# PAR TECHNOLOGY CORP (PAR) FY 2024 MD&A

Verbatim Item 7 Management's Discussion and Analysis from PAR TECHNOLOGY CORP's 10-K for fiscal year 2024.

SEC filing source: https://www.sec.gov/Archives/edgar/data/708821/000070882125000015/par-20241231.htm
Accession: 0000708821-25-000015
Filing date: 2025-03-03
Report date: 2024-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Published MD&A gate trimmed front/tail over-capture.
Confidence: high

Company profile: /company/PAR/
All MD&A years: /company/PAR/mda/
Previous year: /company/PAR/mda/fy2023/ (FY 2023)
Next year: /company/PAR/mda/fy2025/ (FY 2025)

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. 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" above and "Part I, Item 1A. Risk Factors" above.

The following section generally discusses year-over-year comparisons between 2024 and 2023. Discussions related to year-over-year comparisons between 2023 and 2022 are included in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Recast Sections of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on January 6, 2025.

2024 Operating Performance Highlights

[[GREPCENT_TABLE]]
[["Organic - Year-over-year growth of 20.7%","Total - Year-over-year growth of 101.6%"]]
[[/GREPCENT_TABLE]]

GAAP - Year-over-year 5.5% improvement

Non-GAAP - Year-over-year 0.5% decline

Net Loss from Cont. Ops.Year-over-year increase of $8.3 million

Adjusted EBITDAYear-over-year improvement of $32.0 million

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Refer to "Key Performance Indicators and Non-GAAP Financial Measures" below for important information on key performance indicators, such as annual recurring revenue (ARR), and non-GAAP financial measures, including non-GAAP subscription service gross margin percentage and adjusted EBITDA. We use these key performance indicators and non-GAAP financial measures to evaluate our performance.

2024 Corporate Development Highlights

•Stuzo Acquisition: In March 2024, the Company acquired Stuzo, LLC for approximately $190.0 million. The purchase consideration was approximately $170.5 million paid in cash, 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.

◦Private Placement of Common Stock: In connection with, and to partially fund the Stuzo Acquisition, in March 2024, the Company issued and sold 5,174,638 shares of its common stock at $38.65 per share. Net proceeds from the private placement were approximately $194.4 million, net of issuance costs of $5.5 million.

•Divestiture of PAR Government Systems Corporation: In June 2024, the Company divested PAR Government Systems Corporation ("PGSC") for a cash purchase price of $95.0 million, before customary post-closing adjustments.

•Divestiture of Rome Research Corporation: In July 2024, the Company divested Rome Research Corporation ("RRC") for $7.0 million, before customary post-closing adjustments, completing the divestiture of PAR's Government segment. In advance of the divestiture, the Government segment's results were classified as discontinued operations beginning with the quarter ended June 30, 2024, and PAR now operates in a single reportable segment.

•TASK Group Acquisition: In July 2024, the Company acquired TASK Group for approximately $245.5 million. The purchase consideration was approximately $131.5 million paid in cash and $114.0 million paid in shares of Company common stock.

◦Credit Facility: In connection with, and to partially fund the TASK Group Acquisition, in July 2024, the Company entered into a credit agreement (the "Credit Agreement"), with Blue Owl Capital Corporation, as administrative agent and collateral agent, and Blue Owl Credit Advisors, LLC, as lead arranger and bookrunner, that provides for a term loan in an initial aggregate principal amount of $90.0 million (the "Credit Facility" and, the loans thereunder, the “Term Loans”).

•Delaget Acquisition: In December 2024, the Company acquired Delaget, LLC for approximately $125.1 million. The purchase consideration was approximately $16.9 million paid in cash, subject to certain adjustments (including customary adjustments for Delaget cash, debt, debt-like items, and net working capital), and $108.2 million paid in shares of Company common stock.

Refer to “Note 2 – Acquisitions”, “Note 4 – Discontinued Operations”, “Note 10 – Debt”, and "Note 11 – Common Stock" of the notes to consolidated financial statements in "Part II, Item 8. Financial Statements and Supplementary Data" of this Annual Report for additional information about the private placement of common stock, Stuzo Acquisition, divestiture of PGSC & RRC, Credit Facility, TASK Group Acquisition, and Delaget Acquisition.

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COMPONENTS OF RESULTS OF OPERATIONS

Revenues

Subscription Service

Consists of revenue from software-as-a-service ("SaaS") solutions, related software support, managed platform development services, and transaction-based payment processing services.

Hardware

Consists of revenue from the sale of point-of-sale terminals and tablets, wireless headsets, drive-thru systems, kitchen display systems, kiosks, printers, payment devices, and other in-store peripherals.

Professional Service

Consists of revenue from hardware support, installation and implementation, and on-site and technical support.

Cost of Sales

Subscription Service

Consists of expenses directly related to the delivery of our software, including customer support and infrastructure management personnel costs, hosting and cloud infrastructure costs, amortization of capitalized and acquired developed technology, third-party software licensing fees, and payment processing fees.

Hardware

Consists of expenses directly related to the production, procurement, and delivery of hardware products sold to customers, including manufacturing and procurement personnel costs, freight charges, excess and obsolete inventory expenses, and allocated overhead.

Professional Service

Consists of the personnel costs of our deployment team associated with delivering these services and costs related to hardware repairs and advanced exchange contracts.

Operating Expenses

Sales and Marketing

Consists of employee-related costs incurred for personnel that support sales and marketing activities, as well as general marketing and event costs.

General and Administrative

Consists of employee-related costs incurred for management and administrative functions, including finance, legal, human resources, and information technology. General and administrative expenses also include costs related to fees paid for certain professional services and software, insurance and occupancy costs, as well as bad debt expense and depreciation expense.

Research and Development

Consists of uncapitalized engineering and product development personnel costs associated with improvements to our platform and the development of new product offerings and expenses associated with the use of third-party software directly related to the development of our products and services.

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Amortization of Identifiable Intangible Assets

Consists of amortization expense related to acquired intangible assets including customer relationships, non-competition agreements, and trade names.

Adjustment to Contingent Consideration Liability

Reflects a reduction to the fair market value of the contingent consideration liability related to the acquisition of MENU Technologies A.G. in July 2022 (the “MENU Acquisition”).

