Thank you for standing by. My name is Diane. I will be your conference operator. At this time, I would like to welcome everyone to the full year 2024 first quarter financial results call. [Operator Instructions] I would now like to turn the call over to Christopher Byrnes. Please go ahead.

Thank you, operator. Good morning, everyone, and apologies for the technical difficulties we were dealing with this morning. But I welcome you to PAR Technology's First Quarter 2024 Financial Results Call. We issued our Q1 press release a short time ago and furnished the related Form 8-K to the SEC. The press release, along with the corresponding slide presentation, can be found on the Investor Relations section of our website at partech.com. With me on the call today are Savneet Singh, PAR's CEO; and Bryan Menar, PAR's CFO. Before we begin, please remember that during the course of this call, we may make forward-looking statements about the operations and future results of PAR Technology that involve assumptions, risks and uncertainties. If any of these risks and uncertainties develop or if any of the assumptions prove incorrect, actual results could differ materially from those expressed or implied by our forward-looking statements. On this morning's call, we will refer both to GAAP and non-GAAP financial measures. Please refer to today's press release for the reconciliation of GAAP to non-GAAP financial performance and additional disclosures regarding those measures. In addition, our acquisition of Stuzo, closing on March 11, 2024, and therefore our reported first quarter results include 20 days of Stuzo results as well. At times during this call, we may discuss organic or standalone results, which excludes Stuzo, to help listeners understand our organic performance. Now I'll turn the call over to Savneet for the formal remarks portion of the call, followed by Q&A.

Thank you, Chris. We had a strong start to '24 achieving 25% growth in ARR, while closing one M&A transaction, [ we're ] announcing a second. Our subscription services business is [ clicking ] and we feel confident we'll be able to continue to drive growth while turning EBITDA positive in Q3. Crucially, our products continue to be validated as standalone best-in-class, while working better together, helping prove the value of our unified solution and demonstrating to our customers that buying more from PAR does not sacrifice functionality, but rather generates better outcomes. This a point that I really wish to underscore again. Each of our products generates better experiences on other PAR products, thereby enhancing total stickiness and expanding sales opportunities beyond what a single product sale could generate. The flywheel at PAR is real. For the first quarter, subscription services ARR organically grew by 25% when compared to Q1 '23. When we add Stuzo's contribution, ARR now stands at $185.7 million, a 60% increase from the first quarter last year. Additionally, once TASK closes, our current ARR would be over $225 million on a proforma basis. In Q1 '24, all of our products grew and PAR achieved 25% organic [ year-over-year ] expansion without material contribution from large logos we've signed the past few months, notably Burger King and Wendy's. As I mentioned in last call, we're going to be reporting in 2 segments: Operator Cloud, which includes Brink, Data Central and Payments; and Engagement Cloud, which includes MENU, Punchh and Stuzo. Simply put, we are reporting in the same manner as we are organized internally. Our operator cloud solutions predominantly work with IT and operations teams, while our engagement cloud solutions work with marketing and digital teams. Operator Cloud ARR grew 39% to $78.5 million in Q1…

Thank you, Savneet, and good morning, everyone. Total revenues were $105.5 million for the 3 months ended March 31, 2024, an increase of 5% compared to the 3 months ended March 31, 2023 with growth coming from increases and subscription services and contract revenue, partially offset by decreases in hardware and professional service revenue. Net loss for the quarter of 2024 was [ $18.23 million ] or $0.62 loss per share compared to a net loss of $15.9 million or $0.58 loss per share reported for the same period in 2023. Adjusted net loss for the first quarter of 2024 was $10.8 million or $0.36 loss per share compared to an adjusted net loss of $12.7 million or $0.46 loss per share for the same period in 2023. Adjusted EBITDA for the first quarter of 2024 was a loss of $7.2 million compared to an adjusted EBITDA loss of $8.8 million for the same period in 2023 driven by increased margin contribution from subscription services, partially offset by reduction in hardware revenue and margin. Now for more details on revenue. Subscription service revenue was reported at $38.4 million, an increase of $10.4 million or 37.2% from the $28 million reported in the prior year. The increase was substantially driven by increase [ in ] subscription service revenues from the operator cloud services of $5.9 million, driven by a 20.7% increase in active sites and a 22.2% increase in average revenue per site. And from our engagement cloud services of $4.5 million, primarily driven by $2.7 million of post-acquisition Stuzo revenues. The residual increase of $1.8 million from our engagement cloud services was driven by a 5.8% increase in active sites and a 7.5% increase in average revenue per site. Excluding Stuzo, organic subscription service revenue grew a meaningful 27% compared…

