Good day, ladies and gentlemen and welcome to the PAR Technology's Fiscal Year 2017 Third Quarter Financial Results. At this time, all participants are in a listen only mode. [Operator Instructions]. As a reminder, today's conference is being recorded. I would now like to introduce your host for today’s conference call Mr. Christopher Byrnes, Vice President of Business and Financial Relations. You may begin.

Thank you, Katherine and good morning. I'd also like to welcome you today to the call for PAR's third quarter 2017 financial results review. The complete disclosure of our results can be found in our press release issued today 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 today. Participants on the call should be aware that we’re recording the call this afternoon 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 afternoon and in our annual and quarterly filings with the SEC. Joining me on the call today is PAR’s President and CEO, Dr. Donald Foley; Bryan Menar; PAR’s Chief Financial Officer; and Karen Sammon, Chief of Staff. I’d now like to turn the call over to Don for the formal remarks portion of the call which will be followed by general Q&A. Don?

Thank you, Chris. Good afternoon everyone and thank you for joining us today for PAR's third quarter 2017 earnings call. This year continues to be a transformational year, as we execute our strategic plan and move to a software driven solutions company with a business model that yield consistent growth in margin improvement. Before reviewing the financial numbers and providing the details behind the numbers, I want first to address our 8-K which was filed on November 6. Todd Tyler and Paul Eurek two of our independent directors submitted their resignation from PAR’s Board of Directors effective at a later day. Mr. Tyler indicated that he will continue to serve until his replacement is found. Mr. Eurek indicated that he will continue to serve until the earlier of the day his replacement is filed or December 21, 2017. Mr. Tyler stated in his letter of resignation why he resigned and PAR expressed its beliefs. At the end of June this year, Mr. Eurek retired from a successful career as President of Expansion. Paul Eurek indicated that his resignation from PAR was for personal reasons related to family. While Mr. Eurek and Mr. Tyler continue to provide valuable and expert insight in recommendations with respect to our transformation. Todd acting through its Nominating and Governance Committee has already begun the process of identifying and interviewing potential candidates for our Board positions. Now turning to our third quarter results from continuing operations. Our third quarter revenue was $48.9 million a 20.4% decrease from third quarter 2016. Our third quarter GAAP net loss was $1.5 million compared to an income of $500,000 in the corresponding period last year. We reported a loss of $0.10 cents per share versus earnings of $0.03 per diluted share in last year's third quarter. On an adjusted basis,…

Thank you, Don and good afternoon everyone. Product revenue for the quarter was $20.7 million down $5.1 million a 19.6% decrease compared to Q3 2016. During the quarter, decrease in product revenue was primarily driven by a line down of major project installations for our hardware solutions with our Tier 1 customers in our restaurant retail segment. Service revenue for the quarter was $13.3 million up $0.7 million a 5.5% increase compared to Q3 2016. We continue to expand our recurring revenue base which includes both software related services and hardware support contracts. The current revenue for the quarter was $9.3 million up approximately $0.9 million a 10.1% increase compared to Q3 2016. Due to software, up $1 million offset by hardware support contracts down $0.1 million. Momentum continued with our deployments of Brink and SureCheck noting a 111% increase of software-as-a-service compared to prior year. We exited the quarter with approximately $6.6 million of annual recurring revenue from software-as-a-service contract. Contract revenue from our government business was $14.9 million down $8.2 million a 35.5% decrease compared to Q3 2016. This decrease was driven by the wind out of a large multi-year contract within our program management contract offering. Contract backlog continues to be healthy noting total backlog of over $110.2 million as of September 30, 2017. In regard to margin performance for the quarter. Product margin for the quarter was 23.4% compared to 28.4% in Q3 2016. The margin included a $750,000 inventory reserve adjustment resulting in a 360 basis point decrease for the quarter. Service margin for the quarter was 24.1% compared to 28.9% in Q3 2016. The margin for Q3 2017 including adjudgment of service cost of $0.4 million unfavorably impacting margin by 316 basis points. Government contract margin for the quarter was 8.8% compared to 7%…

