Q2 2025 Par Technology Corp Earnings Call
Speaker #1: Today, and thank you for standing by. Welcome to the PAR Technology fiscal year 2025 second quarter financial results call. At this time, all participants are in a listen-only mode.
Speaker #1: After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you'll need to press star one on your telephone.
Speaker #1: You will then hear an automated message advising your hand is raised. To withdraw your estion, please press star one again. I would now like to turn the call over to your speaker for today, Chris Byrnes.
Speaker #1: Senior Vice President for IR and Business Development. Please go ahead, Chris.
Speaker #2: Thank you, Lisa. Good morning, yone, and thank you for joining us today for PAR TECHNOLOGY's 2025 second quarter financial results call. Earlier this morning, we released our financial results.
Speaker #2: The earnings release is available on the Investor Relations page of our website at partech.com. Or you also find the Q2 financials presentation as well as in our related form AK furnished to the SEC.
Speaker #2: During the call this morning, we'll reference non-GAAP financial measures, which we believe to be useful to investors and exclude the impact of certain items.
Speaker #2: 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 #2: I'd also like to remind participants that this conference call may include forward-looking statements that reflect management's expectations based on currently available data. However, actual results are subject to future events and uncertainties.
Speaker #2: 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 arnings release this morning and in our annual and quarterly filings with the SEC.
Speaker #2: 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 our website.
Speaker #2: Joining me on the call today are Savneet Singh, CEO and President, and Bryan Menar, PAR's Chief Financial Officer. I'd now like to turn the call over to Savneet for the formal remarks portion of the call, which will be followed by a general Q&A.
Speaker #2: Savneet?
Speaker #3: Thanks, Chris. And good morning, everyone. Thank you for joining us today. We reported 112.4 million dollars in revenues in the quarter and an increase of 44% year over year.
Speaker #3: We also continue expand our profitability and adjusted EBITDA came in at five and a half million dollars. This number includes 450 thousand dollars of accounting charges for non-period deferred contract costs, which, when further backed , brings our EBITDA to six million dollars for the quarter.
Speaker #3: Subscription services revenue increased by 60% in the quarter to 72 million dollars last year, and 21% organic when compared to Q1 2024. We delivered AR of approximately 287 million dollars up 49% year over year, and achieved organic AR growth of 16%, showing positive momentum across our platform.
Speaker #3: As we just restarted our major rollout and are prepping several multi-product rollouts later this year and early 2026. These results reflect the growing demand for unified technology in the od service industry.
Speaker #3: And the better outcomes our solutions can deliver for brands. Now, to dig into our business with further detail. Total Operator Cloud ARR ended at $119 million and grew 42% in the quarter, with organic growth at 13% when compared to the same period last year.
Speaker #3: This growth is slower than our historical trend due to the mid-quarter restart of BK, which only hit scale starting in June. Crucially, we have significant committed rollout visibility through Q4, which we will markedly increase POS growth in the second half of the year.
Speaker #3: As we mentioned in last quarter's call, in Q2, we restarted , excuse me, in Q2, we restarted the working implementation of PAR POS and initiated the rollout of PAR Ops to their stores.
Speaker #3: We continue to receive very positive feedback from corporate and franchisee stakeholders alike, and this successful PAR partnership was ultimately crucial to us also contracting with Popeye's iana Kitchen with PAR Ops.
Speaker #3: Outside of Burger King, we're seeing strong mid-market traction with 17 new direct POS logos signed in Q2 alone. Continuing the trend from last quarter, all of these deals were multi-product.
Speaker #3: Proving the strength of our product and better together value proposition versus up-and-coming point solution competitors or SMB providers trying crack the enterprise. Our thesis that delivering outcomes of efficient operations and higher sales is playing out quickly in the mid-market and beginning to gain traction in the enterprise with proof points like PAR Ops and RBI.
Speaker #3: Our back office product suite, which we retitled from Data Central to PAR Ops earlier this year, is proving to be one of the most exciting areas of innovation and growth at PAR.
Speaker #3: PAR Ops delivered a strong sales quarter with three new customer deals. We also kicked off our implementation with Popeye's Louisiana Kitchen and Burger King.
Speaker #3: We believe that a key better ether enhancement has been the addition of the delegate product suite. Which we believe will drive our flywheel with strong multi-product adoption.
Speaker #3: As an example of this, Coach AI, our AI-powered intelligent assistant, pulls real-time POS data, drives through a timer information, and voice of the customer guest metrics to give in-store operators actionable intelligence to maximize efficiency.
Speaker #3: It is in clear enhancement of both the POS and back office experience. We're the point where PAR Ops itself is becoming a hero product within the PAR portfolio that is capable of driving cross-sell.
Speaker #3: The PAR Ops product suite has a significant late-stage pipeline covering multiple existing and prospective tier one and two customers, and we are trending towards both 2025 and 2026 being record years for this product line.
Speaker #3: Separately, with respect to our task POS platform, we have aggressively repositioned our focus to pursue global tier one deals and realize the ue that the PAR umbrella brand brings to go-to-market efforts.
Speaker #3: We have gotten extremely compelling feedback from the biggest and fastest growing brands that our task POS platform architecture is the best in the world for global brands pursuing international expansion.
Speaker #3: Because of what we've, because of that, we've en the important measure at investment to this business, while pausing projected rollouts to focus on building out the product for the slate of late-stage stage tier one prospective customers.
Speaker #3: A recent example of task potential was the recent launch of Wingstop's inaugural store in Australia this past quarter. We believe the near-term trade-off of growth for product build-out will set PAR up for massive success in the ure.
Speaker #3: We anticipate rolling out our accrued multi-million dollar backlog of tasks starting in Q1 2026. We believe our decision to run a double-pronged POS strategy with PAR POS for domestic brands and task for global brands will ensure we cover the maximum amount of enterprise concepts.
Speaker #3: There is no one-size-fits-all with point-of-sale software, and with our current portfolio, we cover both domestic and global enterprise QSR brands while also building a pathway toward continued expansion in other hospitality verticals.
Speaker #3: Now onto payments. In the second quarter, PAR's payment business started major shift in operating model, moving from 99% card present transactions to now accepting and selling card not present transactions with the cross-sell of our PAR wallet, ordering, and retail solutions.
Speaker #3: Due to this shift in the timing around the attaching payments with PAR POS rollouts, we saw a slower-than-normal quarter in Q2. The second half of this year should return payments back to growth, as we've signed some significant 500-plus location card-not-present payment deals that we will announce very soon.
Speaker #3: We continue to see PAR payments as a key and strategic growth driver for PAR, with a much larger and future TAM. Given the addition of new sales channels and lets.
Speaker #3: In short, operator cloud is uniquely positioned and hedged in the market to service both the dual need of revenue maximization and operational efficiency. While our business may not be consistent quarter to quarter, the 2025 pipeline keeps very confident about the long-term growth with nearly 50 million dollars in prospective ARR within just POS and back office.
Speaker #3: Further, our point-of-sale products have over 20 million dollars of ARR tied to already contracted rollouts, giving high future visibility and confidence. It's important to note that the aforementioned pipeline number does not even include two mega tier one deals we're pursuing.
