PAR Technology Corporation Q1 2023 Earnings Call

Speaker 2: Good afternoon and thank you for standing by. Welcome to PAR Technologies first quarter 2023 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.

Speaker 2: To ask a question during the session, you will need to press star 1 1 on your telephone. You will then hear an automated message advising that your hand is raised.

Speaker 2: To withdraw your question, simply press star 1-1 again.

Speaker 2: As a reminder, today's conference is being recorded.

Speaker 2: I would now like to hand the conference over to your host today, Chris Burns, Senior Vice President of Business Development. Go ahead, Chris.

Speaker 3: Thank you, Eric, and good afternoon, everyone. And thank you for joining us for part technology's first quarter 2023 financial results call.

Speaker 3: Following the close of trading this afternoon, we released our financial results. The earnings release is available on the Investor Relations page of our website at parttech.com, where you can also find the Q1 financial presentation as well as in our related form 8K furnace to the SEC.

Speaker 3: During our call today, we will reference non-GAAP financial measures which we believe to be useful to investors and exclude the impact of certain items. A description and timing of these items along with a reconciliation of non-GAAP measures to the most comparable GAAP measures can be found in our earnings release.

Speaker 3: I'd also remind participants that this conference call may include forward-looking statements that reflect management's expectations based on currently available data. However, actual results are subject to future events and uncertainties. The information on this conference call related to projections or other forward-looking statements...

Speaker 3: may be relied upon and subject to the safe harbor statement included in our earnings released this afternoon and in our annual and quarterly filings with the SEC.

Speaker 3: Finally, I'd like to remind everyone that the call is being recorded and it will be made available for replay via a link available on the Investor Relations page of the website.

Speaker 3: Joining me on the call today is part CEO and President Seffney Tsing and Brian are part jus financial officer.

Speaker 3: I'd now like to turn the call over to Savneet for the formal remarks portion of the call, which will be followed by General Q&A. Savneet.

Speaker 4: Thanks, Chris, and good afternoon. PAR is off to a solid start in 2023 delivering strong results in our first quarter. Restaurants of all types and at all stages are using PAR as their growth enabler, leveraging our unified commerce technology to solve their most challenging business obstacles.

Speaker 4: These restaurants range from emerging growth brands all the way to established enterprises. Today, I'd like to focus my comments on our recent quarter performance, a view of what our customers are looking at for their technology initiatives, and then finally, a look forward to the rest of 2023 and beyond, touching on the macro environment we're observing and our own internal initiatives.

Speaker 4: We continue to deploy our unified Commerce Platform to help restaurants of all sizes improve operations and enhance the restaurant guest experience.

Speaker 4: Unified Commerce drives our most important KPI, customer satisfaction, which leads to longer LTVs in a greater time over time.

Speaker 4: At the end of Q1, ARR reached $116 million delivering a 23% year-over-year increase, demonstrating the continued growth and scaling of our subscription services engine, and contracted ARR now stands at $131 million. Important leave!

Speaker 4: When adjusting for one-time items such as severance, this growth came with no increased operating expenses from Q4 2022.

Speaker 4: Operator solutions are grew 27.4% to $45.2 million in Q1 when compared to the same period last year.

Speaker 4: During Q1, operator solutions added more than 1,100 new store activations and new booking total approximately 1,200.

Speaker 4: Churn continues to be extremely low at 4% annualized for the forebrink in the quarter.

Speaker 4: With the recent wins and table service and significant strengths in our new customer pipeline, bring kids position well to continue scaling.

Speaker 4: The table service momentum is real, and the first two deals I mentioned on the Q4 call are gearing up for launches at the very end of this year and into 24.

Speaker 4: While the ramp up to take these customers live is long, the AR contribution will be meaningful. In addition, we find ourselves the largest spring customer pipeline in our history, suggesting continued resiliency within our customer base. Payments continues to be an important part of our growth for operator solutions and unified by commerce.

Speaker 4: Rolling out new payment customer sites is slower in Q1 than we expected, but we're recouping some of that delayed business in Q2. Progress is being made and we should see improvement through the remainder of this year.

Speaker 4: We are confident that as we cross sell and upsell payments to all new brink deals and existing customers, we will continue to see significant customer wins in ARR acceleration.

Speaker 4: one tap loyalty, and an improved gateway, this is a strong indication for continued momentum.

Speaker 4: Moving to guest engagement error that includes our leading customer engagement platform punch and newly acquired menu.

Speaker 4: Guest engagement ARR grew 18% in Q1 when compared to Q1 22 and total $59.4 million.

Speaker 4: As we talked about last quarter, punch, while being the leader in loyalty for restaurants, it's currently experiencing a slowdown in the marketplace, as our marketing development funds have been impacted, in turn delaying rollouts and slowing down new customer opportunities as RFPs are deferred for later in the year. We also recognize some expected turn in the quarter.

Speaker 4: This is well mapped out and we argue in a bucket of health feature for both us and the customer. Active Store Count on a year of our databases still increased by 16% and we believe business will improve as the year progresses.

