Welcome to the PAR Technology Fiscal Year 2016 Third Quarter Financial Results. [Operator Instructions] I would now like to introduce your host for today's conference, Mr. Chris Byrnes, Vice President of Business and Financial Relations. Sir, you may begin.

Thank you, Chrystal and good morning everyone. I'd also like to welcome you today to the call for PAR's third quarter 2016 financial results review. The complete disclosure of our first quarter results can be found in our press release issued this morning as well as in our related Form 8-K furnished to the SEC. To access the press release and the financial details, please see the Investor Relations and News section of our website at www.partech.com. At this time, I'd like to take care of certain issues in regards to the call this morning. Participants on the call should be aware that we are recording the call this morning and it will be available for playback. Also, we are broadcasting the conference call via the World Wide Web so please be advised, if you ask a question, it will be included in both our live conference and any future use of the recording. I'd like to remind participants that this conference call includes forward-looking statements that reflect management's expectations based on currently available data. However, actual results are subject to future events and uncertainties. The information on this conference call related to projections or other forward-looking statements may be relied upon and subject to the Safe Harbor statement included in our earnings release this morning and in our annual and quarterly filings with the SEC. Joining me on the call today is PAR's CEO and President, Karen Sammon; and Matt Trinkaus, PAR's Chief Accounting Officer. I'd now like to turn the call over to Karen Sammon for the formal remarks portion of the call, which will be followed by general Q&A. Karen?

Thanks, Chris. Good morning and thank you for joining us today for our third quarter 2016 earnings conference call. I'm pleased to report our results for the third quarter of 2016, a nice rebound from the prior second quarter. This morning we announced that the company reported first quarter revenues from continuing operations of $61.5 million as compared to $58.1 million in the third quarter last year, a 5.9% increase. This strength in the top line was also reflected in 14% sequential increase from the previous quarter. Both of our segments contributed to the growth in the quarter as our restaurant retail business referred to as our hospitality segment within our SEC filings grew 6.1% and government business increased 4.9% from the prior year's third quarter. In the quarter we recorded GAAP net income from continuing operations of 518,000 and diluted EPS of $0.03 compared to the net income of $1.3 million and $0.08 of diluted EPS in the same quarter in 2015. On a non-GAAP basis PAR reported net income from continuing operations of $1.6 million and diluted EPS of $0.10 versus $1.7 million in net income and $0.11 per diluted share reported in the third quarter 2015. Since becoming CEO in January and as a result of the issues caused by our former CFO I have [indiscernible] on our internal controls. In Q3 management identified issues in China and Singapore that was reported to our audit committee. The ensuing investigation will conclude shortly and we do not anticipate further issues going forward. We are already implementing remediation plans and corrective actions. This issue is isolated to a small part of our overall business and we’re confident that our organization is in power to use sound judgment, work with integrity and with the highest ethical business conduct. I would now like to turn the call over to Matt Trinkaus for further details of our financial performance. After Matt's review I will highlight our third quarter performance and give further details on the positive momentum our business has begun to realize as we finish 2016 and continue to build for a strong 2017.

Thanks Karen. Good morning everyone. Product revenue in the quarter was 25.8 million, an increase of 1.3 million and 5.5% compared to the third quarter of 2015. During the quarter the increase in product revenue was mostly driven by hardware sold to our largest global customers primarily McDonald's which represented 26% of total revenue in Q3 2016 versus 20% in prior year third quarter. Additionally, the hardware associated with the deployments of Brink POS increased approximately 1.8 million versus the prior year third quarter. Offsetting these increases was an expected decrease associated with Jack in the Box of 2.3 million due to the completion of this rollout earlier in 2016 and a decrease from our international channel partners. Service revenue that includes revenue streams from our strategic growth strategy was reported at 12.6 million an increase of 8.7% from the 11.6 million recorded in prior year. The company continues to expand our recurring revenue base which includes both software related services and hardware support contract. In total this revenue stream contributed approximately 850,000 of the increase in service revenue. New recurring hardware support contract contributed approximately 500,000 and software as a service contributed 350,000 of the increase. The company continues to gain momentum of its deployment of Brink POS noting a 75% increase in software as a service as compared to prior year. Off the 12.6 million of service revenue reported in Q3 2016 approximately 8.5 million or 67% is comprised of recurring revenue contracts as compared to 7.7 million or 65% of service revenue in Q3 2015. Contract revenue from our government business was 23.1 million an increase of 1.1 million from the 22 million reported in the third quarter of 2015. This is the result of an increased materials and subcontract revenue across all lines of business offsets…

