Q2 2022 PAR Technology Corp Earnings Call
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[music].
Good day and thank you for standing by welcome to the 2022 second quarter financial results Conference call.
At this time all participants are in a listen only mode.
The speakers.
There will be a question and answer session to ask a question. During this session you will need to press star one on your telephone. Please be advised that today's conference is being recorded I would now.
I would like to hand, the conference over to your.
Speaker today, Chris.
<unk> President of business development. Please go ahead.
Thank you Michelle and good morning to everyone I'd like to welcome you today to the call for Par's 2022 second quarter financial results review.
The complete disclosure of our results can be found in our press release issued this morning as well as in our related form 8-K furnished to the SEC.
To access the press release and the financial details. Please see the Investor Relations and news section of our website at Www Dot part Tech Dot com.
I also want to be sure all participants today have access to our earnings presentation, a business review slide deck.
Individuals on the webcast should have access to the deck when they logged onto the call. This morning for those just dialing in on the conference call. The presentation can be accessed on the Investor page of the website and also included as an attachment on the 8-K, we filed this morning as well.
At this time I'd like to take care of certain details in regards to the call today.
Participants on the call should be aware that we are recording the call. This morning, and it will be available for playback.
Ask a question it will be included in both their wife conference and any future use of the recording I'd.
I'd 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. The information on this conference call related to projections or other forward looking statements may be relied upon and subject to the safe Harbor statement included in our earnings release, this morning, and in our annual and quarterly filings with the SEC.
Joining me on the call today as far as CEO , and President <unk>, and Brian <unk>, Our Chief Financial Officer.
I'd now like to turn the call over to Stephanie for the formal remarks portion of the call, which will be followed by general Q&A 70.
Thanks, Christopher and thanks to everyone for joining us to review <unk> second quarter 2020 results during.
During the second quarter, we continued to drive growth in our subscription services revenue and strong gross margin expansion as we continue to realize the benefits of scale and operational efficiency.
The business is performing and the strategy is working we continue to measure against near term expectations, while simultaneously, making strategic progress against this large opportunity that's in front of us.
As a company we delivered a strong second quarter with reported total Q2 revenues of $85 $1 million or 23, 4% increase from one year ago.
Our revenue growth was driven across all business lines and specifically around our software recurring revenues, resulting in $98 $6 million of total lives.
At quarter end and a year over year growth rate of 29% from Q2 last year. This acceleration can it continues to be driven by a 32% growth in ore coming from <unk> and 31% increase coming from break.
Equally important as we scale as the dramatic improvement we have been able to drive gross margin on our subscription services revenue.
At the end of Q2 2022, we've now achieved a 73% gross margin a significant improvement from the 53% we reported at the end of Q2 thousand 20.
We expect this positive trajectory to continue to expand over time. This growth has been driven by intense our ROI focused engineering improved brake architecture and economies of scale.
Strong results this quarter continue to be driven by a high level of execution across the business and continued strong demand for parts of unified Commerce. We've established strong momentum and have continued to build on that throughout the quarter. In Q2, we activate a 962, new brink sites not based off of churn break to store count now totals over 17734% increase from one year ago.
Brink bookings totaled nearly 950 stores in the quarter, we expect both metrics to Activations and bookings to increase the second half of this year as inventory concerns are subsiding alongside strong visibility in a ramp up and go live dates for new customers.
Additionally, we continue to see ARPA expansion pipeline, which will help the revenue momentum.
We continue to see impressive low churn rates or break approximately 4% annualize this low churn rates.
Customers, having a product and ensures our ability to provide and also capture value for card along right now.
Now turning to <unk>, we continue to outperform at plants and added more than 3500 sites in the quarter and now total more than 62300, <unk> a 29%.
<unk> increased in the last 12 months.
We signed 12, new customer logos in Q2 that added to our impressive contracted service.
Further enhanced this impressive list of integration partners with the addition of nine new partners in the quarter.
We also had an important product features and enhancements.
That include campaign management mobile framework loyalty platform offers management, along with machine learning AI approach.
This is like punch, making it easier for brands to connect with their most loyal customers and increase customer lifetime value.
Also beginning to see momentum within the grocery and C store segment and hope to announce future customer wins later this year the growth in these emerging verticals as validation of the work. The team has put in to expand our content in the last couple of years.
Payment services had another strong quarter and we're extremely excited by the pipeline of customers, who are engaged with car for our integrated payment services.
They are attracted to par payment for their competitive pricing transparent cost and full integration with bringing clients part.
Card payments cuts across all park customer types, and we look forward to sharing more data later this year.
Even though still early on in our payments initiative, we've seen notable customer wins during 2022 and believe this revenue stream will be meaningful and accelerators of our future financial future financial performance and gives us strong confidence in hitting our 2022 calls.
