Q4 2023 PAR Technology Corp Earnings Call - Q&A

Operator: www.parker-sheldon.com Good day and thank you for standing by. Welcome to PAR Technology Fiscal Year 2023 4th Quarter Financial Results Conference Call. At this time, all participants are in a listen-only mode.

Yeah.

Good day and thank you for standing by will go to par technology fiscal year 2023 fourth quarter financial results Conference call.

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 a question. During the session you will need to press star one one on your telephone you will then hear an automated message advising your hand is raised to withdraw your question. Please press star.

Operator: After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising that your hand is raised.

Operator: To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Chris Burns, Senior Vice President of Investor Relations and Business Development. Please go ahead.

One one again.

Please be advised that today's conference is being recorded.

I would now like to hand, the conference over to your Speaker today, Chris Byrnes Senior Vice President of Investor Relations and business development. Please go ahead.

Christopher R. Byrnes: Thank you, Gigi, and good morning, everyone. Thank you for joining us for PAR Technology's 2023 fourth quarter and year-end financial results call. This morning we released our financial results. The earnings release is available on the Investor Relations page of our website at partech.com, where you can also find the Q4 financials presentation, as well as in our related form AK Furnace to the SEC.

Thank you Gigi and good morning, everyone. Thank you for joining us for par Technology's 2023 fourth quarter and year end financial results call.

This morning, we released our financial results. The earnings release is available on the Investor Relations page of our website at <unk> Dot Com, where you can also find the Q4 financials presentation.

Well as in our related form 8-K furnished to the SEC.

Christopher R. Byrnes: 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 report. I'd also like to 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 uncertainty.

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.

Also like to remind participants that this conference call may include forward looking statements.

<expletive> managements expectations based on currently available data.

However, actual results are subject to future events and uncertainties. The information on this conference call related to projections or other forward looking statements may be relied upon and subject to the safe Harbor statement included in our earnings release. This afternoon.

Christopher R. Byrnes: 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 afternoon and in our annual and quarterly filings with the SEC. Finally, I'd like to remind everyone that this call is being recorded and will be made available for replay via a link available on the investor relations section of our website. Joining me on the call today is PAR's CEO and President, Savneet Singh, and Bryan Menar, PAR's Chief Financial Officer. 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?

Our annual and quarterly filings with the SEC.

Finally, I'd like to remind everyone that this call is being recorded and will be made available for replay via a link available in the Investor Relations section of our website.

Joining me on the call today is pars CEO and President <unk> Singh and Bryan Mannar Par's, 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 Sandeep.

Savneet Singh: Thanks, Chris, and thank you all for joining us on today's call. 2023 was a foundational year setting us up for. We may have a technical issue. All right. John Archon, Still music playing, okay.

Thanks, Chris.

Thank you all for joining us on today's call.

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Operator: We apologize for any technical difficulties. Speakers, you may continue. Again, we apologize. No, I think we're still having an issue. We're still it's still on the background music on the main line. All right, one moment.

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Operator: Everyone, please remain on the line. Your conference will resume shortly. Music, Pardon me, we are now live again.

Christopher R. Byrnes: We apologize for any technical difficulties. Speakers, you may continue. Thank you, Gigi. And I do apologize for the difficulties this morning.

Christopher R. Byrnes: I'll just start right from the beginning. We are welcoming everyone to the call this morning, the fiscal 2023 fourth quarter and year-end financial results call. This morning, we did release our financial results. The earnings release is available on the investor relations page of our website at partech.com, where you can also find the Q4 financial presentation, as well as our related form 8K, furnished to the FCC.

Okay.

Thank you for your patience, we apologize for any technical difficulties speakers you may continue.

Christopher R. Byrnes: During our call today, we'll reference non-GAAP financial measures which we believe to be useful to investors and exclude the impact of certain items. I'd also like to 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 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 of the SEC. Finally, I'd like to remind everyone that this call is being recorded and it will be made available for replay via a link available on the investment relations section of our website. Joining me on the call today is PAR's CEO and President, Savneet Singh, and Bryan Menar, PAR's Chief Financial Officer. I'd now like to turn the call over to Savneet for the formal remarks portion of the call, which will be followed by a general Q&A. Savneet?

Again, we apologize now all of them.

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Alright, one moment everyone. Please remain on the line your conference will resume shortly.

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Pardon me, we are now alive again, we apologize for any technical difficulties speakers you may continue.

Thank you Vijay and I do apologize for the difficulties. This morning I'll just start right from the beginning we are welcoming everyone for the call. This morning.

Fiscal 2023 fourth quarter and year end financial results call.

This morning, we did release our financial results. The earnings release is available on the Investor Relations page of our website at <unk> Dot Com, where you can also find the Q4 financial presentation as well as in our related form 8-K.

Savneet Singh: Thanks, Chris. And thank you all for joining us on today's call. 2023 was a foundational year setting us up for a value creation slide we think takes flight in 24, hopefully, years to come. The acceptance of our products by the industry's largest customers and the building blocks of an M&A muscle we intend to use regularly are now in place. I'll touch on these ideas later and begin with our results.

Furnished to the SEC.

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.

I'd also like to remind participants that this conference call may include forward looking statements that reflect management's expectations based on currently available data. However, actual result.

Savneet Singh: For the fourth quarter, subscription AR grew by 23% when compared to Q4 2022. Our growth came across our products and was delivered without relying on the exciting customer wins we touched on last quarter, as that revenue will begin later this year. Operator solutions error grew by 45% to 60.2 million in Q4 when compared to the same period last year.

They are subject to future events and uncertainties. The information on this conference call related to projections or other forward looking statements may be relied upon and subject to the safe Harbor statement included in our earnings release, this afternoon and in our annual and quarterly filings with the SEC.

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

Savneet Singh: Operator solutions ARPU increased by 15% from the same period last year due to higher value deals, API monetization, price increases, and PAR payment services go live. We expect this trajectory to continue. Churn was 4.8% for the year in 2020 for BRIC.

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

Thanks, Chris and thank you all for joining us on today's call 2023 was a foundational year setting us up for a value creation flywheel. We think takes flight in 'twenty for a couple of years to come.

Savneet Singh: Operator solutions growth is being driven by increased win rates at Brink, and we believe accelerated market acceptance of cloud solutions and a pivot away from legacy providers. This proved out in Q4, as we announced the signing of Burger King, by far our largest Brink and now menu customer, with our products to be rolled out across their 7000 plus stores in North America. This deal validates our Tier 1 enterprise reach and sets us up nicely to win traditional Tier 1 projects with similar scope. From where we sit today, the deal pipeline for Brink is the largest and highest quality we have seen since beginning the PAR turnaround in 2018. While pipeline is just pipeline, we see a real commitment from brands across the country to accelerate their move to the cloud, and we think at the enterprise, PAR is not only the best choice, but the simplest, our ability to integrate deeply into their existing ecosystems and also provide a solution to vendor consolidation, data integrity, and enterprise scale positions us nicely for continued market share growth.

The acceptance of our products by the industry's largest customers in the building blocks are in M&A muscle. We intend to use regularly are now in place I will touch on these ideas later and begin with our results.

For the fourth quarter subscription <unk> grew by 23% with compared to Q4 of 2022.

Growth came across our products and with living without relying on the exciting customer wins, we touched on last quarter is that revenue will begin later this year.

Operator solutions era grew by 45% to $60 2 million in Q4, when compared to the same period last year.

Greater solutions ARPA increased by 15% from the same period last year due to higher valued yield API monetization price increases in par payment services go lives.

We expect this trajectory to continue.

<unk> was four 8% for the year and twice weekly for brink.

Operator. This is growth is being driven by increased win rates at brink and we believe accelerated market acceptance of cloud solutions and a pivot away from legacy providers. This proved out in Q4, as we announced the signing of <unk> by far our largest brink and now menu customer with our products to be rolled out across their 7000 plus stores in North America.

Savneet Singh: We continue to see Brink as the major cross-sell driver for PAR. The POS relationship will open up avenues for all of our other products. Burger King will be a strong revenue driver for PAR over the next two years, when fully implemented, and will deliver upwards of $23 million in annualized subscription revenue. What's even more exciting is that this number barely scratches the surface of the additional modules we hope to sell into Burger King over time. The rollout begins in earnest in Q2 this year, and we expect on our next call to have details on the pace of this rollout as we work closely to align with Burger King on their timing.

Deal validates our tier one enterprise reach and set us up nicely to win traditional tier one projects with similar scope from where we sit today the deal pipeline for <unk> is the largest and highest quality and we have seen since beginning the power turnaround in 2018.

