Q2 2024 PAR Technology Corp Earnings Call
Good day, and thank you for standing by welcome to the par technology fiscal year 2024 second quarter financial results conference call at.
Speaker Change: At this time all participants are in a listen only mode.
After the speaker's presentation, there will be a question and answer session.
Ask a question during this session you will need to press star one one on your telephone you will then hear an automated message advising your hand is raised to withdraw your question. Please press star one again, please be advised that today's conference is being recorded.
Chris Byrnes: I would now like to hand, the conference over to your Speaker today, Chris Byrnes Senior Vice President of Investor Relations and business development. Please go ahead.
Chris Byrnes: Thank you Amy good morning, everyone and thank you for joining us today for <unk> technologies 2024 second quarter financial results call.
Speaker Change: Earlier. This morning, we released our financial results.
The earnings release is available on the Investor Relations page of our website at <unk> Dot Com, where you can also find the Q2 financials presentation.
Chris Byrnes: As well as in our related form 8-K furnished to the SEC.
During our call today, we will reference non-GAAP financial measures, which we believe to be useful to investors and exclude the impact of certain items.
Chris Byrnes: A description and timing of these items along with a reconciliation of non-GAAP measures to the most comparable GAAP measures can be found in our earnings release.
Chris Byrnes: I'd also like to remind participants that this conference call may include forward looking statements that reflect management's expectations based on currently available data.
Chris Byrnes: However, actual results are subject to future events and uncertainties.
Chris Byrnes: Formation on this conference call related to projections or other forward looking statements may be relied upon and subject to the safe Harbor statement included in our earnings release, this morning, and in our annual and quarterly filings with the SEC.
Chris Byrnes: Finally, I'd like to remind everyone that this call is being recorded and it will be made available for replay.
Chris Byrnes: Via a link available on the Investor Relations section of our website.
Speaker Change: Joining me on the call today is pars CEO and President <unk> Singh and Bryan <unk> Chief Financial Officer.
Speaker Change: I'd now like to turn the call over to <unk> for the formal remarks portion of the call, which will be followed by general Q&A.
<unk> Singh: Thank you, Chris Good morning, and welcome to everyone on the call queue.
Speaker Change: Q2 marked an inflection point for park, we delivered meaningful growth on a near flat Opex space launched our Burger King rollout integrated studio complete the work to close the task acquisition and launched <unk> in July.
Speaker Change: Equally important is that we divested our government business clearing the way for us to be a pure play foodservice technology business.
Speaker Change: We are marching towards becoming a very profitable business, while increasing our ability to actually change at our customers.
Speaker Change: Subscription services continues to be the growth engine of our company and subscription services revenue grew by 48% in the quarter versus the same period last year.
Operator: Good day, and thank you for standing by.
Speaker Change: Our relentless focus on customer success, along with our commitment to delivering best in class products continues to drive our results excluding.
Operator: Welcome to the PAR Technology Fiscal Year 2024 second quarter financial results conference call. At this time, all participants are in listen only mode. After the speaker's presentation, there will be a questioning answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded.
Speaker Change: Excluding studio now branded prior retail second quarter AUR grew organically by 24% when compared to Q2 'twenty three.
Speaker Change: This is an impressive number given we're just kicking off Burger King launched <unk> in July and as you know we recognize payments revenue on a net basis.
Speaker Change: At the end of Q2 <unk> stood at $192 million.
Speaker Change: At 57% increase from the second quarter of last year.
Christopher Burns: I would like to hand the conference over to your speaker today, Chris Burns, Senior Vice President of Investor Relations and Business Development. Please go ahead.
Speaker Change: Additionally, post Q2, we closed our acquisition of task, which will contribute an additional $40 million of IRR.
Speaker Change: Operator cloud <unk> grew by 37% to $84 million in Q2, when compared to the same period last year.
Christopher Burns: Thank you, Amy.
Speaker Change: Greater cloud growth is being driven by increased win rates at brink with stronger multi product attachment of data central and part of payments.
Savneet Singh: Good morning, everyone, and thank you for joining us today for PAR Technologies 2024 second quarter financial results call. Earlier this morning, we released our financial results. The earnings release is available on the Investor Relations page of our website at parttech.com, where you can also find the Q2 financials presentation, as well as in our related form AK first to the SEC. During our call today, we will reference non-gap financial measures, which we believe to be useful to investors and exclude the impact of certain items.
Speaker Change: As well as continued <unk> improvement.
Speaker Change: ARPA increased by 14% from the same period last year due to higher value deals API monetization upsell price increases in part payment services go live.
Savneet Singh: The description and timing of these items along with a reconciliation of non-gap measures to the most comparable gap measures can be found in our earnings release. I'd also like to remind participants that this conference call may include forward-looking statements that reflect management expectations based on currently available data. However, actual results are subject to future events and uncertainties. The information on this conference call related to projections or other forward-looking statements may be relied upon and subject to the safe harbor statement included in our earnings release this morning and in our annual and quarterly filings with the SEC. Finally, I'd like to remind everyone that this call is being recorded, and it will be made available for replay via a link available on the Investor Relations section of our website.
Speaker Change: We expect the growth in <unk> to continue given current white space in existing high value accounts as well as a very robust pipeline of tier one deals to.
Speaker Change: Put this into perspective, the successful attachment of both data central and payments into our brain concept increases to our opportunity by over three X.
Speaker Change: As I mentioned, we officially launched at Burger King Railroad on April one and Burger King is extremely pleased with the progress made to date, including both from a product as well as an implementation perspective.
Speaker Change: We feel confident that part can be the enabler of <unk> success and are giving them every reason to accelerate our rollout and hopefully add additional products down the road.
Speaker Change: It is critical for hurricane needs to implementation thresholds for the year and we are partnering closely to ensure that they do.
Speaker Change: As we mentioned in our last call whenever we don't install this year, we'll get quickly rolled out in 'twenty five and the early parts of 2026.
Speaker Change: Turning to par payments.
Speaker Change: Q2, part payments achieved our highest ever gross processing volume run rate of $2 5 billion.
Savneet Singh: Joining me on the call today is PAR CEO and President, Sevneet Singh and Brian Minar, PAR's chief financial officer.
Speaker Change: Pipeline execution led to the signing of several new concepts such as Chowtime, Canada wings over in Miami growth to name, a few which will be going live before the end of the year in.
Savneet Singh: I'd now like to turn the call over to Sevneet for the formal remarks portion of the call, which will be followed by General Q and A.
Savneet Singh: Sevneet. Thank you, Chris.
Speaker Change: In Q2, we went live with three new customer logos and continued our rollout with smoothie King importantly, many of our new wins include processing for above store transactions not just our traditional in.
Savneet Singh: Good morning and welcome to everyone on the call. Q2 marked an inflection point for PAR. We delivered meaningful growth on a near flat op-ex base, launch our Burger King rollout, integrated stu-zo, complete the work to close the task acquisition, and launch Wendy's in July. Equally important is that we divested our government business, clearing the way for us to be a pure play food service technology business. We are marching towards becoming a very profitable business, while increasing our ability to effectuate change at our customers.
Speaker Change: In store Pos processing.
Speaker Change: Our pipeline of new customers is strong and we expect continued momentum following the launch of our punch wallet offering at the start of Q3.
Speaker Change: I will give more details on punch Walt later in the call.
Speaker Change: Looking forward the team is fully engaged on integrating payment capabilities into part of retail and test to unlock further growth.
Savneet Singh: Subscription services continues to be the growth engine of our company, and subscription services revenue grew by 48% in the quarter, versus the same period last year. Our relentless focus on customer success, along with a commitment to delivering best-in-class products, continues to drive our results. Excluding stu-zo, now branded PAR retail, second quarter AR grew organically by 24% when compared to Q2-23. This is an impressive number given we're just kicking off Burger King, launch Wendy's in July, and as you know, we recognize payments revenue on a net basis.
Speaker Change: Adding payments to the <unk> retail sales bag is very exciting.
Speaker Change: Data Central also delivered a strong Q2. This quarter included the signing of seven new customers across the restaurant and C store space, including pilot travel stops and the ongoing rollout of Love's travel centers.
Speaker Change: We continue to build out a robust pipeline with four new tier one concepts and see additional opportunities for data central to the attachment to break deals.
Speaker Change: Data central is winning off the strength of brings tremendous growth and reputation, creating a roadmap for future upsell of new products. The.
Savneet Singh: At the end of Q2, ARR stood at $192 million, a 57% increase in the second quarter last year. Additionally, post Q2, we closed our acquisition task, which will contribute an additional $40 million of ARR. Operator Cloud ARR grew by 37% to $84 million in Q2, compared to the same period last year. Operator Cloud Growth is being driven by increased wind rates at brink, with stronger multi-product attachment of data central and PAR payments, as well as continued ARR pool improvement.
Speaker Change: The enterprise market is seeing how the connection of the Pos back office and payments processing delivers improved operations enhanced data capture and significant value to their business. This trend will continue.
Speaker Change: Our engagement cloud, which includes punch menu and now retail continued its steady growth trajectory in Q2.
Speaker Change: After a period of rapid change our near term goal for punch to drive stable new business wins of 500 to 1000 new locations quarterly.
Speaker Change: Our exciting new product launch with punch wallets demonstrates better together innovation is driving new revenue with punched plus par pay.
Savneet Singh: ARR pool increased by 14% from the same period last year due to higher value deals, API monetization, upsell, price increases, and PARP payment services go live. We expect the growth in ARR pool to continue given current whitespace in existing high value accounts, as well as a very robust pipeline of tier 1 deals. To put this into perspective, the successful attachment of both data central and payments into a brink concept increases the ARR opportunity by over 3x.
Speaker Change: This has amazing potential to enable Starbucks like payment experiences for all punch brands plus.
Speaker Change: <unk> is a clear demonstration of pars better together strategy and providing improved outcomes for our customers.
Speaker Change: Features include safe payment options stored value balances digital wallets and subscriptions.
Speaker Change: <unk> allows for up to two five times faster checkout times at 23% increase in repeat store visits and an increase in customer lifetime value of more than 150%.
Savneet Singh: As I mentioned, we officially launched the Burger King Rollout on April 1st, and Burger King is extremely pleased that the progress made to date, including both from a product, as well as an implementation perspective. We feel confident that PARP can be the enabler of BK digital success and are giving them every reason to accelerate our rollout and hopefully add additional products down the road. It is critical for Burger King meets their implementation thresholds for the year, and we are partnering closely to ensure that they do. As we mentioned in the last call, whatever we don't install this year, we'll get quickly rolled out in 25 and early parts of 2026. So we need to PARP payments.
Speaker Change: Year over year <unk> growth for engagement cloud was 11% driven by the deals we signed at the end of 2023 and very early in 2024.
Speaker Change: This past quarter saw significant new customer growth with nine new brands launching on the <unk> platform and we also saw 12 upsell deals to existing customers.
Speaker Change: In early July we went live with Wendy's a deal that we announced in Q1 record time for a go live for a larger enterprise deal.
Speaker Change: Looking ahead, we expect tends to be a strong profit contributed apart.
Speaker Change: The newest part of engagement cloud a studio, which has been rebranded as par retail.
Savneet Singh: In Q2, PARP payments achieved our highest ever gross processing volume run rate of $2.5 billion. Pipeline execution lets the signing of several new concepts, such as Cha Time Canada, Wings Over, and Miami Grill to name a few, which will be going live before the end of the year. In Q2, we went live with 3 new customer logos and continued our rollout with Smoothie King. Importantly, many of our new wins include processing for above-store transactions, not just our traditional in-store POS processing.
Speaker Change: Retail is a leading digital engagement software provider can make to convenience and fuel retailers.
Speaker Change: The product is in 20000 stores and over 20000 stores and provides a beachhead to cross sell additional products across like payments and back office.
Speaker Change: Our pipeline looks strong for the second half of the year and importantly, we hope to launch our first payment product for this market, which will continue to improve our better together strategy.
Speaker Change: Menu, our digital ordering application also delivered an impressive Q2.
Speaker Change: We continue launching new customers and officially reached more U S. Based active sites that are international base highlighting.
Savneet Singh: Our pipeline of new customers is strong, and we expect continuing momentum following the launch of our punch walled offering to start a Q3. I'll give more details on punch walled later in the call. Looking forward, the team is fully engaged on integrating payment capabilities into PARP retail and tasks on lots of further growth. Adding payments to the PARP retail sales bag is very exciting. Data Central also delivered a strong Q2. This quarter included the signing of seven new customers across the restaurant and see-store space, including pilot travel stops, and the ongoing rollout of loves travel centers.
Speaker Change: Highlighting highlighting our key initiatives, we had entering the year, which is getting menu to be U S ready.
Speaker Change: We launched five new concepts in Q2, and every new customer is an existing customer of another part product proving that our customers desire a more unified experience.
Speaker Change: Additionally, some of our customers continue to test additional modules modules oven.
Speaker Change: We are encouraged by the progress of our menu and expect a solid second half of 2024.
Speaker Change: Engagement cloud era are now totaled $108 million at the end of Q2 and has approximately 95000 foodservice outlets utilizing our software.
Savneet Singh: We continue to build out a robust pipeline with four new tier-1 concepts and see additional opportunities for data central to the attachment to bring deals. Data Central is winning off the strength of bring tremendous growth and reputation, creating a roadmap for future upsell of new products. The enterprise market is seeing how the connection of the POS back office and payments processing delivers improved operations, enhanced data capture, and significant value to their business.
Speaker Change: We continue to see <unk> is uniquely positioned in the foodservice technology sector with best in class software across key operational and engagement pillars.
Speaker Change: Our ability to deliver better outcomes across our products and producing a better together experience with multiple products sets par up to be the industry standard.
Speaker Change: Q2 hardware revenue grew 10% quarter over quarter and is starting to claw back some of the challenges we had in Q1.
Speaker Change: Hardware is always hard to predict as 40% to 50% of our business is outside of rig.
Savneet Singh: This trend will continue. Our engagement cloud, which includes punch, menu, and now PARP retail, continue to study growth trajectory in Q2. After a period of rapid change, our new Trump goal for punch to drive stable new business wins of 500 to 1,000 new locations quarterly. Our exciting new product launch with Punch Wallets demonstrates better together innovation and is driving new revenue with Punch Plus par pay. This has amazing potential to enable Starbucks-like payment experiences for all Punch Brands.
Speaker Change: But given the strong pipeline of <unk>, we expect hardware to stabilize and hopefully start growing while our team works to upgrade our base of long term hardware only customers.
Speaker Change: Stepping back to review our consolidated results.
Speaker Change: In Q2, our adjusted EBITDA was negative $4 $3 million. This number though includes $2 $5 million of one time charges related to customer credits and studio purchase price accounting adjustments.
Savneet Singh: Punch Wallets is a clear demonstration of parts better together strategy and providing improved outcomes for our customers. At 23% increase from repeat store visits, an increase in customer lifetime value of more than 150%. Year over year air growth for engagement cloud with 11% driven by the deals we signed at the end of 2023 in very early in 2024. This past quarter saw a significant new customer growth with nine new brands launching on the Punch platform and we also saw 12 upsell deals to existing customers.
Speaker Change: When further adjusting for these charges, our adjusted EBITDA came in and negative $1 8 million.
Speaker Change: Giving us tremendous confidence in our previously communicated goals of inflicting to adjusted EBITDA positive in Q3.
Speaker Change: This fast open EBITDA is impressive, especially in light of the over $10 million of annual EBITDA, We gave up as part of our government sale.
Speaker Change: The team is proving that our customer flywheel is leading to dramatic operating leverage.
Speaker Change: Our EBITDA swing is being driven by both subscription services revenue and stringent expense management.
Speaker Change: On the expense side, our non-GAAP operating expenses, including part retail grew by only 3% year over year continuing.
Speaker Change: Continuing our trend of integrity expense controls, while scaling quickly and simultaneously launching both Burger King and Wendy's.
Savneet Singh: In early July, we went live with Wendy's a deal that we announced in Q1 record time for a go live for a larger enterprise deal. Looking ahead, we expect punch to be a strong profit contributed apart. The newest part of engagement cloud is due though, which has been rebranded as part retail. Part retail is a leading digital engagement software provider can make two convenience and fuel retailers. The product is in 20,000 stores and over 20,000 stores and provides a beach edge across all additional products across like payments and back office.
Speaker Change: This is not easy to do and I commend the team for their commitment to only spending in areas, where we can improve ROI.
Speaker Change: I think it bears repeating that this is the sixth quarter in a row, where our operating expenses were near flat, while <unk> grew organically greater than 20%.
Speaker Change: Drilling down into the components of expenses subscription sales and marketing expense as a percentage of revenue. This quarter is 18% a significant sequential 300 basis point improvement from the 21% we had in Q1.
Savneet Singh: Our pipeline looks strong for the second half of the year and importantly, we hope to launch our first payment product for this market, which will continue to improve our better together strategy. Then you are digital ordering application also delivered an impressive Q2. We continued launching new customers and officially reached more US based active sites than an international base highlighting a key initiative we had entering the year, which is getting menu to the US ready.
Speaker Change: Sales and marketing expenses actually decreased $1 million $1 1 million organically.
Speaker Change: As I noted on our last call. We want this number to get to 15% or lower and are sprinting our way there.
Speaker Change: This is being driven primarily by our ability to take price and upsell, while continuing to realize just how many products and individual <unk>.
Speaker Change: Our subscription R&D expense as a percentage of revenue was 31%. This number improved 400 basis points sequentially and our organic R&D spend actually decreased $1 million.
Savneet Singh: We launched five new concepts in Q2 and every new customer is an existing customer of another product proving that our customers desire a more unified experience. Additionally, some of our customers continue to test additional modules modules of menu. We were encouraged by the progress so far with menu and expect a solid second half of 2024. Engagement cloud ARR now total of $108 million at the end of Q2 and has approximately 95,000 food service outlets utilizing our software.
Speaker Change: We have our sight on eventually taking this number to 25% and lower shrink.
Speaker Change: <unk> in particular is leading the charge here.
Speaker Change: <unk> that we can launch large and diverse constant <unk> concepts of one core platform.
Speaker Change: The work we did to retail branch is now paying significant dividends.
Speaker Change: These numbers don't include task, which as most of you know is a very profitable business that we are rapidly integrating depart.
Savneet Singh: We continue to see par as a new position in the food service technology sector with best in class software across key operational and engagement pillars. Our ability to deliver better outcomes across our products and producing a better together experience with multiple products sets par up to be the industry standard. Q2 harbor revenue grew 10% quarter of a quarter and starting to claw back some of the challenges we had in Q1. Hardware is always hard to predict as 40 to 50% of our businesses outside our brain. But given the strong pipeline of brain, we expect hardware to stabilize and hopefully start growing while our team works to upgrade our base of long-term hardware only customers.
Speaker Change: While the path to profitability is very clear we understand that in the end our success will be dictated by the success excuse me the success of our customers. So while we've done a commendable job becoming efficient our team will not lose sight of the fact that our ability to drive. These unit economics is predicated on our customers winning.
Speaker Change: As I said in the past, where it's like consolidation bundling has had negative connotations and I think for the right reasons.
Speaker Change: Prior attempts to consolidate we're not done around industry, leading products it required customers to trade a functionality for simplicity.
Savneet Singh: Stepping back to review our consolidated results. In Q2, our adjusted EBITDA was negative $4.3 million. This number, though, includes $2.5 million of one-time charges related to customer credits and stu-zo purchase price accounting adjustments. When further adjusting for these charges, our adjusted EBITDA came in at negative $1.8 million, giving us tremendous confidence in our previously communicated goals of inflecting the adjusted EBITDA positive in Q2. [inaudible] This fast slope in EBITDAB is impressive, especially in light of the over $10 million of annual EBITDAB we gave up as part of our government sale.
Speaker Change: This is explicitly but we are not doing at par our products must stand on their own the best in class integrated natively integrated natively and one unified deliver surprise and delight.
Speaker Change: This is what's truly driving the financial outcomes youre seeing today.
Speaker Change: To recap Q2 was a very successful quarter across many fronts for our company.
Speaker Change: Im energized by the better together experiences and what that means for our customer relationships and outcomes, both existing and perspective.
Speaker Change: The combined effort of the par team around the globe has put us in a unique position to further our mission of fueling the future of foodservice and retail.
Speaker Change: We're at day, one of a massive opportunity.
Savneet Singh: The team is proving that our customer flywheel is leading to dramatic operating leverage. Our EBITDAB swing is being driven by both subscription services revenue and stringent expense management. On the expense side are non-gap operating expenses, including part retail, grouped by only 3% year over year, continuing our trend of entanglement. Expense controls while scaling AR quickly, and simultaneously launching both Burger King and Wendy's. This is not easy to do, and I commend the team for their commitment to only spending in areas where we can improve our Y. I think it bears repeating that this is a sixth quarter in a row where operating expenses were near flat, while AR are organically greater than 20%.
Speaker Change: Ryan will now review the numbers in more detail Brian.
Ryan: Thank you <unk> and good morning, everyone.
Ryan: Q2 was a successful quarter for par as we were able to drive both positive results and momentum while managing an efficient integration of our retail administer the closure of the <unk> acquisition and effectively manage a smooth divestiture of par government.
Speaker Change: <unk> emphasized <unk> earlier statement Q2 represents a pivotal inflection point in <unk> journey from our beginnings as a quasi restaurant tech and government contracted company to a pure play foodservice Tech led organization.
Speaker Change: The construct of our Q2 2024 statement of operations is indicative of that inflection point as I will highlight.
Savneet Singh: Drilling down into the components of expenses, subscription sales and marketing expense as the percentage of revenue of this quarter is 18%, a significant sequential 300 basis point improvement from the 21% we had in Q1. Sales and marketing expenses actually decreased $1.1 million organically. As I noted on the last call, we want this number to get to 15% lower and are sprinting our way there. This is being driven primarily by our ability to take price and upsell, while continuing to realize just how many products an individual AE can sell.
Speaker Change: Before moving forward I'd like to properly call out that all 2024, and comparative 2023 results that we will discuss this morning exclude any contributions from par government as those results, including the gains on our respective sale of our government has an isolated within our discontinued operations results.
Speaker Change: Total revenue was $78 2 million for the three months ended June 32024.
Speaker Change: An increase of 12% compared to the three months ended June 32023 drew.
Savneet Singh: Our subscription R&D expense as a percentage of revenue was 31%. This number improved 400 basis points sequentially, and our organic R&D spend actually decreased $1 million. We have our site on eventually taking this number to 25% and lower. Brink in particular is leading the charge here, proving that we can launch large and diverse concepts off of one core platform. The work we did to retool Brink is now paying significant dividends. These numbers don't include tasks, which as most of you know, is a very profitable business that we're rapidly integrating in the park.
Speaker Change: Driven by subscription service revenue.
Speaker Change: Growth of 48%, partially offset by decrease in hardware revenue of 24%.
Speaker Change: Net loss from continuing operations for the second quarter of 2024 was $23 6 million were <unk> 69 loss per share compared to a net loss from continuing operations of $21 8 million or <unk> 87 loss per share reported for the same period in 2023.
Speaker Change: non-GAAP net loss for the second quarter of 2024 was $7 9 million.
Savneet Singh: While the path to profitability is very clear, we understand that in the end, our success will be dictated by the success of our customers. So while we've done a commendable job becoming efficient, our team will not lose sight of the fact that our ability to drive these unit economics is predicated on our customers winning. As I said in the past, words like consolidation and bundling has had negative connotations. And I think for the right reasons, prior attempts to consolidate were not done around industry meeting products.
Speaker Change: <unk> 23 loss per share a significant improvement compared to a non-GAAP net loss of $16 3 million or <unk> 67 loss per share for the same period in 2023.
Speaker Change: Yes.
Speaker Change: Adjusted EBIT for the second quarter of 2024.
Speaker Change: It was a loss of $4 3 million.
Speaker Change: Once again meaningful improvement compared to an adjusted EBITDA loss of $12 3 million for the same period in 2023 driven.
Savneet Singh: It required customers to trade off functionality for simplicity. This is explicitly what we are not doing at park. Our products must stand on their own, the best in class, integrated natively and when unified delivers surprise and delight. This is what's truly driving the financial outcomes you are seeing today.
Speaker Change: Driven by increased margin contribution from subscription services, partially offset by a reduction in hardware revenue and margin and.
Speaker Change: As <unk> mentioned, our Q2 results included $2 5 million of one time charges within subscription services.
Speaker Change: Excluding those items adjusted EBITDA would have been a loss of $1 8 million.
Savneet Singh: To recap, Q2 was a very successful quarter across many fronts for a company. I'm energized by the better together experiences and what that means for our customer relationships and outcomes, both existing and perspective. The combined effort of the park team around the globe has put us in a unique position to further our mission of feeling the future of food service and retail. We're at day one of a massive opportunity.
Speaker Change: Now for more details on revenue.
Speaker Change: Subscription service revenue was reported at $44 9 million, an increase of $14 5 million or <unk>, 48% from $34 million reported in the prior year excluding.
Speaker Change: Excluding car retail organic subscription service revenue grew 15% compared to prior year.
Bryan Menar: Brian will now review the numbers in more detail.
Speaker Change: The annual recurring revenue exiting the quarter was $192 2 million an increase of 57% from last year's Q2 with.
Bryan Menar: Brian. Thank you, 70 and good morning, everyone. Q2 was a successful quarter for par as we were able to drive both positive results and momentum while managing efficient integration of par retail.
Speaker Change: With engagement cloud up 77% and operator cloud up 37%.
Bryan Menar: I administer the closure of the task acquisition and effectively manage a smooth and best future of par government. Samasai Savneet's earlier statement, Q2 represents a pivotal inflection point in harsh journey from our beginnings as a quasi-restaurant tech and government contractor company to a pure-play food service tech-led organization. The construct of our Q2-2024 statement of operations is indicative of that inflection point as I will highlight. Before moving forward, I'd like to properly call out that all 2024 and comparative 2023 results that we will discuss this morning, exclude any contributions from PAR Government as those results, including the gains on a respective sale of PAR Government, have been isolated within our discontinued operations results.
Speaker Change: Excluding par retail total organic annual recurring revenue was up 24% year over year.
Speaker Change: Hardware revenue in the quarter was $20 1 million, a decrease of $6 3 million or 24% from the $26 4 million reported in the prior year.
Speaker Change: Sequentially compared to Q1, this year hardware was up $1 9 million or 10%.
Speaker Change: The continued interest from our legacy hardware customers as well as the continued high attachment of hardware sales within our expanding software customer base gives us confidence that our hardware business will continue to contribute meaningful revenue in respective margin.
Speaker Change: Professional service revenue was reported at $13 2 million, an increase of <unk> 4 million or 3% from the $12 8 million reported in the prior year.
Speaker Change: Historically, our professional service revenue trend is correlated to our hardware revenue trend. We were pleased with our team's ability to grow professional service revenue while hardware revenue contracted.
Bryan Menar: Total revenues of 78.2 million for the three months ended June 30, 2024, an increase of 12% compared to the three months ended June 30, 2023. Driven by subscription service revenue, growth of 48% partially offset by decrease in hardware revenue of 24%. Net loss from continuing operations for the second quarter of 2024 was 23.6 million, where 69% loss per share, compared to a net loss from continuing operations of 21.8 million or 87% loss per share reported for the same period in 2023.
Speaker Change: Our team has executed this by expanding our service contract base with successful demonstration of our service teams value proposition.
Speaker Change: $8 2 million of the professional service revenue in the quarter consistent recurring revenue primarily from our hardware support contracts versus $7 2 million in 2023.
Speaker Change: Now turning to margins.
