Par Technology Corp Q1 FY2020 Earnings Call

Good afternoon. My name is Johanna, and I will be your conference operator today. At this time, I would like to welcome everyone to the FY 2020 First Quarter Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. At this time, I would like to turn the conference over to Mr. Chris Byrnes. You may begin, sir.

Thank you, Johanna, and good afternoon, everyone. I hope during these crazy days that everyone is safe, healthy, along with their families. I'd like to take the opportunity to welcome you today also to the call for PAR's 2020 first quarter results review. Complete disclosure of our results today can be found in our press release issued this afternoon as well as in our related Form 8-K furnished to the SEC. To access the press release and the financial results details, please see the Investor Relations and News section of our website. At this time, I'd like to take care of certain details regarding the call today. Participants on the call should be aware that we're recording the call this afternoon, and it will be available for playback. Also, we are broadcasting the conference call via the worldwide web, so please be advised if you ask a question, it will be included in both our live conference and any future use of the recording. I'd also like to remind participants that this conference call includes forward-looking statements that reflect management's expectations based on currently available data. However, actual results are subject to future events and uncertainties, especially during these times. Joining me on the call today is PAR's CEO and President, Savneet Singh; and Bryan Menar, PAR's Chief Financial Officer. I'd now like to turn the call over to Savneet for the formal remarks portion of the call, which will be followed by general Q&A. Savneet?

Thank you, Chris, and good afternoon, everyone. Thank you for joining our call today. I hope that all of you and your families are staying healthy and safe. These are unprecedented times, so we will be taking somewhat of a different approach to our commentary today. On today's call, we'll not only review our business performance and financial results for the first quarter, but we'll also share with you the impact that the coronavirus pandemic has had on our business, what we are doing to address the associated challenges, and how the strength of our business model positions us for long-term success. To begin with our Q1 performance review, our total revenues grew 22.4% to $54.7 million and we reported a GAAP net loss of $10.9 million, a loss per share of $0.61, as compared to a net loss of $2.7 million and a loss per share of $0.17 in the same period last year. On an adjusted basis, the non-GAAP net loss for the quarter was $5.1 million and a loss per share of $0.28 versus a net loss of $1.5 million and a loss per share of $0.09 in Q1 2019. Details on the GAAP to non-GAAP adjustments are included in today's press release. Bryan will provide additional insights on the numbers for the quarter. Now, to address the current business environment. Our company is tackling the challenges associated with COVID-19 with the same seriousness, intellectual rigor and fact-based analysis that we've employed for over 50 years since PAR was founded. We are focused on three things: the health and safety of our team members, demonstrating leadership by continuing to solve our customers' most pressing issues and building long-term value to shareholders. Our unique capabilities include an adaptable business model and a robust client base that have shaped PAR's leading market position. Despite the expected near-term headwinds for restaurants, we are serving thousands of essential businesses and their customers as they continue to operate and serve the general public. Our brand promise is to build the solutions that connect people to the restaurant meals and moments they love. We're doing our best to hold true to that promise in 2020. Our customer base has been extremely resilient in this difficult time. Most of our customers are quick service or fast casual restaurants, and a high number, approximately 85%, have been able to remain open and maintain their operations through drive-thru, counter service, and delivery even while in-store diners are closed. With the initial impact of the COVID-19 restrictions, our customers’ same-store sales have been impacted by as much as 40% compared to the prior year. However, over the last four weeks, we are seeing a rebound in sales for our customers as they streamline their operations and drive efficiencies with drive-thru, pickup, and delivery, along with limited menus, reduced operating hours, and maximizing staff levels. Every day, we are seeing closed stores start to reopen. PAR entered this crisis in a position of great strength. We ended the quarter with $60 million in cash and cash equivalents and short-term investments, and we feel very comfortable with our cash position. Additionally, we initiated a cost savings plan to generate more than $10 million in savings against our annual plan designed to protect our liquidity flexibility to enable us to increase investment in growth areas of our business. Most of our employees have been working from home since the initiation of shelter-in-place orders in mid-March, with the exception of our operations team, who have valiantly continued to work on-site to continue delivering hardware platforms to our global customers. New York State has deemed PAR as an essential business due to the strategic and critical services we provide to restaurants. For over 40 years, PAR has served restaurant clients across the globe in times of crisis. We have long demonstrated our ability to pivot quickly to address our clients' most compelling issues, and we are demonstrating that agility amid the coronavirus once again. Now, I'd like to turn the call over to our Chief Financial Officer, Bryan Menar, for a review of the quarter's financials. Bryan?

