Q3 2022 PAR Technology Corp Earnings Call

November 9, 2022

Yeah.

The conference will begin shortly to raise your hand during Q&A you can dial star one one.

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The conference will begin shortly.

As Johan during Q&A, you can dial star one one.

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Okay.

Good day, and thank you for standing by.

Welcome to the fiscal year 2022 third quarter financial results.

At this time all participants are in a listen only mode.

After the speaker's presentation, there will be a question and answer session.

I asked the question during the session you will need to press star one one on your telephone.

I would now like to hand, the conference over to your speaker for today.

Chris Byrnes, Vice President Dennis business development, you may begin.

Thank you Wanda and good morning, everyone I'd like to welcome you today to the call for Par's 2022 third 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 along with a slide deck on the earnings. Please see the Investor Relations page of our website at Www Dot <unk> Dot com.

At this time I would like to take care of certain details in regards to the call today participants on the call should be aware that we're recording the call. This morning, and it will be available for playback.

You ask a question it will be included in both our live conference and any future use of the recording.

I would like to remind participants that this conference call includes forward looking statements that reflect management's expectations based on currently available data.

Actual results are subject to future events and uncertainties inform.

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 is pars CEO and president of <unk>, and Bryan <unk>, 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 78.

Thanks, Chris and thanks to everyone for joining the call. This morning.

Momentum continues to build for a unified experience strategy and the underlying products that makeup that felicia.

That momentum is delivering new logos at a nice upselling motion to existing customers.

In preparing for today's call. It became apparent how important this opportunity was for us to lay out what's behind the numbers, how we allocate dollars for meaningful return and our commitment to driving to profitability quickly.

We are part understand that every dollar we invest pay ourselves and team members is not our own but yours are shareholders. We don't take the responsibility lately and want to earn the right to continue to manage our investment.

I'm going to break today's call into three sections.

A review of our recent quarter results.

Second a review of our capital allocation policies that should shed light into our decision making process for investments and third a review of the macroeconomic impact and the resilience of our business is showing which is allowing us to dramatically slow down spend yet maintained growth and create a clear path to profitability next year, which will walk you through.

First our results.

I am convinced that <unk> remains the best metric to measure our success.

As we believe underneath each dollar of <unk> is considerable future cash flow at.

At the end of Q3 reached $106 6 million delivering a 29, 2% year over year increase demonstrating the continued growth in scaling of our subscription services engine.

12 month contracted <unk> is reported at $118 3 million or.

$15 million increase from the end of 'twenty one.

Today, we have five key products that make up our unified commerce solution.

Brink, Pos punch data Central park payments and now menu.

In order for you to simply in order to simplify our reporting and to align our internal tracking of these businesses with our external.

We will be reporting them in three distinct <unk> streams.

This classification is how we track the business internally and should help shed light on the return on investment within each of these areas.

The first is the operator solutions, which encompasses break in our payments business.

Given these products are sold together and run by the same team. This is a natural grouping as we often use wanted to help bring in the other and a continuation of how we already reported.

Second as guest engagement <unk>.

<unk> punch in menu, our front of house offerings, while menu is still very small in time it will become a strong portion of the space.

And third as back office, which today is our data central offering.

Operator solutions that includes brink, Pos and par payment services grew 32% in Q3, when compared to the same period last year and reported at $38 9 million.

During Q3 985, new stores, we're activating a new bookings totaled approximately $140.

Churn continues to be extremely low at four 8% annualized.

We continue to raised subscription prices on every renewal and have been able to attach payments to a majority of our new customer wins in 2022.

We saw strong traction in all Rollouts and rollout of our tier one customers in Q3, including dairy Queen Culberson others.

Par payment services continues to outperform our internal plan and we expect an acceleration in Q4 as our large tier one deal gets rolled out faster.

We begin to see the impact from our higher margin partnership deals.

As we have already six weeks into Q4, we have strong visibility into the quarter and as of right now we see a very nice sequential bump in activations in front of us.

One of the significant benefits of having our payments offering it allows us to have another tool during renegotiations to help increase bring subscription rates, but still bring down the total cost of ownership for our customer by giving them more attractively priced payments product.

Moving to guest facing <unk> that includes punch in the newly acquired menu at AOR growth of 31% in Q3, when compared to Q3 'twenty one.

<unk> was reported at $57 5 million.

We added approximately 5700 sites in the quarter.

While menu is still very early in its go to market motion and not yet delivering meaningful revenue. The product is receiving rave reviews from customers and the bundle approach bundled approach with punch it gives us instant credibility.

The acquisition allows us to provide intelligent to ordering customer engagement loyalty and now the newly launched subscriptions product for enterprise restaurants in C stores.

Back office and data central as we have previously message continues to turnaround a strong leadership and a market more focused on cost control.

We reported <unk> of $10 2 million in Q3 with a 12, 3% increase from last year's Q3 number.

And a more notable 11% sequential improvement from Q2.

In Q3, we signed a large multi brand enterprise organization 13 separate brands and over 200 restaurants on the strength of our team and datacenter the ability to seamlessly handle multiple concepts in the same database.

Providing consolidated rollout reporting for the entire organization.

We had a nice jump in activations of nearly 370 stores and.

And 360, new store bookings.

We continue to see evidence that restaurant technology spend as being directly on the back of house to control. The two largest variable costs at the restaurant food and labor and thereby improving their margins and profitability as inflation labor and supply chain issues continue.

In addition to our financial results our product team had a very productive Q3.

As you'll hear shortly when I discuss our capital investment policy.

No significant change at par is that our growth in R&D spend up until now has been focused on customer retention and fixing historical issues not new product.

Over the last couple of quarters, we've been able to reallocate spend some technical debt within brink to new product and shortly any revenue.

This will allow us to ramp up our new product development in 2023, without adding new employees, but by moving resources from fixing issues to new product.

Said differently, we don't intend to increase R&D spend after this year, but internally it will have more resources focused on new revenue generation.

In Q3, we saw the results of some of this work.

<unk> released new drives these features to support the increased traffic that our brands have experienced.

Punch released three new features powered by machine learning feedback sentiment smart segments and spend time optimization.

These machine learning algorithms and utilize the massive transactional data available and the punch system to help brands improve their guest experience.

Data central delivered a redesign of the line check module for operational task management.

Optimizing the flow and ease of use and we will continue enhancing that module to better support store audits.

Equally important we've done tremendous work integrating our products to deliver our customers. The one plus one equals three impact on why buying more from par is a win for them.

An example.

We released insights by data central feature for early adopter bring customers to use data Central's advanced analytics right from the branch interface.

Another good example.

As the piloting of new features that simplified campaign workflows for punch customers using brink.

Huge time savings for our customers and the benefit received only if you have both par products.

Moving on from the result, my second goal of this call is to talk about how we look at investments and give you the math around those investment decisions.

As you heard earlier, we're in a fortunate position, where we do not expect to increase the dollar spent in R&D in 2023.

But by the reallocation of resources, we can still build new revenue generating products.

This will provide tremendous operating leverage as we will see the benefits of revenue growth without growing R&D dollars. After this year.

I would like to shed light on how we look at it in this investing those fixed set of dollars.

Let's start with looking at sales and marketing efficiency.

If we look at the last 12 months, we've added roughly $24 million in new <unk> to par.

During the same period, we estimate we spent roughly $25 million in sales and marketing for those subscription services.

So for approximately every dollar of sales and marketing we've added $1 of IRR.

If we assume that our gross margin on that is around 70% and our annual churn is around 5% our payback period on this investment is one and a half years.

The problem of the payback period, and gross profit as it ignores the incremental R&D and G&A needed to support this customer.

So let's assume for that $1 of incremental revenue, we also need 20 of incremental R&D and G&A.

This is completely incremental to our existing expense base as I mentioned and as I mentioned, we are not adding incremental R&D or SG&A, but for argument's sake, let's assume we do.

The result is that the one dollar of sales and marketing spend drove $1 <unk> and 50 of operating profit when you subtract out 30 sensor Cogs and <unk> for incremental R&D and SG&A.

Simplistically that has a two year payback period.

But we don't look at it as the payback period, we look at it in terms of return on investment.

If we assume that the <unk> 50 of operating profit degradation every year because of 5% churn. The IRR of just this one customer is in excess of 40% on the original $1 of sales and marketing investment.

But I think that's actually an understatement because our goal is to take the 5% churn and turned it into a 100% net retention, thereby taking the IRR is well beyond 50%.

To make this a real example, let's look at our payments initiative.

In 2022, we estimate that we will have spent $5 $3 million inclusive of all G&A allocations on our payments business and.

Im including all costs here, not just sales and marketing to ensure that we look at IRR covering all investments made.

By the end of 'twenty, two I expect our payments AOR to exceed $5 million.

So if our upfront investment of $5 3 million, which includes not just sales and marketing R&D and G&A allocation will returned $5 million of.

The low churn and long term growth.

What's more is that next year, the incremental investment needed to double the size of this business is minimal increasing the efficiency of any sales and marketing investments.

And making the determination of what to invest and what not to invest and we tried to obsess over the return, but also the likelihood of that return.

Every powerpoint Powerpoint pitch for a new product is a great IRR.

But the key for us to determine which of these opportunities can we actually drive that return.

In 2023, we'll be launching a set of new unified commerce products.

In deciding to make this investment we spent significant time with our customers to ensure that when we get the products on store shelves that product will sell.

We chose us these products, because one way and the ability to build and the ability to commercialize these products cleared our highest of ours.

While the sales cycles can be long the rois should be similar to our payments initiatives.

What makes 2023, so attractive to us is that in coming to market with these new products. We're also committing to not grow R&D or sales and marketing expense. After this year. So we should see nearly all of the gross profit from new <unk> dropped straight to the bottom line.

So every new product and all new customer revenue drops straight down.