Speaker Change: Gross profit was $32 million, an increase of $12 8 million or <unk>, 67% and the $19 2 million reported in the prior year.
Bryan Menar: Non-gap net loss for the second quarter of 2024 was 7.9 million or 23% loss per share, a significant improvement compared to a non-gap net loss of 16.3 million or 67% loss per share for the same period in 2023. Adjusted EBITDA for the second quarter of 2024 was a loss of 4.3 million, once again meaningful improvement compared to an adjusted EBITDA loss of 12.3 million for the same period in 2023. Driven by increased margin contribution from subscription services, partially offset by reduction in hardware revenue and margin. As Sebneet mentioned, our Q2 results included 2.5 million of one time charges within subscription services, excluding those items, adjusted EBITDA would have been a loss of 1.8 million.
Speaker Change: The increase was driven by subscription services with gross profit of $23 8 million, an increase of $10 7 million or <unk>, 81% from the $13 1 million reported in the prior year.
Speaker Change: Subscription service margin for the quarter was 53, 1% compared to 43, 3% reported in the second quarter of 2023.
Speaker Change: The increase in margin is driven by our continued focus on efficiency improvements with our hosting and customer support costs as well as accretive margin contributions from par retail operations.
Speaker Change: Excluding the amortization of intangible assets stock based compensation.
Speaker Change: And severance included in subscription service margin total non-GAAP subscription service margin for the three months ended June 30 was 66% compared to 61% in the second quarter of 2023.
Bryan Menar: Now for more details on revenue.
Speaker Change: Hardware margin for the quarter was 22, 8% versus 19, 2% in Q2 2023 and.
Bryan Menar: Subscription service revenue was reported at 44.9 million and increased of 14.5 million or 48% from a 30.4 million reported in the prior year, excluding part retail, organic subscription service revenue proved 15% compared to prior year. The annual recurring revenue exiting the quarter was 192.2 million and increased of 57% from last year's Q2, with engagement cloud of 77% and operator cloud of 37%. The excluding part retail total organic annual recurring revenue was up 24% year over year.
Speaker Change: In light of our year over year revenue decrease.
Speaker Change: Still able to improve margins by taking price as we continue to demonstrate our value while also driving savings with within our cost structure.
Speaker Change: Professional service margin for the quarter was 27, 5%.
Speaker Change: Compared to seven 7% reported in the second quarter of 2023.
Speaker Change: Q2, 2023 results were negatively impacted by onetime charges. Excluding those charges Q2, 2023 professional margin would have been 20%.
Bryan Menar: Hardware revenue in the quarter was 20.1 million, a decrease of 6.3 million or 24% from the 26.4 million reported in the prior year. Sequentially, compared to Q1 this year, hardware was up 1.9 million or 10%. The continued interest from our legacy hardware customers, as well as the continued high attachment of hardware sales within our expanding self or customer base, gives us confidence that our hardware business will continue to contribute meaningful revenue and respective margins.
Speaker Change: Selective of our normalized historical margin rates.
Speaker Change: We expect margins to be approximately 20% for the remainder of this year.
Speaker Change: In regard to operating expenses.
Speaker Change: GAAP sales and marketing was $9 8 million a decrease of <unk> 3 million from $10 1 million reported for Q2 2023 with.
Speaker Change: With organic sales and marketing decreasing $1 $1 million year over year.
Speaker Change: GAAP G&A was $25 4 million and.
Bryan Menar: Professional Service Revenue was reported at 13.2 million, an increase of 0.4 million or 3% from the 12.8 million reported in the prior year. Historically, our professional service revenue trend is correlated to our hardware revenue trend. We are pleased with our team's ability to grow professional service revenue, while hardware revenue contracted. Our team has executed this by expanding our service contract base with successful demonstration of our service team's value proposition. 8.2 million of the professional service revenue in the quarter consisted of recurring revenue primarily from our hardware support contracts, versus 7.2 million in 2023.
Speaker Change: An increase of $8 9 million from $16 4 million reported in Q2 2023.
Speaker Change: The increase was driven by non-GAAP adjustment items for M&A transaction fees and stock based compensation as well as post acquisition our retail costs.
Speaker Change: GAAP R&D was $16 2 million, an increase of $1 3 million from the $14 9 million recorded in Q2 2023.
Speaker Change: The increase was primarily driven by post acquisition <unk> retail expense.
Speaker Change: While organic R&D decreased $1 million year over year.
Speaker Change: Q2, 2020 for operating expense, excluding non-GAAP adjustments was $43 5 million, an increase of $5 $7 million was 15% versus Q2 2023 and.
Bryan Menar: Now turning to margins. Gross profit was 32 million, an increase of 12.8 million or 67% from the 19.2 million report in the prior year. The increase was driven by subscription services with gross profit of 23.8 million, an increase of 10.7 million or 81% from the 13.1 million reported in the prior year. Subscription service margin for the quarter was 53.1% compared to 43.3% reported in the second quarter of 2023. The increase in margin is driven by a continued focus on efficiency improvements with our hosting and customer support costs, as well as a creative margin contributions from our retail operations.
Speaker Change: And excluding the inorganic growth from post acquisition <unk> retail organic operating expenses only increased 3%.
Speaker Change: Our ability to manage operating expenses, while driving substantial margin improvement will continue to be the catalyst for continued consistent EBITDA growth.
Speaker Change: Now to provide information on the company's cash flow and balance sheet position.
Speaker Change: As of June 32024, we had cash and cash equivalents of $114 9 million and short term investments of $27 5 million for.
Speaker Change: For the six months ended June 30 cash used in operating activities was $37 $4 million versus $12 8 million for the prior year 12.
Bryan Menar: Excluding the ammarization of intangible assets, stop based compensation, and severance included in subscription service margin, total non-gastitution service margin for the three months and the June 30th was 66% compared to 61% in the second quarter of 2023. Hardware margin for the quarter was 22.8% versus 19.2% and Q2 2023. In light of our year-over-year revenue decrease, we were still able to improve margins by taking price as we continue to demonstrate our value while also driving savings within our cost structure. Professional service margin for the quarter was 27.5% compared to 7.7% reported in the second quarter of 2023.
Speaker Change: $12 million of the variance was driven by cash activity associated with discontinued operations and the remainder primarily driven by change in net working capital.
Speaker Change: Cash used in investing activities was $72 9 million for the six months ended June 30 versus $6 2 million for the prior year invest.
Speaker Change: Investing activities during the six months ended June 30 included $166 3 million of net cash consideration in connection with the studio acquisition.
Speaker Change: And capital expenditures of $2 7 million for developed technology costs associated with our software platforms.
Speaker Change: Partially offset by $87 1 million of cash consideration received in connection with the disposition of par government and $9 4 million of proceeds from net sales of short term held to maturity investments.
Bryan Menar: Q2 2023 results were negatively impacted by one-time charges. Excluding those charges, Q2 2023 professional margin would have been 20%, reflective of our normalized historical margin rates. We expect margins to be approximately 20% for the remainder of this year. In regard to operating expenses, gap sales and marketing was 9.8 million, a decrease of 0.3 million from the 10.1 million reported for Q2 2023, with organic sales and marketing decreasing 1.1 million year-over-year. Gap GNA was 25.4 million, an increase of 8.9 million from the 16.4 million reported in Q2 2023.
Speaker Change: Cash provided by financing activities was $191 $5 million for the six months ended June 30th.
Speaker Change: Compared to cash used in financing activities of $2 5 million for the prior year.
Speaker Change: <unk> activities during the six months ended June 30 was substantially driven by private placement of common stock.
Speaker Change: I would like to take a moment to reiterate and thank our par team continued to execute our operating plan while successfully managing the integration of the par retail organization and also manage the smooth divestiture par government.
Speaker Change: As a result, we drove significant improvement in key financial metrics with.
Speaker Change: 24% organic growth.
Speaker Change: $12 8 million or 67% improvement in gross margin.
Bryan Menar: The increase was driven by non-Gap adjustment items for M&A transactions and stock-based compensation, as well as post-acquisition par retail costs. Gap R&D was 16.2 million, an increase of 1.3 million from the 14.9 million reported in Q2 2023. The increase was primarily driven by post-acquisition par retail expense, while organic R&D decreased 1 million year over year. Q2-2024 operating expense, excluding non-gap adjustments, was 43.5 million, and increased of 5.7 million or 15% versus Q2-2023, and excluding the inorganic growth from post-acquisition par retail, organic operating expenses only increased 3%. Our ability to manage our operating expenses while driving substantial margin improvement will continue to be the catalyst for continue consistent EBITDA growth.
Speaker Change: All while maintaining modest growth in operating expenses.
Speaker Change: This has resulted in meaningful adjusted EBITDA growth and positions us well to be adjusted EBITDA positive in Q3.
Speaker Change: I will now turn the call back over to <unk> for closing remarks prior to move into Q&A.
Brian: Thanks, Brian.
Speaker Change: Let me wrap up with a few key messages before we open the call for Q&A.
Speaker Change: While the macro environment has been and will always be volatile end market. We're selling two continues to be strong.
Brian: There is no doubt that macroeconomic shock will impact all businesses.
Speaker Change: While we love about our end categories is that in times of duress they outperform.
Speaker Change: Customers trade down and demand more ways to access their food and fuel.
Speaker Change: Over the products, we sell are built to drive ROI, ostensibly helping our customers deal with whatever external pressures they are facing.
Speaker Change: We track this data very closely and are seeing not only resilient, but growth in our base.
Speaker Change: Same store sales within our brink base on average increased five 5% this quarter from a year ago, suggesting that our customers are taking share from adjacent categories. We've seen this happen time and time again.
Bryan Menar: Now to provide information on the company's cash flow and balance sheet position. As of June 30, 2024, we had cash and cash equivalence of 114.9 million and short-term investments of 27.5 million. For the six month ended, June 30, cash used in operating activities was 37.4 million versus 12.8 million for the prior year. 12 million of the variance was driven by cash activity associated with discontinued operations, and the remainder primarily driven by change in network and capital.
Speaker Change: I also think our recent results prove this out in spite of an uncertain macro car delivered its sixth straight quarter of greater than 20% growth with almost no opex growth.
Speaker Change: With more during this time, we've launched our largest Pos and loyalty customers, respectively, without having to add tremendous cost or by offsetting any cost with internal efficiencies.
Speaker Change: We are funding tomorrow's growth engines without net new expense.
Bryan Menar: Cash used in investing activities was 72.9 million for the six month ended in June 30 versus 6.2 million for the prior year. Investing activities during the six month ended, June 30 included 166.3 million of net cash consideration and connection with astusio acquisition, and capital expenditures of 2.7 million for developed technology costs associated with our software platforms. Partially offset by 87.1 million of cash consideration received and connection with the disposition of part government and 9.4 million of proceeds from net sales of short-term health maturity investments.
Speaker Change: In uncertain markets customers aren't looking for speculative tech, but best in class products with proven ROI.
Speaker Change: This is where our multi product model wins.
Speaker Change: We're just starting to scratch the surface of the white space in our Tam and are continuing to build a roadmap to programmatically earn a greater share of our customers' wallets.
Speaker Change: We're an ambitious team at par and treat everyday is day one.
Speaker Change: For the first time in our history, we are a pure play foodservice technology business.
Speaker Change: Adding greater focus and transparency to our investors and our employees.
Speaker Change: This focus will help us accelerate our innovation deliver for our customers and create value for our shareholders.
Speaker Change: I'll open the call for Q&A operator.
Bryan Menar: Cash provided by financing activities was 191.5 million for the six month ended June 30. Compared to cash used in financing activities at 2.5 million for the prior year, financing activities during the six month ended June 30 was substantially driven by private placement of common stock. I would like to take a moment to reiterate and thank our part team on continuing to execute our operating plan while successfully managing the integration of the par retail organization and also manage the smooth divesture of part government.
Speaker Change: Thank you as a reminder to ask a question you will need to press star one one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please standby we compile the Q&A roster.
Speaker Change: And our first question comes from the line of Myles Tandon of Needham Your line is open.
Myles Tandon: Thank you good morning, <unk>, Brian and Chris first of all congrats on the quarter.
Myles Tandon: I wanted to start with.
Bryan Menar: As a result, we drove significant improvement in key financial metrics with 24% organic AR growth, 12.8 million or 67% improvement in growth margin, all while maintaining modest growth and operating expenses. This has resulted in meaningful adjusted EBITDA growth and positions thus well to be adjusted EBITDA positive in Q3.
Myles Tandon: A question around the integration of <unk> and I know you just closed task.
Speaker Change: Would be curious to hear what the customer response has been.
Speaker Change: Integration process any surprises positive or negative early in the process of integrating <unk> and then also I know.
Speaker Change: It's only been a few weeks, but any comments around cash as well.
Speaker Change: Sure.
Savneet Singh: I will now turn the call back over to 17 for closing remarks prior to moving to Q&A.
Speaker Change: Zoe, which we've rebranded part retail it has gone phenomenally well we've done a few of these M&A deals and this is probably the smoothest integration we've had.
Savneet Singh: Thanks Brian.
Savneet Singh: Let me wrap up with a few key messages before we open the call for Q&A. While the macro environment has been and will always be volatile, the end worker we're selling to continues to be strong. There's no doubt that macroeconomic shock will impact all businesses. What we love about our end categories is that in times of dress they all perform. Customers trade down and demand more ways to access their food and fuel.
Speaker Change: The reception from customers has been great. We've jumped in front of them, but I think more importantly, it's the response of our existing C store customers thats been very encouraging.
Speaker Change: Many of them too to sort of agree with it can be excited by the future roadmap the combined resources, but most importantly, having dedicated industry focus is going to make a big difference. There. So it's gone very well I think from a talent perspective, there are a number of people from the studio team that are now working across all apart. So I think we also acquired tremendous team.
Savneet Singh: Moreover, the products we sell are built to drive ROI, ostensibly helping our customers deal with whatever external pressures they are faced. Singh. We tracked this data very closely and are seeing not only resilience but growth in our base. Stain source sales within our brink base on average increased 5.5% this quarter from a year ago, suggesting that our customers are taking share from adjacent categories. We've seen this happen time and time again.
Speaker Change: And I think from a business result perspective.
Myles Tandon: We're really excited for the second half.
Myles Tandon: Personally jumping into a bunch of our go to market motions, we feel really really good about this integration.
Speaker Change: And I think cultural fit underlines everything an M&A deal and Thats been really nice.
Speaker Change: On the test side, where a couple of weeks into it. So you don't want to get too excited but I can say categorically the quality of that senior leadership team is just so impressive. The idea is the insights they have on our category expanding internationally.
Savneet Singh: I also think our recent results prove this out. In spite of an uncertain macro, PAR delivered its sixth straight quarter of greater than 20% growth with almost no object growth. With more, during this time, we've launched our largest POS and loyalty customers respectively without having to add tremendous cost or by offsetting any cost with internal efficiencies. We are funding tomorrow's growth engines without net new expense. In uncertain markets, customers aren't looking for speculative tech, but best in class products would prove in ROI.
Speaker Change: So the adjacent categories is going to be really instrumental in par, but I also think they are deep focus on efficiency is something we're going to continue to expand I think we've done as you've seen the operating leverage in part is really accelerating here.
Speaker Change: <unk> will help us push that forward.
Speaker Change: And then I think it is too early yet on the customer side, but nothing nothing that.
Savneet Singh: This is where our multi-product model wins. We're just starting to scratch a surface of the white space in our TAM and are continuing to build a roadmap to programmatically earn a greater share of our customers' wallets. We're an ambitious team at PAR and treat every day as they want.
Speaker Change: Great. That's good color and then maybe some reason also for Bryan in terms of the financial impact of the two acquisitions I think when you close these deals back in March the contribution was expected to be $80 million in <unk> from <unk> task and I believe about $20 million and adjusted EBITDA is that.
Savneet Singh: For the first time in our history, we are a pro-play food service technology business, providing greater focus and transparency to our investors and our employees. This focus will help us accelerate our innovation, deliver for our customers, and create value for our shareholders.
Myles Tandon: Still I don't know.
Speaker Change: The annualized number but is that still the forecast or do you think there's any change positive or negative relative to when you first announced these acquisitions.
Operator: With that, I'll open the call for Q&A operator. Thank you. As a reminder to ask a question, you will need to press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please stand by, we compile the Q&A roster.
Speaker Change: That's all that's all that's all right.
Speaker Change: Obviously, we were an ambitious team. So we assume there is little bit of upside and opportunity there, but we're still really excited those numbers and we feel really confident about.
Speaker Change: Okay.
Speaker Change: Great I'll get back in queue.
Speaker Change: Thanks.
Speaker Change: Our next question comes from the line of Stephen Sheldon of William Blair. Your line is open.
Mayank Tandon: And our first question comes from the line of my aunt Tandon of Needham. Your line is open. Thank you.
Stephen Sheldon: Hey, good morning, Thanks for taking my question.
Savneet Singh: Good morning, sub-need, Brian and Chris. First, congrats on the quarter. I wanted to start with a question around the integration of STUZO. I know you just close task. Would be curious to hear what the customer response has been, integration process, any surprises, or the negative early in the process of integrating STUZO and also I know it's only been a few weeks, but any comments are on task as well.
Stephen Sheldon: First just to just looking at page nine of the presentation with the organic and total a breakdown.
Stephen Sheldon: It seems like Skus those might've been down just a touch sequentially I think organic <unk> was up over $7 million sequentially total IRR was up by less than $7 million just wanted to make sure am I thinking about that right what would cause you to those.
Speaker Change: <unk> to be down slightly sequentially and just generally how are you thinking about the growth outlook going forward now that it's integrated and rebranded so that asset.
Savneet Singh: Sure. I'm STUZO, which we've rebranded part retail. It's gone phenomenally well.
Speaker Change: Sure.
Speaker Change: The purchase price accounting adjustment around studio very normal course of business. So it wasn't.
Savneet Singh: We've done a few of these M&A deals, and this is probably the same integration we've had. I think the reception for customers has been great. We've jumped in front of them, but I think more importantly, it's the response of our existing C-seasore customers that's been very encouraging. I expect many of them to be excited by the future roadmap to combine resources, but most importantly, having dedicated industry focus is going to make a big difference there.
Speaker Change: Churn it was how we.
Speaker Change: We integrated the businesses the accounting adjustments, though it wasn't I wouldn't say, it's operational more accounting.
Speaker Change: I just end the call I think we're really excited for the second half we have already had three.
Speaker Change: Three signings in July I think we'll have more and with powerful that's too though is that every single deal that we sign.
Savneet Singh: It's gone very well, I think, from a talent perspective, there are a number of people from the STUZO team that are now working across all of PAR, so I think we also acquired tremendous team, and then I think from a business results perspective, we're really excited for the second half. I'm personally jumping into a bunch of our go-to-market motions. We feel everything in an M&A deal, and that's been just really nice.
Speaker Change: It goes live when we signed it and so you don't have to wait for a rollout period, you can pull that revenue in.
Steve: Current quarter, and so we actually feel really really good about it and there are some very very big opportunity in front of us, but even if we don't win those larger opportunities I still think we'll get to where we thought with the deal, which I think we will get to teens to 20% growth on this business just like we do for the rest of par and Steve just to add what <unk> said, there what that really was there from Q1 Q2 was.
Savneet Singh: On the TAS side, we're a couple weeks into it, so I don't want to get too excited, but I can say categorically, the quality of that senior leadership team is just so impressive. The idea is the insights they have on our category expanding internationally, so the adjacent categories is going to be really instrumental in PAR. I also think they're deep focus on efficiency, something we're going to continue to expand. I think as you've seen, the operating leverage in PAR is really accelerating here. That team will help us push that forward, and then I think as it is too early yet on the customer side, but nothing bad.
Steve: Adjusting the actual beginning baseline right as we got in Paris.
Steve: Adjustments as we dig into and get the actual balance sheet on our books was a reset of that <unk> set a new baseline that we're going off of.
Savneet Singh: Great.
Speaker Change: Got it. So then we should probably expect a step up in <unk> from <unk> to three got it.
Speaker Change: Exactly Thats right and then.
Speaker Change: And then just wanted to know.
Speaker Change: It's still very early with with past, but just how are you thinking maybe some more detail on joint go to market efforts with your existing domestic capabilities tax international capabilities and as you think about it or are there.
Savneet Singh: That's good color.
Bryan Menar: And then maybe Savneet and also for Bryan, in terms of the financial impact of the two acquisitions, I think when you close these deals back in March, the contribution was expected to be 80 million in ARR from stilts and tasks and I believe about 20 million in adjustity with duck, is that still, I know that's an annualized number, but is that still the forecast or do you think there's any change followed toward negative relative to when you first and all see that acquisitions. That's all, that's all right.
Speaker Change: Are there a lot of cross selling opportunities that you could go after pretty quickly here.
Speaker Change: Generally what the best cross selling motions look like.
Speaker Change: So I'll give you the the theory, we'll see if we can execute on it and we usually do but.
Speaker Change: Pretty simple so the first thing I think we're evaluating.
Speaker Change: I said to our team and figure out where I point the bazooka the test product does everything and it's incredibly robust really well built cleanly belt and as I said dynamic founders and team. So the immediate I think there are opportunities. We have are what customers do we have in the United States that are looking for national solutions, and where do we want to what products.
Bryan Menar: You know, obviously we, we, you know, we're an ambitious team, so we assume there's little bits of upside and an opportunity, but we're still really excited. Those numbers, and we feel really confident about it. Great. We'll get back into you. Thanks.
Speaker Change: The task platform do you want to get them on <unk>.
Speaker Change: That sort of step one and we know we're doing that work and figure out how to do that.
Stephen Sheldon: Our next question comes from a line of Stephen Sheldon of William Blair. Your line is open. Hey, good morning. Thanks for taking my question. First, just looking at page nine of the presentation with the organic and total ARR breakdown, it seems like stews of ARR might have been down just to touch sequentially. I think organic ARR was up over 7 million sequentially total ARR was up by less than 7 million. I just wanted to make sure and I think about that right.
Speaker Change: We're going to throw in.
Speaker Change: Traditional par resources into the task go to market team to figure that out. The second aspect is there are select places in the United States, where there are parts of the task platform that we want to bring to the U S market.
Savneet Singh: What would cause to those ARR to be down quite sequentially and just get generally how are you thinking about the growth outlook going forward now that it's integrated and rebranded so that asset.
Speaker Change: And I won't go into details here, but we think there's some pretty significant opportunity there.
Speaker Change: That we think are unique.
Speaker Change: Third thing I would say if there are adjacencies that passengers really well so as an example.
Speaker Change: Task is I believe believe leading stadium provider in Australia.
Speaker Change: And are being pulled into numerous deals all of the place we're going to figure out if that makes sense for us, but I think between our U S base that needs to go international.
Savneet Singh: Sure, the purchase price accounting adjustment around stuso, very normal course of business, so it wasn't, you know, a turn. It was how we integrated the businesses, the accounting adjustments. So it wasn't safe operational more accounting.
Speaker Change: The module is a task that can serve our U S customers in areas that we don't today, we've got plenty of plenty of wood to chop and then I think we can explore other ideas down the road, but I think theres going be no shortage of ideas to us that's going to be focusing on the one or two things we can actually prove out quickly.
Savneet Singh: You know, I just have to call. I think we're really excited for the second half. We've already had, you know, three, three signings in July. I think we'll have more. And, you know, what's powerful about stuso is that every single deal that we sign goes live when we sign it. And so you don't have to wait for a rollout period. You can pull that revenue in, you know, current quarter. And so we actually feel really, really good about it and there are some very, very big opportunities in front of us, but even if we don't win those large opportunities, I still think we'll get to, you know, where we thought with on the deal, which, you know, I think we'll get to teens 20% growth on this business, like we do for the rest of our.
Speaker Change: Great to hear thanks for taking my questions.
Speaker Change: Our next question comes from the line of Eric Martin Etsy of Lake Street Capital markets. Your line is open.
Speaker Change: Yes, I was interested in your perspective on the competitive landscape specifically versus.
Speaker Change: Two larger competitors in the Pls.
Speaker Change: Growth in <unk>.
Speaker Change: Now given the completion of the acquisition specifically task how does that change your.
Savneet Singh: And Steve, just to add with what's happening said there, what that really was there from 222 was adjusting the actual beginning baseline, right, as we got in person. Adjustment is as we dig into and get the actual balance sheet on our books. Was this the, it's a reset of that. So now it's a new baseline that we're going off of. Got it. So then we should probably expect to step up then and do though from 2, Q to 3.
Speaker Change: Your the competitive landscape for international for you.
Speaker Change: So I think.
Savneet Singh: That's right.
Speaker Change: Before that we Werent international So I don't think we had a solution at the time of the acquisition one of the things that sort of been observing is that our big U S brands are growing far faster outside the United States and in the United States and over time the decision makers for those businesses will probably gravitate towards the international side, because that's where they're deploying there.
Savneet Singh: And then, and then just want to dig, you know, I know it's still very early with with past, but just how are you thinking maybe some more detail on joint go to market efforts with your existing domestic abilities, past international capabilities. And as you think about it, are there a lot of cross-selling opportunities that you go after pretty quickly here and just generally what do those cross-selling motions look like.
Speaker Change: Capital and I think that puts us at a point of weakness. So we may have the best solution in the U S. But if somebody has a better global solution, maybe that the b b plus product wins over the plus product in the U S. Because they want something more connected.
Speaker Change: And that was a big part of the rationale for the acquisition. So I think it makes us far more competitive on the Mega large deals obviously.
Speaker Change: Obviously as you know task has got one Meg up one or two mega brands already.
Speaker Change: Soon to be three and I think we will be able to help accelerate that so I think it makes us more competitive holistically.
Savneet Singh: So, you know, I'll give you the theory. We'll see if we can execute on it and we usually do, but you know, it's pretty simple. So the first thing I think we're evaluating is, you know, I said to our team, we're figuring out where to point the bazooka. The task product does everything and it's, it's incredibly robust, really well built, cleanly built. And as I said, dynamic, you know, founders and teams.
Speaker Change: Whereas before I think our large customers with sort of think of us as a U S only solution.
Speaker Change: Got it.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: Housekeeping item here post.
Savneet Singh: So the immediate, I think some opportunities we have are, you know, what customers do we have in the United States that are looking for national solutions and where do we want to what products of the task platform we want to get them on. That's where step one and we know we're doing that work and figuring out how to do that. We're, you know, going to throw in some traditional part resources into the task, go to market team to free that out.
Speaker Change: The dust settling on the I think it was.
Speaker Change: July 18th close task.
Speaker Change: Can you give us a sense for kind of a normalized rest of year.
Speaker Change: First expense and share count.
Speaker Change: Absolutely, Brian you want to run through the interest in some of the.
Glen: Glen will note and then well.
Speaker Change: So what you are.
Savneet Singh: The second aspect is there are select places in the United States where there are parts of the task platform that we want to bring to the US market. And I won't go to detail here, but, you know, we think there's some pretty significant opportunity there, you know, that we think are unique. The third thing I would say is there are adjacacies that tasks are really well. So as an example, you know, task is, I believe, believe, leading stadium provider in, you know, Australia.
Eric Martin: Are you referencing there Eric right is the fact that we did.
Speaker Change: Did that acquisition with a combination of cash on the balance sheet a portion of around 3700, 30% equity and then we also used about $190 million of a term loan.
Speaker Change: And blew out.
Speaker Change: That effective interest rate is roughly around 10% we.
Speaker Change: We plan on that that's going to be a shorter term loan within on our balance sheet.
Savneet Singh: You know, there and are being pulled into numerous fields all of the place. We're going to figure out if that makes sense for us. But I think between our US base needs to go to national. The modules of tasks, I can serve our US customers in areas that we don't today. We've got plenty with the chops. And then I think we can explore other ideas down the road. But I think there's going to be no shortage of ideas to us. It's going to be focusing on the one or two things we can actually prove out quickly.
