PAR Technology Corporation Price & Performance (PAR)

However, actual results are subject to future events and uncertainties. The information on this conference call related to projections or other forward looking statements may be relied upon and subject to the Safe Harbor statement included in our earnings release this morning, and in our annual and quarterly filings with the SEC. Finally, I'd like to remind everyone that this call is being recorded. It will be made available for replay via a link available on the Investor Relations section of our website. Joining me on the call today is part of CEO and President, PAR Singh. And Brian Menar, PAR's Chief Financial Officer. I'd now like to turn the call over to Sabineeth for the formal remarks portion of the call which will be followed by general Q and A. Thanks, Chris, and good morning, everyone. We reported $105,000,000 in revenues in Q4, an increase of more than 50% year over year.

Subscription services ARR more than doubled to $276,000,000 from last year, and 21% organic growth when compared to Q4 twenty twenty three. Alongside this revenue growth, our non GAAP gross profit grew organically 30% year over year. Adjusted EBITDA came in at $5,800,000 than doubling the sequential previous quarter continuing to show the long term margin expansion potential. The growth in profitability in the quarter was driven by both operator and engagement cloud. Operator Cloud ARR grew organically by 26% in Q4 when compared to the same period last year. ARR for this business unit now totals approximately $117,000,000 including delegates. Operator cloud growth is being driven by increased new customer wins, upsells and bookings from planned Rillights with existing customers. Par POS signed eight new customer logos in the fourth quarter, with all of those new customers selecting multiple products from PAR PAR. This continues to validate our better together thesis while increasing our LTV per customer meaning with no additional cost to acquire. We're excited about the projected velocity for Burger King as well in 2025 across both PAR POS and PAROPS PAR. Having recently expanded our partnership with Berking to include our ParOps product line, We are working closely with BK and using Q1 to fine tune the sequencing of rollouts between both products enable a combined and mutually agreed upon implementation rollout for 2025.

We expect significant and accelerated implementations from Q2 onwards. This is an exciting change as it demonstrates our better together thesis working at one of our largest POS currently have approximately 1,500 BK sites in backlog with a robust white space ensuring excellent 2025 visibility and acceleration in potential. Combining a second product to the BK rollout temporary slows our PURE POS rollout in Q1, adding a second module dramatically increases our LTV. Would make this trade every time. And importantly, a combined rollout is the right thing for franchisees as well. We will never sacrifice customer success for short term gain. Partnership is what drives our long term strategy. At the very end of the quarter, we announced the acquisition of Delegate, we immediately kicked off a rebrand of our back office initiative into the new PAR ops which includes the delegate and data center product modules. Our integration with Delegate and the team has been better than expected we are seeing strong customer interest including among marquee Tier one accounts we continue to build out our PAR data platform, Delegate not only boasts a highly synergistic product offering that will accelerate cross sell It also affords entry into more than 25,000 sites covering 40 of the top 50 restaurant concepts.

Further, it comes with a seasoned management team now driving the combined PAR ops business. It's important to note that Data Central finished up the year with a strong Q4 through targeted cross sell growth across our customer base. Growth will accelerate as we are forecasting PAR apps to have its strongest growth year yet in 2025. We have begun the work on product unification efforts with Delegate that includes single sign on and real time data flow, a big step in building towards our data platform. Initiative is highly strategic and underscores our continued drive towards a better together platform that is not replicated anywhere else in the enterprise market. Will be sharing additional details as the year progresses, on this exciting initiative. Now to report on our payments business. As we exit 2024, PAR payment services continue to drive high transaction counts and processing volumes across our customer base, we look to more stores to take more stores live while driving better payment processing economics, Notably, we continue to see strong interest in Punch Wallet with more customers onboarding every quarter. Including Paris Baguette, Gold Star Chile and Runza in Q4 PAR. With approximately 1,000 locations on our payment services.

This customer's conversion will positively impact our results over the coming quarters and is a further example of our better together project win. As our customers continue to unify their above store in store processing with PAR pay, The scale of our data sets across loyalty, ordering and POS product puts Parr in a unique position to leverage tokenized information to drive actionable insights, mapping known and unknown customers and personalizing communications to drive higher ROI increased lifetime value. We are the only company in the enterprise who can link off premise and on premise tokenized data with royalty data all the way to the back of house. This is a moat that is hard to replicate. There's a growing trend in the industry towards disjointed multi vendor solutions that attempt to stitch together guest data, payments ordering across multiple third parties. But integrations alone don't create intelligence. First party data does. Many attempt to take pieces of payment data and combine them with external systems But because PAR owns the full technology stack, everything we do is first PAR. Ensuring true data integrity. Some would have you believe that restaurant technology should be run outside the PAR. Fragmenting operations across multiple platforms.

