Q1 2024 PAR Technology Corp Earnings Call

May 9, 2024

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Christopher R. Byrnes: ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ??? ??? ??? ??? ??? ??? ??? ??? ??? ??? ??? ??? ??? ??? ??? Closing on March 11, 2024. And therefore, our reported first quarter results include 20 days of Stuso results as well. At times during this call, we may discuss organic or stand-alone results, which excludes Doozo to help listeners understand our organic performance. Now I'll turn the call over to Savneet for the formal remarks portion of the call, followed by Q&A. Thank you, Chris.

Closing on March 11, 2024, and therefore, our reported first quarter results include 20 days of studio results as well as.

At times during this call, we may discuss organic or Standalone results, which excludes do so to help listeners understand our organic performance now I will turn the call over to Stephanie for the formal remarks portion of the call followed by Q&A.

Savneet Singh: We had a strong start to 24, achieving 25% growth in ARR while closing one M&A transaction and announcing a second. Our Substitution Services business is clicking, and we feel confident we'll be able to continue to drive growth while turning EBITDA positive in Q3. Crucially, our products continue to be validated as standalone best-in-class while working better together, helping prove the value of our unified solution and demonstrating to our customers that buying more from PAR does not sacrifice functionality but rather generates better outcomes.

Stephanie: Thank you Craig we.

Savneet Singh: Chris, we had a strong start to 24, achieving 25% growth in ARR while closing one M&A transaction and announcing a second. Our Substitution Services business is clicking, and we feel confident we'll be able to continue to drive growth while turning EBITDA positive in Q3. Crucially, our products continue to be validated as standalone best-in-class while working better together, helping prove the value of our unified solution and demonstrating to our customers that buying more from PAR does not sacrifice functionality but rather generates better outcomes.

Stephanie: We had a strong start with 24, achieving 25% growth in <unk>, while closing one M&A transaction announcing a second.

Stephanie: Sufficient services business is clicking and we feel confident we'll be able to continue to drive growth, while turning EBITDA positive in Q3.

Stephanie: Crucially our products continues to be validated as standalone best in class, while working better together, helping prove the value of our unified solution and demonstrating to our customers that are buying more from par does not sacrifice functionality, but rather generates better outcome.

Savneet Singh: This is a point that I really wish to underscore again: each of our products generates better experiences on other PAR products, thereby enhancing total stickiness and expanding sales opportunities beyond what a single product sale could generate. The flywheel at PAR is real.

Savneet Singh: This is a point that I really wish to underscore again; each of our products generates better experiences on other PAR products, thereby enhancing total stickiness and expanding sales opportunities beyond what a single product sale could generate. The flywheel at PAR is real.

Stephanie: This is a point that I really wished to underscore again each of our products generate better experiences on other power products, thereby enhancing total stickiness and expanding sales opportunities beyond what a single product sale could generate the flywheel at par Israel.

Savneet Singh: For the first quarter, subscription services ARR organically grew by 25% when compared to Q1-23. When we add to those configurations, ARR now stands at $185.7 million, a 60% increase from the first quarter last year. Additionally, once TASC closes, our current AR would be over $225 million on a pro forma basis.

Stephanie: For the first quarter transition services <unk> organically grew by 25% when compared to Q1 'twenty three.

Stephanie: When we do those contribution now stands at $185 7, Million% to 60% increase from the first quarter last year.

Stephanie: Additionally, once task closes our current air would be over $225 million on a pro forma basis.

Savneet Singh: In Q1-24, all of our products grew, and PAR achieved 25% organic year-over-year expansion without material contribution from large sellers we've signed in the past few months, notably Burger King and Wendy. As I mentioned last call, we're going to be reporting in two segments, Operator Cloud, which includes Brink, Data Central, and Payments, and Engagement Cloud, which includes Menu, Punch, and Suso. Simply put, we are reporting in the same manner as we are organized internally.

Savneet Singh: In Q1 2024, all of our products grew, and PAR achieved 25% organic year-over-year expansion without material contribution from large sellers we've signed in the past few months, notably Burger King and Wendy. As I mentioned last call, we're going to be reporting in two segments, Operator Cloud, which includes Brink, Data Central, and Payments, and Engagement Cloud, which includes Menu, Punch, and Suzo. Simply put, we are reporting in the same manner as we are organized internally.

Stephanie: In Q1, 'twenty for all of our products group and <unk>, 25% organic year degree expansion without material contribution from large logos, we've signed in the past few months, notably Burger King and Wendy's.

Stephanie: As I mentioned last call, we're going to be reporting in two segments, operator cloud, which includes brink data central in payments and engagement cloud, which includes menu pension too though.

Stephanie: Simply put we are reporting in the same manner as we are organized internally.

Savneet Singh: Our operator cloud solutions predominantly work with IT and operations teams, while our engagement cloud solutions work with marketing and digital teams. Operator cloud AR grew 39% to $78.5 million in Q1 when compared to the same period last year. Operator cloud growth is being driven by increased win rates at Brink and continued ARPU improvement. Operator cloud ARPU increased by 22% from the same period last year due to higher value deals, API monetization, price increases, and PAR payment services going live.

Savneet Singh: Our operator cloud solutions predominantly work with IT and operations teams, while our engagement cloud solutions work with marketing and digital teams. Operator cloud ARR grew 39% to $78.5 million in Q1 when compared to the same period last year. Operator cloud growth is being driven by increased win rates at Brink and continued ARPU improvement. Operator cloud ARPU increased by 22% from the same period last year due to higher value deals, API monetization, price increases, and PAR payment services going live.

Stephanie: Our operator, calix solutions predominantly work with it and operations team.

Stephanie: All our engagement cloud solutions work with marketing and digital teams.

Stephanie: Operator cloud <unk> grew 39% to $78 $5 million in Q1, when compared to the same period last year.

Stephanie: Operator cloud growth is being driven by increased win rates that bring and continued <unk> improvement operator cloud <unk> increased by 22% from the same period last year due to higher value deals API monetization price increases and par payment services go lives.

Savneet Singh: We expect the growth in ARPU to continue, given current white space and existing high-value accounts, as well as a robust pipeline. Brint is our most strategic product, and when selected by an enterprise, it presents an opportunity to cross-sell additional PAR products. POS remains the heartbeat of the restaurant, where scalability, stability, and extensibility are central tenets of successful operations. This is demonstrated by the fact that Brink receives almost 1 billion API pings per month across a relatively small number of stores.

Savneet Singh: We expect the growth in ARPU to continue given current white space and existing high-value accounts, as well as a robust pipeline. Brinks is our most strategic product, and when selected by an enterprise, it presents an opportunity to cross-sell additional PAR products. POS remains the heartbeat of the restaurant, where scalability, stability, and extensibility are central tenets of successful operations. This is demonstrated by the fact that Brink receives almost 1 billion API pings per month across a relatively small number of stores.

Stephanie: We expect the growth in <unk> to continue given current white space in existing high value accounts as well as a robust pipeline.

Stephanie: <unk> is our most strategic product and when selected by an enterprise it presents an opportunity to cross sell additional products.

Stephanie: POS remains the heartbeat of the restaurant, where scalability stability and extensibility, our central tenants a successful operation.

Stephanie: This is demonstrated by the fact that brink received almost 1 billion API <unk> per month across a relatively small number of stores.

Savneet Singh: The mission-critical nature of POS for in-store, above the store, and in-kitchen is where we feel the true mission criticality of our solution lies. We've ramped up our teams for the BK project, where we expect rapid and solid velocity to start as of Q2. Payments continues to accelerate its growth and has more than doubled year-over-year. While Q1 is a seasonally slow period with lower processing volume, PAR Payments managed to achieve its highest annualized gross processing volume run rate of $2.4 billion. We achieved this via the full rollout of an 1100 store chain and four additional restaurant concepts.

Savneet Singh: The mission-critical nature of POS for in-store, above-the-store, and in-kitchen is where we feel the true mission criticality of our solution lies. We've ramped up our teams for the BK project, where we expect rapid and solid velocity to start as of Q2. Payments continues to accelerate its growth and has more than doubled year-over-year. While Q1 is a seasonally slow period with lower processing volume, PAR Payments managed to achieve its highest annualized gross processing volume run rate of $2.4 billion.

Stephanie: The mission critical nature of Pos for in store above the store and kitchen is where we feel the true mission criticality of our solution lines.

Stephanie: We've ramped up our teams for the BK project, where we expect rapid installed velocity as of Q2.

Stephanie: Payments continues to accelerate its growth and more than doubled year over year. While Q1 is a seasonally slow period with lower processing value part payments managed to achieve its highest annualized gross processing volume run rate of $2 4 billion.

Savneet Singh: We achieved this via the full rollout of an 1100 store chain and four additional restaurant concepts. Each of these enterprises benefit from operational efficiencies, cost savings, and increased customer engagement by leveraging part rate across multiple part products. Looking forward, Part VIII is becoming a native infrastructure across all of our products, which has led to very high growth and the strongest pipeline we've ever had. With the recently announced acquisition of Fuso and Task, the team is fully engaged in expanding ParPay into new verticals, which will continue to drive deal volume, customer adoption, and materially higher margins. Data Central delivered a strong Q1. The quarter included the go live that loves travel.

Stephanie: We achieved this via the full rollout of 1100 store.

Stephanie: Shane and four additional restaurant concepts each.

Savneet Singh: Each of these enterprises benefit from operational efficiencies, cost savings, and increased customer engagement by leveraging PARP rates across multiple PARP products. Looking forward, ParPay is becoming a native infrastructure across all of our products, which has led to very high growth and the strongest pipeline we've ever had. With the recently announced acquisition of Fuso and Task, the team is fully engaged in expanding ParPay into new verticals, which will continue to drive deal volume, customer adoption, and materially higher margins. Data Central delivered a strong Q1. The quarter includes the go live that loves travel.