Speaker #3: Moving to the engagement cloud, in Q2, we continue to strengthen our ket position driven by a bust customer demand and strong strategic innovation. We exceeded internal targets with engagement ARR increasing 55%, including 18 and a half percent organic growth compared to Q2 last year.
Speaker #3: For enterprise restaurants, the growth trajectory of digital engagement and loyalty programs significantly outpaced traditional sales channels. Despite broader industry headwinds and consumer spending, brands remain committed enhancing their digital strategies with PAR's punch ordering, while PAR's punch ordering and wallet platforms being key focus points of investment.
Speaker #3: In today's competitive market, where customer acquisition costs continue to rise, loyalty programs have shifted from optional extras to essential tools. Their critical not only for driving repeat business, but also for building lasting emotional connection with guests.
Speaker #3: Our platform, powered by a better together approach, uniquely positioned restaurants to capitalize on these opportunities and drive superior outcomes. As a result, we have begun winning multi-product deals at an impressive rate.
Speaker #3: In Q2, we signed 10 new engagement mid-market and enterprise customer deals. Seventy percent of these deals included multiple products, including Punch, ordering, and payments. Let me reiterate that point.
Speaker #3: 70% of our deals were punch. Now include a second product. When last year, Q2, zero deals did this. This is an enormous change at PAR.
Speaker #3: Critical to this multi-product evolution is the expansion of PAR ordering. We closed six new ordering deals this quarter, demonstrating momentum and growing demand for our comprehensive offerings.
Speaker #3: What's particularly noteworthy is that 100% of new Q2 ordering deals were cross-selled into our existing base. What largely drove that trajectory change is the cross-sell within the engagement cloud, which our launch of a new suite products, PAR agement, which unifies four essential pillars: marketing, ordering, loyalty, and data into one integrated solution.
Speaker #3: Even more exciting than our recent wins is our product momentum. Industry is ready to move beyond online ordering 1.0 and is actively seeking innovation.
Speaker #3: Our development team velocity underscores this. Story point commitments have doubled compared to last year, meaning we're launching twice the product volume. The perfect example of this are the embedded AI-driven tools proven to boost check size via intelligent upsell, and drive higher one-to-one personalization through smart segment builder.
Speaker #3: We feel that our ordering product is now best in class versus the legacy peers focused on driving cash flow returns versus product outcomes. Similar to operator cloud, engagement cloud ended the quarter with a pipeline of over 50 million dollars, providing strong visibility for future growth.
Speaker #3: Now turning to PAR etail. PAR retail delivered other strong quarter and is quickly becoming the second pillar of our multi-vertical strategy. Our flywheel and convenience and feel is starting accelerate.
Speaker #3: In Q2, we secured four high-value enterprise wins. Historically, in the C store industry, deals are chunky. In an average year, we would close two to four total.
Speaker #3: Our speed this year highlights the growing trend amongst operators. A move towards consolidation with a single trusted technology partner. And we're building momentum and are actively engaged with eight more enterprise opportunities with the potential to close in the back half of this year.
Speaker #3: Additionally, this quarter, we completed the integration of our new self-checkout product, Skip. This is adding an extremely healthy ARPU white space and tight synergy to drive better outcomes for our ustomers.
Speaker #3: Our largest customers are already in talks to expand their relationship with self-checkout. In comparison to restaurant, we see that while C store deals move slower, they are highly strategic, long-term, multi-product relationships that drive massive future potential to higher ARPU and expand within the PAR ecosystem.
Speaker #3: Just as important as new customer wins in C stores, is the expansion among existing customers. A standout example is EG Group, one of the largest global four-court operators.
Speaker #3: Since launching on PAR retail, EG has scaled significantly, currently performing at nearly three times its original program metrics. More importantly, they are now actively evaluating additional PAR products, including self-checkout, to drive further operational efficiencies and open new revenue streams.
Speaker #3: This kind of expansion, combined with the momentum we have winning new logos, demonstrates the beginning of our long-term flywheel in the convenience and fuel industry.
Speaker #3: We are quickly viewing the potential of this industry to becoming a meaningful driver of PAR's growth overall. Moving to hardware, we had a stronger than planned quarter in hardware revenues with an increase of 33 and a f percent.
Speaker #3: Clearly, there are a number of our hardware customers who accelerate their purchase ahead of tariffs being assigned. The continued uncertainty around tariffs will increase volatility in global trade policies and supply chains.
Speaker #3: We will constantly evaluate the current environment and will take the necessary steps to mitigate the impacts on our business to the best of our ability.
Speaker #3: In summary, Q2 was a validation of PAR's platform strategy and market position. Q2 saw 27 new logos signed with PAR, of whom 19 were multi-product.
Speaker #3: Across food service, we are seeing a definitive shift in buying behavior towards unified enterprise-grade solutions. An environment in which PAR is uniquely well-positioned as an industry leader.
Speaker #3: While our quarter-to-quarter movements are never linear, our 2025 pipeline of new deals stands near 100 million dollars, which gives great confidence around long-term durable growth.
Speaker #3: What's more, we feel even more excited that when looking at our pipeline, we exclude our largest deals from these counts in order not to be over-reliant on a deal or two.
Speaker #3: Giving us even more confidence on our long-term potential. Bryan will now review the numbers in more detail, and I'll come back at the end.
Speaker #3: Bryan?
Speaker #4: Thank you, Savneet, and good morning, everyone. In Q2, we continue to execute our plan of driving organic growth across our products and the verticals we serve, while also driving incremental bottom-line improvement.
Speaker #4: Subscription services continue to fuel our organic growth and represented 64% of total Q2 revenue. The growth from higher margin revenue streams resulted in the consolidated non-GAAP gross margin of 59.3 million.
Speaker #4: An increase of 20.8 million or 54% compared Q2 prior year. We managed the growth while continuing to drive the efficient operating expenses. As a result, we reported 9.9 million dollar improvement and adjusted EBITDA compared to Q2 prior year.
Speaker #4: Now to the financial details. Total revenues were $112 million for Q2 2025, an increase of 44% compared to the same period in 2024. This growth was driven by subscription service revenue growth of 60%, inclusive of 21% organic growth.
Speaker #4: Net loss from continuing operations for the second quarter of 2025 was 21 million, or 52 cent loss per share. Compared to a net loss from continuing operations of 24 million.
Speaker #4: Or a $0.69 loss per share reported for the same period in 2024. Non-GAAP net income for the second quarter of 2025 was approximately $1 million.
Speaker #4: Or 3 cent income per share. A significant improvement compared to a non-GAAP net loss of 8 million, or 23 cent loss per share for the prior year.
Speaker #4: Adjusted EBITDA for the second quarter was of 2025, was 5.5 million. An improvement of 9.9 million compared to the same period in 2024. Sequentially, adjusted EBITDA improved by 1 million, in the first quarter 2025.
Speaker #4: Due to adjusted EBITDA of 5.5 million, included 450 thousand of accounting charges for non-period deferred contract costs. Removing these non-period charges, adjusted EBITDA would have been 6 million.