We see it differently. POS is and will always be the true control center of the restaurant. After all, 80% of transactions still happen at the POS. Where real time transactions, menu data and guest interactions all converge. Payments, loyalty and ordering are not separate systems, They PAR part of a restaurant's mission critical platform. That's what makes our approach fundamentally different from the rest. Rather than layering on third party processors intermediaries, are removing inefficiencies, giving our customers lower processing cost higher authorization rates and full control over the guest relationship. Looking ahead for the year, our pipeline remains robust for our payment offer offering across both par clouds, ensuring we capture new growth opportunities. Moving to our Engagement Cloud, Engagement Cloud ARR reported 15% organic growth in Q4 when compared to the same quarter last year. ARR now stands at approximately $159,000,000 for the Engagement Cloud, and includes Flexure and PAR Retail. Our strong execution in this business has led to several new Tier one customer wins. Our Engagement Cloud continues to exceed standards and dominate the loyalty offers and engagement market with consistently strong interest from existing and new customers. Digital technology to drive increased consumer frequency and retention.

Notably through enhanced investments in loyalty programs. Punch is seeing continued product and sales consistency by delivering growth, new customers and expansion with existing brands. Hansh is a market leader for restaurant loyalty and delivers stability and innovation to our customers. This quarter, we achieved multiple large customer winbacks who had previously churn from Punch for pure guest data platforms but then return back to Punch. Most notably, a Tier one table service chain and two well known casual dining enterprise PAR part of this transition back to Punch. Moving to PAR Retail. In the convenience and fuel industry, our team executed the launch of a major multi thousand unit brand in additional major upsells with our largest customer in Q4. We brought to market the first fully integrated major oil and branded retailer program in the industry. Beyond our exciting customer wins, the PAR retail product continues to expand to serve the fuel and convenience industry. In Q4, we successfully launched gamification updated unified ereceipts, enhanced punch card functionality and optimized member surveys with our focus on developing features that drive incremental outcomes like more visits, more gallons and bigger baskets that continue to deliver value for our customers.

Our customers look to us to expand our platform into into the industry specific white space, are looking to accelerate innovation efforts in the retail vertical through M and A. Are targeting strategic opportunities in the near term that will add additional value to our customers and their members. Moreover, we are beginning to see our integration synergy efforts begin to flourish we have streamlined our efforts across the retail and restaurant space. We've seen already that this is allowing us to focus our R and D and sales efforts between industries to maximize profitability, accelerate innovation. All while improving customer satisfaction. Briefly touching on hardware. I'm pleased to report that we have reversed recent trends in increased our harbor revenues by 7% in Q4 versus the same quarter last year. Several key global brands have approved our newest platform, the PAR, and we are seeing increases in both domestic and global sales. Also contributing to the turnaround was our new PAR Clear drive thru solution that is setting the standard for drive thru comps. With an open architecture that will enable users to leverage the power of AI for the drive thru, Parklier is positioned to be not only the industry leader in QSR drive through systems, today, but also the preferred platform for the future.

Our hardware and POS software divisions are partnering closely on product to ensure that Parclear adds to our strategy of better together innovation. To summarize, remain very bullish about the future of foodservice technology and PAR's continued role as a leading enter 2025, we foresee our ability to execute on both our historical growth rates and deliver on the biggest M and A pipeline we've seen state. View this time as a great opportunity for us to make bold bets and strengthen our market position. I'm confident in our ability to consistently innovate and provide value to our customers for years to come. Persistence trumps everything and I believe we'll come out as a winner in the enterprise. By raising the bar for execution and investing in our products and teams for the long term, Brian will now review the numbers in more detail. [indiscernible] Thank you, Sernie. Good morning. We closed out 2024.