Speaker 4: In the quarter, we signed some return customers. Customers for whatever reason had it in previous years turned, and are now resigning with punch as they realize punch is best in class.

Speaker 4: We are also having success upselling additional punch modules to existing customers as they build out their loyalty and customer engagement priorities.

Speaker 4: New leadership in Punch has started to build a foundation that we can begin to leverage and take Punch to the next level. Now to update you on Menyoo.

Speaker 4: We've been impressed by the early response and the menu that's received from prospective customers this year.

Speaker 4: We have signed nearly 500 locations to date in the United States, and this was an advance of any real sales effort.

Speaker 4: We had previously planned to wait until the second half of this year to bring menu to the US, but it's clear starting earlier it's the right decision.

Speaker 4: We have aggressively started tooling the business for the US domestic market, and we expect revenue to start matriculating in Q3 for these deals.

Speaker 4: We feel more confident now than we did at the time of the acquisition that Menyoo could grow into a dominant product line.

Speaker 4: The demand isn't a problem as the RFP environment is ripe with opportunities as restaurants realize the operational benefits menu can bring to their off-premise orders while enhancing customer satisfaction in building real customer loyalty with a deep integration into punch.

Speaker 4: We are very early in menus and introductions to the domestic US market, but the early response and reaction has been nothing but overwhelmingly positive.

Speaker 4: Our teams are focused on operationalizing the business in the US so that we can blitz the market later this year. Back office continues to turn around. Reported AR of $11.3 million in Q1 was a 30% increase from last year's Q1.

Speaker 4: We had activations of 355 stores in the quarter and now have more than 7,000 active stores.

Speaker 4: New store bookings remain on a strong pace as we continue to penetrate large national, a large national chicken QSR with new stores being signed in the quarter.

Speaker 4: In summary, PARIS can continue to market traction with the execution of unified commerce in Q1, with various net new enterprise customers purchasing multiple products across our software ecosystem, and legacy customers opting to expand their footprint with PARIS. Underpinning our unified commerce platform are forward discrete requirements.

Speaker 4: First, best in class standalone products. Our products must be able to stand on their own.

Speaker 4: Second, best in class integrations. Third, unique light house functionality, and fourth, a truly open ecosystem that empowers restaurants to make choices that are best for their business.

Speaker 4: While the term unified commerce has become increasingly commoditized by our mostly single product competitors, our multi-product offering gives par a strategic advantage.

Speaker 4: Innovation requires coordination, and optimal coordination requires control. Unlike competitors, we are able to sync multi-quarter roadmaps between products, own all sides of an integration, and thereby dictate quality and unlock operational efficiencies, such as singular contracts, and other

Speaker 4: singular account management, better SLAs, and more. Ultimately, what we offer is seamlessness and the unified experience that is scalable.

Speaker 4: As a platform, revenue may not be linear in 23, given the number of large deals we are involved with, and the rollout schedule is being worked with the customer, but the scale of our pipeline is expanding and notable. At our core, we are in the customer data business, and PARS Unified is a great example of that.

Speaker 4: commerce value for users is in the massive amount of real-time transactional data captured via unified commerce for brink

via customer identity data through punch and business data, including employees, inventory and menu items through data central.

As an example, PARP process 4.7 billion transactions through Punch in 2022.

We enrich this raw data based on machine learning to deduce standardized and transform it to make it more actionable.

This includes tracking the activity of each guest from multiple channels of engagement and assigning them into the right segment for analytics, targeting, and attribution purposes. Part makes these analytical insights and data available to our customers in a variety of ways.

Customers can perform self-service analytics right in the product itself, including campaign performance analytics, employee and business reporting, and guest analytics.

Customers can export this data on demand for their own self-analysis and visualization.

For advanced analytics, we also provide an automated ETL of raw data into their own environments through a data pipeline.

This data culture sets up nicely for the wave of artificial intelligence entering our world.

Most consistently, we hear that there are three distinct ways to see AIs being beneficial to their business.

AI can make restaurant visits more consistent and predictable. AI can improve the speed of service. And AI can improve order accuracy.

It also minimizes human interaction and lets experts focus their time and skill on other tasks.

AI can be a lot of things to a lot of different restaurants. For some, it may be utilizing voice recognizing kiosks or tools for cost cutting and reducing labor costs. For others, they are seeing conversational AI tech that improves order accuracy.

While even others need tools to track employee performance and sales data along with inventory forecasting. The possibility of AI adoption is endless and restaurant owners wanting to stay ahead of the game and those wanting to match the market or embracing yearly benefits.

We believe PARS core advantage is that we are the only enterprise firm with the data across customer identity, transactions, menu, and COGS.

This allows par and our customers to create real value as we have complete internal data to match with external sources, thereby having a stronger foundation to build large models that lead to insights and automation. The real exciting part of this is that par's unified commerce allows us to have these first-hand conversations with our enterprise customers near-time integration with technology partners.

in a very aggressive product roadmap that includes AI to enterprise restaurants for a lion parts you consistently deliver.