Speaker #4: Now for more details on revenue. Subscription service revenue was reported at 72 million, an increase of 27 million, or 60% from the 45 million reported in the prior year.
Speaker #4: And now represents 64% of total PAR revenue. Organic subscription service revenue grew 21% compared to prior year, when excluding revenue from our trailing 12-month acquisitions.
Speaker #4: ARR exiting the quarter was $287 million, an increase of 49% from last year's Q2, with Engagement Cloud up 55% and Operator Cloud up 42%.
Speaker #4: Total organic ARR was up 16% year over year. Hardware revenue in the quarter was $27 million, an increase of $7 million, or 34%, from the $20 million reported in the prior year.
Speaker #4: The increase was primarily driven by continued penetration of hardware attachment into our expanding software customer base. Professional service revenue was reported at 13.6 million.
Speaker #4: Relatively unchanged from 13.2 million reported in the prior year. Now turning to margins. Gross margin was 51 million, an increase of 19 million, or 59% from the 32 million reported in the prior year.
Speaker #4: The increase was driven by subscription services with gross margin dollars of 40 million. An increase of 16 million, or 67 percent from the 24 million reported in the prior year.
Speaker #4: GAAP subscription service margin for the quarter was 55.3%, compared to 53.1% reported in Q2 of the prior year. Excluding the amortization of intangible assets, stock-based compensation, and severance, total non-GAAP subscription services margin for Q2 2025 was 66.4%, consistent with the 66.4% for Q2 2024.
Speaker #4: Sequentially, the margin decreased from Q1's margin of 69%, which was primarily driven by favorable Q1 adjustments and Q2 product mix. We expect the adjusted subscription service margin baseline to be between 66% and 67% for the second half of 2025.
Speaker #4: Hardware margin for the quarter was 27.3% versus 22.8% in the prior year. The improvement in margin year over year was substantially driven by favorable product mix, as well as year-over-year reduction in expense, as we aligned our hardware-related workforce with organizational priorities.
Speaker #4: We continue to monitor the uncertainties in light of continuing changes to global tariff policies. Which may have adverse effects on our hardware revenue and hardware gross margin.
Speaker #4: We are continuing to evaluate and implement mitigating actions including potential supply chain resiliency movements, and cost or pricing measures. If needed, as the tariff environment evolves.
Speaker #4: Professional service margin for the quarter was 28.7%, compared to 27.5% reported in the prior year. The increase primarily consists of margin improvement from field operations and repair services, substantially driven by improved cost management and a reduction in third-party spending.
Speaker #4: In regard to operating expenses, GAAP sales and marketing was 12 million, an increase of 2 million from the 10 million reported in the prior year.
Speaker #4: The increase was primarily driven by inorganic increases related to our acquisitions, while organic sales and marketing expenses increased 0.6 million, year over year. GAAP G&A was 32 million, an increase of 6 million from the 25 million reported in the prior year.
Speaker #4: The increase was once again primarily driven by inorganic reases. While organic G&A expenses increased by 1.5 million year over year, primarily due to certain non-cash or non-recurring expenses, of which 1.1 million are non-GAAP adjustments.
Speaker #4: GAAP R&D was 21 million, an increase of 5 million from the 16 million recorded in the prior year. The increase was primarily driven by inorganic expenses, while organic R&D expenses increased 2.1 million year over year.
Speaker #4: Operating expenses excluding non-GAAP adjustments was 54 million, an increase of 11 million, or 26% versus Q2 2024. But when excluding inorganic growth, operating expenses only increased 2.4 million, or 6%.
Speaker #4: The organic increases were primarily driven by a continued investment in R&D expense. Exiting Q2, non-GAAP opex as a percent of total revenue was 47.9%.
Speaker #4: A 680 basis point improvement. From 54.7% in Q2 of the prior year. As we continue to scale efficiently and demonstrate strong operating leverage. Now to provide information on the company's cash flow and balance sheet position.
Speaker #4: As of June 30th, 2025, we had cash and cash equivalents of 85 million and short-term investments of 0.6 million. For the six-month ended, June 30th, cash used and operating activities from continuing operations was 24 million, versus 33 million for prior year.
Speaker #4: Q2 cash used and operating activities of 6.6 million, improved noticeably from Q1. We expect operating cash flow to continue to improve back depositive for the remainder of the year as we continue to drive incremental profitability, and we reduce our networking capital needs.
Speaker #4: Cash used and investing activities was 8 million for the six-month ended, June 30th, versus 73 million for the prior year. Investing activities included 4 million of net cash consideration, in connection with the tuck-in asset acquisition of GoSkip.
Speaker #4: And capital expenditures of 2 million for developed technology costs associated with our software platforms. Cash provided by financing activities was 11 million for six-month ended, June 30th, versus 192 million for the prior year.
Speaker #4: Financing activities primarily consisted of the net proceeds from the 2030 notes of 111 million, of which 94 million was utilized to repay the credit facility in full.
Speaker #4: As noted in our performance and remarks, we are pleased with the 's ability to continue to drive meaningful organic growth and incremental profitability while also making the appropriate investments for sustained growth as we move forward with the next phase of our transformation.
Speaker #4: Our focus on delivering best-of-breed products that truly provide exponential value when bundled together has allowed us to continue to build a healthy pipeline, with both multi-product opportunities as well as accelerated cross-sell penetration.
Speaker #4: I will now turn the call back over to Savneet for closing remarks prior to moving to Q&A. As we wrap up this morning, I want to talk about PAR's trajectory for the balance of the year.
Speaker #4: Our most significant growth potential continues to be in POS. It remains critical to restaurant operations, is one of our highest ARPU products, has incredibly sticky retention, and is our best pathway for cross-selling.
Speaker #4: Despite this opportunity, the POS business has progressed slower than we initially forecasted for 2025. This delay impacts short-term revenue opportunities in POS and payments.
Speaker #4: Our roommates remain very high, but deal rollouts have been slower and deal signings of larger deals delayed not lost. Critically, while macroeconomic pressures can impact the timing of adoption, they do not change the ual need for the tech upgrades.
Speaker #4: Given major recent changes in restaurant software, legacy systems do not have the capacity to run AI-driven tools, and in the battle for efficiency, the tech-forward concepts will always win the day.
Speaker #4: Said differently, the revenue will come, just a little slower than expected. And as I mentioned, our signed but not yet fully rolled-out POS deals are worth over 20 million dollars on their own today.
Speaker #4: These deals are already won not in pipeline. We remain highly confident in our long-term growth prospects. While with the strongest sales pipeline we've seen in the past five years, and the combination of PAR POS and task ensuring we have the largest POS TAM than we've had.
Speaker #4: Currently, we have active advanced stage discussions with three top 20 restaurant brands, two of whom are global top 10 brands. Securing any one of these would significantly accelerate our growth trajectory, alongside the 50 million dollar operator cloud pipeline I mentioned earlier.
Speaker #4: Even aside from these major POS opportunities, our business remains maintained a steady and reliable growth rate exceeding 15%. In short, just one or two tier one POS deals will provide accelerated growth off that base for years to come.
