Exhibit 99.3
Unaudited pro forma condensed combined financial information
On April 8, 2021, PAR Technology Corporation (“PAR Technology”) acquired Punchh Inc., a Delaware corporation (“Punchh”), through the merger of Punchh with and into an indirect wholly owned subsidiary of PAR Technology, with Punchh surviving the merger.
The following unaudited pro forma condensed combined financial information is presented to illustrate the estimated effects of the merger. The unaudited pro forma condensed combined balance sheet as of March 31, 2021 gives effect to completion of the merger as if the merger occurred on that date. The unaudited pro forma condensed combined statements of operations for the three months ended March 31, 2021 and for the year ended December 31, 2020 give effect to completion of the merger as if the merger occurred on January 1, 2020.
PAR Technology accounted for the merger as a business combination using the acquisition method of accounting as prescribed in Financial Accounting Standards Board Accounting Standards Codification 805, Business Combinations (“ASC 805”) and ASC 820, Fair Value Measurements and Disclosures (“ASC 820”). In accordance with ASC 805 and ASC 820, PAR Technology used its best estimates and assumptions to assign fair value, as of April 8, 2021, the date the merger was consummated (the “closing date”), to the tangible and identifiable intangible assets of Punchh acquired and liabilities assumed by PAR Technology in the merger. Goodwill as of the closing date is the excess of the aggregate of the fair values of the consideration transferred and the fair value of noncontrolling interest in the target over the fair values of tangible and identifiable intangible assets acquired and liabilities assumed.
Management’s estimates and assumptions as to the fair values assigned to Punchh’s tangible and identifiable intangible assets acquired and liabilities assumed are preliminary and are based on information that was available as of the closing date and are subject to change as additional information is received. PAR Technology expects to finalize these valuations as soon as practicable, but not later than one year from the closing date.
The unaudited pro forma condensed combined financial information is based upon, and should be read in conjunction with:
• The accompanying notes to the unaudited pro forma condensed combined financial information;
• PAR Technology’s audited consolidated financial statements and accompanying notes included in PAR Technology’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020, filed with the Securities and Exchange Commission (“SEC”) on March 16, 2021;
• PAR Technology’s unaudited condensed consolidated financial statements and accompanying notes included in PAR Technology’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, filed with the SEC on May 10, 2021;
• Punchh’s audited consolidated financial statements for the year ended December 31, 2020 set forth in Exhibit 99.1 of the Current Report on Form 8-K/A; and
• Punchh’s unaudited condensed consolidated financial statements for the three months ended March 31, 2021 and 2020 set forth in Exhibit 99.2 of the Current Report on Form 8-K/A.
March 31, 2021 (unaudited) | ||||||||||||||||||||
Assets | PAR Technology Corp | Punchh Inc. | Pro Forma Adjustment | Note Ref | Pro Forma Combined | |||||||||||||||
Current assets: | ||||||||||||||||||||
Cash and cash equivalents | $ | 173,122 | $ | 23,414 | (89,699 | ) | A/B/C/D/E | $ | 106,837 | |||||||||||
Accounts receivable – net | 38,706 | 5,309 | — | 44,015 | ||||||||||||||||