Part of our ability to continued product investment without growing total spend is due to the expansion of our India R&D team.

Over the last three quarters, we embarked on building out additional R&D capacity in India is beginning to pay dividends. We now have 250 plus employees in our <unk> and Google offices focused on punch and bring product development and technical support.

This investment has significantly better efficiency in terms of cost per employee and also improves our developer productivity globally.

The ship is going to remain a central part of our strategy our strategy to achieve our profitability goals.

Finally, let me turn to the macro environment.

There is no doubt the macro continues to change in front of us at par, while we see changes in our customer outlooks are customers continue to buy as they have in quarters past.

While we see signs of slowing traffic in restaurants orders continue to come in and our customers continue to message a desire to grow spend with par.

I believe this resiliency comes from the end market, we sell to.

It's often said that restaurants are terrible businesses, but what businesses is an enterprise restaurants are incredible businesses. They.

They have high returns on capital strong unit economics, and maybe most importantly price elasticity.

While almost all retail businesses have seen volumes store traffic decline on average our customers have been able to make up for the shortfall with price increases.

Of course price increases can't last forever.

I think it's proven is how durable this end market is during that time.

Additionally, our focus on becoming a unified experience for our customers should help us weather the coming storm.

During tough times like this restaurants tend to consolidate vendors they look to bundle and make investments in areas that can have immediate ROI.

All of our attributes built into the relationship with par today if.

If we can deliver on that promise, we should be able to take share during this time.

Alongside this customer focus we're equally focused on driving to profitability and long term shareholder return.

So the last three years, we've ramped up R&D expense to deal with our historical technical debt and catch up on years of under investment.

Today, we're not only seeing the benefit of that work, but also we're also able to bring our spend in line to long term targets. We can do this because we're shifting shifting resources internally from fixing issues to now building revenue generating products.

So while we're not adding new people, we're seeing more new product development than we ever have before.

In addition, we will see efficiency with our sales expense. This quarter, we combined our sales account management teams, which allows us to cover our customers via one account executive and thereby expand our sales growth without additional head count and expense.

This also streamlines marketing activities and accountability for total customer P&L.

The plan is simple continue to grow revenues at the rates, we're growing and end 2023 without additional sales and marketing R&D expense than we ended 2022, we want every dollar of new gross profit to flow to the bottom line in 'twenty three.

And Vegas investors should begin to notice this change in the upcoming Q4 quarter and continue to track profitability quarter by quarter from then on out.

I'll now turn the call over to Brian who will discuss our financials in more detail and I'll and later with some closing comments Brian over to you.

Thank you <unk> and good morning, everyone.

Total revenues were $92 8 million for the three months ended September 32022.

Kris of 19, 1% compared to the three months ended September 32021 with growth coming from both restaurant retail and government segments.

Net loss for the third quarter of 2022 was $21 3 million.

Or <unk> 79 loss per share compared to a net loss of $31 9 million or $1 23 loss per share reported for the same period in 2021.

Adjusted net loss for the third quarter of 2022 was $11 9 million or <unk> 44 loss per share compared to an adjusted net loss of $9 3 million or <unk> 36, net loss per share for the same period in 2021.

Product revenue in the quarter was $31 3 million, an increase of $1 million or three 5% from $30 3 million reported in the prior year.

We continue to see strong hardware sales both in our tier one legacy customers and across our customer base.

Service revenue was reported at $37 million, an increase of $7 5 million or 25, 3% from $29 5 million reported in the prior year driven by subscription services revenue.

From our operator solutions and guest engagement.

Total subscription services revenue reported in Q3, 2022 was $25 3 million an increase of 34, 6% compared to the $18 8 million in Q3 2021.

The annual recurring revenue rate of subscription services exiting the quarter was $106 6 million an increase of 29, 2% compared to the Q3 2021, driven by 32% growth in operator solutions at 31% growth in guest engagement.

Our recurring revenue base, which includes both software related services and hardware support contracts continues to expand of the $37 million of service revenue reported in Q3 2020 to $33 8 million was comprised of recurring revenue contracts as compared to $25 million in Q3 2012.

One.

Contract revenue from our government business was $24 4 million, an increase of $6 4 million or 35, 3% from the $18 million reported in the third quarter of 2021.

The increase in contract revenues was driven by a $5 1 million increase in our ISR solution.

8 million increase in mission systems, and a <unk> 5 million increase in product services.

The increase in ISR solutions was driven by task orders, resulting from the Air Force Research lab counter small UAS contract awarded in 2021.

Contract backlog as of September 32022.

It was an historical high of $345 million.

An increase of 80% compared to the $192 million backlog as of September 32021.

Total funded backlog as of September 32022 was at a historic high as well with $95 million, 150% increase compared to the funded backlog as of the third.

$238 million for the prior year.

Now turning to margins.

Product margin for the quarter was 18, 8%.

<unk> 24, 8% in Q3 2021.

The decrease in margin was primarily driven by a $1 million charge for excess and obsolete inventory.

Margin, excluding the excess some absolutely charge was 22% for Q3 2022 in line with our expectations.

Service margin for the quarter was 35, 1% compared to 29, 6% reported in the third quarter of 2021.

Proud of our ability to continue to drive margin improvement over multiple periods by improving hosting and support service costs. In addition to a higher mix of SaaS software.

Service margin during the three months ended September 32022 included $5 9 million of amortization of identifiable intangible assets.

<unk> to $5 million of amortization during the three months ended September 32021.

Excluding amortization of intangible assets total service margin for the three months ended September 32022 was 51, 1% an increase from 46, 5% for the three months ended September 32021.

Margin for the quarter was down sequentially from 55, 6% reported in Q2, 2022, primarily driven by professional services that support hardware and software and the inclusion of menu and par payment services, which are early stage subscription service products.

As we ramp up volume to critical mass for menu and payment services, we expect their margin percent contribution to fall in line with our existing products.

Government contract margins were 10, 4% as compared to 10, 9% for the third quarter of 2021.

Both periods represent favorable margins compared to historical averages.

Contract margins for Q3 2022 included increased volume in our higher margin products services product line and higher margin contracts within our mission system product lines.

In regards to operating expenses.

GAAP SG&A was $26 5 million.

An increase of $4 9 million from $41 7 million reported in Q3 2021.

<unk> menu, the gross and SG&A is $4 1 million or 19%.

Primarily driven by sales and marketing investments.

Net R&D.

Was $12 8 million, an increase of $2 7 million from the $10 1 million recorded in Q3 2021.

Backing out menu and onetime adjustments the gross R&D is $1 million or 10%.

As <unk> referenced in his remarks, our incremental investment of R&D and sales and marketing has peaked and we do not expect net growth in 2023 compared to our 2022 exit rate.

Net interest expense was $2 1 million.

Compared to $5 4 million recorded in Q3 2021.

The decrease was driven by the refinancing of the owl rock loan with the issuance of the 2027 notes in September 2021.

Yeah.

Now to provide information on the company's cash flow and balance sheet position.

For the nine months ended September 30.

Cash used in operating activities was $33 6 million versus $43 6 million for the prior year.

Operating cash needs were primarily driven by net loss net of noncash charges and additional net working capital requirements due to a $6 7 million increase in inventory and a $5 8 million increase in accounts receivable related to increased sales <unk>.

During the quarter cash used in operating activities was reduced to $2 million as the government segment made substantial improvements reducing its accounts receivable balance or.

Our focus over the next two quarters will be to reduce the inventory balance by $5 million to $7 million.

Cash used in investing activities was $64 3 million for the nine months ended September 30.

Versus $381 1 million for the prior year.

Investment activities during the nine months ended September 30th included $40 1 million for the purchase of short term U S Treasury bills and notes to be held to maturity.

$18 8 million of cash consideration for the Q3 2022 menu acquisition.

And $1 2 million of cash consideration for the Q1 2022 drive through tuck in acquisition.

Capitalized software for developed technology costs for nine months ended September 30 was $4 7 million.

Cash used in financing activities was $2 million for the nine months ended September 30 <unk>.

$444 3 million for the prior year.

Financing activities for 2022 was driven by stock based compensation related transactions.

Days sales outstanding decreased within restaurants, and retail from 58 days as of December 31 to.

To 46 days as of September 30th.

Days sales outstanding within government segment as of September 32022 was 55 days and consistent with the 55 days as of December 31.

I will now turn the call back over to <unk> for closing remarks prior to move into Q&A.

We at par are not new to tough times.

A few years ago, where a broken company living off of a tiny credit facility with less than $10 million or they are a challenge culture and a very challenged product.

We can climb through each valley of challenge stronger and more convicted that we are in the right business at the right time with the right team.

More importantly, we came out of that convinced that our customers needed us too.

While today's times are certainly difficult we believe we possess the right character to withstand today's challenges and growth.

Growing with scarcity is the environment. Many many of US at park are used to and grew up in.

Every leader here comes with a chip on their shoulder with an intense focus on winning no matter what stands in front of us.

Today is the first time in our history, we actually have financial flexibility the ability to attract the world's best and the ability to actually build new revenue streams.

But we still won't stray from the learnings of our past.

Every dollar will be earmarked for return and I'm confident.

As you see our results in 2023 every quarter, we will build upon the previous quarter.

We are no longer burning cash this change will give us more options to win open up more M&A create the opportunity for buybacks and so much more.

In closing I, often say to our leaders at par that.

But there is no such thing as a money losing business businesses exist only because they can sustain on a profit to invest in our people products community and customers.

We don't believe that you can be a business if you aren't profitable.

No business should depend on the largest of anyone outside of itself.

Must be profitable and you must be able to make tough decisions based on the expected long term return.

We are committed to delivering this value and do not take it lightly that we're stewards of your capital and we must earn the trust of wholesale capital going forward.