Speaker #4: Alongside the many multi-product rollouts we have planned for later this year and 2026, we continue to target 20% growth in organic ARR as our North Star in everything we do. However, we expect this year to end in the mid-teens, driven by the slower POS and payment rollouts we've seen in the first half of this year.
Speaker #4: While the second half looks very strong, and Burger King is rolling out as planned, following the June ramp-up, the slower first half will make this target harder to achieve.
Speaker #4: There are certainly plenty of opportunities us to call back to our goal for year, but we want to be prudent in setting expectations. I wanted to close the call on a personal note.
Speaker #4: I have now been the CEO of PAR for over six and a half years. I take tremendous pride in what 've accomplished, but also believe we are only as good as the future value we can create today.
Speaker #4: I know many of you have built a financial position in PAR, but have also taken a personal bet on me and our ership team.
Speaker #4: We are reminded of this every day and are driven to deliver by the belief you have in us. We do not take this lightly.
Speaker #4: PAR is a representation of myself, and the team I represent, and I take the responsibility and pillar of not only my career, but my life.
Speaker #4: Our culture is one of relentless accountability, urgency, and ownership. We treat your capital like it's our own. We know that every dollar we spend is yours, not ours, and we never forget that.
Speaker #4: Above all, we believe there is one metric and one metric alone that matters: shareholder return over the long run. And we never lose sight of that responsibility.
Speaker #4: We're a company built on the idea that nothing is given and everything is earned. We do not make decisions driven by quarterly results and always consider long-term value.
Speaker #4: Whether that's price increases, accelerating go-lives when you're aving a multi-product angle on the table, or instituting taxes on third-party systems, there are ultimately always levers we choose not to pursue, or pull, because we do not believe in the trade-off.
Speaker #4: The long term must always win. We want to continue to partner with investors that believe in our long-term story and strategy. This is one of great and sitting around corners.
Speaker #4: One of converting a legacy hardware business burning cash into a profitable enterprise software platform with a deep moat and flywheel. We did this by biding our time for the right opportunities, and striking when the window was right in the M&A markets, and building products with long-term payoff perspective.
Speaker #4: There's a reason PAR is not focused on consolidating legacy companies focused on profit versus growth. It does sync with our formula of best-in-class and better together.
Speaker #4: So let me be clear. Our foundation is strong, and our future path is certain. Whether by contracted future rollouts or late-stage tier one pipeline, the future is bright.
Speaker #4: A game isn't decided by where it stands at halftime. And we have a proven team of intense competitors at PAR that are geared up to maximize long-term value for shareholders.
Speaker #4: We treat this opportunity as it's the one that will define our legacy. That mindset has driven us for the six and a half years, and it will power us forward.
Speaker #4: Thank you for taking a bet on PAR. We intend to continually prove you right. Operator, please open the line for questions.
Speaker #1: Thank you. As a reminder, if you would like to k a question, please press star one-one on your telephone. You will then hand the automated message advising your hand is raised.
Speaker #1: We ask that ou please limit yourself to two questions. Also, please wait for our name and company to be announced before proceeding with that question.
Speaker #1: One moment, please, while we compile the Q&A roster. The first question of the day is going to come from Mayank Tanden of Needham. Your line is open.
Speaker #5: Thank ou. Good morning, Savneet, Bryan, and Chris. I wanted to start, Savneet, with some of the comments you made towards the end of the call regarding the growth ramp.
Speaker #5: So, just to be clear, given the BK rollout timing, it's nice to hear that it's back on track. And with some of the deals that are now going live, should we still expect subscription growth to re-accelerate from the first half?
Speaker #5: So any directional guidance you can provide on that would be helpful. And also any comments around what we should think about on the services and the hardware side, just so we have our models in a good spot.
Speaker #2: Sure. Mike, this is Bryan. Thanks for the question. I'll take that first and then Savneet can finish it up. But in regards to the acceleration, yes.
Speaker #2: Like when we talk year-over-year growth and what Savneet was talking about at the end of the script there, it's because of Q1 and Q2 slowing down due to the rollouts. We had that ripple effect as you go through Q3 and Q4 because it's still in your metrics.
Speaker #2: Year-over-year growth is actually a lagging indicator. Incrementally, right, if you go from quarter to quarter, we're ecting now, we're seeing accelerated growth incrementally from Q3 into Q4.
Speaker #2: So hopefully that answers your question there. And I'll Savneet answer your estions on the services and hardware.
Speaker #3: Yeah. So the back half looks very strong. It's more about, you know, 're starting from a lower error base than we expected. So getting to the 20% will be a little bit harder, but there are a lot levers to do that.
Speaker #3: I just wanted to be prudent in setting expectations. And as ou heard, you know, we've got a ton of contracted revenue that just needs to get rolled out.
Speaker #3: And so it's more about, you know, when that hits and the ing of that. On the hardware side, you know, we had a spike in Q2, you know, we think we assume driven by the uncertainty around tariffs and people pulling ahead.
Speaker #3: And so I expect hardware to come down in Q3 to sort of more traditional levels. Same in Q4. I don't, you ow, if there's more aggressive tariff talk, you'll see it spike again because I think our customers clearly want to get ahead of that.
Speaker #3: But right now, I think we're at a point where there seems to be some stability in the buying cycle. And on the services side, you know, I think it'll be consistent.
Speaker #3: You know, you'll see some pickup just because we do have, as Bryan mentioned, incremental revenue growth is, you know, dollar revenue growth in the second half of the year is much larger than the first half of year.
Speaker #3: So, more installs, you know, more PS-type work on that side.
Speaker #5: Got it. That's helpful. And then as my follow-up, Savneet, again, great hear about the multi-product wins, the record number there. Could you maybe give us any thoughts around what are the scope and size of these deals relative to those single product deals?
Speaker #5: In other words, what is the ARPU uplift that you can typically capture from these types of wins?
Speaker #3: It's a great estion. So when they come from the operator cloud, and I'll give you average at the end, but when they come from the ator cloud, you know, you're usually ing a POS deal that's anywhere from, you know, 2400 to 3000 dollars a year and you're adding another 1600 dollars of back office.
Speaker #3: And if it's payments, ou're adding another 2 to 3 thousand dollars as well. So it is, you know, call it a 70, you know, 60% to, you know, doubling of the revenue base depending on which product's been attached.
Speaker #3: So 's very, very impactful. You know, we had an example of a chain we signed in Q1. It's about 100 stores. You know, normally 100 stores picking us for POS will be, you know, call it, you ow, ARPU per store of around 2500 bucks.
Speaker #3: You know, this client will be, you know, a $700,000 or $800,000 a year customer, right? So, paying us $700,000 or $800,000 because they took the full product suite.
Speaker #3: And it has a meaningful impact, and that hasn't flowed through our P&L yet. You know, this has been a very new trend for us.
Speaker #3: On the engagement cloud, you know, it's a little bit The average loyalty customer is, you know, call it anywhere from 80 to 100 bucks a th, sometimes, you know, a little bit ger than that in growing, obviously.
