931) $ (8,811) $ (18,147) (1.7) % (2.5) % (6.4) % (21.3) % (51.4) % For the Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022 Interest expense, net was $6.9 million for the year ended December 31, 2023, a decrease of $1.9 million or 21.3% as compared to $8.8 million for the year ended December 31, 2022.
The income approach incorporates the use of a DCF analysis. A number of significant assumptions and estimates are involved in the application of the DCF model to forecast operating cash flows, including revenue growth, operating income margin and discount rate. These assumptions vary between the reporting units.
A number of significant assumptions and estimates are involved in the application of the DCF model to forecast operating cash flows, including revenue growth, operating income margin and discount rate. These assumptions vary between the 41 Table of Contents reporting units.
In deriving our fair value estimates, we use key assumptions built on the current product portfolio mix adjusted to reflect continued revenue increases from our subscription services. We use total annual revenue growth rates for the reporting unit ranging between 12.7% and 17.4% for the years 2023 through 2030.
In deriving our fair value estimates, we use key assumptions built on the current product portfolio mix adjusted to reflect continued revenue increases from our subscription services. We use total annual revenue growth rates for the reporting unit ranging between 8% and 18% for the years 2024 through 2033.
Taxes Year Ended December 31, Percentage of total revenue Increase (decrease) in thousands 2022 2021 2020 2022 2021 2020 2022 vs 2021 2021 vs 2020 (Provision for) benefit from income taxes $ (1,252) $ 9,424 $ 2,986 (0.4) % 3.3 % 1.4 % (113.3) % >200 % For the Year Ended December 31, 2022 Compared to the Year Ended December 31, 2021 The provision for income taxes of $1.3 million for the year ended December 31, 2022 was substantially due to foreign jurisdiction tax obligations.
Taxes Year Ended December 31, Percentage of total revenue Increase (decrease) in thousands 2023 2022 2021 2023 2022 2021 2023 vs 2022 2022 vs 2021 (Provision for) benefit from income taxes $ (1,988) $ (1,252) $ 9,424 (0.5) % (0.4) % 3.3 % 58.8 % (113.3) % 32 Table of Contents For the Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022 The provision for income taxes of $2.0 million for the year ended December 31, 2023 was substantially due to foreign jurisdiction tax obligations.
Cash used in investing activities was $66.7 million for the year ended December 31, 2022, compared to $383.0 million for the year ended December 31, 2021.
Cash used in investing activities was $7.8 million for the year ended December 31, 2023, compared to $66.7 million for the year ended December 31, 2022.
This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from the results contemplated by these forward-looking statements due to a number of factors, including those discussed under our "Forward-looking statements" disclosure and "Part I, Item 1A. Risk Factors" above.
This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from the results contemplated by these forward-looking statements due to a number of factors, including those discussed under "Forward-Looking Statements" and "Part I, Item 1A. Risk Factors" above. The following section generally discusses year-over-year comparisons between 2023 and 2022.
Adjusted EBITDA represents EBITDA as adjusted to exclude certain non-cash and non-recurring charges, including stock-based compensation, acquisition expenses, certain pending litigation expenses and other non-recurring charges that may not be indicative of our financial performance.
EBITDA represents net loss before income taxes, interest expense and depreciation and amortization. Adjusted EBITDA represents EBITDA as adjusted to exclude certain non-cash and non-recurring charges, including stock-based compensation, acquisition expenses, certain pending litigation expenses and other non-recurring charges that may not be indicative of our financial performance.
As of December 31, 2022, we had cash and cash equivalents of $70.3 million and short-term investments of $40.3 million. Cash and cash equivalents consist of highly liquid investments with maturities of 90 days or less, including money market funds.
As of December 31, 2023, we had cash and cash equivalents of $37.4 million and short-term investments of $37.2 million. Cash and cash equivalents consist of highly liquid investments with maturities of 90 days or less, including money market funds.
The increase was substantially driven by increases in R&D expense related to our offerings for Guest Engagement of $8.2 million, hardware of $2.5 million, and Operator Solutions of $2.2 million, all substantially driven by higher compensation costs associated with additional personnel as we continue to improve and diversify our product and service offerings.
The increase was substantially driven by an increase in R&D expense related to our offerings for Guest Engagement of $9.4 million, of which $6.2 million was driven by higher compensation costs associated with additional personnel as we continue to improve and diversify our product and service offerings.
Subscription service margin during the year ended December 31, 2022 included $21.4 million of amortization of acquired and internally developed technology compared to $17.1 million of amortization of acquired and internally developed technology during the year ended December 31, 2021.
Subscription service margin for the year ended December 31, 2023, included $22.2 million of amortization of acquired and internally developed technology compared to $21.4 million of amortization of acquired and internally developed technology for the year ended December 31, 2022.
Other (Expense) Income, Net Year Ended December 31, Percentage of total revenue Increase (decrease) in thousands 2022 2021 2020 2022 2021 2020 2022 vs 2021 2021 vs 2020 Other (expense) income, net $ (1,224) $ (1,279) $ 808 (0.3) % (0.5) % 0.4 % (4.3) % For the Year Ended December 31, 2022 Compared to the Year Ended December 31, 2021 Other (expense) income, net was ($1.2) million for the year ended December 31, 2022, which remained relatively unchanged as compared to ($1.3) million for the year ended December 31, 2021.