Thanks Matt. Looking forward we are confident our momentum will continue to build across our businesses driven by the intentional execution of our strategy with sharp market focused, organizational alignment, rigorous product management and clear sales performance objectives. In PAR's restaurant retail business we are expanding our reach through our innovative software solutions portfolio and this recently ended quarter our software as a service revenues grew 75% over the third quarter last year and software related services revenue which includes staffs, hosting, professional services and software maintenance increased 24% led by the increasing demand of our Brink and SureCheck solutions. Brink continues to be the industry standard for cloud POS solutions for QSR, Fast Casual and table service restaurants. Our Brink solution which include SaaS hardware and associated services revenues grew 178% in third quarter from the same period last year. The MRR grew 100% over the same period in 2015, the ARR for Brink is 3.6 million versus 1.8 million at September 30, 2015. The site base [ph] grew 23% sequentially over Q2 as we completed the implementation of 354 new stores with Brink. The total number of restaurants now operating with PAR's leading cloud solution total over 2000 sites. New bookings in the quarter totaled 750,000 in ARR. Our Q4 forecast and backlog includes [indiscernible] franchise stores. Totaling all concepts earned but yet to be onboarded including corporate and franchise sites, the backlog of ARR represents over $9 million as compared to the 6 million we reported last quarter. Since our last call we announced several new clients including Lenny's subs with over 100 stores. Aurify brands, a franchise of five separate concepts and MAD Greens, a fast casual restaurant chain with 28 current locations in an aggressive growth plan. At the recent food service technology show, FS/TEC…

[Operator Instructions]. Our first question comes from Sam Bergman from Bayberry Asset Management. Your line is now open.

So I've a couple questions, first I'm going to start with Brink and I guess the metrics you gave upon on Brink 2500, 10,000 in 2018 are units in store count, none of that has to do with SureCheck is that correct?

That is correct, the numbers I gave that we were at this point in time in Q3 about 2000 stores installed and we have line of sight to achieve the 10,000 cycle for Brink by the end of fiscal '18.

So I'm assuming in that number there is going to be one or two Tier 1 customers. Presently are you three quarters away of signing one of those Tier 1 customers?

In that number when I said line of sight to achieve it. We have very few Tier 1 customers. So we are really conservative in how we are building that number, that number is generated from customers to our -- at the bottom of the funnel, so coming through and [indiscernible] have signed contract, we’re very close. So greater than 70%. We’re working with several Tier 1s in various stages.

Okay. With SureCheck you’ve been working grocery stores in the past, you’ve several that have committed, why hasn’t the opportunity quicked a little faster with some of the well-known brand names that you’ve already had?

They are in various stages of reviewing SureCheck. We are delivering a solution that more accustomed to the restaurant operations, grocery stores have a lot of checklists and a lot of different lanes, restaurants have fewer checklists, a lot of multipurpose device so there's a different use case. So the interest increases in food, safety operational efficiencies and quality, reducing food waste, these things are coming together and we believe we're going to see an uptick in restaurant starting with our Tier 1s that we work with today.

So you that’s going to come first before grocery chains?

Grocery chains they are deep in, so we’re well known within the grocery industry with our SureCheck platform and there's other pilots that are occurring today. We've got a really good reputation in the grocery market which SureCheck. So we feel like that part of the business is starting to really mature, restaurants is picking up space and we’re saying an increased interest in what we're doing with SureCheck and with delivering a solution that they need for the rest of market. We're also seeing an uptick in interest from contract food stores, sea stores and food manufacturers. It's been an interesting second half with SureCheck.