Speaker #3: And when they add ordering, it's around the same depending on which modules they pick. So you know, it's a ubling on that side. So it is a really, ally meaningful impact to the P&L.
Speaker #3: And again, something we're looking forward to, you know, having flow into the P&L at the end this year and next year.
Speaker #5: That's great. Thank you so much.
Speaker #1: Thank you. One moment for the xt question. And the xt question will come from the line. Steven Sheldon of William Blair. Your line is open.
Speaker #6: Hey, thanks. So Savneet, you mentioned two mega tier one deals that you're ly pursuing in the operator cloud. I know there are probably limitations on at you can say, but any more context on those win decisions or potentially going get made and what PAR solutions those brands might be considering?
Speaker #6: You know, is POS on the table for those considerations?
Speaker #3: Yeah, they are POS deals. You know, like I said, three top 20 brands, two top 10 brands. All POS-related and, you know, at least one of them we hope to be multi-product, maybe two, but.
Speaker #3: And so it's all POS-driven. You know, timing, you know, on two of them we expect in 2025. You know, one of them will be, you know, I'm expecting 26, the customer will say 25.
Speaker #3: So the, you know, they are big, but you know, the bigger point I think we're making here is that by adding task to the PAR platform, you know, we're now able to do these global deals that really are impacting our pipeline.
Speaker #3: And so, you know, we stop, you know, we've ostensibly stopped most task rollouts for this year. Again, muting ur growth a bit. For reinvesting aggressively in task platform to, you know, not only have these deals, but have more of these global brands that historically we've not been able to participate in.
Speaker #3: So, short answer is 2025 for two, 2026 for one is our ESS, and all POS.
Speaker #2: And I just want to add one thing, Steven, to that. Just want to make re from the remarks that we had in the script to the the amounts that 're talking about pipeline in there excluded these because we didn't want to kind of distort what we're talking about here.
Speaker #2: So we have a healthy pipeline across our products, across the verticals we're serving. And these are other additional actual jobs that are actually our focus for the long-term strategic growth.
Speaker #6: Got it. Yeah, that's helpful. And then just looking at the the active sites between operator and engagement, it seemed ike both were maybe down just a touch sequentially.
Speaker #6: I mean, any context on that? What drove that?
Speaker #3: Yeah, absolutely. So on engagement side, you'll see a nice pickup in Q3. We were signing deals and so we started collecting revenue, but they haven't gone live yet.
Speaker #3: So it's just a timing issue on the engagement side. You know, as I said, the engagement side had, you know, really, really strong ARR growth.
Speaker #3: And so you'll see results flow into the next queue. So I'm super excited there. We had some smaller churn there that candidly was needed churn.
Speaker #3: You know, nothing historical rates, nothing different than historical rates, and obviously stuff we think was good churn for us. On the operator cloud side, it's just, you know, in the second half of the year, the sites get really rolling.
Speaker #2: Yep. And the first half was really due to the rollouts being delayed that caused that issue. In regards to what we saw for growth rates year over year.
Speaker #6: Okay. Thank ou.
Speaker #1: Thank you. One moment for the next question. And the next question coming from the line of Andrew Harte. Of BTRG, your line is open.
Speaker #7: Hi. Thanks for the estion. Savneetet, really appreciate the comments on better together. It sounds like the multi-product sales cycle really starts with POS. But I guess can you talk about what are the most common add-ons?
Speaker #7: I think something you talked about in your prepared remarks was PAR ops having really great momentum. Do you see that as cross-sell or an upsell or net new?
Speaker #7: Just help us understand the sales cycle starting with POS and then what you go with from there.
Speaker #3: That's a great question. So generally in the operator cloud side, you know, you're attaching payments and back office. Obviously, a lot of my commentary on the excitement of PAR ops is because we sort of figured that bundle out really well.
Speaker #3: And it's always product-related. know, once we deliver product functionality, we're able to sort of build that pipeline up. So it's usually on, you know, you're ching one of those two there.
Speaker #3: On the engagement side, it's really PAR ordering. It's attaching our online ordering product, which is now, you know, we really in class and going to take real share.
Speaker #3: And so on that side, it's PAR ordering. What I think is going to be more exciting, you know, in the coming years will be, you know, adding product three, four, five, and six.
Speaker #3: You know, that's what's next and we're gearing up for that.
Speaker #7: Thanks. And then I would love to hear your thoughts on the online ordering space, especially with the OLO deal announced a couple of months ago.
Speaker #7: It feels like PAR has a great opportunity to effectively compete in online ordering. With menu, as an upsell, as you just kind of talked, I would love to hear your thoughts on the online ordering space.
Speaker #7: And then maybe just your continued appetite to probably do M&A. It sounds like there was a, you know, other talk in this quarter as well.
Speaker #7: Thanks.
Speaker #3: So, yeah, absolutely. I am, PAR ordering has been an incredible bright spot for the year. Our ability to, our velocity of product is incredible there.
Speaker #3: We're shipping almost every few weeks. The confidence we have in being best in class there is just super high. What's been fun is that we've done this in stealth of night with a team, and now the results and the wins are there.
Speaker #3: And so, you know, we won six logos this quarter. I ink we're going to have some great wins in Q3 and in Q4. And, you ow, for the first time, we feel we're ready to go and start poaching the big guys.
Speaker #3: So PAR ordering's in a really strong seat. You can see just from the bers of wins we're, you know, the deals we're ning. And what gives us a huge advantage here is that the integration of PAR ordering within loyalty in particular, but also within POS and other parts of PAR, it gives us an advantage that we don't believe anybody can compete with.
Speaker #3: And so at that scale, where we have the largest loyalty business in the industry, and attaching ordering to that, you know, it is a better product.
Speaker #3: And so we expect, you know, a lot more to happen here. Now we're, but we feel pretty good about it. The other thing I'd sort of add there is I mentioned this in the script, but the growth in PAR ordering is also pulling in future payments revenue.
Speaker #3: And so that will be another lever that I think we'll get to later this year. And that's a very, very juicy revenue stream. So, yeah, I think we feel really good, you know, the fact that we're releasing every quarter now the number of wins. We expect to have a bunch of new press releases coming out with wins in the second half of the year.
Speaker #3: And these are logos ou'll ognize.
Speaker #2: And then Andrew, just I think in your references, make sure I clear up for you. On the token acquisition, it was GoSkip that referenced cash flow section.
Speaker #2: Which was a token at the end of Q1 and that is in our retail vertical.
Speaker #7: Thanks, guys. I appreciate the color.
Speaker #2: Yep.
Speaker #1: Thank you. One moment for the next question. And then what next question will be coming from the line of Will Nance of Goldman Sachs?
Speaker #1: line is open.
Speaker #8: Hey, guys. Good morning. Thank you for taking the estions. I wanted to come back to the ARR growth. I heard you on where you're expecting to end the year.
Speaker #8: As a relay of some of the push outs, but it sounds like on an incremental basis, you are expecting some acceleration. And so I was just wondering you could kind of go through the puts and takes, you know, Burger ing, restarting, some things getting pushed out, you know, what does it, what does it sort of take or what's the line of sight, and do you have a sense for when we could see ARR growth kind of back in that 20% range?