Stephanie: Each of these enterprise benefit from operational efficiencies cost savings and increased customer engagement by leveraging <unk> across multiple PARP products.

Stephanie: Looking forward <unk> is becoming a native infrastructure across all of our products, which has led to very high growth and the strongest pipeline we've ever had with.

Stephanie: With the recently announced acquisition of <unk> and task. The team is fully engaged in expanding <unk> into new verticals, which will continue to drive deal volume customer adoption and materially higher margins.

Stephanie: Data central delivered a strong Q1 the quarter include the go lives. The Love's travel center, we continue to build out a robust pipeline of business opportunities for data central to the attachment to brink and part payment deals with multiple tier one concept in the funnel, we feel very bullish about our ability to drive cross sell especially as <unk> works through its very large pipeline of deals this year.

Savneet Singh: We continue to build out a robust pipeline of business opportunities for Data Central through the attachment to Brink and PAR payment deals, with multiple Tier 1 concepts in the funnel. We feel very bullish about our ability to drive cross-sell, especially as Brink works through its very large pipeline of deals this year. Our Operator Cloud offerings provide less complexity, lower total cost of ownership, enhanced security, and reliable payment processes.

Stephanie: Our operator cloud offerings provide less complexity lower total cost of ownership enhanced security and reliable payment processing.

Savneet Singh: Operator cloud products remain highly sticky, which we expect only to be strengthened in difficult macroeconomic times. Our engagement cloud, which includes PunchMenu and now Suzo, continues its momentum with a stronger than expected quarter. Deals closed in the second half of last year are starting to go live, and our year-over-year ARR growth excluding students was 11%. Meanwhile, our platform and tech debt investments are helping lower cost and return, improve customer satisfaction, and expand hosting margins.

Savneet Singh: Operator cloud products remain highly sticky, which we expect only to be strengthened in difficult macroeconomic times. Our engagement cloud, which includes Punch, Menu, and now Suzo, continues its momentum with a stronger than expected quarter. Deals closed in the second half of last year are starting to go live, and our year-over-year ARR growth excluding students was 11%. Meanwhile, our platform and tech debt investments are helping lower customer terms, improve customer satisfaction, and expand hosting margins.

Stephanie: Operator cloud products remain highly sticky, which we expect only to be strengthened and difficult macroeconomic times.

Stephanie: Our engagement cloud, which includes punch menu announced do though continued its momentum with a stronger than expected quarter.

Stephanie: Deals closed in the second half of last year are starting to go live and our year over year <unk> growth, excluding <unk> was 11%.

Stephanie: Meanwhile, our platform and tech that can protect that investments are helping lower customer churn improved customer satisfaction and expand hosting margin.

Savneet Singh: We also continued solid sales momentum in Q1 with some strong brand wins, including Wendy's and a leading national chicken chain. Looking ahead, we expect Punch to be a strong profit contributor to PAR and the engagement cloud solution to drive stable growth. At the same time, we're announcing the launch of exciting new functionality in our Punch wallet. This solution will help enable seamless payment and redemption flows and drive material cross-sell opportunities, further increasing the value and implied stickiness of the PAR product suite.

Savneet Singh: We also continued solid sales momentum in Q1, with some strong brand winners, including Wendy's and a leading national chicken chain. Looking ahead, we expect Punch to be a strong profit contributor to PAR and the engagement cloud solution to drive stable growth. At the same time, we're announcing the launch of exciting new functionality in our Punch wallet. This solution will help enable seamless payment and redemption flows and drive material cross-sell opportunities, further increasing the value and implied stickiness of the PAR product suite.

Stephanie: We also continued solid sales momentum in Q1, with a strong brand wins, including Wendy's and a leading national chicken chain looks.

Stephanie: Looking ahead, we expect punch to be a strong profit contributor to park and the engagement cloud solution to drive stable growth at the same time, we're announcing the launch of exciting new functionality in our punch wallet <unk>.

Stephanie: This solution will help enable seamless payment and redemption flows and drive material cross sell opportunities further increasing the value and implied stickiness of the power product suite.

Savneet Singh: Menu, our digital ordering application, also delivered an improved Q1 by going live in more than 1,200 sites across five new logos, including major chains like Beefo Brady's, Burger King, and a 700-store coffee chain. The newest part of Engagement Cloud is our recent acquisition of Scuso. Just as a refresher, Ctuzo is a leading digital engagement software provider to the convenience and fuel retailer industry, including its open commerce platform, which empowers C-Stores to gain more share of the customer wallet and drive customer lifetime value.

Savneet Singh: Menu, our digital ordering application, also delivered an improved Q1 by going live in more than 1,200 sites across five new logos, including major chains like Beefo Brady's, Burger King, and a 700-store coffee chain. The newest part of Engagement Cloud is our recent acquisition of Kuzo. Just as a refresher, Tuzo is a leading digital engagement software provider to the convenience and fuel bill killer industry, including its open commerce platform, which empowers C-Stores to gain more share of the customer wallet and drive customer lifetime value.

Stephanie: Menu our digital ordering application also delivered an improved Q1 by going live in more than 200 sites across five new logos, including major chains like depot, Brady Burger King and a 700 store coffee chain.

Stephanie: The newest part of mutation cloud as our recent acquisitions to them.

Stephanie: Just as a refresher to those are leading digital engagement software provider to the convenience and fuel wholesaler industry, including its open commerce platform, which empowers C stores to gain more share of customer wallet and drive customer lifetime value.

Savneet Singh: The combination of Punch and Stuzo allows us to offer best-in-class loyalty and digital engagement products across two food service markets, restaurant and C-Store. Additionally, with Suzo, PAR is now the leading technology provider for convenience stores with over 25,000 customer sites and substantial opportunities for innovation in the C-store industry, with a TAM of 150,000 stores domestically. CHOOSA also provides the opportunity for additional cross-sale opportunities for other PAR products into a new customer base with materially stronger unit economics. Engagement Cloud AR now totals more than $107 million with Suzo's contribution at the end of Q1. Also, as we previously reported, due to those trailing 12 months, Adjusted EBITDA was $14 million.

Savneet Singh: The combination of Punch and Stuzo allows us to offer best-in-class loyalty and digital engagement products across two food service markets, restaurant and C-Store. Additionally, with SUSO, PAR is now the leading technology provider for convenience stores with over 25,000 customer sites and substantial opportunities for innovation in the C-store industry, with a TAM of 150,000 stores domestically. Tuzla also provides the opportunity for additional cross-sale opportunities for other PAR products into a new customer base with materially stronger economics. Engagement Cloud AR now totals more than $107 million with Suzo's contribution at the end of Q1. Also, as we previously reported, due to those trailing 12 months, Adjusted EBITDA was $14 million.

Stephanie: The combination of punches allows us to offer best in class loyalty and digital engagement products across to foodservice markets restaurant in C store.

Stephanie: Additionally, with pseudo horizontal.

Stephanie: <unk> is now the leading provider a leading technology provider for convenience stores with over 25000 customer sites and substantial opportunities for innovation in the C store industry with a Tam of 150000 stores domestically.

Stephanie: It also provides the opportunity for additional cross sell opportunities other part products into a new customer base with materially stronger unit economics.

Stephanie: And Jason Cloud era, now totals more than $107 million was due to those contribution at the end of Q1.

Stephanie: So as we previously reported do those trailing 12 months adjusted EBITDA was $14 million.

Savneet Singh: Although Q1 only had revenue contribution from Stuso for around three weeks, the positive impact for the full Q2 and full year 24 will certainly be meaningful. We continue to see PAR's unique position in the food service technology sector with best-in-class software across key operational and engagement pillars. Our ability to guarantee better together experiences across our products, while separately enabling a robust integration infrastructure, keeps us ahead of single product competitors that only control one part of the better together equation and are dependent on third-party integrations for customer experiences.

Savneet Singh: Although Q1 only had revenue contribution from Stuso for around three weeks, the positive impact for the full Q2 and full year 24 will certainly be meaningful. We continue to see PAR's unique position in the food service technology sector with best-in-class software across key operational and engagement pillars. Our ability to guarantee better together experiences across our products, while simply enabling a robust integration infrastructure, keeps us ahead of single-product competitors that only control one part of the better together equation and are dependent on third-party integrations for customer experiences.

Stephanie: Although Q1 only had revenue contribution from studio for around three weeks the positive impacts for the full Q2 and full year 'twenty four it will certainly be meaningful.

Stephanie: We continue to see <unk> is uniquely positioned in the foodservice technology sector with best in class software across key operational and engagement pillars.

Stephanie: Our ability to guarantee better together experiences across our products, while simply enabling a robust integration infrastructure keeps us ahead of single product competitors that only control one part of the better together equation and are dependent on third party integrations for customer experiences.

Savneet Singh: Moving to hardware, we had a softer than normal Q1 due to increased seasonality issues and a shifting demand environment in our legacy restaurant, non-brink-based. Harbor sails are always hard to predict, given their sensitivity to the macro environment.

Savneet Singh: Moving to hard work, we had a softer than normal Q1 due to increased seasonality issues and a shifting demand environment in our legacy restaurant, non-brink. Harbor sails are always hard to predict given their sensitivity to the macro environment, and as such, we'll continue to forecast conservative numbers to protect us from getting ahead of ourselves.

Stephanie: Moving to hardware.

Stephanie: We had a softer than normal Q1, due to increased seasonality issues and the shifting demand environment and our legacy restaurants non branch space hardware.

Stephanie: Hardware sales are always hard to predict given their sensitivity to the macro environment and as such we will continue to forecast conservative numbers to protect us from getting ahead of ourselves we.