Gain on Insurance Proceeds

Consists of insurance proceeds from the settlement of legacy insurance claims.

Other Non-Operating Expenses

Interest expense, net

Consists of interest incurred on our 2026 Notes, 2027 Notes, and Credit Facility, offset by interest earned from cash held in money market accounts and on our marketable securities.

Loss on extinguishment of debt

Represents the loss on inducement of our 2026 Notes and 2024 Notes.

Other income (expense), net

Consists of foreign currency transaction gains and losses and other miscellaneous non-operating income (expense).

Benefit from (Provision for) Income Taxes

Consists of U.S. federal and state income tax as well as international income taxes in various foreign jurisdictions. Our effective tax rate fluctuates from period to period due to changes in the mix of income and losses in jurisdictions with a wide range of tax rates, the effect of acquisitions, changes resulting from the amount of recorded valuation allowance, and permanent differences between GAAP and local tax laws. Refer to "Note 13 - Income Taxes" of the notes to consolidated financial statements in "Part II, Item 8. Financial Statements and Supplementary Data" of this Annual Report for additional information about our income taxes and effective tax rate.

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RESULTS OF OPERATIONS

Results of operations for the years ended December 31, 2024, 2023, and 2022 were as follows:

Consolidated Results

[[GREPCENT_TABLE]]
[["","Year Ended December 31,","","Percentage of total revenue","","Increase (decrease)"],["(in thousands)","2024","","2023","","2022","","2024","","2023","","2022","","2024 vs 2023","","2023 vs 2022"],["Revenues, net:"],["Subscription service","$","207,422","","","$","122,597","","","$","97,499","","","59.3","%","","44.3","%","","37.2","%","","69.2","%","","25.7","%"],["Hardware","87,040","","","103,391","","","114,410","","","24.9","%","","37.4","%","","43.6","%","","(15.8)","%","","(9.6)","%"],["Professional service","55,520","","","50,726","","","50,438","","","15.9","%","","18.3","%","","19.2","%","","9.5","%","","0.6","%"],["Total revenues, net","$","349,982","","","$","276,714","","","$","262,347","","","100.0","%","","100.0","%","","100.0","%","","26.5","%","","5.5","%"],["Gross margin"],["Subscription service","110,903","","","58,862","","","50,075","","","31.7","%","","21.3","%","","19.1","%","","88.4","%","","17.5","%"],["Hardware","21,117","","","23,072","","","22,186","","","6.0","%","","8.3","%","","8.5","%","","(8.5)","%","","4.0","%"],["Professional service","14,104","","","7,512","","","9,456","","","4.0","%","","2.7","%","","3.6","%","","87.8","%","","(20.6)","%"],["Total gross margin","146,124","","","89,446","","","81,717","","","41.8","%","","32.3","%","","31.1","%","","63.4","%","","9.5","%"],["Operating expenses:"],["Sales and marketing","41,708","","","38,513","","","34,900","","","11.9","%","","13.9","%","","13.3","%","","8.3","%","","10.4","%"],["General and administrative","108,898","","","72,139","","","69,770","","","31.1","%","","26.1","%","","26.6","%","","51.0","%","","3.4","%"],["Research and development","67,258","","","58,356","","","48,643","","","19.2","%","","21.1","%","","18.5","%","","15.3","%","","20.0","%"],["Amortization of identifiable intangible assets","8,452","","","1,858","","","1,863","","","2.4","%","","0.7","%","","0.7","%","","200 %","","(0.3)","%"],["Adjustment to contingent consideration liability","(600)","","","(9,200)","","","(4,400)","","","(0.2)","%","","(3.3)","%","","(1.7)","%","","(93.5)","%","","109.1","%"],["Gain on insurance proceeds","(495)","","","(500)","","","\u2014","","","(0.1)","%","","(0.2)","%","","\u2014","%","","(1.0)","%","","N/A"],["Total operating expenses","225,221","","","161,166","","","150,776","","","64.4","%","","58.2","%","","57.5","%","","39.7","%","","6.9","%"],["Operating loss","(79,097)","","","(71,720)","","","(69,059)","","","(22.6)","%","","(25.9)","%","","(26.3)","%","","10.3","%","","3.9","%"],["Other income (expense), net","1,146","","","(485)","","","(1,068)","","","0.3","%","","(0.2)","%","","(0.4)","%","","(200)%","","(54.6)","%"],["Loss on extinguishment of debt","(6,560)","","","(635)","","","\u2014","","","(1.9)","%","","(0.2)","%","","\u2014","%","","200 %","","N/A"],["Interest expense, net","(10,167)","","","(6,931)","","","(8,811)","","","(2.9)","%","","(2.5)","%","","(3.4)","%","","46.7","%","","(21.3)","%"],["Loss from continuing operations before income taxes","(94,678)","","","(79,771)","","","(78,938)","","","(27.1)","%","","(28.8)","%","","(30.1)","%","","18.7","%","","1.1","%"],["Benefit from (provision for) income taxes","4,768","","","(1,848)","","","(1,134)","","","1.4","%","","(0.7)","%","","(0.4)","%","","(200)%","","63.0","%"],["Net loss from continuing operations","$","(89,910)","","","$","(81,619)","","","$","(80,072)","","","(25.7)","%","","(29.5)","%","","(30.5)","%","","10.2","%","","1.9","%"],["Net income from discontinued operations","84,923","","","11,867","","","10,753","","","24.3","%","","4.3","%","","4.1","%","","200 %","","10.4","%"],["Net loss","$","(4,987)","","","$","(69,752)","","","$","(69,319)","","","(1.4)","%","","(25.2)","%","","(26.4)","%","","(92.9)","%","","0.6","%"]]
[[/GREPCENT_TABLE]]

Historical results from our Government segment are reported as discontinued operations. Refer to "Note 4 - Discontinued Operations" within "Item 8. Financial Statements and Supplementary Data" for additional information.