I'd like to thank our customers and our partners for putting their trust in part our customers continue to invest more deeply with us and our unified experience and expanding our partnerships with them.

As always I'm incredibly grateful for our employees all over the world, who bring customer obsession to work that we do every single day. Thank.

Thank you and I'll turn it back to the operator.

Thank you.

As a reminder to ask a question you will need to press star one on your telephone.

Thats Star one wanted to ask a question.

Please standby, while we compile the Q&A roster.

Okay.

Our first question comes from the line of Sam Sam Sal This with Needham <unk> Company. Your line is open.

Hey, guys I'm on for Mike today, Thanks for taking my questions and.

Nice results here.

I wanted to start out on <unk>, good to see the 29% growth there.

And I know you guys mentioned last quarter.

Guys are still confident in being able to hit that 30% to 40% range for the full year I was just wondering if that's still intact.

Given the increased visibility.

Either you guys might be able to.

Towards the lower end or the midpoint of that range or what your thoughts around that thanks.

So you didn't hit the rates, obviously, obviously it'll be towards the lower end of that range a lot of it will depend on our ability to turn on our payment sites.

Which had been the challenging part, while we booked a lot of business getting that rolled out and harder.

Primarily because of lack of payment devices. So we're still shooting for it.

<unk>.

Its worst that's revenues both up for next year, but we're still doing our best to hit that.

Okay.

Got it thanks.

And then just.

Follow up.

Just wanted to touch on gross margins.

Which were a little soft and I know you guys mentioned a few of those onetime charges there.

And obviously government in hardware revenue comes at lower margins.

But it also looks like the subscription margins quite a bit sequentially.

Can you guys just talk more about.

Some of the puts and takes in the gross margins and maybe how we can think about that in the fourth quarter and heading into 2023.

Yeah, absolutely. So it's placement, let's say, which is the core gross margins on <unk> continue to be excellent data central excellent punches.

The strong.

Additionally, because we've ramped up payments revenue and menu for the first quarter Youre seeing the impact of that on the <unk> side, the bigger impact, though is the the onetime stuff on the hydro side, Brian wanted to walk through that but on a subscription side, we feel very confident that we will continue our trajectory from 70% up from there. But this is just the ramp up of two new products that are lower gross margin today, but once it.

It gets us more scale there'll be in line with the rest of our products.

Correct.

And then also within service itself besides subscription services.

Our professional services that support the software and hardware.

And then those we had on.

On the inventory we had in there we had a charge so that brought down those margins, but thats a onetime in.

And that was about 500000 and then in addition on the product side, we had $1 million charge on the inventory that brought that down and so on the product you take out the.

Reserve that I mentioned of $1 million. It gets you back to a 22% margin for product of which we expect low <unk> is what our actual ranges in that product area. So we expect subscription or service margin to get back in line, where we saw.

As of Middle of this year for Q4, and same with our product margin being back into the 20% range for Q4.

Great. Thanks, guys.

Thank you.

Please standby for our next question.

Our next question comes from the line of.

Stephen Sheldon with William Blair. Your line is open.

Hey, good morning, guys and really appreciate all the commentary this quarter that was really helpful.

I would just start here.

Maybe just to get an update on what Youre seeing in terms of cross selling activity between the three main product categories.

There are some of those cross selling motions going better or worse than you would have expected when you acquired some of these assets.

And should that activity pick up as you better incentivize them and integrate these solutions because it sounded like you may be starting to do that a little bit more than you have in the past just any any color there.

Yes, so I think if anything it's going well I mean, it's really really early on menu items to our tenants.

I would say on menu the feedback from customers on the product has been tremendous and so I suspect that will be a very strong motion for next year, obviously, that's a longer sales cycle product requires integrations, but that seems very strong.

This quarter, we combined our break account management and our punch account management teams into one and the reason we did that was because we were seeing momentum and the ability to cross sell and up above that base. Obviously that has a nice cost savings element tier two because you don't have two people covering the same account, but more importantly, it creates the ability to own the customer in totality and we believe that that will.

<unk>.

Alongside all of that though as I mentioned my remarks, one of the most interesting thing. That's happened is now we're <unk>.

Finding ways to connect our products such as the customer gets a unique value that couldnt get if they had two distinct products. So if you have our Pos in our loyalty you get features and functionality you can get somebody else's loyalty Pos.

So that should dramatically help that but we're really looking into that cross and upsell I also think thats the reason why.

Obviously, you read all the headlines that you read we still feel very good about revenue growth this year and next year I think.

We're probably offsetting that with some really nice cross sell and upsell opportunity.

Got it that's helpful.

I guess thinking about back office solutions, and with being centralized <unk> been talking about some central big deals coming through there. It sounded like you had one this quarter is there more to come on that side as you think about the fourth quarter and into 2023 and are you seeing customers focus a lot more on backup if there was something in this environment with rising labor costs and supply.

<unk> costs.

There is no doubt.

I think we see real momentum that and it's obviously the move to immediate ROI in the buying decision of the restaurants is probably the biggest change we see where the restaurants want to know the ROI today and data central is a product that can deliver ROI literally the week you install and so we're seeing tremendous momentum as you know.

And we've talked about the product is so flexible and so beautifully built that it can do a lot more than other products and so we're seeing a lot of momentum. The pipeline is very strong in fact as I mentioned, we're not growing sales and marketing expense next year, we're not growing R&D expense next year, but we'll certainly have more heads focused on data central because of that momentum is actually quite exciting.

We've really energized by that business by the leadership of that business and I think theres more to come fingers crossed.

Very helpful.

One quick last one I think on payments I think you'd mentioned, reaching $5 million in <unk> I didn't catch whether that was <unk>.

I think you'd be able to do this year or maybe it's harder for an officer just footwear.

The Atwood that business, along with a $5 million of reference too.

This year, so the point I was making.

Is that I think is interesting for investors as we sit here today.

Very vocal that we don't want to grow R&D expenses sales and marketing after this year.

And part of that is because we've seen how high ROI is within our existing products by reallocating resources. So this year. We spent $5 three we estimate we will spend $5 $3 million on sales and marketing R&D and G&A on payments and in return. We think we'll end the year of greater than $5 million of IRR and so.

So that payback period is incredibly fast.

And next year.

And we think that business has the ability to double and without anywhere near that doubling of sales.

Sales head count if you will so that was referring to this year honestly I hope we can clear it in.

Candidly the entire ending revenue more of that product.

<unk> is a little bit dependent on Chinese supply chain I feel very confident with five can we hit.

Six or seven is going to be dependent upon the supply chain coming from China.

Great. Thank you.

Thank you please standby for our next question.

Our next question comes from the line of Adam waiting with a DW capital. Your line is open.

Okay can you hear me guys.

Yes, Thats right Okay perfect.

Just wanted to go over a couple of housekeeping items. So the way I heard you describe this on the call is that at the end of Q4 2022, you would spend you expect your expense structure to be effectively flat with the way I read that is G&A flat sales and marketing R&D flat and so it is.

Not a flat margin percentage, it's a flat dollar. So just humor me for a minute. If you guys are if you take $115 million available at the end of 2022, which is effectively what you added in the third quarter and brink bookings are up in your payment. So 115 feels like a conservative starting point.

Okay, I'm going to grow 30% next year, which gets me to $150 million and they are now about $35 million of incremental ALR.

What do you call. It menu has had a lower gross margin than the other your other assets are having increasing gross margin. So take your 70% to 75% incremental gross margin on those sales.

<unk> 35 times 70.

$25 million of incremental EBITDA, but like presumably it's probably more like 75.

Does your leveraging scale right you look at you look at menu and it's lower gross margin because of lower sales base. So when your incremental margins should be like 75% on that on those incremental dollars. I mean is that sort of your how you're thinking about kind of getting too.

Cash flow positive in 2023.

Is it a flat expense.

For one year do you think you can do it for two years I mean walk me through sort of that incremental margin that.

So short answer is everything you said is correct. So we want to exit the 2022 spend base in dollars to be.

Our higher 23 should be no higher than 2022, when we exit both years and so your math is exactly right exactly right, which is we want the gross profit from that new IRR to dropped straight to the bottom line. So it should add.

I can't I haven't talked about guidance, yet, we'll do on our next call, but whatever you assume IRR is I think your math is exactly right.

So that's our hope and that's why we feel incredibly confident in our ability to get to profitability because we're not growing the census, and so we have a lot of control over that.

The second part of your question I think was what happens in 2024.

It's too hard to say now, but there's no way, we sort of youll see a crazy ramping expenses any year going forward. This big ramp we've had an R&D has been focused on let's call it customer satisfaction and dealing with a lot of the sins of the past and we're kind of beyond that now and as you heard my final point, which is the organization. We do you want to control our own destiny.

And the only way you control your destiny as if you could find yourself and grow yourself and that gives you more opportunities to do M&A buybacks and we feel very comfortable going out there and so that is that as the marching orders that we have as an organization.

Okay.

That's.

That's helpful and.

And that makes sense I mean look obviously this company has lots of different products and all of them are sort of going in lockstep.

No.

When I look at what I would call best in class Enterprise software companies like clear water analytics, I mean that business has a 30% EBITDA margin on $300 million. They are it's not it's not even that big.

I think it might be helpful sort of in this kind of a framework for people and I know you've alluded to sort of keeping expense structure sort of flat in 'twenty, three and hopefully in 'twenty four and to some degree, but I think it might be helpful to sort of give people a framework.

Quarter like what we think steady state free cash flow margins are because I mean, I think a lot of companies as you said.

Been a lot of imposter companies in technology, a lot of low gross margin transactional SaaS low mode in SaaS and so I think one of the things that appeals to us is that our growth the growth curve in this business is sort of not pro cyclical so.