Inventories – net | 25,296 | — | — | 25,296 | ||||||||||||||||
Other current assets | 7,970 | 1,321 | 3,832 | F/G | 13,123 | |||||||||||||||
Deferred commission costs | — | 834 | (834 | ) | F | — | ||||||||||||||
Deferred implementation costs | — | 2,998 | (2,998 | ) | G | — | ||||||||||||||
Total current assets | 245,094 | 33,876 | (89,699 | ) | 189,271 | |||||||||||||||
Property, plant and equipment – net | 13,627 | 690 | — | 14,317 | ||||||||||||||||
Goodwill | 41,214 | — | 402,100 | H | 443,314 | |||||||||||||||
Intangible assets – net | 32,652 | — | 101,100 | I | 133,752 | |||||||||||||||
Lease right-of-use assets | 2,423 | — | 2,473 | J | 4,896 | |||||||||||||||
Deferred commission costs - noncurrent | — | 597 | (597 | ) | F | — | ||||||||||||||
Deferred implementation costs - noncurrent | — | 2,552 | (2,552 | ) | G | — | ||||||||||||||
Other assets | 3,665 | 325 | 3,149 | F/G | 7,139 | |||||||||||||||
Total Assets | $ | 338,675 | $ | 38,040 | $ | 415,974 | $ | 792,689 | ||||||||||||
Liabilities and Shareholders’ Equity | ||||||||||||||||||||
Current liabilities: | ||||||||||||||||||||
Current portion of long-term debt | $ | 676 | $ | 1,966 | $ | (1,815 | ) | E | $ | 827 | ||||||||||
Accounts payable | 18,886 | 3,059 | — | 21,945 | ||||||||||||||||
Accrued salaries and benefits | 10,620 | 1,650 | — | 12,270 | ||||||||||||||||
Accrued sales tax liability | — | 2,058 | — | 2,058 | ||||||||||||||||
Accrued expenses | 3,930 | 1,562 | — | 5,492 | ||||||||||||||||
Lease liabilities - current portion | 1,133 | 61 | 881 | J | 2,075 | |||||||||||||||
Customer deposits and deferred service revenue | 9,895 | 5,492 | — | 15,387 | ||||||||||||||||
Total current liabilities | 45,140 | 15,848 | (934 | ) | 60,054 | |||||||||||||||
Lease liabilities - net of current portion | 1,410 | — | 1,592 | J | 3,002 | |||||||||||||||
Deferred service revenue – noncurrent | 2,838 | 2,740 | — | 5,578 | ||||||||||||||||
Long-term debt | 106,851 | 1,500 | 169,174 | B/E | 277,525 | |||||||||||||||
Other long-term liabilities | 4,584 | — | — | 4,584 | ||||||||||||||||
Total liabilities | 160,823 | 20,088 | 169,831 | 350,743 | ||||||||||||||||
Shareholders’ Equity: | ||||||||||||||||||||
Preferred stock, $.02 par value, 1,000,000 shares authorized | — | 2 | (2 | ) | K | — | ||||||||||||||
Common stock, $.02 par value, 58,000,000 shares authorized; 22,982,955 shares issued, 21,917,357 shares outstanding at March 31, 2021 | 462 | 1 | 78 | C/L/M | 541 | |||||||||||||||
Additional paid in capital | 245,566 | 71,222 | 192,793 | C/M/N | 509,581 | |||||||||||||||
Accumulated deficit | (54,977 | ) | (53,459 | ) | 53,459 | O | (54,977 | ) | ||||||||||||
Accumulated other comprehensive loss | (4,238 | ) | 186 | (186 | ) | P | (4,238 | ) | ||||||||||||
Treasury stock, at cost, 1,065,598 shares | (8,961 | ) | — | — | (8,961 | ) | ||||||||||||||
Total shareholders’ equity | 177,852 | 17,952 | 246,143 | 441,945 | ||||||||||||||||
Total Liabilities and Shareholders’ Equity | $ | 338,675 | $ | 38,040 | $ | 415,974 | $ | 792,689 |
Three Months Ended March 31, 2021 | ||||||||||||||||||||
PAR Technology Corp | Punchh Inc. | Pro Forma Adjustment | Note Ref | Pro Forma Combined | ||||||||||||||||
Net revenues: | ||||||||||||||||||||
Product | $ | 18,556 | $ | — | $ | — | $ | 18,556 | ||||||||||||
Service | 18,028 | 8,074 | — | 26,102 | ||||||||||||||||
Contract | 17,883 | — | — | 17,883 | ||||||||||||||||
54,467 | 8,074 | 62,540 | ||||||||||||||||||
Costs of sales: | ||||||||||||||||||||
Product | 14,885 | — | — | 14,885 | ||||||||||||||||