Thank you, Savneet, and good afternoon, everyone. I would now like to take this opportunity to provide some additional details surrounding our first quarter results. As Savneet previously stated, we reported revenues of $54.7 million for the quarter, up 22.4% from $44.7 million reported for Q1 2019. Our net loss was $10.9 million or $0.61 per diluted share for the quarter versus a net loss of $2.7 million or $0.17 loss per diluted share for Q1 2019. Unfavorable year-over-year results from operations were primarily driven by corporate financing charges, including an $8.1 million loss on extinguishment of debt related to the partial repurchase of the 2024 notes and an additional $1.8 million of interest expense related to the 2024 notes and the 2026 notes. Operating segment revenue for the three months ended March 31, 2020, was $37.4 million for the Restaurant/Retail segment, an increase of 27% from $29.6 million reported for Q1 2019, and $17.3 million for the Government reporting segment, which increased 15% from the $15.1 million reported for Q1 2019. Restaurant/Retail revenue for Q1 2020 by business line consisted of $19.9 million for core, which included $3.5 million for Drive-Thru; $17.5 million for Brink, which included $2.2 million for Restaurant Magic. Restaurant/Retail revenue for Q1 2019 by business line was $18.7 million for core, $9.5 million for Brink, and $1.4 million for SureCheck. Government revenue for Q1 2020 by business line consisted of $8.1 million for ISR, $8.5 million for Mission Systems, and $0.1 million for product sales compared to Q1 2019 revenue by business line of $6.3 million for ISR, $8.5 million for Mission Systems, and $0.3 million in product sales. Product revenue for the quarter was $18.6 million, up $3.1 million or 20% compared to Q1 2019. Our hardware sales in the Restaurant/Retail reporting segment were up versus prior year, primarily driven by Brink and also hardware sales from our new Drive-Thru product line. Product revenue related to Brink for the quarter ended March 31, 2020, was $6.7 million, an increase of 49% from $4.5 million recorded for the quarter ended March 31, 2019. Drive-Thru product revenue for the quarter ended March 31, 2020, was $3.4 million. Service revenue for the quarter was $18.8 million, up $4.8 million or 34% compared to Q1 2019. The increase was primarily due to growth in recurring software and hardware installation revenues. Service revenue associated with Brink includes recurring software revenues of $5.2 million, an increase of 40% from $3.7 million recorded for the quarter ended March 31, 2019. Restaurant managing service revenue includes recurring software revenue of $2 million. Contract revenue from our Government operating segment was $17.3 million, up $2.2 million or 15% as compared to Q1 2019. This increase was driven by contracts entered into during the first quarter of 2020 relating to ISR. The contract backlog totaled $136 million as of March 31, 2020, and a trailing 12-month book-to-bill of 1x. In regards to GAAP margin performance for the quarter, product margin for the quarter was 20% compared to 27.6% in Q1 2019. The reduction in product margin was primarily due to unfavorable product mix shift and increases in freight and reserve costs. Service margin for the quarter was 32.6% compared to 26.9% in Q1 2019. The improvement in service margin was primarily due to the continued shift and revenue mix to SaaS revenue with Brink and Restaurant Magic, partially offset by a $0.6 million increase in amortization expense of acquired developed technology costs resulting from the recent Restaurant Magic acquisition. Government contract margin for the quarter was 6.9% compared to 9.7% in Q1 2019. The decrease in margin was primarily due to lower product services business line revenue and increased investment in product services. Now to operating expenses. GAAP SG&A was $11.4 million, up $2.8 million versus Q1 2019. The increase was primarily driven by an additional $0.7 million of Brink sales and marketing expense, an additional $0.8 million in stock-based compensation and the inclusion of $0.7 million of SG&A expense from the recently acquired Restaurant Magic. Non-GAAP SG&A was $10.3 million, up $2.5 million versus Q1 2019. Non-GAAP SG&A adjustments for Q1 2020 included $1.1 million for stock-based compensation as compared to $0.2 million in Q1 2019. Q1 2019 also included $0.3 million of severance costs and $0.2 million related to the internal investigation of conduct in our China and Singapore offices. Restaurant development expenses were $4.9 million, up $1.8 million versus Q1 2019, driven by increased investment in Brink development of $1.8 million, and inclusion of Restaurant Magic R&D of $0.3 million, offset by R&D no longer invested due to the disposition of assets of SureCheck. Now to provide information on the company's cash flow and balance sheet position for the three months ended March 31, 2020. Cash used in operations was $15.7 million, primarily driven by an increase in net working capital needs due to increases in inventory and prepaid assets and payment for annual variable compensation. Inventory levels were strategically increased to support the rollout of projects to Brink and to mitigate the risk of supply chain disruption due to the COVID-19 pandemic. This compares to cash used in operating activities of $3.2 million for the three months ended March 31, 2019. Cash used in investment activities was $2 million for the three months ended March 31, 2020, versus cash used of $1.9 million for the three months ended March 31, 2019. During the three months ended March 31, 2020, we capitalized $1.9 million of costs associated with investments in our Restaurant/Retail segment software platforms compared to $1 million for the same period in 2019. Non-software CapEx costs were $0.2 million for the three months ended March 31, 2020, down $0.7 million versus 2019 due to a decrease in costs associated with IT infrastructure. Cash provided by financing activities from continuing operations was $49.4 million for the three months ended March 31, 2020, versus $5.8 million for the same period in 2019. The increase was primarily driven by proceeds of $115.9 million from the 2026 notes, net of issuance costs, offset by the $66.3 million partial repurchase of the 2024 notes. As of March 31, 2020, the inventory balance was $23.2 million, an increase of $4 million from December 31, 2019. Inventory turns were 4x for both our domestic and international operations. Cash receivable of $41.4 million increased $0.4 million compared to December 31, 2019. The receivable balance was broken down between the Government segment of $9.1 million and the Restaurant/Retail segment of $33.7 million. I would now like to turn the call back over to Savneet.