Don't necessarily throw a lot of dollars and grow 200%, but the idea is to grow 30%, 40% or even 25% and have a 33% to 40% EBITA margin you can get the rule of 40 pretty easily on margin. So I'd be curious to sort of.

And this isn't really necessarily at $23 24 in that but like sort of how we think about steady state margins in the business because that's obviously going to inform how you make investments in all these different modules.

Yeah, absolutely so yes, here's the math that we're targeting for our long term, we want to get to 80% gross margins on subscription services, we want to spend 25% to 30% of that revenue on R&D and 20% on sales and marketing, which should get you to I think the thing that I think you said, 30%, which is what we're targeting so that's exactly what we want to get too and I think.

We're going to be pretty close to that on sales and marketing next year I actually think we might even by next year and so it just continues to be our ability to be a really efficient R&D organization, leveraging our India based such that we can pull the gross margins and R&D in line and so I think we're going to be there pretty quickly on our business there and that's our long term targets.

Your math is roughly in line.

And so okay and then so obviously there is there is there is a nice ramp.

Over this year, because you're sort of investing in advance.

You talked about your unified Commerce platform can you can you talk a little bit about <unk>.

<unk> in your go to market with menu and sort of like what how you think about your sort of go to market on that I think a lot of when I look at the business that I own are still up but the business that I own what I bought it. The first time it was effectively break as you said a low gross margin high technical.

That business.

In some cases, a long sales cycle is a function of hardware now when I look at the business when I look at the business mix today, it looks very much like a vertical software offering where you can take one or all you punch menu restaurant magic brink payments and now unified Commerce platform, which has some.

In multitude of products.

Can you talk to me a little bit about how youre thinking about go to market because each product itself was a trojan horse and all.

Obviously, an environment where.

Franchisees want to spend less money.

No.

They don't have to necessarily make a hardware investment and so how do we think about go to market with these other things that are like payments for example, which has no economic cost right you send them. A thing you saw my little sheet and say, okay, I'll switch or payments I'll give you the terminal for free and they don't have to spend any more money. That's that's a freebie. So I'm just curious.

It's about how you think about go to market sort of on the six kind of line items.

And also like I'd be curious to hear how you are engaging with with these corporates because these corporates do have this marketing fund, which is about 3% of that no punch comes out of that but like CT.

Corporate gets paid based on royalties I mean, what initiatives have you sort of penciled out such that you lower.

The economic burden to the franchisee and shift more of it to moneys that are sort of already being spent because I think I think people think this has macro sensitivity and I think it doesn't have enormous macro sensitivity, but theres also levers for you to pull that are sort of non seen by the customer.

Sure. So let me ask the first part of the question and.

On the go to market motion.

We are go to market as one team and so it's the big change we have internally as I mentioned is the consolidation of our sales account management team.

And we wouldn't have done that if we didn't feel extraordinarily confident that that team can drive more sales on less bodies and its powerful because when you have one customer owning that P&L of that customer that individuals <unk> team member at par.

The P&L of that customer.

Complete accountability and and our products work very well together, so while we have a suite of products. They integrate very beautifully together and the customers now seeing that when I mentioned that one plus clinical III. It truly is that if you have brink and punch. We want you to have a differentiated outcome you can buy whatever you want but you wanted by part because you're going to have that differentiated outcome and then you'll have the benefit of having.

One support one sales so on and so forth.

And so we feel very good about that this year sorry.

Sorry, 'twenty three we're launching our unified commerce products as I mentioned, it's a suite of products coming out we are incredibly excited these are first true.

Thank you.

Game changing products that we don't think others have and we're leveraging our existing sales account management team to upsell that.

And so I feel very good about that.

And then on your second part of your question, we had unfortunately, a long queue today I'm going to jump to the next question is absolutely. We are looking for ways to sell our products together such that we are at less and less burden upon the franchisee and the benefits of having multiple products and payments is that we cannot only increase their ROI, we can hopefully lower their total cost of ownership.

And obviously as part of that we'll be doing that leveraging the punch relationship with the Mds and other parts of that organization. So a lot of momentum there, but having these products truly connected allows us to change that conversation from here is a different conversation with pls is a different one for loyalty and opposed to having one consolidated conversation, which will again tie up to our account management consolidations, so with that let's jump to the next.

Because we got a long queue today.

Thank you please standby for our next question.

Okay.

Our next question comes from the line of Jeremy <unk> with Jefferies. Your line is open.

Great. Thanks, guys for taking my questions.

Among personal lots of other stuff.

First off you guys had the highest since the.

Second quarter of last year, I think the highest.

<unk> added ever.

The AOR growth still kind of ticked down sequentially, what would it take to kind of wrap it up again.

<unk> 30 is kind of how we should look at growth going forward and then I guess since you since menu with kind of combined in here now how are you thinking about AUR growth for menu.

I know it's early now.

Yes.

Answer backward so.

The revenue not really there yet it will come.

I suspect next year, we'll start to see by Middle of next year, a real revenue coming from that business.

The reviews on the product had been beyond what we expected.

I say that with no hyperbole.

And the team is far better than expected. It does take time to get the product in because you need to integrate with all sorts of products that the product has not been integrated into that's everything from Uber eats and try to ask two other U S products that the product is and therefore, but the core functionality is.

Answering the need of our customers and so we'll see that really come next year. So today.

The majority of almost all of that is.

On the pump side.

I suspect pension and I hope for punches to kind of continue to hit.

Round the rates, we're growing now the kinder business grow 50% next year, probably not given where we are but as we add new modules. The goal is that the collective suite of par products.

Continuing to grow at the pace that we're growing now and so.

And it sort of ties to the last question, which is in the end our customers I don't think we'll be saying.

Give me punch separately, then break and then is that the idea is can we get them to buy it together.

And change that conversation to be in this platform for their organization.

And so.

That's kind of how we're looking at today punch.

Punch continues to grow at rates faster than its competitors.

And I think our subscription product is a nice way to have create any upsell product as well and so lots of work and focus on that.

Understood. Thank you and then one more from me so Frank activation, but is still below a thousand I know the goal. There is kind of above 1000 per quarter is there anything specific kind of causing a little bit of weakness here that maybe by banner.

So I think you'll see it make up a lot for that.

We're six weeks and we see a really strong.

It's been very strong so far so we'll end the year I believe in excess of the average across the.

Four quarters, and so I think we'll be fine. This year were at this quarter, we were right around 1000.

We'll be well above that in Q4.

Got you. Thanks for taking my question guys.

Thank you.

Our next question.

Our next question comes from the line.

Youre welcome.

Hallum Your line is open.

Thank you our first day.

Appreciate you all walk through on the new segmentation. That's helpful. So relative key combining the account management teams I am curious about the reality that punch was selling at a headquarter level and break was largely selling do a franchisee group or two regional offices.

Can you walk through kind of how you bring that part together.

Sure so today.

<unk> solutions in the broader customer engagement is generally done at a corporate level out with something called the marketing development fund, which is funded by franchisees, but allocated by corporate and it's sort of the beauty of the punch business model, which as you sign the corporate deal and then you rollout usually in totality within six months so its.

A nice enterprise software deal.

On brink.

It's done at the corporate level, you said when the approval and.

And the mandate, but then you've got to convert.

By region, and we've gotten really good and our team has been incredibly impressive of shortening that time.

We've got some great examples where historically something that would take us three or four years is now one to two years.

And what we're hoping for is that we launched this new unified products. They become not a decision should I turn on a region, but I turned them on across our entire organization. So I'll give you an example.

Next year, we're launching a product.

It allows the restaurants to smile slot and throttle orders so when your restaurants incredibly busy and you've got lots of people in the store and then you've got orders coming from online ordering and then you have orders coming from our recent door Dash and then you've got people in the drive thru and QR code ordering all of that are.

Our software will allow you to throttle and slot those orders in there Brian .

Brand new product that I suspect that if we made that deal with our customers that will be hopefully done at the corporate level because that is a really really revolutionary product that you want to impact across all your customers. So thats all your restaurants and customers have the same experience.

It's an example of our new products not necessarily being a franchisee decision, but being efficient at the corporate level.

So just.

Just one other clarifying question you mentioned that a majority of your new wins in Brian Kevin included payments.

Put a little more specificity around that that's an encouraging.

Perspective.

It is it's probably been.

The most exciting thing of the year.

I'd say.

Three out of every four bring deals we signed direct.

To attach payments.

And it's way ahead of expectations now as we sign the next big large enterprise customers, which we expected to do.

May not are probably won't have payments on that deal upfront.

That is an app.

I don't have a good answer on the ladder.

We work with a couple of vendors one in particular and.

The messaging, we get from that vendor is.

The shutdown in Asia, where there isn't maybe as now pushing things out one month two months, we've worked really really hard we've done everything from prepay to pay more to search for ebay and all over the place reallocate different customers to get the revenue alive.

This will get better as we look for deals as we sort of expand some dual sourcing to try sort of thing.

This will get better and as we get more sophisticated.

We will get better.

But I suspect it will decide in the next couple of months here, but.

As our business continues to grow at our rates and others.

I see slowing down that probably will also free up some of their pipeline to get to allocate back to par.

Okay.

That revenue.

It's not really affecting your ability to sell it in.

Neil.

No no.

Thank you and then in terms of menu.

I understand the margin side, it's a bit more or not yet.

Lack of scaling, but when do you think that's going to be in line with overall margin.

I think in payments, we'll get there.

Next year I think on menu.

We're probably.

A year or so it just depends on how fast you turn the revenue one.

So it's a little hard because I think all surgeons on our product mix, we've got sort of four or five key products within the menu Sweet we're trying a beachhead with one of the products and then expand from there.

I think give me a quarter or two we should be able to give you some guidance on that.

Okay.

Thank you for that and then in terms of.

Let me also remark you said youre putting yourself.

Alright, well position for corporate clients, but how do you see your customers.