Underlying all this though, is that while our industry gets caught up in the excitement around the technology, we will never get lost that in the end we must deliver to a franchisee who must deliver an incredible experience to a guest.

that the franchisee or store owner could care less what model they use or what algorithm we built. They just want the technology to work.

The grit of PAR, combined with our deep understanding of the customer, along with our data advantage, set us up nicely to capitalize.

Brian will now review the numbers in more detail. Brian . Thank you, Stephanie, and good afternoon everyone.

Total revenues were $100.4 million for the three months ended March 31, 2023.

An increase of 25.1% compared to three months ended March 31, 2022.

with growing growth coming from both restaurant retail and government segments.

Net loss for the first quarter of 2023 was 15.9 million or 58 cent loss per share compared to a net loss of 15.7 million or 58 cent loss per share reported for the same period in 2022.

Adjusted net loss for the first quarter of 2023 was 12.7 million, or 0.46 cent loss per share.

Compared to an adjusted net loss of 7.1 million, which 26 cent loss per share for the same period in 2022.

Adjusted EBITDA for the first quarter of 2023 was a loss of $8.8 million compared to the adjusted EBITDA loss of $2.9 million for the same period in 2022.

Included in our results for the first quarter of 2023 was a charge of 2.69 to our hardware margin related to inventory.

Fluting this charge, adjusted net loss for the quarter was $10.1 million, or a 36 cent loss per share, compared to $7.1 million, or a 26 cent loss for 2022.

And adjusted EBITDA was 6.2 million compared to 2.9 million for 2022.

We continue to focus on driving improved even performance with continued top-line growth while managing strong-cost controls. Our revenue in the quarter was 26.8 million, an increase of 1.7 million or 6.8 percent from the 25.1 million report in the prior year.

We continue to see strong hardware sales both with our Tier 1 Legacy customers and across our brand customer base.

So, the Sreshing Service Revenue was reported at $28 million, an increase of $6.7 million, but 31.4% from the 21.3 million reported in the prior years.

The increase came across our unit by commerce. The increase in revenues was driven by both site growth and an increase in average revenue per unit as we continue to cross-sell into our existing customer base. The annual recurring revenue exiting the quarter was 116 million, an increase of 23% compared to Q1 2022, with operator solutions up 27%.

to just engagement of 18% and back office up 30%. Professional service revenue was reported at 13.8 million.

an increase of 1.3 million or 10.8 percent from the 12.5 million reported in the prior year.

Our total recurring revenue base, which includes both subscription services and hardware support contracts within professional services, continues to expand with $35.3 million recorded in Q1 2023, an increase of 23.4% compared to the $28.6 million in Q1 2022.

Contract revenue from our government business was 31.9 million at increase at 10.4 million or 48.6% from the 21.4 million reported in the first quarter of 2022.

The increase in contract revenues was driven by a 9.9 million increase in government ISR solution product line. The increase was substantially driven by continued growth of counter UAS task orders.

and increase the 66 percent compared to the 196 million backlog as of March 31st, 2022.

Total funded backlog as of March 31, 2023.

was 86 million, 105 percent increase compared to the funded backflow of 42 million for the prior year.

105% increase compared to the funded back while the 42 million for the prior year. Now turn into margins.

Hardware margin for the quarter was 16.4% versus 20.2% Q1 2022. The decrease in margin was driven by a charge to our inventory.

Excluding the adjustment, hardware margins were over 20%. And we expect hardware margins of at least 20% going forward consistent with recent trending.

So, here's in services margin for the quarter, was 50.2% compared to 50.1% reported in the first quarter of 2022.

of Ammarization of Identifiable Intangible Assets compared to 5.1 million of Ammarization during the three months ended March 31st, 2022.

Excluding the authorization of intangible assets, total adjusted subscription service margin for the three months ended March 31st, 2023. 71% compared to 74% for the three months ended March 31st, 2022. Our rate of acceleration of continued margin improvement slowed this quarter.

as you absorb the initial growth of part payment services and menu which are both in the early phase products.

Professional Services Margin, for the quarter, was 17.9% compared to 26.5% reported in the first quarter of 2022. The decrease in margin was driven by a decrease in margins related to our implementation and hardware repair services.

Government contract margins were 7.2%, compared to 7.3% for the first quarter of 2022.

And regards to operating expenses. Gap S-GNA was 27.5 million.

and increase the 5.1 million from the 22.4 million reported Q1 2022.

The increase was driven by increases in internal technology infrastructure costs and sales and marketing expense.

The variance also includes 1.5 billion of expense related to menu, which was acquired in Q3, 2022.

So, quencially, NetRND expense of 14.3 million in Q1 2023 was down 0.6 million from the 14.9 million reported in Q4 2022. Compared to prior year, in the first quarter, NetRND increased 3.5 million from the 10.8 million recorded in Q1 2022.

Increase is related to personnel hired in 2022 as we continue to improve and diversify our product and service offerings.

