Acquisitions

6 Months Ended

Jun. 30, 2024

Business Combination, Asset Acquisition, and Joint Venture Formation [Abstract]

On March 8, 2024, ParTech, Inc. ("ParTech"), acquired 100% of the outstanding equity interests of Stuzo Blocker, Inc., Stuzo Holdings, LLC and their subsidiaries (collectively, “Stuzo” and such acquisition, the “Stuzo Acquisition”), a digital engagement software provider to convenience and fuel retailers ("C-Stores"), for purchase consideration of approximately $170.5 million paid in cash (the "Cash Consideration"), subject to certain adjustments (including customary adjustments for Stuzo cash, debt, debt-like items, and net working capital), and $19.2 million paid in shares of Company common stock. 441,598 shares of common stock were issued as purchase consideration, determined using a fair value share price of $43.41. The Company acquired Stuzo to expand its footprint in the C-Stores market vertical with Stuzo's industry-leading guest engagement platform (PAR Retail) serving major brands in the space.

$1.5 million of the Cash Consideration was deposited into an escrow account administered by a third party to fund potential post-closing adjustments and obligations. The balance in the escrow account was $1.5 million as of June 30, 2024.

The Company incurred acquisition expenses related to the Stuzo Acquisition of approximately $2.8 million which are included in general and administrative in the condensed consolidated statements of operations.

The Stuzo Acquisition was accounted for as a business combination in accordance with Accounting Standards Codification ("ASC") Topic 805, Business Combinations. Accordingly, assets acquired and liabilities assumed have been accounted for at their preliminarily determined respective fair values as of March 8, 2024, (the "Acquisition Date"). The fair value determinations were based on management's estimates and assumptions, with the assistance of independent valuation and tax consultants. Preliminary fair values are subject to measurement period adjustments within the permitted measurement period (up to one year from the Acquisition Date) as management finalizes its procedures and net working capital adjustments (if any) are settled.

During the three months ended June 30, 2024, preliminary fair values of assets and liabilities as of the Acquisition Date were adjusted to reflect ongoing acquisition valuation analyses and net working capital adjustments. These adjustments included changes to accounts receivable, customer relationships, trademarks, non-competition agreements, goodwill, deferred revenue, and deferred taxes to reflect changes in underlying fair value assumptions. The Company is in the process of finalizing valuation assumptions for the intangibles and the sales tax liability exposure as of the Acquisition Date.

The following table presents management's current purchase price allocation and the initial purchase price allocation:


(in thousands)	Current purchase price allocation		Initial purchase price allocation
Cash	$	4,244	$	4,244
Accounts receivable	1,262		2,208
Property and equipment	307		307
Developed technology	18,200		18,200
Customer relationships	39,400		39,000
Trademarks	5,400		6,600
Non-competition agreements	3,500		4,800
Prepaid and other acquired assets	774		774
Goodwill	137,008		132,140
Total assets	210,095		208,273
Accounts payable	317		317
Accrued expenses	4,459		4,459
Deferred revenue	7,680		5,443
Deferred taxes	7,934		8,349
Consideration paid	$	189,705	$	189,705

Intangible Assets

The Company identified four acquired intangible assets in the Stuzo Acquisition: developed technology; customer relationships; trademarks; and non-competition agreements. The preliminary fair value of developed technology and customer relationship intangible assets were determined utilizing the “multi-period excess earnings method”, which is predicated upon the calculation of the net present value of after-tax net cash flows respectively attributable to each asset. The Company applied a seven-year economic life and discount rate of 12.5% in determining the Stuzo developed technology preliminary intangible fair value and applied a 7.0% estimated annual attrition rate and discount rate of 12.5% in determining the Stuzo customer relationships intangible preliminary fair value. The preliminary fair value of trademarks intangible was determined utilizing the “relief from royalty” approach, which is a form of the income approach that attributes savings incurred from not having to pay a royalty for the use of an asset. The Company applied a fair and reasonable royalty rate of 1.0% and discount rate of 12.5% in determining the trademarks intangible preliminary fair value. The preliminary fair value of the Stuzo non-competition agreements was determined utilizing the discounted earnings method. The estimated useful life of these identifiable intangible assets was preliminarily determined to be: seven years for developed technology; fifteen years for customer relationships related to SaaS platform and related support; five years for customer relationships related to managed platform development services; indefinite for the trademarks; and five years for the non-competition agreements.

Goodwill

Goodwill represents the excess of consideration transferred for the fair value of net identifiable assets acquired and is tested for impairment at least annually. The goodwill value represents expected synergies from the product acquired and other benefits. It is not deductible for income tax purposes.

Deferred Taxes

The Company determined the deferred tax position to be recorded at the time of the Stuzo Acquisition in accordance with ASC Topic 740, Income Taxes, resulting in recognition of $7.9 million in deferred tax liabilities for future reversing of taxable temporary differences primarily for intangible assets.

The net deferred tax liability relating to the Stuzo Acquisition was determined by the Company to provide future taxable temporary differences that allow for the Company to utilize certain previously fully reserved deferred tax assets. Accordingly, the Company recognized a reduction to its valuation allowance resulting in a net tax benefit of $7.7 million for the six months ended June 30, 2024.

Pro Forma Financial Information - unaudited

For the three and six months ended June 30, 2024, the Stuzo Acquisition resulted in additional revenues of $10.1 million and $12.7 million, respectively and income before income taxes of $1.4 million and $1.8 million, respectively.

The following table summarizes the Company's unaudited pro forma results of operations for the three months ended June 30, 2023 and the six months ended June 30, 2024 and 2023 as if the Stuzo Acquisition had occurred on January 1, 2023:



	Three Months Ended June 30,		Six Months Ended June 30,
(in thousands)	2023		2024		2023
Total revenue	$	79,676	$	156,066	$	158,025
Net loss from continuing operations	(21,054)		(51,359)		(32,623)

The unaudited pro forma results presented above are for illustrative purposes only and do not reflect the realization of actual cost savings or any related integration costs. The unaudited pro forma results do not purport to be indicative of the results that would have been obtained, or to be a projection of results that may be obtained in the future. These unaudited pro forma results include certain adjustments, primarily due to increases in amortization expense due to the fair value adjustments of intangible assets, acquisition related costs and the impact of income taxes on the pro forma adjustments. $2.4 million of acquisition costs have been reflected in the 2023 pro forma results.