While top line is just pipeline, we see a real commitment from brands across the country to accelerate their move to the cloud and we think at the Enterprise Park not only the best choice, but the simplest.

Savneet Singh: We feel confident executing against burgeoning timelines, and once we have visibility from the customer, we'll report back to the market. While payments is nested within an operator solutions business, this product line has some strong highlights in the quarter. In Q4, we saw ARR from PAR payment services more than double from that in Q4 2022 and expect this growth trajectory to continue. Q4 was seasonally strong, which saw us achieve our highest gross processing volume annual run rate of $2.1 billion.

<unk> integrate deeply into their existing ecosystems and also provides solutions to vendor consolidation data integrity and enterprise scale positions us nicely for continued market share growth.

We continue to see break at the major cross sell driving per part.

S relationship open up avenues for all of our other products.

Burger King will be a strong revenue drivers with car over the next two years and when fully implemented.

Cleveland and will deliver upwards of $23 million of annualized subscription revenue.

Savneet Singh: This growth is being driven by the continued adoption of Parpe from brands such as Pita Pit, Zippy's, and Ono's Hawaiian BBQ to name a few. Brands are increasingly benefiting from operational efficiencies, cost savings, and increased customer engagement by leveraging Parfait across the operator and engagement suite of products. In Q4, our Apple Wallet loyalty solution won silver in the category of most innovative enterprise product of the year from Best in Biz Awards, a distinction that gives us confidence in the aggressive growth plans we have. This, coupled with payment innovations such as pay-at-the-table and SMS text link, ensures that PAR is executing against the mantra of best in class, plus better together. Looking forward, as we natively embed PAR page drive, differentiate, and unique experiences, it's leading to the strongest pipeline we've ever had. Crucially, we are seeing payments uptake on brink, punch, and menu deals, offering us multiple avenues to grow deal value. We anticipate continued positive momentum in customer adoption. Moving to guest engagement AR. Guest engagement AR grew 8.2% in the quarter when compared to Q4 of 22. In total, approximately $64 million.

What's even more exciting as this number barely scratching the surface of the additional modules, we hope to sell into Burger King overtime the.

The rollout begins in earnest in Q2, this year and we.

<unk> on our next call that details on the pace of this rollout as we worked closely to align with Burger King on their timing.

We feel confident in executing <unk> timelines and once we have visibility from the customer we will report back to the market.

While payments is nested within an operator solutions business. This product line has been strong highlights in the quarter in Q4, we saw <unk> from par payment services more than doubled from that in Q4 of 2020 do you expect this growth trajectory to continue.

Q4 was seasonally strong which saw us achieve our highest gross processing volumes annual run rate of $2 1 billion.

This growth is being driven by the continued adoption of parkway from brands such as Pita pit ZIP is an owner with wind barbecue to name a few.

Brands are increasingly benefiting from operational efficiencies cost savings and increased customer engagement by leveraging parfait across the operator, it engaged and suite of products.

In Q4, our Apple wallet loyalty solution, one silver in the category of most innovative enterprise product of the year from best in Biz Awards and distinctions that gives us confidence in the aggressive growth plans we have.

This coupled with payment innovations such as pay at the table and SMS text link ensured that part is executing against the mantra mantra of best in class plus better together.

Savneet Singh: In the quarter, Punch continues with strong execution and business revitalization, evidenced by the wins we recently announced at Bob Evans, Insomniac Cookies, and most recently Pinkberry. These wins don't hit revenue until later in 24, but show how Punch has turned around from the beginning of 23. In total, we signed 12 new logos in Q4 and over 40 in fiscal year 23, continuing to further our position of best in class in market dominance and loyalty in offers.

Looking forward as we natively embed parkway to drive differentiation and unique experiences, it's leading to the strongest pipeline we've ever had.

Crucially, we are seeing payments uptake on brain punched in menu deal offering us multiple avenues to grow deal value. We anticipate continued positive momentum in customer adoption.

Moving to guest engagement.

Guest engagement Arab grew eight 2% in the quarter and when compared to Q4, 'twenty, two and total approximately $54 million in.

In the quarter punch continue with strong execution and business revitalization evidenced by the wins, we've recently announced that Bob Evans Insomnia cookies and most recently Pinkberry. These wins don't hit revenue until later in 'twenty for Michelle how punches turned around from the beginning of 'twenty three.

Savneet Singh: Additionally, major platform investments are beginning to show improvements as the speed, uptime, and general scalability are at all-time highs to match the growth of our customers and focus on the enterprise, who's off the lowest turn quarter all year with less than 0.5% gross turn. We've invested in our platform to better support our customers' business requirements and are proactively adding additional features to increase our adjustable market and ability to raise price and renewal cycles. These investments will also help us potentially digest future acquisitions as we tend to run tightly on one platform. Moreover, as flagged above, Punch has begun to establish itself as a verified cross-sell driver of payments, which we expect to accelerate in 2024. The other important piece of guest engagement is our online ordering engine menu.

In total we signed 12, new logos in Q4 and over 40% to fiscal year 'twenty three.

Turning to further our position a best in class and market dominance and loyalty offers.

Additionally, major platform investments are beginning to show improvements at the speed uptime in general scalability are at all time highest domestic growth of our customers and focus on the enterprise.

It was at the lowest churn quarter, all year with less than <unk>, 5% gross churn.

We're investing in our platform to better support our customers business requirements and are proactively adding additional features to increase our addressable market and ability to raise price in renewal cycles. The.

Investors will also help us potentially digest future acquisitions, as we tend to run tightly on one platform.

Moreover, as flagged above punches begin to establish <unk> as a verified cross sell driver payments, which we expect to accelerate in 'twenty four.

Savneet Singh: As we have discussed, domestic menu revenue will begin in Q1 and will continue to grow throughout 24. Two weeks ago, we celebrated the launch of the first full menu solution at BFO Brady's, a chain of nearly 200 stores. What makes this win even more exciting is that Befoe Grady's is a win back for Punch as this customer turned from Punch years ago, again, highlighting the power of unified ordering loyalty.

The other important piece of guest engagement is our online ordering engine menu as we have discussed domestic menu revenue will begin in Q1 and will continue to grow throughout 'twenty four two.

Two weeks ago, we saw with the launch of the full the first full menu solution at <unk> achieved nearly 200 stores what makes us win even more exciting is that <unk> is a win back for clients as this customer churn for a bunch of years ago again housing the parent of unified ordering loyalty this quarter, we'll announce a rollout plan.

Savneet Singh: This quarter, we'll announce the rollout plan. This quarter, excuse me, we have an aggressive rollout plan with several customers, including an 800 store chain. Further, the new customer pipeline for 24 will drive additional logo signing. We spent the majority of 2023 investing in converting menu into a product that we can scale in the United States and are seeing this work validated. Menu highlights our attempts to build a platform out of our products. PartPay is built into almost every menu deal, and I believe almost every single menu customer signing is a punch-or-brink customer.

This quarter excuse me, we have an aggressive rollout plan with several customers, including 800 store chain.

Further the new customer pipeline for 'twenty four it will drive additional logo signings. We spent the majority of 'twenty three investing in converting menu into a product that we can scale in the United States and are seeing this were validated menu.

Menu highlights our attempts to build the platform out of our products heart based built into almost every menu deal and I believe almost every single menu customer signing is a punch our brink customer division of attaching menu and selling it into existing Carla. This is still in the early phases, but starting to become a reality as the majority of customers today are a customer of another product. This creates a roadmap for future acquisitions.

Savneet Singh: The vision of attaching menu and selling it into existing PAR logos is still in the early phases, but starting to become a reality, as the majority of customers today are a customer of another PAR product. This creates a roadmap for future acquisitions. Backoffice and Data Central again delivered a solid quarter, reported ARR of $13 million in Q3, with a 19% increase from last year's Q4. We have now more than 7,700 stores active, and in the quarter signed two additional new concepts, along with a large franchise via Burger King.

Back office and data Central again delivered a solid quarter reported <unk> $13 million in Q3 was a 19% increase from last year's Q4, we have now more than 7700 stores active and ended the quarter signed two additional new concepts along the large franchisee of Burger King.

Savneet Singh: Our pool increased more than 8% from last year's Q4, and we're seeing an accelerated pipeline as we closer attach Data Central with Brink Sales. The plan for 24 is to work to aggressively to bundle data central payments within Brink and create a closer go to market motion. For instance, there are obvious advantages to supplanting Brink reporting with the more powerful data central reporting.

ARPA increased more than 8% from last year's Q4, and we're seeing an accelerated pipeline it would be closer attached data central with <unk> sales.