Do you see an impact among them and I mean, given where you are servicing them and helping them be more efficient.

Maybe.

Yes, Alex and duration in.

Jason.

Uh huh.

So I'll break into two parts. So our customers have been incredibly resilient. So I think the state is widely reported in our data it ties to it which is every restaurants in pretty much every retail business has declines in volume and traffic. So order counts are down across the industry revenues continue to hold because they've been able to pass price through.

And I think that shows the durability of this end market.

Serve <unk> and fast casual which are lower priced relative to the average restaurant and those those businesses do well in tough times they take share.

Secondly in tough times like this restaurants looks for this immediate ROI they want a product anymore ROI fast and our products. We believe provide that in addition, when you consolidate vendors their room for cost savings and simplicity.

I suspect that as restaurants deal with a slowdown in their business, they're not going to want to have 15 different vendors because that requires more staff to manage theyre going to want fewer and fewer vendors just like we are always looking to do that.

And we I think stand to benefit there because we are I believe the only solution to enterprise that can actually give them that.

Today as I said on the call the resiliency of our customers has held and the resiliency in our revenue. So we continue to see the demand.

We haven't had the Oh, my God moment, and but we're ready for that our goal as I stated it was to be a proper business by next year and so what our revenues are slower than expected or faster than expected, we will hit that number.

Because we believe that we are setting up the cost structure to deal with that and so but today, we feel really good I mean, we haven't we haven't seen that drop off happened but.

And when it happens, we're sort of preparing for that to happen today.

Okay, great. Thank you and I will talk to me.

Thanks, Thank you.

I'm showing no further questions in the queue.

I would now like to turn the call back over to <unk> closing remarks.

Thank you everyone for joining the call. We appreciate your support and as I mentioned, we truly believe we are stewards of your capital and thank you for that trust, we will see you next call.

Yes.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.

The conference will begin shortly to raise your hand during Q&A you can dial star one one.

Hum.

Hmm.

Yes.

Hum.

Okay.

Yes.

[music].

Okay.

Yes.

Okay.

[music].

Good day, and thank you for standing by.

Welcome to the fiscal year 2022 third quarter financial results.

At this time all participants are in a listen only mode.

After the speaker's presentation, there will be a question and answer session.

To ask the question during the session you will need to press star one one on your telephone.

I would now like behind the conference over to your speaker for today.

Chris Byrnes, Vice President business business development, you may begin.

Thank you Wanda and good morning, everyone I'd like to welcome you today to the call for Par's 2022 third 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.

To access the press release and the financial details along with a slide deck on the earnings. Please see the Investor Relations page of our website at Www Dot <unk> Dot com.

You ask a question it will be included in both our live conference and any future use of the recording.

I would 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.

Joining me on the call today is pars CEO and president of <unk>, and Bryan <unk>, Chief Financial Officer, I'd now like to turn the call over to <unk> for the formal remarks portion of the call, which will be followed by general Q&A 78.

Thanks, Chris and thanks to everyone for joining the call. This morning.

Momentum continues to build for a unified experience strategy and the underlying products that makeup escalation.

Momentum delivering new logos at a nice upselling motion to existing customers.

We are part understand that every dollar we invest pay ourselves and team members is not our own but yours are shareholders.

We don't take the responsibility lightly and want to earn the right to continue to manage our investment.

And then break today's call into three sections.

A review of our recent quarter results.

First our results.

I am convinced that <unk> remains the best metric to measure our success as.

As we believe underneath each dollar of IRR is considerable future cash flow.

At the end of Q3 reached $106 6 million delivering a 29, 2% year over year increase demonstrating the continued growth in scaling of our subscription services engine.

12 month contracted <unk> is reported at $118 3 million a $15 million increase from the end of 'twenty one.

Today, we have five key products that make up our unified commerce solution.

Brink, Pos punch data Central park payments and now menu.

In order to fight is simple in order to simplify our reporting and to align our internal tracking of these businesses with our external will be reporting them in three distinct <unk> streams.

This classification is how we track the business internally and should help shed light on the return on investment within each of these areas.

The first is the operator solutions, which encompasses break in our payments business.

Given these products are sold together and run by the same team. This is a natural grouping as we often use wanted to help bring in the other and a continuation of how we already reported.

Second as guest engagement. This includes pension menu our front of house offerings, while menu is still very small in time it will become a strong portion of the space.

And third as back office, which today is our data central offering.

Upper solutions <unk> that includes brink, Pos and par payment services grew 32% in Q3, when compared to the same period last year and reported at $38 9 million.

During Q3 985, new stores were activated and new bookings totaled approximately 140%.

Churn continues to be extremely low at four 8% annualized.

We continue to raised subscription prices on every renewal and have been able to attach payments to majority of our new customer wins in 2022.

We saw strong traction in all Rollouts and rollout of our tier one customers in Q3, including dairy Queen covers and others.

Par payment services continues to outperform our internal plan and we expect an acceleration in Q4 as our large tier one deal gets rolled out faster and we begin to see the impact from our higher margin partnership deals.

As we have already six weeks into Q4, we have strong visibility into the quarter and as of right now we see a very nice sequential bump in activations in front of us.

One of the significant benefits of having our payments offering is it allows us to have another tool during renegotiations to help increase bring subscription rates, but still bring down the total cost of ownership for our customer by giving them more attractively priced payments product.

Moving to guest facing <unk> that includes punch in the newly acquired menu at AOR growth of 31% in Q3, when compared to Q3 'twenty one.

<unk> was reported at $57 $5 million.

We added approximately 5700 sites in the quarter.

The acquisition allows us to provide end to end digital ordering customer engagement loyalty and now the newly launched subscriptions products for enterprise restaurants in C stores.

Back office and data central as we have previously message continues to turnaround a strong leadership and a market more focused on cost control.

Reported <unk> of $10 2 million in Q3 with a 12, 3% increase in last year's Q3 number.

And a more notable 11% sequential improvement from Q2.

In Q3, we signed a large multi brand enterprise organization 13 separate brands and over 200 restaurants on the strength of our team and data centers the ability to seamlessly handle multiple concepts in the same database.

Providing consolidated rollout reporting for the entire organization.

We had a nice jump in activations of nearly 370 stores and.

360, new store bookings.

In addition to our financial results our product team had a very productive Q3.

As you'll hear shortly when I discuss our capital investment policy.

Most significant change at par is that our growth in R&D spend up until now has been focused on customer retention and fixing historical issues not new product.

Over the last couple of quarters, we've been able to reallocate spend some technical debt within brink to new product and shortly new revenue.

This will allow us to ramp up our new product development in 2023, without adding new employees, but by moving resources from fixing issues to new product.

Said differently, we don't intend to increase R&D spend after this year, but internally, we will have more resources focused on new revenue generation.

In Q3, we saw the results of some of this work.

Brink released new drives these features to support the increased traffic that our brands have experienced punch.

<unk> released three new features powered by machine learning feedback sentiment smart segments and spend time optimization.

These machine learning algorithms utilizing massive transactional data available and the punch system to help brands improve their guest experience.

Data central.

Third a redesign of the line check module for operational past management, optimizing the flow and ease of use and we will continue enhancing that module to better support store audits.

Equally important we've done tremendous work integrating our products to deliver our customers. The one plus one equals three impact on why buying more from par is a win for them.

As an example.

We released insights by data central feature for early adopter bring customers to use data Central's advanced analytics right from the <unk> interface.

Another good example is.

As the piloting of new features that simplify campaign workflows for punch customers using brink.

Huge time savings for our customers and our benefit received only if you have both par products.

Moving on to the results My second goal of this call is to talk about how we look at investments and give you the math around those investment decisions.

As you heard earlier, we're in a fortunate position, where we do not expect to increase the dollar spent in R&D in 2023.

But by the reallocation of resources, we can still build new revenue generating products.

This will provide tremendous operating leverage as we will see the benefits of revenue growth without growing R&D dollars. After this year.

I would like to shed light on how we look at it in this investing those fixed set of dollars.

Let's start with looking at sales and marketing efficiency.

If we look at the last 12 months, we've added roughly $24 million in new <unk> to par.

During the same period, we estimate we spent roughly $25 million in sales and marketing for those subscription services.

So for approximately every dollar of sales and marketing we've added $1 of IRR.

If we assume that our gross margin on that is around 70% and our annual churn is around 5% our payback period on this investment is one and a half years.

The problem of the payback period on off of gross profit as it ignores the incremental R&D and G&A needed to support this customer.

So let's assume for that $1 of incremental revenue, we also need 20 of incremental R&D and G&A.

This is completely incremental to our existing expense base as I mentioned and as I mentioned, we are not adding incremental R&D or SG&A, but for argument's sake, let's assume we do.

The result is that the one dollar of sales and marketing spend drove $1 <unk> and 50 of operating profit when you subtract out 30 sensor Cogs in 'twenty for incremental R&D and SG&A.

Simplistically that has a two year payback period.

But we don't look at as the payback period, we look at it in terms of return on investment.

If we assume that the <unk> 50 of operating profit Segregates every year because of 5% churn. The IRR of just this one customer is in excess of 40% on the original $1 of sales and marketing investment.

But I think that's actually an understatement because our goal is to take the 5% churn and turned it into a 100% net retention, thereby taking the IRR is well beyond 50%.

To make this a real example, let's look at our payments initiative and.

In 2022, we estimate that we will have spent $5 $3 million inclusive of all G&A allocations on our payments business.

Im including all costs here, not just sales and marketing to ensure that we look at IRR covering all investments made.

By the end of 'twenty, two I expect our payments AOR to exceed $5 million.

So far upfront investment of $5 3 million, which includes not just sales and marketing R&D and G&A allocation will returned $5 million of IRR with low churn and long term growth.