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Revenues, Net

[[GREPCENT_TABLE]]
[["","Year Ended December 31,","","Percentage of total revenue","","Increase (decrease)"],["(in thousands)","2024","","2023","","2022","","2024","","2023","","2022","","2024 vs 2023","","2023 vs 2022"],["Revenues, net:"],["Subscription service","$","207,422","","","$","122,597","","","$","97,499","","","59.3","%","","44.3","%","","37.2","%","","69.2","%","","25.7","%"],["Hardware","87,040","","","103,391","","","114,410","","","24.9","%","","37.4","%","","43.6","%","","(15.8)","%","","(9.6)","%"],["Professional service","55,520","","","50,726","","","50,438","","","15.9","%","","18.3","%","","19.2","%","","9.5","%","","0.6","%"],["Total revenues, net","$","349,982","","","$","276,714","","","$","262,347","","","100.0","%","","100.0","%","","100.0","%","","26.5","%","","5.5","%"]]
[[/GREPCENT_TABLE]]

For the Year Ended December 31, 2024 Compared to the Year Ended December 31, 2023

Total revenues were $350.0 million for the year ended December 31, 2024, an increase of $73.3 million or 26.5% compared to $276.7 million for the year ended December 31, 2023.

Subscription service revenues were $207.4 million for the year ended December 31, 2024, an increase of $84.8 million or 69.2% compared to $122.6 million for the year ended December 31, 2023. The increase was substantially driven by increased Engagement Cloud subscription service revenues of $60.0 million, of which $52.4 million was driven by inorganic increases in revenues of $34.6 million and $17.8 million stemming from the post-acquisition operations of the PAR Retail and Plexure product lines, respectively. The residual increase of $7.6 million from Engagement Cloud subscription services was driven by a 17.4% organic increase in active sites. Operator Cloud subscription services increased $24.2 million of which revenues of $3.2 million was driven by an inorganic increase in revenues stemming from the post-acquisition operations of the TASK product line. The residual increase of $21.0 million from Operator Cloud subscription services was driven by a 14.7% organic increase in active sites and a 14.7% organic increase in average revenue per site equally driven by cross-selling initiatives, upselling, and price increases.

Hardware revenues were $87.0 million for the year ended December 31, 2024, a decrease of $16.4 million or 15.8% compared to $103.4 million for the year ended December 31, 2023. The decrease was substantially driven by decreases in hardware revenues from terminals of $7.2 million, kitchen display systems of $2.9 million, peripherals (scanners, printers, payment devices) of $2.6 million, and tablets of $2.5 million. These decreases were substantially driven by the timing of tier one enterprise customer hardware refresh cycles and timing of onboarding of Operator Cloud customers buying hardware. Hardware revenues will continue to be affected by the timing of the aforementioned drivers.

Professional service revenues were $55.5 million for the year ended December 31, 2024, an increase of $4.8 million or 9.5% compared to $50.7 million for the year ended December 31, 2023. The increase was substantially driven by a $4.6 million increase in hardware repair services and a $2.4 million increase in field operations, partially offset by a $2.2 million decrease in installation services.

Gross Margin

[[GREPCENT_TABLE]]
[["","Year Ended December 31,","","Gross Margin Percentage","","Increase (decrease)"],["(in thousands)","2024","","2023","","2022","","2024","","2023","","2022","","2024 vs 2023","","2023 vs 2022"],["Gross margin"],["Subscription service","$","110,903","","","$","58,862","","","$","50,075","","","53.5","%","","48.0","%","","51.4","%","","5.5","%","","(3.4)","%"],["Hardware","21,117","","","23,072","","","22,186","","","24.3","%","","22.3","%","","19.4","%","","2.0","%","","2.9","%"],["Professional service","14,104","","","7,512","","","9,456","","","25.4","%","","14.8","%","","18.7","%","","10.6","%","","(3.9)","%"],["Total gross margin","$","146,124","","","$","89,446","","","$","81,717","","","41.8","%","","32.3","%","","31.1","%","","9.5","%","","1.2","%"]]
[[/GREPCENT_TABLE]]

For the Year Ended December 31, 2024 Compared to the Year Ended December 31, 2023

Total gross margin as a percentage of total revenue for the year ended December 31, 2024, increased to

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41.8% as compared to 32.3% for the year ended December 31, 2023.

Subscription service gross margin as a percentage of subscription service revenue for the year ended December 31, 2024, increased to 53.5% as compared to 48.0% for the year ended December 31, 2023. The increase was substantially driven by a continued focus on efficiency improvements with our hosting and customer support costs as well as improved gross margins stemming from post-acquisition operations of PAR Retail.

Hardware gross margin as a percentage of hardware revenue for the year ended December 31, 2024, increased to 24.3% as compared to 22.3% for the year ended December 31, 2023. The increase primarily consists of improved inventory management resulting in lower excess and obsolescent inventory charges and improved gross margins from terminals and kitchen display systems primarily driven by price increases.

Professional service gross margin as a percentage of professional service revenue for the year ended December 31, 2024, increased to 25.4% as compared to 14.8% for the year ended December 31, 2023. The increase primarily consists of increased gross margins for hardware service repair and field operations substantially driven by improved cost management.

Sales and Marketing Expenses ("S&M")

[[GREPCENT_TABLE]]
[["","Year Ended December 31,","","Percentage of total revenue","","Increase (decrease)"],["(in thousands)","2024","","2023","","2022","","2024","","2023","","2022","","2024 vs 2023","","2023 vs 2022"],["Sales and marketing","$","41,708","","","$","38,513","","","$","34,900","","","11.9","%","","13.9","%","","13.3","%","","8.3","%","","10.4","%"]]
[[/GREPCENT_TABLE]]

For the Year Ended December 31, 2024 Compared to the Year Ended December 31, 2023

S&M expenses were $41.7 million for the year ended December 31, 2024, an increase of $3.2 million or 8.3% compared to $38.5 million for the year ended December 31, 2023. The increase consists of an inorganic increase in S&M expense of $3.4 million stemming from post-acquisition operations of PAR Retail and TASK Group while organic S&M expense decreased by $0.2 million.