Savneet Singh: And as such, we'll continue to forecast conservative numbers to protect us from getting ahead of ourselves. We are focusing our efforts to make up this shortfall and believe there are opportunities to drive sales of hardware, namely increased McDonald's sales during their convention year and with the recent favorable industry response to our newly released terminal, the PAR Wave. Additionally, we're focusing on selling hardware to the few concepts who use Brink who have not historically used our hardware, as well as current Brink customers that will benefit from updated equipment.

Savneet Singh: We are focusing our efforts to make up this shortfall and believe there are opportunities to drive sales of hardware, namely increased McDonald's sales during their convention year and with the recent favorable industry response to our newly released terminal, the PAR Wave. Additionally, we're focusing on selling hardware to the few concepts who use Brink but have not historically used our hardware, as well as current Brink customers that will benefit from an updated equipment. Additionally, with a near 100% attachment rate of hardware to upcoming BRINK projects, we will be able to tap into new large-cap customers in the near future. Part of our white space will only continue to grow, and this is truly an issue of when not to.

Stephanie: We are focusing our efforts can make up the shortfall and believe there are opportunities to drive sales and hardware, namely increased Mcdonald's sales during their convention year and with the recent favorable industry response to our newly released terminal par wave.

Stephanie: Additionally, we're focusing on selling hardware to the few concepts, we use brink, who have not historically used our hardware as.

Stephanie: As well as current <unk> customers that will benefit from an updated equipment.

Savneet Singh: Additionally, with a near 100% attachment rate of hardware to upcoming BRINK projects, hardware will be able to tap into new large-cap customers in the near future. Hardware white space will only continue to grow, and this is truly an issue of when, not if.

Stephanie: Additionally, with a near 100% attachment rate of hardware to upcoming bring projects hardware will be able to tap into new large cap customers in the near future.

Stephanie: Hardware White space will only continue to grow and this is truly an issue of when not if.

Savneet Singh: Moving to expenses, our non-GAAP operating expenses grew 7% when compared to Q1 last year and excluding STUZO. Almost the entire OPEX increase is associated with the Burger King and Wendy's rollouts that will have a significant return on investment, and that cost will then rationalize downward. In addition, earlier this year, we right-sized our go-to-market teams, giving us additional expense tailwinds, and we expect to end 2024 at a lower quarterly OPEX than we started, excluding our acquisition.

Stephanie: Moving to expenses.

Stephanie: Our non-GAAP operating expenses grew 7% when compared to Q1 last year and excluding studio.

Stephanie: Almost the entire Opex increase is associated with the Burger King and Wendy's Rollouts that will have significant return on investment and that cost will then rationalize downward. In addition earlier this year, we right sized our go to market teams, giving us additional expense tailwind and we expect to end 2024 at a lower quarterly opex than we started.

Stephanie: <unk> our acquisitions.

Savneet Singh: Similar to last year, where we expect ARR to grow meaningfully without adding operating expenses, this rigid expense management combined with consistent organic AR growth will allow our company, as we said today, to be EBITDA positive by the third quarter of this year. What I'm most proud about, though, as I just mentioned, is that we also expect PAR FX, excluding Stuzo, to actually come down through 2014. Said differently, I expect us to grow at the rates we're growing without additional operating expenses.

Savneet Singh: Similar to last year, where we expect ARR to grow meaningfully without adding operating expenses, this rigid expense management combined with consistent organic AR growth will allow our company, as we said today, to be EBITDA positive by the third quarter of this year. What I'm most proud about, though, as I just mentioned, is that we also expect PAR FX, excluding STUZO, to actually come down through 2020. Said differently, I expect us to grow at the rates we are growing without additional operating expenses.

Stephanie: Similar to last year, where we expect <unk> to grow meaningfully without adding operating expense.

Stephanie: This is Richard expense management combined with consistent organic air growth will allow our company as we sit today to be EBITDA positive by the third quarter of this year.

Stephanie: What I'm most proud about them as I. Just mentioned is that we also expect opex, excluding studio to actually come down through 2000.

Stephanie: Said differently I expect it to grow the rates, we're growing without additional operating expenses and of course any accretive M&A only accelerate profitability.

Savneet Singh: And, of course, any accretive M&A only accelerates profitability. To provide more detail, I want to walk through the underlying margin for our subscription services business, which will provide clarity on how healthy our unit economics are becoming. These numbers exclude tasks which, if added, would only help prove the point.

Stephanie: To provide more detail I want to walk through the underlying margin for our subscription services business, which will provide clarity on how healthy our unit economics are becoming these.

Savneet Singh: These numbers exclude tasks, which are added would only help prove the point.

Savneet Singh: At the very top, our adjusted subscription services gross margin this quarter was 66%, flat quarter over quarter. As we get scale, we want to drive this to 70% plus. We feel confident we can get this done and think we'll see improvements this year. We estimate our sales and marketing spend as a percentage of ARR this quarter, when including the annualized contribution from Stuso, would be around 21%. This number will continue to improve as we get the benefit of the cost cuts I mentioned earlier this year. As I pointed out last call, we want this number to get to 15% or lower.

Savneet Singh: At the very top, our adjusted subscription services gross margin this quarter was 66%, flat quarter over quarter. As we get scale, we want to drive this to 70% plus. We feel confident we can get this done and think we'll see improvements this year. We estimate our sales and marketing spend as a percentage of ARR this quarter, when including the annualized contribution from Stuzo, would be around 21%. This number will continue to improve as we get the benefit of the cost cuts I mentioned earlier this year. As I pointed out last call, we want this number to get to 15% or lower.

Stephanie: At the very top or adjusted student services gross margin this quarter was 66% flat quarter over quarter.

Stephanie: As we get scale, we want to drive this to 70% plus we.

Stephanie: We feel confident we can get this done and think we'll see improvement this year.

Savneet Singh: We estimate our sales and marketing expense as a percentage of IRR this quarter, when including the annualized contribution from studio would be around 21%.

Stephanie: This number will continue to improve as we get the benefit of the cost cuts I mentioned earlier this year.

Stephanie: As a slide last call, we want this number to get to 50% or lower.

Savneet Singh: We estimate our R&D expense as a percentage of AR, again including the annualized contribution from SUSO, was around 35%. This number continues to get better, and we have our sights on our target of 25%. As I hope investors can see, we're focused on driving towards our long-term goals, and the intense focus on keeping our OPEX flat has led to a strong acceleration in margins. What's more, as we bring TASC into PAR, we'll be adding another $6 to $8 million to EBITDA, a large pipeline of deals, and a strong base of customers to cross-sell PAR products, creating the same flywheel internationally.

Stephanie: We estimate our R&D expense as a percentage of they are again, including the annualized contribution from studio was around 35%. This number continues to get better and we have our sites on our target of 25%.

Savneet Singh: As I hope investors can see we're focused on driving towards our long term goals and the intense focus on keeping our opex flat has led to a strong accelerating an acceleration in margin.

Stephanie: What's more as we bring cash into park will be adding another $6 million to $8 million EBITDA and a large pipeline of deals and a strong base of customers to cross sell <unk> products, creating the same flywheel internationally.

Savneet Singh: To recap, we're executing a strategy that we established several years ago, and we're seeing the benefits of that strategy. We have a business model with strong organic fundamentals that positions us well to drive shareholder value, while continuing to acquire new products to cross-sell into our base. We partner with some of the largest and most innovative restaurant companies in the world and have established ourselves as a trusted technology partner to these companies as they undertake their digital journey.

Stephanie: To recap.

Stephanie: We are executing a strategy that we established several years ago, and we're seeing the benefits of that strategy we.

Stephanie: We have a business model with strong organic fundamentals that positions us well to drive shareholder value, while continuing to acquire new products to cross sell into our base.

We are partners in the largest and most innovative restaurant companies in the world and have established ourselves as a trusted technology partner at these companies as they undertake their digital journey.

Savneet Singh: We've executed a disciplined M&A strategy that is accretive to our journey towards profitability and the rule of 40, while crucially expanding our TAM into markets with greater margin and cross-sell potential. And finally, we have a talented and dedicated employee base across the globe who are committed to helping our customers and our company win in the industry. Bryan will review the numbers in more detail, and then I'll come back to offer some guidance for the rest of the year.

We've executed a disciplined M&A strategy that is accretive to our journey towards profitability and rule of 40, while crucially expanding our TAM into markets with greater margin and cross-sell potential. And finally, we have a talented and dedicated employee base across the globe who are committed to helping our customers and our company win the industry. Bryan will review the numbers in more detail, and then I'll come back to offer some guidance for the rest of the year. Bryan?

Savneet Singh: We've executed a disciplined M&A strategy that is accretive to our journey towards profitability and rule of 40, while quickly expanding our tam into the market into markets with greater margin and cross sell potential and finally, we have a talented and dedicated employee base across the globe, who are committed to helping our customers and our company wind industry.

Savneet Singh: Brian will review the numbers in more detail and then I'll come back to offer some guidance for the rest of the year Brian.

Bryan A. Menar: Thank you, Savneet. Good morning, everyone. Total revenues were $105.5 million for the three months ended March 31, 2024, an increase of 5% compared to the three months ended March 31, 2023, with growth coming from increases in professional services and contract revenue, partially offset by decreases in hardware and professional service revenue. The net loss for the quarter of 2024 was $18.3 million, for a $0.62 loss per share, compared to a net loss of $15.9 million, or $0.58 loss per share, reported for the same period in 2023.

Brian: Thank you <unk> good morning, everyone.

Brian: Total revenues were $105 5 million for the three months ended March 31, 2024, an increase of 5% compared to the three months ended March 31 2023 with.