Other Expense, Net Year Ended December 31, Percentage of total revenue Increase (decrease) in thousands 2023 2022 2021 2023 2022 2021 2023 vs 2022 2022 vs 2021 Other expense, net $ (489) $ (1,224) $ (1,279) (0.1) % (0.3) % (0.5) % (60.0) % (4.3) % For the Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022 Other expense, net was $0.5 million for the year ended December 31, 2023, an increase of $0.7 million as compared to $1.2 million for the year ended December 31, 2022.
Segment Revenue by Product Line as Percentage of Total Revenue Year Ended December 31, Percentage of total revenue Increase (decrease) In thousands 2022 2021 2020 2022 2021 2020 2022 vs 2021 2021 vs 2020 Hardware $ 114,410 $ 105,014 $ 73,228 32.2 % 37.1 % 34.3 % 8.9 % 43.4 % Subscription service 97,499 62,649 31,370 27.4 % 22.1 % 14.7 % 55.6 % 99.7 % Professional service 50,438 42,688 37,914 14.2 % 15.1 % 17.7 % 18.2 % 12.6 % Total Restaurant/Retail $ 262,347 $ 210,351 $ 142,512 73.7 % 74.4 % 66.7 % 24.7 % 47.6 % Mission systems 35,458 38,311 37,448 10.0 % 13.5 % 17.5 % (7.4) % 2.3 % ISR 56,141 33,188 32,947 15.8 % 11.7 % 15.4 % 69.2 % 0.7 % Commercial software 1,849 1,026 879 0.5 % 0.4 % 0.4 % 80.2 % 16.7 % Total Government $ 93,448 $ 72,525 $ 71,274 26.3 % 25.6 % 33.3 % 28.8 % 1.8 % Total revenue $ 355,795 $ 282,876 $ 213,786 100.0 % 100.0 % 100.0 % 25.8 % 32.3 % 27 Table of Contents Revenues, Net Year Ended December 31, Percentage of total revenue Increase (decrease) in thousands 2022 2021 2020 2022 2021 2020 2022 vs 2021 2021 vs 2020 Revenues, net: Hardware $ 114,410 $ 105,014 $ 73,228 32.2 % 37.1 % 34.3 % 8.9 % 43.4 % Subscription service 97,499 62,649 31,370 27.4 % 22.1 % 14.7 % 55.6 % 99.7 % Professional service 50,438 42,688 37,914 14.2 % 15.1 % 17.7 % 18.2 % 12.6 % Contract 93,448 72,525 71,274 26.3 % 25.6 % 33.3 % 28.8 % 1.8 % Total revenues, net $ 355,795 $ 282,876 $ 213,786 100.0 % 100.0 % 100.0 % 25.8 % 32.3 % For the Year Ended December 31, 2022 Compared to the Year Ended December 31, 2021 Total revenues were $355.8 million for the year ended December 31, 2022, an increase of $72.9 million or 25.8% compared to $282.9 million for the year ended December 31, 2021.
Financial Statements and Supplementary Data" for additional information. 28 Table of Contents Segment Revenue by Product Line as Percentage of Total Revenue Year Ended December 31, Percentage of total revenue Increase (decrease) In thousands 2023 2022 2021 2023 2022 2021 2023 vs 2022 2022 vs 2021 Hardware $ 103,391 $ 114,410 $ 105,014 24.9 % 32.2 % 37.1 % (9.6) % 8.9 % Subscription service 122,597 97,499 62,649 29.5 % 27.4 % 22.1 % 25.7 % 55.6 % Professional service 50,726 50,438 42,688 12.2 % 14.2 % 15.1 % 0.6 % 18.2 % Total Restaurant/Retail $ 276,714 $ 262,347 $ 210,351 66.5 % 73.7 % 74.4 % 5.5 % 24.7 % Mission systems 35,583 35,458 38,311 8.6 % 10.0 % 13.5 % 0.4 % (7.4) % ISR 102,153 56,141 33,188 24.6 % 15.8 % 11.7 % 82.0 % 69.2 % Commercial software 1,373 1,849 1,026 0.3 % 0.5 % 0.4 % (25.7) % 80.2 % Total Government $ 139,109 $ 93,448 $ 72,525 33.5 % 26.3 % 25.6 % 48.9 % 28.8 % Total revenue $ 415,823 $ 355,795 $ 282,876 100.0 % 100.0 % 100.0 % 16.9 % 25.8 % Revenues, Net Year Ended December 31, Percentage of total revenue Increase (decrease) in thousands 2023 2022 2021 2023 2022 2021 2023 vs 2022 2022 vs 2021 Revenues, net: Hardware $ 103,391 $ 114,410 $ 105,014 24.9 % 32.2 % 37.1 % (9.6) % 8.9 % Subscription service 122,597 97,499 62,649 29.5 % 27.4 % 22.1 % 25.7 % 55.6 % Professional service 50,726 50,438 42,688 12.2 % 14.2 % 15.1 % 0.6 % 18.2 % Contract 139,109 93,448 72,525 33.5 % 26.3 % 25.6 % 48.9 % 28.8 % Total revenues, net $ 415,823 $ 355,795 $ 282,876 100.0 % 100.0 % 100.0 % 16.9 % 25.8 % For the Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022 Total revenues were $415.8 million for the year ended December 31, 2023, an increase of $60.0 million or 16.9% compared to $355.8 million for the year ended December 31, 2022.
Cash used in financing activities was $2.6 million for the year ended December 31, 2022, compared to cash provided by financing activities of $443.6 million for the year ended December 31, 2021. Cash used in financing activities for the year ended December 31, 2022, was substantially driven by stock based compensation related transactions and principal payments on long-term debt.