Increase is related to personnel hired in 2022 as we continue to improve and diversify our product and service offerings, including $1.9 million for menu.

Inputing and operating expenses for 2021-2023 was a 5.2 million reduction to the fair value of the contingent consideration liability for the menu acquisition.

This contra expense is a non-GAAP adjustment.

Total operating expenses, including the contingent liability adjustment, total 42.3 million, versus Q4 2022, operating expenses of 41.2 million.

Met interest was 1.7 million compared to 2.5 million recorded in Q1 2022.

The decrease is driven by increased interest revenue from our short-term investments during the three months ended March 31st, 2023.

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

Three months ended March 31st, cash use and operating activities was 16.7 million versus 21.2 million for the prior year. Operating cash needs during Q1 2023.

We're primarily driven by net loss, net of non-cash charges, and additional networking capital requirements. Increased networking capital requirements was primarily due to the annual variable O comp payout in Q1, and increased accounts receivable within the restaurant retail operating segment.

Cash to use and investing activities was 1.8 million for the three months ended March 31st.

Cash to use and investing activities was 1.8 million for the three months ended March 31st Versus 3.1 million for the prior year

Investing activities during the three months at the March 31, 2023, included .5 million for purchases of short-term, health and maturity securities, and capital expenditures of .8 million for the internal use software.

Capitalized software for developed technology costs for the three months ended March 31st was $0.5 million. Cash used in financing activity was $2.4 million for the three months ended March 31st compared to $1.4 million for the prior year.

Funding financing activities for 2023 was driven by stock-based compensation related transactions.

State sales outstanding for the restaurants and retail segment increased from 53 days as of December 31st, 2022 to 60 days as of March 31st, 2023. We expect the SO levels to come back to historical levels closer to 50 days in Q2.

Day sales outstanding for government segmenting decreased from 55 days as of December 31st to 51 days as of March 31st, 2023.

I'll now turn the call back over to 70 for closing remarks prior to moving to Q&A.

Thanks, Brian . To comment and brew the economic environment, while we can't predict what the future holds at a macro level, we're forging ahead with conviction and vigilance as we look to continue to fuel durable growth over the long term and deepen our strategic advantages. Today, while there are pockets of weakness within the restaurant industry, broadly speaking, the market is still showing signs of strength.

Outside of punch, we continue to see robust pipelines, and in particular, we see more RFP activity for brinks than we ever had before. PARs internal execution matched with the macro worry creates a stage for a more aggressive M&A environment.

If we can continue to deliver, we should be able to leverage our currency to effectuate creative transactions that add unique product or additional market share to our business. As I mentioned for the past several quarters, we've been able to go revenue and error while not increasing overhead.

While adjusting for one-time items such as severance and inventory adjustments, we were successful in maintaining our operating expenses quarter over quarter as we implement our plans on becoming a profitable company.

We're focused on executing against our long-term goals and we're eager to take this momentum and build upon it for the rest of the year and the out years to come. As always, I'd like to thank all of Parson Village for the dedication and efforts over the past quarter and for never forgetting our mission.

to enable personalized experiences that connect people to the brands, meals, and moments they love. At PARP we have a demanding environment and we ask a lot from our team members.

We are constantly striving to increase our growth without increasing up-expend.

All the while, expecting each and every one of us to do more to deliver for our customers. I thank you and have the utmost confidence that all your hard work will be rewarded.

Would that open the call for Q&A? Operator? Thank you. At this time, we'll conduct a question and answer session. As a reminder to ask a question, press star 11 on your telephone and wait for your name to be announced.

To withdraw your questions, simply press star 1 1 again. Please stand by while we compile the Q&A roster.

And our first color is Samad Samana with Jeffries. Samad your line is open, please go ahead. You got it.

Great, hey, good afternoon. Thanks for taking my questions. Maybe, Sabine, first one for you. Just look at the metrics, X-Punch. You actually added the most dollars of operator solutions there are, quarter of a quarter that you've done in, kind of as far back as my model goes. So I think you're seeing pretty good strength there, and you've got a pretty.

It's definitely a company specific and not seasonal. In fact, it's actually understated because as I mentioned or said quickly, our payment should have been higher this quarter. Some of it's such a Q2 that it shouldn't have. So it's definitely a trend that I think will continue throughout the year. It's resulting really from the continued growth of the brink.

and the cross-cell of payments that we're really starting to figure out on a more consistent basis. So it's a combo of, you know, bring adding more customers at higher RPU and us being doing a good job of stapling payments every deal we can.