Thanks, Bryan. Now to complete the review of our segment performance for the first quarter. Annual recurring revenue for Brink at the end of Q1 was $22.2 million, an increase of $6.6 million and a 42% increase from a year ago and a $3 million increase from the sequential fourth quarter. This AR number is built off restaurants being invoiced as of March 15, 2020. In the quarter, we completed the installation of 970 new stores of Brink. New bookings in the quarter totaled 725 sites, and our open order backlog now stands at 1,180 stores. This lower bookings number is directly related to the initial spread of COVID-19. As the spread intensified, we saw a meaningful number of new business engagements and purchase decisions put on hold for the time being. Unfortunately, a significant number of these deployments have been delayed due to new safety guidelines instituted by restaurants to limit who is physically allowed inside their stores. We believe this situation is temporary, and we are proactively working with our customers to employ solutions as safely as possible. Regarding churn, we ended the quarter on a positive note with an annualized rate of 4.9% for the quarter. We are proud of the work we completed in 2019 which continues to result in lower churn. We will continue to invest aggressively in R&D for Brink in 2020 as we make the necessary move to an agile development environment, which will allow us faster release of new versions and a much more seamless experience for our customers. Now shifting to Restaurant Magic's performance in the quarter. ARR for Restaurant Magic at the end of March was $8.6 million, a 28% increase from Q1 2019. In the quarter, we implemented 507 new store sites and now have 5,408 active restaurants utilizing Restaurant Magic. Bookings in Q1 totaled 596 stores. I am pleased that the continued momentum of Restaurant Magic since we closed in December. In the quarter, the Restaurant Magic team has signed three new MSA deals alongside Brink and have initiated a significant pilot with a Tier 1 customer. Our core business that sells hardware and services to Tier 1 restaurant organizations performed well in Q1 as we expanded distribution channels and deployed new terminals to our largest customers in anticipation of refreshes being driven by the end-of-life Windows 7 by Microsoft. Unfortunately, this part of our business is being most impacted by COVID-19 restrictions and the overall downturn in the economic landscape. All major customers have paused most projects, new construction, and scheduled deployments. We are confident these are not lost opportunities, but rather being pushed into the second half of this year depending on a specific concept and the timing restrictions being reviewed. We are seeing some renewed business interest in specific international regions that are ahead of the U.S. on the infection curve. Now to review our Government segment. Our Government business delivered a solid quarter, evidenced by the 15% increase in revenues compared to Q1 2019. Our backlog at the end of Q1 was $136 million. Our Intel Solutions business was the driving force behind the growth in the quarter as ISR revenues increased 39.5% from last year's Q1. We continue to seek out contract opportunities where we can leverage our decade-long experience, performance excellence, specifically in value-added revenue contracts that include more direct labor and high-tech contract work within our Intel Solutions business line. In summary, we are in the midst of a shift in the way restaurant organizations evaluate, purchase, and implement restaurant technology. I believe that while our business will no doubt feel substantial impact from COVID-19, the crisis will accelerate the underlying secular trends propelling it forward today. The flexibility of a modern restaurant platform has been proven out to an extreme degree. We believe we can not only withstand this crisis but grow share during this time. PAR's market of customers has historically been and likely will continue to be heavily weighted to the QSR and fast casual market. This market generally performs better in slowing economies as customers tend to shift towards these concepts. In addition, these franchise-based businesses tend to withstand crises better as their business models seem to be more mature and enjoy brand recognition. Second, there is potential that the virus' spread is accelerating the need for digital and drive-thru spending. As restaurants experience closed table service traffic, we are seeing off-premise dining, online ordering, and delivery become the most important priority, all of which require a modern restaurant platform. Third, we are observing valuations on potential M&A targets becoming more attractive in this market. As venture funding has paused and growth stopped for many, we are seeing an increasing number of companies looking towards an exit. This, combined with the fact that many of our competitors are pulling back, can provide entry points for PAR's consolidation. It's in PAR's DNA to help our customers solve some of their most complicated operational challenges, and these challenges have only intensified during this COVID-19 period. We know that the pandemic has made life challenging for everyone, for both our customers and our employees for the past few weeks and months, reminding us that we are all in this together. All of us are empowered by the dedication of our employees, specifically their willingness to go above and beyond for our customers in these unprecedented times. This experience has challenged us to get better, pushed us to work harder, and developed a deep desire to serve our customers. It will have lasting implications on our business and industry, but in many ways, it's elevated our culture and mission. With the value we continue to provide our customers and the trust they place in us, I'm fully confident that we can emerge from this stronger than ever. We'll now open up the call to questions.