So just going back to the break metrics of 10,000 that has no Tier 1 in there, so a Tier 1 could really bring those numbers upto 15,000 units pretty quickly in a couple of years if you’ve got a Tier 1 is that correct?

That is correct. When I look at Tier 1 and this monster organizations, they had a lot of demands, most of them -- nearly all the Tier 1s are blend of corporate and franchise and so getting to the corporate stores and proving out the concepts and then getting to the franchise this is a multi-year effort. So that's why we keep our number of conservatives. Since the acquisition of the Brink platform I have said that 2018 would be the year where we really firmly secured Tier 1, it's happening faster, we have a lot of interest, but I still believe that the big rollout won't start to happen until the 2018 period.

Let's go to organizational alignment, can you give us a little bit more clarity on that and has that -- did that start six months ago or is it just starting now?

No organization alignment has been going on since I came back to the company and it continues. As I said we've been shining the light on every aspect of the organization, we've taken significant costs out of the company over the 2015 period and now we’re looking at everything that we're doing in our corporate infrastructure to make sure that we are as efficient as possible. We've reported that we are investing in an ERP solution which we ultimately believe will enable us to spin out -- to rightsize the corporation to the demands that we need for us going forward so we can accelerate our business.

So if I go into the SG&A for this quarter, it was over $2 million above last year this quarter. Is it correct that there was $400,000 for that lawsuit and finally that lawsuit has ended? Or was that all this quarter $400,000?

Yes it does include the $400,000 of the investigation fees. It also includes the write-off of $789,000 of human capital management system that we previously capitalized in conjunction with the new ERP system and it also does have some legal fees related to the ongoing current investigation of Asia Pacific. Those are the three biggest drivers and then we also have some investments within our Brink and SureCheck product lines that we -- we're kind of realigning our cost structure to support those products.

So I realize the realignment is ongoing, is it going to be a shift of personnel from the POS side or to the Brink side or are you going to add more people in a very large way or did you have enough of that employee base already in POS that you can just move over to Brink?

So just so back up to your last question, there is no law suit, so there was an investigation and that those fees have wrapped up and but there has never been a lawsuit. To answer your question about the investment, we are doing a number of strategic things to support the growing business, the Brink business is accelerating and we’re investing to keep up with the demand in sales, in product management, in development we have made it to this decision and we're transitioning some of our legacy development teams to Brink so we don’t run out of adding additional expense but I do expect that we will add expense and develop you will see it in the R&D line and in the SG&A line but we will be supporting the revenue growth.

So you would expect the revenue growth to come first before the actual increase in the R&D, in the SG&A?

We’re expecting revenue growth and we will be investing in our development teams to support the on-boarding of some of these Tier -1s that you’re talking about.

Okay. Going to the inventory amount. So the inventory amount I go back several years so that’s a pretty high increase in inventory, what Tier 1 customers are going to have their units worked on in the fourth quarter that so much of that inventory was needed?

It is historically a high number for us, we are expecting McDonald's to continue their technology upgrades within their stores. They are at 26% our total revenue in this quarter and we think that's probably a pretty good churn to going forward. We expect to deploy a lot of that in Q4, there will be some into Q1 maybe. But yes that’s your expectation, I don't think we'll get down to the $22 million-ish that we reported at the end of last year but we should be closer to the 25 I think that we had at the end of September 30.

Is it mostly that McDonald's inventory or is it other Tier 1?

There's a larger pool but the majority of McDonald's some as related to the continued Brink deployments of [indiscernible], a lot of the McDonald's work will be project related work for their dual point and you know cashless exercises that they've gone through but a lot of -- the majority is McDonald's but there are other --we are ramping up our every survey thousand deployments which we expected really kick up in Q4 and into next year as we moved that manufacturing back into new Harford [ph] there is a cycle of manufacturing that we're going through and that we’re building out that as well.