To update you on data central.
It's a solid bounce back in Q2, and so on net new Activations in more than 350 stores as we went live with California Pizza kitchen, and assigns a franchisee of a noted tier one China.
I am encouraged about the opportunity of datacenter has ahead of it because it's a proven solution that solve the biggest challenges the restaurant industry faces today flavor and fragrance.
In the last two plus years restaurants that focus tech spend on the front of house with CRM loyalty digital and delivery now that most reference to upgrade at the front of house back they're struggling with operational issues in profit breaking out the back door via food and labor challenges.
We've added to our sales staff to take advantage of this opportunity and importantly have improved in scheduling features of the product and expect to accelerate sales in the marketplace around labor solutions.
As we continue to strive to report meaningful metrics to our fast growing subscription services revenue will now report 12 month contracted a R which is life sites plus site signed with the expectation of going live in the next 12 months with much of that contracted air are going live in just the next six months. This number should give investors a more accurate view of our future revenues.
And is the number I personally and track internally.
<unk> 12 month car stands now at $115 million paving the way for a strong rest of the year and beyond.
Our product and hardware revenue continues to perform well in a difficult and challenging environment product ratings in the quarter continued to strengthen year over year, and we reported a 28.
And were reported at $28 4 million and this recently ended quarter, a 19% increase from one year ago.
The capital purchase environment restaurants is always tricky and this is even has been even more so.
Inflation pressures in the global supply chain difficulties.
I mentioned previously we are not immune to these challenges around the supply chain and we experienced some margin impact with costs associated with current situations. We continue to monitor the supply chain environment closely and the reality is occurring in Asia, particularly China.
The pandemic and the impact of specific shutdowns.
Now to briefly report on the government business Park, everyone has delivered a strong year over year performance for the second quarter.
Our government is up 17, 4% revenue over the same period last year has outpaced its Q2 'twenty one profitability by 48%.
Enhanced focus on contract financial performance has resulted in bottom line acceleration.
Our government segment performed above plan for both revenue and earnings.
Our business has.
I had a solid quarter driven by increased demand for recurring service excuse me for services, resulting in a 28% and year over year revenue growth and improved contract margins. Okay.
Our government segment also delivered improved performance for mission systems and product business lines and I'm confident this segment will continue to outperform for the foreseeable future with solid contract backlog and future award opportunities.
Now to our acquisition as most of you hopefully saw this morning, we announced that we acquired menu technologies.
Fast growing omnichannel ordering solution.
Menu acquisition has a robust e-commerce solution, including online ordering kiosk menu management, delivering management dispatch and much more menu.
Menu now allows part of consolidated restaurants off premise and on premise orders into one unified Tech Zach.
This is an important deal for our company, although small in size. We believe menu was the best kept secret in restaurant technology.
We were incredibly hard to win many of them over as you think menu brings a level of product sophistication, we have not seen elsewhere.
Biologic and behind the business are simple.
Can you provide a best of breed solution for off premise ordering.
Customers have been asking us for alternative view and we feel we just acquired the modern version of todays incumbents.
That gives restaurants complete configurations end to end commerce, and a very special customer focused culture.
This acquisition acquisition should help significantly expand part IPO and potential and provide years of potential upsell.
And enterprise software product wins, and we think we've acquired the most innovative solution in the market and then you already has corporate contracts with several of the largest restaurant brands in the industry extending <unk> leadership in the restaurant and the upper echelons of tier one.
Second the menu acquisition marks <unk> expansion into international markets menu is already offering solutions to enterprise restaurants in 25 countries located in Northern Europe , North and South America, and now allows part of Leverages brand and reputation to personally menu, but other portfolio products internationally.
Third and most important menu accelerates parse plans to unify the restaurant beginning immediately part will initiate an effort to unify menu within part of if I'd conversation.
<unk> no longer need to maintain two different systems for on and off premise ordering.
<unk> basically.
All transactions to become a true system of record and allow for extensibility.
As innovation accelerates the number of ordering channels a unified system allows that channel expansion to function seamlessly, while ensuring uninterrupted interrupted operations.
Other benefits of adding menu to par include a more seamless experience that puts the customer at the center of every transaction regardless of the channel they use to order and pay.
The acquisition Centralizes key functions like menu management for all systems to a shared model across both commerce and loyalty solutions.
It also natively connected kitchen management system across channels to better manage customer experiences as well as manage demand into the kitchen.
The combination will also provide a material reduction in costs for brands, who maybe managing multiple systems to offer every customer ordering through the cross channels.
While also accelerating innovation for brands as new possibilities unlocked by unified Commerce, I, certainly hope you're excited as I am about the physician to park and our unified Commerce offering.
Diligently thought out the correct partner, we needed to acquire literally evaluate every player in the space.