Thank you, Bryan. Let me wrap up with a few key messages before we open up the call for Q&A. In regard to the initial phase of the Burger King implementation program, early indications are that new orders are being submitted at a healthy pace. While it's hard to perfectly predict where we will sit at the end of the year, we're executing well on our end and feel confident we can give Burger King every reason to only accelerate our 2-year rollout plans. The BK rollout has a strong impact on our year-over-year growth and profitability. And to provide clarity, I'll share what I shared internally with our team. In the event we have a very low install base from BK, our growth will be around 20%. In the event we have a very fast rollout, our growth will approach 30% or higher. As a mid-case, we're assuming mid-20s growth and I feel confident we can hit that. As we mentioned on the last call, whatever we don't install this year will get quickly rolled out in 2025 and the early parts of 2026. BK and PAR are in sync in the desire for fast progress and high quality rollouts give every indication of a strong 2024. With new customers, Burger King and Wendy's and then including our acquisitions, we certainly feel we are at an inflection point for PAR. As I said earlier, we intend to be EBITDA positive in Q3 and then continue a fast acceleration to meaningful profits. This holds true even with the momentary challenges we see in the hardware business today. Our business flywheel will lead to a clash flow flywheel, rewarding our shareholders for their investment and transitioning our focus to free cash flow per share. As we've highlighted in the past, our ARR per share number at PAR has grown substantially and ARR for us is a proxy for future cash flow. As we look to the future, it's exciting not to have to use a proxy for free cash flow, but actually focus on free cash flow. This focus on cash flow will not take our attention off of our products and customer flywheel. The 2 will work in balance living our core value of winning together where customers, employees and shareholders must all win together. With that, I'll open the call for Q&A. Operator?

[Operator Instructions] And our first question comes from the line of George Sutton from Craig-Hallum.

Savneet, I wanted to better understand as you were talking about working through your pipeline of opportunities. Given that you've got a pretty massive Burger King rollout and on the loyalty side of Wendy's rollout, are you getting any pushback from some of those folks in your pipeline or are they even more encouraged that you're able to roll these out as they're looking at you versus other options?

I think it's the latter. We obviously have to sort of give transparency of what we're rolling out, what we think we can roll out for potential new deals, but it's very validating and as I said a couple calls ago, we've never had so much deal flow on the Brink, Data Central and payment side before, and we're looking forward to sharing more details on that as we win those deals through our press releases. And so I think it's [ reflective ] in that, as you win a large customer and then another, it helps other brands feel comfortable that you can handle that scale. And as I mentioned, we feel we're doing a great job on the rollout of that first big customer. I think they would say the same and that customer reference will only help new customers.

Now knowing that you have in the past been unable to take on international opportunities for some of these larger chains, I'm just curious how those discussions go, particularly with those in your pipeline as you're bringing on TASK later this year?

Historically, it's been a challenge as you said, and I'd say a mark against us in [ RP ], but I think sort of obviously we've been public that we've signed an agreement to acquire TASK and we think TASK will be a good solution. I would say categorically the response to that has been positive from customers and future customers because it's really a pain point for them. And if we can execute on an international strategy under the PAR umbrella, I think it gives the customers a lot of comfort that we will execute just like we have for them in the U.S. And so we're really excited to rapidly integrate the TASK into the PAR family. But I also think we'll see a lot of acceleration within the TASK business because it allows us the ability to cross-sell things like payments, hardware and additional modules. So it'll work both ways.