Service | 12,695 | 2,934 | 3,150 | A | 18,779 | |||||||||||||||
Contract | 16,687 | — | — | 16,687 | ||||||||||||||||
44,267 | 2,934 | 3,150 | 50,351 | |||||||||||||||||
Gross margin | 10,200 | 5,140 | (3,150 | ) | 12,189 | |||||||||||||||
Operating expenses: | ||||||||||||||||||||
Selling, general and administrative | 14,537 | 5,009 | — | 19,546 | ||||||||||||||||
Research and development | 5,809 | 2,672 | — | 8,480 | ||||||||||||||||
Amortization of identifiable intangible assets | 275 | — | 254 | B | 529 | |||||||||||||||
Gain on insurance proceeds | (4,400 | ) | — | — | (4,400 | ) | ||||||||||||||
16,221 | 7,681 | 254 | 24,155 | |||||||||||||||||
Operating loss | (6,021 | ) | (2,541 | ) | — | (8,561 | ) | |||||||||||||
Other (expense) income, net | (51 | ) | (319 | ) | — | (370 | ) | |||||||||||||
Interest expense, net | (2,160 | ) | (9 | ) | (2,363 | ) | C | (4,531 | ) | |||||||||||
Loss before provision for income taxes | (8,232 | ) | (2,869 | ) | (2,363 | ) | (13,463 | ) | ||||||||||||
(Provision for) benefit from income taxes | (39 | ) | — | 9,964 | D | 9,925 | ||||||||||||||
Net loss | (8,271 | ) | (2,869 | ) | 7,602 | (3,538 | ) | |||||||||||||
Net loss per share (basic and diluted) | (0.38 | ) | (0.14 | ) | ||||||||||||||||
Weighted average shares outstanding (basic and diluted) | 21,929 | 3,947 | E | 25,876 |
Year Ended December 31, 2020 | ||||||||||||||||||||
PAR Technology Corp | Punchh Inc. | Pro Forma Adjustment | Note Ref | Pro Forma Combined | ||||||||||||||||
Net revenues: | ||||||||||||||||||||
Product | $ | 73,228 | $ | — | $ | — | $ | 73,228 | ||||||||||||
Service | 69,284 | 27,229 | — | 96,513 | ||||||||||||||||
Contract | 71,274 | — | — | 71,274 | ||||||||||||||||
213,786 | 27,229 | — | 241,015 | |||||||||||||||||
Costs of sales: | ||||||||||||||||||||
Product | 58,887 | — | — | 58,887 | ||||||||||||||||
Service | 49,933 | 10,109 | 12,600 | A | 72,642 | |||||||||||||||
Contract | 65,641 | — | — | 65,641 | ||||||||||||||||
174,461 | 10,109 | 12,600 | 197,170 | |||||||||||||||||
Gross margin | 39,325 | 17,120 | (12,601 | ) | 43,845 | |||||||||||||||
Operating expenses: | ||||||||||||||||||||
Selling, general and administrative | 46,196 | 21,081 | — | 67,278 | ||||||||||||||||
Research and development | 19,252 | 8,948 | — | 28,200 | ||||||||||||||||
Amortization of identifiable intangible assets | 1,163 | — | 1,014 | B | 2,178 | |||||||||||||||
Gain on contingent liability | (3,340 | ) | — | — | (3,340 | ) | ||||||||||||||
63,271 | 30,029 | 1,014 | 94,315 | |||||||||||||||||
Operating loss | (23,946 | ) | (12,910 | ) | (13,615 | ) | (50,471 | ) | ||||||||||||
Other (expense) income, net | 808 | (5 | ) | — | | 803 | ||||||||||||||
Loss on extinguishment of debt | (8,123 | ) | — | — | (8,123 | ) | ||||||||||||||
Interest (expense) income, net | (8,287 | ) | 107 | (9,450 | ) | C | (17,630 | ) | ||||||||||||
Loss before benefit from income taxes | (39,548 | ) | (12,808 | ) | (23,065 | ) | (75,421 | ) | ||||||||||||
Benefit from income taxes | 2,986 | — | 9,964 | D | 12,950 | |||||||||||||||
Net loss | (36,562 | ) | (12,808 | ) | (13,101 | ) | (62,471 | ) | ||||||||||||
Net loss per share (basic and diluted) | (1.92 | ) | (2.72 | ) | ||||||||||||||||
Weighted average shares outstanding (basic and diluted) | 19,014 | 3,947 | E | 22,961 |
1. Basis of Presentation
The accompanying unaudited pro forma condensed combined financial information presents the pro forma condensed combined balance sheet and statements of operations of PAR Technology based upon the financial statements of PAR Technology and Punchh after giving effect to the merger.