Cash used in financing activities was $1.6 million for the year ended December 31, 2023, compared to cash provided by financing activities of $2.6 million for the year ended December 31, 2022. Cash used in financing activities for the year ended December 31, 2023, was substantially driven by stock based compensation related transactions.
Included in operating expenses for the year ended December 31, 2022 was a $4.4 million reduction to the fair value of the contingent consideration liability for certain post-closing revenue focused milestones from the MENU Acquisition. There was no comparable reduction to expense for the year ended December 31, 2021.
Included in operating expenses for the year ended December 31, 2023 was a $9.2 million reduction to the fair value of the contingent consideration liability for certain post-closing revenue focused milestones from the acquisition of MENU Technologies A.G. (the "MENU Acquisition") compared to a $4.4 million reduction for the year 31 Table of Contents ended December 31, 2022.
Refer to "Key Performance Indicators and Non-GAAP Financial Measures" below for important information on key performance indicators and non-GAAP financial measures, including ARR, active sites, and adjusted subscription service gross margin, used by us to evaluate Restaurant/Retail segment performance. 26 Table of Contents RESULTS OF OPERATIONS Results of operations for the years ended December 31, 2022, 2021, and 2020 were as follows: Consolidated Results Year Ended December 31, Percentage of total revenue Increase (decrease) in thousands 2022 2021 2020 2022 2021 2020 2022 vs 2021 2021 vs 2020 Net revenues: Hardware $ 114,410 $ 105,014 $ 73,228 32.2 % 37.1 % 34.3 % 8.9 % 43.4 % Subscription service 97,499 62,649 31,370 27.4 % 22.1 % 14.7 % 55.6 % 99.7 % Professional service 50,438 42,688 37,914 14.2 % 15.1 % 17.7 % 18.2 % 12.6 % Contract 93,448 72,525 71,274 26.3 % 25.6 % 33.3 % 28.8 % 1.8 % Total revenues, net $ 355,795 $ 282,876 $ 213,786 100.0 % 100.0 % 100.0 % 25.8 % 32.3 % Gross margin Hardware 22,186 24,173 14,341 6.2 % 8.5 % 6.7 % (8.2) % 68.6 % Subscription service 50,075 23,998 10,458 14.1 % 8.5 % 4.9 % 108.7 % 129.5 % Professional service 9,456 8,113 8,893 2.7 % 2.9 % 4.2 % 16.6 % (8.8) % Contract 7,576 5,837 5,633 2.1 % 2.1 % 2.6 % 29.8 % 3.6 % Total gross margin 89,293 62,121 39,325 25.1 % 22.0 % 18.4 % 43.7 % 58.0 % Operating expenses: Selling, general and administrative 101,219 83,998 46,196 28.4 % 29.7 % 21.6 % 20.5 % 81.8 % Research and development 48,643 34,579 19,252 13.7 % 12.2 % 9.0 % 40.7 % 79.6 % Amortization of identifiable intangible assets 1,863 1,825 1,163 0.5 % 0.6 % 0.5 % 2.1 % 56.9 % Adjustment to contingent consideration liability (4,400) — (3,340) (1.2) % — % (1.6) % N/A (100.0) % Gain on insurance proceeds — (4,400) — — % (1.6) % — % (100.0) % N/A Total operating expenses 147,325 116,002 63,271 41.4 % 41.0 % 29.6 % 27.0 % 83.3 % Operating loss (58,032) (53,881) (23,946) (16.3) % (19.0) % (11.2) % 7.7 % 125.0 % Other (expense) income, net (1,224) (1,279) 808 (0.3) % (0.5) % 0.4 % (4.3) % Loss on extinguishment of debt — (11,916) (8,123) — % (4.2) % (3.8) % (100.0) % 46.7 % Interest expense, net (8,811) (18,147) (8,287) (2.5) % (6.4) % (3.9) % (51.4) % 119.0 % Loss before benefit from income taxes (68,067) (85,223) (39,548) (19.1) % (30.1) % (18.5) % (20.1) % 115.5 % (Provision for) benefit from income taxes (1,252) 9,424 2,986 (0.4) % 3.3 % 1.4 % (113.3) % >200 % Net loss $ (69,319) $ (75,799) $ (36,562) (19.5) % (26.8) % (17.1) % (8.5) % 107.3 % Beginning with this Annual Report, we retroactively split our "Service" financial statement line items ("FSLIs") into two FSLIs, "Subscription Service" and "Professional Service" and our "Product" FSLIs were renamed to "Hardware".