General and Administrative Expenses ("G&A")

[[GREPCENT_TABLE]]
[["","Year Ended December 31,","","Percentage of total revenue","","Increase (decrease)"],["(in thousands)","2024","","2023","","2022","","2024","","2023","","2022","","2024 vs 2023","","2023 vs 2022"],["General and administrative","$","108,898","","","$","72,139","","","$","69,770","","","31.1","%","","26.1","%","","26.6","%","","51.0","%","","3.4","%"]]
[[/GREPCENT_TABLE]]

For the Year Ended December 31, 2024 Compared to the Year Ended December 31, 2023

G&A expenses were $108.9 million for the year ended December 31, 2024, an increase of $36.8 million or 51.0% compared to $72.1 million for the year ended December 31, 2023. The increase primarily consists of a $8.7 million inorganic increase in G&A expense stemming from post-acquisition operations of PAR Retail and TASK Group and a $7.1 million organic increase in compensation costs, including variable compensation.

The residual increase was substantially driven by a $18.6 million increase in certain non-cash or non-recurring expenses consisting of $10.4 million in stock-based compensation, $6.3 million in costs related to transaction due diligence, $1.0 million in depreciation and amortization, $0.7 million in severance, and $0.2 million in asset impairment expense.

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Research and Development Expenses ("R&D")

[[GREPCENT_TABLE]]
[["","Year Ended December 31,","","Percentage of total revenue","","Increase (decrease)"],["(in thousands)","2024","","2023","","2022","","2024","","2023","","2022","","2024 vs 2023","","2023 vs 2022"],["Research and development","$","67,258","","","$","58,356","","","$","48,643","","","19.2","%","","21.1","%","","18.5","%","","15.3","%","","20.0","%"]]
[[/GREPCENT_TABLE]]

For the Year Ended December 31, 2024 Compared to the Year Ended December 31, 2023

R&D expenses were $67.3 million for the year ended December 31, 2024, an increase of $8.9 million or 15.3% compared to $58.4 million for the year ended December 31, 2023. The increase consists of an inorganic increase in R&D expense of $9.6 million driven by post-acquisition operations of PAR Retail and TASK Group while organic R&D expense decreased by $0.7 million as we continue to reinforce efficiency in our R&D function.

Other Operating Expenses: Amortization of Intangible Assets / Contingent Consideration / Insurance Proceeds

[[GREPCENT_TABLE]]
[["","Year Ended December 31,","","Percentage of total revenue","","Increase (decrease)"],["(in thousands)","2024","","2023","","2022","","2024","","2023","","2022","","2024 vs 2023","","2023 vs 2022"],["Amortization of identifiable intangible assets","$","8,452","","","$","1,858","","","$","1,863","","","2.4","%","","0.7","%","","0.7","%","","200 %","","(0.3)","%"],["Adjustment to contingent consideration liability","(600)","","","(9,200)","","","(4,400)","","","(0.2)","%","","(3.3)","%","","(1.7)","%","","(93.5)","%","","109.1","%"],["Gain on insurance proceeds","$","(495)","","","$","(500)","","","$","\u2014","","","(0.1)","%","","(0.2)","%","","\u2014","%","","(1.0)","%","","N/A"]]
[[/GREPCENT_TABLE]]

For the Year Ended December 31, 2024 Compared to the Year Ended December 31, 2023

Amortization of identifiable intangible assets was $8.5 million for the year ended December 31, 2024, an increase of $6.6 million as compared to $1.9 million for the year ended December 31, 2023. The increase primarily consists of an increase in amortizable intangible assets stemming from the Stuzo Acquisition and TASK Group Acquisition.

Included in operating expenses for the year ended December 31, 2024 was a $0.6 million reduction to the fair value of the contingent consideration liability for certain post-closing revenue focused milestones from the MENU Acquisition compared to a $9.2 million reduction for the year ended December 31, 2023.

Included in operating expenses for the year ended December 31, 2024 was $0.5 million in insurance proceeds from the settlement of legacy insurance claims compared to $0.5 million in insurance proceeds from the settlement of a legacy insurance claim for the year ended December 31, 2023.

Other Income (Expense), Net

[[GREPCENT_TABLE]]
[["","Year Ended December 31,","","Percentage of total revenue","","Increase (decrease)"],["(in thousands)","2024","","2023","","2022","","2024","","2023","","2022","","2024 vs 2023","","2023 vs 2022"],["Other income (expense), net","$","1,146","","","$","(485)","","","$","(1,068)","","","0.3","%","","(0.2)","%","","(0.4)","%","","(200)%","","(54.6)","%"]]
[[/GREPCENT_TABLE]]

For the Year Ended December 31, 2024 Compared to the Year Ended December 31, 2023

Other income (expense), net was $1.1 million for the year ended December 31, 2024, an increase of $1.6 million as compared to ($0.5) million for the year ended December 31, 2023. Other income (expense), net substantially includes foreign currency transactions gains and losses and other miscellaneous non-operating income (expense). The change was substantially driven by increases in foreign currency transaction gains and other miscellaneous expenses.

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Loss on Extinguishment of Debt

[[GREPCENT_TABLE]]
[["","Year Ended December 31,","","Percentage of total revenue","","Increase (decrease)"],["(in thousands)","2024","","2023","","2022","","2024","","2023","","2022","","2024 vs 2023","","2023 vs 2022"],["Loss on extinguishment of debt","$","(6,560)","","","$","(635)","","","$","\u2014","","","(1.9)","%","","(0.2)","%","","\u2014","%","","200 %","","N/A"]]
[[/GREPCENT_TABLE]]

For the Year Ended December 31, 2024 Compared to the Year Ended December 31, 2023

Loss on extinguishment of debt was $6.6 million for the year ended December 31, 2024, related to the induced conversion of a portion of the 2026 Notes. 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").

Interest Expense, Net

[[GREPCENT_TABLE]]
[["","Year Ended December 31,","","Percentage of total revenue","","Increase (decrease)"],["(in thousands)","2024","","2023","","2022","","2024","","2023","","2022","","2024 vs 2023","","2023 vs 2022"],["Interest expense, net","$","(10,167)","","","$","(6,931)","","","$","(8,811)","","","(2.9)","%","","(2.5)","%","","(3.4)","%","","46.7","%","","(21.3)","%"]]
[[/GREPCENT_TABLE]]

For the Year Ended December 31, 2024 Compared to the Year Ended December 31, 2023

Interest expense, net was $10.2 million for the year ended December 31, 2024, an increase of $3.2 million or 46.7% as compared to $6.9 million for the year ended December 31, 2023. The increase was primarily driven by an additional $4.8 million of interest expense in connection with the Credit Facility for the year ended December 31, 2024.