Great. And then maybe Brian , one for you. Just as I think about the gross margins and operator solutions and restaurant magic growing faster, how should they maybe the subscription revenue gross margin either mixing or changing as punch's growth has been a little bit slower? Should we think about that as having a material impact going forward or should it be in a fairly consistent fashion?

consistent range is what we've seen over the last few quarters. I'll take the high level and give it to Brian . So the short answer is you know the margins are muted now because of primarily menu and to a degree payments. We put a lot of investment into menu as you heard given the unexpected customer demand in the US and payments because we have a build-up there. The margins of punch, data central and

and BRINK are all relatively high, not all the same, but all very high. And so as menu and payment scale, it'll bring the gross margin up because the rest of them all are relatively high. But Brian , anything else you wanna add? Yeah, the only thing I would add there is, as you know, Samad, over the past couple of years, we have also saw a deep improvement in BRINK.

as we improve margins there on the hosting cost. I think we've gotten ourselves to a pretty good level though. There's still some opportunity. In the next area, doing something similar on the punch side. We will see improvements there, but you're not going to see the drastic of the each quarter, but we have to absorb a couple more quarters of the early growth of menu and payments.

I'm gonna say get critical mass. Okay, I'm gonna break the rules and squeeze in a very question to set. And you're closing remarks you mentioned, it sounded like you might have been hinting at that there may be M&A on the horizon where you're gonna attempt to be opportunistic. I'm curious, one, that's what you were trying to implement in two, how we should maybe consider that with the back-up of trying to get the profitability. So, you know, I think...

I don't know if I was hinting or ostensibly saying, I think we're gonna see a lot of M&A in our category. There was a lot of venture capital money that came in that I think is stranded in companies that either really didn't deserve venture capital money or can't raise at prices that make sense anymore. And so we're seeing a lot of deal flow today.

The interesting part is that we see that both in the small startups but also in the large part of the market. And what I think is interesting is that I believe we will have out performance as an organization and as a result have a better multiple than the deals we're looking at. And I think if we look to be the consolidated or we will be in a very strong position. So I think it was there.

As it relates to the point of being profitable, I don't think you'll see us do a deal that doesn't get us to profitability faster or similar unless it added tremendous growth where the ROI would have made sense. But I think the deals we're seeing today not only can be accretive to our growth but also to our margins. kept at risk for selling back to companies and their partner so that we can grow the

Great. Appreciate you taking all my questions. That's right.

standby for our next caller. And will Nance is here with Goldman Sachs? Will your line is open? Please go ahead. Hey guys, good afternoon. I appreciate you taking the question. Stephanie, I'm wondering if you can talk about maybe the outlook for ARR growth in the context of some of the comments you made on the various segments. It sounds like maybe a little bit more.

accelerating over the course of the year? Yeah, I think what will be comfortable be in the range we put that 20 to 30 percent where we are is So we still have to a long way to go, you know in particular We've got a you know a couple opportunities we've won and signed as I mentioned these table service initiatives the date They go live has a tremendous swing in our revenues for the year because of the you know the sheer quantity of ARR service

to take a brain customer live. So those are really positive things. And I guess I would say really strong stabilization of punch better than I expected. If you ask me how I felt discord about punch for last quarter, I'd say we feel much better. Where we need to pick up the pace is on payments because the opportunity is too large and while it's working, it should be better. And I think the menu needs to really capture this opportunity and it's right.

You don't have perfect visibility, but there are levers we have in your year that do add the nice potential upswing for us, particularly the large table service deals that I mentioned. And we can land one of the larger menu RFPs, where those will have pretty nice impacts for us. Got it, very helpful. And then maybe as a follow-up, I think it's recorded. You made some comments around one of the big five chains potentially moving down.

in the near term, you know, how that relates to sort of the man on the hardware side, which kind of continues to outperform at least your top line expectations. I would say, in relative to the macro uncertainty that we're seeing.

It might be the most interesting observable data point in that, I said in the call a few times, we've never had a Brink pipeline so robust with large customers. We've always had robust pipeline with mid-sized customers, emerging customers, but we've never had so many large customers in RFP, not even sort of pipeline, real, real, real, real

this sort of secular shift to the cloud within POS really gaining share. Is it flash in the pan or is it secular? I think there's enough in the pipeline that makes me think that this is just the snowball building. And as you sort of reference, we are seeing more large, large, large brands opening the door now.

I think probably a little bit ahead of schedule from what we expected. Now we'll see if any of them actually do anything. We'll see if it comes through. But purely from a pipeline and RFP perspective, I think it's highlighting the strength of those customers but also their commitment to upgrading technology no matter what the environment is.

Got it. Makes sense. I appreciate you taking the questions. Stand by for our next caller. Japan, with Patrick McEwley with William Blair, Patrick, your line is open. Please go ahead. Hi, thanks for taking my questions.

So I think you said that you attached payments to roughly 80% of your break signings last year, and I wanted to ask one are you still seeing that level of attachment this year and two given some of those payment deals were pushed out a little bit it sounds like potentially back a quarter are you still seeing that level of attachment?

for us will be the upsell into the base where we haven't done as good of a job. You know as far as where the revenue would land, you know I think it's probably between 10 and 15, you know I think 15 would be you know a stretch today. But you know if one of these large POS deals lands and they take our payments offering you know then that would be an underestimate.