Johanna, we're ready for Q&A now.

Your first question comes from Adam Wyden of ADW Capital.

Hey guys, really remarkable. Thank you for taking my questions. So a lot going on in the restaurant industry. Can you talk a little bit about the competitive environment in enterprise? I mean, obviously, work from home and quarantine has hurt your customers, given most of them are focusing on SMB, and the lion's share of their revenues are from merchant processing. And we've heard that your largest competitor has laid off their entire enterprise sales team. I'd imagine there'd be some positive implications for pricing as well since they were kind of giving away SaaS in exchange for merchant processing, and obviously, the availability of talent. I mean can you provide some color on some of this?

Sure. I won't talk about individual competitors, but categorize. I would say that, relative to competition, we are probably in the strongest suit in that our base of customers are larger than just enterprises, and they're still open. And that has led to the opportunity for us to acquire talent faster and potentially better than we could have historically. It, in many ways, proved out our model of our focus on high-quality, high-enterprise customers as a stickier place to be. So we have seen a number of competitors pull out of our, let's call it, the enterprise market. We think that market has actually expanded for us during this time. At the same time, I do believe that our ability to win will still be tied to our ability to deliver on the solutions that we've talked about for the last couple of quarters. So I feel we're sort of hitting an interesting point where we're getting through the big technology developments we need to, to really accelerate and be agile. At the same time, we do see competition retreating, which has led to opportunities, as well as our available talent is growing.