Bryan: With growth coming from increases in subscription services and contract revenue, partially offset by decreases in hardware and professional service revenue.

Bryan: Net loss for the quarter of 2024 was $18 3 million.

Bryan: 462, 62 loss per share.

Savneet Singh: Fair to a net loss of $15 9 million or <unk> 58 loss per share reported for the same period in 2023.

Bryan A. Menar: Adjusted net loss for the first quarter of 2024 was $10.8 million, or $0.36 loss per share, compared to an adjusted net loss of $12.7 million, or $0.46 loss per share, for the same period in 2023. Adjusted EBITDA for the first quarter of 2024 was a loss of $7.2 million compared to an adjusted EBITDA loss of $8.8 million for the same period in 2023, driven by increased margin contribution from subscription services, partially offset by a reduction in hardware revenue and margin. Now, for more details on Revit,

Bryan: Adjusted net loss for the first quarter of 2024 was $10 8 million or <unk> 36 loss per share compared to an adjusted net loss of $12 7 million or <unk> 46, net loss per share for the same periods in 2023.

Bryan: Adjusted EBITDA for the first quarter of 2024 was a loss of $7 2 million compared to an adjusted EBITDA loss of $8 8 million for the same period in 2023.

Savneet Singh: Driven by increased margin contribution from subscription services.

Bryan: We offset by a reduction in hardware revenue and margin.

Bryan: Now for more details on revenue.

Bryan A. Menar: Position service revenue was recorded at $38.4 million, an increase of $10.4 million, or 37.2% from the $28 million recorded in the prior year. The increase was substantially driven by an increase in shipment service revenues from the operator cloud services of $5.9 million, driven by a 20.7% increase in active sites and a 22.2% increase in average revenue per site, and from our engagement cloud services of $4.5 million, primarily driven by $2.7 million of post-acquisition STUZO revenues.

Bryan: Subscription service revenue was reported at $38 4 million, an increase of $10 4 million or <unk> 37, 2% from the $28 million reported in the prior year.

Bryan: The increase was substantially driven by increase in shipments service revenues from the operator cloud services of $5 9 million.

Bryan: Given by a 27% increase in active sites and a 22, 2% increase in average revenue per site.

And from our engagement cloud services of $4 5 million.

Bryan: Primarily driven by $2 7 million of post acquisition acquisitions do so revenues the residual increase of $1 8 million from our engagement cloud services was driven by a five 8% increase in active sites at a seven 5% increase in average revenue per site.

Bryan A. Menar: The residual increase of $1.8 million from our engagement cloud services was driven by a 5.8% increase in active sites and a 7.5% increase in average revenue per site. Excluding STUZO, organic subsistence service revenue grew a meaningful 27% compared to the prior year.

Bryan: Excluding <unk> organic subscription service revenue grew a meaningful 27% compared to prior year.

Bryan A. Menar: The annual recurring revenue exiting the quarter was $185.7 million, an increase of 60.2% from last year's Q1, with engagement cloud up 80.5% and operator cloud up 38.8%. The acquisition of Fuso contributed $41 million to ARR, included within Engagement Cloud as of March 31st. Excluding STUZO, total organic annual recurring revenue was up 24.8% year over year. Hardware revenue in the quarter was $18.2 million, a decrease of $8.6 million, or 31.9 percent, from the $26.8 million recorded in the prior year.

Bryan: The annual recurring revenue exiting the quarter with $185 7 million, an increase of 62% from last year's Q1 with engagement cloud up 85% and operator cloud up 38, 8% the.

Bryan: The acquisition of <unk> contributed $41 million to air are included within engagement cloud as of March 31.

Bryan: Excluding stew, so total organic annual recurring revenue was up 24, 8% year over year.

Bryan: Hardware revenue in the quarter was $18 2 million a decrease of $8 6 million or 31, 9% from the $26 8 million recorded in the prior year.

Bryan A. Menar: The decrease was substantially driven by the timing of enterprise customer hardware refreshes and the timing of next generation PAR terminal and headset rollout. We continue to be optimistic about the hardware business as we address the growing demands from both legacy hardware customers as well as attached hardware sales within our expanding software customer base. Professional service revenue was reported at $13.5 million, a decrease of $0.4 million, or 2.7%, from the $13.8 million recorded in the prior year.

Bryan: The decrease was substantially driven by timing of enterprise customer hardware refreshes and timing of next generation Park terminal on headset Rollouts, we continue to be optimistic of our hardware business as we address the growing demands from both legacy hardware customers as well as attached hardware sales within our expanding software customer base.

Bryan: Professional service revenue was reported at $13 5 million a decrease of <unk> 4 million or two 7% from the $13 8 million recorded in the prior year.

Bryan A. Menar: 7.7 million of the professional service revenue in the quarter consisted of recurring revenue primarily from a hardware support contract. Contract revenue from our government business was $35.4 million, an increase of $3.6 million or 11.2% from the $31.9 million recorded in the first quarter of 2023. The increase in contract revenue was driven by a $4.5 million increase in the government's ISR solution product line. Project Backlog, associated with our government business, continues to be strong and appropriately funded.

Bryan: $7 7 million of the professional service revenue in the quarter consisted of recurring revenue primarily from our hardware support contracts.

Bryan: Revenue from our government business was $35 4 million, an increase of $3 6 million or 11, 2% from $31 9 million recorded in the first quarter of 2023.

Bryan: The increase in contract revenue was driven by $4 5 billion increase in governments ISR solution product line.

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

Bryan A. Menar: As of March 2024, backlog was $315.4 million, a decrease of 3%, compared to $326 million as of December 2023. Total funded backlog as of March 2024 was $72 million. Now, turn to Marge.

Bryan: As of March 2024 backlog was $315 4 million, a decrease of 3% compared to $326 million as of December 2023 <unk>.

Bryan: Total funded backlog as of March 2024 was $72 million.

Bryan: Now turning to margins.

Bryan A. Menar: Gross profit was $28.6 million, an increase of $5.4 million, or 23% from the $23.2 million reported in the prior year. The increase was driven by subscription services, which had a gross profit of $19.8 million, an increase of $5.7 million, or 41% from the $14 million reported in the prior year. Subscription service margin for the quarter was 51.6% compared to 50.2% reported in the first quarter of 2023. The increase in margin is driven by a continued focus on efficiency improvements with hosting and customer support costs for operator cloud services, as well as improved margins stemming from Stuso's post-acquisition operation.

Bryan: Gross profit was $28 6 million, an increase of $5 4 million for 23% from the $23 2 million reported in the prior year.

Bryan: The increase was driven by subscription services with gross profit of $19 8 million, an increase of $5 7 million or 41% and the 14 million reported in the prior year.

Bryan: Subscription service margin for the quarter was 51, 6% compared to 52% reported in the first quarter of 2023.

Bryan: The increase in margin was driven by our continued focus on efficiency improvements with our hosting and customer support costs for operator cloud services as well as improved margins stemming from studios post acquisition operations.

Bryan: Excluding the amortization of intangible assets total adjusted subscription service margin for the three months ended March 31 was 66% compared to 71% in the first quarter of 2023.

Bryan A. Menar: Excluding the amortization of intangible assets, total adjusted subscription service margin for the three months ended March 31st was 66% compared to 71% in the first quarter of 2023. Consequently, Q1 2024 Adjusted Sufficient Service Margin is consistent with Q4 2023. Hardware margin for the quarter was 22.3% versus 16.4% in Q1 2023.

Bryan: Sequentially Q1, 2024, adjusted sufficient service margin is consistent with Q4 2023.

Bryan: Hardware margin for the quarter was 22, 3% versus 16, 4% in Q1 2023.

Bryan A. Menar: Improvement in margin year-over-year was substantially driven by improved inventory management and price increases, focusing on demonstrating value for a price. Improved operational efficiency has allowed us to continue to improve hardware margins year over year. Professional service margin for the quarter was 16.5% compared to 17.9% reported in the first quarter of 2023.

Bryan: 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 continue to improve our margins year over year.

Bryan: Professional service margin for the quarter was 16, 5% compared to 17, 9% reported in the first quarter of 2023.

Bryan A. Menar: The decrease in margin is driven by a decrease in margin for hardware-related services. We expect professional service margins to remain in the upper teens for the remainder of 2024. Government contract margins remained essentially flat at 7.1% as compared to 7.2% for Q1 2023, in regards to operating expenses.

Bryan: Decrease in margin was driven by a decrease in margin for hardware related services.

Bryan: We expect professional service margins to remain in the upper teens for the remainder of 2024.

Bryan: Government contract margins remained essentially flat at seven 1% as compared to seven 2% for Q1 2023.

Bryan: In regards to operating expenses.

Bryan A. Menar: Gap sales and marketing was $10.9 million, an increase of $1.5 million from the $9.4 million reported in Q1 2023. As Savneet mentioned, during the quarter, we made changes to the sales and marketing organization to enable more efficient growth. Gap Q&A was $25.6 million, an increase of $7.5 million and $18.1 million recorded in Q1 2023. The increase was driven by an increase in M&A transaction fees, as well as stock-based compensation, severance costs, and post-acquisition student loans.

Bryan: GAAP sales and marketing was $10 9 million, an increase of $1 5 million from the $9 4 million reported in Q1 2023.

Bryan: At 70 mentioned during the quarter, we made changes to the sales and marketing organization to enable more efficient growth.

Savneet Singh: Yes.

Savneet Singh: <unk> was $25 6 million.

Savneet Singh: Okay.

Bryan: Reported in Q1 2023.

Bryan: Increase was driven by an increase in M&A transaction fees as well as stock based compensation severance costs and post acquisitions do so.