So, conservative, I wouldn't go that high. Understood, thanks. And then on menu, it sounds like things are going really well there. Sorry, one quick clarification. Go ahead. The deals aren't being pushed. The rollout was being pushed. So, this is the quick clarification. It wasn't a deal being pushed. It was a deal signed, papered. It's the rollout that got slowed down. Got it, got it, thanks. And then my second one on menu. So, can you...

It sounds like things are going really well there. I guess, can you just provide any more context on how early conversations are going there and how far along you are in terms of building out those third-party integrations that you had needed? Yeah, that's a great question. So you know, it's been surprising. We had not planned to bring Menyoo to the United States really until the second half of this year.

As you suggested, because of the dire for us to build out these integrations more fully, and to focus on some of the international business that would already be signed. Essentially what happened was enough customers literally pulled us into their RFPs and then started giving us business that we reassess and said this is clearly where the market opportunity is.

where we can win customers, you know, against the biggest and the best roll out, you know, enter a year and then create the opportunity for a real unified commerce experience where we are the POS loyalty and online ordering. And so we have been retooling the business to focus on the U.S., which is creating an acceleration of those integrations.

are waiting for us to finish a specific point-to-point integration to go live. And I think that just highlights the quality of the product that the customers truly want the product and are waiting for us. So, we're excited. We could be wrong, but I think we now see enough pipeline and also candidly enough signed deals against, like I said, great competitors that...

you know, it would behoove us not to continue to push on the US and also be smart about how we stage that. You know, we could win a lot more deals right now, but we need to go slower and make sure we service those deals, do a good job on those deals and let our reputation kind of compound from there.

Got it. Thanks, Samit. That's very encouraging and really helpful. Thanks for taking my question. Stand by for our next question. And our next question comes from Maynak Tandon with Needham. Thank you. Good evening. Yes. Thank you. Good evening. Samit, could you sort of give us a sense of where you are on the journey, the cross-sell journey, and maybe share any data points in terms of how many customers are using multiple products versus where you could penetrate over time? And I guess the broader question is how many users are facing

The amount of under penetration is enormous. Payments is probably not even in 10% of Brink customers yet. Data Central is not even half of Brink customers yet. Menu is obviously in almost no Brink customers yet. And so there's an incredible opportunity to push that forward.

Not to mention the 70,000 stores that Punch is in, where Menu is a really, really perfect fit. And so the ability for us to grow revenue going forward will be as much driven by our ability to cross sell and upsell as it will be for net new sites. Today, most of our growth though is still net new sites, but we are seeing a continued pickup.

in driving cross-sell as being more and more of our revenue contribution. And that will continue to get higher this year as menu gets rolled out and as payments gets rolled out because of the both upsell products. Got it. And then I wanna ask about the government businesses given the pickup in revenue here. Any sort of directional guidance on where we should see that trend, at least over the current year and then.

if you could maybe give any updates on your plans for that business, if there's anything incremental that you can share with us.

No public update yet. I think, as we said, we're a year into one year into where we said we would be when we would look at those strategic alternatives. Again, I think when we have an update, we'll come back to you, but the business is delivered as we expected. In the event we wanted to do something, I think there would be no better time, but we're executing on internally and also the macro environment.

I think the growth that you're going to continue to see is going to be solid, but having that 50% year-to-year, it's going to get down to a more muted level as we've gotten critical mass within that real large contract that we have.

Great. That's helpful, Kala. Thank you so much.

Great, that's helpful, thank you so much. And standby.

Our next question comes from Adam Wyden with ADW Capital. Adam, your line is open. Please go ahead. Okay. Three questions. I'll start with the easiest one. You had said, I guess, interquarter or perhaps last quarter that PAR was going to have the greatest improvement and there were no changes in the

exiting the year at Rule 40 or close to it? Can you elaborate on the efficiency improvement throughout the year and whether you're on track or ahead of that? Can you elaborate on the efficiency improvement throughout the year and whether you're on

Yeah, obviously our guidance is relatively wide, it relates to revenue growth. So what I can say is, you know, we are executing on a plan to grow within the range we said while holding our operating expenses flat. And as you saw, R&D actually came down, quarter of a quarter, which is our biggest line item. And so, you know, I do expect us to be able to have...

you know, nice growth rate with a tremendously improving cost structure along that and be a large mover on the rule of 40. Will be the largest or not, I don't know, we have to look at everybody else, but you know, I think we're executing on that plan. Nothing's really changed, which is continue to grow the revenue between 20 and 30 and then keep the outback flat and hopefully we have some creative M&A on there that accelerates revenue and or accelerates profitability.

Okay, good. Second question, rep three. Second question is around M&A. You know, when you first got in, you did the tuck-in of Restaurant Magic, which is now Data Central. That's doing well. You know, sort of was growing, then slowed down, now growing again. Sort of talks to the portfolio approach. You know, menu is an R&D box, which you guys are excited about.

Is the issue cost of capital? What is sort of holding it back? I mean, there's lots of private market assets that are sort of up for sale. And I'm just trying to understand what the bottleneck is in terms of getting sort of what I would call more substantial ARR deals done sort of in the...