The plan for 'twenty for it to work to aggressively to bundled data center on payments within brink and creative closer go to market motion for instance, there are obvious advantages disappointing threep reporting with a more powerful data central reporting. This serves as both the gateway to the wider datacenter product as well as an immediate revenue stream will be moving data center revenues within operator stations in coming quarters.

Savneet Singh: This serves as both the gateway to the wider data central product as well as an immediate revenue stream. We'll be moving data central revenues within operator solutions in coming quarters to simplify reporting as well. We think the connection between data central and Brink will accelerate the data central pipeline and win rates while allowing us to rationalize sales specific resources. Touch on expenses.

Simplify our reporting as well we think the connection between data Central Bank will accelerate to datacenter pipeline inland rates, while allowing us to rationalize sales specific resources.

Just on expenses I feel confident in our expense controls as we continue not to grow our R&D expense outside of editions for Burger King, which we believe is very high Rois spin I think for 'twenty four we're able to grow opex single digits, continuing to show operating leverage while maintaining revenue and margin growth as that message will have a couple of quarters of growth and prepare for a big rollout, but overall there.

Savneet Singh: I feel confident in our expense controls as we continue not to grow our R&D expense outside of additions for Burger King, which we believe is very high ROI spend. I think for 2024, we'll be able to grow OPEX to single digits, continuing to show operative leverage, while maintaining revenue and margin growth. As I've messaged, we'll have a couple quarters of growth to prepare for our big rollout, but overall, the rest of the business is still running with a fixed set of resources and delivering on long-term growth. Our headwind in cost is almost exclusively within our menu business unit, which shows the majority of our loss in fiscal year 23, hiding that Brink, Punch, and Data Central grew their revenue with almost no net new headcount. In 24, we will not have this headwind as menu revenue finally hits, and we have worked to aggressively reduce headcount this quarter. My confidence in our commitment to moving to the Rule 40 is that we have absorbed the cost of menu and Burger King in advance of the revenue impact. That will reverse in 2024.

Rest of the business is still running over the fixed that resources in delivering our long term growth our.

Our headwind in cost is almost exclusively within our menu business unit, which drove the majority of our loss in fiscal year 'twenty three hiding that bring punched in data central group their revenue with almost no net new head counts in.

In 'twenty four we will not have this headwind as menu revenue finally hits and we have worked to aggressively reduce head count this quarter.

My confidence and our commitment to moving to the rule of 40 is that we have absorbed the cost of menu and Burger King in advance of the revenue impact that will reverse in 2024. This gives me great confidence that there's more to squeeze when our expense base without risking growth, making the setup for 24 excited.

Bryan A. Menar: This gives me great confidence that there is more to squeeze from our expense base without risking our growth, making the setup for 2024 exciting. Bryan will now read the numbers and I'll come back at the end with some concluding messages. Bryan?

Brian will now be the numbers and I'll come back at the end with some concluding messages Brian.

Bryan A. Menar: Thank you, Savneet, and good morning, everyone. Total revenues were $107.7 million for the three months ended December 31, 2023, an increase of 10.3% compared to the three months ended December 31, 2022. With growth coming from subscription service and contract revenue, partially offset by hardware and professional service revenue. Net loss for the fourth quarter of 2023 was $18.6 million, or $0.67 loss per share, compared to a net loss of $13.5 million, or $0.50 loss per share reported for the same period in 2022.

Thank you Stephanie and good morning, everyone.

Total revenues were $107 7 million for the three months ended December 31, 2023 and.

An increase of 10, 3% compared to three months ended December 31 2022.

With growth coming from subscription service and contract revenue, partially offset by hardware and professional service revenue.

Net loss for the fourth quarter of 2023 was $18 6 million or 67 loss per share compared to a net loss of $13 5 million or 50 cent loss per share reported for the same period in 2022.

Bryan A. Menar: Adjusted net loss for the fourth quarter of 2023 was $9.3 million, or $0.33 loss per share, compared to an adjusted net loss of $7 million, or $0.26 loss per share for the same period in 2022. Adjusted EBITDA for the fourth quarter of 2023 was a loss of $4.5 million compared to adjusted EBITDA loss of $2.8 million for the same period in 2022, driven by reduction in professional service margin and increased R&D investments in advance of our large customer ramp, harshly offset by increased margin contribution from subscription services. Now for more details on revenue. Hardware revenue in the quarter was $24.4 million, a decrease of $5.2 million or 17.5% from the $29.6 million reported in the prior year.

Adjusted net loss for the fourth quarter of 2023 was $9 3 million or 33% loss per share compared to an adjusted net loss of $7 million or 26 net loss per share for the same period in 2022.

Adjusted EBITDA for the fourth quarter of 2023 was a loss of $4 5 million compared to an adjusted EBITDA loss of $2 8 million for the same period in 2022 driven.

Driven by a reduction in professional service margin and increased R&D investments and Vance of a large customer ramp.

Partially offset by increased margin contribution from subscription services.

Now for more details on revenue.

Hardware revenue in the quarter was $24 4 million a decrease of $5 2 million or 17, 5% from the $29 6 million reported in the prior year.

Bryan A. Menar: Q4 2022 was an historically strong quarter, hard work quarter for us to last. We continue to be optimistic of our hardware business as we launch new products to address the demands from legacy hardware customers, as well as attached hardware sales within our expanding software customer base. Subscription services revenue was reported at $32.9 million, an increase of $5 million, or 18% from the $27.9 million reported in the prior year.

Q4, 2022 was a historically strong quarter over quarter for us to lap.

We continue to be optimistic of our hardware business as we launched new products to address the demands from legacy hardware customers as well as attached hardware sales within our expanding software customer base.

Subscription and services revenue was reported at $32 9 million, an increase of $5 million or 18% from the $27 9 million reported in the prior year.

Bryan A. Menar: The increase was primarily driven by increased assistance services revenue from our operator solutions business of $3.9 million, driven by a 19% increase in active sites and a 15% increase in average revenue per site. Residual increases driven by increased subsistence services revenue of $0.6 million from our guest engagement business. The annual recurring revenue exiting the quarter was $137 million, an increase of 23% from last year's Q4, with operator solutions up 45%, guest engagement up 8%, and back office up 19%. Professional services revenue was reported at $12.6 million, a decrease of $0.9 million, or 6.5% from the $13.5 million reported in the prior year.

The increase was primarily driven by increased subscription services revenue from our operator solutions business of $3 9 million driven by a 19% increase in active sites and a 15% increase in average revenue per site.

The residual increase was driven by increased subscription services revenue of $1 6 million from our guest engagement business.

The annual recurring revenue exiting the quarter was $137 million, an increase of 23% from last year's Q4, with operator solutions up 45%.

Guests engagement up 8% and back office up 19%.

Professional services revenue was reported at $12 6 million a decrease of <unk> 9 million or six 5% from $13 5 million reported in the prior year.

Bryan A. Menar: $7.5 million of the professional services revenue in the quarter consisted of recurring revenue primarily from our hardware support contract. Contract revenue from our government business was $37.8 million, an increase of $11.1 million, or 41.7% from the $26.7 million reported in the fourth quarter of 2022. The increase in contract revenue was driven by an $11.8 million increase in government ISR solutions product lines, increase was substantially driven by continued growth of counter-EUAS task orders. Contract backlog associated with a government business continues to be strong and appropriately funded. As of December 2023, backlog was $326 million, a decrease of 2%, compared to $333.9 million as of December 2022. Total funded backlog as of December 2023 was $73.2 million. Now turn it to Marge.

$7 5 million of the professional services revenue in the quarter consisted of recurring revenue primarily from our hardware support contracts.

Contract revenue from our government business was $37 8 million, an increase of $11 1 million or 41, 7% from the $26 7 million reported in the fourth quarter of 2022.

The increase in contract revenue was driven by $11 8 million increase in government ISR solutions product line the.

The increase was substantially driven by continued growth of counter UAS task orders.

Contract backlog associated with our government business continues to be strong and appropriately funded.

As of December 2023 backlog was $326 million, a decrease of 2% compared to $333 9 million as of December 2022.

Total funded backlog as of December 2023 was $73 2 million.

Now turning to margins.

Bryan A. Menar: Hardware margin for the quarter was 29% versus 23.8% in Q4 2022. The improvement in margin year over year was substantially driven by improved inventory management and price increases. Our focus of demonstrating value for our price with improved operational efficiency has allowed us to improve hardware margins in the second half of the year and finish 2023 with full year hardware margins of 22 percent. Subscription services margin for the quarter was 48.1% compared to 53.1% reported in the fourth quarter of 2022. The decrease in margin is driven by absorbing the initial investment into the Burger King rollout, while also absorbing the initial growth of menu and PAR payment services, which are both early stage products, excluding the amortization of intangible assets, total adjusted subscription services margin for the three months ended December 31st was 65% compared to 72% in the fourth quarter of 2022. Professional services margin for the quarter was 10.4% compared to 23.3% reported in the fourth quarter of 2022. The decrease in margin was driven by decreases in margins from implementation services and hardware service repair.