Taxes

[[GREPCENT_TABLE]]
[["","Year Ended December 31,","","Percentage of total revenue","","Increase (decrease)"],["(in thousands)","2024","","2023","","2022","","2024","","2023","","2022","","2024 vs 2023","","2023 vs 2022"],["Benefit from (provision for) income taxes","$","4,768","","","$","(1,848)","","","$","(1,134)","","","1.4","%","","(0.7)","%","","(0.4)","%","","(200)%","","63.0","%"]]
[[/GREPCENT_TABLE]]

For the Year Ended December 31, 2024 Compared to the Year Ended December 31, 2023

The benefit from (provision for) income taxes was $4.8 million for the year ended December 31, 2024, an increase of $6.6 million as compared to $(1.8) million for the year ended December 31, 2023. The change was substantially driven by a reduction in the Company's valuation allowance which resulted from the establishment of deferred tax liabilities related to the Stuzo Acquisition and Delaget Acquisition.

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Net Income from Discontinued Operations

[[GREPCENT_TABLE]]
[["","Year Ended December 31,","","Percentage of total revenue","","Increase (decrease)"],["(in thousands)","2024","","2023","","2022","","2024","","2023","","2022","","2024 vs 2023","","2023 vs 2022"],["Net income from discontinued operations","$","84,923","","","$","11,867","","","$","10,753","","","24.3","%","","4.3","%","","4.1","%","","200 %","","10.4","%"]]
[[/GREPCENT_TABLE]]

For the Year Ended December 31, 2024 Compared to the Year Ended December 31, 2023

Net income from discontinued operations was $84.9 million for the year ended December 31, 2024, an increase of $73.1 million as compared to $11.9 million for the year ended December 31, 2023. The increase was substantially driven by an $81.2 million gain on sale of PGSC and RRC. The residual amount represents PGSC and RRC operating income, offset by a provision for income taxes relating to the gain on sale of PGSC and RRC.

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. 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.

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.

ARR is the annualized revenue from our subscription services, which includes subscription fees for our SaaS solutions and related support, managed platform development services, and transaction-based fees for payment processing services. We generally 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 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. Further, ARR is not a forecast of future revenue and investors should not place undue reliance on ARR as an indicator of our future or expected results. Our reported ARR is based on a constant currency, using the exchange rates established at the beginning of the year and consistently applied throughout the period and to comparative periods presented. The table below presents our ARR on a constant currency basis, calculated using the exchange rates from 2024. For acquisitions made during each period, the constant currency rate applied is the exchange rate at the date of each acquisition's closure. There was no impact on our prior period ARR as a result of applying a constant currency as the exchange rate effects only began with the TASK Group Acquisition in 2024.

Active sites represent locations active on our subscription services as of the last day of the respective reporting period. Our key performance indicators ARR and active sites are presented as two subscription service product lines:

•Engagement Cloud consisting of Punchh, PAR Retail, PAR Ordering, and Plexure product offerings.

•Operator Cloud consisting of PAR POS, PAR Pay, PAR OPS (Data Central and Delaget) and TASK product offerings.

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Annual Recurring Revenue

[[GREPCENT_TABLE]]
[["","Year Ended December 31,","","Increase (decrease)"],["(in thousands)","2024","","2023","","2022","","2024 vs 2023","","2023 vs 2022"],["Engagement Cloud:"],["Organic","$","73,108","","","$","63,784","","","$","58,933","","","14.6","%","","8.2","%"],["Inorganic*","86,040","","","\u2014","","","\u2014","","","N/A","","N/A"],["Total Engagement Cloud","159,148","","","63,784","","","58,933","","","149.5","%","","8.2","%"],["Operator Cloud:"],["Organic","92,080","","","73,119","","","52,510","","","25.9","%","","39.2","%"],["Inorganic**","24,754","","","\u2014","","","\u2014","","","N/A","","N/A"],["Total Operator Cloud","116,834","","","73,119","","","52,510","","","59.8","%","","39.2","%"],["Total","$","275,982","","","$","136,903","","","$","111,443","","","101.6","%","","22.8","%"]]
[[/GREPCENT_TABLE]]

*Inorganic Engagement Cloud ARR represents PAR Retail and Plexure ARR only as of December 31, 2024.

**Inorganic Operator Cloud ARR represents TASK and Delaget ARR only as of December 31, 2024.

Revaluing our ending ARR as of December 31, 2024 using currency rates determined at the beginning of 2025, our Inorganic Engagement Cloud ARR would be $85.1 million and Inorganic Operator Cloud ARR would be $24.1 million.

Active Sites

[[GREPCENT_TABLE]]
[["","Year Ended December 31,","","Increase (decrease)"],["(in thousands)","2024","","2023","","2022","","2024 vs 2023","","2023 vs 2022"],["Engagement Cloud:"],["Organic","83.2","","","70.8","","","69.9","","","17.4","%","","1.3","%"],["Inorganic*","36.5","","","\u2014","","","\u2014","","","N/A","","N/A"],["Total Engagement Cloud","119.7","","","70.8","","","69.9","","","68.9","%","","1.3","%"],["Operator Cloud:"],["Organic","29.0","","","25.3","","","21.3","","","14.7","%","","19.0","%"],["Inorganic**","25.7","","","\u2014","","","\u2014","","","N/A","","N/A"],["Total Operator Cloud","54.8","","","25.3","","","21.3","","","116.4","%","","19.0","%"]]
[[/GREPCENT_TABLE]]

*Inorganic Engagement Cloud active sites includes PAR Retail and Plexure active sites only as of December 31, 2024.

**Inorganic Operator Cloud active sites represents TASK and Delaget active sites only as of December 31, 2024.

Non-GAAP Financial Measures

In addition to disclosing financial results in accordance with GAAP, this Annual Report contains references to the non-GAAP financial measures below. We believe these non-GAAP financial measures provide investors with useful supplemental information about our operating performance, enable comparison of financial trends and results between periods where certain items may vary independent of business performance, and allow for greater transparency with respect to key metrics used by management in operating our business and measuring our performance. Our non-GAAP financial measures reflect adjustments based on one or more of the following items below. The income tax effect of the below adjustments, with the exception of non-recurring income taxes, were not tax-effected due to the valuation allowance on all of our net deferred tax assets.