Refer to "Key Performance Indicators and Non-GAAP Financial Measures" below for important information on key performance indicators and non-GAAP financial measures, including ARR, active sites, and adjusted subscription service gross margin, used by us to evaluate Restaurant/Retail segment performance. 27 Table of Contents RESULTS OF OPERATIONS Results of operations for the years ended December 31, 2023, 2022, and 2021 were as follows: Consolidated Results Year Ended December 31, Percentage of total revenue Increase (decrease) in thousands 2023 2022 2021 2023 2022 2021 2023 vs 2022 2022 vs 2021 Net revenues: Hardware $ 103,391 $ 114,410 $ 105,014 24.9 % 32.2 % 37.1 % (9.6) % 8.9 % Subscription service 122,597 97,499 62,649 29.5 % 27.4 % 22.1 % 25.7 % 55.6 % Professional service 50,726 50,438 42,688 12.2 % 14.2 % 15.1 % 0.6 % 18.2 % Contract 139,109 93,448 72,525 33.5 % 26.3 % 25.6 % 48.9 % 28.8 % Total revenues, net $ 415,823 $ 355,795 $ 282,876 100.0 % 100.0 % 100.0 % 16.9 % 25.8 % Gross margin Hardware 23,072 22,186 24,173 5.5 % 6.2 % 8.5 % 4.0 % (8.2) % Subscription service 58,862 50,075 23,998 14.2 % 14.1 % 8.5 % 17.5 % 108.7 % Professional service 7,512 9,456 8,113 1.8 % 2.7 % 2.9 % (20.6) % 16.6 % Contract 8,864 7,576 5,837 2.1 % 2.1 % 2.1 % 17.0 % 29.8 % Total gross margin 98,310 89,293 62,121 23.6 % 25.1 % 22.0 % 10.1 % 43.7 % Operating expenses: Sales and marketing 38,513 34,900 24,166 9.3 % 9.8 % 8.5 % 10.4 % 44.4 % General and administrative 68,992 66,319 59,832 16.6 % 18.6 % 21.2 % 4.0 % 10.8 % Research and development 58,356 48,643 34,579 14.0 % 13.7 % 12.2 % 20.0 % 40.7 % Amortization of identifiable intangible assets 1,858 1,863 1,825 0.4 % 0.5 % 0.6 % (0.3) % 2.1 % Adjustment to contingent consideration liability (9,200) (4,400) — (2.2) % (1.2) % — % 109.1 % N/A Gain on insurance proceeds (500) — (4,400) (0.1) % — % (1.6) % N/A (100.0) % Total operating expenses 158,019 147,325 116,002 38.0 % 41.4 % 41.0 % 7.3 % 27.0 % Operating loss (59,709) (58,032) (53,881) (14.4) % (16.3) % (19.0) % 2.9 % 7.7 % Other expense, net (489) (1,224) (1,279) (0.1) % (0.3) % (0.5) % (60.0) % (4.3) % Loss on extinguishment of debt (635) — (11,916) (0.2) % — % (4.2) % N/A (100.0) % Interest expense, net (6,931) (8,811) (18,147) (1.7) % (2.5) % (6.4) % (21.3) % (51.4) % Loss before (provision for) benefit from income taxes (67,764) (68,067) (85,223) (16.3) % (19.1) % (30.1) % (0.4) % (20.1) % (Provision for) benefit from income taxes (1,988) (1,252) 9,424 (0.5) % (0.4) % 3.3 % 58.8 % (113.3) % Net loss $ (69,752) $ (69,319) $ (75,799) (16.8) % (19.5) % (26.8) % 0.6 % (8.5) % Beginning with this Annual Report, we retroactively split our "Selling, general and administrative" financial statement line item ("FSLI") into two FSLIs, "Sales and marketing" and "General and administrative".
Over the next 12 months our total contractual obligations are $39.2 million, consisting of purchase commitments for normal operations (purchase of inventory, software licensing, use of external labor, and third-party cloud services) of $29.6 million, interest payments of $8.0 million and facility leases of $1.6 million.
Over the next 12 months our total contractual obligations are $35.9 million, consisting of purchase commitments for normal operations (purchase of inventory, software licensing, use of external labor, and third-party cloud services) of $27.1 million, interest payments of $7.4 million related to the Senior Notes, and facility leases of $1.4 million.
We use certain estimates and judgments that consider several factors, including product demand, changes in customer requirements and changes in technology to provide for excess and obsolescence reserves to properly value inventory.
The Company uses certain estimates and judgments and considers several factors including hardware demand, changes in customer requirements and changes in technology to provide for excess and obsolescence reserves to properly value inventory.
Subscription service revenues were $97.5 million for the year ended December 31, 2022, an increase of $34.9 million or 55.6% compared to $62.6 million for the year ended December 31, 2021.
Subscription service revenues were $122.6 million for the year ended December 31, 2023, an increase of $25.1 million or 25.7% compared to $97.5 million for the year ended December 31, 2022.
The increase was substantially driven by increases in sales and marketing expense of $6.6 million and internal technology infrastructure costs of $4.1 million, both substantially driven by an increase in purchased services and higher compensation costs associated with additional personnel as we continue to support the growth of our business.
The residual increase was substantially driven by an increase in purchased services and higher compensation costs associated with additional personnel as we continue to support the growth of our business.
ASC Topic 606 : Revenue from Contracts with Customers requires the Company to distinguish and measure performance obligations under customer contracts. Contract consideration is allocated to all performance obligations within the arrangement or contract.
Revenue Recognition Restaurant/Retail The Company's revenue in the Restaurant/Retail segment is derived from three types of revenue: hardware sales, subscription services, and professional services. ASC Topic 606 : Revenue from Contracts with Customers requires the Company to distinguish and measure performance obligations under customer contracts. Contract consideration is allocated to all performance obligations within the arrangement or contract.
Hardware revenues were $114.4 million for the year ended December 31, 2022, an increase of $9.4 million or 8.9% compared to $105.0 million for the year ended December 31, 2021.
Hardware revenues were $103.4 million for the year ended December 31, 2023, a decrease of $11.0 million or 9.6% compared to $114.4 million for the year ended December 31, 2022.
Of the $8.2 million increase related to Guest Engagement, $3.0 million was driven by the year ended December 31, 2021, only including nine months of post-acquisition Punchh R&D expenses compared to the full twelve months in the year ended December 31, 2022, and $2.3 million was driven by the year ended December 31, 2022, including five months of post-acquisition MENU R&D expenses.