Hardware margin for the quarter was 29% versus 23, 8% in Q4 2022.

The improvement in margin year over year was substantially driven by improved inventory management and price increases.

Our focus of demonstrating value for a price with improved operational efficiency has allowed us to improve our margins in the second half of the year and finished 2023 with full year hardware margins of 22%.

Subscription services margin for the quarter was 48, 1% compared to 53, 1% reported in the fourth quarter of 2022.

The decrease in margin is driven by absorbing the initial investment into the Burger King rollout, while also absorbing the initial growth of menu and par payment services, which are both early stage products.

Excluding the amortization of intangible assets total adjusted subscription services margin for the three months ended December 31 was.

With 65% compared to 72% in the fourth quarter of 2022.

Professional services margin for the quarter was 10, 4% compared to 23, 3% recorded in the fourth quarter of 2022.

The decrease in margin was driven by decreases in margins from implementation services and hardware service repair, we expect professional services margins to transition back to the mid teens for 2024.

Bryan A. Menar: We expect professional services margins to transition back to the mid-teens for 2024. Government contract margins were 5.8% as compared to 4.3% for the Q4 2022, team continues to manage direct labor to properly support task orders and improve margins, in regards to operating expenses. Gap sales and marketing was $9.3 million, an increase of 0.3 million from the $9.2 million reported for Q4 2022.

Government contract margins were five 8% as compared to 44, 3% for the Q4 2022.

Team continues to manage direct labor to properly support task orders and improve margins.

In regards to operating expenses.

GAAP sales and marketing was $9 3 million an increase of <unk> 3 million from the $9 2 million reported for Q4 2022.

Bryan A. Menar: Gap GNA was $18.6 million, an increase of $1.9 million from the $16.7 million reported in Q4 2022. The increase was driven by an increase in M&A due diligence, as well as higher stock-based compensation. Net R&D was $14.5 million, a decrease of $0.4 million from the $14.9 million recorded in Q4 2022, non-GAAP R&D increased 1.3 million or 9% driven by investments in our larger customer rollout. Total non-GAAP operating expense was $37.5 million, an increase of $2.4 million or 7% versus Q4 2022, primarily driven by R&D expenses as we continue to invest responsibly in our large enterprise customer rollout that Savneet discussed earlier. Net interest expense was $1.89, to pitch $1.8 million recorded in Q4 2022, now to provide information on the company's cash flow and balance sheet position.

GAAP G&A was $18 6 million, an increase of $1 9 million from the $16 7 million reported in Q4 2022.

The increase was driven by an increase in M&A due diligence as well as higher stock based compensation.

Net R&D was $14 5 million a decrease of <unk> 4 million from $14 9 million recorded in Q4 2022.

non-GAAP R&D increased $1 3 million or 9% driven by investments in our larger customer rollout.

Total non-GAAP operating expense was $37 5 million, an increase of $2 4 million or 7% versus Q4 2022.

Primarily driven by R&D expenses as we continue to invest responsibly in our large enterprise customer rollout that said meet discussed earlier.

Net interest expense was $1 8 million.

<unk> to $1 8 million recorded in Q4 2022.

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

Bryan A. Menar: For the year ended December 31st, cash used in operating activities was $17.1 million versus $43.1 million for the prior year. The reduction in cash burn compared to the prior year was due to the management of net working capital, primarily resulting from improved inventory management. Cash used in investing activities was $7.8 million for the year ended December 31st, versus $66.7 million for the prior year. Investing activities during the year ended December 31, 2023 included $1.9 million of cash consideration for a payments token acquisition for the rights to merchant payment commissions from one of our restaurant tech partners, capital expenditures of $5.8 million for internal use software and $5.3 million for developed technology costs associated with a restaurant retail software platform, partially offset by $5 million of proceeds from net sales of short-term health, maturity, security. Cash used in financing activities was $1.6 million for the year ended December 31st, compared to $2.6 million for the prior year.

For the year ended December 31st cash used in operating activities was $17 1 million versus $43 1 million for the prior year the.

The reduction in cash burn compared to the prior year was due to management of net working capital, primarily resulting from improved inventory management.

Cash used in investing activities was $7 8 million for the year ended December 31.

Versus $66 7 million for the prior year.

Investing activities during the year ended December 31, 2023 included $1 9 million of cash consideration for our payments tuck in acquisition for the rights to merchant payment commissions from one of our restaurant Tech partners.

Capital expenditures of $5 8 million for internal use software.

$5 3 million for develop technology costs associated with our restaurant retail software platforms.

Partially offset by $5 million of proceeds from net sales of short term held to maturity securities.

Cash used in financing activities was $1 6 million for the year ended December 31, compared to $2 6 million for the prior year.

Bryan A. Menar: Financing activities for 2023 was driven by stock-based compensation-related transactions. Day sales outstanding for the restaurant and retail segment increased from 53 days as of December 31st, 2022 to 57 days as of December 31st, 2023. We expect DSO levels to remain near historical levels of the lower 50 day range. Day sales outstanding for the government segment decreased from 55 days as of December 31st, 2022 to 51 days as of December 31st, 2023.

Financing activities for 2023 was driven by stock based compensation related transactions.

Days sales outstanding for the restaurant and retail segment increased from 53 days as of December 31, 2022.

<unk> 57 days as of December 31, 2023.

We expect DSO levels to remain near historical levels of the lower 50 day range.

Days sales outstanding for the government segment decreased from 55 days as of December 31, 2022 to 51 days as of December 31 2023.

Savneet Singh: I will now turn the call back over to Savneet for closing remarks prior to moving to Q&A. Thanks, Bryan. Let me wrap with a few key messages. What's clear to me is that as we bring our products closer together, our ability to cross sell is increasing. The tight integration with MENU, as an example, has led to 70% of MENU deals, including PARPAY. While even more interesting, every MENU deal has come from an existing Punch or Brink customer. Historically, words like consolidation and bundling have had negative connotations, and I think for the right reasons. Prior attempts to consolidate were not done around industry leading products.

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

Thanks, Brian Let me wrap with a few key messages.

It's clear to me is that as we bring our products closer together our ability to cross sell is increasing.

The tight integration with menu as an example has led to 70% of menu deals, including par pay while even more interesting every menu deal has come from legacy <unk> customer.

Historically worried like consolidation and bundling has had negative connotation and I think for the right reasons.

Prior attempts to consolidate we're not done around industry, leading products that requires customers to trade out functionality for simplicity.

Savneet Singh: It requires customers to trade off functionality for simplicity. This is explicitly what we're not doing at PAR. Our products must stand on their own, be best in class when integrated and unified. And when unified, deliver surprise and delight. As the years move on, I think we'll see a standardization around a platform that will then allow development to come on top of that system of record, hopefully increasing innovation and true technical outcomes. As mentioned in the opening, we think the shareholder value creation flywheel is in motion. I believe the flywheel starts with land and expand with the car platform within our current category, followed by the cross-sell of additional products, and then followed by the addition of a creative M&A to bolster our platform capabilities and expand our TAM. Each new product and acquisition allows us to drive higher returns on capital because we can leverage our existing go-to-market infrastructure. Yeah, in addition to punch and menu, we're table setting.

This is explicitly what we're not doing apart our products in a standalone be best in class fully integrated and unified.

In one unified deliver surprise and delight.

As everyone I think we'll see a standardization around a platform that will then allow development that come on top of that system of record hopefully increasing inflation into technical outcome.

As mentioned in the opening we think the shareholder value creation flywheel of the notion I believe the final starts with land and expand with required platform within our current category.

Followed by the cross sell of additional products and then followed by the addition of accretive M&A to bolster our platform capabilities and expand our Tam.

Each new product and acquisition the acquisition allows us to drive higher returns on capital because we can leverage our existing go to market infrastructure.

Yes, Theres no pension menu were table setting now we're ready to get the machine a notion as we scale allows us to invest more integration and thereby continue to have best in class products starting to fly will all over again.

Savneet Singh: Now we're ready to get the machine in motion. As we scale, it allows us to invest in more integration and thereby continue to have best-in-class products starting the flywheel all over again. 2023 is where we saw real evidence of the first step in this flywheel, landing our platform into the enterprise. Designing a birdcage as a brain customer, followed by our second step of leveraging a seamless integration with menu was a good example of the flywheel in motion.