10 to 50 and then there's obviously the larger public companies that could be merger candidates Instead of my commentary, we think now is the time We see, I think what you see in the public markets and the private markets You know what I mean by that is there are a number of assets now where a year ago You know I wouldn't say it was a cost of capital problem. I think it was an expectation problem from

you know, 2020 and 2021 where people were sort of hoping for prices that we didn't feel were appropriate for the risk. I think today two really interesting things have happened. One is I think...

Partly or primarily because of our POS business, but broadly because of our unified platform, it is understood that our company deserves a premium multiple to any single product. What I mean by that is if you are a company that's solving one particular need within the restaurant industry, I believe we can very comfortably argue with you and your shareholders that we should deserve the premium multiple relative to you, given the resiliency of our business.

and the growth of that business. And so I don't think it's a cost of capital problem. I think the market actually now appreciates that. And in my conversations, we get very comfortable there. The second thing that's happened, which I think clearly happened in the public markets, is the quantity of deals available has changed. There are many companies that we went after the last 18 months that...

It was a chase. Or today we see numerous companies not only be up for business but hire investors and bankers and change the conversation. So I think we feel excited about the M&A opportunity set, primarily in actually the larger deals that you're talking about. Most of the small deals, I don't think you'd see us do a menu like deal. That was a very unique product but a very unique hole that we needed to fill. But I think we feel more excited about the larger deals and the smaller deals because the smaller deals are a ton of work and we don't have a massive product gap we're trying to fill like we did with menu. Here we're trying to fill market share more cash flow and more growth.

Right. So let me build on that. This is the final part of my question. Obviously, this has been a long journey when you joined on the company. It was subscription revenue of seven million. Whether we finished the year at 140 or 150, government is bigger, hardware is now profitable. But the company arguably trades at the lowest multiple. Private equity firms are out there buying different businesses.

20, 25% growers, 30% growers, you know, at double digit revenue multiples. I mean, if you are unable to scale this business in the public markets, I mean, how do you think about creating shareholder value for folks? Because I mean, I would make arguments that this would be an amazing platform for any private equity firm or another, you know, sort of larger strategic public player because there seems to be a lot of a lot of people who are not familiar with this.

being the consolidated because right now interest rates are 5% and if you're not trading $50 million a revenue, you're trading at a fraction of what your private market is. If you're not trading $50 million a day in the public markets, you're not Microsoft. You can't get valued in the public market. So I'm just sort of thinking, what is your willingness to...

Car is a great platform, whether it's private or public, to have an incredibly successful run for a long period of time. As you heard in my comments, while we've grown a lot, our pipeline has never been bigger. And I believe that we may not be the 100% grower, but the durability of long-term, high-quality growth is here for a long run. And so I think that's very attractive, whether it's public or private.

To your question of our ability to extract value, I believe PAR is up for sale every single day. Every single day we are available to create value for our shareholders. And if there's an opportunity for that to be where we are not the consolidator and we are the consolidated. We'll have to talk about that out.

we're not running from that. I think we have to drive value wherever value can be found. And so we wouldn't run from that. Now, do I think it's the right long-term fit for shareholders for, it would depend on price. And we see a really strong path for us to.

be the consolidator and to drive high returns on capital. But if someone comes in and prides that to feed that, no problem are in. We're not gonna, you know, hold on to anything because our job is to create value for our shareholders. On, on, you're sort of last part about size. You know, you're not activated about this, but, you know, I think that if we can get to the property numbers that we think we can get and become a rule of 40 company, the market will reward us. And I think they're a good example Finding champion as an idiot.

Our next question comes from George Sutton with Craig Hallam. George, your line is open.

Thank you. This is Adam on for George. Thanks for taking my questions. Savneet, it's great to hear the menu is off to such a strong start, but I'd be curious to know if there's anything specific you've heard from the signed customers that's really driving that enthusiasm and whether or not that's something you think is persistent through, you know, the industry landscape or if this is really more of a unique or operator specific.

It's a product move. So I think when we show a demo of the backend of Menu, it reminds me of when I first became the CEO and people would see a demo of Brink and they would say, how did you crawl on my head and know exactly what I wanted? Menu was built to be the modern version of the legacy online ordering companies that exist today. And what I see is our customers quickly see that.

Our customers are moving from a world from a templated online ordering site to something that configures and makes them feel like it's their brand. You know, I've used examples, if you go to different large brand online ordering websites, they relatively look quite similar. And I think back in the day when online ordering was an acute problem, i.e. during the pandemic, it didn't really matter. But today where competition is fierce, we're in a recession, you really need that online ordering presence to match the brand, the feel, the look, the ethos, the culture.

to say, okay, we can try to trust Parv to do this. Over time, we'll add other layers, the sort of unified service, unified contract, unified support, all these things I think will come. But right now, I do believe we're winning because of the product. And over time, I think we'll add more layers to that. Now, there are amazing companies that are in this space that we look up to and have envy of.