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Our non-GAAP financial measures should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations from these results should be carefully evaluated. Additionally, these measures may not be comparable to similarly titled measures disclosed by other companies.

[[GREPCENT_TABLE]]
[["Non-GAAP Measure or Adjustment","Definition","Usefulness to management and investors"],["Non-GAAP subscription service gross margin percentage","Represents subscription service gross margin percentage adjusted to exclude amortization from acquired and internally developed software, stock-based compensation, and severance.","We believe that non-GAAP subscription service gross margin percentage and adjusted EBITDA provide useful perspectives with respect to the Company's core operating performance and ongoing cash earnings by adjusting for certain non-cash and non-recurring charges that may not be indicative of our financial performance."],["Adjusted EBITDA","Represents net loss before income taxes, interest expense and depreciation and amortization adjusted to exclude certain non-cash and non-recurring charges that may not be indicative of our financial performance."],["Non-GAAP diluted net loss per share","Represents net loss per share excluding amortization of acquired intangible assets and certain non-cash and non-recurring charges that may not be indicative of our financial performance.","We believe that adjusting our diluted net loss per share to remove non-cash and non-recurring charges provides a useful perspective with respect to the Company's operating performance as well as comparisons to past and competitor operating results."],["Stock-based compensation","Consists of non-cash charges related to our employee equity incentive plans.","We exclude stock-based compensation because management does not view these non-cash charges as part of our core operating performance. This adjustment facilitates a useful evaluation of our current operating performance as well as comparisons to past and competitor operating results."],["Contingent consideration","Adjustment reflects a non-cash reduction to the fair market value of the contingent consideration liability related to the MENU Acquisition.","We exclude changes to the fair market value of our contingent consideration liability because management does not view these non-cash, non-recurring charges as part of our core operating performance. This adjustment facilitates a useful evaluation of our current operating performance as well as comparisons to past and competitor operating results."],["Transaction costs","Adjustment reflects non-recurring professional fees incurred in transaction due diligence and integration, including costs incurred in the acquisitions of Stuzo, TASK Group, and Delaget.","We exclude professional fees incurred in corporate development and integration because management does not view these non-recurring charges, which are inconsistent in size and are significantly impacted by the timing and valuation of our transactions, as part of our core operating performance. This adjustment facilitates a useful evaluation of our current operating performance, comparisons to past and competitor operating results, and additional means to evaluate expense trends."]]
[[/GREPCENT_TABLE]]

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[[GREPCENT_TABLE]]
[["Non-GAAP Measure or Adjustment","Definition","Usefulness to management and investors"],["Gain on insurance proceeds","Adjustment reflects the gain on insurance proceeds due to the settlement of legacy claims.","We exclude these non-recurring adjustments because management does not view these costs as part of our core operating performance. These adjustments facilitate a useful evaluation of our current operating performance as well as comparisons to past and competitor operating results."],["Severance","Adjustment reflects severance tied to non-recurring restructuring events included in cost of sales, sales and marketing expense, general and administrative expense, and research and development expense."],["Regulatory matters","Adjustment reflects non-recurring expenses related to our efforts to resolve regulatory matters."],["Litigation expense","Adjustment reflects the release of a loss contingency and settlement expenses for legal matters."],["Loss on extinguishment of debt","Adjustment reflects loss on extinguishment of debt related to the conversion of the 2024 Notes and a portion of the 2026 Notes."],["Discontinued operations","Adjustment reflects income from discontinued operations related to the disposition of our Government segment."],["Impairment loss","Adjustment reflects impairment loss related to the discontinuance of the Brink POS trademark and 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."],["Other (income) expense, net","Adjustment reflects foreign currency transaction gains and losses and other non-recurring income and expenses recorded in other (income) expense, net in the accompanying statements of operations."],["Non-recurring income taxes","Adjustment reflects a partial release of our deferred tax asset valuation allowance resulting from the Stuzo Acquisition and Delaget Acquisition.","We exclude these non-cash and non-recurring adjustments for purposes of calculating non-GAAP diluted net loss per share because management does not view these costs as part of our core operating performance. These adjustments facilitate a useful evaluation of our current operating performance, comparisons to past and competitor operating results, and additional means to evaluate expense trends."],["Non-cash interest","Adjustment reflects non-cash amortization of issuance costs and discount related to the Company's long-term debt."],["Acquired intangible assets amortization","Adjustment reflects amortization expense of acquired developed technology included within cost of sales and amortization expense of other acquired intangible assets."]]
[[/GREPCENT_TABLE]]

The tables below provide reconciliations between net loss and adjusted EBITDA, diluted net loss per share and non-GAAP diluted net loss per share, and subscription service gross margin percentage and non-GAAP subscription service gross margin percentage. Amounts presented in the reconciliations and other tables presented herein may not sum due to rounding.