Great. Yes. It's super, super exciting. And that was helpful. It's kind of our understanding that you guys signed up to kind of four-figure unit change with payments. Obviously, I'm not expecting to confirm that, but was hoping you might be able to give us some color on payments, the progress you've made thus far on payments and kind of the opportunity going forward.

Sure. I can't provide too much color on this. But I can say we are excited about the opportunity to expand our payment business. I think part of our challenge in the payments business will be that the table service market in 2020 will be relatively small, which was a big part of our payment plan. That said, we've been encouraged that a couple of our larger organizations are interested in deploying our payment products. So I'd say we feel encouraged out of our existing base picking up the product and maybe expanding it further than at least I had expected. The balance of that is that the table service market probably won't be here in 2020 with COVID-19. So we feel encouraged by where we are. We've got a lot of work to do before we can really get it out there. But from a customer adoption perspective, I think all of us feel like there's a really big opportunity there.

All right. I have two more questions. You've talked a lot about your microservices, kind of, replatforming, which has kind of been the bottleneck to basically rolling out more units per quarter. Obviously, your bottleneck now is actually being able to get into the restaurant. Can you talk a little bit about the progress you've made on microservices and kind of your ability to kind of replatform? And how that will be manifested in terms of rolling out more units once the restaurants open up?

Sure. I think we are incredibly happy where we are in the transition to being agile to microservices and just a more modern infrastructure. We've got an amazing leader at Brink who's really driven this from the top, and it's spread throughout the ethos of the organization. We're probably still a quarter or so away from really running, maybe a quarter and a half, but we're already seeing great progress. You can see it in our numbers. You can see it in the quality of talent that we've attracted. I hate to say that this crisis is good for anything, but in many ways, we as a firm sort of jumped on this idea that our goal is not just to survive, it's to thrive during this time. And so we're taking the time to continue to push very, very hard on our R&D spending. We did not cut $1 of R&D spending related to the microservice project, and we'll continue to get that right because, as you suggested, it's been the only reason we haven't grown the business faster. It's the only reason. So we are into that work today. And I think we're still a quarter or so away from really being up to speed, but there are real signs of progress.

Well, I mean, look, obviously, you guys with me on this call for a few years now. I mean it's super exciting now that we have basically an intersection of your ability to take on these customers and now these QSR customers realizing that they actually need that product. And I think it kind of leads me to my next question, which is, I look at your customers, and I say to myself, wow, they're super well-capitalized. Popeyes comped 30%. Jack in the Box has 93% off-premise. On some level, just talking to some of these QSRs that we talked to, COVID/the pandemic on some level should accelerate the adoption of Brink because it allows for loyalty, online ordering, and obviously, the Drive-Thru. And I think on some level, people might have been dragging their feet before, and it seems like not having it is kind of a risk to your sales in this kind of world. So super exciting on that front. I think the intersection of the microservices and now these guys are realizing that they need this, I think the growth will be explosive once they're letting you out into the restaurants. But I want to ask about something else. The company has not really ever broken out Brink from core. And we saw in the proxy that finally, you broke out core in terms of hardware and service. I was pretty stunned actually; you guys generated $11 million in operating profit. So what do you think people are missing here?

Sure. I'd say, listen, I think we, as a business, got sort of thrown out with restaurants, right? I think there was just a sentiment that everything tied to the restaurant would struggle. I think what investors are missing is the fact that we have a very, very resilient client base. These are the best organizations in the world. In many ways, we can actually accelerate these organizations. We have certain organizations that depend on us for their mobile apps, online ordering, and so on. So I think what was lost was that we were just considered another restaurant tech company without rigor around who we actually service. How do we rectify the valuation gap if there is one? Listen, I think we execute, right? We installed more stores this quarter in quite some time. We'll continue to push for growth during this time, and we'll start telling our story. I can't stress to you what a shock the COVID experience was to see our customer sales drop. But now we've seen it rally back. I think we are coming to terms with the need to keep winning in this environment and being aggressors. I think that will help bridge this valuation gap. It's part us executing and part us getting our story out.