Bryan A. Menar: Gap R&D was $15.8 million, an increase of $1.5 million from the $14.3 million recorded in Q1 2023. The increase was primarily driven by post-DUZO acquisition costs. Q1 2024 operating expense, excluding non-GAAP adjustments, was $42.3 million, an increase of $3.7 million, or 10% versus prior year. Excluding SUSO costs, the increase was 7%.

Bryan: GAAP R&D was $15 8 million, an increase of $1 5 million from $14 3 million recorded in Q1 2023.

Bryan: The increase was primarily driven by post <unk> acquisition costs.

Bryan: Q1, 2020 for operating expense, excluding non-GAAP adjustments was $42 3 million, an increase of $3 7 million or 10% versus prior year and excluding studio costs. The increase was 7%.

Bryan A. Menar: As Savneet explained earlier, we expect organic operating expenses to be flat for the remainder of the year as we continue to drive ARR and revenue growth, consistent with how we managed operating expenses last year. Now, to provide information on the company's cash flow and balance execution. For the three months ended March 31st, cash used in operating activities was $23.6 million versus $16.7 million for the prior year. Cash used for the three months ended March 31st was substantially caused by a net loss from operations and additional net working capital requirements due to an increase in accounts receivable resulting from revenue growth. Cash used in investing activities was $151.9 million for the three months ended March 31st, versus $1.8 million for the prior year.

Bryan: As <unk> explained earlier, we expect organic operating expenses to be flat for the remainder of the year as we continue to drive <unk> revenue growth consistent with how we manage operating expenses last year.

Bryan A. Menar: Investing activities during the three months ended March 31st included $166.3 million of net cash consideration in connection with the STUZO acquisition and capital expenditures of $1.4 million for developing technology costs associated with our restaurant retail software platform. This was all partially offset by $15.9 million of proceeds from Med-Cal's short-term investment. Cash provided by financing activities was $190.8 million for the three months ended March 31st.

Savneet Singh: Parity cash used in financing activities was $2.4 million for the prior year. Financial activities during the three months ended March 31st were substantially driven by a private placement of common stock. I will now turn the call back over to Savneet for closing remarks prior to moving to Q&A. Thank you, Bryan. Let me wrap up with a few key messages before we open up the call for Q&A. In regard to the initial phase of the Burger King implementation program, early indications are that new orders are being submitted at a healthy pace.

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

Bryan: For the three months ended March 31 cash used in operating activities was $23 6 million versus $16 7 million for the prior year.

Bryan: Cash used for the three months ended March 31 was essentially driven by a net loss from operations and an additional net working capital requirements due to an increase in accounts receivable, resulting from revenue growth.

Savneet Singh: Cash used in investment in investing activities was $151 9 million for the three months ended March 31.

Bryan: $1 8 million for the prior year.

Bryan: Investing activities during the three months ended March 31 included $166 3 million of net cash consideration in connection with the studio acquisition and capital expenditures of $1 4 million for developed technology costs associated with our restaurant retail software platforms.

Bryan: This was all partially offset by $15 9 million of proceeds from net sales of short term investments.

Bryan: Cash provided by financing activities was $190 8 million for the three months ended March 31 compared.

Bryan: Third to cash used in financing activities was $2 4 million for the prior year.

Bryan: Financing activities during the three months ended March 31 was substantially driven by our private placement of common stock.

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

Bryan: Thank you, Brian let me wrap up with a few key messages before we open up the call for Q&A.

Bryan: In regards to the initial stage of the Burger King implementation program clearly indications are that new orders are being submitted at a healthy pace.

Savneet Singh: While it's hard to perfectly predict where we will sit at the end of the year, we're executing well on our end and feel confident we can give Burger King every reason to only accelerate our two-year rollout plan. The BK Rollout has a strong impact on our year-over-year growth and profitability. And to provide clarity, I'll share what I shared internally with our team. In the event that we have a very low installed base from BK, our growth will be around 20%. In the event that we have a very fast rollout, our growth will approach 30% or higher. As a mid-case, we're assuming mid-20s groups, and I feel confident we can hit that.

Bryan: While its hard to perfectly predict where we will sit at the end of the year.

Bryan: We're executing well on our end and feel confident we can get Burger King every reasons only accelerate our two year rollout plans.

Bryan: The <unk> has a strong impact on a year over year growth and profitability and to provide clarity I'll share what I shared internally with our team.

Bryan: In the event, we have a very low installed base from Dk, our growth will be around 20%.

Bryan: In the event, we have a very fast rollout, our grizzle approached 30% or higher.

Savneet Singh: As we mentioned in the last call, whatever we don't install this year will get quickly rolled out in 2025 and the early parts of 2026. DK and PAR are in sync in the desire for fast progress, and high quality rollouts give every indication of a strong 2024. With new customers, Burger King and Wendy's, and then including our acquisitions, we certainly feel we're at an inflection point for PAR. As I said earlier, we intend to be EBITDA positive in Q3 and then continue a fast acceleration to meaningful profits.

Bryan: As a mid case or assuming mid twenty's growth and I feel confident we can hit that.

Bryan: As we mentioned on our last call whatever we don't install this year, we'll get quickly rolled out in 2025 and the early parts of 2026.

Bryan: Became part of our instinct and the desire for fast progress and high quality Rollouts give every indication of a strong 2024.

Bryan: With new customers Burger, King and Wendy's and then including our acquisitions, we certainly feel we're at an inflection point for part.

Savneet Singh: This holds true even with the momentary challenges we see in the hardware business today. Our business flywheel will be a cash flow flywheel, rewarding our shareholders for their investment and transitioning our focus to free cash flow per share.

Bryan: As I said earlier, we intend to be EBITDA positive in Q3, and then continue with fast acceleration to meaningful profit.

Bryan: This holds true even with the momentary challenges, we see in the hardware business today.

Bryan: Our business flywheel will lead to a cash flow flywheel promoting our shareholders for their investment and transitioning our focus to free cash flow per share.

Savneet Singh: As we've highlighted in the past, our ARR for share numbers at PAR has grown substantially, and ARR for us is a proxy for future cash flow. As we look to the future, it's exciting not to have to use a proxy for free cash flow but actually focus on free cash flow. This focus on cash flow will not take our attention off of our products and customer flywheel.

Bryan: As we've highlighted in the past our AVR per share number at par has grown substantially and our <unk> and <unk> for us as a proxy for future cash flow as.

Bryan: As we look to the future it's exciting.

Bryan: Not to have to use a proxy for free cash flow, but actually focus on free cash flow.

Savneet Singh: The two will work in balance, living our core value of winning together, where customers, employees, and shareholders must all win together. With that, I'll open the call for Q&A. Operator?

Bryan: This focus on cash flow it will not take our attention off of our products and customer flywheel. The tool working balance living our core values, together, where customers employees and shareholders must all win together.

Operator: Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. If you are called upon to ask your question while listening via the loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute before asking your question.

Bryan: With that I'll open the call for Q&A operator.

Bryan: Thank you we will now begin the question and answer session. If you have dialed in and I would like to ask a question. Please press star wanting a telephone keypad to raise your hand in China. If you would like to withdraw your question simply press Star. One again is that called upon to ask a question or listening via loud speakers. Your advice. Please pickup your handset insurance.

George Frederick Sutton: Again, press star 1 to join the queue, and our first question comes from the line of George Sutton from Greig Hallam. Please go ahead. Thank you. Savneet, I wanted to better understand as you were talking about working through your pipeline of opportunities, you know, given that you've got a pretty massive Burger King rollout and on the loyalty side of Wendy's rollout. Are you getting any pushback from some of those folks in your pipeline? Or are they even more encouraged that you're able to roll these out as they're looking at you versus other options? I think it's the latter.

Bryan: One is that in asking question.

Bryan: First I wanted to join the queue and our first question comes from the line of John Sutton from Craig Hallum. Please go ahead.

Bryan: Thank you suddenly they wanted to.

Bryan: Better understand as you were talking about working through your pipeline of opportunities given that you're you've got a pretty massive burger king rollout and on the loyalty side of Wendy's rollout.

Bryan: Are you getting any pushback from some of those folks in your pipeline or are they even more encouraged that you are able to roll these out.

Savneet Singh: We obviously have to sort of give transparency of what we're rolling out, what we think we can roll out for potential new deals, but it's very validation. And, you know, as I said a couple calls ago, we've never had so much deal flow on the brink, data central, and payment side before. And, you know, we're looking forward to sharing more details on that as we win those deals and put out press releases.

Bryan: As they're looking at you versus other options.

Bryan: I think it's the latter.

Bryan: Obviously, you have to sort of.

Bryan: Give transparency of what we're rolling out what we think we can rollout for potential new deals, but it's very validating and as I said a couple of calls ago. We've never had so much deal flow on the brain data central and payment side before and we're looking forward to it.

Bryan: Share more details on that as the Windows put out press releases.

Savneet Singh: And so I think it's reflected in that as you win a large customer and then another, it helps other brands feel comfortable that you can handle that scale. And as I mentioned, you know, we feel we did a great job on the rollout of that first big customer. I think they would say the same.

Bryan: And so I think it's reflected in that as you win a large customer and then another it helps other brands you're comfortable that you can handle that scale and as I mentioned, we feel we are doing a great job on the relative that first day customer.

Savneet Singh: And, and, you know, that customer reference will only help new customers. Now, knowing that you have in the past been unable to take on international opportunities for some of these larger chains, I'm just curious how those discussions go, particularly with those in your pipeline as you're bringing on tasks later this year. Historically, it's been a challenge, as you said, and I'd say a mark against us in an RFP, but obviously, we've been public that we've signed an agreement to acquire TASC, and we think TASC will be a good solution.

Bryan: They would say the same and that customer reference will only help new customers.