But in the end, we believe that our sort of gritty nature, our ability to empathize with the operator, not the CIO, but the actual operator on the ground, will continue to help us win this year.

That's great. And I was hoping could also provide one more detail on the pipeline. I know you mentioned that there's more large QSRs than ever before, but any other detail would be appreciated. You know, it's hard to give detail on pipeline, but what I think we see happening is that every year I used to say we want to get, you know, one or two.

large customers. And today what we see is this pipeline fill up with very, very substantial brands that I would have thought would be the late adopters. That's maybe the best way to explain it. There are late adopters now that are active in evaluating upgrades to their technology infrastructure.

that are way ahead of the schedule I would have had. And so much so that it's stretched us internally to figure out how do we service this best. And I think what's happened is that they've seen the success of other brands adopting the cloud. They've also seen the challenges of homegrown systems and the ability to kind of build POS or loyalty on your own and how hard it is to maintain that in a world of the cloud where you're doing an update every month or every two weeks or before it was static.

And then I think there is some ability where I think our reputation and you know, we may not be the greatest company in the world, but you know, I do believe our customers know that they can trust us. They can call me at any time and I will pick up the phone and we'll get to a solution. They can text anyone on our team, they'll get a response. And in the restaurant business...

you know, it's a real-time business. If something goes down, you need a response. You need someone to care for you. And I think we've done a really good job of, while we've had, I think, good success and we feel like we've accomplished a lot, you know, we haven't lost that gritty nature of, you know, when you're a store operator and you're in that store and that POS is down, the last thing you want to get it, want you to hear is, hey, we'll get back to you tomorrow.

I think it's a combination of their saying, all right, we're now at a scale where we can continue to operate, but they see the success of other people doing it, and I think they see the potential failures in trying to do with themselves given how much technology has changed over the last decade.

Thanks. And I'm going to squeeze in one more if that's all right. I'd be remiss if I didn't ask at least one question on AI. And I appreciate the tempered enthusiasm. Obviously, it's very early, but without getting ahead of ourselves, it would be great to hear your thoughts on what may be the lowest hanging fruit for restaurant operators and how you think about that in terms of development.

I don't know if I've got the perfect answer for that. I think we see test cases happening everywhere. I think the industry answer would be the highest area of artificial intelligence usage would be on voice AI. It's calling in for phone orders, using voice at the kiosk, or using voice at the drive-through. But that I would say isn't sort of industry-wide. But I think that would be the most common answer you'd see, because those solutions have kind of been out in the market for some time.

10 cents depending on the time we go to a store. Those are the areas I think that could be more interesting for the restaurant. In the end, we operate in a market that is highly ROI focused. And so I don't see restaurants being the early adopters of AI until we can give them a use case that we can say this is the return on that investment we're giving you.

And that was sort of my point, which is if I went to our customers and said, hey, we're spending 20% of our budget on AI products, I think they would shoot me. And they'd say, what are you talking about? Like, we want this stuff to work better in the store. We want more delivery. However, given that we are, I think, have so much data gravity across all of our products, we have more data, I think, than anybody else in the enterprise. When that innovation happens, we are the perfect place for that to be built out of. And so we have a ton of initiatives internally to build great products.

But we can't lose sight of the fact that we still need to deliver every single day. And so we're trying to walk that line carefully, which is we do have a lot of issues going on, but we have to do a great job on our core products on its own. We're inside an ad. Internally at par, I think you'll see really cool tools. We're going to use AI, obviously, for things like our chatbots, our support for our customers, our support internally.

We're using it to understand how we manage our own resources, to make our developers more efficient. And so AI will be used within PAR, but I think we have to sort of watch how the industry ends up adopting and getting to a point where we can actually prove our way. OK. We have time for one last question. Stand by.

We have Anja Soderstrom with CIDOTI. Anja your line is open please go ahead. Okay thank you and I actually only have one question as most of my other questions have been addressed but I'm just curious when you and Apsella cross-sell do you?

often displace other providers or is it selling into an empty space? Hey Anja, good evening. It is, we're almost always displacing other providers. There's once in a while where, you know, I think punch is going into an organization that may not have a loyalty product or it may have something home-built, but for the most part we're displacing an existing vendor.

Okay, and is it most often the same vendor or various or? It's various although if you think of the categories we operate in, online ordering, POS, loyalty, there are some large competitors that we probably see more often, but it's various. Okay, thank you, that was all for me.

Okay, and is it most often the same vendor or various or? It's various, although, you know, if you think of the categories we operate in, you know, online ordering, POS, loyalty, there are, you know, there are these some large competitors that are probably what we see more often, but it's various. Okay, thank you, that was all for me. Thanks Anya.

Okay. That does conclude our Q&A. I would like to turn it back to Sanveet Singh, CEO , for closing remarks. Thanks everyone for joining. We look forward to updating you on your progress as we go forward. Thank you for your participation in today's conference. This does conclude our program. You may now disconnect.