Speaker #8: Like do we need to last the first half of 2025 when things are going little bit slower to kind of see the full acceleration or could we see it sooner?
Speaker #3: You know, the earliest you'd see it is Q4, but I think it'll be a little bit after that. That's why I made the comments, although, you know, there's a lot of good stuff happening.
Speaker #3: So it's, as you can see, the quarter-to-quarter is a little hard for us to forecast. The puts and takes are pretty le.
Speaker #3: Burger King's ing great. But, you know, from the baseline of ARR we're at now, it, you know, we're, as we're, even though we're going to add a bunch of ARR, you know, probably what we hope to add.
Speaker #3: Because it's starting at a lower base, the comparison will look lower. This is more about rollouts we had planned that involve over $20 million of contract revenue, which are going a little bit slower than we expected.
Speaker #3: And I think it's very much tied to the macroeconomic uncertainty, where we saw people say, "Hey, let’s push out the rollout a month or two." So, still contracted, still guaranteed to pay PAR with a contract.
Speaker #3: But we need, you know, those deals to continue to celerate. And so I think that that's been the main, you ow, headwind, if you .
Speaker #3: The other one is our decision, which was purposeful to not take task revenue live and focus on these global tier one deals. You know, that was a nice chunk of revenue that we, you know, could have taken on. As I mentioned at the end of the script, we could have done it on a very long-term basis.
Speaker #3: But we decided to make the right, we think right thing so we can hopefully win one of these global tier one deals and make that ROI there.
Speaker #3: And the last one I mentioned is that the multi-product deals that we do, they do slow down the single product sale. And, you know, we've continued make the decision, which is the multi-product is so powerful, the ics are so much better for our shareholders, that we'll always do that.
Speaker #3: And so we'll get faster and faster at that, but they do slow down stuff a little bit. Now, to part of like what could get us there, the rollout celerations, absolutely can come through and we've seen those turn on a dime in the past, but we want to be careful.
Speaker #3: But those can absolutely come through. Number two is, you know, delegate, and the PAR ops having a strong end of the year because delegate becomes organic by the end of the year.
Speaker #3: And I think the third thing is the winning of these any one of these larger deals that are in the pipeline, you know, we would hope to start, you know, billing in 2025.
Speaker #3: And so there are a number of levers that can get us there. But we want to be, ou know, careful and not getting ahead of ourselves.
Speaker #3: So we're still shooting for it, but I wanted to be, you know, transparent of sort of like, hey, the first half, because of the POS side, became a little bit slower.
Speaker #3: And so we want to be, you know, careful.
Speaker #2: And what I'll add to that is Savneet's right in everything we just talked about regarding the business perspective. I think what you were referencing, Will, is also the pure math of it.
Speaker #2: And ou're right. When you're lapping in Q1 and Q2 of next year, and over what happened the first half of this year, the math goes in your favor.
Speaker #2: At that point in time as well, on top of what Savneet just laid out for you.
Speaker #6: Got it. No, that's very clear. And if I could just follow up on the task side, and you know, at the isk of asking a potentially dumb question, like why can't you do both on this?
Speaker #6: So it seems like you're delaying kind of implementations of clients already signed to focus on like go-to-market and people that are not signed. So what's sort of the connection there and like why is it you can't implement some of the book while you're going after, you know, some of these newer opportunities?
Speaker #3: It's primarily development capacity, right? When you're implementing a new deal, you're configuring; there's a ton of work upfront. And so when you're winning a Tier 1 deal, you're doing a bunch of work in advance to win that deal.
Speaker #3: You're ing up the menus, the labs, the, you know, the backend. And so it's a small team. And, you know, we made the ision to have those really unfortunately tough versations with customers and, and, and, and make those investments in the t.
Speaker #3: And so it's just about scaling up the team so that we can do both. You know, to be honest, we didn't expect this to happen so fast.
Speaker #3: That's really the thing here. It's a wonderful problem, I guess, which is we didn't think this would come so quickly. And these global deals.
Speaker #3: And as a result, we didn't have the team ready to do. So we're, you know, we're incurring, you know, more expense to grow that team.
Speaker #3: And then we just need to get the existing team to, you know, hopefully crack on the tier one deals. And then we'll go back and take that venue live because I do think we'll still win; we'll still be able to roll out those deals.
Speaker #3: But we can't do both right now with the size of the team we have.
Speaker #6: Okay. No, that's clear. I appreciate it. And at the risk of taking the liberty of maybe asking a quick one here: Are these like in-house to out-of-house conversions, or are these competitive situations?
Speaker #6: I mean, I’m sure they’re competitive RFPs, but are they using an existing vendor, or are these in a lot of the industries on in-house technology?
Speaker #3: Everyone is on some legacy product primarily. There are, you know, there is certainly in our tier one pipeline, there are certainly in-house technology being used.
Speaker #3: But I want to be careful what say there.
Speaker #6: Okay. Understood. Thanks for taking the estions.
Speaker #1: Thank you. One moment for the next question. And the next question will be coming from the line of Samarana of Jefferies. Your line is open.
Speaker #9: Hi. Good morning. Thanks for taking my questions. Maybe first, just stepping back, Savneet, like as we you mentioned macro a couple of times and you mentioned payments was maybe a little lower.
Speaker #9: Was that more related to what you've seen out of maybe some of the QSRs talking about, like, cross currents? And is that what impacted payments, or was there something else that we need to know about there?
Speaker #9: And then I have a follow-up question as well.
Speaker #3: It's two things, really. So, one is that POS going slower impacts payments because they're usually bundled together. So that's the big driver there.
Speaker #3: And the second point you mentioned is that there is definitely a slowdown in the QSR. So that's the second part.
Speaker #3: But the first part is the more important one. For the first half so far.
Speaker #9: Understood. And then, if you think about the record $100 million pipeline, obviously it's very impressive. You guys are also bigger than ever.
Speaker #9: You have more product than ever. So is there a way to both weight that maybe relative to what you would have offered historically? Obviously 100 million again is a big number.
Speaker #9: And then maybe related to that, of that 100 million, what like what would you look at the maybe like the 12-month horizon looking like in s of converting that from pipeline to bookings or revenue?
Speaker #3: Yeah, so it's in a few ways. So, well, firstly, which is the pipeline doesn't include what's already contracts rolled out. So, as I mentioned, on the POS side alone, there's $20 million that needs to be rolled out.
Speaker #3: That's contracts already. I don't have off the hand, but there'll be, you know, big numbers for loyalty, retail stuff and so forth. So you've got a lot of coverage just from what's already contracted out.
Speaker #3: Generally, when we look at the pipeline, you're looking at what you can sign within the next 12 months, and you're weighting it down over there.
Speaker #3: So it is a, you know, it is a conservative UR pipeline. Already, because we want to make sure that, you know, they're there. So from a pipeline coverage perspective, it's not always a pipeline larger than it's ever been.
Speaker #3: From a pipeline coverage perspective, i.e., coverage to hit your growth rates, it's also higher than we've historically had in the past. And the last thing, you know, Bryan mentioned this.