The unaudited pro forma condensed combined statements of operations for the twelve months ended December 31, 2020 and for the three months ended March 31, 2021 combine the historical consolidated statements of operations of PAR Technology and the historical consolidated statements of operations of Punchh. These unaudited pro forma condensed combined statements of operations give effect to the merger as if it had been completed on January 1, 2020, the beginning of the earliest period presented. The unaudited pro forma condensed combined balance sheet combines the historical condensed consolidated balance sheet of PAR Technology and the historical condensed consolidated balance sheet of Punchh as of March 31, 2021, giving effect to the merger as if it had been completed on March 31, 2021.
The unaudited pro forma condensed combined financial information was prepared using the acquisition method of accounting with PAR Technology considered the acquirer of Punchh. Under the acquisition method of accounting, the purchase price is allocated to the underlying tangible and intangible assets acquired and liabilities assumed with any excess allocated to goodwill. The pro forma purchase price allocation was based on an estimate of the fair market value of the tangible and intangible assets of Punchh acquired and liabilities PAR Technology assumed.
The unaudited pro forma condensed combined financial information does not reflect the costs of any integration activities or benefits that may result from the realization of future cost savings from operating efficiencies or revenue synergies expected to result from the merger.
2. Preliminary Purchase Price
The preliminary purchase price to complete the merger was $510 million (the “Purchase Price”) as follows (in thousands):
Purchase Price | ||||
Cash Consideration* | $ | 401,853 | ||
Equity Consideration | $ | 108,406 | ||
Total Consideration | $ | 510,259 |
*Cash consideration reflects the merger purchase price ($390 million) and preliminary net working capital ($12 million).
3. Preliminary Allocation of Purchase Price
Under the acquisition method of accounting, the Purchase Price is allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values as of the closing. The residual amount of the Purchase Price after preliminary allocation to identifiable tangible and intangible assets acquired and liabilities assumed has been allocated to goodwill.
PAR Technology has performed a preliminary valuation analysis of the fair market value of Punchh’s assets acquired and liabilities PAR Technology assumed. Using the total consideration to complete the merger, PAR Technology has estimated the allocations to assets acquired and liabilities assumed, with assistance from an independent valuation specialist. PAR Technology has not finalized its detailed valuation studies necessary to arrive at the required fair values of Punchh’s assets acquired and liabilities assumed. Therefore, the following allocation of the Purchase Price to acquired assets and assumed liabilities is based on preliminary fair value estimates and is subject to adjustment pending final management analysis. The Company will finalize the purchase price allocation no later than one year from the closing of the transaction.
The following table summarizes the allocation of the preliminary Purchase Price as of the closing date (in thousands):
Purchase Price Allocation | ||||
Current Assets | $ | 34,903 | ||
Property Plant & Equipment | $ | 592 | ||
Other Assets | $ | 7,430 | ||
Identified Intangible Asset – Developed Technology | $ | 88,200 | ||
Identified Intangible Asset – Customer Relationships | $ | 7,100 | ||
Identified Intangible Asset – Trade Name | $ | 5,800 | ||
Goodwill | $ | 402,100 | ||
Total Assets Acquired | $ | 546,125 | ||
Current Liabilities | $ | 25,301 | ||
Other Long-term Liabilities | $ | 10,565 | ||
Total Liabilities Assumed | $ | 35,866 | ||
Net Assets Acquired | $ | 510,259 |
4. Pro Forma Adjustments
The unaudited pro forma condensed combined financial information is not necessarily indicative of what the financial position and results of operations of PAR Technology would have been had the merger been completed at or as of the respective pro forma dates. Such information includes adjustments that are preliminary and may be revised. Such revisions may result in material changes. The financial position and results of operations shown herein are not necessarily indicative of what the past financial position or results of operations of PAR Technology would have been had the merger been completed on such dates.