The residual increase of $3.2 million was driven by the year ended December 31, 2022 only including approximately five months of post-acquisition MENU R&D expenses.
Key performance indicators and non-GAAP financial measures do not reflect and should be viewed independently of our financial performance determined in accordance with GAAP.
Key performance indicators and non-GAAP financial measures do not reflect and should be viewed independently of our financial performance determined in accordance with GAAP. Key performance indicators and non-GAAP financial measures are not forecasts or indicators of future or expected results and should not have undue reliance placed upon them by investors.
To the extent that we change the manner in which we develop and test new features and functionalities related to our platform, assess the ongoing value of capitalized assets or determine the estimated useful lives over 42 Table of Contents which the costs are amortized, the amount of internal-use software development costs we capitalize and amortize could change in future periods Accounting for Business Combinations We account for acquired businesses using in accordance with ASC Topic 805, Business Combinations , which requires that acquired assets and assumed liabilities be recorded at their respective fair values on the date of acquisition.
To the extent that we change the manner in which we develop and test new features and functionalities related to our platform, assess the ongoing value of capitalized assets or determine the estimated useful lives over which the costs are amortized, the amount of internal-use software development costs we capitalize and amortize could change in future periods.
Annual Recurring Revenue (“ARR”) Year Ended December 31, Increase (decrease) In thousands 2022 2021 2020 2022 vs 2021 2021 vs 2020 Guest Engagement* $ 58,933 $ 46,686 $ — 26.2 % N/A Operator Solutions 41,614 32,120 24,705 29.6 % 30.0 % Back Office 10,896 9,390 8,755 16.0 % 7.3 % Total $ 111,443 $ 88,196 $ 33,460 26.4 % 163.6 % *Guest Engagement ARR includes MENU ARR only in the year ended December 31, 2022 Active Sites Year Ended December 31, Increase (decrease) In thousands 2022 2021 2020 2022 vs 2021 2021 vs 2020 Guest Engagement* 69.9 56.1 — 24.6 % N/A Operator Solutions 19.5 15.9 11.7 22.6 % 35.9 % Back Office 7.0 6.3 5.9 11.1 % 6.8 % *Guest Engagement active sites includes MENU active sites only in the year ended December 31, 2022 34 Table of Contents Non-GAAP Financial Measures Within this Annual Report, the Company makes reference to adjusted subscription service gross margin, EBITDA, adjusted EBITDA, adjusted net loss, and adjusted diluted net loss per share which are non-GAAP financial measures.
Annual Recurring Revenue Year Ended December 31, Increase (decrease) In thousands 2023 2022 2021 2023 vs 2022 2022 vs 2021 Guest Engagement* $ 63,784 $ 58,933 $ 46,686 8.2 % 26.2 % Operator Solutions 60,159 41,614 32,120 44.6 % 29.6 % Back Office 12,960 10,896 9,390 18.9 % 16.0 % Total $ 136,903 $ 111,443 $ 88,196 22.8 % 26.4 % *Guest Engagement ARR includes MENU ARR only in the years ended December 31, 2023 and 2022. 33 Table of Contents Active Sites Year Ended December 31, Increase (decrease) In thousands 2023 2022 2021 2023 vs 2022 2022 vs 2021 Guest Engagement* 70.8 69.9 56.1 1.3 % 24.6 % Operator Solutions 23.3 19.5 15.9 19.5 % 22.6 % Back Office 7.7 7.0 6.3 10.0 % 11.1 % *Guest Engagement active sites includes MENU active sites only in the years ended December 31, 2023 and 2022.
Gross Margin Year Ended December 31, Gross Margin Percentage Increase (decrease) in thousands 2022 2021 2020 2022 2021 2020 2022 vs 2021 2021 vs 2020 Gross margin Hardware $ 22,186 $ 24,173 $ 14,341 19.4 % 23.0 % 19.6 % (8.2) % 68.6 % Subscription service 50,075 23,998 10,458 51.4 % 38.3 % 33.3 % 108.7 % 129.5 % Professional service 9,456 8,113 8,893 18.7 % 19.0 % 23.5 % 16.6 % (8.8) % Contract 7,576 5,837 5,633 8.1 % 8.0 % 7.9 % 29.8 % 3.6 % Total gross margin $ 89,293 $ 62,121 $ 39,325 25.1 % 22.0 % 18.4 % 43.7 % 58.0 % For the Year Ended December 31, 2022 Compared to the Year Ended December 31, 2021 Total gross margin as a percentage of total revenue for the year ended December 31, 2022, increased to 25.1% as compared to 22.0% for the year ended December 31, 2021.
The increase was substantially driven by Government segment's Intelligence, Surveillance, and Reconnaissance solutions ("ISR Solutions") product line revenues due to continued Counter small Unmanned Aircraft System tasks orders. 29 Table of Contents Gross Margin Year Ended December 31, Gross Margin Percentage Increase (decrease) in thousands 2023 2022 2021 2023 2022 2021 2023 vs 2022 2022 vs 2021 Gross margin Hardware $ 23,072 $ 22,186 $ 24,173 22.3 % 19.4 % 23.0 % 4.0 % (8.2) % Subscription service 58,862 50,075 23,998 48.0 % 51.4 % 38.3 % 17.5 % 108.7 % Professional service 7,512 9,456 8,113 14.8 % 18.7 % 19.0 % (20.6) % 16.6 % Contract 8,864 7,576 5,837 6.4 % 8.1 % 8.0 % 17.0 % 29.8 % Total gross margin $ 98,310 $ 89,293 $ 62,121 23.6 % 25.1 % 22.0 % 10.1 % 43.7 % For the Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022 Total gross margin as a percentage of total revenue for the year ended December 31, 2023, decreased to 23.6% as compared to 25.1% for the year ended December 31, 2022.