Many accelerates our path to becoming the world's largest restaurant technology company.
Just wanted to reiterate that we are just getting started as we seek out other transactions are the best in class companies that we can add to our unified commerce offering each time, we allocate your capital is for the purpose to drive long term shareholder value.
Incredibly humbled about the work that's happening in part we believe our vision of unified Commerce gives us the opportunity to become a once in a generation company.
But our unit economics and technology advantages, we believe will win and Brian gave that commerce to key vertical markets. Looking ahead, we have sufficient cash to execute on our strategy, we're prioritizing and making excellent progress on integrating past acquisitions and ensuring appropriate controls are in place while simultaneously, making notable progress on our internally developed projects as well.
We feel confident in hitting our 30% to 40% growth target for the year and while the macro environment could be challenge, we feel we see real reasons, you've got domestic apartments as always I would like to thank all of our employees for their dedication and effort over the past quarter across the organization people set up to ensure we meet the needs of our customers while at the same time embracing the changes necessary to create a company for long term.
Sustainable success.
Continue to act as owners of our company with that I'd like to hand, it off to Brian who will review our financial performance in greater detail.
Thank you Bethany and good morning, everyone.
Total revenues were $85 1 million for the three months ended June 32022.
An increase of 23, 4% compared to the three months ended June 32021 with growth coming from both restaurant retail and government segments.
Net loss for the second quarter of 2022 was $18 8 million or <unk> 70 loss per share compared to a net loss of $10 million or <unk> 39 loss per share reported at the same period in 2021 <unk>.
Adjusted net loss for the second quarter of 2022 was $9 8 million or <unk> 36 loss per share.
It's an adjusted net loss of $9 2 million or <unk> 36 loss per share for the same period in 2021.
Product revenue in the quarter was $28 4 million and.
An increase of $4 5 million or 18, 6% from the $23 9 million reported in the prior year. We continued to see strong hardware sales, both with our tier one legacy customers and across our brands and customer base.
Service revenue was reported at $35 8 million, an increase of $8 6 million or 31, 6% from the $27 2 million reported in the prior year driven by subscription services revenue from our punch and bring offerings.
Total subscription services revenue reported in Q2, 2022 was $23 4 million compared to $16 5 million in Q2 2021.
Our recurring revenue rate of subscription services exiting the quarter was $98 6 million, an increase of 29% compared to Q2, 2021, driven by 31% growth in brake and 32% growth in potash.
Our recurring revenue base, which includes both software related services and hardware support contracts continues to expand.
Of the $35 8 million of service revenue recorded in Q2 2020 to.
$31 million was comprised of recurring revenue contracts as compared to $23 million in Q2 2021.
Contract revenue from our government business was $20 9 million, an increase of $3 1 million or 17, 4% from the $17 8 million reported second quarter of 2021.
The increase in contract revenue was driven by $2 4 million or 27% increase in our ISR solutions product line.
Contract backlog continues to be significant noting a total backlog of $184 5 million as of June 32022, compared to $141 2 million backlog as of June 32021.
Now turning to margins.
Margin for the quarter was 14, 7% versus 22, 8% in Q2 2021.
The decrease in margin was primarily driven by $1 5 billion charge for excess and obsolete inventory.
Margins, excluding the excess and obsolete charges was 20% for Q2 2022.
We're keenly focused on product delivery and the supply challenged market, but we continue to improve processes to efficiency efficiently balanced customer demand and more modest inventory levels. We continue to also monitor our pricing to properly reflect changes in the dynamic and cost environment.
Service margin for the quarter was 49% compared to 33% reported in the second quarter of 2021.
The substantial margin improvement over multiple periods continues to be driven by improvements in housing and support services costs at a higher mix of SaaS software.
Service margin during the three months ended June 32022, and.
<unk> included $5 4 million of amortization of identifiable intangible assets compared to $5 million.
During the three months ended June 32021.
Excluding the amortization of intangible assets total service margin for the three months ended June 32022 was 55, 6% an increase from 49, 2% for the three months ended June 32021.
Government contract margins were 11, 1% as compared to seven 9% for the second quarter of 2021.
The increase was driven by higher margin mission systems contracts and lower corporate expenses across all product lines.
In regards to operating expenses.
GAAP SG&A was $26 4 million, an increase of $3 5 million from the $22 9 million recorded in Q2 2021.
The increase was primarily driven by $1 9 million in sales and marketing expenses $1 million in internal technology infrastructure cost and <unk> 6 million increase in corporate management expense.
Net R&D was $10 1 million, an increase of $1 5 million from $8 six recorded in Q2 2021, as we increased spend across our software product development organization.
Net interest expense was $2 5 million compared to $4 9 million recorded in Q2 2021 the.