And just last question, Karen, can you can you give us a little bit of a color on what types of units or how many units Brink right now is doing pilots for that could eventually become a regular account for you guys going forward. Start with the lowest amount being a 100 units how high are some of these customers in terms of counts of units?

So let me make sure I understand your question, you’re looking for visibility into the types of clients we're working with?

Yes visibility into the pipeline of clients that you’re working with.

So at our last count we were working with not a number of clients from Tier 3 to Tier 1 those that we are either in contract with or in pilot or lab tests that number totals around I think I believe I said 11,000 sites and each site we use as an average three to five -- it's about 11,000, 11,000 total sites on average.

11,000 total sites currently. Do you’ve any relation to what it was last quarter?

So here is another metrics that I mentioned. The total annual recurring revenue for the sites that were contracted with including corporate and franchisees that including sites that needs to be at on-boarded that number is 9 million as compared to 6 million last quarter.

Pretty healthy growth.

We’re pleased with it.

[Operator Instructions]. And our next question comes from Gary Siperstein from Eliot Rose Wealth Management. Your line is now open.

So good sequential progress, and exciting metrics for the future. So let me talk about the negative first. So we were sort of surprise by the additional cost on the former CFO, I thought last quarter we had said that was pretty much done but the Board had limited to $125,000 remaining in light of the fact that the unauthorized investment was less than $1 million. It didn't seem to make sense to spend more than you could recover. So what happened there. So it was over $400,000 in the quarter.

That is what I told you and that's what I believed at that time. The investigation led by the audit committee was very thorough and the remaining $400,000 which it does conclude any investigation costs we’re lingering they came from their friends with auditors -- our audit company, BDO, these are the areas where the expenses come from. It is now concluded, there will that be any fees related to this situation.

Okay. So that's definitively done this time.

It is.

Okay. And then the write-off on the prior I guess it was an ERP system but it was something similar, that's one and done there's no residual from that?

There's no residual from that, that was a system that was implemented several years ago and is being replaced, it's been replaced with the new systems that we're putting in and that that is one and done.

Okay. It's going to be very sweet once these onetime charges are done. It's been a very crazy year with all those onetime noise in the financials. So that will be very refreshing Karen when that’s behind us. So just moving towards the balance sheet before I get into the future. Sam touched on the increase inventories and receivables I assume most of the receivables from Tier 1 so they're good receivables and Matt had talked about the inventory coming down to 25 million in Q4 and then maybe a little more after that. So notwithstanding the growth with other hardware you might have to build in advance for SureCheck and then Brink related. Is that a good figure going forward somewhere in the 22 million to 25 million range unless growth really spikes?

That is a good number. We have an aggressive plan around the ERP as well to really to take a look at our inventory demand and to increase the churns to get even generating a healthier turn. So we have an initiative and we're looking to bring that number down further within the 2017 fiscal year. So we believe that we can perform better.

And do we still feel the remaining receivable I guess it's around June 30, that it's due from the prior sale of hotel division, is that still expected to come in on time and at that figure?

Yes that should come at 4.5 million in June of next year, and just to circle back on the inventory quick. I do think that it's a good trend to use -- I just wanted to caveat that, we are expecting our Tier 1 speak pretty strong going forward. So that could factor into the inventory level there at certain times but not during the year.

In terms of the former CFO, wasn’t there some insurance that we might get some recovery on that, can you give us any status on where that stands?

Gary unfortunately we're going through the process and you know we will update the investor community when we can. Right now we cannot do that.

Okay. Now the good stuff. So going forward those are very exciting metrics Karen you gave us on Brink, so let me make sure I understood that correctly. So the path to 10,000 by the end of 2018 is not including Tier 1 to be conservative. It's mostly Tier 3, Tier 2, and you’ve those units inside on some level?

That is correct. So we've built out our forecast over the three year period we were very conservative with the number of Tier 1 sites that we would pull into the plan and so we focused on those customers that we have won, those customers that were high probability through our pipeline to get to the number that gives us line of sight to get to 10,000 sites.