Speaker Change: So what I would say as you can see the bump up from that we're going to set the 90, 10%, but that I would not put that as a longer term expectation for us will be looking to properly adjust the balance sheets go forward that actually allowed us as everyone understands.
Stephen Sheldon: Great to hear. Thanks for taking the questions.
Speaker Change: That actual loan were allowed us to do is really reduce the deal risks for us and what I mean by that we signed the deal back in March right. We did not know exactly what the equity and cash ratio is going to be we did not know the exact timing of when the par government divestiture, what's going to happen. So we wanted to make sure the deals the value of it was very strong for us as 70 just explain.
Eric Martinuzzi: Our next question comes from the line of Eric Martinuzzi of Lake Street Capital Markets. Your line is open. Yeah, I was interested in your perspective on the competitive landscape specifically versus two larger competitors in the P.O.I, with microbes and T.R. Horicks.
Speaker Change: <unk> that we had that locked in on this allowed us to do that and we were able to get that commitment from them.
Speaker Change: Now, we're going to make sure that we probably do our capital allocation that we always have.
Speaker Change: Hopefully for good ROI.
Speaker Change: Alright.
Speaker Change: Share count.
Savneet Singh: Now given the completion of the acquisition specifically task, how does that change your competitive landscape for international for you? Well, I think, you know, before that, we weren't international. So, you know, I don't think we had a solution. And the time of the acquisition, you know, one of the things that sort of been observing is that our big US brands are growing far faster outside the United States than in the United States.
Speaker Change: Okay got it.
Speaker Change: What is it.
Speaker Change: Referring to the 8-K I believe it's at right now.
Speaker Change: We've just about I think its about another $2 3 million in shares on top of where we were versus what you see in the year.
Speaker Change: And the 8-K.
Speaker Change: Got it thank you.
Speaker Change: Our next question comes from the line of Samad Samana of Jefferies. Your line is open.
Samad Samana: Hey, good morning, Thanks for getting me on Harris, just really impressive the amount of about.
Savneet Singh: And over time, the decision makers for the businesses will probably gravitate towards the international side because that's where they're deploying their capital. And I think that puts us at a point of weakness. So, we may have the best solution in the US, but if somebody has a better global solution, maybe the B plus product wins over the A plus product in the US because they want something more connected. And that was a big part of the rationale for the acquisition.
Samad Samana: The amount of change you guys are digested in the second quarter and early kind of clearing the path for the company and its just great to see all of that so that maybe just <unk>.
Speaker Change: Given us some guardrails on organic growth and in terms of what would lead you to the upper bound that you've given historically versus maybe where you are so can you maybe just help us think room now.
Savneet Singh: So, I think it makes us far more competitive on these mega large deals. Obviously, as you know, TASC has got one or two mega brands already. I think, you know, soon to be three. And I think we will be able to help accelerate that. So, I think it makes us more competitive holistically, whereas before I think our large customers would sort of think of us as a US only solution. Yeah. Yep.
Speaker Change: Now that you're done with this period of really really big change in Q U. How we should think about organic growth through the rest of the year and if you feel more confident and maybe thinking about the upper upper end of that range and then I have a couple of follow ups.
Ahmad: Thanks Ahmad.
Speaker Change: I appreciate the feedback so listen as you know a lot of I think what got me. So excited is our growth is decelerating and we've cleaned up I think the government business made a pure play and as I hope.
Bryan Menar: Then a housekeeping item here. Post the, the dust settling on the, I think it was July 18th closed on TASC. Can you give us a sense for kind of a normalized rest of year interest expense and share count?
Ahmad: Communicate on the call.
Speaker Change: Our operating leverage is pretty tremendous we our EBITDA was negative $1 8 million. After we sold off over $10 million of EBITDA. So.
Bryan Menar: Absolutely. Brian, do you want to run through the interest sense on the global note and then we'll. Yeah, so what you're referencing there are great is the fact that we did that acquisition with the combination of cash and a balance sheet, a portion around 37 30% equity. And then we also used about 90, 90 million of a term loan from blue out that affected it straight is roughly around 10%. We plan on that that's going to be a short term loan within our on our balance sheet.
Speaker Change: It's kind of exciting to see just how fast the financial profile changing alongside all the business transformation you mentioned from a growth perspective.
Speaker Change: We still feel Super confident.
Speaker Change: Later than 20% were in the mid 24, 25% right now.
Speaker Change: As far as confidence on accelerating beyond that we're still early in the Burger King rollout. So we certainly if we can continue to execute and they get excited we have.
Speaker Change: Clearly a path to get to the higher end of that but.
Speaker Change: You know from where we sit today I wouldn't want to change anything I don't want to get ahead of ourselves, but we feel pretty confident as I said, we have never I think.
Bryan Menar: So, what I would say is you could see the bump up from that. I get it said that 90 to 10% but that I would not put that as a longer term expectation for us will be looking to properly. You know, adjust the balance sheets go forward that actually allowed us to say everyone understands that actual loan allowed us to do was really reduce the deal risk for us. And what I mean by that we started to deal back in March right we did not know exactly what the equity and cash ratio was going to be.
Speaker Change: This is very subjective, but I don't think we've ever done rollout as well as we're doing this one and as soon as his commitment to the customer and so I think we're giving no reason for that organization not to give us more in del Mar.
Speaker Change: Right now, it's a very month by month process to figure out what we're doing next month from that side and Thats. The one lever there the other lever as I mentioned is on the retail business formerly studio.
Speaker Change: We've got a really strong pipeline right now of some very big deals and what's neat about that business, which is so different than our historical path is you get one of those big deals and you start billing them immediately and and so there is we now have a kind of a second lever to potentially get us to the higher end of the range, but that will be very much Q4 experience.
Bryan Menar: We did not know the exact timing of when the part government investor was going to happen. So, we wanted to make sure the deal the value of it was very strong for us to have me just explained that we had that locked in. This allowed us to do that and we were able to get that commitment from them. And then now we're going to make sure that we probably do our capital allocation like we always have, hopefully for good ROI.
Speaker Change: Great and then just on the Wendy's rollout it sounds like that implementation has gone much faster than expected.
Bryan Menar: All right, and the share count just getting kind of, what is it tonight? Yes, it's referring to the AK, I believe it's that right now, we just have those two, I think it's about another 2.3 million shares about on top of where we were versus what you see in the, in the AK. Gotcha. Thank you.
Brian: In the third quarter and can you just remind us and just maybe for Brian Brian. If this is maybe more of a question for you but is that our as Wendy is already reflected in IRR or is it now that Nick five in the third quarter it'll be actually in the <unk> numbers. We're just trying to get a sense of magnitude, there and where that contribution vaults.
Samad Samana: Our next question comes from the line of Samad Samana of Jeffries, your line is open. Hey, good morning, thanks for getting me on first, just really impressive the amount of change you guys have digested in the second quarter and really kind of clearing the path up for the company and just great to see all that. So if that may be just, you've given us some guardrails on organic growth and in terms of what will lead you to the upper bound that you've given historically versus maybe where you are, so can you maybe just help us think through now that you're done with this period of really, really big change in QQ, how we should think about organic air growth through the rest of the year and if you feel more confident in maybe thinking about the upper end of that range and then I think we'll fall off.
Speaker Change: So it'll be it'll be in the third quarter, because we launched in July and we build when we launch.
Speaker Change: So this quarter, even like I said, we grew 24%.
Speaker Change: Didn't include that Wendy's number so again through acuity a nice boost we unfortunately can't dimensionalize the size of that contract in public forums because of our relationship with a customer but.
Speaker Change: I think I feel really comfortable at one of our largest one of our top two largest punch customers.
Speaker Change: Great and maybe just last question for me.
Speaker Change: I think on the call we've talked a lot about how much the business has grown and changed I'm. Just curious from an operational standpoint, how you are thinking about where you spend your time and maybe how you're thinking about organizationally kind of matching the scale that you gained over the last.
Speaker Change: Let's call it year and change.
Speaker Change: Your time differently, you guys plan evolving maybe the leadership to match the scale that you did.
Savneet Singh: Thanks Samad and appreciate the feedback. So let's not you know, a lot of, I think what got me so excited is our growth isn't decelerating and we cleaned up, I think the government business made a pure play and as I hope communicated in the call, our operating leverage is pretty tremendous. Our EBITDA was exciting to see just how fast the financial profile is changing alongside all the business transformation you mentioned. From a growth perspective, you know, we still feel super confident, you know, greater than 20%, we're in the mid, you know, we're 24, 25% right now, you know, as far as confidence on accelerating beyond that, you know, we're so early in the Burger King rollout, so we certainly, you know, if we can continue to execute and they get excited, we have, you know, really a path to get to the higher end of that.
Speaker Change: That's a really good question, it's not and it's the thing I think and I think our board assesses on the most so I spent a lot of time thinking about organizational design, we weren't functional theyre runs their business units, how do we go to market how do we get the most and how do we most importantly build our bench of talent underneath it and a lot of that work is studying the companies that have done this.
Speaker Change: <unk> generations pass are current.
Speaker Change: In the current market and so we run relatively decentralized we have a business unit that runs our engagement cloud our business around our operator cloud those two leaders are both phenomenal I mean, you can see the growth in operator cloud.
Speaker Change: And I joke.
Speaker Change: I left running the day to day, the business got better and so I feel really good about the quality of talent there.
Speaker Change: And so to me. The question is yes, I expect you've always want our organizational design is scalable the acquisition of <unk> retail.
Savneet Singh: But, you know, from what we said today, I wouldn't want to change anything because I don't want to get ahead of ourselves, but we feel pretty confident. As I said, we've never, I think this is very subjective, but I don't think we've ever done a role and as well as we're doing this one and as shown as a commitment to the customer and so I think we're giving no reason for that organization not to give us more and deal more.
Speaker Change: Such a successful integration happened not because of me, but because of the team underneath that and the ability integrate make that team feel part of our team and our culture and so that I think it's the architectural design combined with really really high quality talent I'd say, it's all the time and I mean sincerely there are four or five people at park that will be better Ceos and.
Savneet Singh: But right now, it's a very month by month process to figure out what we're doing next month from that side and that's the one that we're there. The other lever, as I mentioned, is on the part retail business, formerly Suzo, we've got a really strong pipeline right now, some very big deals and what's neat about that business, which is so different than our historical past, is, you know, you get one of those big deals and you start building them immediately. And so there's we now have a kind of a second lever to potentially get us to the higher end of the range, but that will be very much a Q4 experience.
Speaker Change: My bad my salary on it and so the combination of adding great talent plus great.
Speaker Change: The organizational design to do it where I'm spending my time.
Speaker Change: I'd say, its probably allocated in three or four buckets.
Speaker Change: The first is strategic.
Speaker Change: When we took over par, but we were talking before the call our subscription and service revenue was like $5 million in Q4 of <unk>. Today, we are almost 200 were for well over 200 with task.
Bryan Menar: Great. And then just on the Wendy's rollout, it sounds like, you know, that implementation has gone much faster than expected. I know it happened in the third quarter. Can you just remind us, and this may be prepared or not, Brian, if this is maybe more of a question for you, but is Wendy's already reflected in ARR or is it now that it's live in the third quarter? It'll be actually in the three-view numbers.
Speaker Change: And so our vision and mission it has to change with that and we have all these ambitious people, but these efficiencies aren't going to stay around if our goal is to take 200 to 300, and so I spent a lot of time on what's the strategic vision that we can align organization such that it aligns with the customers that we're serving and spent a lot of time on that.
Speaker Change: And kind of a cheerleader for the company on our values and making sure we're hiring firing promoting based off the values that we signed up for and being really tight on that and creating a lot of accountability.
Bryan Menar: We're just trying to get a sense of magnitude there and where that contribution falls. So it'll be in a third quarter because we launched in July and we built when we launched. So this quarter, I guess that we grew 24% and it didn't include that Wendy's number. So again, we're doing a nice boost. We unfortunately can't dimensionalize the size of that contract and public forums because there's our relationship with the customer. But I think I feel really comfortable with one of our top two largest punch customers.
Speaker Change: And that means everything from if a customer has a problem.
Speaker Change: <unk> <unk>.
Speaker Change: <unk> back and make sure that our team no. That's what I expect to everybody and then I spend a ton of time on recruitment of talent. So I am really active in trying to find great talent that we can add the par and keep us honest about it.
Speaker Change: And then lastly, it's on capital allocation and so.
Speaker Change: We have this constant debate, which we are holding our operating expenses very tight and so.
Savneet Singh: Great. I think on the call, we've talked a lot about how much the business has grown and change.
Speaker Change: Where we decided to invest that budget is is a very tough conversation do we put it more into payments. So we put it more into per retail do we put more into brink, where we have this tremendous growth those are hard conversations with imperfect data and so I spend a ton of time figure out where do we want to make that incremental investment.
Savneet Singh: I'm just curious from an operational standpoint, how you're thinking about where you spend your time and maybe how you're thinking about organizationally kind of matching the scale that you've gained over the last, let's call it year and change and if you're spending your time differently and if you guys plan on evolving maybe the leadership to match the scale that you gained. That's a really good question, it's the thing I think and I think our board obsesses on the most.
Speaker Change: Then supplementing that with does M&A make more sense and so we're kind of always having that conversation.
Speaker Change: Got you I appreciate the answer and congrats on all the success.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Adam Wyden of EDW Capital. Your line is open.
Savneet Singh: So I find a lot of time thinking about organizational design. We want functional through runs through business units, how do we go to market, how do we get the most and how do we most importantly build a bench of talent underneath it. And a lot of that work is studying the companies that have done this in generations paths or current market. And so we run relatively decentralized. We have a business unit that runs our engagement cloud, a business run that runs our operator cloud.
Adam Wyden: Hey, guys.
Adam Wyden: Super exciting and congratulations I feel like I've been waiting six years to sort of have this.
Adam Wyden: Phone call. So I, just I want a separate about some qualitative questions in some.
Speaker Change: Quantitative questions. If I look at the $2 $5 million of add backs and those are truly add backs and 78, you said minus 1% of EBITDA that does not include government.
Savneet Singh: Those two leaders are both phenomenal, I mean you can see the growth in operator cloud and I joke when I left running the day-to-day the business got better. And so I feel really good about the quality of talent there. And so to me the question is, I answer the question too, which is what are organizational divine is scalable. The acquisition of part retail, such a successful integration happened not because of me but because of the team underneath that and their ability to integrate, make that team feel part of our team and our culture.
Speaker Change: If I look at sort of the contract revenue that you generated last quarter of 35.
Speaker Change: And obviously you have some corporate absorption corporate allocation in the government segment, I mean, if I sort of put a 9% margin on that.
Speaker Change: It looks like to me like about.
Speaker Change: About three three to three three of EBITDA. So I know you said over 10-K.
Speaker Change: Can you just sort of Dimensionalize I guess like the quantum of that.
Savneet Singh: And so I think it's the organizational line combined with really, really high quality talent. I say it's all the time and I mean it sincerely. There are four or five people at par that will be better CEOs than me. And I bet my salary on it. And so the combination of adding great talent plus a flexible organizational design to do it.
Speaker Change: Is it more like 12 13.
Speaker Change: Is there a corporate G&A do you think you can take down associated with that that you haven't yet to take down and then I would say secondly.
Speaker Change: Can you sort of give us a sense of what you think sort of the ongoing EBITDA contribution is because I mean, I guess sort of where I would get at high level Youre sort of you were profitable in the second quarter without past sort of what I'm trying to get through so if you can unpack that and then I've got a couple of other questions about pipeline.
Savneet Singh: Where I'm studying my time, I say it's probably allocated in three or four buckets. The first is strategic. When we took over a par, we were talking before the call, our subscription service revenue was like $5 million in Q4 of 18. Today we're almost 200 or well over 200 with task. And so our vision mission has to change with that. And we have all these ambitious people, but these ambitious people aren't going to stay around if our goal is to take 200, 300.
Speaker Change: But that would be helpful to sort of conceptualize.
Speaker Change: So I think if we had the government business, we have cross we would've crossed EBITDA profitability really comfortably this year.
Speaker Change: As I said, it's over 10 over quarter this quarter, sorry this quarter.
Savneet Singh: And so I spend a lot of time on what's the strategic vision that we can align our organization such that it aligns with customers that we're serving. And so I spend a lot of time on that. I am kind of the cheerleader for the company on our values and making sure we're hiring, firing, promoting based off the values that we signed up for and being really tight on that and creating a lot of accountability.
Speaker Change: Over $10 million, EBITDA, plus allocations and stuff like that.
Speaker Change: I don't think it was a swing.
Speaker Change: $5 million, if you will because thats too much but I think it's a few million dollars would have gone in the right direction and we would across that and so the point I was making a call and I think you are suggesting is even call that a headwind on EBITDA, we still got to these numbers and obviously it shows how much how efficient the core businesses becoming.
Savneet Singh: And that means everything from a customer has a problem. I text them and text them back and make sure that a team knows that's what I expect of everybody. And then I spend a ton of time on recruitment of talent. So I'm really active in trying to find great talent that we can add to par and keep us honest about it. And then lastly, it's on capital allocation. And so we have this constant debate, which is we are holding our operating expenses very tight.
Speaker Change: So in short I think we would have been EBITDA, we would across this quarter.
Speaker Change: We will cross the next quarter.
Speaker Change: And I think my guess, probably a few million dollars.
Speaker Change: A little bit hard because theres rationalizing.
Speaker Change: Rationalizing office expense and things like that.
Speaker Change: Youre, making allocations versus sometimes science alright.
Savneet Singh: And so where we decide to invest that budget is a very tough conversation. Do we put it more into payments? Do we put it more into par retail? Do we put it more into brink? What we have this tremendous growth? Those are hard conversations with imperfect data. And so I spend a ton of time figuring out where do we want to make that incremental investment? And then supplementing that with does M&A make more sense? And so we are kind of always having that conversation.
Speaker Change: Alright, and then on the tax side do you sort of still expect to get.
Savneet Singh: Thank you.
Speaker Change: $8 million to $10 million per year, I guess I mean.
Speaker Change: I think that there is additional huge investment on the tax side from a G&A perspective is it fair to assume that you still think you're going to get sort of two to two and a half on task.
Speaker Change: Per quarter I think.
Speaker Change: Post the cuts from post transaction right. So the public company costs separate takeout I think that's reasonable.
Savneet Singh: I appreciate the answer and thank you for all the success. Thank you.
Adam Wyden: Our next question comes from the line of Adam Wyden of ABW Capital.
Speaker Change: When we reported it at we were in the six to eight.
Speaker Change: Guidance I think post smoothing things like everything from reporting fees, the board fees and audit fees things like that will pull out another couple of Bucks, we hope as we talked about on the May announcement call.
Adam Wyden: Your line is open. Hey guys, super exciting and congratulations.
Savneet Singh: I feel like I've been waiting six years to have this phone call. So I want to separate about some qualitative questions and some quantitative questions. If I look at the two and a half million dollars of ad backs and those are truly ad backs and Savneet you said minus one eight of EBITDAH, that does not include government. If I look at sort of the contract revenue that you generated last quarter of 35 and obviously you have some corporate absorption, corporate allocation in the government segment.
Speaker Change: And then I think that assumes that we don't find ways to grow the business. So.
Speaker Change: Let's assume that for now and obviously that will not happen, but let's assume that for now so short answer is no different when we reported back in March.
Speaker Change: So and I don't want to belabor this but sort of in summary, if you give the $3 million credit for.
Speaker Change: Just remind us on on government that gets you to like one two plus plus.
Speaker Change: Plus another two on task and you're I mean, you're a.
Savneet Singh: I mean, if I sort of put a nine percent margin on that, you know, it looks like to me like about, you know, about three to three three of EBITDAH. So I know you said over 10, but I mean, can you sort of dimensionalize, I guess, like the quantum of that? And is it more like 12, 13? Is there a corporate GNA that you think you can take down associated with that that you don't have to get to take down?
Speaker Change: A solidly profitable company, and which sort of leads me to my follow up which is.
Speaker Change: I look at sort of a gel assess and I get it's different in that you guys have multiple products, but now as engaging cloud as sort of integrated in your merchant Skus with punch and Youre getting those cost synergies and those revenue synergies are moving pumps customers to <unk> and getting higher <unk> and now with data central integrated I mean, you are really now starting to get to the <unk>.
Savneet Singh: And then I would say secondly, you know, can you sort of give us a sense of what you think sort of the ongoing EBITDAH contribution is? Cause I mean, I guess sort of where I would get at is high level. You're sort of you were profitable in the second quarter without past. I mean, sort of what I'm trying to get to. So if you could unpack that and then I've got a couple of the questions about pipeline and qualitative, but that would be helpful to sort of conceptualize.
Speaker Change: Where your products are getting integrated I mean agilis. This is running at a 17% margin and it's a much smaller IRR company I mean can you talk a little bit about sort of.
Speaker Change: How do you think about we're 40 because at least from our accounts it looks like Youre getting there a lot sooner than we thought and do you think about that from an AOR growth plus company wide margin will have 40.
Speaker Change: Can you sort of have a sense of when youre going to get there.
Savneet Singh: So you know, I think if we had the government business, we would cross we would have crossed EBITDAH profitability really comfortably this year. You know, they said it's over 10 over this quarter. Sorry, this quarter. With, you know, over $10 million EBITDAH plus, you know, allocation and stuff like that, you know, I don't, I don't think it was a swing to $5 million, if you will, because that's too much. But I think it's a few million dollars would have gone in the right direction and we would have crossed that that.
Speaker Change: Any sort of thoughts in terms of like pass the rule of 40 accelerated development based on this acquisition and cost.
Speaker Change: Anything you can sort of talk about your confidence of getting to rule of 40, and where you think that sort of lens.
Speaker Change: Sure. So we're growing call it mid twenties.
Speaker Change: We acquired this $6 million to $8 million attached EBITDA call. It pre synergy plus you havent, yet seen sort of the philosophy, we have as we win new car retail deals and again the most important driver of our profitability is still the core business, becoming so efficient kind of messaging here, we haven't really added costs in six quarters and barely any costs for the last seven or eight quarters, yet the revenues there.
Savneet Singh: And so the point I was making on the call and I think you're suggesting is even with, you know, call that a headwind on EBITDAH. We still got to these numbers and, and obviously this shows how much how efficient the core business is becoming. So, you know, in short, I think we would have been EBITDAH, we would have crossed the this quarter across the next quarter. And, and I think, you know, my guess probably a few million dollars, you know, it's a little bit hard because there's, you know, rationalizing office expense and things like that.
Speaker Change: That's still the biggest driver.
Speaker Change: And so I think we're not giving guidance on this call, but we are squarely focused on hitting our rule of 40 and our business units are all guided to hit the rule of 40 independently.
Savneet Singh: You know, you're, you're making allocations versus, you know, sometimes signs. Right. And then on the top side, do you sort of still expect to get, you know, 8 to 10 million per year, I guess. I mean, you don't think that there's an additional huge investment on the top side. I mean, is it fair to assume that you still think you're going to get, you know, sort of two to two and a half on task.
Speaker Change: So we're going to get there very quickly.
Speaker Change: I guess, if the slope to EBITDA has been so fast and we will and I think it will continue to go there in 2025 as we rollout these big deals.
Speaker Change: So we're really focused on it I think we'll be there.
Speaker Change: We're working our way to get there as fast as possible and maybe most importantly, the reason I break out the sales and marketing R&D expense and you can just you can see again on an organic basis, excluding task with him in there how fast that's happening so.
Savneet Singh: Per quarter. I think post the cuts from, you know, post transaction, right. So, the public company costs are taking out. I think that's reasonable. You know, when we reported it, we were in the six to eight, you know, guidance. I think post moving things, like, you know, everything from reporting fees to board fees and audit fees is like that. We'll applaud another couple of bucks. We hope as we talked about on the announcement call.
Speaker Change: Squarely focused on improving their fast and what I'm really prioritizing animas.
Speaker Change: It gets really really.
Speaker Change: Really quickly if we turn down the growth engine, and just say hey, let's get let's ramp up the cash flow, we're not trying to do that we want to capture as much market share keep the growth high.
Speaker Change: And so that's how we can get there.
Speaker Change: Feel really good about that the other part I would just say it's really quickly.
Savneet Singh: And then I think that assumes that we don't find ways to grow the business. So, you know, let's assume that for now and obviously that will not happen, but let's assume that for now. So, short answer is no different from when we reported back in March. Right. So, I don't want to belabor this, but sort of in the summary, if you give the $3 million credit for, you know, or plus or minus on government that gets you to like one, two, plus, you know, plus another, you know, two on task.
Speaker Change: The white space within our Tam is meaningful and I think as Youre seeing in our numbers one of the things. We've figured out is how to attach more products and so we're just at the beginning of that really really honestly just at the beginning of that and so youre seeing us become drive this growth by selling 1234 products before as one product wait a year at another product now.
Speaker Change: Getting them in faster and faster and that is that.
Speaker Change: That were just the beginning of that white space and so that's what I'm really excited about where they are.
Savneet Singh: I mean, you're, you're, I mean, you are a solidly profitable company, and which sort of leads me to my follow-up, which is, you know, I look at sort of a jealousist, and I get it's different. You guys have multiple products, but now, as engaged in cloud, sort of integrated in your version of stu-zo, and with punch, and, you know, you're getting those cost energies and those revenue synergies, the moving punch, punch customers to stu-zo, and getting higher R2, and now with data central integrated.
Speaker Change: So.
Speaker Change: I think of it yet, but we're not giving guidance on this call, but we'll come back with that on our next couple of calls and I just wanted to clarify.
Speaker Change: Adam So I'll clarify one thing.
Speaker Change: <unk> to the Q2 numbers did not include part of government. So we're talking about that adjustment, we talked about the $1 $8 million loss. That's a good baseline to go off of Q2 and it has like we said is that pure foodservice and baseline and now we can build off of and you layer in the growth that we're expecting driven student services and new later in tests.
Savneet Singh: I mean, you're really now starting to get to the point where your products are getting integrated. I mean, a jealousist is running at a 17% margin, and it's a much smaller ARR company. I mean, can you talk a little bit about sort of, you know, how do you think about, you know, rule of 40, because at least from our cow, it looks like you're getting there a lot sooner than the thought, and, you know, do you think about that from an ARR plus company wide margin, rule of 40?
Speaker Change: Alright, just wondering how do you think.
Speaker Change: We got another quote was number two.
Speaker Change: Chris got one last question on the on the pipe Okay.
Chris Byrnes: On the pipeline and you made a comment on <unk>.
Speaker Change: <unk> of Super Mega brands, and then you said.
Savneet Singh: You know, do you sort of have a sense of when you're going to get there, or, you know, I'm just, you know, any sort of thoughts in terms of, like, you know, path to rule of 40, accelerated development based on this acquisition and cost, and anything you can sort of talk about your confidence of getting to rule of 40 and where you think that sort of lives. Sure, so, you know, we're growing, call it mid-20s.
Speaker Change: Hope to get a third.
Speaker Change: Can you talk a little bit I mean at the end of 2023, you talked about how the pipeline was the biggest it's ever been and.
Speaker Change: No you're very sensitive to customers and I want the customers who are listening this call to understand that youre, not telling us anything, but we're all sort of going to the tradeshows and trying to figure out what's out there for RFP, but I mean, it appears to us that there are many large mega brands that are out there sort of doing feasibility studies for point of sale.