The following describes the pro forma adjustments related to the merger that have been made in the accompanying unaudited pro forma condensed combined balance sheet as of March 31, 2021 and statements of operations for the three months ended March 31, 2021 and for the year ended December 31, 2020, which have been prepared to reflect the merger for the net purchase price of $510 million:
Balance Sheet Pro Forma Adjustments:
A - Adjustment reflects $402 million cash consideration of merger purchase price ($390 million) and net acquired cash ($12 million). |
B - Adjustment reflects $180 million principal of term loan financing entered as part of the merger, less fees of $9.3 million. |
C - Adjustment reflects $160 million increase in shares of PAR Technology common stock outstanding due to the 2,352,942 shares issued ($68.00 per share) from the private placement equity financing entered as part of the merger, less fees of $4.3 million. |
D - Adjustment reflects cash settlement for Punchh’s transaction costs ($8.7 million) on the closing date. |
E - Adjustment reflects cash settlement of Punchh’s current ($1.8 million) and noncurrent ($1.5 million) CARES Act PPP Loan obligations on the closing date. |
F - Adjustment reflects presentation of current and noncurrent deferred commission costs in other current assets and other assets, respectively, to conform to PAR Technology’s financial statement presentation. |
G - Adjustment reflects presentation of current and noncurrent deferred implementation costs in other current assets and other assets, respectively, to conform to PAR Technology’s financial statement presentation |
H - Adjustment reflects the recognition of goodwill related to the merger. Goodwill is calculated as the difference between the fair value of the consideration transferred and the values assigned to the identifiable tangible and intangible assets acquired and liabilities assumed. The estimated goodwill calculation is preliminary and is subject to change based upon final determination of the fair value of assets acquired and liabilities assumed. Goodwill is not amortized, but is assessed at least annually or more frequently if events or changes in circumstances indicate that the carrying value of the goodwill may not be recoverable based on management’s assessment. |
I - Adjustment reflects identifiable intangible assets acquired as part of the merger; specifically, trade name ($5.8 million), customer relationships ($7.1 million) and developed technology ($88.2 million). The trade names valuation utilized the “relief from royalty” approach, a form of the income approach, whereby the fair value of an asset is developed by attributing the savings incurred from not having to pay a royalty for the use of the asset. The customer relationship valuation utilized the “multi-period excess earnings method,” which is predicated upon the calculation of the net present value of the after-tax net cash flows attributable to the customers over the expected remaining life of the relationships. The developed technology valuation also utilized the “multi-period excess earnings method”. The preliminary estimated useful life of these identifiable intangible assets is approximately (i) indefinite for the trade names, (ii) 7 years for the customer relationships and (iii) 7 years for the developed technology. The preliminary purchase price allocation assumed the historical carrying value of such assets acquired along with the liabilities assumed will approximate fair value due to their short-term nature. The underlying assumptions used to prepare the discounted cash flow analysis used in these estimates may change. For these and other reasons, actual results may vary significantly from estimated results. |
J - Adjustment reflects the estimated adjustment to record Punchh’s lease obligations consistently with PAR Technology’s lease obligations in accordance with ASC 842 Leases, including a reduction to the Right of Use Asset for an unfavorable lease ($0.3 million). |
K - Adjustment reflects the elimination of Punchh’s historical preferred equity. |
L - Adjustment reflects the elimination of Punchh’s historical common equity. |
M - Adjustment reflects $108.4 million increase in shares of PAR Technology’s common stock outstanding due to the 1,594,202 shares issued to Punchh’s stockholders ($68 share price) as part of the merger purchase price. |
N - Adjustment reflects the elimination of Punchh’s historical additional paid in capital. |
O - Adjustment reflects the elimination of Punchh’s historical accumulated deficit. |
P - Adjustment reflects the elimination of Punchh’s historical accumulated other comprehensive loss. |
Statement of Operations Pro Forma Adjustments:
A - Adjustment reflects amortization expense related to developed technology intangible assets obtained as part of the merger. |
B - Adjustment reflects amortization expense related to customer relationship intangible assets obtained as part of the merger. |
C - Adjustment reflects interest expense on $180 million principal amount of term loan financing entered as part of the merger. |
D - There are no tax provision adjustments as PAR Technology has been in a full valuation allowance since 2018 and Deferred Tax Liabilities of $24 million arising from acquired identifiable intangible assets have been fully offset with the release of Punchh ($14.3 million) and PAR Technology ($9.9 million) Deferred Tax Asset valuation allowances; the PAR Technology valuation allowance release is recognized as other income. PAR Technology has not finalized its detailed Internal Revenue Code Section 382 study to determine the extent to which, if any, PAR Technology and Punch qualify for limitations in use of historical net operating losses; therefore, this preliminary adjustment is subject to change pending final management analysis, with assistance of third-party specialists. |
E - Adjustment reflects increase in shares of PAR Technology’s common stock outstanding due to the 1,594,202 shares issued to Punchh’s stockholders as part of the merger purchase price and 2,352,942 shares issued from the private placement equity financing entered as part of the merger. |