And I think the cadence that you had given us previously was roughly 2500 units by the end of this year, 5000 by the end of next year and then 10. So is that still roughly how you see it developing?

That’s right. So we are roughly 2000 right now. We will end this year just under 25. So within those numbers that I gave you.

Okay. As Sam pointed out, so if you manage to secure a contract with a Tier 1 sometime in the next 12 months for delivery or installation in 2018 the 2018 number could instead 10,000 could be 12500 or 15,000 am I understanding that correctly if that happens.

It could, I will just repeat that the Tie 1s are challenging, they're big, they're demanding and they're slow moving. So that's our objective is to push forward and to get into a cadence. If you reflect back to Brink we won Brink in the beginning of 2015 and -- they are big customers -- they are 1300, 1400 stores and the projection is -- they wanted to do roll out their franchise stores by the end of '17. So we've picked up momentum but it took us time to get the cadence and it's not just at PAR, it's PAR and the other partners they choose and their internal systems and internal people. So it's a lot of moving parts, so you can kind of look at the five guys and we’re smarter after a five guys going forward, lot of good learnings from that but that is -- that’s kind of the way it moves.

Okay. So just for my clarity, so the 11,000 units in pilots with several Tier 1s that are in various stages that 11,000 is the totality of the Tier 1s units or is that just the number of units on their first go around with you guys?

So the 11,000 includes those companies besides from those companies that we’re working with that are either in pilot or lab test. So with those we are we have line at sight at these 11,000

Okay, but I'm just curious what how many units did those customers had in total?

The 11,000.

Okay. So that’s the entire for those several customers that's their entire program [ph]?

Yes those are ones that are active right now, in lab, in pilot. So doesn't include those are coming to the pipeline these are ones that are really close to a 100%.

And just not to split here but you said several Tier 1s in various stages in terms of those 11,000 so several four or more and few is three?

Okay, so four or more Tier 1s.

Okay. And then going back to that 9 million fee Karen, the ARR, and the recurring revenue so just work me through that. So we're not going to be doing 9 million annually until we get closer to 5000 units by the end of 2017. So just work me through that 9 million again what it comes from?

So if you total all the concepts that we've earned that we've contracted with or we have been selected with but you get to be on-board so excluding those sites that we've talked about with the revenue is today -- this includes corporate and franchise sites, the backlog of ARR represents over 9 million and that's compared to the 6 million that we reported last quarter.

Just to follow up on that we reported on our remarks that currently we’re running at 3.6 of ARR, that should grow this year to over $4 million but the end of the year but we should see that continuing to grow. The 9 million represents a lot of those stores that we haven't installed yet that will be installed over the course of next year and beyond.

And then I'll get back in queue. Lastly where do you stand on the CFO search?

So we are finalizing negotiations and if we hope to have our CFO on board at the beginning of 2017.

Our next question comes from Richard Dearnley from Longport Partners. Your line is now open.

I'm new to your company and ARR I think it is recurring revenue, what is MRR?

I'm sorry I should have spelled that out, so ARR is annual recurring revenue and MRR is monthly recurring revenue.

The monthly recurring revenue is -- how is that different than ARR?

It's not, so the ARR just represents the 12 months. So if I take our current monthly recurring revenue rate and extrapolate that over 12 months to get--

I see. And then what is the monthly recurring revenue rate or revenue dollars?

We didn’t report the dollars we reported that MRR grew a 100% over the same period in 2015. So we did not disclose that number.

I think. And what is the Brink's revenue jus for the quarter

For the quarter -- we don’t break that out in our financials and that represents a lot of the monthly recurring. There is hardware attachment to that as well you know, the software represents the ARR at $3.6 million right now, you know that will continue to grow. Hardware we have pretty solid hardware attachment right now with five guy [ph] stores. It's not large enough for we reported out as being a significant enough part of the business but we will get there shortly.

Then changing gears, you said there was no further capitalized software that's related to the HR write-off is there other software on the balance sheet that you think will be obsoleted as you change things over the next year or two?