And then just lastly for me, Bryan, could you -- when you look at SG&A spend in the quarter, was there anything one-time in nature that wouldn't necessarily recur, just so I'm being clear?

Yes, there were large amounts related obviously for the M&A transactions that we did, transaction fees that were sitting in G&A. We did have some reorg take place during the quarter too, which you can see in the severance. Most of what you see in the non-GAAP adjustment in the [ AK ] is all related to kind of what happened within OpEx. And so when we look at what we did from a standpoint of organic non-GAAP was about a 7% increase total OpEx year-over-year.

Our next question comes from a line of Eric Martinuzzi from Lake Street.

Yes, I wanted to better understand the product roadmap post-Stuzo acquisition. Are we going to be running 2 product lines essentially with Punchh pointed towards the enterprise restaurant brands and Stuzo aimed at the C-Stores?

Great question. So we are aggressively consolidating and working towards consolidating into one application. I think we feel really excited. It's going to be a multi-year process, but I would tell you, having spoken to our large customers, the Stuzo large customers, we feel that they're very excited about combining those, that -- such a functionality. And so the short answer is we're going to get down to one product for the market and it'll be a multi-year process. But as an example, we're focusing in new deals on the Stuzo product so that we don't complicate the merging of the 2 products. So we feel really good about the opportunity so far. The customer feedback has been excellent, and I would tell you what has changed from when we first announced is that I think we think we'll see faster cross-sell of additional PAR products into this market than we'd expected when we acquired the business.

Okay. And then on the hardware side, you talked about kind of some -- I guess it was 2 reasons for that. We had some issues with lumpiness and enterprise customer orders, and then you talked about next gen PAR terminal and headset rollout. But historically I've thought of the hardware business as kind of a $100 million annual business. Do we get back to that and did we recover in Q2 or is this kind of a smaller business?

I think -- So, yes, the weakness is in our non-Brink base. So our Brink customers are attaching, they continue to attach and we've got optimism, as I mentioned, given how strong the Brink pipeline is and the deals that we've won recently that what we believe will attach hardware. There's an incredible amount of opportunity for hardware to get back to that [ $100 million ] and then grow well beyond it. When we get there this year, I think that will be harder for us. It's certainly in the cards, but I don't want to tell you we're guaranteed. But this to me, again, it's a matter of if, not when. The hardware attachment on Brink is going to be the driver of that business going forward, and given how large these Brink deals are that we're winning or in final stages of winning and their attachment of Brink hardware, we think we'll make it up. It's just the rollouts will sort of depend when that comes in. So will we get back to the a $100 million? Absolutely. Will it be this year? I'm not counting on that, but I think there are people at PAR that said absolutely.

Our next question comes from the line of Stephen Sheldon from William Blair.

Maybe just on the bargaining rollout, can you maybe talk about -- I think you maybe started to come go live in April. I mean, just generally how are things progressing relative to your own expectations and what's your level of confidence that you have the right headcount now to complete the implementation successfully?

Stephen, short answer is yes and yes. I feel great about what we're delivering. We check in weekly with leadership. They're really happy with us. They communicate that to us. The coordination is very tight. Our General Manager of that -- our Brink business will tell you there's only room for optimism here given our execution and their execution. So we feel very good. Now listen, we're 1 month into it. So could things change? Yes, I'm not expecting it, given how much prep work each side has done to get to where we are today. We feel appropriate staff, as I mentioned on the call, we're not expecting OpEx to grow from here. In fact, I think it'll come down. And so we've ramped up. We're rolling out. I think that ramp up is why the rollout's going so well, and we don't expect to add more to support to it.

And then just on the adjusted gross margins, can you maybe help frame where adjusted gross margins fit for the different products you have? Are most products currently in that 70% plus range that I think you've mandated every kind of product to get to? And just remind us where the drag is coming from and whether those -- the areas of drag are moderating at all, such as with MENU, which I think MENU is one that you've called out before as being a drag?