The market approach incorporates the use of the quoted price and public company methods utilizing public market data for our company and comparable companies for each of our two reporting segments.
The market approach incorporates the use of the quoted price and public company methods utilizing public market data for our company and comparable companies for each of our two reporting segments. Restaurants/Retail: We performed a quantitative assessment to test our Restaurant/Retail reporting unit impairment as of October 1, 2023.
Management additionally believes that adjusted EBITDA permits investors to gain an understanding of the factors and trends affecting its ongoing cash earnings, from which capital investments are made and debt is serviced.
Management also believes that adjusted EBITDA provides investors with insight into factors and trends that could affect the Company's ongoing cash earnings, from which capital investments are made and debt is serviced.
Loss on Extinguishment of Debt Year Ended December 31, Percentage of total revenue Increase (decrease) in thousands 2022 2021 2020 2022 2021 2020 2022 vs 2021 2021 vs 2020 Loss on extinguishment of debt $ — $ (11,916) $ (8,123) — % (4.2) % (3.8) % (100.0) % 46.7 % For the Year Ended December 31, 2022 Compared to the Year Ended December 31, 2021 Loss on extinguishment of debt was $11.9 million for the year ended December 31, 2021, related to the repayment of the Owl Rock Term Loan.
Loss on Extinguishment of Debt Year Ended December 31, Percentage of total revenue Increase (decrease) in thousands 2023 2022 2021 2023 2022 2021 2023 vs 2022 2022 vs 2021 Loss on extinguishment of debt $ (635) $ — $ (11,916) (0.2) % — % (4.2) % N/A (100.0) % For the Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022 Loss on extinguishment of debt was $0.6 million for the year ended December 31, 2023, related to the induced conversion of the 4.500% Convertible Senior Notes due 2024 (the "2024 Notes").
Hardware margin as a percentage of hardware revenue for the year ended December 31, 2022, decreased to 19.4% as compared to 23.0% for the year ended December 31, 2021. The decrease in margin was substantially driven by excess and obsolescent inventory charges due to managing higher inventory levels to mitigate supply risks.
Hardware margin as a percentage of hardware revenue for the year ended December 31, 2023, increased to 22.3% as compared to 19.4% for the year ended December 31, 2022. The increase in margin was substantially driven by improved inventory management resulting in lower excess and obsolescent inventory charges during the year ended December 31, 2023.
Other drivers were increases in stock-based compensation of $10.4 million of which $8.7 million was related to the Punchh Acquisition, $4.3 million in corporate expenses, $2.3 million in internal technology infrastructure costs, and $1.5 million for sales and marketing expenses. 30 Table of Contents Research and Development Expenses Year Ended December 31, Percentage of total revenue Increase (decrease) in thousands 2022 2021 2020 2022 2021 2020 2022 vs 2021 2021 vs 2020 Research and development $ 48,643 $ 34,579 $ 19,252 13.7 % 12.2 % 9.0 % 40.7 % 79.6 % For the Year Ended December 31, 2022 Compared to the Year Ended December 31, 2021 R&D expenses were $48.6 million for the year ended December 31, 2022, an increase of $14.1 million or 40.7% compared to $34.6 million for the year ended December 31, 2021.
Research and Development Expenses Year Ended December 31, Percentage of total revenue Increase (decrease) in thousands 2023 2022 2021 2023 2022 2021 2023 vs 2022 2022 vs 2021 Research and development $ 58,356 $ 48,643 $ 34,579 14.0 % 13.7 % 12.2 % 20.0 % 40.7 % For the Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022 R&D expenses were $58.4 million for the year ended December 31, 2023, an increase of $9.7 million or 20.0% compared to $48.6 million for the year ended December 31, 2022.
Professional service margin as a percentage of professional service revenue for the year ended December 31, 2021, decreased to 19.0% compared to 23.5% for the year ended December 31, 2020. The decrease was substantially driven by a decrease in our hardware repair margins.
Professional service margin as a percentage of professional service revenue for the year ended December 31, 2023, decreased to 14.8% as compared to 18.7% for the year ended December 31, 2022. The decrease was substantially driven by decreases in margins for implementation services and hardware service repair, partially offset by an increase in margin on our installation services.
We calculate ARR by annualizing the monthly recurring revenue for all active sites as of the last day of each month for the respective reporting period.
ARR is the annualized revenue from our subscription services, which includes subscription fees for our SaaS solutions, related support, and transaction-based fees for payment processing services. We calculate ARR by annualizing the monthly recurring revenue for all active sites as of the last day of each month for the respective reporting period.
Cash used in investing activities for the year ended December 31, 2022, included $18.8 million of cash consideration, net of cash acquired, for the MENU Acquisition and acquisition of substantially all the assets and liabilities of a privately held restaurant technology company (the "Q1 2022 Acquisition"), $40.3 million for purchases of short-term held-to-maturity securities, and capital expenditures of $6.4 million for developed technology costs associated with our Restaurant/Retail software platforms.
Cash used in investing activities for the year ended December 31, 2023, included $1.9 million of cash consideration, net of cash acquired, for the rights to ongoing payment facilitator referral commissions from a privately held restaurant technology company (the "Q4 2023 Acquisition") and capital expenditures of $5.5 million for internal use software and $5.3 million for developed technology costs associated with our Restaurant/Retail software platforms, partially off-set by $5.0 million of proceeds from net sales of short-term held-to-maturity securities.