Bryan: Now knowing that you have in the past been unable to take on international opportunities for some of these larger chains I'm just curious how those discussions go particularly with those in your pipeline as you are.

Bryan: Bringing on task later this year.

Bryan: Historically, it's been a challenge as you said and I would say a mark against us in an RFP, but we I think.

Savneet Singh: I would say, categorically, the response to that has been positive from customers and future customers because it's really a pain point for them, and if we can execute on an international strategy under the PAR umbrella, I think it gives the customers a lot of comfort that we'll execute just like we have for them in the U.S., and so we're really excited to rapidly integrate the TASC into the PAR family, but I also think Okay, then just lastly for me, Bryan, could you, when you look at SG&A spend in the quarter, was there anything one-time in nature that wouldn't necessarily recur, just so I'm being clear? Yeah, there were, there are large amounts related, obviously, to the M&A transactions, the transactions that are sitting in G&A.

Bryan: Obviously, we've been public.

Bryan: Signed an agreement to acquire cask and we think that will be a good solution I would say categorically. The response to that has been positive from customers and future customers, because it's really a pain point for them and if we can execute on international strategy under the par and Bella I think it gives the customers a lot of.

Bryan: Comfort that we'll execute like we have for them in the U S.

Bryan: And so we're really excited to rapidly integrate.

Bryan: The tasks into the <unk> family.

Bryan: But I also think we'll see a lot of acceleration within the test business because it allows us the ability to cross sell things like payments hardware.

Bryan: An additional module so it will work both ways.

Bryan: Okay and then just lastly for me Brian could you when you look at SG&A spend in the quarter was there anything onetime in nature that wouldn't necessarily recur just so im being clear.

Bryan A. Menar: We did have some re-org take place during the quarter too, which you can see in the severance. Most of what you see in the non-GAAP adjustment in the AK is all related to some of what happened within OPEX. And so when we look at what we did from the standpoint of organic non-GAAP, it was about a 7% increase in total OPEX year-to-year. Perfect. Thank you. Our next question comes from the line of Eric Martinuzzi from Lake Street. Please go ahead.

Bryan: Yes. There was there are large amounts related obviously for the M&A transaction or any transaction fees and G&A we.

Bryan: We did have some rework take place during the quarter, which included severance.

Bryan: Most of what you see.

Bryan: In the non-GAAP adjustments in the 8-K is all related to kind of what happened within within Opex and so when we look at.

Bryan: What we did from a standpoint of organic non-GAAP is about a 7% increase until opex year on year.

Bryan: Perfect. Thank you.

Eric Martinuzzi: Yeah, I wanted to better understand the product roadmap post-Stuzo acquisition. Are we going to be running two product lines, essentially with punch pointed towards the enterprise restaurant brands and Stuzo aimed at the C-stores? A great question.

Savneet Singh: Yes.

Savneet Singh: Our next question comes from the line of Eric My opinion Z from Lake Street. Please go ahead.

Bryan: Yes, I wanted to better understand the product roadmap post.

Bryan: Acquisition, how are we going to be running two product lines essentially with punch pointed towards.

Savneet Singh: So, we are aggressively consolidating and working towards consolidating into one application. You know, I think we feel really excited. It's going to be a multi-year process, but I would tell you, having spoken to our large customers, the CISO large customers, we feel that they're very excited about combining those sets of functionality. And so, the short answer is we're going to get down to, you know, one product for the market, and it'll be a multi-year process.

Bryan: Enterprise restaurant brands.

Bryan: So aimed at C stores.

Bryan: A great question. So we are aggressively consolidating and working towards consolidating.

Bryan: Into one.

Bryan: One application.

Bryan: I think we feel really excited it's going to be a multiyear process, but I would tell you having spoken to.

Savneet Singh: But, you know, as an example, we're focusing the new deals on the studio product so that we don't complicate the merging of the two products. So, we feel really good about the opportunity so far. The customer feedback has been excellent.

Bryan: Our large customers and centralized customers.

Bryan: We feel that they're very excited about combined with debt that touch functionality.

Bryan: And so the short answer is we're going to get down to one one product for the market.

Bryan: And it will be a multiyear process, but.

Bryan: As an example, where we're focusing and new deals on the studio product.

Savneet Singh: And, you know, I would tell you what has changed from when we first announced it is that I think we'll see faster cross-sell of additional products in this market than we had expected when we acquired the business. Okay, and then on the hardware side, you talked about kind of some, I guess it was two reasons for that. You know, we had some issues with lumpiness in enterprise customer orders, and then you talked about next-gen part terminals and heads to roll out.

Bryan: So that we don't complicate.

Bryan: Complicate the merging of the two products. So we feel really good about the opportunity so far customer feedback has been excellent and I would tell you what.

Bryan: As change.

Bryan: The first is that I think we think we'll see faster cross sell of additional products into this market than we had expected when we acquired the business.

Speaker Change: Okay, and then on the hardware side, you talked about kind of I guess it was two reasons for that we had some issues with.

Savneet Singh: But, you know, historically, I thought of the hardware business as kind of a hundred million dollar annual business. Do we get back to that? And is it, do we recover in Q2? Or is this kind of a, you know, it's?

Savneet Singh: Okay.

Savneet Singh: Lumpiness in enterprise customer orders and then you talked about Nextgen.

Bryan: Our terminal in <unk>.

Bryan: Rollout, but.

Bryan: Historically I thought of the hardware business is kind of a $100 million annual business.

Savneet Singh: I think... So, yeah, the weakness is in our non-Brink base. So our Brink customers are attaching, they continue to attach, and we've got optimism, as I mentioned, given how strong the Brink pipeline is and, you know, the deals that we've won recently that we believe will attach hardware. There's an incredible amount of opportunity for hardware to get back to that hundred and then grow well beyond it. You know, will we get there this year?

Bryan: Do we get back to that and that's it.

Bryan: Cover in Q2 or is this kind of a.

Bryan: It's <unk>.

Bryan: I think so.

Bryan: So yes, the weaknesses in our non brink base. So our brand customers are attaching that continue attached and with that optimism as I mentioned, given how strong the bring pipeline is and the deals that we've won.

Savneet Singh: I think that will be harder for us. It's certainly in the cards, but I don't want to, you know, I don't want to tell you we're guaranteed. But this, to me, again, it's a matter of if not when.

Savneet Singh: Recently that we believe will attach hardware.

Bryan: Incredible amount of opportunity to to hardware to get back to that 100, and then grow well beyond it and while we get there. This year I think that will be harder for us certainly in the cars, but I don't know I don't want to tell you.

Savneet Singh: The hardware attachment on Brink is going to be the driver of that business going forward, and given how large these Brink deals are that we're winning, or in the final stages of winning, and their attachment of Brink hardware, you know, we think we'll make it up. It's just the rollouts will sort of depend on when that comes in. So, you know, will we get back to the hundred million? Absolutely. Will it be this year?

Savneet Singh: Guaranteed.

Savneet Singh: But this to me again, it's a matter of if not when the hardware attachment on break is going to be the driver of that business going forward and given how large. These bank deals are that we're winning are in final stages of winning and their attachment of brink hardware, we think we'll make it up.

Savneet Singh: You know, I'm not counting on that, but I think there are people at PAR that absolutely love it. Thank you for taking my question. Our next question comes from the line of Stephen Sheldon from William Blair. Please go ahead.

Bryan: It's just the Rollouts will sort of depend when that comes in and so will we get back to $100 million absolutely will it be this year.

Bryan: I'm not counting on that but I think there is.

Bryan: There are people at part of that absolutely.

Stephen Hardy Sheldon: Hey, thanks, and appreciate all the additional detail this quarter, maybe just on the Burger King rollout. You know, Can you maybe talk about, I think you maybe started from GoLive in April. I mean, just generally how are things progressing relative to your own expectations? And what's your level of confidence that you have the right headcount now to complete the implementation success? And, you know, the short answer is, you know, yes, and yes. I feel great about what we're delivering. You know, we check in weekly with leadership. They're really happy with us. They communicate that to us. The coordination is very tight.

Bryan: Thank you for taking my questions.

Savneet Singh: Our next question comes from the line of Stephen Sheldon from William Blair. Please go ahead.

Bryan: Hey, thanks.

Bryan: And I appreciate all the additional detail.

Bryan: This quarter, maybe just on the Burger King rollout.

Stephen Hardy Sheldon: Can you can you maybe talk about I think I think you may be starting to get some go lives in April.

Bryan: Generally how are things progressing relative to your own expectations and what's.

Bryan: Your level of confidence that you have the right head counting now to complete the implementation successfully.

Savneet Singh: Our general manager of that, you know, our brink business, will tell you there's only room for optimism here, given our execution and their execution. So we feel very good now. We're one month into it.

Speaker Change: Thanks for the question.

Stephen Hardy Sheldon: Yes short answer is yes, and yes, I feel great about what we're delivering we checking weekly with leadership they are really happy with us they communicate that to us.

Savneet Singh: So, you know, could things change? Yes. But I'm not expecting it, given how much prep work each side has done to get to where we are today.

Savneet Singh: The coordination is very tight our general manager of that.

Savneet Singh: We feel appropriately staffed, as I mentioned on the call, you know, that we're not expecting OPEX to grow from here. In fact, I think it'll come down. And so we've ramped up. You know, we're rolling it out. I think that ramp-up is why the rollout is going so well, and we don't expect to add more to support it. Great to hear. And then just on the gross, the adjusted gross margins, can you maybe help me frame or adjust the adjusted gross margin? Page PAGE of NUMPAGES www.verbalink.com, And I think you've mandated every kind of product to get to.

Bryan: <unk> business I'll tell you there is only room for optimism here given our execution in their execution. So we feel very good now that we're one month into it though.