Savneet Singh: You know, let's, you know, we acquire this $68 million to Tassie with up, you know, call it Precinergy, plus, you know, you haven't yet seen sort of the velocity we have as we win new part retail deals, and again, the most important driver of our property is still the core business becoming so efficient. You know, as we kind of messaging here, we haven't really added costs in six quarters, and barely any costs are the last seven or eight quarters yet the revenue's there, and that's still the biggest driver.
Speaker Change: And for vertical solutions, I mean, I think windows is an amazing proof point in that you know they went and took punch and they sort of have their own loyalty online ordering platform and it seems like they are moving away Burger King is another example, I mean can you talk a little bit about that third mega brands to task and then.
Savneet Singh: And so I think we're not getting guidance on this call, but we are squarely focused on hitting rule of 40, and, you know, our business units are all guided to hit the rule of 40 independently. And so we're going to get there very quickly, like I said, the slope to EBITDA has been so fast, and I think it will continue to go there in 2025 as we roll out these big deals.
Speaker Change: I think a couple of calls you talked about Burger King sort of being a mega brand within the Mega brands on top of that can you talk a little bit about that pipeline and then also table service and then I'm done.
Speaker Change: I can't talk about the brands Unfortunately in but let me answer it this way.
Savneet Singh: So we're really focused on it. I think we'll be there, you know, working our way to get that as fast as possible. And maybe most importantly, you know, the reason I break out the sales and marketing are in the expense. As you can see, again, on an organic basis, you know, excluding taxes even in there, how fast that's happening. So we're squarely focused on it, moving there fast. And, you know, what I'm really prioritizing at it is, you know, if we get to rule of 40, you know, really quickly, if we turn down the growth engine and just say, hey, let's ramp up the cash flow, we're not trying to do that.
Speaker Change: We have again categorically never had so much pipeline, particularly with the operator cloud as we have today, it's real it's meaningful it's literally seems like every week on flying somewhere with a team member to try to get these deals over the finish line and I don't think that's going to continue and as I said in the call. This.
Speaker Change: This macro environment, while it might be scary is actually we think pretty exciting for us like process, we get to go on offense, because our customers as I said the average the average same store sales across our customer base was up five 5% this quarter, that's way more than the average restaurant and so they're still making these investments we have not seen a slowdown in our pipeline and I.
Savneet Singh: We want to capture as much marketer, keep the growth high. And so that's how we're going to get there. And I feel really good about that. The other part I would just say is really quickly, the white space within our can is meaningful. And I think as you're seeing in our numbers, one of the things we've figured out is how to attach more products. And so we're just at the beginning of that.
Speaker Change: I think that maybe thats, a better way to answer which is we have not seen any follow on pipeline and particular, where I see the most pipeline expansion. While break has great pipeline expansion is the expansion pipeline and data central as an example that we're like Wow, that's really becoming exciting for us.
Savneet Singh: Really, really honestly, just at the beginning of that. And so you're seeing us become, you know, drive this growth by selling one, two, three, four products. You know, before there's one product, wait a year at another product. Now it's getting them in faster and faster. And that is that model that we're just beginning of that white space. And so that's what I'm really excited about. We're there. So that's what we're saying. I can't give a big yet.
Speaker Change: As far as specifically the brands I, just can't talk about that stuff, yet, but we feel really good about it and and and.
Speaker Change: And listen if I was if we felt like the pipeline was getting smaller or we had.
Speaker Change: We are feeling any of that I would tell you that.
Speaker Change: This environment's really helping us right now.
Jonathan: Hello, Jonathan framework.
Speaker Change: Yes, but the prospect of Mega brands beyond Burger King you think that Thats on the table and that's all that's all I'm trying to get at but there are mega brands larger than Burger King that you think are feasible in terms of selling more products, that's what I'm trying to get at.
Savneet Singh: We're not giving guidance on this call, but we'll come back with that, you know, on our next couple called. And I just want to talk about one thing, Adam. I just want to talk about one thing, because I don't understand too. The Q2 numbers did not include part of governments. So when we talk about that adjustment, we talk about no 1.8 million loss. That's the good baseline to go off of Q2.
Speaker Change: I would say we are actively in conversations with Mega brands.
Speaker Change: I think many people are going to this constant debate of internal versus vendor based <unk> and I think theyre going to move to vendors over time.
Savneet Singh: And it has that, like we said, that pure food service tech and baseline and now we build off of. And your layer in the growth that we're expecting, driven services and your layer in task. All right, so let me think. You know, can we get other qualities in the Q. Chris got one last question on the pipeline on the pipeline. You made a comment on two of super mega brands. And then you said, hope to get a third.
Speaker Change: Okay. Thank you.
Speaker Change: Our next question comes from the line of Mark Palmer of the Benchmark Company. Your line is open.
Mark Palmer: Yes. Good morning, Thanks for taking my questions.
Speaker Change: <unk>.
Speaker Change: Along the lines of.
Speaker Change: What Adam actually just asked.
Speaker Change: Wanted to get your sense of what the company's current capacity is to take on.
Savneet Singh: Can you talk a little bit? I mean, at the end of 2023, you talked about how the pipeline was the biggest it's ever been. And you know, I know you're very sensitive to customers. And you know, I want the customers who are listening to this call to understand that like you're not telling us anything, but we're all sort of going to the trade shows and trying to figure out what's out there for our fee.
Speaker Change: New tier one customers given the ongoing.
Speaker Change: Burger King rollout, which is on the front end.
Speaker Change: As well as.
Speaker Change: Launch of Wendy's.
Speaker Change: We're just capacity stand could you comfortably tuck in another tier one at this point.
Savneet Singh: But I mean, it appears to us that like there are many more mega brands that are out there sort of doing, you know, feasibility studies for point of sale and for vertical solutions. I mean, I think Wendy's is an amazing group point in that, you know, they went and took punch and, you know, they sort of have their own loyalty online or in platform and it seems like they're moving away. You know, Burger King is another example.
Speaker Change: Absolutely so I think.
Speaker Change: A lot of it the model we've changed within particularly the operator cloud segment all he and the team has done this incredible job of making it.
Speaker Change: Dynamic and so our ability to ramp up and ramp down.
Speaker Change: Is is what's changed most about par going back three four years. We just don't think we manage it highly and I don't think we had a flexibility today, we can ramp up and ramp down and do this in partnership with our customers.
Savneet Singh: I mean, can you talk a little bit about that third mega brand for task. And then, you know, I think on couple calls, you talked about Burger King sort of being a mega brand, but then like mega brands on top of that. Can you talk a little bit about that pipeline and then also table service that I'm done. You know, I can't talk about any of the brands, unfortunately, but let me enter it this way.
Speaker Change: And so the most important part is we aligned to the customers' such that we can make sure. We're there and we worked really hard to make sure they pay for it and so it's really it's been a change in how we do it and again kudos because that team is continuing seeking out ways to delay that and one of our emerging leaders.
Speaker Change: She is sort of finds a way to get it done and I think we will you've got a nice vacation and we will on the engagement side as you mentioned when we launched.
Savneet Singh: We have, again, categorically, never had so much pipeline, particularly with an operator cloud as we have today. It's real, it's meaningful. It literally seems like every week I'm flying somewhere with a team member to try to get these fields on the finish line, and I don't think that's going to continue. And as I send the call, this macro environment, well, it might be scary, it's actually, you know, we've been pretty exciting for us.
Speaker Change: <unk> is one of our largest accounts over and I encourage everybody to download the app play around CF functionality.
Speaker Change: It was amazing how fast we did it it was complicated and.
Mike: Mike gives me great confidence that when we get the next one will be able to do that and as I mentioned on the retail side.
Savneet Singh: Like for us, we get to go on offense because our customers, you know, as I said, the average brings, the average brings a standard sales across our customers is up 5.5% with quarter. That's way more than the average restaurant. And so they're still making these investments. We have not seen a slowdown in that pipeline. And I think that maybe that's the better way to answer, which is, we have not seen any slowdown pipeline.
Speaker Change: Seems an execution machine and I have no no fear that we if we land one or two of these big deals will be able to get it done as we promised.
Speaker Change: Okay, good and just one follow up.
Savneet Singh: And, you know, particularly where I see the most pipeline expansion, while break has great pipeline expansion, it's the expansion of pipeline and data central as an example that we're like, wow, that's really, you know, becoming exciting for us. You know, as far as specifically the brands, I just can't talk about that stuff yet, but we feel really good about it. And, and, and, and, you know, listen, if I was, if we felt like a pipeline was getting smaller or we had, you know, we were feeling any that I would tell you, but this environment is really helping us right now.
Speaker Change: You just talked about the fact that par's business is somewhat counter cyclical that.
Speaker Change: Restaurants enterprise restaurants.
Speaker Change: See value in what you're offering in particular during a down market as they look to boost sales and gain efficiency.
Speaker Change: How does the.
Speaker Change: Company's effort too.
Speaker Change: Two.
Speaker Change: Improved pricing fit into that mix.
Speaker Change: With regard to the degree of receptivity that Youre seeing the degree of receptivity that you anticipate.
Savneet Singh: Yeah, but the prospect of mega brands beyond Burger King, you think that that's on the table. That's all that's all I'm trying to get at. If there are mega brands larger than Burger King, you know, you think are feasible, you know, in terms of, you know, selling more products. That's what I was trying to get at. I would say we're, you know, actively in conversations with mega brands, but, and, I think many people are going to this constant debate of internal versus vendor-based tech, and I think they're going to move to vendors over time. Okay, thank you.
Speaker Change: For pricing to me based on value that we drive and if we drive value we take price if we don't we don't.
Speaker Change: We're thinking deeply about this idea of adding outcomes to a big part of the part thesis, but we drive outcomes.
Speaker Change: I think we had to change the framework for truck from our customer base. The thing we're not trying to SLA. If we're trying to drive business outcomes for you and if we drive those outcomes and we take value off those outcomes, we're aligned and that's what we're seeing.
Speaker Change: <unk> was up 14% this quarter. It was up a similar amount last quarter I expect that to continue and all of that suggesting is that our customers are willing to pay if we can drive great outcomes and in this environment. As you suggested if we're able to drive those outcomes and our customers are running alongside of US I think we havent felt pressure too.
Mark Palmer: Our next question comes from the line of Mark Palmer of the Benchmark Company. Your line is open. Yes, good morning. Thanks for taking my questions. A long line of what Adam actually just asked, wanted to get your sense of what the company's current capacity is to take on new tier one customers, given the ongoing Burger King rollout, which is on the front end, as well as launch of Wendy's. Where does capacity stand, you know, could you comfortably tuck in another tier one at this point?
Speaker Change: The percent forward and and so we're excited and I think the point on.
Speaker Change: Cyclicality.
Speaker Change: The enterprise sort of foodservice business is just very durable.
Speaker Change: And I don't find them to make drastic changes to their plans because they don't have businesses that go up 20 down 20.
Speaker Change: So when they have the time to address they make investments in things like <unk>.
Speaker Change: Things like because they're kind of downturn.
Savneet Singh: Absolutely. So I think, well, a lot of the model we've changed within particularly the operator cloud segment, you know, all in the team has done this incredible job of making it, you know, dynamic. And so our ability to ramp up and ramp down is what's changed most of that part, you know, of going back three or four years. I don't think we managed it highly, and I don't think we had that flexibility today.
Speaker Change: But at the same time.
Speaker Change: They are back office, because we got more efficiently.
Speaker Change: We are very well situated to be in that and most importantly, because we're already in all of these brands.
Savneet Singh: We can ramp up and ramp down and do this in partnership with our customers. And so the most important part is we align to the customers, such that we can make sure we're there, and we work really hard to make sure they pay for it too. And so it's been a change in how we do it, and again, this goes to that team that's continuing to figure out ways to delay that.
Speaker Change: The Robin the challenge and the friction to get going its far lower than if we were a net new customer by vendor excuse me.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of George Sutton of Craig Hallum. Your line is open.
George Sutton: Thank you just one question for me relative to the trend that we're seeing of.
Speaker Change: OLS and Pos players trying to bring their products together to market.
Savneet Singh: You know, one of our emerging leaders, you know, she sort of finds a way to get it done, and I think we will. You've got to rise to the occasion, and we will. On the engagement side, as you mentioned, you know, when we launched, you know, Wendy is one of our largest accounts ever, and you know, I encourage everybody to download the app, play around, see our functionality. It was amazing how fast we did it.
Speaker Change: From separate companies versus your unified.
George Sutton: Modality can you just give us a sense of of how you think that ultimately wins in the market again, its going to the tangible examples of a better together concept.
Savneet Singh: It was complicated, and it gives me great confidence that when we get the next one, we'll be able to do that. And as I mentioned on the part retail side, that teams an execution machine, and I have no fear that we, if we land one or two of these big deals, we'll be able to get it done as we promised.
Speaker Change: Yeah, absolutely. So first of all that we play with both we are the most integrated solution in our category by a long shot and nobody has more integrations into more online ordering partners loyalty partners ecommerce partners than we do so we support both but our thesis and I think you can sort of see that is that overtime customers don't want to just joined the tech stack. They don't want to take the risk.
Savneet Singh: We're good, and just one follow-up, you just talked about the fact that PAR's business is somewhat counter-cyclical that restaurants, enterprise restaurants see value in what you're offering in particular during a down market as they look to boost sales and gain efficiency. How does the company's effort to improve pricing fit into that mix with regard to the degree of receptivity that you're seeing, the degree of receptivity that you anticipate? Pricing to me is based on value that we drive, and if we drive value, we take price if we don't, we don't.
Speaker Change: One vendor changes something an excuse of all the other vendors, which is literally what happens every single month and so what we've observed and I think it's in our data.
Speaker Change: Every menu customer is an existing customer or acquire product and I think all of that suggesting is that if we can build a comparable product our customers prefer to add on additional product versus adding a new vendor where they need to learn that vendor going to pursue that vendor and then deal with all sorts of.
Speaker Change: Challenging things like having different menus different pricing.
Speaker Change: A different API like you just create more friction and more risk of things going wrong, and so I think generally our thesis is that our customers over time will prefer something more unified something more deeply integrated but we don't force that upon them and we give them complete flexibility to figure out what works best but I think what we're seeing is that over and over again and this is to your last point where.
Savneet Singh: You know, we're thinking deeply about this idea of adding outcomes to a big part of the part of pieces, but we drive outcomes. You know, I think we had a change of framework from our customer base saying, we're not trying to hit SLA, we're trying to drive business outcomes for you, and if we drive those outcomes and we take value off those outcomes, we're aligned. And that's what we're seeing. You know, ARP who was up 14% this quarter, it was up, you know, summer amounts last quarter, I expect that to continue.
Speaker Change: <unk> able to prove better together outcomes, we can say when you take the second part product look at this outcome you got that you Couldnt get before you had a third product Oh, My God hears a third one.
Speaker Change: Finding ways to surprise and delight you. The example, I gave on this call was the point of wallet, which really is a cool feature that we only get if you've got punched in our payments product. If you had punched different payments product it'd be really hard to deliver that outcome for the customer and so again ill start from the customers that we can deliver great products.
Savneet Singh: And all that suggesting is that our customers are willing to pay if we can drive great outcomes. And in this environment, as you suggested, if we're able to drive those outcomes and our customers are wanting alongside of us, I think we haven't felt pressure to push that forward. And so we're excited. And I think, you know, the point on, you know, the cyclicality, the enterprise sort of food service business is just very durable.
Speaker Change: Our customers will buy and if we can prove that out.
Speaker Change: Perfect. Thank you.
Speaker Change: Our next question comes from the line of Anya Soda Schrum with Sidoti Your line is open.
Savneet Singh: And I don't find them to make drastic changes to their plans because they don't have businesses that go up 20 down 20. And so when they have the time to direct, they make investments in things like loyalty, they make investments in things like digital sales because they're trying to capture share. But at the same time, they make investments in their back office because they've got to run more efficiently. And so we are, I think, very well situated to be in that. And most importantly, because we're already in all these brands, the rub and the challenge and the friction to get going, it's far lower than if we were a net new customer vendor, excuse me.
Speaker Change: Alright, Thank you for taking my questions.
Speaker Change: But I just had a follow up on them.
Speaker Change: Hello.
Speaker Change: Adoption among your customers do you see that.
Speaker Change: Customers being more urgent to.
Speaker Change: Click on your solutions.
Speaker Change: And do you see there.
Speaker Change: Being a little bit more challenged.
Speaker Change: I think it's too early to say our customer base is diverse and so we definitely have customers that have struggled but on average they have done relatively well, particularly against the broader restaurant community.
George Sutton: Thank you. Our next question comes from the line of George Sutton of Craig Holland. Your line is open.
Speaker Change: Yes.
Speaker Change: What I think we observed is again since I've been CEO I haven't lived through a bunch of cycles, but I remember.
Savneet Singh: Thank you. Just one question for me, relative to the trend that we're seeing of, you know, OMS and POS players trying to bring their products together to market from separate companies versus your unified. Modality, can you just give us a sense of how you think that ultimately wins in the market. Again, it's going to the tangible examples of the better together concept. Absolutely. So first of all, we play with both. We are, you know, the most integrated solution in our category by a long shot.
Speaker Change: And the pandemic, we saw how quickly customers ran to add additional technology.
Speaker Change: And so I think that's the analog that I have at where it was an acute problem. They absolutely ran into it I think when you have something that is honestly not yet in the numbers of our customers, but there is a fear that something might happen.
Speaker Change: I suspect it might be similar to what we saw back then which is a greater push to get these tools out the door to prove that ROI.
Speaker Change: And I think one of the beauties of great technology is that it.
Speaker Change: Its operating expense not capex and it allows them to rollout a product prove the ROI without having to tie up tons of budget upfront, which is probably very hard to do right now and so I think what we're seeing is this constant debate or are customers of which product do we prioritize first and we really help them kind of give arguable how that works in a rollout.
Savneet Singh: Nobody has more integrations into more online ordering partners, loyalty partners, the common partners than we do. So we support both. But our thesis, and I think you can, you know, sort of see that is that over time, customers don't want to disjointed text back. They don't want to take the risk that one vendor changes something and it screws up all the other vendors, which is literally what happens every single month. And so what we've observed, and I think it's in our data, you know, every menu customer is an existing customer of a part product.
Savneet Singh: And I think all that suggesting is that if we can build a comparable product, our customers prefer to add on an additional product first adding a net new vendor, where they need to learn that vendor, get a few that vendor, and then deal with all sorts of challenging things like having different menus, different pricing, different APIs. Like you just create more friction and more risk of things going wrong. And so I think generally our thesis is that our customers over time will prefer something more unified, something more deeply integrated.
Speaker Change: Okay. Thank you that was all for me.
Speaker Change: Our next question comes from the line of Andrew Hart.
Speaker Change: <unk> Your line is open.
Andrew Hart: Hey, just one for me so you talked about how you're really excited about the white space within the existing customer base and I think you answered do it in a couple of questions. So far today, but yes.
Speaker Change: One of the things you're talking about.
Speaker Change: Paired remarks was the 10% <unk> growth since last year, but I guess, just can you kind of frame up for us or elaborate at least on how much upside is there inside the existing base today.
Savneet Singh: But we don't force that upon them, and we give them complete flexibility to figure out what works best. But I think what we are seeing is that over and over again, this is to your last point, we're able to prove better together outcomes. We can say, when you take a second part product, look at this outcome you got that you couldn't get before. You had the third product, oh my god, here's the third one, and we are finding ways to surprise and delight you.
Speaker Change: How do you see pricing evolving over the next one to two years.
Speaker Change: So I don't want to I think we think about within the existing base. There is three <unk> the size of the current revenue we have today and as you know I hate hyperbole in massive numbers and so I keep chipping that number down.
Speaker Change: But there's just a ton of opportunity to current base less than 10% of our customers on brain kept our payments product.
Savneet Singh: The example I gave on this call was the Punch Wallet, which really is a cool feature that you only get if you've got punch in our payments product. If you had punch in a different payments product, it would be really hard to deliver that outcome to the customer. And so again, it all starts with the customer, which is that we can deliver great products, with our customers of life. And if we can't put that out, they won't.
Speaker Change: Even though payments is growing so quickly like we have a long long way to go there data central has now got tremendous pipeline, we have excitement that data central could be our fastest growing product next year, that's because we're mining that white space and so now that we have a playbook I think we can do it.
Anja Söderström: Perfect, thank you.
Anja Söderström: Our next question comes from the line of Anja Soderstrom with Sodoti. Your line is open.
Speaker Change: All he and the team have really figured out I get the stuff going integrator launch it quickly and.
Speaker Change: And so we feel I think we feel really encouraged that we can attack that white space, where I think in years past we were hopeful today, it's much more programmatic customer focus, but I think let us demonstrate it and then we can give better guidance.
Speaker Change: Thanks, and maybe a follow up on that when you think about the 20% to 30% ARPA growth longer term, how do you parse that out between net new locations and <unk> opportunity.
Anja Söderström: I'd like to take on your solutions now when they see themselves being a little bit more challenged. I think it's truly to say our customer base is diverse. And so we definitely have customers that have struggled, but on average they've done relatively well, particularly against the broader restaurant community. I think we observed, again, since I've been CEO, I haven't lived through a bunch of cycles, but I remember in the pandemic we saw how quickly customers ran to add additional technology.
Speaker Change: So historically, it's been completely location basis is the first year that we've been able to demonstrate call. It <unk> <unk> inclusive of a price increase it's modules.
Speaker Change: I think over time it would be great. If we can create something more fundamentally about 50 50, I think as I look into 2025, it will be heavily driven by net new store locations because the wins that we have and so it will still be heavily based in new locations, but that doesn't mean, we're taking our eye off the ball on pricing and new modules just happens to be that.
Anja Söderström: And so I think that's the analog that I have where when it was an acute problem, they absolutely ran to it. I think when you have something that is honestly not yet in the numbers of our customers, but there's a fear that something might happen. And I suspect it might be similar to what we saw back then, which is a greater push to get these tools out the door to prove that ROI.
Speaker Change: If we signed these large deals has got to get these stores out the door, yes, I think what it is to as we have more tools in the toolbox for us to use right and so it allows us to flex one versus the other 72 point, we're setting up for 2025, new logos, which can help drive that which same time and accelerate our growth with Europe throughput and.
Speaker Change: Passed we felt predominantly we had to get the new logos, but now that we have multiple products that working very well together and we've got a sales motion no Samsung together additional <unk>.
Anja Söderström: And I think one of the beauties of great technology is that it's operating expense, not CAPEX. And it allows them to roll out a product through the ROI without having to tie up tons of budget upfront, which is probably very hard to do right now. And so I think what we're seeing is this constant debate of our customers of, you know, which product would prioritize first? And we really help them kind of give our view of how that works and overall up.
Anja Söderström: Okay. Thank you. That was awesome.
Speaker Change: One was robust.
Speaker Change: Okay.
Speaker Change: Great to hear all of those levers will thanks, guys nice results.
Speaker Change: And I'm showing no further questions at this time I would now like to turn it back to Christopher Burns for closing remarks.
Christopher Burns: Well, thank you Amy and thank you everyone for joining us today.
Speaker Change: Sure.
Speaker Change: We certainly appreciate your time this morning, and look forward to connecting with you over the next days weeks months and we'll speak to you. After the Q3. Thank you so much and have a good day.
Andrew Hart: Our next question comes from the line of Andrew Hart of B P I G. Your line is open. Hey, just one for me, Sydney, you talked about how you're really excited about the white space within the existing customer base. And I think you answered do it in a couple of questions so far today, but you know, one of the things you talked about in prepared remarks was before 15% our poop roast in last year.
Speaker Change: Thank you for your participation in today's conference. This does conclude the program you may now disconnect.
Speaker Change: Yes.
Speaker Change: [music].
Speaker Change: Okay.
Andrew Hart: But I guess just can you kind of frame up for us or elaborate at least on how much upside is there inside the existing base today? And, you know, how do you see pricing evolving over the next one to two years? Thanks.
Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change:
Speaker Change: Okay.
Speaker Change: Yes.
Savneet Singh: So I don't want to, you know, I think we think about within the existing base, there's three x the size of the current revenue we have today. And as you know, I hate hyperbole and massive numbers. And so I keep chipping that number down. But there's just a ton of opportunity current base, you know, less than 10% of our customers on brink have our payments product like, you know, even though payments is growing so quickly, like we have a long, long way to go there.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: Hmm.
Speaker Change:
Savneet Singh: You know, data central is now got tremendous pipeline. You know, we have excitement that data central could be our fastest growing product next year. That's because we're mining that white space. And so now that we have a playbook, you know, I think we can do it. And, you know, as I said, all in the team have really figured out how to get this stuff going integrated launch it quickly. And so we feel, I think we feel really encouraged that we can attack that white space where I think years past we were hopeful today. It's much more programmatic for focus. But, you know, I think let us demonstrate it and then we can get better guidance. Thanks.
Speaker Change: Okay.
Speaker Change: <unk>.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change:
Speaker Change: Okay.
Savneet Singh: And maybe a follow up on that. When you think about the 20 to 30% are pro growth, longer term, how do you part set out between, you know, not new locations and our pool up? Attorney. Historically, it's been completely location-based. This is the first year that we've been able to demonstrate, call it RPU and RGOD inclusive of price-increases modules. I think over time, it would be great if we can create something more familiar, like 50-50.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Okay.
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Speaker Change: [music].
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Savneet Singh: It allows us to flex one up versus the other. The Savneet point we're setting for 2025 with some new logos, which is going to help drive that, which at the same time accelerate our growth with the RPU. In the past, we felt predominantly we had to get the new logos, but now that we have multiple products that work very well together, and we've got a sales motion, notice how to sell them together, it's an additional tool in the toolbox. Great to hear all those levers. Well, thanks, guys. Nice results.
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Speaker Change: Good day, and thank you for standing by welcome to the par technology fiscal year 2024 second quarter financial results conference call at.
Speaker Change: At this time all participants are in a listen only mode.
Speaker Change: After the speaker's presentation, there will be a question and answer session.
Speaker Change: Ask a question during this session you will need to press star one on your telephone you will then hear an automated message advising your hand is raised to withdraw your question. Please press star one again, please be advised that today's conference is being recorded.
Chris Byrnes: I would now like to hand, the conference over to your Speaker today, Chris Byrnes Senior Vice President of Investor Relations and business development. Please go ahead.
Chris Byrnes: Thank you Amy good morning, everyone and thank you for joining us today for <unk> technologies 2024 second quarter financial results call.
Speaker Change: Earlier. This morning, we released our financial results.
Speaker Change: The earnings release is available on the Investor Relations page of our website at <unk> Dot Com, where you can also find the Q2 financials presentation.
Speaker Change: As well as in our related form 8-K furnished to the SEC.
Speaker Change: During our call today, we will reference non-GAAP financial measures, which we believe to be useful to investors and exclude the impact of certain items.
Speaker Change: A description and timing of these items along with a reconciliation of non-GAAP measures to the most comparable GAAP measures can be found in our earnings release.
Speaker Change: I'd also like to remind participants that this conference call may include forward looking statements that reflect management's expectations based on currently available data.
Speaker Change: However, actual results are subject to future events and uncertainties.
Speaker Change: Information on this conference call related to projections or other forward looking statements may be relied upon and subject to the safe Harbor statement included in our earnings release, this morning, and in our annual and quarterly filings with the SEC.
Speaker Change: Finally, I'd like to remind everyone that this call is being recorded and it will be made available for replay.
Speaker Change: Via a link available on the Investor Relations section of our website.
Speaker Change: Joining me on the call today is pars CEO and President <unk> Singh and Brian <unk> Chief Financial Officer.
<unk> Singh: I'd now like to turn the call over to <unk> for the formal remarks portion of the call, which will be followed by general Q&A 70.
<unk> Singh: Thank you, Chris Good morning, and welcome to everyone on the call.