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[[GREPCENT_TABLE]]
[["(in thousands)","Year Ended December 31,"],["Reconciliation of Net Loss to Adjusted EBITDA","2024","","2023","","2022"],["Net loss","$","(4,987)","","","$","(69,752)","","","$","(69,319)"],["Discontinued operations","(84,923)","","","(11,867)","","","(10,753)"],["Net loss from continuing operations","(89,910)","","","(81,619)","","","(80,072)"],["Provision for (benefit from) income taxes","(4,768)","","","1,848","","","1,134"],["Interest expense, net","10,167","","","6,931","","","8,811"],["Depreciation and amortization","37,907","","","27,014","","","25,643"],["Stock-based compensation","24,487","","","14,291","","","13,261"],["Regulatory matters","\u2014","","","\u2014","","","415"],["Contingent consideration","(600)","","","(9,200)","","","(4,400)"],["Litigation expense","\u2014","","","(808)","","","525"],["Transaction costs","8,454","","","2,273","","","1,300"],["Gain on insurance proceeds","(495)","","","(500)","","","\u2014"],["Severance","2,769","","","253","","","525"],["Loss on extinguishment of debt","6,560","","","635","","","\u2014"],["Impairment loss","225","","","\u2014","","","1,301"],["Other (income) expense, net","(1,146)","","","485","","","1,068"],["Adjusted EBITDA","$","(6,350)","","","$","(38,397)","","","$","(30,489)"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(in thousands, except per share amounts)","Year Ended December 31,"],["Reconciliation between GAAP and Non-GAAP diluted net loss per share","2024","","2023","","2022"],["Diluted net loss per share","$","(0.14)","","","$","(2.53)","","","$","(2.55)"],["Discontinued operations","(2.49)","","","(0.43)","","","(0.40)"],["Diluted net loss per share from continuing operations","(2.63)","","","(2.96)","","","(2.95)"],["Non-recurring income taxes","(0.19)","","","\u2014","","","\u2014"],["Non-cash interest","0.07","","","0.08","","","0.07"],["Acquired intangible assets amortization","0.84","","","0.66","","","0.63"],["Stock-based compensation","0.72","","","0.52","","","0.49"],["Regulatory matters","\u2014","","","\u2014","","","0.02"],["Contingent consideration","(0.02)","","","(0.33)","","","(0.16)"],["Litigation expense","\u2014","","","(0.03)","","","0.02"],["Transaction costs","0.25","","","0.08","","","0.05"],["Gain on insurance proceeds","(0.01)","","","(0.02)","","","\u2014"],["Severance","0.08","","","0.01","","","0.02"],["Loss on extinguishment of debt","0.19","","","0.02","","","\u2014"],["Impairment loss","0.01","","","\u2014","","","0.05"],["Other (income) expense, net","(0.03)","","","0.02","","","0.04"],["Non-GAAP diluted net loss per share","$","(0.73)","","","$","(1.96)","","","$","(1.73)"],["Diluted weighted average shares outstanding","34,155","","","27,552","","","27,152"]]
[[/GREPCENT_TABLE]]

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[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["Reconciliation between GAAP and Non-GAAP Subscription Service Gross Margin Percentage","2024","","2023","","2022"],["Subscription Service Gross Margin Percentage","53.5","%","","48.0","%","","51.4","%"],["Depreciation and amortization","12.2","%","","18.1","%","","21.9","%"],["Stock-based compensation","0.1","%","","0.3","%","","\u2014","%"],["Severance","0.1","%","","\u2014","%","","\u2014","%"],["Non-GAAP Subscription Service Gross Margin Percentage","65.9","%","","66.4","%","","73.3","%"]]
[[/GREPCENT_TABLE]]

LIQUIDITY AND CAPITAL RESOURCES

Our primary sources of liquidity are cash and cash equivalents. As of December 31, 2024, we had cash and cash equivalents of $108.1 million. Cash and cash equivalents consist of highly liquid investments with maturities of 90 days or less, including money market funds.

Cash used in operating activities was $25.2 million for the year ended December 31, 2024, compared to $17.1 million for the year ended December 31, 2023. The increase in cash used in operating activities of $8.2 million was substantially driven by an increase in cash used relating to our discontinued operations of $18.8 million, while cash used in operating activities from continuing operations decreased by $10.6 million due to improved profitability from our core operations.

Cash used in investing activities was $180.1 million for the year ended December 31, 2024, compared to $7.8 million for the year ended December 31, 2023. Cash used in investing activities for the year ended December 31, 2024, included $309.4 million of cash consideration paid in connection with the Stuzo Acquisition, TASK Group Acquisition, and Delaget Acquisition (net of cash acquired) and capital expenditures of $5.8 million for developed technology costs associated with our software platforms, partially offset by $96.1 million of cash consideration received in connection with the disposition of PGSC and RRC and $36.7 million of proceeds from net sales of short-term held-to-maturity investments.

Cash provided by financing activities was $278.5 million for the year ended December 31, 2024, compared to cash used in financing activities of $1.6 million for the year ended December 31, 2023. Cash provided by financing activities during the year ended December 31, 2024 primarily consisted of a private placement of common stock of $194.5 million (net of issuance costs) and $87.3 million (net of issuance costs) from the Credit Facility. We do not have any off-balance sheet arrangements or obligations.

We expect our available cash and cash equivalents will be sufficient to meet our operating needs for at least the next 12 months. Over the next 12 months our total contractual obligations are $58.9 million, consisting of purchase commitments for normal operations (purchase of inventory, software licensing, use of external labor, and third-party cloud services) of $42.7 million, interest payments on long-term debt of $13.4 million and facility lease obligations of $2.8 million. We expect to fund such commitments with cash provided by operating activities and our sources of liquidity.

Our non-current contractual obligations are $435.9 million, consisting of purchase commitments for normal operations (purchase of inventory, software licensing, use of external labor, and third-party cloud services) of $31.1 million, interest payments of $22.7 million and principal payments of $375.0 million related to long-term debt, and facility leases of $7.1 million. Refer to “Note 10 – Debt” of the notes to consolidated financial statements in "Part II, Item 8. Financial Statements and Supplementary Data" of this Annual Report for details.

After period end, the Company completed a private offering of $115.0 million aggregate principal amount of 1.00% Convertible Senior Notes due 2030 (the “2030 Notes”) and utilizing the net proceeds from this offering, repaid in full the $90.0 million aggregate principal amount outstanding of the Credit Facility. The Company intends to use the remaining proceeds from the 2030 Notes for general corporate purposes. These transactions enhance our capital structure by extending our debt maturity profile and reduces our interest expense. Refer to "Note 17 - Subsequent Events" for further information on extinguishment of the Credit Facility and the private offering of the 2030 Notes.

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Our actual cash needs will depend on many factors, including our rate of revenue growth, growth of our SaaS revenues, the timing and extent of spending to support our product development and acquisition integration efforts, the timing of introductions of new products and enhancements to existing products, market acceptance of our products, and the factors described above in Part II, Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Annual Report and our other filings with the SEC.

From time to time, we may seek to raise additional capital through equity, equity-linked, and debt financing arrangements. In addition, our board of directors and management regularly evaluate our business, strategy, and financial plans and prospects. As part of this evaluation, the board of directors and management periodically consider strategic alternatives to maximize value for our shareholders, including strategic transactions such as an acquisition, or a sale or spin-off of non-strategic company assets or businesses. We cannot provide assurance that any additional financing or strategic alternatives will be available to us on acceptable terms or at all.