Thanks Bryan. A bit more color and insight behind our financials. Starting with our government business. Consistent with previous remarks in the last few quarters. We are in the midst of transforming our contract base away from the high pass through revenue low margin contracts associated with our program management office line of business to the more sustainable value-added contracts within the ISR and mission systems lines of business. As stated, our overall contract revenue for the quarter was down 35.5% ISR associated revenues for the quarter were up 10.6% and margins improve year-over-year from 7% to 8.8%. Since our last call, we announced new subcontract awards of $11.9 million at Tinker Airforce Base in Oklahoma and $7.4 million for work at Warner Robins Airforce Base Our multi-year contract backlog at the end of the third quarter stands at $110.2 million. Now turning to PAR’s restaurant and retail segment. Revenues for the quarter decreased by 11.5% year-over-year. As I noted above, we reported a significantly higher pace of project business from Tier one customers primarily McDonalds in the first half of 2017. The highly anticipated release of McDonald's mobile application growth projects that started as early as late third quarter 2016 and had been planned to extend over the first three quarters of 2017, the effectively acceleration into the first half coupled with the impact of higher Q3 2016 revenue contributed to our performance in Q3 2017. PAR’s Brink and SureCheck cloud platforms continue on their positive trajectory as evidenced by the more than doubling of our software as a service revenue from last year's third quarter. SaaS revenue grew 111%. Software related revenues increased by more than 54%. In a year-over-year comparison and recurring revenues now comprise 27% of the restaurant retail segment. In the quarter Brink added 389…

Thank you. And our first question comes from Howard Brous with Wunderlich Securities. Your line is open.

Wunderlich Securities. Thank you. First of all, Don, Karen I want to congratulate you on your contract with Arby’s and the additional 800 sites with Smoothie. I have a good number of questions on the quarter. First of all, when is the Q [ph] coming out Bryan?

It would be actually probably in about 15 minutes.

Well then, okay. I would like to differ on a lot of the questions I have on the Q. So sometimes the next couple of days and certainly I have few questions on the announcement that you made last week. But I do have really one specific question and you started on SureCheck and one of the big questions I have is margins. Where do we stand in terms of potential margins? Again, we've discussed Brink, we understand what the potential margins are and the growth. Can you give us a little bit more granularity with SureCheck in terms of margins? And I do know that Wegman’s and Walmart is a different margin then what you're getting an additional contracts?

We had some background noise. Bryan, you can take this.

Correct. So, in regards the SureCheck we need to have enough critical mass to really gain on the margins in that business. But looking at combined, the goal where we have in regards to the margin of that business from a rate looking at software hardware and services meaning that was more roughly 50% range, just north of 50%. Right now, we're not there obviously as we're going through getting more critical mass to absorb that.

Bryan that’s margin on the software or is that combined margin on hardware, software and services?

Correct Software, hardware and services.

At what point in time was SureCheck, do you think you'll gather enough mass ex-Walmart and Wegman's because that's a different margin that’s not correct, is that not correct?

Correct in regards to the fact that right its moving more to the higher margin in regards to outside those two spaces. Howard to give you a forecast out of when exactly we’d hit that I think would be -

No, I'm not looking for a forecast of specific numbers. But when you do you gather mass is it 2018, is it 2019 when can we look forward to looking at a number? Because you’ve given us numbers in Brink.

Sure.

Yes. This is Karen.

Hi Karen.

Good afternoon. I would expect that we would start to see really critical mass start to build up in the second half of 19. We’ve added to our sales force. Our investment in SureCheck is being moderated in R&D and we’re putting our efforts into the sales organization and we found in this year that the confusion from the sales individual that we had really contributed that 690 that we had year-to-date and we'll have a good solid year with him this year. So, we’ve added a couple more sales people, we expect that we'll be able to grow the device count with the sales team in 2018. But to get to in “critical mass”, I would think that would be more in the mid 2019 timeframe but we're going to keep you apprised of how we're doing be transparent with the number of devices that we add and how they are contributing from an MRR perspective and what that looks like as we project forward.

Karen. Thanks. That’s exactly what I am looking forward to. That's all I have for the moment. Thank you.

Thank you, Howard.

Thank you. Jon Hook with Voss Capital. Your line is open.