Singh: Q2 marked an inflection point for PARP, we delivered meaningful growth on a near flat Opex space launched our Burger King rollout integrated studio completed the work to close the task acquisition.
Singh: And launched <unk> in July.
Singh: Equally important is that we divested our government business clearing the way for us to be a pure play foodservice technology business.
Singh: We are marching towards becoming a very profitable business, while increasing our ability to effectuate change at our customers.
Singh: Subscription services continues to be the growth engine of our company and subscription services revenue grew by 48% in the quarter versus same period last year.
<unk> Singh: Our relentless focus on customer success, along with our commitment to delivering best in class products continued to drive our results ex.
Speaker Change #101: Excluding studio now branded <unk> retail second quarter, <unk> grew organically by 24% when compared to Q2 'twenty three.
Speaker Change #101: This is an impressive number given we're just kicking off Burger King launched <unk> in July and as you know we recognize payments revenue on a net basis.
<unk> Singh: At the end of Q2 <unk> stood at $192 million.
<unk> Singh: At 57% increase from the second quarter of last year.
<unk> Singh: Additionally, post Q2, we closed our acquisition of task, which will contribute an additional $40 million of IRR.
<unk> Singh: Operator cloud <unk> grew by 37% to $84 million in Q2, when compared to the same period last year.
<unk> Singh: Greater cloud growth is being driven by increased win rates at brink with stronger multi product attachment of data central and part of payments.
<unk> Singh: As well as continued <unk> improvement.
<unk> Singh: ARPA increased by 14% from the same period last year due to higher value deals API monetization upsell price increases in part payment services go live.
<unk> Singh: We expect the growth in <unk> to continue given current white space in existing high value accounts as well as a very robust pipeline of tier one deals to.
<unk> Singh: To put this into perspective, the successful attachment of both data central payments into our brain concept increases to our opportunity by over three X.
<unk> Singh: As I mentioned, we officially launched the Burger King rollout on April <unk> and Burger King is extremely pleased with the progress made to date, including both from a product as well as an implementation perspective.
<unk> Singh: We feel confident that part can be the enabler of BK digital success and are giving them every reason to accelerate our rollout and hopefully add additional products down the road.
Speaker Change #103: It is critical Burger king needs to implementation thresholds for the year and we are partnering closely to ensure that they do as.
<unk> Singh: As we mentioned in our last call whatever we don't install this year, we will get quickly rolled out in 'twenty five and the early parts of 2026.
<unk> Singh: Turning to pause payments.
Operator: And I'm showing no further questions at this time.
<unk> Singh: Q2, part payments achieved our highest ever gross processing volume run rate of $2 5 billion.
Operator: I would now like to turn it back to Christopher Burns for closing remarks.
<unk> Singh: Pipeline execution led to the signing of several new concepts such as chat time, Canada wings over in Miami growth to name, a few which will be going live before the end of the year in.
Christopher Burns: Well, thank you, Amy, and thank you, everyone, for joining us today. We certainly appreciate your time this morning, and look forward to connecting with you over the next days, weeks, months, and we'll speak to you after the Q3.
<unk> Singh: In Q2, we went live with three new customer logos and continued our rollout with smoothie King importantly, many of our new wins include processing for above store transactions not just our traditional <unk>.
Operator: Thank you so much, and have a good day.
Operator: Thank you for your participation in today's conference.
<unk> Singh: In store Pos processing.
<unk> Singh: Our pipeline of new customers is strong and we expect continued momentum following the launch of our punch wallet offering at the start of Q3.
Operator: This does conclude the program.
<unk> Singh: I will give more details on punch well later in the call.
Operator: You may now disconnect.
<unk> Singh: Looking forward the team is fully engaged on integrating payment capabilities and depart retail and test to unlock further growth.
Operator: [inaudible] . .
<unk> Singh: Adding payments to the <unk> retail sales bag is very exciting.
<unk> Singh: Data Central also delivered a strong Q2. This quarter included the signing of seven new customers across the restaurant and C store space, including pilot travel stops and the ongoing rollout of Love's travel centers.
Operator: Charles Nabhan, Charles Nabhan, John Charles Nabhan, Charles Nabhan, Charles Nabhan, Charles Nabhan, John John next video.
Christopher Burns: [inaudible] Finally, I'd like to remind everyone that this call is being recorded and it will be made available for replay via a link available on the Investor Relations section of our website. Joining me on the call today is PAR's CEO and President, Savneet Singh, and Bryan Menar, PAR's Chief Financial Officer.
<unk> Singh: We continue to build out a robust pipeline with four new tier one concepts and see additional opportunities for data central to the attachment to bring deals.
Savneet Singh: I'd now like to turn the call over to Savneet for the formal remarks portion of the call, which will be followed by General Q&A.
<unk> Singh: Data central is winning off the strength of brings tremendous growth and reputation, creating a roadmap for future upsell of new products. The.
Savneet Singh: Savneet? Thank you, Chris.
<unk> Singh: The enterprise market is seeing how the connection of the Pos back office and payments processing delivers improved operations enhanced data capture and significant value to their business. This trend will continue.
<unk> Singh: Our engagement cloud, which includes punch menu and now part retail continued its steady growth trajectory in Q2.
<unk> Singh: After a period of rapid change our near term goal for punch to drive stable new business wins of 500 to 1000 new locations quarterly.
<unk> Singh: Our exciting new product launch with punch wallets demonstrates better together innovation is driving new revenue with punched plus par pay.
<unk> Singh: This has amazing potential to enable Starbucks like payment experiences for all punch brands punch.
<unk> Singh: <unk> is a clear demonstration of pars better together strategy and providing improved outcomes for our customers.
<unk> Singh: Features include save payment options stored value balances digital wallets and subscriptions.
<unk> Singh: <unk> allows for up to two five times faster checkout times at 23% increase in repeat store visits and an increase in customer lifetime value of more than 150%.
Savneet Singh: Good morning and welcome to everyone on the call. Q2 marked an inflection point for PAR. We delivered meaningful growth on a near-flat op-ex base, launch our Burger King rollout, integrate a stuso, complete the work to close the task acquisition, and launch Wendy's in July. Equally important is that we divested our government business, clearing the way for us to be a pure play food service technology business. We are marching towards becoming a very profitable business while increasing our ability to effectuate change at our customers.
Speaker Change #103: Year over year growth for engagement cloud was 11% driven by the deals we signed at the end of 2023 and very early in 2024.
Savneet Singh: Subscription services continues to be the growth engine of our company, and subscription services revenue grew by 48% in the quarter for the same period last year. Our relentless focus on custom success along with a commitment to delivering best-in-class products continues to drive our results. Excluding stuso, now branded PAR retail, second quarter AR grew organically by 24% when compared to Q2-23. This is an impressive number given we're just kicking off Burger King, launch Wendy's in July, and as you know, we recognize payments revenue on a net basis.
Speaker Change #103: This past quarter saw significant new customer growth with nine new brands launching on the punch platform and we also saw 12 upsell deals to existing customers.
<unk> Singh: In early July we went live with Wendy's a deal that we announced in Q1 record time for a go live for a larger enterprise deal.
<unk> Singh: Looking ahead, we expect punch to be a strong profit contributed apart.
Savneet Singh: At the end of Q2, AR are stood at $192 million, a 57% increase in the second quarter last year. Additionally, post Q2, we closed our acquisition of tasks which will contribute an additional $40 million of AR. Operator cloud AR grew by 37% to $84 million in Q2 when compared to the same period last year. Operator cloud growth is being driven by increased wind rates at brink with stronger multi-product attachment of data central and PAR payments, as well as continued AR pool improvement.
<unk> Singh: The newest part of engagement cloud a studio, which has been rebranded as <unk> retail.
Savneet Singh: AR pool increased by 14% from the same period last year due to higher value deals, API monetization, upsell, price increases, and PAR payment services go live. We expect the growth in AR through to continue given current white space and existing high value accounts, as well as a very robust pipeline of tier one deals. To put this into perspective, the successful attachment of both data central payments into a brink concept increases the ARR opportunity by over 3x.
<unk> Singh: Retail is a leading digital engagement software provider can be to convenience and fuel retailers.
Savneet Singh: As I mentioned, we officially launched the Burger King Rollout on April 1st and Burger King's extremely pleased that the progress made to date, including goats from a product, as well as an implementation perspective. We feel confident that PAR can be the enabler of BK2 to success and are giving them every reason to accelerate our rollout and hopefully add additional products down the road. It is critical Burger King meets their implementation thresholds for the year and we are partnering closely to ensure that they do. As we mentioned in the last call, whatever we don't install this year, we will get quickly rolled out in 25 and early parts of 2026.
<unk> Singh: The product is in 20000 stores and over 20000 stores and provides a beachhead to cross sell additional products across like payments and back office.
Savneet Singh: Turning to PAR payments. In Q2, PAR payments achieved our highest ever gross processing volume run rate of $2.5 billion. Pipeline execution lets the signing of several new concepts such as Chaut Time Canada, Wingsover, and Miami Girls name of you, which will be going live before the end of the year. In Q2, we went live with three new customer logos and continued our rollout with Smoothie King. Importantly, many of our new wins include processing for above-store transactions, not just our traditional in-store POS process.
<unk> Singh: Our pipeline looks strong for the second half of the year and importantly, we hope to launch our first payment products for this market, which will continue to improve our better together strategy.
<unk> Singh: Menu, our digital ordering application also delivered an impressive Q2.
<unk> Singh: We continue launching new customers and officially reached more U S based active sites Center International base.
Savneet Singh: Planning. Our pipeline of new customers is strong and we expect continuing to mention following the launch of our punch walled offerings at the start of Q3. I'll give more detail on punch walled later in the call. Looking forward, the team is fully engaged on integrating payment capabilities in depart retail and tasks to unlock further growth. Adding payments to depart retail sales bag is very exciting.
<unk> Singh: Highlighting our key initiative, we had entering the year, which is getting menu to be U S ready.
<unk> Singh: We launched five new concepts in Q2, and every new customer is an existing customer of another product proving that our customers desire a more unified experience.
<unk> Singh: Additionally, some of our customers continue to test additional modules modules.
Savneet Singh: Data Central also delivered a strong Q2. This quarter included the signing of seven new customers across the restaurant and sea source space, including pilot travel stops and the ongoing rollout of Love's travel centers. We continue to build out a robust pipeline with four new tier one concepts and see additional opportunities for data central to the attachment to bring deals. Data Central is winning off the strength of bring tremendous growth and reputation, creating a roadmap for future upsell of new products.
<unk> Singh: We are encouraged by the progress of our menu and expect a solid second half of 2024.
<unk> Singh: Engagement cloud era are now totaled $108 million at the end of Q2 and has approximately 95000 foodservice outlets utilizing our software.
<unk> Singh: We continue to see <unk> is uniquely positioned in the foodservice technology sector with best in class software across key operational and engagement pillars.
<unk> Singh: Our ability to deliver better outcomes across our products and producing a better together experience with multiple products sets par up to be the industry standard.
Savneet Singh: The enterprise market is seeing how the connection of the POS back office and payments processing delivers improved operations, enhanced data capture, and significant value to their business. This trend will continue. Our engagement cloud, which includes punch, menu, and now part retail, continue to study growth trajectory in Q2. After a period of rapid change, our near-term goal for punch to drive stable new business wins of 500 to 1000 new locations quarterly. Our exciting new product launch with punch wallets demonstrates better together innovation and is driving new revenue with punch plus par pay.
Speaker Change #107: Q2 hardware revenue grew 10% quarter over quarter and is starting to claw back some of the challenges we had in Q1.
Speaker Change #104: <unk> is always hard to predict as 40% to 50% of our business is outside of break.
Speaker Change #104: But given the strong pipeline of <unk>, we expect hardware to stabilize and hopefully start growing while our team works to upgrade our base of long term hardware only customers.
Speaker Change #109: Stepping back to review our consolidated results.
Speaker Change #104: Q2, our adjusted EBITDA was negative $4 $3 million.
<unk> Singh: This number though includes $2 5 million of one time charges related to customer credits and studio purchase price accounting adjustments.
Savneet Singh: This has amazing potential to enable Starbucks like payment experiences for all punch brands. Punch wallets is a clear demonstration of parse better together strategy and providing improved outcomes for our customers. Teachers include save payment options, stored value balances, digital wallets, and subscriptions. Punch wall allows for up to two and a half times faster checkout times, a 23% increase from repeat store visits, and an increase in customer lifetime value of more than 150%.
<unk> Singh: When further adjusting for these charges our adjusted EBITDA came in a negative $1 8 million, giving us tremendous confidence in our previously communicated goals of inflicting to adjusted EBITDA positive in Q3.
<unk> Singh: This fast open EBITDA is impressive, especially in light of the over $10 million of annual EBITDA, We gave up as part of our government sale.
<unk> Singh: The team is proving that our customer flywheel is leading to dramatic operating leverage.
Savneet Singh: Year over year, ARR growth for engagement cloud was 11%, driven by the deals we signed at the end of 2023, and very early in 2024. This past quarter saw a significant new customer growth with nine new brands launching on the punch platform, and we also saw 12 upsell deals to existing customers. In early July, we went live with Wendy's, a deal that we announced in Q1, record time for a go live for a large enterprise deal. Looking ahead, we expect punch to be a strong profit contributor to PAR.
<unk> Singh: Our EBITDA swing is being driven by both subscription services revenue and stringent expense management.
<unk> Singh: On the expense side, our non-GAAP operating expenses, including part retail grew by only 3% year over year continuing.
<unk> Singh: Continuing our trend of entertainments expense controls, while scaling quickly and simultaneously launching both Burger King and Wendy's.
<unk> Singh: This is not easy to do and I commend the team for their commitment to only spending in areas, where we can improve ROI.
Savneet Singh: The newest part of engagement cloud is Stuzo, which has been rebranded as PAR retail. PAR retail is a leading digital engagement software provider that can be two convenience and fuel retailers. The product is in 20,000 stores and over 20,000 stores and provides a BCHED to cross sell additional products across like payments and back office. Our pipeline looks strong for the second half of the year, and importantly, we hope to launch our first payment products for this market, which will continue to improve our better together strategy.
<unk> Singh: I think it bears repeating that this is a six quarter in a row, where our operating expenses were near flat, while <unk> grew organically greater than 20%.
<unk> Singh: Drilling down into the components of expenses subscription sales and marketing expense as a percentage of revenue. This quarter is 18% a significant sequential 300 basis point improvement from the 21% we had in Q1.
<unk> Singh: Sales and marketing expenses actually decreased $1 million $1 $1 million organically.
Savneet Singh: Menu, our digital ordering application, also delivered an impressive Q2. We continued launching new customers and officially reached more US-based active sites than our international base, highlighting a key initiative we had entering the year, which is getting menu to the US ready. We launched five new concepts in Q2, and every new customer is an existing customer of another PAR product, proving that our customers desire a more unified experience. Additionally, some of our customers continue to catch additional models, modules of many.
Speaker Change #111: As I noted on our last call. We want this number to get to 15% lower and are sprinting our way there.
<unk> Singh: This is being driven primarily by our ability to take price and upsell, while continuing to realize just how many products in individual AE can sell.
<unk> Singh: Our subscription R&D expense as a percentage of revenue was 31%. This number improved 400 basis points sequentially and our organic R&D spend actually decreased $1 million.
<unk> Singh: We have our sight on eventually taking this number to 25% lower and lower shrink.
Savneet Singh: We are encouraged by the progress so far with the menu and expect a solid second half of 2024. Engagement Cloud ARR now holds $108 million at the end of Q2 and has approximately 95,000 food service outlets to utilizing our software. We continue to see PAR as a uniquely positioned in the food service technology sector with best-in-class software across key operational and engagement pillars. Our ability to deliver better outcomes across our products and producing a better together experience with multiple products sets PAR up to be the industry standard.
<unk> Singh: <unk> in particular is leading the charge here.
<unk> Singh: <unk> that we can launch large and diverse Constance <unk> concepts offer one core platform.
<unk> Singh: The work we did to retail branch is now paying significant dividends.
<unk> Singh: These numbers don't include task, which as most of you know is a very profitable business that we are rapidly integrating depart.
<unk> Singh: While the path to profitability is very clear we understand that in the end our success will be dictated by the success excuse me the success of our customers. So while we've done a commendable job becoming efficient our team will not lose sight of the fact that our ability to drive. These unit economics is predicated on our customers winning.
Savneet Singh: Q2 hardware revenue grew 10% quarter of a quarter and it started to claw back some of the challenges we had in Q1. Hardware is always hard to predict as 40 to 50% of our businesses outside our brink. But given the strong pipeline of brink, we expect hardware to stabilize and hopefully start growing while our team works to upgrade our base of long-term hardware only customers.
Speaker Change #106: As I said in the past, where it's like consolidation bundling have had negative connotations and I think for the right reasons.
Speaker Change #113: Attempts to consolidate we're not done around industry, leading products it required customers to trade a functionality for simplicity.
Savneet Singh: Stepping back to review our consolidated results. In Q2, our adjusted EBITDA with negative $4.3 million. This number, though, includes $2.5 million of one-time charges related to customer credits and spuzo purchase price accounting adjustments. When further adjusting for these charges, our adjusted EBITDA came in a negative $1.8 million dollars, giving us tremendous confidence in our previously communicated goals of inflicting the adjusted EBITDA positive in Q3. This fast slope in EBITDA is impressive, especially in light of the over $10 million of annual EBITDA we gave up as part of our government sale.
Speaker Change #106: This is explicitly but we're not doing our part.
Speaker Change #106: Our products must stand on their own the best in class integrated natively integrated natively and one unified deliver surprise and delight. This.
Speaker Change #106: This is what's truly driving the financial outcomes, you're seeing today.
Speaker Change #106: To recap Q2 was a very successful quarter across many fronts for our company.
Speaker Change #106: I'm energized by the better together experiences and what that means for our customer relationships and outcomes, both existing and perspective the.
Speaker Change #106: The combined effort of the par team around the globe has put us in a unique position to further our mission of fueling the future of foodservice and retail.
Savneet Singh: The team is proving that our customer flywheel is leading to dramatic operating leverage. Our EBITDA swing is being driven by both subscription services revenue and stringent expense management. On the expense side, our non-gap operating expenses, including part retail, grew by only 3% year-over-year, continuing our trend of intense expense controls while scaling AR quickly and simultaneously launching both Burking and Wendy's. This is not easy to do, and I commend the team for their commitment to only spending in areas where we can improve our Y. I think it bears repeating that this is a sixth quarter in a row where operating expenses were near flat, while AR grew organically greater than 20%.
Speaker Change #106: Whereas we're at day, one of a massive opportunity.
Speaker Change #106: Brian will now review the numbers in more detail Brian.
Speaker Change #106: Sure.
Brian: Thank you <unk> and good morning, everyone.
Brian: Q2 was a successful quarter for par as we were able to drive both positive results and momentum while managing an efficient integration of our retail administer the closure of the <unk> acquisition and effectively manage a smooth divestiture of our government.
Brian: <unk> <unk> earlier statement Q2 represents a pivotal inflection point in <unk> journey from our beginnings as a quasi restaurant tech and government contracted company.
Speaker Change #110: To a pure play foodservice Tech led organization.
Speaker Change #110: Construct of our Q2 2024 statement of operations is indicative of that inflection point as I will highlight.
Savneet Singh: Trilling down into the components of expenses, subscription sales and marketing expense as the percentage of revenue of this quarter is 18%, a significant sequential 300 basis point improvement from the 21% we had in Q1. Sales and marketing expenses actually decreased $1.1 million organically. As I noted on the last call, we want this number to get to 15% lower and are sprinting our way there. This is being driven primarily by our ability to take price and upsell, while continuing to realize just how many products an individual AE can sell.
Speaker Change #110: Before moving forward I'd like to properly callout that all 2024, and comparative 2023 results that we will discuss this morning exclude any contributions from par government.
Speaker Change #106: As those results, including the gains on our respective sale of our government had been isolated within our discontinued operations results.
Speaker Change #106: Total revenue was $78 2 million for the three months ended June 32024, and.
Savneet Singh: Our subscription R&D expense as a percentage of revenue is 31%, this number improved 400 basis points sequentially, and our organic R&D spend actually decreased $1.1 million. We have our site on eventually taking this number to 25% and lower. Brink in particular is leading the charge here, proving that we can launch large and diverse concepts off of one core platform. The work we did to retool Brink is now paying significant dividends. These numbers don't include tasks, which as most of you know is a very profitable business that we're rapidly integrating in the park.
Speaker Change #106: An increase of 12% compared to the three months ended June 32023.
Speaker Change #106: Driven by subscription service revenue.
Speaker Change #106: <unk> growth of 48%, partially offset by decrease in hardware revenue of 24%.
Speaker Change #106: Net loss from continuing operations for the second quarter of 2024 was $23 6 million were 69 loss per share.
Speaker Change #106: Compared to a net loss from continuing operations of $21 8 million or <unk> 87 loss per share reported for the same period in 2023.
Savneet Singh: While the path of profitability is very clear, we understand that in the end, our success will be dictated by the success of our customers. So while we've done a commendable job becoming efficient, our team will not lose sight of the fact that our ability to drive these unit economics is predicated on our customers winning.
Speaker Change #106: non-GAAP net loss for the second quarter of 2024 was $7 9 million.
Speaker Change #106: Or 23% loss per share a significant improvement compared to a non-GAAP net loss of $16 3 million or <unk> 67 loss per share for the same period in 2023.
Savneet Singh: As I said in the past, words like consolidation and bundling have had negative connotations and I think for the right reasons prior attempts to consolidate were not done around industry reading products. It required customers to trade out functionality for simplicity. This is explicitly what we are not doing at part. Our products must stand on their own the best in class, integrated natively and when unified delivers surprise and delight. This is what's truly driving the financial outcomes you are seeing today.
Speaker Change #106: Okay.
Speaker Change #106: Adjusted EBITDA for the second quarter of 2024.
Speaker Change #106: It was a loss of $4 3 million.
Speaker Change #106: Once again meaningful improvement compared to an adjusted EBITDA loss of $12 3 million for the same period in 2023 driven.
Speaker Change #106: Driven by increased margin contribution from subscription services, partially offset by a reduction in hardware revenue and margin and.
Speaker Change #109: As <unk> mentioned, our Q2 results included $2 $5 billion of one time charges within subscription services.
Savneet Singh: To recap, Q2 is a very successful quarter across many fronts for our company. I'm energized by the better together experiences and what that means for our customer relationships and outcomes, both existing and perspective. The combined effort of the PAR team around the globe has put us in a unique position to further our mission of feeling the future of food service and retail. We're at day one of a massive opportunity.
Speaker Change #107: Excluding those items adjusted EBITDA would have been a loss of $1 8 million.
Speaker Change #107: Now for more details on revenue.
Speaker Change #107: Subscription service revenue was reported at $44 9 million, an increase of $14 5 million or <unk>, 48% from the $30 4 million reported in the prior year excluding.
Speaker Change #107: Excluding car retail organic subscription service revenue grew 15% compared to prior year.
Bryan Menar: Bryan will now review the numbers in more detail.
Bryan Menar: Bryan, thank you, Savneet and good morning everyone. Q2 was a successful quarter for PAR as we were able to drive both positive results and momentum while managing efficient integration of PAR retail. I administer the closure of the task acquisition and effectively manage a smooth divestiture of PAR government. To emphasize Savneet's earlier statement, Q2 represents a pivotal inflection point in PAR's journey from our beginnings as a quasi restaurant tech and government contractor company to a pure plight food service tech led organization.
Speaker Change #107: The annual recurring revenue exiting the quarter was $192 2 million an increase of 57% from last year's Q2 with.
Speaker Change #107: With engagement cloud up 77% and operator cloud up 37%.
Speaker Change #107: Excluding par retail total organic annual recurring revenue was up 24% year over year.
Speaker Change #106: Hardware revenue in the quarter was $20 1 million, a decrease of $6 3 million or 24% from the $26 4 million reported in the prior year.
Bryan Menar: The construct of our Q2 2020 for statement of operations is indicative of that inflection point as I will highlight. Before moving forward, I'd like to properly call out that all 2024 and comparative 2023 results that we will discuss this morning is good any contributions from PAR government as those results, including the gains on respective sale of PAR government have been isolated within our discontinued operations results. Total revenues of 78.2 million for the three months ended June 30 of 2024 and increase of 12% compared to the three months ended June 30 of 2023 driven by subscription service revenue growth of 48% partially offset by decrease in hardware revenue of 24%.
Speaker Change #106: Sequentially compared to Q1 this year Harbor was up $1 9 million or 10%.
Speaker Change #106: The continued interest from our legacy hardware customers as well as the continued high attachment of hardware sales within our expanding software customer base gives us confidence that our hardware business will continue to contribute meaningful revenue in respect of margin.
Speaker Change #106: Professional service revenue was reported at $13 2 million, an increase of <unk> 4 million or 3% from the $12 8 million reported in the prior year.
Speaker Change #106: Historically, our professional service revenue trend is correlated to our hardware revenue trend. We were pleased with our team's ability to grow professional service revenue while hardware revenue contracted.
Speaker Change #106: Our team has executed this by expanding our service contract base with successful demonstration of our service teams value proposition.
Speaker Change #111: $8 2 million of the professional service revenue in the quarter consistent recurring revenue primarily from our hardware support contracts versus $7 2 million in 2023.
Bryan Menar: Net loss from continuing operations for the second quarter of 2024 was 23.6 million were 69 set loss per share compared to a net loss from continuing operations of 21.8 million or 87 loss per share reported for the same period in 2023. Non-gap net loss for the second quarter of 2024 was 7.9 million or 23 set loss per share significant improvement compared to a non-gap net loss of 16.3 million or 67 loss per share for the same period in 2023.
Speaker Change #106: Now turning to margins.
Speaker Change #106: Gross profit was $32 million, an increase of $12 8 million or 67% and the $19 2 million reported in the prior year.
Speaker Change #106: The increase was driven by subscription services with gross profit of $23 8 million, an increase of $10 7 million or <unk>, 81% from the $13 $1 million reported in the prior year.
Speaker Change #106: Subscription service margin for the quarter was 53, 1% compared to 43, 3% reported in the second quarter of 2023.
Bryan Menar: Adjusted EBITDA for the second quarter of 2024 was a loss of 4.3 million once again meaningful improvement compared to an adjusted EBITDA loss of 12.3 million for the same period in 2023 driven by increased margin contribution from subscription services, partially offset by reduction in hardware revenue and margin, and Savneet mentioned are due to results included 2.5 million of one-time charges within subscription services. Excluding those items, I just that even it would have been a loss of 1.8 million.
Speaker Change #106: The increase in margin is driven by our continued focus on efficiency improvements with our hosting and customer support costs as well as accretive margin contributions from our retail operations.
Speaker Change #106: Excluding the amortization of intangible assets stock based compensation.
Speaker Change #106: Severance included in subscription service margin total non-GAAP subscription service margin for the three months ended June 30 was 66% compared to 61% in the second quarter of 2023.
Bryan Menar: Now for more details on revenue. Subscription service revenue was reported at 44.9 million and increased to 14.5 million, or 48% from the 30.4 million reported in the prior year. Excluding car retail, organic subscription service revenue grew 15% compared to prior year.
Speaker Change #106: Hardware margin for the quarter was 22, 8% versus 19, 2% in Q2 2023 and.
Speaker Change #106: In light of our year over year revenue decrease.
Speaker Change #106: We'll able to improve margins by taking price as we continue to demonstrate our value while also driving savings with within our cost structure.