The Government segment has three principal contract offerings: intelligence, surveillance, and reconnaissance solutions, mission systems operations and maintenance, and commercial software products for use in analytic and operational environments that leverage geospatial intelligence data. 41 Table of Contents The Company's revenue in the Government segment is recognized over time as control is generally transferred continuously to its customers, with the exception of certain commercial software products that are transferred point in time when control transfers.
The Company's revenue in the Government segment is recognized over time as control is generally transferred continuously to its customers, with the exception of certain commercial software products that are transferred point in time when control transfers.
Cash used in operating activities for the year ended December 31, 2022, was substantially driven by a net loss from operations, net of non-cash charges and additional net working capital requirements substantially driven by an increase in accounts receivable resulting from revenue growth.
Cash used in operating activities for the year ended December 31, 2023, was substantially driven by a net loss from operations of $69.8 million, net of non-cash charges of $32.5 million, partially off-set by a reduction in net working capital requirements substantially driven by a decrease in inventory of $16.0 million, due to improved inventory management, and an increase in accounts payable of $6.3 million resulting from a growth in expenses and timing of payments.
Selling, General and Administrative Expenses (“SG&A”) Year Ended December 31, Percentage of total revenue Increase (decrease) in thousands 2022 2021 2020 2022 2021 2020 2022 vs 2021 2021 vs 2020 Selling, general and administrative $ 101,219 $ 83,998 $ 46,196 28.4 % 29.7 % 21.6 % 20.5 % 81.8 % For the Year Ended December 31, 2022 Compared to the Year Ended December 31, 2021 SG&A expenses were $101.2 million for the year ended December 31, 2022, an increase of $17.2 million or 20.5% compared to $84.0 million for the year ended December 31, 2021.
General and Administrative Expenses ("G&A") Year Ended December 31, Percentage of total revenue Increase (decrease) in thousands 2023 2022 2021 2023 2022 2021 2023 vs 2022 2022 vs 2021 General and administrative $ 68,992 $ 66,319 $ 59,832 16.6 % 18.6 % 21.2 % 4.0 % 10.8 % For the Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022 G&A expenses were $69.0 million for the year ended December 31, 2023, an increase of $2.7 million or 4.0% compared to $66.3 million for the year ended December 31, 2022.
The increase was substantially driven by the Government segment's ISR Solutions product line revenues due to task orders resulting from the Air Force Research Laboratory Counter-small Unmanned Aircraft System contract awarded in 2021.
The decrease in contract margin was substantially driven by the Air Force Research Laboratory Counter-small Unmanned Aircraft System contract within the Government segment's ISR Solutions product line having a lower contracted margin than historical contracts.
Actual results could differ from these estimates. Our estimates are subject to uncertainties, including those associated with market conditions, risks and trends. Refer to "Item 1A. Risk Factors" of this Annual Report for additional information. Revenue Recognition Policy Restaurant/Retail The Company's revenue in the Restaurant/Retail segment is derived from three types of revenue: hardware sales, subscription services, and professional services.
Actual results could differ from these estimates. Our estimates are subject to uncertainties, including those associated with market conditions, risks and trends. Refer to "Item 1A. Risk Factors" of this Annual Report for additional information. Refer to "Note 1 - Summary of Significant Accounting Policies" for additional information regarding our accounting policies and other disclosures required by GAAP.
In the Government segment, when determining revenue recognition, the Company analyzes whether its performance obligations under Government contracts are satisfied over a period of time or at a point in time. In general, the Company's performance obligations are satisfied over a period of time; however, there may be circumstances where the latter or both scenarios could apply to a contract.
In general, the Company's performance obligations are satisfied over a period of time; however, there may be circumstances where the latter or both scenarios could apply to a contract. The Company usually expects payment within 30 to 90 days from the date of service, depending on its terms with the customer.
Contract margin as a percentage of contract revenue for the year ended December 31, 2021, was relatively unchanged at 8.0% compared to 7.9% for the year ended December 31, 2020.
Contract margin as a percentage of contract revenue for the year ended December 31, 2023, decreased to 6.4% compared to 8.1% for the year ended December 31, 2022.
Contract revenues were $93.4 million for the year ended December 31, 2022, an increase of $20.9 million or 28.8% compared to $72.5 million for the year ended December 31, 2021.
Professional service revenues were $50.7 million for the year ended December 31, 2023, which remained relatively unchanged compared to $50.4 million for the year ended December 31, 2022. Contract revenues were $139.1 million for the year ended December 31, 2023, an increase of $45.7 million or 48.9% compared to $93.4 million for the year ended December 31, 2022.
The Company utilizes ARR and active sites as key performance indicators of the scale of our subscription services for both new and existing customers. ARR is the annualized revenue from our subscription services, which includes subscription fees for our SaaS solutions, related support, and transaction-based fees for payment processing services.
Key Performance Indicators Within this Annual Report, the Company makes reference to annual recurring revenue, or ARR, and active sites, which are both key performance indicators. The Company utilizes ARR and active sites as key performance indicators of the scale of our subscription services for both new and existing customers.
If the carrying value of either reporting unit exceeds its fair value, an impairment charge is recognized for the excess of the carrying value of the reporting unit over its fair value. Fair values of the reporting units are estimated using a weighted methodology considering the output from both the income and market approaches.
Goodwill Fair values of the reporting units are estimated using a weighted methodology considering the output from both the income and market approaches. The income approach incorporates the use of a DCF analysis.