Hi guys, how is it going?

Hi Jon.

I have a few questions here. I guess when you're thinking about the new board members can you give us some idea of what kind of individuals you're looking for? And have you considered maybe expanding past five board members giving it’s a relatively small board and it seems like there's quite a bit going on between the transition to software and then continuing to deal with that China-Singapore issue.

Yes. I can take that one. Certainly, adding experience in the public domain is extraordinarily important to us. We'd like people that have - and by the way our criteria it’s all based on balance. So, besides adding public domain we like to have some board members that have had experience in transitioning larger companies, and so that’s another criteria that we have. As far as expanding the board, the answer to that it is a definite consideration, a definite consideration.

Okay. I guess maybe outside of the Board space have you thought about a real challenge I would imagine going from a pure hardware to software company and doing it hyper growth I guess with Brink. Have you thought about bringing in more software management into the senior level outside of the Board but more like at the sea level position?

Well we actually thought about bringing in a Board member so it’s another criteria, that we're looking at quite actively. One of the candidate was even a CTO of a very large corporation, successful corporation. We feel very comfortable with our current CTO of our restaurant business.

Okay. Paul?

Now, he’s made. No.

No, Jon. You know if you only have met Chad Wooster [ph] he joined us in April, late April of this year. And so, we’ve added Chad to our team he came from Qualcomm. He's got deep experience in mobility and cloud solutions and so he's had experience doing start-ups all the way through major organizations and so he really knows how to scale software teams and we’re really confident that he is going to be impactful. We’ve seen the impact, the positive impact of his contribution already.

Great. And just sticking with the Board for a second. I guess talking to a number of investors over the last week and I guess we were trying to just get an understanding, some kind of understanding of what the fundamental disagreement was between the co-founder Mr. Sammon and your Board member Todd Tyler. Is there any more color you can add to that?

The 8-K says it all.

Okay. So, your key implementation, can you give us any update on where that is?

Sure. So, earlier this year we actually went live with our, the CRM module that we were using of Microsoft and then we are now planning on for the ledger modules going live towards the end of Q1 and then incorporating, integrating in for our service business piece especially to be able to really support the growth of Brink and straighten that in by the middle of next year and regards to connecting the CRM and the AX ledger modules.

Okay. And is there any more I guess detail on the ERP implementation in terms of how it could impact operating costs?

We all continue looking at from a organizational change manner or perspective by each area and by each department. So those things that we can actually even do I think beforehand I would look at how our teams are set up. One of the things that we’ve looked at as we do the ERP implementation is what are some of the processes that have been put in place for a while here that we can actually undo and help to kind of enable streamline. What we are doing it’s not just ERP implementation. So, those things that we’re looking at that would actually go into effect prior to go live which will start helping us out and then in addition to that we’ll be able to look at additional cost savings that we can have post go live.

Okay. That’s helpful. I guess turning to Brink for a second, obviously seeing very good success and for everyone we’ve talked here is clear industry leader. I guess could you talk a little bit about some of the goals that you’ve set for 2017 and 2018. What would be the kind of things that would have to happen for you to get to those goals at this point for you to meet them or beat them and then making it look like - breaking it down a little further what are kind of some of the puts and takes on kind of the average revenue per restaurant. I assume Tier 1 are coming in maybe a little lower, but you are also developing additional product so any help with that would be helpful.

Hi Jon, the goals that we had for Brink that we’ve been articulating is that we wanted to end the year with roughly 5,000 restaurants. Where we sit today with merely 3,700 makes that objective challenging to get to. But to put it into context, we had if you know we had Arby’s and Smoothie King and a few other big accounts that joined the PAR family in earlier this year. And so then, we have a little bit of a slowdown in Q3 as we prepared for deployments with those accounts and we took a step back to do big upgrade for our existing customers at the end of Q2 which had us spend more time focusing on them in Q3. That said Q4 is stronger and, but to get to the 5,000 is not going to be achievable. We also said that the other goal for this year was we are going to get to the Tier 1, we’ve done that. It’s increasing our bookings in Q4 going into Q1 and then to the first half of 2018. So, we’re confident that we’re going to continue the acceleration that we've got good pipeline, we've got good backlog and that we're going to continue our objective to get to the 10,000 sites by the end of 2018 and that remains our focus and that is our objective. And then with regard to the average ASP [ph] for the restaurant you're generally correct that big Tier 1’s have buying power and we do anticipate that the MRR will come down for our base platform, base solution that we offer offsetting, or actually augmenting that will be the introduction of new modules that will bring to market. We’ll be bringing it to market in the early parts of 18, with the uptake of those products within the year. So, I expect I will start to see more of a positive impact of those modules later in the year, but I think from an MRR perspective, we're going to see it come down to the 145-150 range.