The decrease was driven by the refinancing of the owl rock loan with the issuance of the 2027 notes in September 2021, and a reduction of accretion.
Resulting from a January one 2020 to adoption of a recent accounting pronouncements.
Now to provide information on the company's cash flow and balance sheet position.
For the six months ended June 32022 cash used in operating activities was $31 6 million versus $33 1 million for the prior year cash.
Cash used for the six months ended June 32022 was primarily driven by additional net working capital requirements due to $11 6 million increase in accounts receivable related to our government segment.
And a $7 million increase in inventory these.
These increases will be temporary as we expect accounts receivable and inventories revert back Claude.
At December 31, 2021 levels during the second half of 2022.
Cash used in investing activities was $5 million for the six months ended June 32020 Q.
Versus $381 7 million for the six months ended June 32021.
Investing activities during the six months ended June 32022 included $1 2 million of cash consideration for the Q1 2022 drive through Chuck acquisition.
Capitalized software for developed technology costs for the six months ended June 32022 was $3 2 million versus $3 8 million from six months ended June 32020.
Cash used in financing activities was $1 $8 million for the six months ended June 32022.
Versus $319 3 million for the prior year.
Financing activities for 2022 was driven by stock based compensation related transactions, while 2021 activities included financing related to the punch acquisition.
Days sales outstanding decreased within the restaurant retail segment from 58 days at December 31, 2021 to 47 days at June 32022.
Day sales outstanding increase within the government segment from 55 days at December 31.
To 89 days at June 32022.
Interim increase is expected to be reduced normalized levels during the third quarter.
This concludes my formal remarks, and we'll now move to Q&A.
Okay.
As a reminder to ask a question you will need to press star one one on your telephone please standby, while we compile the Q&A roster.
Okay.
Our first question comes from <unk> Tandon with Needham Your line is now open.
Thank you good morning, congrats on the quarter suddenly if you shared a lot of information on the acquisition, but just to clarify maybe I missed this how much did you pay for the acquisition and could you share any financial metrics in terms of.
<unk> growth and revenue contribution and how that should flow through the balance of 2022 into 2023.
Yes, so in regards to the acquisition costs will see it's also as a subsequent event in our 10-Q filing later on today.
The base industrial was $25 million, comprising a mix of both cash and equity and there is a.
An earn out.
Linked to that it's also primarily driven by our growth over the next 24 months.
As far as revenue excitations.
De Minimis now, but with a very strong ramp expected.
Over the next 12 months here.
What's amazing about menu and as I mentioned, we really do think it's the best kept secret in restaurant technology, they've signed meaningful contracts within the largest restaurant brands internationally.
Right at that sort of.
The point, where theyre, taking contracted revenue lives. So it will be small this year and we expect to accelerate meaningfully in the out years with.
With pretty decent visibility.
Okay.
Understood.
And then in terms of the.
Contracted arrow, that's a very helpful metric, but could you just provide any framework in terms of how youre thinking about the back half of the year given all the concerns around the recession or economic slowdown have you seen any slowdown in decision, making from your customers and prospects. It doesn't sound like it but I would love to get any sort of thought process around your X.
Dictations for the back half of the year, especially.
Yeah, you know in the beginning of year, we sort of guided to 30% to 40% growth and we still feel really confident about that and we think the next couple of quarters will actually be faster growth than the last quarter.
The world holds up.
A lot of that we feel is being driven by.
Our brink initiative with payments, where we're seeing really strong adoption and that adoption, we haven't seen an ounce of customer pushback as it relates to the macro environment or anything.
Yeah.
Macro related we haven't really seen that change the pipeline is in fact, expanding not contracting and that gives us some good confidence.
There are other parts of our business, we expect to see a slowdown in hardware revenues in the back half of the year and while we haven't really seen it yet and that's just an expectation that as rates go up and as the economy slows franchisees as a large tier one chain to our hardware only customers will probably pull back so we're getting ready for that we're not seeing that.
And in an aggressive way yet we've seen small signs of it here and there, but that's where we would expect to see a slowdown.
Our contracts are that I put out there.
It's a very good guy and we expect to turn most of that live in the next six months, which is why we put that metric out there is what I tracked in terms of internally. So that's a good guide for sort of on the air side, but to your question.
If the economy slows down significantly and we will see that impact in our hardware business.
Great. Thanks for that color I'll get back in queue. Thank you.
Please standby for the next question.
Our next question comes from Stephen Sheldon with William Blair. Your line is now open.
Hey, thanks.
I wanted to also ask you about the IRR.
And I guess.
Specifically, great to see that contracted IRR number.
That all goes live I think that would imply about 30% growth, but just curious what youre also seeing on the pipeline side.
Yes.
Is what youre seeing in the pipeline also giving you some confidence about that 30% to 40% AOR growth number just any detail on the pipeline across the different businesses.