At this time not -- not internal software relating to the ERP system. You know most of the software remaining in our balance sheet relates to the software that we're selling with Brink, SureCheck and the PixelPoint. But internally we do not anticipate any other software that we're replacing or updating.

Right. As you think about Tier 1 using the Brink system, what effect do you suspect volume will have on pricing or margins in that segment of the business?

As you go up market the pricing pressure becomes more significant. So we have factored that into our assumptions going forward over the next few years but with the number of stores they have 4000, 5000 stores so if they have the ability to provide, to pressure us.

And with that when you look at the margins overall for a staff based product you know it's really driven by volume so although there might be pricing concessions needed for some of these Tier 1s the sheer volume of adding those two are infrastructure and how we host within the cloud, the cost to that is not one to one, we should continue as we add Tier 1s and add volumes, we should be the margins continue to improve on the service line.

[Operator Instructions]. Our next question comes from Vijay Patel, a Private Investor. Your line is now open.

I have just one quick question. Your hardware and hardware service business, what would the margins there be if you weren’t running SureCheck and Brinks expenses through that segment? I ask because you know I'm trying to understand how a top line of a $135 million generates so little in terms of profitability whether you look at EBITDA or net income, I assume that’s because you're running all these development costs for SureCheck and Brinks through that segment. Have you disclosed before what those numbers would be if you weren’t expensing those line items through that segment?

We haven't specifically broken that out. As we look at our business and we look at our growth opportunities the growth is definitely within our software platforms, the hardware on the top line does have a nice feel to it. We do -- there's multiple levels of that hardware, there's terminals and then there's third party that we saw with project related work for a Tier 1. It is volatile and that is kind of the strategy of the overall corporations is get to a point where our top line is not volatile based on some of these hardware. Mix things that we go through with our Tier 1, bringing down the profitability on the other side as you know we are continuing to invest on the R&D side of our software product but we have never historically broken those pieces out.

I mean again the margins are sort of in the mid-20s to high-20s for that revenue base correct?

That is correct. Our product market is direct are mid to high 20.

Even if you assume a 7.5% EBITDA margin in that top line it would be something in the order of $10 million. I would think of it's actually higher than 7.5%. So that just sort of leads me to believe that you [indiscernible] is it fair to say that’s over $10 million a year into what is SureCheck and Brink top line which is not a lot this year, I mean is it $10 million to $15 million a year? Could it be that high?

Answering your question, you’re wondering how much the investment that SureCheck and Brink are, what was that?

I start with the top line [Technical Difficulty] $35 million for hardware service. I think you’re just going through your gross margins in the mid to higher-20s and that’s all the disclosure is but I'm just saying a business like that should do at least 7.5% EBITDA margin, I mean on a conservative basis and that gets me to about a $10 million in EBITDA, but obviously on the consolidated basis you don’t see that -- that segment shows a lot less so that can only be that all the profitability from that is going into Brinks and SureCheck, in a condition to figure out how much that is and that number seems to be again on a ball park you can give something in $10 million to $15 million a year.

I think you would be pretty close if you looked at it that way, you might be a little bit high but yes a lot of the margin that we’re earning within our hardware business is helping to fund our development efforts on the Brink and SureCheck side, I think 10 is probably maybe slightly high.

When you look at the core business is funding our next-gen platform is what I said earlier today it's healthy, it's growing, and it's stealing our future and so these are strategic investments, we’re confident in our Brink and SureCheck strategies and the growth in the market that we’re seeing. Brink is in a more mature marketplace and SureCheck is in a more of an emerging market but it's starting to really take hold and grow and so do we think these are very smart investments that we can do organically to get this business to be more predictable and to smooth out our business with the SaaS revenue.

Thank you. And I'm showing no further questions from our phone line. I would now like to turn the conference back over to Karen Sammon for any closing remarks.

I just want to thank everyone for your time today and we look forward to speaking with you individually and on our 2016 call. Thank you very much.

Ladies and gentlemen thank you for participating in today's conference. This does conclude the program. You may all disconnect. Everyone have a wonderful day.