'twenty 'twenty periods, where we saw real evidence of the first step in the flywheel landing our platform into the enterprise.

Assigning a burger King brand customer followed by a second step of leveraging our seamless integration with menu with a good example of the flywheel in nursing.

Savneet Singh: The next part of this flywheel is a creative and cash flowing M&A. Through the backup of 2023, we ramped up our corporate development efforts and believe we will be able to deliver a creative and cash-generating M&A in short order. As the market continues to move towards platform-like solutions, individual point solutions must partner up with platforms like PAR.

The next part of the flywheel is accretive and cash flow in M&A.

Through the back half of 2023, we ramped up our corporate development efforts and believe we will be able to deliver accretive in <unk> cash generating M&A in short order.

As the market continued to move move towards the platform Mike towards platform solutions individual point solutions, Ms partnering up with platforms like part two.

Savneet Singh: Today, the market realizes the value is in the platform, not the standalone solution, creating a strong dispersion acquisition multiples. Some of these targets we feel are great fits for PAR, and hence our ramped up efforts here. What I like most about these deals is that they are all cash flowing businesses with tremendous real estate to part, either addressing product goals or allowing us to leverage our existing cost base. A ramp-up in M&A infrastructure should lead to results in the near future, thereby accelerating our flywheel. And then finally, I should comment that working at PAR has never felt more like day one.

Today, the market realized with the value within the platform not the Standalone vision, creating a strong dispersion acquisition multiples. Some of these targets, we feel a great fit for par and hence our ramped up efforts here.

What I like most about these deals.

They are all cash flow basis cash flowing businesses with tremendous real thin REIT, apart, either addressing protocols or allowing us to leverage our existing cost base.

Our ramp up in M&A infrastructure should lead to result in the near future, thereby accelerating our flywheel.

And then finally I should comment that working at par has never felt more like day, one today from what I see in front of me the restaurant market is adapting our products at a faster rate than ever.

Savneet Singh: Today, from what I see in front of me, the restaurant market is adopting our products at a faster rate than ever. I think we can not only execute on an aggressive organic growth plan, but also put into motion the acquisition machine we once dreamed about. Our team has built an equally important structure to execute to ensure we don't drop the ball on our plan while allowing us to balance the short term with the long term.

We cannot only execute on an aggressive organic growth plan, but also put into motion the acquisition machine, we once dreamed it out.

Our team has built an equally important structure to execute to ensure we don't drop the ball on our plan, while allowing us to balance the short term with the long term.

Savneet Singh: The excitement internally is palpable, and we think our success will only be limited by our ambitions. What I like about our setup today is that I think we continue growing at our current rates with our existing core business, improve our margins as our emerging low margin products scale, and continue to run the business on a closely managed OPEX. As I mentioned earlier, our core products of Brink, Punch, Payments, and Data Central have run a near flat headcount in 2023, and the headwinds on Menu and Burricking Investments should reverse in 2024. Said differently, our revenue should continue to grow while our product-duty economics get better with scale and our G&A costs stay tight as revenue absorbs the costs we've taken the hit on in 23. Any additional M&A would then drive meaningful cash flow to the bottom line, which is why this foundation is so important.

The excitement internally is palpable and we think our success will only be limited by our ambition.

Like about our setup today, because I think we continue growing at our current rates with our existing core business improve our margins as our emerging low margin products scale and continue to run the business on a closely manage opex space.

As I mentioned earlier, our core products that break punch payments and data central have run a near flat head count in 'twenty, three and the headwinds on menu and Burger King investments should reverse in 'twenty four.

Said differently, our revenue should continue to grow while our product unit economics get better with scale and our G&A cost stay tight as revenue absorbed the costs, we've taken the hit on in 'twenty three.

Any additional M&A will then drive meaningful cash flow to the bottom line, which is why this foundation is still important.

Operator: Outside of our incremental hiring for Burger King, there are almost no new hires needed to hit our growth plans, and we feel confident that the efficiency of this org design will only get better as we continue to consolidate our teams. Today, we are still a relatively small business with less than $150 million of AR, but we believe we have the foundation to do much more, and the team is excited to execute on it. With that, I'll open the call for Q&A. Operator?

Outside of our incremental hiring for Burger King there are almost no new hires needed to hit our growth plan and we feel confident that the efficiency of its or design will only get better as we continue to consolidate our team today, we are still relatively small business with less than $150 million of error, but we believe we have the foundation to do much more and the team is excited to execute on them with that I'll open the call for Q&A.

Operator.

Operator: Thank you. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again.

Thank you as a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one one again.

Mayank Tandon: Our first question comes from the line of Mayank Tandon from Needham. Thank you. Good morning.

Our first question comes from the line of my Yang Tandon from Needham.

Thank you good morning, Savi is great to see all of these new logo wins.

Savneet Singh: Savneet, great to see all these new LogoWins, outside of BK as well in the last several months. I wanted to start with, I know you're not giving formal guidance, but just based on your comments, I wanted to get a sense of your expectations for ARR growth. Can you sustain the current levels in 24, or should we expect some acceleration given you've had these new wins, most notably, as you mentioned, Bob Evans, Hooters, et cetera. So just want to get a sense of your expectations for 2024. Yeah, I think we feel confident we'll maintain and potentially grow a lot of it depending on as we get the Burger King rollout going, the sequencing of that rollout. We don't have that today.

Outside of BK as well in the last several months I wanted to start with I know you.

Not giving formal guidance, but just based on your comments I wanted to get a sense of your expectations for <unk> growth can you sustain the current levels in 'twenty four or should we expect some acceleration given you've had these new wins.

<unk> as you mentioned, Bob Evans orders et cetera. So just wanted to get a sense of your expectations for 2024.

Yes, I think we felt confident we will maintain and potentially grow a lot of it depending on as we get the <unk> rollout going the sequencing of that rollout, we don't have that today, but even without that it assuming conservative numbers. There I think we feel really good about the growth maintaining and growing.

Savneet Singh: But even without that, and assuming conservative numbers there, I think we feel really good about the growth maintaining and growing. And, you know, I think we'll do a great job on that rollout. And so I think there's opportunity for it to get even better. But, you know, once we get that data, we'll report back to the market, because obviously, it'll be very, very influential for us. But, you know, I think we feel very good about it. And I think we've got more wins to come that we'll announce.

And I think we'll do a great job on that rollout and so I think there is opportunity for it to get even better.

But once we get that data, we'll report back to the market because obviously it will be very very influential for us.

But I think we feel very good about it and I think we've got more wins to come.

Savneet Singh: And so, you know, we've had a lot of these announced wins, but none of the revenue for that yet. And so I think, you know, what's exciting is the growth we've had in 23, you know, didn't come from any of the logos we've announced, you know, the last three, six months. Well, let me just ask you this way.

We will announce and so we've had a lot of these announced wins, but none of the revenue for that yet and so I think what's exciting is the growth we've had in 'twenty three.

Income from any logos, we've announced in the last three six months.

Let me just ask you this way I think in the past you have said you can grow IRR between 20, and 40% is that still the target model for the company and on that note <unk> subscription revenue for all the <unk> growth trajectory is that a pretty good correlation the way to think about it.

Savneet Singh: I think in the past, you've said you can grow ARR between 20 and 30%. Is that still the target model for the company? And on that note, should subscription revenue follow the ARR growth trajectory? Is that a pretty good correlation, the way to think about it? Yes, I think that's a good way.

Yes, I think Thats, a good way and then as I said once we get the timing of <unk> I can come back and say do we think there'll be 30 or 25, I think we just need the details of that which we don't yet have.

Savneet Singh: And then, as I said, once we get the timing of birking, I can come back and say, do we think it'll be 30 or 25? You know, I think we just need the details of that, which we don't yet have. Got it.

Savneet Singh: And then just as a quick follow up, in terms of the leverage in the model, great commentary around that. So just based on what you said, is it reasonable to then think that you could potentially reach EBITDA profitability at some point in 2024? Or given some of your comments, is it going to be maybe in 2025, given the timing of some of these sort of leverage points in your model? You know, it'll all be dependent on Burger King because we've ramped up cost meaningfully to support that launch, you know, both in menu and in and in Brink, you know, you know, can we get there by the end of the year? I think so, unless Burger King decides to not roll out a small, you know, do all the roll out in 25, which is extremely unlikely.

Got it and then just as a quick follow up in terms of the leverage in our model great commentary around that so just based on what you said is it reasonable to then take that you could potentially reach EBITDA profitability at some point in 2024 or given some of your comment is it going to be maybe in 2025, given the timing of some of these.