Bryan Menar: The annual recurring revenue exiting the quarter was 192.2 million and increased to 57% from last year's Q2, with engagement cloud of 77% and operator cloud up 37%. Excluding car retail, total organic annual recurring revenue was up 24% year over year.
Speaker Change #106: Okay.
Speaker Change #106: Professional service margin for the quarter was 27, 5%.
Speaker Change #106: Compared to seven 7% reported in the second quarter of 2023.
Speaker Change #106: Q2, 2023 results were negatively impacted by one time charges. Excluding those charges Q2, 2023 professional margin would have been 20%.
Bryan Menar: Hardware revenue in the quarter was 20.1 million, a decrease of 6.3 million or 24% from the 26.4 million reported in the prior year. So, coincidentally, compared to Q1 this year, hardware was up 1.9 million or 10%. The continued interest from our legacy hardware customers, as well as the continued high attachment of hardware sales within our expanding software customer base gives us confidence that our hardware business will continue to contribute meaningful revenue and respective margin.
Speaker Change #106: Selective of our normalized historical margin rates.
Speaker Change #106: We expect margins to be approximately 20% for the remainder of this year.
Speaker Change #106: In regard to operating expenses.
Speaker Change #106: GAAP sales and marketing was $9 8 million a decrease of <unk> 3 million from $10 1 million reported for Q2 2023 with.
Speaker Change #106: With organic sales and marketing decreasing $1 $1 million year over year.
Speaker Change #106: GAAP G&A was $25 4 million and.
Bryan Menar: Professional service revenue was reported at 13.2 million and increased of 0.4 million or 3% from the 12.8 million reported in the prior year. Historically, our professional service revenue trend is correlated to our hardware revenue trend. Will we are pleased with our team's ability to grow professional service revenue while hardware revenue contracted? Our team has executed this by expanding our service contract base with successful demonstration of our service team's value proposition. 8.2 million of the professional service revenue in the quarter consisted of recurring revenue primarily from our hardware support contracts, versus 7.2 million in 2023.
Speaker Change #106: An increase of $8 9 million from the $16 4 million reported in Q2 2023.
Speaker Change #106: The increase was driven by non-GAAP adjustment items for M&A transaction fees and stock based compensation as well as post acquisition our retail costs.
Speaker Change #106: GAAP R&D was $16 2 million, an increase of $1 3 million from the $14 9 million recorded in Q2 2023.
Speaker Change #106: The increase was primarily driven by post acquisition <unk> retail expense while.
Speaker Change #106: While organic R&D decreased $1 million year over year.
Speaker Change #106: Q2, 2020 for operating expense, excluding non-GAAP adjustments was $43 5 million, an increase of $5 $7 million was 15% versus Q2 2023 and.
Bryan Menar: Now, turning to margins. Gross profit was 32 million and increased of 12.8 million or 67% in the 19.2 million report in the prior year. The increase was driven by subscription services with gross profit of 23.8 million and increase of 10.7 million or 81% in the 13.1 million reported in the prior year. Substitution service margin for the quarter was 53.1% compared to 43.3% reported in the second quarter of 2023. The increase in margin is driven by a continued focus on efficiency improvements with our hosting and customer support costs, as well as a creative margin contributions from our retail operations.
Speaker Change #106: And excluding the inorganic growth from post acquisition part retail organic operating expenses only increased 3%.
Speaker Change #106: Our ability to manage our operating expenses, while driving substantial margin improvement will continue to be the catalyst for continued consistent EBITDA growth.
Speaker Change #118: Now to provide information on the company's cash flow and balance sheet position.
Speaker Change #106: As of June 32024, we had cash and cash equivalents of $114 9 million and short term investments of $27 5 million for.
Speaker Change #106: For the six months ended June 30 cash used in operating activities was $37 4 million versus $12 8 million for the prior year 12.
Bryan Menar: Excluding the ammarization of intangible assets, stop-based compensation, and severance included in subscription service margin, total non-gap subscription service margin for the three months and the June 30th was 66% compared to 61% in the second quarter of 2023. The hardware margin for the quarter was 22.8%, versus 19.2% and 22.2023. In light of our year-over-year revenue decrease, we were still able to improve margins by taking price as we continue to demonstrate our value while also driving savings within our cost structure.
Speaker Change #106: $12 million of the variance was driven by cash activity associated with discontinued operations and the remainder primarily driven by change in networking capital.
Speaker Change #106: Cash used in investing activities was $72 9 million for the six months ended June 30 versus $6 2 million for the prior year invest.
Speaker Change #106: Investing activities during the six months ended June 30 included $166 3 million of net cash consideration in connection with the studio acquisition.
Speaker Change #106: And capital expenditures of $2 7 million for developed technology costs associated with our software platforms.
Bryan Menar: Professional service margin for the quarter was 27.5% compared to 7.7% reported in the second quarter of 2023. Q2-2023 results were negatively impacted by one-time charges, excluding those charges, Q2-2023 professional margin would have been 20%. Reflective of our normalized historical margin rates, we expect margins to be approximately 20% for the remainder of this year.
Speaker Change #106: Partially offset by $87 1 million of cash consideration received in connection with the disposition of <unk> government and $9 4 million of proceeds from net sales of short term held to maturity investments.
Speaker Change #106: Cash provided by financing activities was $191 $5 million for the six months ended June 30th.
Speaker Change #106: Compared to cash used in financing activities of $2 5 million for the prior year.
Bryan Menar: In regard to operating expenses, gap sales and marketing was 9.89, a decrease of 0.3 million from the 10.19 reported for Q2-2023, with organic sales and marketing decreasing 1.19 year-over-year. Gap GNA was 25.4 million, an increase of 8.9 million from the 16.4 million reported in Q2-2023. The increase was driven by non-Gap adjustment items for M&A transactions and stock-based compensation, as well as post-acquisition par retail costs. Gap R&D was 16.2 million, an increase of 1.3 million from the 14.9 million recorded in Q2-2023.
Speaker Change #106: Financing activities during the six months ended June 30 was substantially driven by private placement of common stock.
Speaker Change #116: I would like to take a moment to reiterate and thank our par team are continuing to execute our operating plan while successfully managing the integration of the par retail organization and also manage the smooth divestiture of par government.
Speaker Change #106: As a result, we drove significant improvement in key financial metrics with <unk>.
Speaker Change #106: 24% organic growth.
Speaker Change #106: $12 8 million or 67% improvement in gross margin.
Speaker Change #106: All while maintaining modest growth in operating expenses.
Speaker Change #106: This has resulted in meaningful adjusted EBITDA growth and positions us well to be adjusted EBITDA positive in Q3.
Speaker Change #122: I will now turn the call back over to <unk> for closing remarks prior to move into Q&A.
Bryan Menar: The increase was primarily driven by post-acquisition par retail expense, while organic R&D decreased 1 million year-over-year. Q2-2024 operating expense, excluding non-Gap adjustments, was 43.5 million, an increase of 5.7 million or 15% versus Q2-2023, and excluding the energetic growth from post-acquisition par retail, organic operating expenses only increased 3%.
<unk> Singh: Thanks, Brian.
Speaker Change #115: <unk> wrap up with a few key messages before we open the call for Q&A.
Speaker Change #124: While the macro environment has been and will always be volatile end market. We're selling two continues to be strong.
Speaker Change #115: No doubt that macroeconomic shock will impact all businesses.
Speaker Change #122: What we love about our end categories is that in times of duress they outperform.
Speaker Change #115: Customers trade down and demand more ways to access their food and fuel.
Speaker Change #115: Over the products, we sell are built to drive ROI, ostensibly helping our customers deal with whatever external pressures they are facing.
Bryan Menar: Our ability to manage operating expenses while driving substantial margin improvement will continue to be the catalyst for continued consistent EBITDA growth.
Speaker Change #115: We track this data very closely and are seeing not only resilient, but growth in our base.
Speaker Change #115: Same store sales within our brink base on average increased five 5% this quarter from a year ago.
Bryan Menar: Now to provide information on the company's cash flow and balance sheet position. As of June 30, 2024, we had cash and cash equivalence of 114.9 million and short-term investments of 27.5 million. For the six-month ended, June 30, cash used in operating activities was 37.4 million versus 12.8 million for the prior year. 12 million of the variance was driven by cash activity associated with discontinued operations, and the remainder primarily driven by change in network and capital.
Speaker Change #115: Suggesting that our customers are taking share from adjacent categories.
Speaker Change #115: We've seen this happen time and time again.
Speaker Change #115: I also think our recent results prove this out in spite of an uncertain macro par delivered its sixth straight quarter of greater than 20% growth with almost no opex growth.
Speaker Change #115: What's more during this time, we've launched our largest Pos and loyalty customers, respectively, without having to add tremendous cost or by offsetting any cost with internal efficiencies.
Bryan Menar: Cash used in investing activities was 72.9 million for the six-month ended June 30 versus 6.2 million for the prior year. Investing activities during the six-month ended June 30 included 166.3 million of net cash consideration and connection with astusioacquisition, and capital expenditures of 2.7 million for developed technology costs associated with our software platforms. Partially all set by 87.1 million of cash consideration received and connection with disposition of park government and 9.4 million of proceeds from net sales of short-term health maturity investments.
Speaker Change #115: We are funding tomorrow's growth engines without net new expense.
Speaker Change #115: In uncertain markets customers aren't looking for speculative tech, but best in class products with proven ROI.
Speaker Change #115: This is where our multi product model wins.
Speaker Change #115: We're just starting to scratch the surface of the white space in our Tam and are continuing to build a roadmap to programmatically earn a greater share of our customers' wallets.
Speaker Change #164: We're an ambitious team at par and treat everyday is day one.
Speaker Change #115: For the first time in our history, we are a pure play foodservice technology business.
Speaker Change #115: Riding greater focus and transparency to our investors and our employees.
Speaker Change #115: This focus will help us accelerate our innovation deliver for our customers and create value for our shareholders.
Bryan Menar: Cache provided by Financing Activities was $191.5 million for the six month and the June 30th. Compared to Cache, using the Financing Activities at $2.5 million for the prior year, Financing Activities during the six month and the June 30th were substantially driven by private placement of common stop.
Speaker Change #141: I'll open the call for Q&A operator.
Speaker Change #168: Thank you as a reminder to ask a question you will need to press star one one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.
Speaker Change #116: Standby, while we compile the Q&A roster.
Bryan Menar: I would like to take a moment to reiterate and thank our PAR team on continue to execute our operating plan while successfully managing the integration of the PAR retail organization and also manage the smooth divesture of PAR government. As a result, we drove significant improvement in key financial metrics with 24% organic AR growth, 12.8 million or 67% improvement in gross margin, all while maintaining modest growth and operating expenses. This has resulted in meaningful adjusted EBITDA growth and positions as well to be adjusted EBITDA positive in Q3.
Speaker Change #129: And our first question comes from the line of <unk> Tandon of Needham Your line is open.
<unk> Tandon: Thank you good morning, <unk>, Brian and Chris first of all congrats on the quarter I wanted to start with.
Speaker Change #116: A question around the integration of <unk> and I know you just closed task.
Speaker Change #119: Would be curious to hear what the customer response has been.
Speaker Change #174: The integration process any surprises positive or negative early in the process of integrating <unk> and then also I know, it's only been a few weeks, but any comments around cash as well.
Savneet Singh: I will now turn the call back over to Savneet for closing remarks prior to moving to Q&A.
Speaker Change #116: Sure.
Speaker Change #166: Zoe, which we've rebranded part retail it's gone phenomenally well we've done a few of these M&A deals and this is probably the smoothest integration we've had I think.
Savneet Singh: Thank you, Brian.
Savneet Singh: Let me wrap up with a few key messages before we open the call for Q&A. While the macro environment has been and will always be volatile, the end worker we're going to continue to be strong. There's no doubt that macroeconomic shock will impact all businesses. What we love about our end categories is that in times of direct they outperform. Customers trade down and demand more ways to access their food and fuel.
Speaker Change #146: The reception from customers has been great. We've jumped in front of them, but I think more importantly, it's the response of our existing C store customers thats been very encouraging.
Speaker Change #122: Many of them too to sort of agree with that I'd be excited by the future roadmap the combined resources, but most importantly, having dedicated industry focus is going to make a big difference. There. So it's gone very well I think from a talent perspective, there are a number of people from the studio team that are now working across all at par. So I think we also acquired tremendous team.
Savneet Singh: Moreover, the products we sell are built to drive ROI, ostensibly helping our customers deal with whatever external pressures they are facing. We track this data very closely and are seeing not only resilience but growth in our base. Same source sales within our brink base on average increased 5.5% of this quarter from a year ago, suggesting that our customers are taking share from adjacent categories. We've seen this happen time and time again.
Speaker Change #116: And I think from a business result perspective.
Speaker Change #116: We're really excited for the second half.
Speaker Change #116: I am personally jumping into a bunch of our go to market motions, we feel really really good about this integration.
Speaker Change #131: And I think cultural fit underlying everything an M&A deal and Thats been really nice.
Savneet Singh: I also think our recent results prove this out. In spite of an uncertain macro, our delivered at 6th straight quarter of greater than 20% growth with almost no objects growth. With more, during this time, we've launched our largest POS and loyalty customers respectively without having to add tremendous costs or by offsetting any cost with internal efficiencies. We are funding tomorrow's growth engines without net new expense. In uncertain markets, customers aren't looking for speculative tech, but best in class products would prove in ROI.
Speaker Change #122: On the tax side, where a couple of weeks into it. So I don't want to get too excited but I can say categorically the quality of that senior leadership team is just so impressive. The idea is the insights they have on our category expanding internationally.
Speaker Change #144: So the adjacent categories is going to be really instrumental in par, but I also think they are deep focus on efficiency is something we're going to continue to expand I think we've done as you've seen the operating leverage in part is really accelerating here that team will help us push that forward.
Savneet Singh: This is where our multi-product model wins. We're just starting to scratch the surface of the white space in our TAM and are continuing to build a roadmap to programmatically earn a greater share of our customers' wallets.
Speaker Change #144: And then I think it is too early yet on the customer side, but nothing nothing that.
Speaker Change #116: Great. That's good color and then maybe some reason also for Bryan in terms of the financial impact of the two acquisitions I think when you close these deals back in March the contribution was expected to be $80 million of <unk> from Duke land task and I believe about $20 million and adjusted EBITDA is that.
Savneet Singh: We're an ambitious team at PARB and treat every day as day one. For the first time in our history, we are a pro-play food service technology business, providing greater focus and transparency to our investors and our employees. This focus will help us accelerate our innovation, deliver for our customers and create value for our shareholders.
Speaker Change #157: Still I don't know if an annualized number but is that still the forecast or do you think there's any change positive or negative relative to when you first announced these acquisitions.
Operator: With that, I'll open the call for Q&A. Operator? Thank you. As a reminder to ask a question, you will need to press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please stand by, we compile the Q&A roster.
Speaker Change #148: That's all that's all that's all right. Obviously, we were an ambitious team. So we assume there is little bit of upside and opportunity there, but we're still really excited those numbers and we feel really confident about.
Speaker Change #119: Great I'll get back in queue.
Mayank Tandon: In our first question comes from a line of Myogtandon, of Needham, your line is open. Thank you.
Speaker Change #119: Thanks.
Speaker Change #122: Our next question comes from the line of Stephen Sheldon of William Blair. Your line is open.
Savneet Singh: Good morning, Savneet, Bryan and Chris. First, congrats on the quarter. I wanted to start with a question around the integration of stu-zo, and I know you just closed task. Would be curious to hear what the customer response has been, integration process, any surprises, all that they were negative early in the process of integrating stu-zo, and then also, I know it's only been a few weeks, but any comments are on task as well.
Stephen Sheldon: Hey, good morning, Thanks for taking my question.
Stephen Sheldon: Just to just looking at page nine of the presentation with the organic and total AOR breakdown at.
Stephen Sheldon: It seems like <unk> might have been down just a touch sequentially I think organic IRR was up over $7 million sequentially total IRR was up by less than $7 million just wanted to make sure am I thinking about that right what would cause <unk> to be down slightly sequentially and just generally how are you thinking about the growth outlook going forward now that it's integrated.
Savneet Singh: Sure. I'm stu-zo, which we've rebranded part retail. It's gone phenomenally well. You know, we've done a few of these M&A deals, and this is probably the same integration we've had. I think the reception for customers has been great. We've jumped in front of them, but I think more importantly, it's the response of our existing C-seater customers that's been very encouraging. I expect many of them to sort of agree with, I could be excited about a future roadmap to combine resources, but most importantly, having dedicated industry focus is going to make a big difference there.
Stephen Sheldon: And rebranded so that asset.
Stephen Sheldon: Sure.
Speaker Change #164: The purchase price accounting adjustment around studio very normal course of business. So it wasn't.
Speaker Change #127: Churn it was how we.
Speaker Change #155: We integrate the businesses the accounting adjustments, though it wasn't I wouldn't say, it's operational more accounting.
Speaker Change #127: I'll just hand, the call I think we're really excited for the second half we've already had three three.
Savneet Singh: So it's gone very well, I think, from a talent perspective. There are a number of people from the stu-zo team that are now working across all of par. So I think we also acquired tremendous team. And then I think from a business results perspective, you know, we're really excited for the second half. You know, I'm personally jumping into a bunch of our go-to-market motions. We feel really, really good about this integration.
Speaker Change #149: <unk> signings in July I think we'll have more and with powerful that's too though is that every single deal that we signed.
Speaker Change #127: Live when we sign them and so you don't have to wait for a rollout period, you can pull that revenue and.
Stephen Sheldon: Current quarter.
Stephen Sheldon: We actually feel really really good about it and there are some very very big opportunity in front of us, but even if we don't win those larger opportunities I still think we will get to where we thought with on the deal which.
Savneet Singh: And I think, you know, cultural fit underlines everything in an M&A deal, and that's been, you know, just really nice. On the task side, you know, we're a couple weeks into it. So, you know, I don't want to get too excited, but you know, I can say categorically, you know, the quality of that senior leadership team is just so impressive. The idea is the insight they have on our category, expanding internationally.
Stephen Sheldon: We will get to teens to 20% growth on this business just like we do for the rest of <unk>.
Steve: Steve just to add what <unk>, what that really was there from Q1 Q2 was adjusting the actual beginning baseline right as we got in place.
Speaker Change #122: Adjustments as we dig into and get the actual balance sheet on our books was this a reset of that Saddam uncertainty baseline that we're going off of.
Savneet Singh: So the adjacent categories is going to be really, you know, instrumental in par. But I also think, you know, their deep focus on efficiency is something we're going to continue to expand. I think we've done, you know, as you've seen, the operating leverage in par is really accelerating here. That team will help us push that forward. And then I think as it is too early yet on the customer side, but, you know, nothing, nothing bad. Great.
Speaker Change #129: Got it. So then we should probably expect a step up in <unk> from <unk> to three got it.
Stephen Sheldon: Exactly Thats right and then.
Stephen Sheldon: And then just wanted to.
Speaker Change #157: I know, it's still very early with with past, but just how are you thinking maybe some more detail on joint go to market efforts with your existing domestic capabilities tax international capabilities.
Savneet Singh: That's good color.
Bryan Menar: And then maybe some need an also for Brian in terms of the financial impact of the two acquisitions. I think when you close these deals back in March, the contribution was expected to be 80 million in ARR from Sturthland Task. And I believe about 20 million in adjustity with duck. Is that still, I don't know if an annualize number, but is that still the forecast or do you think there's any change, both were negative relative to when you first announced these acquisitions.
Speaker Change #126: And as you think about it or are there.
Speaker Change #159: Are there a lot of cross selling opportunity that you could go after pretty quickly here.
Speaker Change #169: Generally what the best cross selling motions look like.
Speaker Change #139: So I'll give you the theory, we'll see if we can execute on it and we usually do but.
Speaker Change #126: It's pretty simple so.
Speaker Change #162: The first thing I think we're evaluating et.
Speaker Change #166: I said to our team and figure out where to point the bazooka the task product does everything and it's incredibly robust really well built cleanly belt and as I said dynamic founders and team. So the immediate I think they are opportunities. We have are what customers do we have in the United States that are looking for national solutions, and where do we want to what products.
Bryan Menar: That's all, that's all, that's all right. You know, obviously we, we, you know, we're an ambitious team. So we assume there's little bits of upside and an opportunity, but we're still really excited. Those numbers, and we feel really confident about. Great.
Stephen Sheldon: We'll get back into you.
Stephen Sheldon: Thanks. Our next question comes from a line of Steven Sheldon of William Blair. Your line is open. Hey, good morning. Thanks for taking my question. First, just just looking at page nine of the presentation with your organic and total ARR breakdown. It seems like stews of ARR might have been down just to touch sequentially. I think organic ARR was up over 7 million sequentially total ARR was up by less than 7 million.
Speaker Change #126: The SaaS platform do you want to get them on that.
Speaker Change #145: What sort of step one and we don't we're doing that work and figure out how to do that we're going to throw in some.
Speaker Change #145: Traditional <unk> resources into the task of go to market team to figure that out. The second aspect is there are select places in the United States, where there are parts of the task platform that we would want to bring to the U S market.
Speaker Change #145: And I will go into details here, but we think there is some pretty significant opportunity there.
Stephen Sheldon: That we think are unique the third thing I would say is there are adjacencies that task is really well so as an example.
Savneet Singh: So I just wanted to make sure, and I think about that right, what would cause stews of ARR? to be down quite least sequentially and just generally, how are you thinking about the growth outlook going forward now that it's integrated and rebranded to that asset? Sure, the purchase price accounting adjustment around Suzzo, very normal course of business. So it wasn't, you know, a turn. It was how we, as we integrated the businesses, the accounting adjustments. So it was, it wasn't safe, operational, more accounting, you know, as it's on the call.
Speaker Change #157: <unk> I believe believe leading stadium provider in Australia.
Stephen Sheldon: And are being pulled into numerous deals all of the place we're going to figure out if that makes sense for us, but I think between our U S based that needs to go international.
Stephen Sheldon: The module is a task that can serve our U S customers in areas that we don't today, we've got plenty of plenty of wood to chop and then I think we can explore other ideas down the road, but I think there's gonna be no shortage of ideas to us it's going to be focusing on the one or two things we can actually prove out quickly.
Savneet Singh: I think we're really excited for the second half. We've already had, you know, three, three signings in July. I think we'll have more. And, you know, what's powerful about Suzzo is that every single deal that we sign goes live when we sign it. And so you don't have to wait for a rollout period. You can pull that revenue in, you know, current quarter. And so we actually feel really, really good about it.
Stephen Sheldon: Yeah.
Speaker Change #130: Great to hear thanks for taking my questions.
Speaker Change #174: Our next question comes from the line of Eric Martin Etsy of Lake Street Capital markets. Your line is open.
Speaker Change #149: Yes, I was interested in your perspective on the competitive landscape specifically versus.
Savneet Singh: And there are some very, very big opportunities in front of us. But even if we don't win those larger opportunities, I still think we'll get to, you know, where we thought with on the deal, which, you know, I think we'll get to teens 20% growth on this business, just like we do for the rest of part. And Steve, just to add what Steve said there, what that really was there from 2122 was adjusting the actual beginning baseline, right, as we got in perspriced adjustment as we dig into and get the actual balance sheet on our books.
Speaker Change #134: Third larger competitors in the Pls.
Speaker Change #134: <unk>.
Speaker Change #177: Now given the completion of the acquisition specifically task.
Speaker Change #173: How does that change your.
Speaker Change #134: Your the competitive landscape for international for you.
Speaker Change #134: So I think.
Speaker Change #181: Before that we Werent international So I don't think we had a solution at the time of the acquisition one of the things that sort of been observing is that our big U S brands are growing far faster outside the United States and in the United States and over time the decision makers for those businesses will probably gravitate towards the international side, because that's where they're deploying their <unk>.
Savneet Singh: It's a reset of that somehow. It's a new baseline that we're going off of. Got it. So then we should probably expect to step up then and to go from 2Q to 3Q. Got it. That's right.
Savneet Singh: And then, and then just wanted to, you know, I know it's still very early with with tasks, but just how are you thinking maybe some more detail on joint, go to market efforts with your existing domestic abilities, tasks, international capabilities. And as you think about it, are there a lot of cross-selling opportunities that you go after pretty quickly here and just generally what do those cross-selling motions look like? So, you know, I'll give you the theory.
Speaker Change #134: <unk>.
Speaker Change #159: And I think that puts us at a point of weakness. So we may have the best solution in the U S. But if somebody has a better global solution, maybe the b to B plus product wins over there plus product in the U S. Because they want something more connected.
Speaker Change #134: And that was a big part of the rationale for the acquisition. So I think it makes us far more competitive on the Mega large deals obviously.
Speaker Change #134: Obviously as you know task has got one Meg up one or two mega brands already.
Speaker Change #134: Soon to be three and I think we will be able to help accelerate that so I think it makes us more competitive holistically.
Savneet Singh: We'll see if we can execute on it and we usually do, but you know, it's pretty simple. So the first thing I think we're evaluating is, you know, I said to our team, we're figuring out where to point the bazooka. The task product does everything and it's incredibly robust, really well built, cleanly built, and as I said, dynamic, you know, founders and teams. So the immediate, I think some opportunities we have are, you know, what customers do we have in the United States that are looking for national solutions?
Speaker Change #134: Whereas before I think our large customers with sort of think of us as a U S only solution.
Speaker Change #134: Got it.
Speaker Change #134: Yes.
Speaker Change #134: Housekeeping item here.
Speaker Change #134: Post.
Speaker Change #134: The dust settling on the I think it was July 18th close.
Savneet Singh: And where do we want to, what products of the task platform do we want to get them on? That's where step one, and we know we're doing that work and figuring out how to do that. We're, you know, going to throw in some traditional part resources into the task, go to market teams to free that out. The second aspect is there are select places in the United States where there are parts of the task platform that we want to bring to the U.S, market.
Speaker Change #134: I ask.
Speaker Change #177: Can you give us a sense for kind of a normalized rest of year interest.
Speaker Change #181: Interest expense and share count.
Speaker Change #134: Absolutely, Brian you want to run through the interest in some of the <unk> and then we will.
Speaker Change #135: Go ahead sorry.
Speaker Change #137: Were you referencing there Eric right is the fact that we do.
Speaker Change #148: Did that acquisition with a combination of cash on the balance sheet a portion of around 3700, 30% equity and then we also used about $190 million of a term loan.
Savneet Singh: And I won't go to details here, but, you know, we think there's some pretty significant opportunity there, you know, that we think are unique. The third thing I would say is there are adjacencies that tasksters really well. So as an example, you know, task is I believe, I believe, leading stadium provider in, you know, Australia. And they're being pulled into numerous fields all of the place. We're going to figure out if that makes sense for us.
Speaker Change #162: And blew out.
Speaker Change #154: That effective interest rate is roughly around 10% we.
Speaker Change #154: We plan on that that's going to be a shorter term loan within on our balance sheet.
Speaker Change #137: So what I would say as you can see the bump up from that we're going to set the 90, 10%, but that I would not put that as a longer term expectation for us will be looking to properly adjust the balance sheets go forward that actually allowed us as everyone understands.
Savneet Singh: But I think between our U.S, base that needs to go to national. The modules of tasks, I can serve our U.S, customers in areas that we don't today. We've got plenty with the job. And then I think we can explore other ideas down the road. But I think there's going to be no shortage of ideas to us. It's going to be focusing on the one or two things we can actually prove out quickly.
Speaker Change #146: That actual loan were allowed us to do is really reduce the deal risk for us and what I mean by that we signed the deal back in March right. We did not know exactly what the equity and cash ratio is going to be we did not know the exact timing of when the par government divestiture, what's going to happen. So we wanted to make sure the deals the value of it was very strong for us as 70 just explain.