Yes, absolutely and I'll go one by one so you have some color so short answer is.
We think we'll hit that number as I mentioned again, the kind of make a turn this change we feel pretty good about it now.
Product by product.
The hardware business pipeline, it's hard because it's a very short window and customers can change quickly. So I think we see orders come in we haven't had a good quarter, but we expect that new version of the pipeline there to contract and even if the economy slows down.
On the <unk> payment side, we felt we see strong pipeline of go lives happening and we've got pretty good visibility into that for the next six months.
And we are in the process with a couple of large accounts that will set us up nicely for the following year, but.
Today pipeline team is as strong as it needs to be for us to hit those goals.
Yes, I don't think its a reach for us at all or otherwise we wouldn't add.
And so we feel.
Pretty decent about the bring pipeline, but that will be the key for the second half can we expand that pipeline. So that 2023 successful year 2019, we feel confident.
Theres not a lot we can do in 2022 to dramatically impact 2022, but it has a tremendous impact on 'twenty three.
The <unk> side.
Pretty much everything we have contracted or booked to date is.
Is all that we have.
What will execute in the second half so any business that we signed in the second half of the year as it relates to our punch products will probably go live in 2023, now that's excluding Upsells and cross sells.
So we have really strong visibility into punch for the remaining six months as it relates to <unk> and to everything we signed for the next six months will be real car for the following year.
So.
Short answer is we have very strong visibility from now to the end of the year of where we think revenue will go because that revenue has been booked and plan to rollout in the second half of the year.
Payments is.
Is it is a business that can impact 2022 immediately it does not have a long ago lifecycle as most of these customers already on brink.
And Thats, where we have probably not probably without question our strongest pipeline.
Demand for payments is accelerating ahead of our expectations.
And as hardware supply chains weekend and should help us frame.
Prepayment devices, which is limiting factor antares revenue live at the moment. So payments. The pipeline is very robust very strong and I would argue if the economy weakens that business will get stronger and stronger the net cost savings to our customers and so that's an easy switch for CFO and CIO has to make.
And lastly on data central.
<unk> low here, so short short answer.
We feel feel momentum we've got a great leader, there and markets Boston, who often says we've got stronger fragile momentum and I think we will see see that continue to grow we're in a couple of processes, we feel very confident about.
So data essentially I think the pipeline is very strong so.
In short I think because our businesses are contracted they are longer sales cycles. The the rest of the year is very much executing on what's been signed this year.
Outside of payments in parts of <unk>. So we have very good bids later this year and so from here until the end of the year, it's very much going to be what impacts 2023.
Got it that's incredibly helpful.
Maybe shifting to the menu acquisition that was great to see and clearly a lot to dig into there, but can you give some more background there between their focus on SMB versus enterprise.
And then how aggressively do you plan to take this out as an option to your current U S enterprise customer base.
As an alternative to the other online ordering solution partner.
So par has an open solution and will always be supportive of every single restaurant technology company.
We sort of look at the companies in conveyance musical comes to pass and they become sort of toll keepers.
Stifle innovation and we want to be the opposite of that and so it will have any impact on any of our partners specific to your question.
Priority, one two and three within that acquisition is taking live the revenue that.
Many of us already contracted.
Menu is and it is truly a special set of products.
Net.
100 different digital ordering companies kiosk companies and.
Its hands.
Far and away the best product we've seen.
And when I say that it's not a single product, it's an online ordering product. It's a mobile product, it's a loyalty product at the kiosk product that product. It's a railcar that gets its truly incredible what they built and it's a 100% built for the enterprise and that's really where it aligns with what par is building.
And so we don't it's not taking an SMB product and make enterprise, it's already enterprise product.
And so our goal with menu is to take live the revenue that they've worked very hard on the last few years and helping them take that life and that is predominantly in international markets to 25 markets that I spoke about in the call but of course, we see tremendous opportunity in bringing their products to the United States.
We've been sort of pounded on by our customers to find alternatives to what they have today and so we expect to eventually bring that United States and into a unified solution and we've got pilots with couple of our existing customers to date and so we're not waiting on that but I'd say, probably one has taken a lot of the revenue that's already been contracted and priority will be bringing it tonight states and bundling into a unified conversation, which is the real recently.
And so over time I suspect the U S to be a huge and probably the biggest market for menu, but today, we've got to take all of the revenue that's in contracted and again. It is it is a I guess, it's just an incredible product that we're really really excited about.
Great. Thank you.
Please standby for the next question.
Okay.
Our next question comes from Jim <unk>.
Masako with Factset. Your line is now open.
Our next question comes from Jim Saga with facts that your line is now open.
Please standby for our next question.
The next question comes from Smarts.
<unk> with Jefferies. Your line is now open.