What's more is that next year, the incremental investment needed to double the size of this business is minimal increasingly efficiency of any sales and marketing investments.

And making the determination of what to invest and what not to invest and we tried to obsess over the return, but also the likelihood of that return.

Every powerpoint Powerpoint pitch for a new product is a great IRR.

But the key for us to determine which of these opportunities can we actually drive that return.

In 2023, we'll be launching a set of new unified commerce products.

In deciding to make this investment we spent significant time with our customers to ensure that when we get the product on store shelves that product will sell.

We chose us these products, because one way and the ability to build and the ability to commercialize these products cleared our highest of ours.

While the sales cycles will be long the rois should be similar to our payment initiatives.

It makes 2023, so attractive to us is that in coming to market with these new products. We're also committing to not grow R&D or sales and marketing expense. After this year. So we should see nearly all of the gross profit from new <unk> dropped straight to the bottom line.

So every new product and all new customer revenue drops straight down.

Part of our ability to continue product investment without growing total spend is due to the expansion of our India R&D team.

Over the last three quarters, we embarked on building out additional R&D capacity in India is beginning to pay dividends and we now have 250 plus employees in our <unk> and Google offices focused on punch and bring product development and technical support.

This investment has significantly better efficiency in terms of cost per employee and also improves our developer productivity globally.

The ship is going to remain a central part of our strategy our strategy to achieve our profitability goals.

Finally, let me turn to the macro environment.

There is no doubt the macro continues to change in front of us at par, while we see changes in our customer outlooks are customers continue to buy as they have in quarters past.

While we see signs of slowing traffic in restaurants orders continue to come in and our customers continue to message a desire to grow spend with par.

I believe this resiliency comes from the end market, we sell to.

It's often said that restaurants are terrible businesses.

But what this is is that enterprise restaurants are incredible businesses.

They have high returns on capital strong unit economics, and maybe most importantly price elasticity.

While almost all retail businesses have seen volumes or traffic decline on average our customers have been able to make up for the shortfall with price increases.

Of course price increases can't last forever.

But I think it's proven is how durable this end market is during bad times.

Additionally, our focus on becoming a unified experience for our customers should help us weather the coming storm.

During tough times like this restaurants tend to consolidate vendors they look to bundle and make investments in areas that can have immediate ROI.

All of our attributes built into the relationship with part to date.

If we can deliver on that promise, we should be able to take share during this time.

Alongside this customer focus we are equally focused on driving to profitability and long term shareholder return.

So the last three years, we've ramped up R&D expense to deal with our historical technical debt and catch up on years of under investment.

Today, we're not only seeing the benefit of that work, but also we're also able to bring our spend in line to long term targets. We can do this because we're shipping shifting resources internally from fixing issues to now building revenue generating products.

So while we're not adding new people, we're seeing more new product development than we ever have before.

This also streamlines marketing activities and accountability for total customer P&L.

And Vegas investors should begin to notice this change in the upcoming Q4 quarter and continue to track profitability quarter by quarter from then on out.

I'll now turn the call over to Brian who will discuss our financials in more detail and I will end later with some closing comments Brian over to you.

Thank you <unk> and good morning, everyone.

Total revenues were $92 8 million for the three months ended September 32022.

Kris of 19, 1% compared to the three months ended September 32021 with growth coming from both restaurant retail and government segments.

Net loss for the third quarter of 2022 was $21 3 million.

Or <unk> 79 loss per share compared to a net loss of $31 9 million or $1 23 loss per share reported for the same period in 2021.

Product revenue in the quarter was $31 3 million, an increase of $1 million or three 5% from $30 3 million reported in the prior year.

We continue to see strong hardware sales both in our tier one legacy customers and across our customer base.

Service revenue was reported at $37 million, an increase of $7 5 million or 25, 3% from $29 5 million reported in the prior year driven by subscription services revenue from our from our operator solutions and guest engagement.

Total subscription services revenue reported in Q3, 2022 was $25 3 million an increase of 34, 6% compared to the $18 8 million in Q3 2021.

Our recurring revenue base, which includes both software related services and hardware support contracts continues to expand up to $37 million of service revenue reported in Q3 2020 to $33 8 million was comprised of recurring revenue contracts as compared to $25 million in Q3 2020.

One.

Contract revenue from our government business was $24 4 million, an increase of $6 4 million or 35, 3% from the $18 million reported in the third quarter of 2021.

The increase in contract revenues was driven by a $5 1 million increase in our ISR solution.

8 million increase in mission systems, and a <unk> 5 million increase in product services.

The increase in ISR solutions was driven by task orders, resulting from the Air Force Research lab counter small UAS contract awarded in 2021.

Contract backlog as of September 32022.

Wasn't a historical high of $345 million.

An increase of 80% compared to the $192 million backlog as of September 32021.

Total funded backlog as of September 32022 wasn't historical high as well with $95 million, 150% increase compared to the funded backlog as of the.

Compared to the $38 million for the prior year.

Now turning to margins.

Product margin for the quarter was 18, 8% versus 24, 8% in Q3 2021.

The decrease in margin was primarily driven by a $1 million charge for excess and obsolete inventory.

Margin, excluding the extra some absolutely charge was 22% for Q3 2022 in line with our expectations.

Service margin for the quarter was 35, 1% compared to 29, 6% reported in the third quarter of 2021.

We are proud of our ability to continue to drive margin improvement over multiple periods by improving hosting and support service costs. In addition to a higher mix of SaaS software.

Service margin during the three months ended September 32022 included $5 9 million of amortization of identifiable intangible assets compared to $5 million of amortization during the three months ended September 32021.

Excluding the amortization of intangible assets total service margin for the three months ended September 32022 was 51, 1% an increase from 46, 5% for the three months ended September 32021.

As we ramp up volume to critical mass for menu and payment services, we expect their margin percent contribution to fall in line with our existing products.

Government contract margins were 10, 4% as compared to 10, 9% for the third quarter of 2021.

Both periods represent favorable margins compared to historical averages.

Margins for Q3 2022 included increased volume in our higher margin product services product line and higher margin contracts within our mission system product lines.

In regards to operating expenses.

GAAP SG&A was $26 5 million, an increase of $4 9 million from the $21 7 million reported in Q3 2021.

Backing out menu, the gross and SG&A is $4 1 million or 19%.

Primarily driven by sales and marketing investments.

Net R&D.

<unk> was $12 8 million, an increase of $2 7 million from $10 1 million recorded in Q3 2021.

Our menu and onetime adjustments the gross R&D is $1 million or 10%.

As <unk> referenced in his remarks, our incremental investment of R&D and sales and marketing has peaked and we do not expect net growth in 2023 compared to our 2022 exit rate.

Net interest expense was $2 1 million.

Compared to $5 4 million recorded in Q3 2021, the decrease was driven by the refinancing of the owl rock loan with the issuance of the 2027 notes in September 2021.

Now to provide information on the company's cash flow and balance sheet position.

For the nine months ended September 30.

Cash used in operating activities was $33 6 million versus $43 6 million for the prior year.

During the quarter cash used in operating activities was reduced to $2 million as the government segment made substantial improvements reducing its accounts receivable balance.

Our focus over the next two quarters will be to reduce the inventory balance by $5 million to $7 million.

Cash used in investing activities was $64 3 million for the nine months ended September 30.

Versus $381 1 million for the prior year.

Investment activities during the nine months ended September 30 included $40 1 million for the purchase of short term U S Treasury bills and notes to be held to maturity.

$18 8 million of cash consideration for the Q3 2022 menu acquisition.

And $1 2 million of cash consideration for the Q1 2022 drive through tuck in acquisition.

Capitalized software for developed technology costs for nine months ended September 30 was $4 7 million.

Cash used in financing activities was $2 million for the nine months ended September 30.

Versus $444 3 million for the prior year.

Financing activities for 2022 was driven by stock based compensation related transactions.

Days sales outstanding decreased within restaurants, and retail from 58 days as of December 31 to.

To 46 days as of September 30.

Days sales outstanding within government segment as of September 32022 was 55 days and consistent with the 55 days as of December 31.

I will now turn the call back over to <unk> for closing remarks prior to move into Q&A.

We at par are not new to tough times.

Few years ago, where a broken company living off of a tiny credit facility with less than $10 million or they are a challenge culture and a very challenged product.

We can climb through each valley of challenge stronger and more convicted that we're in the right business at the right time with the right team.

More importantly, we came out of that convinced that our customers needed us too.

While today's times are certainly difficult we believe we possess the right character to withstand today's challenges and growth.

Growing with scarcity is the environment. Many many of US at park are used to and grew up in.

Every leader here comes with a chip on their shoulder with an intense focus on winning no matter what stands in front of us.

Today is the first time in our history, we actually have financial flexibility the ability to attract the world's best and the ability to actually build new revenue streams.

But we still will strengthen the learnings of our past.

Every dollar will be earmarked earmarked for return and I'm confident that.

As you see our results in 2023 every quarter, we will build upon the previous quarter.

We are no longer burning cash this change will give us more options to win open up more M&A create the opportunity for buybacks and so much more.

In closing I, often say to our leaders at par that.

But there is no such thing as a money losing business.

Businesses exist only because they can sustain on a profit to invest in our people products community and customers.

We don't believe that you can be a business if you aren't profitable.

No business should depend on the largest of anyone outside of itself.

Must be profitable and you must be able to make tough decisions based on the expected long term return.

We are committed to delivering this value and do not take it lightly that we're stewards of your capital and we must earn the trust to hold your capital going forward.

As always I am incredibly grateful for our employees all over the world, who bring customer obsession to work that we do every single day.

Thank you and I'll turn it back to the operator.

Thank you.

As a reminder to ask a question you will need to press star one on your telephone.

Star one wanted to ask a question please.

Please standby, while we compile the Q&A roster.

Okay.