Sort of leverage points in your model.

It will all be dependent on <unk>, because we've ramped up costs meaningfully to support that launch.

The menu and then and then.

Great.

Can we get there by end of year, I think so and less working decides that not rollout.

The rollout in 25, which is extremely unlikely.

Savneet Singh: And so we feel really excited. And then I think, you know, the, the, the exciting part I tried to mention on the call, which is we've absorbed so much cost from menu is the vast majority of our loss in 23. That revenue itself is coming live. You know, today, we just took live another large customer. And so I think there's a lot of optimism on the bottom line, because we've been taking the hits on cost to get the rollout built out for both of these chains, both these products, which will reverse in 24, but short answer is, I'm going to give guidance, I think, on the next quarter, once I have details on Burger King and kind of got you exactly where I think we'll be. But that has such, you know, that changes the model tremendously. Very helpful. Thank you so much.

So we feel really excited and then I think.

The exciting product to Teddy mentioned the call, which is we've absorbed so much cost from in menu was the vast majority of our loss in 'twenty three that revenue itself is coming alive.

Hey, we just slight decline another large customer and so I think there's a lot of optimism on the bottom line because we've been taking the hits on cost to get the rollout built out for both of these chains.

Both of these products, which will reverse in 'twenty four but Tony says I'm going to give guidance I think in the next quarter. Once I have detailed on Burger King and kind of got you to exactly where I think it will be.

But that as such.

That changed the model tremendously.

Got it very helpful. Thank you so much.

Thank you one moment far next question.

Our next question comes from the line of Stephen Sheldon from William Blair.

Okay.

Hey, good morning, lobster dig into here as always.

On Burger King.

As we think about that what are some of the key milestones that we externally should be thinking about for that implementation.

Mayank Tandon: Thank you. One moment for our next question. Our next question comes from the line of Stephen Sheldon from William Blair. Hey, good morning.

They are still quite a few moving pieces and then.

Stephen Hardy Sheldon: Lots to dig into here as always. Just on Burger King, is we think about that. What are some of the key milestones we externally should be thinking about for that implementation? Kind of like there's still quite a few moving pieces and then, What are the biggest risks to that process in your view that you're concerned about? And I guess asking that another way, what do you absolutely need to get right?

What are the biggest risks to that process and your view that you are concerned about and I guess asking that in another way what are you absolutely need to get right as we think about this implementation.

So it is everything's on track.

Better than expected on the far side, though we feel great about it and there's no concern.

To me, it's the only thing you are tracking towards that goal.

It's pretty simple and so we haven't started the rollout.

Operator: Thank you for listening. We'll be right back. Thank you. So everything's on track, you know, I would say going better than expected on the far side. So we feel great about it.

A lot of it is we will see when we go live but we feel really good.

A couple of hundred stores now as sort of test they're going great.

And so to me. It's just the store has gone live and like I said I think we can.

Savneet Singh: So no concern. You know, to me, it's the only thing you're tracking is the stores that go live. It's pretty simple.

Feel really good it's a two year rollout so it's going to be very very quickly. It's just going to be about how much is in 'twenty four for sandwiches and 25, and we don't have those details yet.

Savneet Singh: And so, you know, we haven't started the rollouts, which is, you know, so a lot of it is, we'll see when we go live, but we feel really, really good. You know, we're in a couple hundred stores now as sort of tests, they're going great. And so to me, it's just the stores going live. And like I said, I think we feel really, really good.

But just like any other large organization I think.

They understand that we don't want to do everything back in because it will put a lot of stress and everybody, but until we have that I think we're going to sort of be.

Be conservative til investment.

The metric in fact this is how many stores go lives because that's the only metric that matters.

Got it.

And I guess related for operator solutions unit had a really good bookings quarter, there I think 3400.

Savneet Singh: It's a two year rollout. So it's going to be very, very quickly. It's just going to be about how much is in 24 versus how much is in 25. And we don't have those details yet.

Net new site bookings there is.

Burger King in that at all I guess is that the majority of it did you have a lot of good booking activity there outside of Burger King just any detail on how much of a new sector for the FERC versus others.

Savneet Singh: But, you know, just like any other large organization, I think they understand that, you know, we don't want to do everything back in because it'll put a lot of stress on everybody. But until we have that, I think we're going to sort of, you know, be conservative till then. But the metric to track is just how many stores go live because that's the only metric that matters. Got it.

A burger king almost none of it like maybe 100 or 100 per day I mean, it's all other logos.

Okay. That's.

Great and then I guess sticking with operator solutions just one more.

The step up in a proactive side it seems like that was up.

7% to 8% sequentially.

Just curious if you give some more detail on the moving pieces. There I guess the payments adoption is a big part of that but any notable benefit from pricing uplifts or just anything else you can call out.

Savneet Singh: And I guess we're late for operator solutions. You know, you had a really good bookings quarter there, I think 3,400, net new site bookings there. Is Burger King in that at all?

It's a 50 50 payments and price uplift and youre going to that's going to continue.

This is the exciting part of the model.

Savneet Singh: I guess, is that the majority of it? Did you have a lot of good booking activity there outside of Burger King? Is there any detail on how much of the new site bookings with Burger King versus others? Burger King is almost none of it, like maybe 100 or 150. I mean, it's all other logos.

The size of the deals were in are much larger than before and also higher <unk>.

That's going to continue so we feel really good about the pricing of Brent break as the premium product is getting rewarded for the premium product and deals and that will continue but I'd say, it's right now it's about 50 50 call. It modules modules being primarily payments, but also API amortization and other happy pure price increase.

Savneet Singh: Wow, okay. Great. And then, I guess, sticking with Operator Solutions, just one more.

Savneet Singh: The step up in ARR for active site, seems like that was up. 7-8% sequentially. I'm curious if you can give us some more detail on the moving pieces there, you know, I guess the payments adoption is a big part of that, but any notable benefit from pricing uplift or just anything else you can call out? It's about 50-50 payments and price uplift, and that's going to continue. You know, this is an exciting part of the model.

Hi, Tahira. Thank you.

Thank you one moment far next question.

Our next question comes from the line of Eric Martin Newsy from Lake Street capital markets.

Yes, I wanted to dive in a little bit more on the transaction due diligence at $2 3 million dollar number.

Savneet Singh: The size of the deals we're in are much larger than before, and also a higher ARPU. And so that's going to continue, so we feel really good about the pricing. Brink's premium product is getting rewarded for the premium product and deals, and that will continue. But I'd say right now it's about 50-50 call it modules, modules being primarily payments, but also API monetization, and the other half being true price increases, to hear. Thank you. Thank you.

For your M&A work and just curious to know obviously you are talking about some point solutions that you could tuck into your platform, but are these pointed in any particular direction as far as engaged versus operator solutions versus back office.

So obviously, we have been from numbers, it's clear we're deep in an M&A process and Thats why we disclosed it because it's a meaningful amount as far as where that M&A is happening.

Stephen Hardy Sheldon: One moment for our next question. Our next question comes in the line of Eric Martz. Agency from Lake Street Capital Markets.

I would say.

Within that.

Guest engagement and in operations, where we have most of the deals.

Guest engagement, we're seeing.

Eric Martz: Yeah, I wanted to dive in a little bit more on the transaction due diligence that $2.3 million number caught my eye for your your M&A work. And just curious to know, obviously, you're talking about some point solutions that you can tuck into your platform. But are these pointed in any particular direction as far as engage versus operator solutions versus back office? So, you know, obviously we've been, you know, from numbers, it's clear we're deep in the M&A process, and that's why we disclosed it, because it's a meaningful amount. As far as where that M&A is happening, it's, you know, I'd say, within, you know, guest engagement and operations where we have most of the deals, you know, guest engagements where we're seeing the most activity right now.

The most activity right now, but M&A is opportunistic at times and so we'll see yourself picks up but that.

The deal flows is the highest but what I think is exciting today is the strategic fit both from a price perspective, and a product perspective is great which is why we ramped up cost sell mattresses, we're pushing hard to get these done.

And you did say that those were cash positive targets or the kind of post acquisition there would be.

No. These are all very profitable.

I think every company look at is at rule of 40 independent and so part of it will be better.

And if they're not really for a closer look where we can take a total of 40. So we're really focused on that.

And I don't think you'll ever see us buy something thats money, losing we made these investments menu, which has obviously been a headwind to the cost but.