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. GAAP requires the use of estimates, assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenue, and expense amounts reported. We believe our use of estimates and underlying accounting assumptions adhere to GAAP and are consistently applied. Valuations based on estimates are reviewed for reasonableness and adequacy on a consistent basis. Significant items subject to these estimates and assumptions include revenue recognition, the recognition and measurement of assets acquired and liabilities assumed in business combinations at fair value, identifiable intangible assets and goodwill, valuation allowances for receivables, classification of discontinued operations, and valuation of excess and obsolete inventories. 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.

Revenue Recognition

The Company's revenue is derived from three types of revenue: hardware sales, subscription services, and professional services, which may be sold separately or bundled together in a single contract. 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. Assessing whether products and services constitute distinct performance obligations that should be recognized separately or combined may require judgment. Performance obligations that are determined not to be distinct are combined with other performance obligations until the combined unit is determined to be distinct and that combined unit is then recognized as revenue over time or at a point in time depending on when control is transferred. The Company evaluated the potential performance obligations and evaluated whether each performance obligation met the ASC Topic 606 criteria to be considered a distinct performance obligation.

The primary method used to estimate a stand-alone selling price is the price that the Company charges for the particular good or service sold by the Company separately under similar circumstances to similar customers. Assessing the stand-alone selling price for each distinct performance obligation may involve significant judgment. Key pricing factors taken into consideration include our discounting policies, transaction size and volume, target customer demographic, price lists, as well as both historical and current sales and contract prices.

For certain arrangements, particularly those involving managed platform development services and transaction-based payment processing, we must determine whether we are acting as a principal or an agent. This assessment is based on our level of control over the services before they are transferred to the customer, our pricing discretion, and our responsibility for fulfillment. Where we conclude that we are the principal, we recognize revenue on a gross basis; otherwise, revenue is recorded net of certain pass-through costs.

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Inventories

The Company’s inventories are valued at the lower of cost and net realizable value, with cost determined using the weighted average cost method. 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.

Capitalized Software Development Costs

We capitalize certain costs related to the development of our platform and other software applications for internal use in accordance with ASC Topic 350-40, Intangibles - Goodwill and Other - Internal - Use Software. We begin to capitalize our costs to develop software when preliminary development efforts are successfully completed, management has authorized and committed project funding, and it is probable that the project will be completed and the software will be used as intended. We stop capitalizing these costs when the software is substantially complete and ready for its intended use, including the completion of all significant testing. These costs are amortized on a straight-line basis over the estimated useful life of the related asset, generally estimated to be three to seven years. We also capitalize costs related to specific upgrades and enhancements when it is probable the expenditure will result in additional functionality and expense costs incurred for maintenance and minor upgrades and enhancements. Costs incurred prior to meeting these criteria together with costs incurred for training and maintenance are expensed as incurred and recorded within research and development expenses in our consolidated statements of operations.

We exercise judgment in determining the point at which various projects may be capitalized, in assessing the ongoing value of the capitalized costs and in determining the estimated useful lives over which the costs are amortized. 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.

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. The fair value of the consideration paid is assigned to the underlying net assets of the acquired business based on their respective fair values. Any excess of the purchase price over the estimated fair values of the net assets acquired is recorded to goodwill. Intangible assets are amortized over the expected life of the asset. Fair value determinations and useful life estimates are based on, among other factors, estimates of expected future cash flows from revenues of the intangible assets acquired, estimates of appropriate discount rates used to present value expected future cash flows, estimated useful lives of the intangible assets acquired and other factors. Although we believe the assumptions and estimates we have made have been reasonable and appropriate, they are based, in part, on historical experience, information obtained from the management of the acquired companies and future expectations. For these and other reasons, actual results may vary significantly from estimated results.

Discontinued Operations

In determining whether a group of assets disposed of (or is to be disposed of) should be presented as a discontinued operation, the Company analyzes whether the group of assets disposed of represented a component of the entity; that is, whether it had historic operations and cash flows that were discrete both operationally and for financial reporting purposes. In addition, the Company considers whether the disposal represents a strategic shift that has or will have a major effect on the Company’s operations and financial results.

The assets and liabilities of a discontinued operation, other than goodwill, are measured at the lower of carrying amount or fair value, less cost to sell. When a portion of a reporting unit that constitutes a business is to be disposed of, the goodwill associated with that business is included in the carrying amount of the business based on the relative fair values of the business to be disposed of and the portion of the reporting unit that will be retained. Interest is allocated to discontinued operations if the interest is directly attributable to the discontinued operations or is interest on debt that is required to be repaid as a result of the disposal.

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Goodwill

Fair values of the reporting unit are estimated using a weighted methodology considering the output from both the income and market approaches. The income approach incorporates the use of a discounted cash flow (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. The market approach incorporates the use of the quoted price and public company methods utilizing public market data for our company and comparable companies.

Under GAAP, the Company has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of the reporting unit is greater than its carrying amount. If, after assessing the totality of events or circumstances, the Company determines it is more likely than not that the fair value of a reporting unit is greater than its carrying amount, there is no need to perform any further testing. However, if the Company concludes otherwise, then it is required to perform a quantitative impairment test by calculating the fair value of the reporting unit and comparing the fair value with the carrying amount of the reporting unit. If the fair value of the reporting unit is less than its carrying value, an impairment loss is recorded based on that difference.

The Company has the option to bypass the qualitative assessment for any reporting unit in any period and proceed directly to performing the quantitative goodwill impairment test.

The Company elected to perform the qualitative assessment described above for purposes of its annual goodwill impairment test in 2024. As a part of this analysis, we evaluated factors including, but not limited to, our market capitalization and stock price performance, macro-economic conditions, market and industry conditions, cost factors, the competitive environment, and the operational stability and overall financial performance of the reporting unit. The assessment indicated that it was more likely than not that the fair value of the reporting unit exceeded its respective carrying value. As such, goodwill was not impaired and no further testing was required. No impairment charge was recorded in any of the periods presented in the accompanying consolidated financial statements.

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.