Our first question comes from the line of Sam Sam file this with Needham <unk> Company. Your line is open.

Hi, guys I'm on for Mike today, Thanks for taking the questions.

Nice results here.

I wanted to start out on <unk>, good to see the 29% growth there.

And I know you guys mentioned last quarter, you guys are still confident in being able to hit that 30% to 40% range for the full year I was just wondering if that's still intact.

Given the increased visibility.

Whether you guys might be able to.

Towards the lower end or the midpoint of that range what are your thoughts around that thanks.

Yes.

As you didn't hit the range, obviously, obviously it'll be towards the lower end of that range a lot of it will depend on our ability to turn on our payment sites.

Which have been the challenging part, while we booked a lot of business getting that rolled out and harder.

Primarily because of the lack of payment devices. So we're still shooting for it and its worst that's revenues built up for next year, but.

Doing our best to hit that.

Okay.

Got it thanks.

And then just the follow up.

Just wanted to touch on gross margins.

Which were a little soft and I know you guys mentioned a few of those onetime charges there.

And obviously government in hardware revenue comes at lower margins.

But it also looks like the subscription margins quite a bit sequentially could.

Could you guys just talk more about.

Some of the puts and takes in the gross margins and maybe how we can think about that in.

The fourth quarter in hedging on the 2023.

Yeah, absolutely so.

Since let's say, which is the core gross margins on billings continue to be excellent data central excellent punches.

<unk>.

Additionally, the company ramped up payments revenue and menu for the first quarter Youre seeing the impact of that on the subscription side the bigger impact, though is the the onetime stuff on the hydro side, Brian Lynn as you walk through that but on the subscription side, we feel very confident that we will continue our trajectory from 70% up from there. But this is just the ramp up of two new products that are lower gross margin today, but.

Once they get to some more scale there'll be in line with the rest of our products.

Correct.

And then also within service itself.

Subscription services.

Our professional services that support the software and hardware.

And then those we had.

On the inventory we had in there we had a charge so that brought down those margins, but thats a one time.

And that was about 500000 and then in addition on the product side, we had $1 million charge on the inventory that brought that down and so on the product you take out the.

Reserve that I mentioned of $1 million. It gets you back to a 22% margin for product of which we expect will low <unk> is what our actual ranges in that product area. So we expect subscription or service margin to get back in line, where we saw.

As of Middle of this year for Q4, and same with our product margin being back into the 20% range for Q4.

Great. Thanks, guys appreciate it.

Thank you.

Please standby for our next question.

Our next question comes from the line of.

Stephen Sheldon with William Blair. Your line is open.

Hey, good morning, guys and really appreciate all the commentary this quarter that was really helpful.

So just to start here.

Can I get an update on what Youre seeing in terms of cross selling activity between the three main product categories.

Are some of those cross selling motions going better or worse than you would've expected when you acquired some of these assets.

And should that activity pick up as you better incentivize them and integrate these solutions because it sounded like you are maybe starting to do that a little bit more than you have in the past just any any color there.

Yes, so I think it's.

So Anthony is going well I mean, it's really really early on menu.

<unk> two <unk>.

This quarter, we combined our break account management and our punch account management teams into one and the reason we did that was because we were seeing momentum and the ability to cross sell enough of that base. Obviously that has a nice cost savings element too because you don't have two people covering an account, but more importantly, it creates the ability to own the customer in totality and we believe that that will.

<unk>.

Alongside all of that though as I mentioned my remarks, one of the most interesting thing Thats happened is now we're finding ways to connect our products such that the customer gets a unique value that couldnt get if they had two distinct products. Since you have our Pos in our loyalty you get features and functionality you can get if you get somebody else's loyalty Pos.

So that should dramatically help that but we're really looking into that cross and upsell I also think thats the reason why.

Obviously, you read all the headlines that you read we still feel very good about our revenue growth this year and next year I think.

We are probably offsetting that with some really nice cross sell and upsell opportunity.

Got it Thats helpful.

I guess switching thinking about back office solutions and with data centrally you'd been talking about some potential big deal coming through there. It sounded like you had one this quarter is there more to come on that side as you think about the fourth quarter and into 2023 and are you seeing customers focus a lot more on back office efficiency in this environment with rising labor costs and supply.

<unk> costs.

There's no doubt.

As you know and we've talked about the product is so flexible and so beautifully built that it can do a lot more than other products and so we're seeing a lot momentum. The pipeline is very strong in fact as I mentioned, we're not growing sales and marketing expense next year, we're not growing R&D expense next year, but we'll certainly have more heads focused on data central because of that momentum is actually quite exciting.

And.

We've really energized by that business by the leadership of that business and I think there is more to come fingers crossed.

Very helpful. And then just one quick last one I think on payments I think you'd mentioned, reaching $5 million.

I didn't catch whether that was weather.

Mike. Thank you Bill this year or maybe it's harder for them. So I guess, just where you're at with that business, along with a $5 million of reference deal.

This year, so the point I was making which.

Is that I think is interesting for investors as we sit here today.

Very vocal that we don't want to grow R&D expenses sales and marketing after this year.

And next year.

We think that business has the ability to double and without anywhere near that doubling of sales.

Sales head count if you will so that was referring to this year honestly I hope we can clear it in.

Candidly the entire ending revenue more of that product.

<unk> is a little bit dependent on Chinese supply chain I feel very confident with five can we hit.

Six or seven is going to be dependent upon the supply chain coming from China.

Great. Thank you.

Thank you.

Standby for our next question.

Our next question comes from the line of Adam Wyden with a DW capital. Your line is open.

Okay can you hear me guys.

Yes, Thats right Okay perfect.

Just wanted to go over a couple of housekeeping items. So the way I heard you described this on the call is that at the end of Q4 2022, you would spend you expect your expense structure to be effectively flat with the way I read that is G&A flat sales and marketing plan R&D flat and so it is.

Not a flat margin percentage flat dollar so just humor me for a minute.

If you take $115 million available at the end of 2022, which is effectively what you added in the third quarter and brink bookings are up in your payments. So 115 feels like a conservative starting point and you say, okay I'm going to grow 30% next year, which gets me to $150 million and they are.

Now that's $35 million of incremental ALR.

Honestly.

What do you call. It menu has had a lower gross margin than the other your other assets or having increasing gross margin. So take your 70% to 75% incremental gross margin on those sales.

I think 35 times 70.

That's $25 million of incremental EBITDA, but like presumably it's probably more like 75.

Because you're leveraging scale like you look at you look at menu and it's lower gross margin because of lower sales base. So when your incremental margins should be like 75% on that on those incremental dollars. I mean is that sort of your how you're thinking about kind of getting too.

Cash flow positive in 2023, I mean is it.

Is it a flat expense.

For one year do you think you can do it for two years I mean walk me through sort of that incremental margin that.

So short answer is everything you said is correct. So on an exit the 2012.

Turning to your spend base in dollars to be.

No our higher 2003, it should be no higher than 2022, when we exit both years and so your math is exactly right exactly right, which is we want the gross profit from that new AOR to dropped straight to the bottom line. So it should add.

I can't I haven't talked about guidance, yet, we'll do on our next call, but whenever you assume IRR is I think your math is exactly right.

So that's our hope and that's why we feel incredibly confident in our ability to get to profitability because we are.

Growing the census, and so we have a lot of control over that.

The second part of your question I think was what happens in 2024.

It's hard to say now but.

There's no way, we sort of Youll see a crazy ramp in expenses any year going forward. This big ramp we've had an R&D has been focused on let's call it customer satisfaction dealing with a lot of the sins of the past and we're kind of beyond that now and as you heard my final point, which is.

Innovation, we want to control our own destiny and the only way you control your destiny as if you could find yourself and grow yourself and that gives you more opportunities to do M&A buybacks and we feel very comparable and so that is that as the marching orders that we have as an organization.

Okay.

That's.

Yes.

That's helpful and.

And that makes sense I mean look obviously this company has lots of different products and all of them are sort of going in lockstep.

So.

When I look at what I would call best in class Enterprise software companies like clear water analytics, I mean that business has a 30% EBITDA margin on the $300 million.

It's not it's not even that big.

I think it might be helpful sort of in this kind of a framework for people and I know you've alluded to sort of keeping expense structure.

Flat in 'twenty, three and hopefully in 'twenty, four and to some degree, but I think it might be helpful too.

Give people a framework.

Quarter like what we think steady state free cash flow margins are because I mean, I think a lot of companies as you said.

There's been a lot of imposter companies in technology, a lot of low gross margin transactional SaaS low mode in SaaS and so I think one of the things that appeals to us is that our growth the growth curve in this business is sort of not pro cyclical so.

You don't necessarily throw a lot of dollars and grow 200%, but the idea is to grow 30%, 40% or even 25%.

Have a 30, 30% to 40% EBITDA margin you can get the rule of 40 pretty easily on margins. So I'd be curious to sort of.

And this isn't really necessarily at 'twenty, three 'twenty, four but like sort of how we think about steady state margins in the business because that's obviously going to inform how you make investments in all of these different modules.

Yeah, absolutely. So yes, here's the math that we are targeting our long term, we want to get to 80% gross margins on subscription services, we want to spend.

25% to 30% of that revenue on R&D and 20% on sales and marketing, which gets you to I think the thing that I think you said, 30%, which is what we're targeting so that's exactly what we want to get too and I think.

Isn't there and Thats, our long term targets.

Your math is roughly in line.

And so okay, and then so obviously theres a theres a nice ramp.

Over this year, because you're sort of investing in advance.

You talked about your unified Commerce platform can you can you talk a little bit about UCP and your go to market with menu and sort of like what.

How you think about your sort of go to market on that I think a lot of when I look at the business that I own are still all but the business that I own what I bought it. The first time it was effectively break as you said a low gross margin high technical debt business.