Savneet Singh: Great to hear.
Savneet Singh: Thanks for taking the questions.
Eric Martinuzzi: Our next question comes from the line of Eric Martinuzzi of Lake Street Capital Markets. Your line is open. Yeah, I was interested in your perspective on the competitive landscape, specifically versus two larger competitors in the POI, Chris Leichros and NCR Horicks. Now given the completion of the acquisition specifically task, how does that change your competitive landscape for international for you? Well, I think, you know, before that, we weren't international. So, you know, I don't think we had a solution.
Speaker Change #146: <unk> that we had that locked in on this allowed us to do that and we were able to get that commitment from them.
Speaker Change #146: Now, we're going to make sure that we probably do our capital allocation that we always have.
Speaker Change #168: Hopefully for good ROI.
Speaker Change #171: Alright, and the share count.
Speaker Change #181: Okay got it.
Speaker Change #169: What is it.
Speaker Change #148: Referring to the 8-K I believe it's at right now.
Speaker Change #148: We just.
Speaker Change #141: I think it's about $2 3 million in shares on top of where we were versus what you see in the near.
Speaker Change #141: Okay.
Eric Martinuzzi: And the time of the acquisition, you know, one of the things that sort of been observing is that our big US brands are growing far faster outside the United States than in the United States. And over time, the decision makers for those businesses will probably gravitate towards the international side because that's where they're deploying their capital. And I think that puts us at a point of weakness. So, we may have the best solution in the US, but if somebody has a better global solution, maybe the B plus product wins over the A plus product in the US because they want something more connected.
Speaker Change #164: Gotcha. Thank you.
Speaker Change #141: Our next question comes from the line of Samad Samana of Jefferies. Your line is open.
Speaker Change #139: Hey, good morning, Thanks for getting me on Harris, just really impressive the amount of that about.
Speaker Change #142: The amount of change you guys are digested in the second quarter and early kind of clearing the path up for the company and just great to see all of that says that maybe just.
Eric Martinuzzi: And that was a, you know, big part of the rational of the acquisition. So, I think it makes us far more competitive on these mega large deals. Obviously, as you know, it's got, you know, one or two mega brands already. I think, you know, it seems to be three. And I think we will be able to help accelerate that. So, I think it makes us more competitive, politically. Whereas before, I think our large customers would sort of think of us as a US-only solution. Yep.
Speaker Change #157: Given us some guardrails on organic growth and in terms of what would lead you to the upper bound that you've given historically versus maybe where you are so can you maybe just help us think room now.
Bryan Menar: Then a housekeeping item here.
Speaker Change #141: Now that you're done with this period of really really big change in Q U. How we should think about organic growth through the rest of the year and if you feel more confident and maybe thinking about the upper upper end of that range and then I have a couple of follow ups.
Ahmad: Thanks Ahmad.
Speaker Change #172: I appreciate the feedback so listen as you know a lot of I think what got me. So excited is our growth is decelerating and we cleaned up I think the government business made a pure play and as I hope.
Bryan Menar: Post the, the dust settling on the, I think it was a July 18th closed-on task.
Bryan Menar: Can you give us a sense for kind of a normalized rest of year interest expense and share count? Absolutely.
Ahmad: Communicate on the call.
Speaker Change #172: Our operating leverage is pretty tremendous we our EBITDA was negative $1 8 million. After we sold off over $10 million of EBITDA. So it's.
Bryan Menar: Brian, do you want to run through the interest expense on the Guel note? And then, we'll, you know, what you're referencing there, Eric Wright, is the fact that we did that acquisition with the combination of cash and a balance sheet, a portion around 37-38 percent equity. And then we also used about 90 million of a term loan from Blue Alp. That affected interest rate is roughly around 10 percent. We plan on that, that's going to be a short-term loan within our, on our balance sheet.
Speaker Change #148: It's kind of exciting to see just how fast the financial profile changing alongside all the business transformation you mentioned from a growth perspective.
Speaker Change #148: We still feel Super confident.
Speaker Change #148: Later than 20% were in the mid 24, 25% right now.
Speaker Change #148: As far as confidence on accelerating beyond that we're still early in the Burger King rollout. So we certainly if we can continue to execute and they get excited we have.
Speaker Change #148: Clearly a path to get to the higher end of that but.
Bryan Menar: So, what I would say is you could see the bump up from that we're going to set to 90, the 10 percent, but that, I would not put that as a longer-term expectation for us. We'll be looking to properly, you know, adjust the balance sheet, go forward.
Speaker Change #148: From where we sit today I wouldn't want to change anything I don't want to get ahead of ourselves, but we feel pretty confident as I said, we have never I think.
Speaker Change #148: This is very subjective, but I don't think we've ever done rollout as well as we're doing this one and as soon as his commitment to the customer and so I think we're giving no reason for that organization not to give us more and build more but right now it's a very month by month process to figure out what we're doing next month from that side and Thats. The one lever there the other lever as I mentioned is on the core retail business formula.
Bryan Menar: That actually allowed us, as everyone understands, that actual loan, what allowed us to do was really reduce the deal risk for us. And what do I mean by that? We signed a deal back in March, right? We did not know exactly what the equity and cash ratio was going to be. We did not know the exact timing of when the part government's investor was going to happen. So, we wanted to make sure the deal, the value of it was very strong to us as Stephanie just explained that we had that locked in. This allowed us to do that, and the way we were able to get that commitment from them.
Speaker Change #148: Sure.
Speaker Change #148: We've got a really strong pipeline right now of some very big deals and what's neat about that business, which is so different than our historical path is you get one of those big deals and you start billing them immediately and and so there is we now have a kind of a second lever to potentially get us to the higher end of the range, but that will be very much Q4 experience.
Bryan Menar: And then, now, we're going to make sure that we probably do our, you know, capital allocation, like we always have, hopefully for good or otherwise. All right.
Speaker Change #177: Great and then just on the Wendy's rollout it sounds like that implementation has gone much faster than expected and a half.
Bryan Menar: And the share count just getting kind of there. What is it today? Yes, it's referring to the AK. I believe it's that right now. We just have the two. I think there's another 2.3 million shares about on top of where we were versus what you see in the in the AK. Gotcha.
Brian: And in the third quarter and can you just remind us and just maybe for Brian Brian. If this is maybe more of a question for you but is that our as Wendy is already reflected in IRR or is it now that Nick live in the third quarter it'll be actually in the <unk> numbers. We're just trying to get a sense of magnitude, there and where that contribution of vault.
Samad Samana: Thank you. Our next question comes from the line of Samad Samana. Jeffries, your line is open. Good morning. Thanks for getting me on first just really impressive the amount of the amount of change you guys have digested in the second quarter and really kind of clearing the path up for the company. And just great to see all that. So if that maybe just in a you've given us some guardrails on organic growth and in terms of what would lead you to the upper bound that you've given historically versus maybe where you are.
Speaker Change #188: So it'll be it'll be in the third quarter, because we launched in July and we build when we launch.
Speaker Change #190: This quarter, even like I said, we grew 24% and.
Speaker Change #158: And it didn't include that Wendy's number so again through Keoghan nice boost we unfortunately can't dimensionalize the size of that contract in public forums because of our relationship with the customer but I.
Speaker Change #148: I think I feel really comfortable at one of our largest one of our top two largest punch customers.
Speaker Change #188: Great and maybe just last question for me.
Speaker Change #191: I think on the call we've talked a lot about how much the business has grown and changed I'm. Just curious from an operational standpoint, how you are thinking about where you spend your time and maybe how are you thinking about organizationally kind of matching the scale that you gained over the last.
Samad Samana: So can you maybe just help us think through now that you're done with this period of really, really big change in QQ how we should think about organic air or growth through the rest of the year. And if you feel more confident in maybe thinking about the upper upper end of that range and then I have a follow up. Thanks Samad and you know appreciate the feedback. So tonight you know a lot of I think what got me so had me so excited is you know our growth isn't decelerating and we cleaned up you know I think the government business made a pure play and you know as I hope was you know communicating the call.
Speaker Change #191: Let's call it year and change and if you are spending your time differently you guys plan on evolving maybe the leadership to match the scale that you get.
Speaker Change #188: That's a really good question, it's not in it.
Speaker Change #148: I think and I think our board assesses on <unk>. So I spent a lot of time thinking about organizational design, we weren't functional theyre runs their business units, how do we go to market how do we get the most and how do we most importantly build our bench of talent underneath it and a lot of that work is studying the companies that have done this in generations past or current.
Samad Samana: You know our our operating leverage is pretty tremendous you know we are even though it was negative one point eight million after we sold off you know over ten million dollars of even though so it's kind of exciting to see just how fast the potential for us changing alongside all the business transformation you mentioned. From a growth perspective you know we still feel super confident you know greater than 20% we're in the mid you know where we're 24 25% right now you know as far as confidence on accelerating beyond that you know we're so early in the birken rollout.
Speaker Change #148: The current market and so we run relatively decentralized we have a business unit that runs our engagement cloud our business runs our operator cloud those two leaders are both phenomenal I mean, you can see the growth in operator cloud.
Speaker Change #148: And I joke, when I left running the day to day, the business got better and so I feel really good about the quality of talent there.
Samad Samana: So we certainly you know if we can continue to execute and they get excited we have you know clearly a path to get to that you know the higher end of that. But you know from what we said today I wouldn't want to change anything so I don't want to get ahead of ourselves but we feel pretty confident as I said we've never I think this is very subjective but I don't think we've ever done a rollout as well as we're doing this one and as shown as a commitment to the customer and so I think we're giving no reason for that organization not to give us more and deal more.
Speaker Change #148: And so to me the question is and I ask because you've always want our organizational design is scalable the acquisition of <unk> retail.
Speaker Change #148: No.
Speaker Change #148: Such a successful integration happen not because of me, but because the team underneath that and their ability integrate make that team feel part of our team and our culture and so that I think it's the architectural design combined with really really high quality talent I'd say, it's all the time and I mean sincerely there are four or five people at park that will be better Ceos.
Samad Samana: But right now it's a very month by month process to figure out what we're doing next month from that side and that's the one over there. The other lever as I mentioned is on the part retail business formally Suzo we've got a really strong pipeline right now some very big deals and what's neat about that business which is so different than our historical paths is you know you get one of those big deals and you start building them immediately.
Speaker Change #148: And I bet My bet my salary and so the combination of adding great talent plus great flex.
Speaker Change #148: Flexible organizational design to do it where I'm spending my time.
Speaker Change #148: It's probably allocated in three or four buckets.
Samad Samana: And so there's we now have a kind of a second lever to potentially get us to the higher end of the range but that will be very much a Q4 experience. Great and then just on the Wendy's rollout it sounds like you know that implementation has gone much faster than expected I don't happen in the third quarter. Can you just remind us and this may be prepared enough to Brian if this is maybe more of a question for you but is that our is Wendy's already reflected in ARR or is it now that it's live in the third quarter it'll be actually in the review numbers we're just trying to get a sense of magnitude there and where that contribution falls.
Speaker Change #148: And strategic when we took over par.
Speaker Change #159: And for the call are subscription service revenue was like $5 million in Q4 2018 today, we're almost 200 were for well over 200 with task.
Speaker Change #159: So our vision and mission it has to change with that and we have all these ambitious people, but these ambitious people aren't going to stay around if our goal is to take 200 300, and so it's been a lot of time on what's the strategic vision that we can align our organization such that it aligns with the customers that we're serving and so it's been a lot of time on that.
Speaker Change #159: Im kind of a cheerleader for the company on our values and making sure we're hiring firing promoting based off the values that we signed up for and being really tight on that and creating a lot of accountability.
Samad Samana: So, it'll be in a third quarter because we launched in July and we built when we launched. So, you know, this quarter, I guess that we grew 24% and it didn't include that Wendy's number. So, again, we're doing a nice boost. We unfortunately can't dimensionalize the size of that contract and, you know, public forums because of our relationship with the customer, but, you know, I think I feel really comfortable with, you know, one of our largest, you know, one of our top two largest punch customers. Great. And maybe just last question for me, you know, I think on the call, we've talked a lot about how much the business has grown and changed.
Speaker Change #159: And that means everything from if a customer has a problem.
Speaker Change #159: Test them and take them back and make sure that our team no that's what I expect to everybody.
Speaker Change #159: And then I spend a ton of time on recruitment of talent. So im really active in trying to find great talent that we can add to par and keep us honest about it.
Speaker Change #159: And then lastly, it's on capital allocation and so.
Speaker Change #159: We have this constant debate, which is we are holding our operating expenses very tight and so.
Speaker Change #159: We decided to invest that budget is is a very tough conversation do we put it more into payments. So we put it more into retail, but we put it more into brink. When we have this tremendous growth those are hard conversations with imperfect data and so I spend a ton of time figure out where do we want to make that incremental investment.
Savneet Singh: I'm just curious from an operational standpoint, how you're thinking about where you spend your time and maybe how you're thinking about organizationally kind of matching the scale that you've gained over the last, let's call it year and change and if you're spending your time differently and if you guys plan on evolving, maybe the leadership to match the scale that you did. That's a really good question, but it's the thing I think and I think our board obsesses on the most.
Speaker Change #159: And then supplementing that with M&A make more sense and so we're kind of always having that conversation.
Speaker Change #171: Got you I appreciate the answer and congrats on all the success.
Speaker Change #214: Thank you.
Speaker Change #159: Our next question comes from the line of Adam Wyden of a DW capital. Your line is open.
Savneet Singh: So, I spend a lot of time thinking about organizational design. We want it functional, we run through business units. How do we go to market? How do we get the most? And how do we most importantly build a bench of talent underneath it? And, you know, a lot of that work is studying the companies that have done this, you know, in generations paths or current, you know, in the current market. And so, we run, you know, relatively decentralized.
Adam Wyden: Hey, guys.
Adam Wyden: Super exciting and congratulations I feel like I've been waiting six years to sort of have this this phone call. So I just I want to separate about some qualitative questions in some kwan.
Speaker Change #177: Quantitative questions. If I look at the $2 $5 million of add backs and those are truly add backs and 78, you said minus 1% of EBITDA that does not include governance.
Savneet Singh: We have a business unit that runs our engagement cloud, a business unit that runs our operator cloud. Those two leaders are both phenomenal. I mean, you can see the growth in operator cloud and, you know, I joke, you know, when I left running the day-to-day, the business got better and so, I feel really good about the quality of talent there and so, to me, the question is, you know, I answer the question is, what are organizational design is scalable?
Speaker Change #210: If I look at sort of the contract revenue that you generated last quarter of 35.
Speaker Change #187: And obviously you have some corporate absorption corporate allocation in the government segment, I mean, if I sort of put a 9% margin on that.
Savneet Singh: The acquisition of part retail, you know, such a successful integration happened not because of me, but because of the team underneath that, and their ability to integrate, make that team feel part of our team and our culture. And so that, I think it's the organizational design combined with really, really high-quality talent. I say it's all the time and I mean it sincerely. There are four or five people at part that will be better CEOs than me and, you know, I bet my, you know, I bet my salary on it.
Speaker Change #208: It looks like to me like about.
Speaker Change #186: About three three to three three of EBITDA. So I know you said over 10, but I mean, okay.
Speaker Change #222: Can you sort of Dimensionalize I guess like the quantum of that and is it more like 12 13.
Speaker Change #188: Is there a corporate G&A do you think you can take down associated with that that you haven't yet to take down and then I would say secondly.
Savneet Singh: And so, the combination of adding great talent plus great, you know, a flexible organizational design to do it. You know, where I'm studying my time, you know, I say I, it's probably allocated in three or four buckets. The first is strategic. You know, when we took over a par, you know, what we were talking before the call, you know, our subscription service revenue was like $5 million in Q4 of 18. You know, today we're almost 200, we're well over 200 with, with, with, with task.
Speaker Change #171: Can you sort of give us a sense of what you think sort of the ongoing EBITDA contribution is because I mean, I guess sort of where I would get at his high level Youre sort of you were.
Speaker Change #227: Profitable in the second quarter without past sort of what I'm trying to get through so if you can unpack that and then I've got a couple of other questions about pipeline qualitative, but that would be helpful to sort of conceptualize.
Savneet Singh: And so, our vision mission has to change with that and we have all these ambitious people, but, you know, these ambitious people aren't going to stay around if our goal is to, you know, take 200 to 300. And so, I spent a lot of time on what's the strategic vision that we can align our organization such that it aligns with customers that we're serving. And so, I spent a lot of time on that.
Speaker Change #190: So I think if we had the government business, we cross we would've crossed EBITDA profitability really comfortably this year.
Speaker Change #190: As I said, it's over 10 million over quarter this quarter, sorry this quarter.
Speaker Change #190: With over $10 million, EBITDA, plus allocations and stuff like that.
Savneet Singh: I am kind of the cheerleader for the company on our values and making sure we're hiring, firing, promoting based off the values that we've signed up for and being really tight on that and creating a lot of accountability, you know, and that means everything from a customer, you know, has a problem, I text them and text them back and make sure that a team knows that's what I expect of everybody. And then, I spent a ton of time on recruitment of talent, so, you know, I'm really active in trying to find great talent that we can add to par and, and keep us honest about it.
Speaker Change #171: I don't think it was a swing of $5 million. If you will because that's too much but I think it's a few million dollars would have gone in the right direction and we would across that.
Speaker Change #171: So.
Speaker Change #211: I was making the call and I think you are suggesting is.
Speaker Change #197: Even with that headwind on EBITDA, we still got to these numbers and obviously.
Speaker Change #193: How much how efficient the core businesses, becoming.
Speaker Change #171: So in short I think we would have been EBITDA, we would across this quarter.
Speaker Change #171: We will cross the next quarter.
Savneet Singh: And then, you know, lastly, it's on capital allocation. And so, you know, we have this constant debate, which is we are holding our operating expenses very tight, and so, where we decide to invest that budget is a very tough conversation. Do we put it more into payments, do we put it more into part retail, do we put it more into brink, do we have this tremendous growth, those are hard conversations with imperfect data, and so, I spent a ton of time figuring out where do we want to make that incremental investment, and then supplementing that with, does M&A make more sense? And so, we are kind of always having that conversation.
Speaker Change #194: And I think my guess, probably a few million dollars.
Savneet Singh: Patrick, I appreciate the answer and congrats on all the success.
Speaker Change #188: A little bit hard because theres rationalizing.
Speaker Change #188: Rationalizing office expense and things like that.
Speaker Change #194: Youre, making allocations versus sometimes science.
Adam Wyden: Thank you. Our next question comes from the line of Adam Wyden of ABW Capital. Your line is open.
Speaker Change #224: And then on the tax side do you sort of still expect to get.
Speaker Change #171: $8 million to $10 million per year, I guess, I mean, you don't.
Speaker Change #214: I think that there is additional huge investment on the tax side from a G&A perspective is it fair to assume that you still think you're going to get sort of two to two and a half on task.
Speaker Change #194: Per quarter I think.
Speaker Change #171: Post the cuts from post transaction right. So the public company costs separate taking out I think thats reasonable when we reported it at we were in the six to eight.
Speaker Change #188: Guidance, I think post smoothing things like everything from reporting fees, the board fees and audit fees and things like that will pull out another couple of Bucks, we hope as we talked about on the May announcement call.
Adam Wyden: Hey guys, super exciting and congratulations. I feel like I've been waiting six years to sort of have this phone call. So I just want to separate about some qualitative questions and some quantitative questions. If I look at the two and a half million dollars of addbacks and those are truly addbacks and Savneet you said minus one eight of EBITDA, that does not include government. If I looked at sort of the contract revenue that you generated last quarter of 35 and obviously you have some corporate absorption, corporate allocation and the government segment.
Speaker Change #188: And then I think that assumes that we don't find ways to grow the business. So.
Speaker Change #190: Let's assume that for now and obviously that will not happen, but let's assume that for now so short answer is no different when we reported back in March right, So and I don't want to belabor this but sort of in summary, if you give the $3 million credit for.
Speaker Change #190: Plus or minus on government that gets you to like one two plus.
Adam Wyden: I mean, if I sort of put a nine percent margin on that, it looks like to me like about three to three three EBITDA. So I know you said over 10, but I mean, can you sort of dimensionalize I guess like the quantum of that and is it more like 12, 13? Is there a corporate G&A that you think you can take down associated with that that you haven't yet to take down?
Speaker Change #193: Plus another two on task and you're I mean, you're a solidly profitable company and which sort of leads me to my follow up which is.
Speaker Change #234: I look at sort of a <unk> and I guess, it's different in that you guys have multiple products, but now as engaging cloud as sort of integrated in your merchant Skus with punch.
Speaker Change #171: And you are getting those cost synergies and those revenue synergies are moving parts pumps customers to <unk> and getting higher <unk> and now with data central integrated I mean, youre really now starting to get to the point, where your products are getting integrated I mean agilis. This is running at a 17% margin and it's a much smaller IRR company I mean can you talk a little bit about sort of.
Adam Wyden: And then I would say secondly, can you sort of give us a sense of what you think sort of the ongoing EBITDA contribution is because I mean, I guess sort of where I would get at is high level you're sort of you were profitable in the second quarter without past. I mean, it's sort of what I'm trying to get to. So if you could unpack that and then I've got a couple of other questions about pipeline and qualitative, but that would be helpful to sort of conceptualize.
Speaker Change #214: How do you think about rule of 40, because at least from our accounts it looks like Youre getting there a lot sooner than we thought and you think about that from an AOR growth plus company wide margin will have 40.
Adam Wyden: So I think if we had the government business, we would have crossed even without profitability, really comfortably this year quarter, you know, they said it's over 10 over this quarter, sorry, this quarter, with you know, over 10 million dollars EBITDA plus, you know, allocations and stuff like that, you know, I don't I don't think it was a swing of five million dollars, if you will, because that's too much, but I think it's a few million dollars would have gone in the right direction and we would have crossed that that and so the point I was making on the call and I think you're suggesting is even with, you know, call that headwind on EBITDA, we still got to these numbers and obviously it shows how much how efficient the core business is becoming. So, you know, in short, I think we would have been EBITDA, we would have crossed the discordor, we'll cross the next quarter and I think, you know, my guess is probably a few million dollars, you know, it's a little bit hard because there's, you know, rationalizing, office expense and things like that, you know, you're making allocations versus, you know, sometimes signs.
Speaker Change #214: Can you sort of have a sense of when youre going to get there.
Speaker Change #238: Any sort of thoughts in terms of like pass the rule of 40 accelerated development based on this acquisition and cost in.
Speaker Change #214: Anything you can sort of talk about your confidence of getting to rule of 40, and where you think that sort of lens.
Speaker Change #206: Sure. So we're growing call it mid twenties.
Speaker Change #218: We acquired this $6 million to $8 million of tasks EBITDA call. It pre synergy plus you havent, yet seen sort of the philosophy, we have as we win new part retail deals and again the most important driver of our profitability is still the core business, becoming so efficient and kind of messaging here, we haven't really added costs in six quarters and barely any costs, our last seven or eight quarters, yet the revenues there.
Speaker Change #171: The biggest driver.
Speaker Change #206: And so I think we're not giving guidance on this call, but we are squarely focused on hitting our rule of 40 and our business units are all guided to hit the rule of 40 independently.
Speaker Change #206: So we're going to get there very quickly.
Adam Wyden: Right, and then on the top side, do you sort of still expect to get, you know, 8 to 10 million per year, I guess, I mean, you don't think that there's an additional huge investment on the task size and the DNA perspective. I mean, is it fair to assume that you still think you're going to get, you know, sort of two to two and a half on task per quarter? I think post the cuts from, you know, post transaction, right, so the couple company cost suffering out, I think that's reasonable.
Speaker Change #206: I guess, if the slope to EBITDA, so fast and we will and I think it will continue to go there in 2025 as we rollout these big deals.
Speaker Change #206: So we're really focused on it I think we'll be there.
Speaker Change #171: We're working our way to get there as fast as possible and maybe most importantly, the reason I break out the sales and marketing R&D expense and you can just you can see again on an organic basis, excluding task with him in there how fast that's happening so we're.
Speaker Change #171: Squarely focused on it and moving their fast and what Im really prioritizing animas.
Adam Wyden: You know, when we reported it, we were in the six state, you know, guidance, I think post moving things like, you know, everything from reporting fees, the board fees and audit fees and things like that, we'll plot another couple of bucks we hope, as we talked about on the announcement call. So, and then I think that assumes that we don't find ways to grow the business. So, you know, let's assume that for now and obviously that will not happen, but let's assume that for now.
Speaker Change #171: We get a little 40 really quickly if we turn down the growth engine and just say hey, let's get let's ramp up the cash flow, we're not trying to do that we want to capture as much market share keep the growth high.
Speaker Change #171: And so that's how we can get there and I feel really good about that the other part I would just say it's really quickly.
Speaker Change #171: The white space within our Tam is meaningful and I think as Youre seeing in our numbers one of the things. We've figured out is how to attach more products and so we're just at the beginning of that really really honestly just at the beginning of that and so youre seeing us become drive this growth by selling 1234 products before as one product wait a year at another product now.
Adam Wyden: So, short answer is no different from when we reported back in Right, so I don't want to belabor this, but sort of in summary, if you give the $3 million credit for, you know, or plus or minus on government that gets you to like one, two, plus, you know, plus another, you know, two on task. I mean, you're, I mean, you are a solidly profitable company, and which sort of leads me to my follow-up, which is, you know, I look at sort of a jealousist, and I get it's different, you know, you guys have multiple products, but now as engaged in cloud is sort of integrated in your merchant stu-zo and with punch, and you know, you're getting those cost synergies and those revenue synergies, and moving punch, punch customers to stu-zo and getting higher R2, and now with data central integrated, I mean, you're really now starting to get to the point where your products are getting integrated.
Speaker Change #171: Getting them in faster and faster and that that model that we're just at the beginning of that white space and so that's what I'm really excited about where they are.
Speaker Change #171: No.
Speaker Change #171: Thanks.
Speaker Change #210: I think of it yet, but we're not giving guidance on this call, but we'll come back with that on our next couple of calls and I just wanted to clarify.
Speaker Change #210: Adam So I'll clarify one thing on the <unk>.
Speaker Change #226: As to the Q2 numbers did not include part of government. So we're talking about that adjustment, we talked about that $1 8 million loss. That's a good baseline to go off of Q2 and it has like we said is that pure foodservice tech and baseline and now we can build off of and no later than the growth that we're expecting driven services emulator and task.
Adam Wyden: I mean, a jealousist is running at a 17% margin, and it's a much smaller ARR company. I mean, can you talk a little bit about sort of, you know, how do you think about, you know, rule of 40? Because at least from our couch, it looks like you're getting there a lot sooner than we thought, and you know, do you think about that from an ARR plus company wide margin, rule of 40?
Speaker Change #225: Alright, I just wanted to add anything.
Speaker Change #213: We got another call it material.
Speaker Change #171: Chris got one last question on the on the <unk>.
Speaker Change #171: Right Okay.
Speaker Change #248: On the pipeline and <unk> you made a comment on two of Super Mega brands, and then you said <unk>.
Adam Wyden: You know, do you sort of have a sense of when you're going to get there, or you know, I'm just, you know, any sort of thoughts in terms of like, you know, path to rule of 40, accelerated development based on this acquisition and cost, and anything you can sort of talk about your confidence of getting to rule of 40 and where you think that sort of lives.
Speaker Change #171: To get a third.
Speaker Change #231: Can you talk a little bit I mean at the end of 2023, you talked about how the pipeline was the biggest it's ever been and.
Speaker Change #210: No you're very sensitive to customers and I want the customers who are listening this call to understand that youre, not telling us anything, but we're all sort of going to the tradeshows and trying to figure out what's out there for RFP, but I mean, it appears to us that there are many large mega brands that are out there sort of doing feasibility studies for point of sale.