Eric Martz: But, you know, M&A is opportunistic at times, and so we'll see where stuff picks up. But the deal flow is the highest, but what I think is exciting today is the strategic fit, both from a price perspective and a product perspective, is great, which is why we ramped up costs so much, which is we're pushing hard to get these done. And you did say that those were cash positive targets or the kind of post acquisition they were? No, these are all very profitable. I think every company we look at is at Rule of 40 independent, and so at PAR, it'll be better. And if they're not Rule of 40, they're close to Rule of 40, we can take it to Rule of 40.

Once we have the platform, which we have a platform now everything on top of it is.

The cash generating and create a flywheel that I mentioned.

Got it thanks for taking my question.

Thank you one moment far next question.

Our next question comes from the line of George Sutton from Craig Hallum.

Hi, Good morning, this is Adam on for George.

On the last earnings call you mentioned that there are three additional large two of our brands.

But we're taking a pretty meaningful look at Brent just curious if you had an update on those specific potential customers.

So I can't comment until we've announced press release, but I would say the number is now more than three that the pipeline has really gotten far bigger than anything we've seen in the past.

Savneet Singh: So we're really focused on that. And I don't suspect you'll ever see us buy something that's money losing. We made these investments, Menu, which has obviously been a headwind to the cost. But once we have the platform, which we have the platform now, everything on top of it needs to be cash generating and create the flight load that I mentioned. Got it.

I think we've got.

We see three logos that are sort of what we call near term within our funnel and then another.

Before that are sort of medium term so that the funnel is large in Israel and one thing in particular this is on the Pls side Pls funnels.

Eric Martz: Thanks for taking my question. Thank you. One moment for our next question. Our next question comes from the line of George Sutton from Craig Halla. Hey, good morning. This is Adam on for George.

Rfps are really robust processes for the customer we work with generally they are hiring a consultant it's been $100000 of consultants on survey and so when it gets the near term.

George Frederick Sutton: Savneet, on the last earnings call, you mentioned that there are three additional large QSR brands that we're taking a pretty meaningful look at Brink. Just curious if you had an update on those specific potential customers. So, you know, I can't comment anything until we've announced the press release, but, you know, I'd say the number is now more than three, just the pipeline has really gotten far bigger than anything we've seen in the past. You know, I think we've got, you know, we see three logos that are sort of what we call near term within our funnel. And then, you know, another four that are sort of medium term. So that the funnel is large and it's real.

Decisions do come because they've already spent a ton of money to get to the point of making that decision. So it is usually a great sign as it relates to business provided we win that business.

Great and then.

With respect to menu can we just can't update on where that product is in terms of development of features as well as the integration path are you, 90% done 80% done and anything else you can drop it would be great.

Were there so we're not making investments in fact, we cut costs meaningfully just in the last month, there as we hit the product.

We wanted to get to in United States and so we took the cost basis down there pretty meaningfully just like I said two weeks ago, because we kind of hit the goals we need to.

Savneet Singh: And, you know, one thing in particular, this is on the POS side, you know, POS, You know, RFPs are really robust processes for the customer we work with. Generally, they're hiring consultants. They spend hundreds of thousands of dollars on consultants, on surveys.

I mentioned, we had our first U S go live with <unk> two weeks ago.

You can download the app check out the website and I think you'll see how innovative and beautiful about it is we had our second customer go live today I'll talk about that later, because it's not public but are really impressive.

Savneet Singh: And so when it gets to the near term, you know, the decisions do come because they've already spent a ton of money to get to the point of making that decision. And so it is usually a great sign as it relates to business, you know, provided we win that business. Great. And then, with respect to menu, can we get an update on, you know, where that product is in terms of development of, you know, features as well as, you know, the integration path? Are you, you know, 90% done, 80% done? Anything else you can offer would be great.

John.

70, <unk>, so it's always coming in and I know, it's been people because we know what killed me as the core business is running so much more efficiently. We haven't added head count in a long time menu, where we have major loss.

Like I said Thats reversing in 'twenty four as we have revenue coming on for menu.

To offset that impact plus these cost cuts that I mentioned.

And then one final question for me.

With respect to the Burger King rollout did most of the scaling from a head count and cost perspective come during Q4 or should we see that continuing in Q1 as well.

Youll see some of it in Q1, but a lot of it was in Q4.

Savneet Singh: You know, we're there. So we're not making investments. In fact, we've cut costs meaningfully just in the last month there as we hit the product, you know, parity we wanted to get to in the United States. And so, you know, we took the cost basis down there pretty meaningfully, just like I said, two weeks ago, because we kind of hit the goals we needed to. You know, as I mentioned, we had our first U.S. go-live with Bepo Brady's two weeks ago. You can download the app, check out the website, and, you know, I think you'll see how innovative and beautiful of a product it is.

We're scaling up call it.

140 people now these are the short term. This has not been I can stay with par forever by state legislations limitations Dev teams to finish the integration and so it's a meaningful amount of cost so again that causes isn't perpetual because.

Once we rollout we don't need those costs and those will come down over the next two years and so we've taken a lot of it now it will scale with way back down.

The way I like to think about it is.

Call. It two scrum teams to ask Graeme teams for that sort of same store.

Savneet Singh: We had our second customer go-live today. I'll talk about that later because it's not public, but a really impressive, you know, 7800 support chain. So it's coming. And I know it's been painful because, you know, what kills me is the core business is running so much more efficiently. We haven't added headcount in a long time. It's menu where we have the major loss.

Compared a time and then it's primarily support professional services.

And that's about it and so it is not.

It's painful to absorbed effort a couple of quarters before we get any revenue from it but.

We will get it back very very quickly and then those costs will rationalize themselves back down.

Thank you.

Savneet Singh: And like I said, that's reversing in 24 as we have revenue coming on for menu to offset that impact plus these cost cuts that I mentioned. And then one final question for me, with respect to the Burger King rollout, did most of the scaling from headcount and cost perspective come during Q4, or should we see that continuing in Q1 as well? You'll see some of it in Q1, but a lot of it was in Q4.

One moment for our next question.

Our next question comes from the line of Samad Samana from Jefferies.

Hi.

Thanks for taking my questions maybe first one.

You've done a great job in terms of.

Matching the cost structure to where the business is at and in today's slide deck. It looks like there is a new disclosure about.

Sales and marketing and R&D as a percentage of IRR.

Savneet Singh: You know, we're scaling up, call it, you know, 140 people. Now, this is short-term. This is not, they're not going to stay apart forever, but think of it as installations, implementations, dev teams to finish the integration. And so, it's a meaningful amount of cost, but again, that cost isn't perpetual because once we roll out, you know, we don't need those costs, and those will come down over the next two years. So, we've taken a lot of it now. It will scale us way back down. You know, the way I like to think about it is, you know, call it two scrum teams, two and a half scrum teams for a short, you know, some short period of time, and then it's primarily support or professional services, and that's about it.

I look at the gross margin.

Percentages.

And it looks like.

The subscription.

Part of the business is actually profitable even factoring in expenses am I getting the right read on that is that the same.

All right you were trying to settlement that disclosure and then I have follow up.

Yes, so I think the disclosure is really to give you a lot more transparency on how fast we're rationalizing cost basis on that side and Thats why we also do an X menu because I said menus.

The majority of our loss.

Is it more just could attract how fast we're going to get there and then as I said M&A nine youll see that take step functions, but it's really more just to provide transparency, we're going to get there quickly and smart. It doesn't include that slide 32 is not include the G&A and that is from a looking at it from a noncash perspective.

Savneet Singh: And so, it's not, you know, like I said, it's painful to absorb that for a couple quarters before we get any revenue from it, but we will get it back very, very quickly, and then those costs will rationalize themselves back down. Thank you. One moment for our next question. Our next question comes from the line of Samad Samana from Jeffreys. Hi, good morning.

Okay, Okay perfect.

And then you've called out the impact of menu and payment side. The gross margins. When do you expect these investments to lapse do you expect something of a permanent headwind to gross margins from the mix shifts or do you expect that to their faculty and staff in Asia Pac should we think about that.

Samad Samana: Thanks for taking my questions. Maybe first one, I mean you guys have done a great job in terms of, You know, mismatching the cost structure to where the business is at. And in today's slide deck, it looks like there is a new disclosure about sales and marketing and R&D as a percentage of ARR. And I look at the gross margins and I look at those percentages, it kind of looks like the subscription part of the business is now actually profitable, even factoring in expenses. Am I getting the right read on that? Is that the signal that you were trying to send with that disclosure? And then I have a follow-up.

We're definitely and get to the 70% and higher overtime.

That question. So we recognized statements on a net basis, though our payment gross margins will be near our software margins, because we are super conservative and sort of doing a net.

The growth.