In some cases, a long sales cycle is a function of hardware now when I look at the business when I look at the business mix today, it looks very much like a vertical software offering where you can take one or all you have punch menu restaurant magic brink payments and now unified Commerce platform, which has some <unk>.

Multitude of products.

Can you talk to me a little bit about how youre thinking about go to market because each product itself was a trojan horse and RV.

Obviously, an environment where.

Franchisees want to spend less money.

<unk>.

They don't have to necessarily make a hardware investment and so how do we think about go to market with these other things that are like payments for example, which has no economic cost right you send them a thing we saw my little sheet and say, okay, I'll switch or payments that will give you the terminal for free and they don't have to spend any more money. That's that's a freebie. So I'm just curious.

So about how you think about go to market sort of on the six kind of line items and also like I'd be curious to hear how you are engaging with.

These corporates because these corporates do have this marketing fund, which is about 3% of that no punch comes out of that but like Corp.

Corporate gets paid based on royalties I mean, what initiatives have you sort of penciled out such that you lower.

Sure. So let me ask the first part of the question and.

On the go to market motion.

We are go to market as one team and so it's the big change we have internally as I mentioned is the consolidation of our sales account management team.

The P&L of that customer.

Complete accountability and and our products work very well together, so while we have a suite of products. They integrate very beautifully together and the customers now seeing that when I mentioned that one plus clinical III. It truly is that if you have brink and punch. We want you to have a differentiated outcome you can buy whatever you want but you wanted by park is you're going to have that differentiated outcome and then youll have the benefits of having.

One support one sales so on and so forth.

And so feel very good about that this year sorry.

Sorry, 'twenty three we're launching our unified commerce products as I mentioned, it's a suite of products coming out we are incredibly excited these are first true.

Thank you.

Game changing products that we don't think others have and we're leveraging our existing sales account management team to upsell that.

And so I feel very good about that.

And then on your second part of your question, we had unfortunately, a long queue today as I'm going to jump to the next question is absolutely. We are looking for ways to sell our products together such that we are at less and less burden upon the franchisee and the benefits of having multiple products and payments is that we cannot only increase their ROI, we can hopefully lower their total cost of ownership.

Because we got a long queue today.

Thank you please sandbox, where our next question.

Okay.

Our next question comes from the line of Jeremy <unk> with Jefferies. Your line is open.

Great. Thanks, guys for taking my questions.

I'm on for some odd Savannah.

So first off you guys had the highest since the.

Second quarter of last year, and I think the highest sites added ever.

AOR growth still kind of ticked down sequentially, what would it take to kind of wrap. This up again is low 30 is kind of how we should look at growth going forward and then I guess since menu with kind of combined it here now how are you thinking about AUR growth for menu.

I know it's early now.

Yes.

Answer backward so.

Not really there yet it will come.

I suspect next year, we'll start to see by Middle of next year, a real revenue coming from that business.

The reviews on the product had been beyond what we expected.

Say that with no hyperbole.

And the team is far better than expected. It does take time to get the product in because you need to integrate with all sorts of products that the product has not been integrated into that's everything from <unk> to ask two other U S products that the product is and therefore, but the core functionality is.

During the need of our customers and so we will see that really come next year. So today.

The majority of almost all of that is punch.

On the pump side.

I suspect pension and I hope for punches to kind of continue to hit.

Round the rates, we're growing now the kinder business grow 50% next year, probably not given where we are but as we add new modules. The goal is that the collective suite of par products.

Continuing to grow at the pace that we're growing now and so.

And it sort of ties to the last question, which is in the end our customers I don't think we'll be saying.

Give me punch separately, then break and then the idea is can we get them to buy it together.

And change that conversation to be in this platform for their organization.

And so.

That's kind of how we're looking at today punch.

Punch continues to grow at rates faster than its competitors.

And I think our subscription product is a nice way to have created an upsell product as well.

And so lots of work and focus on that.

So I think you'll see it make up a lot for that.

We're six weeks and we see a really strong.

<unk>.

It's been very strong so far so we'll end the year I believe in excess of the average across the four quarters and so I think we'll be fine. This year at this quarter, we are at right around 1000.

We will be well above that in Q4.

Got you. Thanks for taking my question guys.

Thank you.

Our next question.

Our next question comes from the line.

Youre welcome.

Hallum Your line is open.

Thank you our first site.

<unk> walked through them the new segmentation that's helpful. So relative key combining the account management teams I am curious about the <unk>.

Reality that punch was selling at a headquarter level and break was largely selling do a franchisee group or two regional offices.

Can you walk through kind of how you bring that part together.

Sure so today.

Loyalty solutions in the broader customer engagement is generally done at a corporate level out with something called the marketing development fund, which is funded by franchisees, but allocated by corporate and it's sort of the beauty of the punch business model, which as you sign the corporate deal and then you rollout usually in totality within six months.

Nice enterprise software deal.

On brink.

It's done at the corporate level, you sort of when the approval.

The mandate, but then you've got to convert to a region by region.

Really good and our team has been incredibly impressive of shortening that time.

We've had some great examples where historically something that would take us three or four years is now one to two years.

And what we're hoping for is that we launched this new unified products. They become not a decision should I turn on a region, but should I turn them on across our entire organization. So I'll give you an example.

Next year, we're launching a product.

It allows the restaurant to slide slot and throttle orders, so when youre restaurants incredibly busy and you've got lots of people in the store and then you've got orders coming from online ordering and then you have orders coming from our recent door Dash and then you've got people in the drive thru and QR code ordering all of that our software will allow you to throttle and slot those orders in there.

New product that I suspect that if we made that deal with our customers that will be hopefully done at the corporate level because that is a really really revolutionary product that you want to impact across all your customers. So thats all your restaurants and customers have the same experience and so it's an example of our new products not necessarily being a franchisee decision, but being efficient at the corporate level.

Gotcha.

Just one other clarifying question you mentioned that a majority of your new wins in Brent curve, including payments.

Put a little more specificity around that that's an encouraging.

Perspective.

It is it's probably been.

The most exciting thing of the year.

I would say.

Three out of every four bring deals we signed direct.

To attach payments.

And and and it's way ahead of expectations now as we sign the next big large enterprise customers, which we expect we would do.

May not are probably won't have payments on that deal upfront, although were trying very hard.

Well.

But I believe that in sort of our market that sort of mid market that we are in we should be able to attach payments on the vast majority of deals and so far really in year, one we've proven that already.

Great. Thanks, guys.

Thank you.

Please standby for our next question.

Our next question comes from the line of onshore filled a strawman.

Sidoti Your line is open.

Hi, and thank you for taking my questions and congratulations on.

Good progress.

I'm just curious what are the payments.

You mentioned earlier.

And that May.

And then a bit slower.

A payment device.

The supply chain.

What do you think Samsung.

And that is in the App.

I don't have a good answer on the ladder.

We work with a couple of vendors one in particular and.

No.

The messaging, we get from that vendor is.

The shutdown in Asia, where there isn't maybe as now pushing things out one month two months, we've worked really really hard we've done everything from prepay to pay more to search for ebay and all of the place reallocate different customers to get the revenue alive.

This will get better as we look for deals as we sort of expand some dual sourcing to try sort of thing.

This will get better and as we get more sophisticated.

We will get better.

But I suspect it will decide in the next couple of months here, but.

As our business continues to grow at our rates and others.

I see slowing down that probably will also free up some of their pipeline to get to allocate back to par.

Okay.

That revenue being pushed out.

<unk>.

We're likely to sell it in.

Neil.

No no.

Thank you and then in terms of menu.

I understand the margins.

<unk> are not used to that network.

Scaling, but when do you think that's going to be in line with overall margin.

I think in payments, we'll get there.

Next year I think on menu.

Probably.

I am guessing a year. So it just depends on how fast you turn the revenue one.

So it's a little hard because I think also just on the product mix, we've got sort of four or five key products within the menu sweet.

Beachhead with one of the products and then expand from there.

I think give me a quarter or two we should be able to give you some guidance on that.

Okay.

Thank you for that and then in time.

It's nothing to remark you said you're setting yourself.

Alright, well position for corporate clients, but how do you see your customers.

Do you see an impact among them and I mean, given where you are servicing them and helping them be more efficient.

Maybe.

Yes.

<unk>.

Right.

So I'll break in two parts. So our customers have been incredibly resilient. So I think the state is widely reported in our data it ties to it which is every restaurants in pretty much every retail business has declines in volume and traffic. So order counts are down across the industry revenues continue to hold because they've been able to pass price through.

And I think that shows the durability of this end market.

Serve <unk> and fast casual which are lower priced relative to the average restaurant and those those businesses do well in tough times they take share.

Secondly in tough times like this restaurants look for this immediate ROI they want a product anyone ROI fast.

And our products. We believe provide that in addition, when you consolidate vendors their room for cost savings and simplicity.

We are part are always looking to do that.

I think stand to benefit there because we are I believe the only solution to enterprise that can actually give them that.

Today as I said on the call the resiliency of our customers has held and the resiliency in our revenue. So we continue to see the demand.

We have we haven't had the Oh, my God moment, and but we're ready for that our goal as I stated it was to be a profitable business by next year and so what our revenues are slower than expected or faster than expected, we will hit that number.

We believe that we are setting up the cost structure to deal with that and so but today, we feel really good I mean, we haven't we haven't seen that drop offs happen, but.

And when it happens, we're sort of preparing for that to happen today.

Okay, great. Thank you and I will talk to me.

Thanks, Thank you.

I'm showing no further questions in the queue.

I would now like to turn the call back over to <unk> for closing remarks.

Thank you everyone for joining the call. We appreciate your support and as I mentioned, we truly believe we are stewards of your capital and thank you for that Trust will see you next call.

Yes.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.

Q3 2022 PAR Technology Corp Earnings Call

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