Bryan: Things changed yes, I'm not expecting it given how much prep work each side has done to get to where we are today.

Bryan: We feel appropriate that as I mentioned on the call.

Bryan: We're not expecting opex to grow from here in fact, I think it will come down.

Bryan: And so we've ramped up we're rolling out I think that ramp up is why the rollout is going so well.

Savneet Singh: And.

Savneet Singh: And we don't expect to add more to support it.

Bryan: Great to hear.

Bryan: And then just on the gross would be adjusted gross margins can you maybe help frame or adjusted gross margins for the different products. You have are most products currently in that do you have any.

Savneet Singh: And just remind us where the drag is coming from and whether those areas of drag are moderated at all, such as with menu, which I think menu is one that you've called out before as being a drag. Yeah, so all the products are between the low 60s and the mid 70s, punch being, you know, punch and data central at the high end of that. And a menu at the very bottom of that. The menu is definitely a drag.

Savneet Singh: <unk> plus range.

Savneet Singh: <unk> mandated every kind of product to get to and just remind us where the drag is coming from and what are those the areas of drag or moderating at all such as with menu, which I think menu is one that you've called out before as being a drag.

Bryan: So as Albert process between low <unk> and mid seventies punch being pension datacenter all at the high end of that.

Bryan: Menu at the very bottom of that.

Bryan: And you're definitely drag, but as you saw menu added.

Savneet Singh: 200, <unk> this quarter, which is.

Bryan: Very very large amount.

Bryan: This category.

Bryan: As the revenue gets lie there youll get had one there.

Savneet Singh: Payments is getting is going to get to that margin too, but again it depends it's growing so fast so that too will get there and so at the very bottom of that menu of top end it data central and punch and brink is kind of in the middle.

Savneet Singh: But as you saw, you know, Menu added 1200 sites this quarter, which is a, you know, very, very large amount in this category. So as the revenue gets live there, you'll have a good headwind there. Payments are getting, it's got to get to that margin too. But again, as payments are growing so fast, so that too will get there. And so, you know, at the very bottom of this menu, at the top end is data central and punch, and Brink is kind of in the middle. Great, thank you. Our next question comes from a line by Samad Samana from Jeffries. Please go ahead. Hey guys, this is Jeremy on behalf of Samad.

Samad Saleem Samana: Thanks for taking my questions. I wanted to follow up on that question about the VK rollout. It's great to see that color on the other 20% to 30% revenue based on the rollout. I guess, what are some of the hurdles to get to that higher VK rollout in 2024? Or what would prevent it from moving faster or slower?

Speaker Change: Great. Thank you.

Samad Saleem Samana: Our next question comes from the line of Samad Samana from Jefferies. Please go ahead.

Savneet Singh: Hey, guys. This is Jeremy on for Mark Thanks for taking my questions. So I wanted to follow up on that question about the BK rollout, it's great to see that color on the 20% to 30% revenue based on the Rollouts I guess, what are some of the hurdles to get to that higher VK rollout in 2024, or I guess, what would prevent it from moving faster or slower than what we will give you more visibility.

Savneet Singh: What would give you more visibility? So number one is our performance, and like I said, that's the part I feel really strongly about. Our whole team feels that way, and I think, you know, BK would tell you the same thing. We're executing as we promised and committed to, and probably even better, and the communication is excellent. So the number one reason for anything to go up or down is our own performance, and that's the variable we control. The variable we don't control is on the other side, because these are incredibly, you know, choreographed rollouts, and we sort of need to work alongside our corporate partners. Transcripts provided by Transcription Outsourcing, LLC.

Savneet Singh: Number one is our performance and like I said, that's the part I feel really strongly about our whole team feels that way and I think BK will tell you. The same thing we're executing as we promised committed to you and probably even better and our communication is excellent. So thats. The number one reason for anything to go up or down in our own performance and Thats the variable weed control available Youll control is.

Savneet Singh: On the other side because these are incredibly.

Savneet Singh: Choreographed.

Savneet Singh: Rollouts and and we certainly intend to work alongside our corporate partners and so the only reason we wouldn't.

Savneet Singh: And then I wanted to ask about that Wendy's win that you announced a few weeks ago. You know, it's great to see another Tier One customer. Some of the language in the press release, maybe it seemed a little bit different from other wins, you know, I mentioned the punch enterprise support. I guess, was this a full rip and replace for Wendy's? Or is it maybe something more complementary, I guess? Well, what did it feel like?

Savneet Singh: Way above.

Bryan: The midpoint is.

Savneet Singh: Danny at some time, they wanted to slow it down the internal measurement machinations, there, but as I mentioned, because we are both committed to a tiered rollout.

Savneet Singh: Equally incentivized to go as fast as possible.

Bryan: Got you that's really helpful color and then I wanted to ask about that Wendy's win that you announced <unk>, it's great to see another tier one customer.

Savneet Singh: No, it's, it's a full rip and replace. So it's a really big win. It's a big initiative. It's truly the full solution at within punch.

Savneet Singh: Some of the language in the press release, maybe it seemed a little bit different from other wins I mentioned the enterprise support I guess was this a full rip and replace for Wendy's or is it maybe something more complementary I guess what was the deal it.

Savneet Singh: Gotcha. Thanks for taking my question. Our next question comes from Adam Wyden from ADW. Please go ahead. Okay, guys, can you hear me?

Adam David Wyden: Yep. All right, so just help me with some math here. It appears that you guys added about 8 million in AR organically. If I sort of look at your minus 7 of EBITDA in the period, obviously, you have some Burger King implementation costs that will come down or are obviously non-recurring. Is there anything you can do to sort of give us some sort of parameters as to how much of that is sort of implementation costs, whether it's Burger King or Wendy's, that you expect to sort of go down? I mean, obviously, there is 1 times 7 is a transaction, but can you give us a little bit, and then I want to sort of move forward with the question. How about this?

Adam David Wyden: It's a full rip and replace so it's a really big win it's a big initiative, it's truly the full solution at within punch.

Speaker Change: Got you thanks for taking my questions.

Adam David Wyden: Our next question comes to the line of Adam Wyden from <unk>. Please go ahead.

Speaker Change: Hey, guys can you hear me.

Adam David Wyden: Yep.

Adam David Wyden: Alright, So just help me with some math here. It appears that you guys added about $8 million of <unk>.

Adam David Wyden: Organically.

Adam David Wyden: If I sort of look at your minus seven of EBITDA in the period. Obviously you have some burger King implementation cost will come down or obviously are nonrecurring is there anything you can do to sort of give us some sort of.

Savneet Singh: Take the minus 7 of EBITDA. You have $8 million of organic in the period. If you hold that true, and your OPEX is flat, and you are adding STUSO, which you got very little contribution from, wouldn't that make your EBITDA break even in the second quarter? I mean take 8 million of organic.

Adam David Wyden: Parameters as to like.

Savneet Singh: How much of that is sort of implementation costs, whether it's burger king or Wendy's that you expect to sort of go down I mean, obviously, there's onetime severance and transaction, but can you give us a little bit and then I want to sort of.

Savneet Singh: To move forward with the question Bob with US take the minus seven of EBITDA, you have $8 million of organic in the periods. If you hold that through.

Savneet Singh: If your OPEX is flat, again take a 70% or 80% incremental gross margin. That gets you to 5.6, and then you get a full quarter of STUSO, which is doing like 4. Wouldn't that take you into profitability in the second quarter if OPEX is coming down? Am I doing something wrong?

Savneet Singh: Your Opex is flat and you are adding students, though which you got very little contribution wouldn't that make you EBITDA breakeven in the second quarter, I mean take 8 million of organic.

Savneet Singh: If your Opex is flat again, you'll take a 70% 80% incremental gross margin that gets you to five six right and then you get a full quarter of <unk>, which is doing my four will then take you into profitability.

Savneet Singh: It certainly could. You know, we're putting out guidance to make sure we hit it. As I said, we're doing our guidance, assuming the hardware business, you know, doesn't get better. So, you know, like I said, we feel really, I mean, the software business is clicking, and the margins are growing. You know, you can see how efficient we've gotten sales and marketing; R&D is working its way there. And so we feel really good about it.

Savneet Singh: In the second quarter, if opex is coming down by doing some law.

Savneet Singh: It certainly could.

Savneet Singh: But we're putting out.

Savneet Singh: Make sure we hit it and as I said, we're doing our guidance assuming the hardware business.

Savneet Singh: So could we, you know, I think it's possible, but I want to make sure we hit what we tell you. And specifically Q1, Q1 is always a challenging quarter because there are what I would call one-time items that can't be adjusted out, things like bonus accrual adjustments, Canadian pensions, insurance payments, that for some reason don't get amortized, that we can spend an hour talking about that offline. And so, you know, I would say the Q1 number is not apples to apples compared to Q4, as an example.

Savneet Singh: It doesn't get better so.

Savneet Singh: I guess, we still really I mean, the software business is clicking the margins are growing.

Savneet Singh: You can see how efficient we got in sales and marketing R&D is working its way there.

Savneet Singh: And and and so we feel really good about it so could we think it's possible, but I want to make sure. We hit what would put you can tell you.

Savneet Singh: And specifically in Q1 Q1 is always a challenging quarter because there are what I would call one time items that can't be adjusted out things like bonus accrual adjustments Canadian pension insurance payments. If for some reason don't get amortized that we can spend an hour talking about that offline.

Savneet Singh: So, in summary, I think we feel really good about getting there in Q3. As I said, I think there's continued to be meaningful acceleration. The part, you know, that I, the real part I was trying to push on the call was, you know, we're not adding any heads within the core products of Brink, Punch, Data Central, and Payments and, you know, really holding this expense flat. The only heads we added were Wendy's and Burger King.