Hey, good morning.
And Brian .
Our guys are doing well.
A few questions for me I guess I just wanted to first make sure. So Carter there are in last quarter's presentation was that.
Above 116 million Thats $1 $15 million into your Q I'm curious why it was down $1 million quarter over quarter I was there a change in either what you're including in that or.
Just maybe help me understand that and then I have a couple of follow up questions.
Sure, Yes, we mentioned on the call it's definitely not down what we did was to give you better visibility. We've put we changed the definition of contracted <unk> to be just the next 12 months with us and most of that next 12 months car as the next six months and so.
We think that gives you a lot more visibility, it's a number that I track, which is what's the revenue with contract that's going to go live in the next 12 months and again most of it will go out of the next six months.
Got you I apologize I must have missed that part so okay. That's helpful. And then I guess, just as I think about <unk>, it's still growing.
The overall <unk> growth, but I guess I'm curious, if I think back to <unk>.
When you guys acquired it was growing.
Well north of the mid forties this quarter I know it is a tough comp, but youre talking about growth decelerated to the low Thirty's I'm just curious is there.
What's is it just changes that are going on in the sales organization or sales cycles getting longer there, maybe what's driving some of that slowdown in that punch are our growth.
Yes, just one question when we bought the business it had grown about 30% year over year from the prior year and then obviously you sounded a lot with.
Our go live motion plus the cross sell up sell.
It is just scale right, we're still adding huge amounts of every quarter and every year.
And so as we scale I think that growth rate will sort of stabilize and as you've heard me say, we want to maintain that 30%, 40% growth rate and so now it's continuing to take that product internationally, leveraging the menu acquisition and new product upsell. So we believe we'll continue to grow the punch business, 30% to 40% I think when we were growing 45%.
That was.
A moment in time, where we had just incredible cross sell opportunities through the brink acquisition, but we think it will stabilize around this rate as we sort of think for all of our products will serve to be in that 30% to 40% range and we're seeing good movement now in adjacency markets with with grocer and also with convenience.
Especially with that product.
Great and then maybe just one one last one for me just any update on maybe what the new.
New brink are our trends are in terms of our Pooper site are you seeing better pricing are you seeing.
Similar pricing to what you've seen maybe over the last two or three quarters. Just anything that you can see that that gives us an idea of maybe what the <unk>.
Size and scale of the deals you're landing and the price youre able to retain even as you do that.
Yes, thanks for that answer that question, because it's I wish I extend anymore. So the short answer is no.
We've been taking live a lot of sites that were contracted this is a sound crazy to you in 2016.
And that is weighted down the <unk> the average <unk> of grain for signed contracts over the last 12 months has been significantly higher than the contracts signed obviously in 2016 and so in the second half we should benefit from that momentum of the signed deals.
And allow for us to expand revenue growth within the brink product line, so you'll see a.
A reversal starting slowly but it will really pick up and then 2023, we'll have a lot of benefit of taking live the contracts that we've put out there at <unk> list prices is up considerably just in the last 12 months.
And then as we've found ways to monetize things like API.
And additional product module as it will continue to grow so we will see a reversal of that trend. Unfortunately, the revenue that goes live we put lar is oftentimes.
Older contracts that we have.
They're a great sign that we've now taken live revenue that was contracted years ago, and that was with stock because of weather management or product issues, but.
We have been.
Unfortunate getting the benefit of all of these sites and I think that will reverse now.
Great. Thanks for taking my questions.
Please standby for the next question.
Our next question comes from Anja Soderstrom with Sidoti Your line is now open.
Alright, and thank you for taking my questions.
Good questions asked already I'm, just curious how did you.
How about with the menu technology acquisition and how long have you worked on it and why now.
So we've been spending a lot of time on this idea of unified Commerce and unified Commerce doesn't work unless you can bring together off premise and on premise orders off premise or things like online orders mobile orders, yes, everything is not in the store and we haven't obviously had a solution for that and so we spent I'd say two years look.
For our product really a year and half, but let's call. It two years to find a product.
Is it will work for us the great challenge in in that market, though is that most people focus on the SMB market and while there are great companies. They are growing very quickly, it's incredibly hard taken F&B product and make it enterprise, particularly in restaurants.
And so we really did scour the world trying to find.
Let the best product.
As I said in my remarks.
And you can have the best marketing the best sales team.
The most savvy management team, but product wins, and we needed to find the best product and so we discovered menu I want to say nine months, a year ago and candidly, we didnt believe what we saw we'd never seen a product a company that has so much product that was still relatively young.
And its maturity.
And so we took a long time to give incentive become part of par.
And during that time, we drilled the men's depreciation for now and the product suite, but just the obsession they have over making customers happy it's something we can continue to learn from the park and so while it's a small acquisition.