And so the payments, albeit issue menu will take a couple of years to get where we need to but it's not going to be Permian headwind because the rest of the business is also growing nicely.

Savneet Singh: Yeah, so I think, you know, disclosure is really to give you a lot more transparency on how fast we're rationalizing the cost basis on that side. And that's why we also do an X menu, because I said, you know, menu is, you know, the majority of our loss, it's just more to sort of track how fast we're going to get there. And then, as I said, as we get M&A done, you'll see that take step functions, but it's really more just to provide transparency and that, you know, we're going to get there quickly. Yeah, and Samad, it doesn't include that slide you're referring to does not include the G&A.

And so if you remove out those products were kind of back to exactly where we were in the past a little high.

So it's just the growth of the two businesses.

Menu has been the major headwind because you've got such a major cost without really any revenue that like I said, we just had our first customer live in the U S. We had another big one going and Thats before the Burger King revenue turns lie there as though you'll see a nice movement. There. This year and then in the out years to get there, but all of our products need to get to mid Seventy's and higher gross margins at sort of the mandate, we're going to drive towards.

Great I appreciate you taking my questions.

Savneet Singh: And that is from a, looking at it from a non-cash perspective. Okay, okay, perfect. And then you call that the impact of menu and payments on gross margins. When do you expect these investments to last? Do you expect something of a permanent headwind to gross margins from payments as the mix shifts? Or do you expect that to get back up to the 70s?

Thank you.

One moment for our next question.

Hey, Ben Carson inhibitors. So.

Okay.

Our next question comes from the line of Anja Soderstrom from Sidoti.

Thank you for taking my question.

I was just curious in terms of that you said, you said and sort of cloud transition from Prime My first accelerated.

Savneet Singh: Just how should we think about that? We're definitely going to get to the 70s and then higher over time, you know, without question. So we recognize payments on a net basis. So our payment gross margins will be near our software margins because we are super conservative in sort of doing the net versus the gross. And so the payments won't be the issue.

Do you think.

And then aside from that I wanted to get some tech stack.

Kieran aspect to this.

Okay.

So.

Yes, I think implicit in all of it.

Essentially that's a security risk, but it does not the major driver I think the major driver is the legacy guys are giving up share more rapidly than in the past I think this is being driven by a bunch of your factories ready the biggest one is that if.

Savneet Singh: Menu will take a couple of years to get to where we need to, but it's not going to be a permanent headwind because the rest of the business is also growing nicely. And so, you know, if you remove out those products, we're kind of back to exactly where we were in the past, you know, a little higher. So it's just the growth of those two businesses. Menu has been the major headwind because you've got such a major cost without, you know, really any revenue that, like I said, we just took our first customer live in the U.S. We got another big one going and that's before the Burger King revenue turns live there. And so you'll see a nice movement there this year and then, you know, the outliers get there. But all of our products need to get to mid 70s and higher gross margins. It's sort of the mandate we're going to drive towards. Great. Appreciate you taking the time to do this.

If you were on an old product, even continually even though product within the cloud your ability to innovate and take on bes.

Innovations that are driving the.

The restaurant of the future you were really limiting your experience and obviously the simplest way to do this is look at the stock chart of the restaurants that have made these major investments in technology Chipotle cover Mcdonald's and so forth you can see the actual returns that they've had and then look at the other ones that that in.

And so I think.

It's more about the functionality youre getting from a modern product and of course security is part of that.

Okay.

Okay. Thank you and I will talk let me actually just Gary.

Samad Samana: Thank you. One moment for our next question. Bad on hard time hearing us.

Yeah.

Thank you.

One moment for our next question.

Operator: Graduate. Our next question comes from the line of Anja Soderstrom from Sudati. Hi, thank you for taking my question. I'm just curious in terms of you said you said the sort of cloud transition from prem accelerated, Do you think, aside from wanting to get to tech stack, is there a security aspect to this? So. You know, I think implicit in all of it, there's, you know, essentially this is security risk, but that's not the major driver. I think the main major driver is the legacy guys are giving up share more rapidly than in the past. I think this is being driven by a bunch of different factors. But I think the biggest one is that if you were on an old product, even, Ken, even an old product that's on the cloud, your ability to innovate and take on these innovations that are driving the restaurant of the future, you are really limiting your experience. And, you know, I would say the simplest way to do this is, you know, look at the stock charts of the restaurants that have made these major investments in technology, Chipotle, Kava, you know, McDonald's, so on and so forth. You know, you can see the actual returns that they've had and then look at the ones that haven't.

Our next question comes from the line of Andrew Hart from BT I G.

Hey, good morning, when we're thinking about 2020 for kind of the different components of IRR growth, obviously, operator solutions.

With Burger King should be the key driver of it but have you had in the past you've kind of sized up relative growth of guest engagement and back office compared to operator solutions can you just help us on how youre thinking about the growth of kind of the other pieces there in 2024.

Yeah, absolutely. So I think we'll have an acceleration from that engagement.

Driven by <unk>.

<unk> and menu.

Suggested punches won a bunch of logos in the back half of 'twenty, three we announced that even more with more in the next month or two here and so we'll have an acceleration on time.

Anja Söderström: And so I think it's more about the functionality you're getting from a modern product. And of course, security is part of that. Okay, thank you. That was all for me.

Menu will have revenue growth, we haven't really had any growth there because of this move to the U S and so we will see growth there.

Savneet Singh: Thank you. One moment for our next question. Our next question comes from the line of Andrew Hart from BTIG. Hey, good morning.

I don't think that business grows 30% just because of the size, but I think we'll see a nice uplift from where we are today.

Andrew Hart: When we're thinking about 2024, kind of the different components of ARR growth, obviously operator solutions, with Burger King should be the key driver of it. But Savneet, in the past, you've kind of sized up, you know, relative growth of guest engagement and back office, you know, compared to operator solutions. Can you just help us on how you're thinking about the growth of kind of the other pieces there in 2024? Yeah, absolutely.

On the back office side, which is a small part of our business.

That grew call. It 19, 5%. This year I think that business will also have an ability to move up this year with the bundling within brink.

And I think we will see some interesting acquisition opportunities that come out of there too.

And then we've talked about bank already but theres just a lot of pipeline. There I think the key part though is that drink landing allows everything else to grow faster.

Savneet Singh: So I think we'll have an acceleration from guest engagement, driven by punch and menu, you know, sort of, you know, suggested punches one, a bunch of logos in the back half of 23, we're gonna announce them even more, more in the next, you know, month or two here. And so we'll have an acceleration on punch menu, we'll have revenue growth, you know, we haven't really had any growth there, because of this move to the US. And so we'll see growth there. You know, I don't think that business grows 30%, just because of the size, but I do think we'll see a nice uplift from where we are today. On the back office side, which is the smallest part of our business, you know, that grew call it, you know, 1920% this year, I think there's that business will also have an ability to move up this year with the bundling within Brink. And, and I think we'll see some interesting acquisition opportunities that come out of there, too. And then, you know, we've talked about Brink already, but you know, there's just a lot of pipeline there. The key part, though, is that Brink landing allows everything else to grow faster.

So it bring plans almost evergreen customer we signed in 'twenty four added another product and so that will drive everything which is why we continue to sort of consolidate the units together because as we land bank expansion at the beginning is getting easier and easier.

Okay.

I appreciate the comment on kind of ramping up your M&A capabilities, I guess I'm kind of the other side of that question can you just kind of update us strategically about how youre thinking about the government business here.

I would look at the disclosures in the dark.

Fair enough. Thanks.

Thank you.

This time I'm showing no further questions I would like to turn the conference back over to solve needs Zhang for closing remarks.

Thanks, everybody for your time look forward at the next quarter and feel free to reach out with any questions.

This concludes today's conference call. Thank you for participating you may now disconnect.

Okay.

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Savneet Singh: And so at BrinkLands, you know, almost every Brink customer we signed in 24 added another product, and so that will drive everything, which is why we continue to consolidate the units together, because as we land Brink, expansion is getting easier and easier. Thanks, and then appreciate the comment on kind of ramping up your M&A capabilities. I guess I'm kind of the other side of that question.

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Andrew Hart: Can you just kind of update us strategically about how you're thinking about the government business here? You know, I would look at the disclosures in the doc. Fair enough, thanks. Thank you. At this time, I'm showing no further questions. I would like to turn the conference back over to Savneet Singh for closing remarks. Thanks everybody for your time. Look forward to seeing you next quarter and feel free to reach out with any questions. This concludes today's conference call. Thank you for participating. You may now disconnect. ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? Microsoft Office Word 97-2003 Document MSWordDoc Word. Document.8

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