Yes, so I say all the products are between low 60s and mid-70s, Punchh and Data Central at the high end of that and MENU at the very bottom of that. MENU's definitely a drag, but as you saw, MENU added 1,200 sites this quarter, which is very, very large amount in this category. So as the revenue gets live there, you'll have a good head one there. Payments has got to get to that margin too, but again, as Payments is growing so fast. So that's who we'll get there. And so at the very bottom of this is MENU. At the top end, it's Data Central and Punchh and Brink is kind of in the middle.

Our next question comes from the line of Samad Samana from Jefferies.

This is Jeremy on for Samad. So I wanted to follow up on that question about the BK rollout. It's great to see that color on the 20% to 30% revenue based on the rollout. I guess what are some of the hurdles to get to that higher BK rollout in 2024? Or I guess what would prevent it from moving faster or slower and what would give you more visibility?

So [ #1 ] is our performance. And like I said, that's the part I feel really strongly about. Our whole team feels that way and I think BK would tell you the same thing. We're executing as we've promised, committed to and probably even better. And the communication's excellent. So that's the [ #1 ] reason for anything to go up or down is our own performance and that's the variable we control. The variable we don't control is on the other side because these are incredibly choreographed rollouts and we sort of need to work alongside our corporate partners. And so the only reason we wouldn't be way above where the midpoint is, if they need some time, they wanted to slow it down, the internal [ machinations ] there. But as I mentioned, because we're both committed to a tier rollout, we're equally incentivized to make it go as fast as possible.

That's really helpful color. And then I wanted to ask about the Wendy's win that you announced a few weeks back. It's great to see another Tier 1 customer, some of the little language in the press release. Maybe it seemed a little bit different from other wins mentioned, the Punchh enterprise support. I guess was this a full rip-and-replace for Wendy's, or is it maybe something more complimentary I guess? What was this deal like?

No, it's a full rip-and-replace, so it's a really big win. It's a big initiative. It's truly the full solution at -- within Punchh.

Our next question comes to the line of Adam Wyden from ADW.

So just help me with some math here. It appears that you guys added about $8 million of ARR organically. If I sort of look at your minus $7 million of EBITDA in the period, obviously you have some Burger King implementation costs that will come down or obviously are non-recurring. Is there anything you can do to sort of give us some sort of parameters as to like how much of that is sort of implementation costs, whether it's Burger King or Wendy's that you expect to sort of go down? I mean obviously there's one-time severance in transaction, but can you give us a little bit -- and then I want to sort of move forward with the question. Well, how about this? Take the minus $7 million of EBITDA, you have $8 million of organic in the period. If you hold that true and your OpEx is flat and you're adding Stuzo, which you got very little contribution, wouldn't that make you EBITDA breakeven in the second quarter? I mean, take $8 million of organic, if your OpEx is flat, again take a 70% or 80% incremental gross margin, that gets you to $5 million, $6 million, right? And then you get a full quarter of Stuzo, which is doing like $4 million. Wouldn't that take you into profitability in the second quarter if OpEx is coming down? Am I doing something wrong?

It certainly could. We're putting out guidance to make sure we can hit it. As I said, we're doing our guidance assuming the hardware business doesn't get better. So like I said, we feel really -- I mean the software business is clicking, the margins are growing. You can see how efficient we've got in sales and marketing. R&D is working its way there. And so we feel really good about it. So could we? I think it's possible, but I want to make sure we hit what we put to -- tell you. And specifically in Q1, Q1 is always a challenging quarter because there are, what I would call one-time items that can't be adjusted out. Things like bonus accrual adjustments, Canadian pension, insurance payments that for some reason don't get amortized, that we can spend an hour talking about that offline. So I would say the Q1 number is not apples to apples compared to Q4 as an example. So in summary, I think we feel really good about getting there in Q3. As I said, I think it's continued to be meaningful acceleration. The real part I was trying to push on the call was we're not adding any heads within the core products of Brink, Punchh, Data Central and Payments. It's really holding this expense lot. The only heads we added were Wendy's and Burger King, and as I said on the call, we expect the OpEx to actually come down organically, so excluding Stuzo even. So it's the core business driving meaningful profitability Stuzo will add. And then obviously when we roll in TASK, that's another call it [ $6 million ], [ $7 million ], [ $8 million ] annualized.