It's one that our entire team has rallied behind been a huge part of and Youll see us continue to grow and what's exciting about it is this wasn't our intent when we went on the journey, but now gives us international foothold that will continue to expand and we will start by pushing punch aggressively internationally, but eventually all of our products and so we love that it fills a product gap that we needed which was sort of off premise ordering but it also brings us.
Nationally, which is an area that we want to extend to as well as there isn't a really dominant enterprise player nationally and then the sort of final benefit is they've got contract signed.
<unk>.
This is not when they go to the next large customer it's not going to be in.
You experienced I sort of know that they know the RFP process. They know the testing process security process and everything in between so.
I think we will.
That would be very excited what we discover.
Okay and.
Also benefiting from the stronger dollar I guess when you acquired it.
Okay.
I think with.
<unk> cash so we did benefit some in but.
But I think the key to the acquisition for the menu team will be their ability to grow the IRR efficiently and hit some of the earn out targets that we put out for them, which will be in our and our subsequent events filing which youll see.
And so I think to then the motivation is to drive that or not.
Okay, and how do you see in general that the M&A environment now and what does that mean for your government business potential spinoff.
So.
I think we are this is our second quarter, we printed.
Revenue from our new contract that's driving a lot of the growth that you see.
As we continue to see that and the margin expansion, we'll constantly explore the opportunity set that exists for that business.
Given the growth given the margin expansion.
It's a business that should get a good multiple of any event that our board decides to monetize it.
Okay, and then lastly, just in terms of them.
No uncertain economy has that customer sentiment through the sales cycle being affected if at all.
And what's going on in the economy now for you.
Today, we're not seeing tremendous change.
As I mentioned on the call, we would expect to see it in our hardware business and I think we would potentially see it.
In other parts of our business, but we're not.
It's one of those things, where we talked about with our customers, but we're not seeing that elongation of sales cycles quite yet, but without question it can and should happen.
And if it does happen I think it'll be more of a 2023 issue is it 2022 is very much being booked now so.
It's something that I think if it happens.
We'll be ready for it and we're taking precautions slowing down hiring focusing on price being more efficient, but today. It's I would say we continue to be surprised by that the revenue is going live.
Okay, and actually one more last one and in terms of.
Unified solution now when you added to the menu acquisition is there an extra.
Do you have a hit list of potential customers that you think theyre going to be more prone to signing on now when you have an even more robust solution.
Of course I think.
First and foremost as we integrate the menu product into part it'll make us more attractive of our existing products. Those customers that are in sales cycles for <unk> Branca just punch.
Central should find us more attractive because we can unify their on premise off premise to the back office that is a really attractive proposition and so unless you really if we're in a process and let's just say brink is in second place in that first place. This should help us push that over the finish line.
And so I think I will just naturally bring more revenue forward on our existing products.
The second part of your question the menu product is very well focused on the enterprise customer it's not a product for the single storey restaurant its product for global International brands that want an alternative to the incumbent exist today, and we're highly focused on being scalable completely configurable and really giving control back to the restaurant.
<unk> I think if you talk to restaurant companies.
They're happy with what they have but they're not blown away and particularly there's ability to be configurable and integrated such that the kitchen is a smart is the online ordering system and they are speaking the same language and none of that exists today and menu give them that opportunity now.
Okay.
Okay, great. Thank you and also for me.
As a reminder to ask a question. Please press star one one on your telephone.
Please standby for our next question.
The next question comes from Adam Wyden with <unk> Capital. Your line is now open hey.
Hey, guys couple of questions for me I just wanted to clarify your your contract today our definition so.
That doesn't include.
That doesn't include payments correct and you made another comment around brink that it doesn't include all of brink. So it's largely punches outright like can you can you kind of clarify what's in there and what's not sure.
So the majority of the Delta between the Lar Lar live revenue and contract revenue is punch.
A small portion of his brink and that's because we don't put anything in contracted revenue from brink unless it's assigned order for that store. So as an example, if we sign a big chain today, none of that goes to contracted revenue until we have visibility into that revenue coming in the next 12 months and so what we've done is just made it very specific is cars that <unk>.
We have visibility into the next 12 months.
So it's predominantly.
With a portion of our brain can is a small portion of the payments.
Right and that wouldn't that wouldn't include potential price increases it wouldn't include.
I mean, it basically is very light on Frank as it relates to new New live activation doesn't include pricing doesn't include payments in any material amount is that a fair way to.
Describe it that's fair.
So in a perfect World you know there.
The economy kind of keeps together.
There could be could be upside to that.
Okay.
Absolutely.
As I said I track this number very closely internally because I know, we'll hit it and now it's about how do we get above that.
Right. So I've got two questions. The first one is more qualitative. So if you think about the journey and I've been on the turn in a long time now.