Speaker #3: We've moved these sort of mega tier one deals just because they make the pipeline look, you know, almost too big. And so, you know, you've got that also as a nice tailwind.
Speaker #9: Great. I appreciate the time, as always. Thank you.
Speaker #1: Thank you. As a reminder, if you would like to ask a question, please press star one-one on your telephone. And our next one moment for the next question.
Speaker #1: Our next question will be coming from the line of Charles Nathan of Stevens. Your line is open.
Speaker #10: Good morning, and thank you for double-clicking on your comments around the gross margin. I know some of the sequential decreases are due to some non-recurring benefits in the first quarter.
Speaker #10: But as we think about that range of 66 to 67, in the back half of the year and beyond, could you maybe talk about, you ow, the puts and the takes, whether we could expect fourth arter to be maybe a little higher?
Speaker #10: How we should think 26 as well as the impact of payments and menu, which have historically been diluted to subscription gross margin?
Speaker #2: Sure. I'll take this one. It's Bryan. Thanks for the question. You're correct, right? Part of the 69 and then sequential down, we've referenced this, I think, in the Q1 call, right?
Speaker #2: That about at ast 1% of that, 100 basis points was due to some favorability one-timers in Q1. So now talking 68. And then the remainder majority is actually product mix of where the actual growth came from, both ARR and subscription services.
Speaker #2: Revenue in Q2. That mix is not going to change noticeably in Q3 and Q4. That's why the range that was given is for Q2 and Q4.
Speaker #2: But our longer-term goal of getting back up closer to 70% is still out there, right? It's just that the baseline where we're at right now with the mix is going to be tough to get there.
Speaker #2: So, it's why we wanted to manage your expectations there for both Q3 and Q4.
Speaker #6: Got it. Okay. And as a follow-up, I wanted , I wanted to get your perspective on AI first as a disruptive force to the industry.
Speaker #6: And then secondly, as an opportunity, not just externally as a means of, as an opportunity to enhance your product set and you value proposition to ustomers, but also as a, as a means of improving your internal efficiency.
Speaker #6: So, any perspective on that I think would be helpful.
Speaker #3: Absolutely. I mean, I think if you'd asked anybody, any employee at PAR, you know, PAR is all in on AI. You know, I think lots of people say that.
Speaker #3: I think we have focused on being execution-oriented there. So instead of sort of prophesizing about how amazing AI is going to be, you know, we really break it down into projects.
Speaker #3: And what we can deliver. Every department leader at PAR has to deliver a plan on AI and what an AI-first version of their organization looks like.
Speaker #3: And then working backwards, how do we get there from where we are today? So we're eing, you know, aningful, you ow, success right now.
Speaker #3: In two areas, which would be on the development side. Our development efficiency, our ability to not raise development headcount while still shipping more product than ever before, is crystal clear.
Speaker #3: Whether you measure it in story points, whether you measure it as commits, you know, you're seeing tremendous, tremendous acceleration of velocity over there. And we are still not even, you know, halfway through what we want to get to get done on that side.
Speaker #3: The other part of the world we're seeing that is on support, where not only are we using tooling to make our teams better, but to understand, you know, types of calls and call volume.
Speaker #3: We're also, ou know, building on our ents so that we can start answering in a more automated fashion. And we're there. What's amazing about that, though, is also become an amazing tool for our internal team.
Speaker #3: So our sales teams no longer need to figure out a complex configuration or track down a hardware piece. It's all done through an internal AI PAR agent.
Speaker #3: So those are the two big areas where we see meaningful ability to control costs and handle cut costs. Where you'll see it going forward, and I think the more important part of AI for us will be delivery to our customers.
Speaker #3: You know, at PAR, AI is built in. It's not bolted on. You know, we're building it natively in our products because we control the workflow.
Speaker #3: And I think having the workflow is going to matter because we've got proprietary data, you're already in our products, and so our ability to connect your restaurant and your systems through AI is far better than somebody coming in from the outside.
Speaker #3: And so I ink we have an incredible advantage that we are looking to take vantage of. I mentioned on the call, one of our first products coming out, later this quarter, it's called Coach AI.
Speaker #3: And it's a great example using AI to pull data across the POS, the back office, the drive through to give actionable insights to the operators to say, "Hey, hey, this, cut this, what about this?" It's becoming the agent for the store.
Speaker #3: You know, these are really, really, you know, big changes to the operator. And so that's where we're most excited. But we've started on the internal because believe that, you know, we have to be AI in the internal in order to be external to our ustomers.
Speaker #6: Got it. Appreciate the or, guys. Thank you.
Speaker #1: Thank you. One moment for the next question. And the next question will come from the line of Eric Montazini of Lake Street. Your line is open.
Speaker #11: Yep. Just from a macro perspective, I've been seeing some headlines about lower foot traffic at QSR. Just curious to know if you've seen any lift in the engagement cloud pipeline that you could say was kind tied to that where people are saying, "Okay, I've got to pull whatever levers are available to me."
Speaker #3: Yeah, absolutely. We're seeing a lot of strength in the engagement side, you know, in pipeline. So, we'll see if that converts. What's been exciting is that the engagement side of the business has been growing without that, but we certainly see a lot more interest in loyalty.
Speaker #3: What's critical about that is that it's loyalty engagements we have today; it's not about, "Okay, let me go send a bunch of counts to get you to come back in the e." It's about building these personal connections.
Speaker #3: And why I love that is that it actually ingrains the loyalty in the workflow of the ustomer. The customer being you and I as a customer of that restaurant versus, you know, us always selling tools.
Speaker #3: To the internal. And why it's erful is that then you can then connect in PAR ordering, PAR wallets, and do so much more. So the simple answer is absolutely, there's a lot more demand for engagement in a world where there is absolutely a lot of volatility in short-term atility from the macroeconomics in the QSR and fast-casual space.
Speaker #3: But I think the long-term trend here is going to continue because the value of these loyalty programs, in both good and bad markets, is undeniable.
Speaker #11: Got it. Thank ou.
Speaker #1: Thank you. One moment. And our next question will be coming from the line of George Burton of Craig-Hallum. Your line is open.
Speaker #12: Thank you. Savneet, you had mentioned that the point of sale process was slow or sales process was slow. I'm curious how much is that driven by your actual focus on trying to sign multi-product deals?
Speaker #12: Obviously, it's kind of a long-term gain for some short-term pain. I'm just curious, how significant is that?
Speaker #3: So it's significant, but it's, you know, it's 10% or 15%. There's some impact for sure because you're trying to bundle the second product. But I just want to be clear.
Speaker #3: It's not the sales side; it's the getting the deals rolled out. Because when we roll out a deal, there's a CapEx for the restaurateur, usually the hardware of services.
Speaker #3: And so that's what's been slower than we expected. And then some of these sales that have been slower, again, all these deals will come in the door.
Speaker #3: I think this stuff might be tied to the multi-product offerings. Or just, you know, hey, macroeconomic uncertainty. But what I think is most important to get is, you know, it's not that the pipeline is just long.