So high level, just to summarize, I mean your peers who are merchant processors, their ARR is down, yet they trade at 15x ARR. You trade at three or whatever the number is, and you're resilient. Are you confident that the market will eventually see the valuation disconnect? I mean, is that what you're saying? Obviously, I know $10 where we were last quarter is a little bit different than we are up here. But I mean, are you confident that the market is going to be able to see the valuation disconnect? I mean, obviously, as you continue to execute and get bigger?

I think so. I do think markets eventually get relatively efficient, and it's just a function of how soon we can bridge that gap. But I'd say the fact that we, as a management team, as a company, are cognizant of that also puts more focus on it.

Well, look, it's super exciting having been an investor and bystander, just looking back to where we were in early 2018, I mean, where the company is and where it's going. I'm just – I'm very happy and pleased that I've been able to be part of the journey. And I hope that you guys figure out a way to get your cost of capital up because I think there's probably a lot of M&A to do. So congratulations on a wonderful job, and I look forward to seeing more.

Thank you.

What I'd add to that is that from our standpoint, what's helped Brink also in the attachment that we have in the hardware that we've seen over the past four quarters. The roll out, depending on the phasing when that comes back in, that's where our risk is on the revenue side. We are happy to see how our customers have fared over the past four to six weeks. Approximately 85% of them are still open.

Hi, good afternoon, guys. Congrats on a good quarter. A couple of questions from me. And I apologize in advance because I missed the first few minutes of the call. Savneet, can you give a sense for what's your outlook for the second quarter? I know your Q1 numbers are terrific, but what about your Q2 numbers, especially for Brink bookings?

Yes, if you look at through the last answer, we just don’t really know. It will be, obviously, one of our slowest summers. But like I said, we're seeing a rebound every single day. It's a little bit hard to predict store activities right now. We're able to book stores and install them, but there's a moratorium on work right now, and we need to work with customers to figure out how they want to proceed. So once things get back to some normalcy, we should be able to install at least what we did last quarter and hopefully a lot more.

Got it. Thank you, guys.

I just want to find out from you guys about the Brink POS. Is it a self-serve SaaS product? Or, just to paraphrase, can a customer deploy Brink without having any formal training?

Thanks for joining. So it can be a self-service product. Today, most of our terminals are installed by an installer, but we are working very hard to make it as self-service as possible. Most large chains do have it installed because that install generally encompasses more than just Brink—the terminal, the peripherals, and other components that they're rolling out. It hasn't been historically like this. But there's no doubt that COVID has dramatically accelerated our focus on making this as seamless as possible. You can see it being installed by an individual. However, most of our installs are still tied to someone coming into the store.

All right. Thank you. I just want to find out as well. I missed the earlier part of this earnings call. Since more QSR senior executives are staying at home these days, do you find it easier to reach out to them and discuss whether Brink could help them during this period or even post COVID-19?

During the COVID experience, it's not the best time to pitch to the CIOs or the CEOs since they were going from seeing sales drop 40%, 50%, or 60% overnight. However, what we've become is a resource for our existing customers and those we are trying to assist in providing services. We created a program called PARk it, which is a virtual drive-thru and pickup, and we're giving this to our customers to help them survive. This experience has, in many ways, bonded us not physically but emotionally to our customers and helped us understand their pain points.

Thank you very much. Just one last question: obviously, I'm just figuring out for the restaurants in terms of the unit economics. So obviously, QSRs care a lot about protecting their bottom line and, of course, sales as well. By installing Brink, could you talk about maybe some form of cost savings? Or how fast would they get ROI on installing Brink?