Restaurants/Retail: We performed a quantitative assessment to test our Restaurant/Retail reporting unit impairment as of October 1, 2022. The excess of the estimated fair value over the carrying value (expressed as a percentage of carrying value) was in excess of its carrying value of $665 million by approximately 21% as of September 30, 2022.
The excess of the estimated fair value over the carrying value (expressed as a percentage of carrying value) was in excess of its carrying value of $655 million by approximately 37% as of October 1, 2023.
Once the services provided are determined to be distinct or not distinct, the Company evaluates how to allocate the transaction price. Generally, the Government segment does not sell the same good or service to similar customers and the contract performance obligations are unique to each government solicitation. The performance obligations are typically not distinct.
Once the services provided are determined to be distinct or not distinct, the Company evaluates how to allocate the transaction price.
As a result of adoption, the accounting for our Senior Notes is no longer bifurcated between debt and equity (refer to "Note 1 - Basis of Presentation" of the notes to consolidated financial statements in "Part II, Item 8. Financial Statements and Supplementary Data" of this Annual Report for additional information).
Refer to “Note 9 – Debt” of the notes to consolidated financial statements in "Part II, Item 8. Financial Statements and Supplementary Data" of this Annual Report for details.
Adjusted subscription service gross margin represents subscription service gross margin adjusted to exclude amortization from acquired and internally developed software. EBITDA represents net loss before income taxes, interest expense and depreciation and amortization.
Non-GAAP Financial Measures Within this Annual Report, the Company makes reference to adjusted subscription service gross margin, EBITDA, adjusted EBITDA, adjusted net loss, and adjusted diluted net loss per share which are non-GAAP financial measures. Adjusted subscription service gross margin represents subscription service gross margin adjusted to exclude amortization from acquired and internally developed software.
The residual increase of $6.1 million was driven by increases of $3.7 million due to the year ended December 31, 2021, only including nine months of post-acquisition Punchh SG&A expenses compared to the full twelve months in the year ended December 31, 2022, and $2.4 million due to the year ended December 31, 2022, including five months of post-acquisition MENU SG&A expenses.
The increase was substantially driven by a $1.9 million increase in sales and marketing efforts for MENU driven by the year ended December 31, 2022 only 30 Table of Contents having approximately five months of post-acquisition MENU S&M expenses.
The increase was substantially driven by increases in hardware revenues from kitchen display systems of $4.9 million, other hardware (mobile, terminals, kiosk, drive-thru, peripherals) of $2.4 million, and payment devices of $2.1 million, all substantially driven by an increase in sales volume.
The decrease was substantially driven by decreases in hardware revenues from terminals of $6.7 million and kitchen display systems of $5.3 million, both substantially driven by a decrease in sales volume.
Management's Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Annual Report. 38 Table of Contents CRITICAL ACCOUNTING POLICIES AND ESTIMATES Our consolidated financial statements are based on the application of accounting principles generally accepted in the United States of America.
We cannot provide assurance that any additional financing or strategic alternatives will be available to us on acceptable terms or at all. 37 Table of Contents CRITICAL ACCOUNTING POLICIES AND ESTIMATES Our consolidated financial statements are based on the application of accounting principles generally accepted in the United States of America.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeThe volatility of exchange rates depends on many factors that we cannot forecast with reliable accuracy. Interest Rate Risk As of December 31, 2022, we had $13.8 million, $120.0 million, and $265.0 million in aggregate principal amount outstanding on the 2024 Notes, the 2026 Notes, and the 2027 Notes, respectively.
Biggest changeThe volatility of exchange rates depends on many factors that we cannot forecast with reliable accuracy. Interest Rate Risk As of December 31, 2023, we had $120.0 million, and $265.0 million in aggregate principal amount outstanding on the 2026 Notes and the 2027 Notes, respectively.
These primary currencies are the Great British Pound, the Euro, the Swiss Franc, the Serbian Dinar, and the Australian dollar, the Singapore dollar, the Canadian dollar, the Indian Rupee and the Chinese Renminbi. Accordingly, changes in exchange rates may negatively affect our revenue and net income (loss) as expressed in U.S. dollars.
These primary currencies are the Great British Pound, the Euro, the Swiss Franc, the Serbian Dinar, the Australian dollar, the Singapore dollar, the Canadian dollar, the Indian Rupee and the Chinese Renminbi. Accordingly, changes in exchange rates may negatively affect our revenue and net income (loss) as expressed in U.S. dollars.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Foreign Currency Exchange Risk Our primary exposures relate to certain non-dollar denominated sales and operating expenses in Canada, Europe and Asia.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Foreign Currency Exchange Risk Our primary exposures relate to certain non-dollar denominated sales and operating expenses in Canada, Europe, Asia, and Australia.
However, the fair value of the Senior Notes changes when the market price of our common stock fluctuates or interest rates change. 44 Table of Contents
However, the fair value of the Senior Notes changes when the market price of our common stock fluctuates or interest rates change. 43 Table of Contents
We have experienced and will continue to experience fluctuations in our net income (loss) as a result of gains (losses) on these foreign currency transactions and the remeasurement of monetary assets and liabilities. As of December 31, 2022, the impact of foreign currency exchange rate changes on our revenues and net income (loss) were not material.
We have experienced and will continue to experience fluctuations in our net income (loss) as a result of gains (losses) on these foreign currency transactions and the remeasurement of monetary assets and liabilities. As of December 31, 2023, the impact of foreign currency exchange rate changes on our revenues and net income (loss) was not material.

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