Speaker #3: It's actually the signed deals that are there. They just have to get out the door.
Speaker #2: And we have seen the acceleration of rollouts happen at the very end of Q2 in the last month.
Speaker #12: Understand. Thanks for the clarity. And on your online ordering 2.0 thesis, relative to 1.0, can you just talk about the metrics behind that? What you are seeing in terms of any of the improved metrics for the customers?
Speaker #3: Yeah, generally, I think when you bundle, as we've been doing on ordering within some loyalty, you see an increase in a few areas. You see an increase in conversion.
Speaker #3: Which is wildly important as, you know, I'm sure you're ike me, there's tons of abandoned carts all over the internet. You see an increase in basket size.
Speaker #3: And then you see an increase in long-term customer value. I can get back to you with specifics on that. You know, it's probably too early, right, just because we've had this real sales velocity the last, call it, six months.
Speaker #3: And but that's what's been crazy, crazy exciting. And I'll give you some examples that I think are just really neat. You know, when you now use our online ordering products, you know, upfront you say, "I have these three allergies and the u gets updated just to update for ou." You know, things like that we could have added so much functionality that we just think it's going to be hard for anyone to compete with us when you combine that loyalty data within ordering suite.
Speaker #12: Awesome. ank you.
Speaker #1: Thank you. And the next question will be coming from the line of Adam Winden of ABW Capital. Please go ahead.
Speaker #13: Hey. So you talked a little bit about task and two questions on task. One is, you talked about a Q1 26 rollout for task.
Speaker #13: And then you also talked about, you know, having to do, I guess, stuff for people in the pipeline. Is that affecting your gross margin?
Speaker #13: I mean, even if there's not additional G&A or resources, I mean, are you spending additional money that's running through the P&L today in, you know, with the idea that ou're going to get this business?
Speaker #3: Correct. So we've increased the investment in Task. It's not a singular rollout for Task; we had a multi-million dollar backlog of Task customers to roll out in 2025.
Speaker #3: We've pushed most of that to 2026. So we can build out for these potential global tier one deals that we're asking. And so the short answer is yes, but I just want to be clear, it's not one deal.
Speaker #3: It's the backlog of deals we've already signed that needs to get out the door.
Speaker #2: Got it. So you're hosting, piloting, and spending money, basically allowing the stuff that's already been signed on task, as well as the new stuff in the pipeline.
Speaker #2: You're also spending money in, you know, with the hope that, you know, these guys take it on and they start billing. So that's obviously going to be affecting your gross margin on the task side now?
Speaker #3: Yeah, I look at it more at configuration, building integrations, you know, things like that. The hosting is absolutely, but it's that other core R&D work that hits both the Cogs line and the R&D line.
Speaker #2: Okay. And then you said 100 million dollars not including the super tier one. I mean, is there any way you can try and quantify what that could ok like?
Speaker #2: Would it be a global deal? Would it be a singular market deal? I mean, is there any way you can sort of bracket that?
Speaker #2: Because I think, you know, you said that you would expect to hear two of them in '25 and one in '26. Is there any sort of way you could, you ow, attempt to quantify?
Speaker #2: I mean, viously that there's a ability element to it. But if, in fact, you did win one or two of those, how do you ink about what those could be?
Speaker #3: You know, they're very large. I an, the reason I don't put them in the pipeline is that they sway the pipeline numbers so significantly that, you know, I don't ant the sales team getting lazy thinking we got plenty of age.
Speaker #3: You know, the two of them are global deals. So they are not a, you ow, one country deal. They're al deals. And one of them is, you know, call it North America.
Speaker #3: And so but, you know, these deals would be, you know, up there with our largest or many multiples of our largest customer now.
Speaker #2: Right. So it's not just a singular market. You would be getting like a geography, you'd get like a North America or you'd et, you know, the globe for two of these.
Speaker #2: So these things could be.
Speaker #3: Exactly, yeah.
Speaker #2: In theory, they could be very large.
Speaker #3: And then, you know, my other question is, you know, obviously the company has been acquisitive. You know, you're seeing other people like DoorDash buy seven rooms in Toma Bravo buying OLO.
Speaker #3: I mean, you've been the acquirer of choice and you've done a enomenal job doing it. But I ink, you know, now when I ok at the stock where it is right , I think you're trading at, you know, I don't know, under five times ARR on 2026.
Speaker #3: I mean, I have to sort of think about what the $26 ARR is. But I am, you're trading at effectively a multiple that's likely lower than anything you're going to buy.
Speaker #3: I mean, how do you think about, you know, sort of the delta between sort of what I would consider other vertical software companies like a Guidewire or a Service Titan or an Axon, which has a hardware and software component?
Speaker #3: Even something like Agilicis. I mean, how do you think , you know, sort of doing M&A with your multiple here and, you know, I guess the question is, you know, would you at this point consider being the acquiree?
Speaker #3: Because it feels like you know the market is not really appreciating, you ow, sort of the the value of this platform. So, you ow, on the last part, you know, we are for sale every day.
Speaker #3: And, you know, 's othing that would prevent someone from coming into PAR at any time. And if it creates value for shareholders, that we believe beats the long-term value of areholders, I think myself and my board would be super supportive of that.
Speaker #3: And, you know, we've always said that. You know, as I said in the script, we are highly aligned to you, a shareholder, and care only about driving returns.
Speaker #3: If that drives a return, it's always there. Nothing will stop that. Does it make it more attractive? You know, of course, if our multiples are it certainly makes us probably more ractive.
Speaker #3: But I think what makes us more attractive is our business has never been in a better position from a competitive standpoint, from a ket standpoint.
Speaker #3: And so I think that's what's, you know, should drive anyone's ision. On your first point, we feel there's plenty of M&A to be done.
Speaker #3: You know, comparing us to, you know, Guidewire and these other amazing companies, yeah, it obviously pisses me off because I think we've got longer, more growth and prospects in front of us.
Speaker #3: But I think, at the same time, our M&A is relative to our category. And so, it's very hard for anyone that we want to acquire to argue that they deserve a multiple greater than PAR.
Speaker #3: I said differently, I think we would set the tone of evaluation based off where we are trading. And sure, there are random things out there that are out of our range, but that's usually not the stuff that we want or we are chasing.
Speaker #3: You know, we're looking for blocking and tackling products that we can integrate quickly and build AI on top of. We're not looking for the, you know, Silicon Valley startup that has $500,000 of revenue and wants half a billion dollars of price.
Speaker #3: You know, we're looking for pure erprise software. And so to me, you ow, evaluation is a relative game to category you're looking to acquire.
Speaker #3: And in our category, we still feel very, really good.
Speaker #2: Got it. So, I mean, what I would say is that, for the time being, you know, because I think a lot of people on this call, you know, I know you probably can't comment about Party A and all this stuff and proxies and this and that.
Thank you. Just want to conclude today's Q&A session. I would like to turn the call back over to Chris. Now, for closing remarks,
Thanks Lisa and thanks to everyone for joining us today. Uh we look forward to speaking and updating uh most of you in the coming days and weeks, thank you and have a nice day.
This concludes today's conference call. You all may disconnect.