It's not something we disclose. In general, I think buying the point-of-sale has changed a lot. Point-of-sale is becoming part of a platform. Historically, when you would install a point-of-sale system, it was the world of the CTO and CIO. Today, that decision includes the CEO, CIO, and the whole team. The ROI is significant in that, a) it has been proven that a modern technology-enabled restaurant outperforms one that is outdated. You can see the sales growth in organizations and those that haven’t adapted. There are numerous reasons on the cost savings side, including data integrity issues and back-office savings. However, we don't have a single equation because it varies by chain. The conversation has shifted from ROI to why we're the right solution.

Yes. Excellent. Yes, I think very great results this quarter, and I look forward to the rest of the year. Thank you very much.

Thank you.

Sorry, guys. I didn't mean to – I forgot there was one last question I didn't ask. Obviously, you spoke about getting the baby out with the bathwater in restaurants. This stock has been the target of a lot of short sellers. I think it might be helpful for you guys to talk about kind of what the investment that is required on behalf of a restaurant to actually adopt Brink. I think in your conversations, you mentioned that actually, a base hardware for QSR is only a few thousand dollars. And it's also – I think from our research, it seems some of the larger chains are effectively soft dollar subsidizing the investment and providing the money upfront or over a 10-year period to finance the hardware. So I think it might be helpful for you to talk about the capital investment required to do Brink because a lot of guys are walking around saying, 'Well, the restaurant isn't making any money, they can't take Brink.' If you can outline the costs and what franchisors are doing to basically subsidize that, and what initiatives you guys are doing to defray the cost such that once you're open and microservices is going, we can do $2,000, $3,000 a quarter.

To get Brink launched in organizations, you sign up for our software product. The historical costs are about $2,000 a year depending on how many terminals you have. The actual cost of a physical terminal is not so different than a computer. You're looking anywhere from $700 to $2,000. For quick service and fast casual customers, maybe $5,000 to $10,000 is needed if you're doing a lot. However, it is relatively small CapEx. In today's world, some customers might say, 'I don't want to do any CapEx,' but we realize Brink can be installed pretty much on anything—any Windows device—so a massive upfront purchase is not necessarily needed. Many customers now say, 'I need all this technology to grow my revenue.' I think it's great that our existing customers feel that way, and financial incentives encourage faster transitions to our products.

We believe we are looking to be more aggressive in our approach, and the rational competition is encouraging. It is crucial to adapt to shifting strategies.

Great. This is super exciting. All right. That's it from me.

Hi. Thank you. This is Ryan Bressner on for Samad here. Just a couple of questions here, if I may. First, you talked a bit earlier about the broader environment, but if I could just maybe follow-up on that. How are your customers thinking about store reopenings in context of the broader consumer behavior in terms of demand recovery out of this? What's the thought there?

Our customers are still figuring things out. I don't think there's anyone saying this is our go-forward plan just yet. There's still a lot of wait and see. We got our first couple of states reopening, and we'll see how that data goes. Unfortunately, we don't have enough information yet to provide an intelligent answer. However, we do have active dialogue with larger organizations we are rolling out to about when and how to restart safely.

Okay. Thank you. Helpful. Just secondly, how have efforts to cross-sell Restaurant Magic been going? And also in your comments about PARk it earlier, how do you see this particular opportunity in drive-thru evolving after COVID?

On the Restaurant Magic side, I'm very encouraged, though we are still extremely early. We closed on Restaurant Magic at the end of December, and I think we've barely scratched the surface of building up the team. We've signed three customers together already. In terms of PARk it, the traditional drive-thru will no doubt accelerate after this crisis. I think every organization with a decent quantity of stores will have something like this by the end of the year. I don't think any CEO or CIO wants to take the risk of not having contingency plans in case there's a recurrence of COVID, especially with off-premise dining becoming the norm.

Okay. Thank you. Appreciate your time.

Of course.

And there are no further questions from the phone line.

Well, thank you, everyone, for joining this afternoon. We'll be certainly available in the coming days and weeks for callbacks and follow-ups. Please stay healthy to you and your families. Again, thank you for your time today.

Thank you for participating in today's conference. You may disconnect at this time.