Okay. So, that $20 million, I mean you talked about 10,000 sites $20 million is it still, that’s still like the laser goal you guys are honing it on, or is it?

It is our goal. It is our goal. So, we - it remains a goal. I think a goal for the ARR was like 19.6 something like that. But it remains - with the number of stores that remains in our line of sight we got to get the stores in and implemented early in the year to be able to achieve that. Again, our backlog in bookings look good. We continue to have a product that the industry is demanding and we've got - it’s fully featured we’re doing a lot of innovation around the solution and we're going to continue to March toward our goals.

Okay. One more real quick, and then I’ll hand the line. You talked earlier about a couple Tier 1’s they were either close to being signed or had been signed. I think Arby is obviously great and Smoothie King. Is there any other color you can share at the pipeline; I mean you said it’s strong but are close to negotiation or close to finishing up negotiations?

We are working with other large clients that are in different stages of negotiations, review of our product. It runs a gamut, so there's a few that are in our pipeline that hopefully will be announcing in the next quarter or so.

Including some that are in pilot.

Got it. Okay. That’s helpful. I’m sorry I did have one more. So, you’ve talked several times about the government business having strategic optionality and I know you are kind of transforming it but it seems -- you were looking at kind of some of the government service businesses are trading in the 12 to 15 times EBIT range. I know I don't have some of those companies have, I guess what is holding back from kind of the divestiture of the government business at this point? And is there any other color you can add on that?

Same as I said last quarter, the Boar does take a look at it. We believe it's a valuable asset. It certainly generates consistent cash and we look at it from quarter-to-quarter.

You look at some of the current metrics that some of these companies are having they are about 10 year all time high multiples. I guess if you are going to sell it, now might be the time, what would be holding you back?

Certainly, the decrease in revenue, actually like a hockey stick [ph]. Although the revenue that is decreasing is the part that’s not valuable, it’s the pass-through revenue where we win a contract we buy somebody else’s product and we forward deploy it. But it would be nice if we had an increasing hockey stick [ph] in both revenue and profit at the time that multiples are high and we will just continuously evaluate. It is a very valuable asset.

Alright. Thanks guys.

Thanks Jon.

Thank you and our next question comes from Joe Vidich with Manalapan Oracle Capital Management. Your line is open.

Yes, hello. Yes, I have a few follow-up questions on what those guys were asking. With regard to the government business, I was just wondering if you had what you’d consider a base level going forward.

Base level in regard to what Joe?

Just quarterly or annual run rate that you think is recurring with that business.

To give you a little bit more color in regards to what we’ve seen over the past three quarters, right. So, as we have reported last three quarters with revenue decrease in regards to the PMO. We are now at the point now from a lapping perspective going forwards that will not be an impact to our -- at the same time we've been seeing the ISR business continue to grow and continue to build relationships within that space. And so, that growth that will not have the offset that we've seen in regards to that PMO. So, this is what we have expecting to happen during the course of the year, but now it's a matter of the same time we're able to do that without actually having materially impacting the actual margin contribution from that business. I think it’s actually down about 300,000 year-over-year with a decrease of I think roughly around $8 million regards to or $5 million with regards to the revenue this quarter. So, from a go forward standpoint, we believe that decrease is going side, we’re going to see the growth come back into that business with more value-added higher margin and these margins are not your margins or from a investment government standpoint your middle single-digits to your higher single-digits at some points double-digit depending upon, low double digits depending upon the way you won some of these contract. So, we do expect to see some growth both in the top line and bottom line.