You you started getting momentum and then Covid hit and you had your first kind of like 1500 brink live units activation I want to call. It and then what the Hell of a handbasket and thank everybody woke up and because of the nature of getting into the stores and made a very harder harsha.
Activate break even though everyone knew that they either kind of off premise. Digital then you know you have the supply chain and the inflation I mean do you think people are kind of up to this and saying, it's almost kind of like a perfect storm in terms of like the the necessity I mean at what point do you think the <unk>.
The customers say kind of like yeah, I get it it's inflationary, but like you know.
Costs are up but like we're going to bite the bullet and make some investments to reduce that I mean, I get a payment is easy because it reduces the cost day, one, but I mean prompted the purposes a lot of the stuff that you're doing does reduce cost they want it.
They just need to see it in our model and our workforce I mean do you think people kind of look at the last two years and say you know what like.
I can't control revenues, but you know I can spend a little bit of money upfront and you get a big return.
Got it because it's like if this is like these are the ideal conditions for your business.
I think youre right.
As long as sort of as we've become very good at selling the ROI of our solution.
And one of our leaders I think has done a tremendous job in and showing our customers Here's what happens when you install brand keeps it happens when you install brink with another module apart.
And that ROI is definable it it's real it's real real math and it's not sort of fluffy stuff is actual data that we have and I think that's how exactly how we sell and so I think the last year in the next couple of years are very strong environment for us to continue to see this growth that we see now so.
So I don't think we're at a point, where enterprises don't get that value today at just about convinced them to go faster.
In a market where.
We're losing tons of business or competitors and keeping up its a business where when the customer goes we go and we feel we've got a strong probability of winning that deal and so it's just about building momentum in this environment could potentially help accelerate that with these customers pushed them over the edge.
And then my last question is around M&A.
I'm not sure if you called out what.
What the <unk> contribution.
As for menu or what you would expect it to do but.
Obviously, we're in this kind of log jam, where private companies are in general or at least historically traded at higher multiples of IRR relative to the public comps you've seen.
Mr until my Bravo, you saw Valero last week comp.
Companies are out there buying I mean, just to use <unk> as an example, I think they paid 11 times. They are our 12 times or something when you do fully diluted and options blah Blah Blah and you know that business was probably later in its maturity and had.
It's probably a lower a similar growth rate to kind of break in and all the rest and so.
I look at par today, and I think it's obviously, it's definitely material undervalued to that but but but the question is when you look at private equity.
They are taking advantage of what I would call the $30 million to $40 million of kind of cost of being public not just the New York stock exchange listing costs not just the.
The control our CEO CFO blah blah blah, but also just kind of be the systems in place and we've kind of benchmarked it and for a company of the scale. We think it could be 2030 $40 million of kind of duplicative costs. There are obviously, some some public company players like <unk> like although like transact technologies there are companies out there.
That might not have the same valuations and as the private markets, where you could effectively do a transformational deal like punch in the public markets and kind of.
Get that scale and duplicative cost and kind of you know.
Synergy value I mean, how do you think about kind of going after companies like that or in the absence of private market deals that makes sense, you know kind of doing something in the public markets, where you can kind of take advantage of the dislocation there.
Yes.
The macro view that your comment is very true which is if.
If I look at our acquisition.
When the numbers get printed.
18 months warehouse called vantage points with you I think it'll be a homerun deal for park and I take great Pride in and I think that the contract position not only beat expectations, but it was incredibly accretive to parse shareholders I suspect this deal will be as well and so we start from there. The business has been the model has to work and todays environment provides opportunity. If we had tried to acquire <unk>.
When you a year ago and by the way we did it would have been a very different price has been very very hard to work and so we feel that we can be the aggressor today, we've staffed up a really high quality M&A team now.
Covering rock after rock as I said menu was the best kept secret and it's.
The business that.
I don't know if many people realized that was out there and so we don't want to use this environment to be aggressive and.
And if theres a larger asset out there that we can make work and put our playbook.
Work in that organization and that platelet being drive gross margins. So that we can reinvest in product well.
But it's these are oftentimes opportunistic approaches where you've got to find the right asset that serves the same end market that wants to sell and obviously it doesn't want to sell what were very hard to convince them to sell but that can take some time, but it's the short answer is this acquisition. While small is completely illustrate the point you are saying, which is there is no way we could have made the math work a year ago, but we can today.
And I expect we'll continue to do that for the rest of the year and next year.
Okay, Alright, that's it from me thank you.
Okay.
I am not showing any other questions at this time I would now like to turn the conference back to submit <unk> for closing remarks.
Okay.
Thanks, everybody for joining and we look forward to updating you next quarter.
This concludes today's conference call. Thank you for participating you may now disconnect.
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As Johan during Q&A, you can dial star one one.
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Hum.
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