Savneet Singh: And so.

Savneet Singh: I would say the Q1 number is not apples to apples compared to Q4 as an example, so.

Savneet Singh: In summary, I think we feel really good about getting there in Q3 and I said I think it's continued to be meaningful acceleration.

Savneet Singh: And as I said on the call, we expect the OPEX to actually come down, you know, organically, so excluding Suzo even. So it's the core business driving meaningful profitability. Suzo will add, and then obviously when we roll in task, that's another, you know, call it, you know, six, seven, eight annualized. But would you expect, I mean, obviously, in the quarter you had about, you know, I think I calculated about a three and a half million dollar gross margin headwind, which probably a lot of it's EBITDA. I mean, would you, I'm just basically I mean, you wouldn't, I mean, that sort of is already in the cake.

Savneet Singh: Right.

Savneet Singh: The real problem is trying to push on the call is we're not adding any heads within the core products that bring punch day in central and payments.

Savneet Singh: And.

Savneet Singh: Holding this expense line. The only has we outerwear Wendy's and Burger King and as I said on the call. We expect the opex to actually come down.

Savneet Singh: Organically, excluding pseudo even so it's the core business driving meaningful profitability, Susan will add and then obviously when we throw in task that's another call it 678 annualized.

Savneet Singh: Yeah.

Savneet Singh: When would you expect I mean, obviously in the quarter you had about I.

Savneet Singh: I think I calculated about a $3 5 billion dollar gross margin headwind, which was probably a lot of its EBITDA, but would you I'm just basically taking the point from the first quarter are you expecting additional headwinds in hardware sequentially, because it was a pretty big decline year over year.

Savneet Singh: So, I mean, you're not expecting additional declines in hardware, you know, sort of from the level where you are in Q1, is that right? I'm not, I'm not. And as I said, I think the second half, when we announce some of these wins that we've had that we haven't, you know, you know, when they get public, I think we'll probably move back. But I'm not expecting Q1, sorry, Q2 over Q1 to be meaningfully worse by any means. And, in fact, we are only expecting a little bit better.

Savneet Singh: You Wouldnt I mean that sort of is already in the case, so I mean youre not expecting additional declines in hardware so that from the level, where you are in Q1 is that right.

Savneet Singh: Right. So again, going back to sort of the analysis I'm doing, if you expect similar organic revenue in the second quarter, and you're holding OPEX flat, if anything, down, and you get, I mean, what was the contribution from Stuzo in the quarter to EBITDA? It must have been only like a couple weeks, right? I mean, you didn't get very much out of it, right? We got a little bit less than three weeks of Stuzo in the quarter.

Savneet Singh: I'm not I'm, not and I think in the second half with when we announce some of these wins that we've had that we haven't.

Savneet Singh: I think we'll claw some of that but I'm not expecting Q1 Q2 over Q1 to be meaningfully worse by any means and in fact, yes, we are.

Savneet Singh: Generally expecting a little bit better.

Savneet Singh: Right. So I think just again going back to sort of the analysis I'm doing if you expect similar organic revenue in the second quarter.

Savneet Singh: So it's not really in there, and you get the benefit of that fully in Q2. Right, so you get a full quarter of Stuzo. You get, hopefully, some declines in OPEX in the second quarter because there were obviously some layoffs that were online and whatnot. And obviously, hopefully, some of the implementation comes down. And if you add organic – now, last question.

Savneet Singh: Youre holding opex flat, if anything down right and you get I mean, what was the contribution of <unk> in the quarter on EBITDA must have been only like a couple of weeks right. I mean, you didn't get very much of it right.

Savneet Singh: We got about little bit less than three weeks of DSO in the quarter.

Savneet Singh: How do you think about adding organic revenue? How should we think about the incremental dollars of revenue against a statement of OpEx flat?

Savneet Singh: So it's not really in there and get the benefit of that full in Q2.

Savneet Singh: Right. So you get a full quarter of <unk> you get hopefully some declines in opex in the in the second quarter. Because there was obviously some layoffs that were online and whatnot and obviously hopefully some of the implementation comes down and if you add organic now how do you. The last question. How do you think about adding organic revenue. So when you say opex is flat.

Savneet Singh: Are you talking about a hundred percent flow through? Or are you talking about a flow through at your gross margin rate? A flow-through at our gross margin rate obviously depends on the product, right? So one of the things I've seen is that we are really getting much, much better at stapling Data Central to Brinkfield.

Savneet Singh: Data Central is an incredibly high gross margin product, and so that gross margin flow-through is higher versus Menu, which today is lower. So it depends on the product. So I, I budget internally, you know, let's assume gross margins just stay flat. That's what drops, drops down.

Savneet Singh: How should we think about the incremental dollars of revenue against a statement of Opex flat right are you talking about 100 bps flow through or are you talking about a flow throughout your gross margin rate.

Savneet Singh: Flow through in our gross margin rate, obviously depends on the product right. So when we look one of the things. We've seen is that we are really getting much much better at stapling data central at the brink deal David Central has an incredibly high gross margin product and so that gross margin flow through is higher versus menu, which today's lower so it depends on product. So I budget internally, let's assume gross margins just stay flat that's what.

Savneet Singh: As you know, and we've talked about, we expect that number to grow as well. Wouldn't your gross margins go up on your lower margin products as you drive better utilization? I mean, I guess if you're at a 60% gross margin menu, wouldn't the incremental margin on a dollar of revenue be higher on the menu than on the brink? I mean, once we clear the cost, yeah, and so it's, remember, even when you add a menu customer, as an example, we're still, you know, firing up an Amazon instance, we're still launching the product, so there's still incremental costs.

Savneet Singh: Drops drops down.

Savneet Singh: As you know and we've talked about we expect that number the gross margins to grow as well.

Savneet Singh: What are your gross margins go up in your lower margin products as you get as you drive better utilization.

Savneet Singh: But yes, over time, menus should get to the same gross margins. I mean, I want menus to get a bunch of gross margins which are really exciting and growing a ton. And so over time, yeah, it will get there. But the actual revenue dollars have to come in.

Savneet Singh: If you had a 60% gross margin menu Lindsay incremental margin on a dollar of revenue be higher on menu than a bank I mean is that right.

Savneet Singh: Once we clear the cost yet and so.

Savneet Singh: You remember even when you.

Savneet Singh: So we launched these, you know, six or seven customers this quarter. In Q2, we get the full quarter of that revenue. And that's, again, going to boost those gross margins. So I think what your point is, what is the incremental gross margin of a customer? It's, on the menu, it's a little bit hard because we're so early, right?

Savneet Singh: Our menu customer as an example, we're still firing up in Amazon instance, we're still launching that box are there still incremental cost, but yes overtime menu should get to the same gross margins I mean, I want many to get to <unk> margins are really exciting.

Savneet Singh: We're a million, two million bucks into this thing. And so, you know, we're still not where I can say, oh, it's a 90% drop, but it should be no different than any other SaaS product because every incremental instance, as an example, is higher margin than the last. Right, so it's a fair assumption that at minimum, our incremental gross margin should be around 70, and hopefully, it should be higher as we drive utilization in our lower margin products, right?

Savneet Singh: Growing a ton.

Savneet Singh: And so over time, yes, it will get there.

Savneet Singh: The actual revenue dollars have to come in so we launched <unk>.

Savneet Singh: Six or seven customers this quarter in Q2, we get the full quarter of that revenue.

Savneet Singh: And that's again going to.

Savneet Singh: Boost that those gross margins so.

Savneet Singh: So I think what you pointed what is incremental gross margin of our customer.

Savneet Singh: On menu a little bit hard because we're still early right. We're $1 2 million Bucks into this thing and so.

Savneet Singh: So if I take sort of 70 where we are, at 8 million, that's 5.6 plus a full quarter of Stuzo plus lower OPEX. I mean, assuming hardware doesn't get worse, I mean, I'm seeing profitability in the second quarter.

Savneet Singh: We're still not where I can say, oh, it's 90% drop but yes, it should be no different any other SaaS product because.

Savneet Singh: Every incremental instance, as an example is higher margin.

Savneet Singh: I guess you guys are just sort of being conservative with your guidance. Is that a fair way to walk away from this? Unknown Attendee. Okay. All right. That's it.

Savneet Singh: Right. So it's a fair assumption that at minimum or incremental gross margin should be around 70 at hopefully they should be higher as we drive utilization in our lower margin products right. So if I take sort of 70, where we are at $8 million up five six plus a full quarter of <unk> plus a full quarter of <unk> plus lower Opex I mean.

Unknown Attendee: I mean, assuming hardware doesn't get worse, I mean, I'm seeing profitability in the second quarter. I guess, you guys are necessarily being conservative with your guidance does that is that a fair way to.

Operator: Thank you. And there are no further questions at this time. I'll hand the conference back to management for any further remarks. Thank you everybody for joining our call. We look forward to updating you in the future and giving you more updates on our progress towards free cashflow profitability and also some of these large, great wins. Thanks. Thank you all for joining the call today. You may now disconnect.

Operator: To walk away from this.

Operator: And those assumptions it is and I think your math is generally pretty.

Operator: Directionally accurate on everything.

Speaker Change: Okay, Alright, that's it thank you.

Operator: Okay.

Operator: And there are no further questions at this time I'll hand, the conference back to management for any further remarks.

Operator: Thanks, everybody for joining our call. We look forward to updating you in the future and giving you more updates on our progress towards free cash flow profitability, but also some of these large great wins.

Operator: Thank you all for joining the call today you may now disconnect.

Operator: Okay.

Operator: Yeah.

Operator: [music].

Operator: Yes.

Operator: Okay.

Operator: Yeah.

Operator: Okay.

Operator: Yes.

Operator: Okay.

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