But would you expect -- I mean obviously in the quarter you had about -- I think I calculated about a $3.5 million gross margin headwind, which probably a lot of its EBITDA. Would you -- I mean, I'm just basically taking the point from the first quarter. Are you expecting additional headwinds in hardware sequentially because it was a pretty big decline year-over-year? I mean, that sort of is already in the [ cake ]. So I mean, you're not expecting additional declines in hardware sort of from the level where you are in Q1, is that right?

I'm not, and as I said, I think in the second half with -- when we announced some of these wins that we've had, that we haven't -- when they get public, I think we'll [indiscernible] that, but I'm not expecting Q1 -- sorry, Q2 over Q1 to be meaningfully worse by any means. And in fact, I think we are current expecting a little bit better.

Yes. So just again, going back to sort of the analysis I'm doing, if you expect similar organic revenue in the second quarter and you're holding OpEx flat if anything down, right? And you get -- I mean, what was the contribution from Stuzo in the quarter on EBITDA? It must have been only like a couple weeks, right? I mean, you didn't get very much of it, right?

We got about a little bit less than 3 weeks of Stuzo in the quarter. So it's not really in there. And we get the benefit of that full in Q2.

Right. So you get a full quarter of Stuzo. You get hopefully some declines in OpEx in the second quarter because there was obviously some layoffs that were online and whatnot. And obviously hopefully some of the implementation comes down and if you add organic now -- last question. How do you think about adding organic revenue? So when you say OpEx is flat, how should we think about the incremental dollars of revenue against a statement of OpEx flat, right? Are you talking about a 100% flow through or are you talking about a flow through at your gross margin rate?

Yes. A flow through at our gross margin rate. That obviously depends on the product, right? Like one of the things we've seen is that we are really getting much, much better at stapling Data Central into Brink deals. Data Central is an incredibly high gross margin product, and so that gross margin flow through is higher versus MENU, which today is lower. So it depends on the product. So I budget internally, let's assume gross margins just stay flat. That's what drops down. And we've talked about we expect that number, the gross margins to grow as well.

Wouldn't your gross margins go up in your lower margin products as you drive better utilization?

Correct.

I mean, I guess if you're at a 60% gross margin MENU, wouldn't the incremental margin on a dollar of revenue be higher on MENU than a Brink? I mean, is that…

Once we clear the cost, yes. And so remember, even when you add a MENU customer as an example, we're still firing up an Amazon instance, we're still launching a product. So there's still incremental costs, but yes, over time MENU should get to the same gross margins. I mean, I want MENU to get to Punchh gross margins, which are really exciting and growing a ton. And so over time, yes, it will get there. But the actual revenue dollars have to come in. So we launched these 6 or 7 customers this quarter. In Q2, we get the full quarter of that revenue and that's again going to boost up those gross margins. So I think what your point is, what is incremental gross margin of a customer? On MENU, it's a little bit hard because we're so early, right? We're $1 million, $2 million bucks into this thing. And so we're still not where I can say, oh, it's 90% drop, but it should be no different than any other SaaS product because every incremental instance as an example is higher margin the lot.

Right. So it's a fair assumption that at minimum our incremental gross margin should be around [ 70% ] and hopefully they should be higher as we drive utilization in our lower margin products, right? So if I take sort of [ 70% ] where we are at $8 million, that's [ $5.6 million ] plus a full quarter of Stuzo plus lower OpEx. I mean, assuming hardware doesn't get worse, I mean I'm seeing profitability in the second quarter. I guess you guys are just sort of being conservative with your guidance. Is that a fair way to walk away from this?

On those assumptions, it is. And I think your math is generally pretty directionally accurate on everything.

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

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

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