Savneet Singh: Sure. So, you know, we're growing, call it mid-20s. You know, let's, you know, we acquired this $68 million, a taxi with a, you know, call it Precinergy, plus, you know, you haven't yet seen sort of the velocity we have as we win new part retail deals. And again, the most important driver of our property is still the core business becoming so efficient. You know, as we kind of messaging here, we haven't really added cost in six quarters, and barely any cost in the last seven or eight quarters yet the revenue is there, and that's still the biggest driver.
Speaker Change #210: And for vertical solutions, I mean, I think windows is an amazing proof point in that day.
Speaker Change #213: They went and took ponds.
Speaker Change #213: They have their own loyalty online ordering platform and it seems like they are moving away Burger King is another example, I mean can you talk a little bit about that third mega brands to task and then.
Savneet Singh: And so, I think we're not getting guidance on this call, but we are squarely focused on hitting rule of 40, and you know, our business units are all guided to hit the rule of 40 independently. And so, we're going to get there very quickly. Like I said, the slope to EBITDA has been so fast, and we'll continue, and I think it'll continue to go there in 2025 as we rely on these big deals.
Speaker Change #252: I think a couple of calls you talked about Burger King sort of being a mega brand, but then the mega brands on top of that can you talk a little bit about that pipeline and then also table service and then I'm done.
Speaker Change #233: I can't talk about the brands, Unfortunately, and but let me answer it this way.
Savneet Singh: So, we're really focused on it. I think we'll be there, you know, working our way to get there as fast as possible, and maybe most importantly, the reason I break out the sales and marketing R&D expense, as you can see again, on an organic basis, you know, excluding taxes in there, how fast that's happening. So, we're squarely focused on it, moving there fast. And, you know, what I'm really prioritizing at it is, you know, if we get to rule of 40, you know, really quickly, if we turn down the growth engine and just say, hey, let's ramp up the cash flow, we're not trying to do that.
Speaker Change #238: We have again categorically never had so much pipeline, particularly with the operator cloud as we have today, it's real it's meaningful it's literally seems like every week on flying somewhere with a team member to try to get these deals over the finish line and I don't think they're going to continue and as I said in the call. This.
Speaker Change #238: This macro environment, while it might be scary is actually we think pretty exciting for us like process, we get to go on offense, because our customers as I said the average bring the average same store sales across our customer base was up five 5% this quarter, that's way more than the average restaurant and so they're still making these investments we have not seen a slowdown in our pipeline and I.
Savneet Singh: We want to capture as much marketer, keep the growth high. And so, that's how we're going to get there. And I feel really good about that. The other part I would just say is really quickly, the white space within our tan is meaningful. And I think as you're seeing in our numbers, one of the things we've figured out is how to attach more products. And so, we're just at the beginning of that, really, really honestly just at the beginning of that.
Speaker Change #210: That maybe that's a better way to answer which is we have not seen any follow on pipeline and particular, where I think the most pipeline expansion. While break has great pipeline expansion is the expansion pipeline and data central as an example that we're like Wow, that's really becoming exciting for us.
Savneet Singh: And so, you're seeing us become, you know, drive this growth by selling one, two, three, four products. You know, before there's one product, wait a year at another product, now it's getting them in faster and faster. And that is that model that we're just beginning of that white space. And so, that's what I'm really excited about, we're there.
Speaker Change #210: As far as specifically the brands I, just can't talk about that stuff, yet, but we feel really good about it and and and.
Speaker Change #210: And listen if I was if we felt like the pipeline was getting smaller or we had.
Speaker Change #210: We are feeling any of it I would tell you that.
Speaker Change #210: This environment's really helping US right now with the primary out of Jonathan framework.
Savneet Singh: So, I can't give a big yet because we're not getting guided from this call, but we'll come back with that, you know, on our next couple of calls. And I just want to clarify one thing, Adam. It's one of the things I want to understand, too. The Q2 numbers did not include part of government. So, when we talk about that adjustment, we talk about 1.8 million loss. That's the good baseline to go off of Q2.
Speaker Change #273: Yes, but the prospect of Mega brands beyond Burger King you think that Thats on the table and that's all that's all I'm trying to get at but there are mega brands larger than Burger King that you think are feasible in terms of selling more products. That's what I was trying to get at.
Speaker Change #214: I would say we are actively in conversations with Mega brands.
Speaker Change #239: I think many people are going to this constant debate of internal versus vendor based <unk> and I think theyre going to move to vendors over time.
Savneet Singh: And it has that, like we said, that pure food service tech and baseline, and now we build off of any layer in the growth that we're expecting, driven services, and you layer in task. All right, so I just want to give you a thing. You know, okay. Are we going to have the callers in the queue?
Speaker Change #238: Okay. Thank you.
Speaker Change #258: Our next question comes from the line of Mark Palmer of the Benchmark Company. Your line is open.
Savneet Singh: Chris got one last question on the pipeline. Okay. On the pipeline, you made a comment on two of super mega brands. And then you said hope to get a third. Can you talk a little bit? I mean, at the end of 2023, you talked about how the pipeline was the biggest it's ever been. And, you know, I know you're very sensitive to customers. And, you know, I want the customers who are listening to this call to understand that, like, you're not telling us anything, but we're all sort of going to the trade shows and, you know, trying to figure out what's out there for our fee.
Mark Palmer: Yes. Good morning, Thanks for taking my questions.
Speaker Change #210: <unk>.
Speaker Change #238: Along the lines of.
Mark Palmer: What Adam actually just asked wanted to get your sense of what the company's current capacity is to take on.
Speaker Change #210: New tier one customers given the ongoing.
Speaker Change #210: Burger King rollout, which is on the front end.
Speaker Change #210: As well as.
Speaker Change #210: Launch of Wendy's.
Speaker Change #220: We're just capacity stand could you comfortably.
Savneet Singh: But I mean, it appears to us that like, there are many more mega brands that are out there sort of doing, you know, kind of say I went for vertical solutions. I mean, I think Wendy's is an amazing group point in that, you know, they went and took puns and, you know, they sort of have their own loyalty online or in platform and it seems like they're moving away. You know, Burger King is another example.
Speaker Change #220: <unk> another tier one at this point.
Speaker Change #220: Absolutely, so I think well.
Speaker Change #220: A lot of it the model we've changed within particularly the operator cloud segment.
Speaker Change #222: The team has done this incredible job of making it.
Speaker Change #220: Dynamic and so our ability to ramp up and ramp down.
Speaker Change #259: Is is what's changed most of the par going back three or four years. We just don't think we manage it tightly and I don't think we have that flexibility today, we can ramp up and ramp down and do this in partnership with our customers.
Savneet Singh: I mean, can you talk a little bit about that third mega brands to task? And then, you know, I think on a couple calls, you talked about Burger King sort of being a mega brand, but then like mega brands on top of that. Can you talk a little bit about that pipeline and then also table service, and then I'm done. You know, I can't talk about any of the brands, unfortunately, but let me enter it this way.
Speaker Change #259: And so the most important part is we aligned to the customers' such that we can make sure. We're there and we worked really hard to make sure they pay for it and so it's really it's been a change in how we do it and again kudos to our team is continuing thing that weighs to delay that and one of our emerging leaders.
Savneet Singh: We have, again, categorically, never had so much pipeline, particularly with an operator cloud as we have today. It's real, it's meaningful. It literally seems like every week I'm flying somewhere with a team member to try to get these fields on the finish line, and I don't think that's going to continue. And as I send the call, this macro environment, well, it might be scary, it's actually, you know, we've been pretty exciting for us.
Speaker Change #248: She is sort of finds a way to get it done and I think we will you've got a nice vacation and we will on the engagement side as you mentioned when we launched.
Speaker Change #248: <unk> is one of our largest accounts ever and I encourage everybody to download the app play around CF functionality.
Speaker Change #220: It was amazing how fast we did it it was complicated and.
Savneet Singh: Like for us, we get to go on offense because our customers, you know, as I said, the average brings, the average brings a same sort of sales across our customers is up 5.5% with quarter. That's way more than the average restaurant. And so they're still making these investments. We have not seen a slowdown in that pipeline. And I think that maybe that's the better way to answer which is we have not seen any slowdown pipeline.
Speaker Change #220: Mike gives me great confidence that when we get the next one will be able to do that and as I mentioned on the retail side.
Speaker Change #220: That seems an execution machine and I have no no fear that we if we land one or two of these big deals will be able to get it done.
Speaker Change #220: As we promised.
Savneet Singh: And, you know, particularly where I see the most pipeline expansion, while break has great pipeline expansion, it's the expansion pipeline and data central as an example that we're like, wow, that's really, you know, becoming exciting for us. You know, as far as specifically the brands, I just can't talk about that stuff yet, but we feel really good about it. And, and, and, and, you know, listen, if I would, if we felt like a pipeline was getting smaller or we had, you know, we were feeling any that I would tell you, but this environment's really helping us right now.
Speaker Change #228: Okay, good and just one follow up.
Speaker Change #248: You just talked about the fact that par's business is somewhat counter cyclical that.
Speaker Change #248: Restaurants enterprise restaurants.
Speaker Change #222: See value in what you're offering in particular during a down market as they look to boost sales and gain efficiency.
Speaker Change #253: How does the <unk>.
Speaker Change #222: Company's effort too.
Speaker Change #222: Two.
Speaker Change #222: Improved pricing fit into that mix.
Speaker Change #233: With regard to the degree of receptivity that Youre seeing the degree of receptivity that you anticipate.
Savneet Singh: But the prospect of mega brands beyond Burger King, you think that that's on the table, and that's all I'm trying to get at. If there are mega brands larger than Burger King, that, you know, you think are feasible, you know, in terms of, you know, selling more products, that's what I was trying to get at. I would say we're, you know, actively in conversations with mega brands, but, and, um, I think many people are going to the constant debate of internal versus vendor based tech, and I think they're going to move to vendors over time.
Speaker Change #225: For pricing to me based on value that we drive and if we drive value we take price if we don't we don't.
Savneet Singh: Okay. Thank you.
Speaker Change #225: We're thinking deeply about this idea of adding outcomes to a big part of the part thesis, but we drive outcomes.
Speaker Change #225: I think we had to change the framework for truck from our customer base. The thing we're not trying to hit SLA. If we're trying to drive business outcomes for you and if we drive those outcomes and we take value off those outcomes, we're aligned and that's what we're seeing.
Mark Palmer: Our next question comes from the line of Mark Palmer of the benchmark company.
Speaker Change #225: <unk> was up 14% this quarter. It was up similar amounts last quarter I expect that to continue and all of that suggesting is that our customers are willing to pay or if we can drive great outcomes and in this environment. As you suggested if we're able to drive those outcomes and our customers are winning alongside of US I think we havent felt pressure too.
Mark Palmer: Your line is open? Yes.
Savneet Singh: Good morning. Thanks for taking my questions. Um, along the lines of, uh, what Adam actually just asked, um, wanted to get your sense of what the company's current capacity is to take on, um, new tier one customers, uh, given the ongoing, um, Burger King rollout, which is on the front end, um, uh, as well as, uh, launch of Wendy's, um, where, where does capacity stand, you know, could you comfortably, uh, tuck in another tier one at this point?
Speaker Change #272: The percent forward and and so we're excited and I think the point on.
Speaker Change #225: The cyclicality.
Speaker Change #225: The enterprise sort of foodservice business is just very durable.
Speaker Change #266: And I don't find them to make drastic changes to their plans because they don't have businesses that go up 20 down 20.
Speaker Change #225: So when they have the time to address they make investments in things like loyalty to make investments in things like digital sales because they are trying to capture share but at the same time and make investments in their back office, because they've got to run more efficiently and so we are I think very well situated to be in that and most importantly, because we're already in all these brands the Robin the challenge and the friction to get going its far lower.
Savneet Singh: Absolutely. So I think, um, but we've, a lot of the model we've changed within particularly the operator cloud segment, you know, all in the team has done this incredible job of making it, uh, you know, dynamic. And so our ability to ramp up and ramp down, uh, is, is what's changed most about par, you know, going back three, four years, we just, I don't think we managed it highly. And, and I don't think we had that flexibility today.
Savneet Singh: We can ramp up and ramp down and do this in partnership with our customers. Um, and so the most important part is we, we align to the customers such that we can make sure we're there and we work really hard to make sure they pay for it too. Uh, and so it's, it's, it's been a change in how we do it. And, and again, who does go to that team that's continuing, seeing our way to delay that, you know, one of our emerging leaders, um, you know, she, she sort of finds the way to get it done.
Speaker Change #225: Then if we were a net new customer vendor excuse me.
Speaker Change #234: Thank you.
Speaker Change #276: Our next question comes from the line of George Sutton of Craig Hallum. Your line is open.
Speaker Change #268: Thank you just one question for me.
Speaker Change #277: Relative to the trend that we're seeing of.
George Sutton: OLS and Pos players trying to bring their products together to market.
Savneet Singh: And I think we will, um, you got to rise to the occasion and we will. On the engagement side, as you mentioned, you know, when we launched, um, you know, Wendy is one of our largest accounts ever. And, uh, you know, I encourage everybody to download the app, play around, see our functionality. It's, it was amazing how fast we did it. It was complicated and, um, like, it's me great confidence that when we get the next one, we'll be able to do that.
George Sutton: From separate companies versus your unified.
George Sutton: Modality can you just give us a sense of of how you think that ultimately wins in the market again, its going to the tangible examples of a better together concept.
Speaker Change #238: Yeah, absolutely. So first of all that we play with both we are the most integrated solution in our category by a long shot nobody has more integrations into more online ordering partners loyalty partners ecommerce partners than we do so we support both but our thesis and I think you can sort of see that is that over time customers don't want a disjointed tech stack, they don't want to take the risk.
Savneet Singh: And as I mentioned on the part retail side, it's, that teams and execution machines and I have no, no fear that we, if we land one or two of these big deals, we'll be able to get it done as a promise.
Savneet Singh: We're good, and just one follow-up. You just talked about the fact that PAR's business is somewhat counter-cyclical that restaurants, enterprise restaurants see value in what you're offering in particular during a down market as they look to boost sales and gain efficiency. How does the company's effort to improve pricing fit into that? That makes, with regard to the degree of receptivity that you're seeing, the degree of receptivity that you anticipate. Pricing to me is based on value that we drive, and if we drive value, we take price if we don't, we don't.
Speaker Change #238: One vendor changes something that screws up all the other vendors, which is literally what happens every single month and so what we've observed and I think it's in our data.
Speaker Change #238: Every menu customer is an existing customer or a power product and I think all of that suggesting is that if we can build a comparable product our customers prefer to add on additional product versus adding a new vendor where they need to learn that vendors get up to speed that vendor and then deal with all sorts of.
Speaker Change #238: Challenging things like having different menus different pricing.
Speaker Change #260: Different API like you just create more friction and more risk of things going wrong, and so I think generally our thesis is that our customers over time will prefer something more unified something more deeply integrated but we don't force that upon them and we give them complete flexibility to figure out what works best but I think what we're seeing is that over and over again and this is to your last point.
Savneet Singh: We're thinking deeply about this idea of adding outcomes to a big part of the part of pieces, but we drive outcomes. I think we had a change of framework from our customer base saying, we're not trying to hit SLA, we're trying to drive business outcomes for you, and if we drive those outcomes and we take value also those outcomes, we're aligned. That's what we're seeing. ARP, who was up 14% this quarter, it was a similar amounts last quarter, I expect that to continue, and all that suggesting is that our customers are willing to pay if we can drive great outcomes.
Speaker Change #273: We're able to prove better together outcomes, we can say when you take the second part product to look at it. The outcome you got that you Couldnt get before you had a third product Oh, My God hears a third one.
Speaker Change #234: Finding ways to surprise and delight. The example, I gave on this call was the point of wallet, which really is a core feature that we only get if you've got punched in our payments product. If you had punched different payments product.
Savneet Singh: In this environment, as you suggested, if we're able to drive those outcomes and our customers are wanting alongside of us, I think we haven't felt pressure to push that forward. We're excited, and I think the point on the localities, the enterprise sort of food service business is just very durable, and I don't find them to make drastic changes to their plans because they don't have businesses that go up 20 down 20.
Speaker Change #238: Really hard to deliver that outcome for the customer and so again it all starts from the customers that we can deliver great products.
Speaker Change #234: Our customers are aligned and if we can prove that out.
Speaker Change #234: Perfect. Thank you.
Anya <unk>: Our next question comes from the line of Anya <unk> with Sidoti Your line is open.
Anya <unk>: Alright. Thank you for taking my questions have been addressed but I just had a.
Savneet Singh: When they have the time to direct, they make investments in things like loyalty, they make investments in things like digital sales because they're trying to capture a share. But at the same time, they make investments in their back office because they've got to run more efficiently, and so we are having very well situated to be in that. And most importantly, because we're already seeing all these brands, the rub and the challenge and the friction to get going, it's far lower than if we were a net new customer vendor, excuse me.
Anya <unk>: Follow up on them.
Anya <unk>: Hello.
Savneet Singh: Thank you.
Speaker Change #241: Adoption among your customers do you see that.
Speaker Change #241: Your potential customers being more urgent to.
Speaker Change #242: Click on your solutions now and when do you see there being a little bit more challenged.
Speaker Change #238: I think it's too early to say.
Speaker Change #273: Customer base is diverse and so we definitely have customers that have struggled but on average they have done relatively well, particularly against the broader restaurant community.
Savneet Singh: Our next question comes from the line of George Sutton of Craig Holland.
George Sutton: Your line is open. Thank you. Just one question for me, relative to the trend that we're seeing of, you know, OMS and POS players trying to bring their products together to market from separate companies.
Speaker Change #238: What I think we observed is again since I've been CEO I haven't lived through a bunch of cycles, but I remember in.
Speaker Change #238: In the pandemic, we saw how quickly customers ran to add additional technology.
Speaker Change #260: And so I think that's the analog that I have at where it was an acute problem. They absolutely ran through it I think when you have something that is honestly not yet in the numbers of our customers, but there's a fear that something might happen.
Savneet Singh: These versus your unified modality, can you just give us a sense of how you think that ultimately wins in the market. Again, it's going to the tangible examples of the better together concept. Absolutely. First of all, we play with both. We are, you know, the most integrated solution in our category by a long shot. Nobody has more integrations into more online ordering partners, loyalty partners, the comments partners than we do. So we support both.
Speaker Change #260: I suspect they might be similar to what we saw back then which is a greater push to get these tools out the door to prove that ROI.
Speaker Change #260: And I think one of the beauties of great technology is that it.
Speaker Change #238: Its operating expense not capex and it allows them to roll out a product prove the ROI without having to tie up tons of budget upfront, which is probably very hard to do right now and so I think what we're seeing is this constant debate or are customers of which product do we prioritize first and we really help them kind of give our view of how that works in a rollout.
Savneet Singh: But our thesis, and I think you can, you know, sort of see that is that over time, customers don't want to disjointed text back. They don't want to take the risk that one vendor changes something and it screws up all the other vendors, which is literally what happens every single month. And so what we've observed, and I think it's in our data, you know, every menu customer is an existing customer of a part product.
Speaker Change #248: Okay. Thank you that will hopefully.
Speaker Change #238: Our next question comes from the line of Andrew Hart.
Savneet Singh: And I think all that suggesting is that if we can build a comparable product, our customers prefer to add on an additional product first adding a new vendor where they need to learn that vendor, get a few that vendor and then deal with all sorts of challenging things like having different menus, different pricing, different APIs, like you just create more, more friction and more risk of things going wrong. And so I think generally our thesis is that our customers over time will prefer something more unified, something more deeply integrated. But we don't force that upon them, and we give them complete flexibility to figure out what works best.
Speaker Change #271: <unk> Your line is open.
Speaker Change #266: Hey, just just one for me so you talked about how youre really excited about the white space within the existing customer base and I think you answered it in a couple of questions. So far today, but one.
Andrew Hart: One of the things you're talking about in the prepared remarks was the 10% <unk> growth since last year, but I guess, just can you kind of frame up for us.
Speaker Change #280: Elaborate at least on how much upside is there inside the existing base today and how.
Speaker Change #248: Do you see pricing evolving over the next one to two years. Thanks.
Savneet Singh: But I think what we are seeing is that over and over again, and this is to your last point, we're able to prove better together outcomes. And we can say when you take a second part product, look at this outcome you got that you couldn't get before. Yeah, the third product, oh my god, here's the third one, and we are finding ways to surprise and delight you. The example I gave on this call was the Punch Wallet, which really is a cool feature that we only get if you've got punch in our payments product.
Speaker Change #273: So I don't want to.
Speaker Change #268: We think theres about within the existing base Theres three X the size of the current revenue we have today and as you know I hate hyperbole and massive numbers and so I keep chipping that number down.
Speaker Change #264: But there's just a ton of opportunity to current base less than 10% of our customers on brain kept our payments product like <unk>.
Speaker Change #264: Even though payments is growing so quickly like we have a long long way to go there.
Savneet Singh: If you had punch in a different payments product, it'd be really hard to deliver that outcome to the customer. And so again, it all starts from the customer, which is that we can deliver great products, with our customers alive. And if we can't put that out, they won't.
Speaker Change #253: Central is now got tremendous pipeline, we have excitement that data central can be our fastest growing product next year and that's because we're mining that white space and so now that we have a playbook I think we can do it and as I said, all he and the team have really figured out I guess, it's tough going integrator launch it quickly and so we feel I think we feel really encouraged that we can attack that whites.
Savneet Singh: Perfect, thank you.
Anja Söderström: Our next question comes from the line of Anja Soderstrom with Sudoti. Your line is open. Thank you for taking my questions. I just had a follow up on the sort of adoption among your customers. Do you see that then your potential customers being more urgent to take on your solutions now when they see their sales being a little bit more challenged? I think it's truly to say, our customer base is diverse.
Andrew Hart: Space, where I think in years past, we were hopeful today, it's much more programmatic customer focus.
Speaker Change #263: I think let us demonstrate it and then we can give better guidance.
Speaker Change #259: Thanks, and maybe a follow up on that when you think about the 20% to 30% ARPA growth longer term, how do you parse that out between net new locations and <unk> opportunity.
Speaker Change #273: So historically, it's been completely location basis is the first year that we've been able to demonstrate call. It <unk> <unk> inclusive of a price increase in modules.
Anja Söderström: And so we definitely have customers that have struggled, but on average they've done relatively well, particularly against the broader restaurant community. What I think we observed is, again, since I've been CEO, I haven't lived through a bunch of cycles, but I remember in the pandemic, we saw how quickly customers ran to add additional technology. And so I think that's the analog that I have where when it was an acute problem, they absolutely ran to it.
Speaker Change #273: I think over time it would be great. If we can create something more like 50, 50, I think as I look into 2025, it will be heavily driven by net new store locations because the wins that we have and so it will still be heavily based in new locations, but that doesn't mean, we're taking our eye off the ball on pricing and new modules just happens to be that if we signed these large deals we've got these stores out the door.
Anja Söderström: I think when you have something that is, you know, honestly, not yet in the numbers of our customers, but there's a fear that something might happen. I suspect it might be similar to what we saw back then, which is a greater push to get these tools out the door to prove that our lives. And I think one of the beauties of great technology is that it's operating expense, not Capex, and it allows them to roll out a product through the ROI without having to tie up tons of budget upfront, which is probably very hard to do right now.
Speaker Change #259: I think what it is to as we have more tools in the toolbox for us.
Speaker Change #259: To use right and so it allows us to flex.
Speaker Change #259: One of them versus the other 70 point, we're setting up for 2025, new logos, which can help drive that.
Speaker Change #259: Same time and accelerate our growth with Europe, but in the past we felt predominantly we had to give the new logos, but now that we have multiple products that working very well together and we've got a sales motion no Samsung together, it's an additional.
Andrew Hart: <unk> toolbox.
Speaker Change #270: Great to hear all of those levers will thanks, guys nice results.
Anja Söderström: And so I think what we're seeing is this constant debate of our customers of, you know, which product do we prioritize first and we really help them kind of give our view of how that works and then roll out. Okay, thank you. That was not for me.
Andrew Hart: And I'm showing no further questions at this time I would now like to turn it back to Christopher Byrnes for closing remarks.
Christopher Byrnes: Well, thank you Amy and thank you everyone for joining us today.
Andrew Hart: Sure.
Andrew Hart: Our next question comes from the line of Andrew Hart of BPIG.
Christopher Byrnes: We certainly appreciate your time this morning, and look forward to connecting with you over the next days weeks months and we'll speak to you. After the Q3. Thank you so much and have a good day.
Andrew Hart: Your line is open. Hey, just just one for me, Tiffany, you talked about how you're really excited about the white space within the existing customer base. And I think you answered, do it in a couple of questions so far today. But, you know, one of the things you talked about in prepare to march was before 15% our poop roast in last year. But I guess just can you kind of frame up for us or elaborate, at least on how much upside is there inside the existing base today?
Speaker Change #276: Thank you for your participation in today's conference. This does conclude the program you may now disconnect.
Andrew Hart: And, you know, how do you see pricing evolving over the next one to two years? Thanks. So I don't want to, you know, I think we think about when the existing base, there's three exercise the current revenue we have today. And as you know, I hate hyperbole and massive numbers. And so I keep chipping that number down. But there's just a ton of opportunity current base, you know, less than 10% of our customers on brink have our payments product.
Andrew Hart: Like, you know, even though payments is growing so quickly, like we have a long, long way to go there. You know, data central is now got tremendous pipeline. You know, we have excitement that data central could be our fastest growing product next year. That's because we're mining that white space. And so now that we have a playbook, you know, I think we can do it. And, you know, as I said, all in the team have really figured out how I get this stuff going.
Andrew Hart: I mean, integrate it, launch it quickly. And so we feel, I think we feel really encouraged that we can attack that white space where I think in years past we were hopeful today. It's much more programmatic and we're focused.
Savneet Singh: But, you know, I think let us demonstrate it and then we can get better guidance. Thanks.
Savneet Singh: And maybe a follow up on that. When you think about the 20 to 30% are pro growth longer term. How do you parse that out between, you know, not new locations and are pull up? Attorney. Historically, it's been completely location-based. This is the first year that we've been able to demonstrate, call it ARPU and ARPU being inclusive of a price increase in modules. I think over time, it'd be great if we can create something more familiar, like 50-50.
Savneet Singh: I think as they look into 2025, it will be heavily driven by net news store locations because the winds that we have. And so it will still be heavily based in new locations. But that doesn't mean we're taking our eye out the ball on price and new modules. It just happens to be that if we sign these large deals, we gotta get these stores out the door. I think what it is too is we have more now tools in the toolbox for us to use.
Savneet Singh: And so it allows us to flex one up versus the other. So at 70's point, we're setting up for 2025 with some new logos, which is going to help drive that, which at the same time accelerate our growth with ARPU. But in the past, we felt predominantly we had to get the new logos, but now that we have multiple products that work very well together. And we've got a sales motion, no time to tell them together. It's an additional toolbox. Great to hear all those levers.
Savneet Singh: Well, thanks, guys. Nice results.
Operator: And I'm showing no further questions at this time.
Christopher Burns: I would now like to turn it back to Christopher Burns for closing remarks.
Christopher Burns: Well, thank you, Amy. And thank you, everyone, for joining us today. And we certainly appreciate your time this morning and look forward to connecting with you over the next days, weeks, months.
Operator: And we'll speak to you after the Q3. Thank you so much and have a good day.
Operator: Thank you for your participation today's conference does conclude the program. You may now disconnect.
Operator: Thank you so much for joining us.