Okay. That’s great. With regard to the Brink backlog of devices your target is 10,000 - to have 10,000 installed by the end of 2018. I was just wondering are all those currently in backlog or what percentage of that is in backlog?

Not all of those in backlog. We do have line of sight to look between our current business and book business and expected growth of our current customers and then customers that we are working with. So, we have line of sight that gets us towards that number being able to - that is our goal that we set for ourselves. Right now, we are sitting right around 3,700 sites and we believe that we can make up some of that distance and it really depends on how well we can deploy our current customers in the first half of this year and we keep you appraised of all the sites that we deploy and the bookings and our pipeline.

Okay.

As a matter of fact, I think I’m very partial to a metric that combines the number of sites times that monthly recurring revenue is the best method. We may begin in 2018 reporting that way. We have plans, as Karen mentioned to add some features in our road map and so I'm hoping that in 2018 we can begin reporting not only the number of sites, but the annual recurring revenue.

Right. And you may have said this, but I think I might have missed. That is how many SureCheck devices do you currently have deployed?

Currently, we have 18,000 SureCheck devices deployed in I think 27 countries.

And I believe you're saying, what was the number you are getting for the number of devices you want to be deployed by 2020 was that the year?

Double that number, 36,000.

36,000, okay. Okay then, that’s all I have. Thanks very much.

Thank you.

Thank you. Our next question comes from Jonathan Reichek with Brasada Capital. Your line is open.

Hi, thank you for taking my questions. First on Brink, since you guys had deceleration in deployments in the third quarter. Does that mean that, so I think about fourth quarter maybe being the best quarter of the year for installs for you?

Fourth quarter is shaping up to be a good quarter. So, we have initiated deployments with our Tier 1’s and so some of the initial deployments with our Tier 1’s we’ve had a pick-up with our existing accounts in the fourth quarter and bookings are strong. That would be a safe assumption.

Okay. And then on 2018, so it sounds like you are going to have a record number of deployments or installs. Do you have I guess, do you have enough people to [indiscernible] can you talk about how you guys are handling that?

Yes, that’s a great question. So, execution is key for us. We have been building up both our internal teams and our partnership to be able to deploy. Some of our deployments are handled differently by different customers some of them execute themselves Arby's for example will implement their own stores with their own people and then they've contracted out to do that work themselves. Others of our customers require PAR to do the installations and deployments and then we leverage partners to be able to accommodate that. But execution is really critical and it requires that our internal teams are -- that the portals are set up in order to process all the orders that our organization is able to fulfill. Our installation partners are ready to go. We’ve had some good practice with big accounts like Five Guys and the deployment of their 13,000 sites were probably a 1000 moved on they've thousands of sites so, we have been able to scale up to be able to accommodate and accelerated deployment but that is - execution is key.

Okay. And then last question. Can you help you help me understand why a deceleration in deployment at Brink in the third quarter? Do you think it’s because I think of new sales, but why are they related? I would think it’s different people involved on each background.

So, there are two things happened. We brought on some new big customers and when you bring them on there is expectations that I have said earlier in the year. We’ve been working on these contracts for some time and so expectations I’ve said about when they are going to be ready to go, when we are going to be ready to go. What functionality they require and the software. So, the anticipation was that we were going to continue with the pilots and add sites and things happened. So, we learn things through the pilots, which is exactly what you want to do and sometimes there's a slowdown and in this case, that was in the third quarter. Compounding that a big release that we did in the late second quarter, it required a lot of focus as we upgraded all of our different customers and we've got hundreds of different customers now and so upgrading all of them and turning our attention to make sure that all their functionality and their cloud solutions were operating well, it required our attention. And so, you can't grow without having a happy basis so we turned some of our attention to working to make sure that that base was happy. So, the combination of those two things that temporarily decelerated our deployment and now we're back on track.

Okay. So those issues are your past it sounds like.

They are behind us.

Okay, great. Thank you very much.

Thank you.

Thank you. And I'm showing no further questions at this time. I would like to turn the call back to Mr. Don Foley for any closing remarks.

Now, I'd like to thank all of you for taking your valuable time to join us today.