With another successful quarter for PAR. Subscription services continue to fuel our organic growth while our team continues to execute with fiscal responsibility. As a result, adjusted EBITDA for the quarter improved $3,400,000 sequentially from Q3 and $13,100,000 compared to Q4 prior year. This positive movement is indicative of our ability to Now to the financial details. Total revenues were $105,000,000 for Q4 twenty twenty four. An increase of 50% compared to the same period in 2023. Driven by subscription services revenue growth of 95% inclusive of 25% organic growth. [indiscernible] Net loss from continuing operations for the fourth quarter of twenty twenty four was $25,000,000 or $0.68 loss per share compared to a net loss from continuing operations of $22,000,000 or $0.77 loss per share reported for the same period in 2023. Non GAAP net loss for the quarter 2024 was $37,000 or effectively $0 per share a significant improvement compared to non GAAP net loss of $12,000,000 or $0.43 loss per share for the prior year. Now for more details on revenue. Subscription services revenue was reported at $64,000,000 an increase of $31,000,000 or 0.9595% from the $33,000,000 reported the prior year and now represents 61% of our overall par revenue.

Excluding PAR retail, and Task Group, Organic subscription services revenue grew 25% compared to prior year.

ARR exiting the quarter was $276,000,000 an increase of 102% from last year's Q4. With Engagement Cloud up 150% and Operator Cloud up 60%. Excluding PAR retail, task group and delegate, total organic annual recurring revenue was up 21% year over year.

Power revenue in the quarter was $26,000,000 an increase of $2,000,000 or 7% from the $24,000,000 reported in Sequentially, compared to Q3 this year, hardware was up $3,000,000 or 15% driven by an increase in volume attached to our software customers.

Professional service revenue was reported at $15,000,000 an increase of $2,000,000 or 17% in the $13,000,000 reported in the prior year.

The growth was driven by recurring revenue service contracts. $9,000,000 of the professional services revenue in the quarter consisted of recurring revenue.

A 25% increase versus prior year. Now turning to margins. Gross margin was $45,000,000 an increase of $21,000,000 or 86% from the $24,000,000 reported in [indiscernible] The increase was driven by subscription services with gross margin of $34,000,000 an increase of $18,000,000 or 116% from the $16,000,000 reported in the prior year. Subscription services margin for the quarter was 53% compared to 48% reported in the Q4 of the prior year. Increase in margin is driven by a continued focus on efficiency improvements with our hosting and customer support costs, as well as accretive margin contributions from recent acquisitions. Excluding the amortization of intangible assets, stock based compensation, and severance total non GAAP subscription services margin for Q4 twenty twenty four was 64.7% compared to 65.3% for Q4 twenty twenty three. The modest tick down was driven by a shift in product mix, post 2024 acquisitions.

Gross margin continues to improve across our products and we expect total non GAAP subscription services margin to continue to improve from this current baseline. [indiscernible] versus 29% in the prior year. Hardware margin in Q4 twenty twenty three was positively affected by one time inventory adjustments Our focus of demonstrating value for our price with improved operational efficiency has allowed us to improve hardware margins during the year and finished 2024 with full year hardware margin of 24%. [indiscernible] Professional service margin for the quarter was 28% compared to 10% reported in the prior year. The increase primarily consists of increases in margins for field operations and repair services. Substantially driven by improved cost management and reductions in third party spending. In regard to operating expenses, GAAP sales and marketing was $10,500,000 an increase of $1,000,000 from the $9,500,000 reported for the prior year. The increase was primarily driven by inorganic increases related to our acquisition, While organic sales and marketing expenses decreased $300,000 year over [indiscernible] GAAP G and A was $31,000,000 an increase of $12,000,000 from the $19,000,000 reported in the prior year.

The increase was primarily driven by non GAAP adjustment items for M and A transaction fees and stock based compensation. As well as inorganic increases related to our acquisitions. GAAP R and D was 17,000,000 an increase of $3,000,000 from the 14,000,000 recorded in the prior year. The increase was primarily driven by inorganic increases related to our acquisitions.

While organic R and D expenses decreased $500,000 year over year, Our team was able to effectively drive cost efficiency and properly prioritize resource allocation which enabled us to continue to drive innovative outcomes without incremental costs during 2024. Operating expenses excluding non GAAP adjustments was $47,000,000 an increase of $9,000,000 or 25% versus Q4 twenty twenty three. And excluding inorganic growth, organic operating expenses increased a modest 2%. The organic increase was primarily driven by variable compensation and benefit Exiting Q4, non GAAP OpEx as a percent of revenue was 45%, a 900 basis point improvement from 54% in Q4 prior year. Now to provide information on the company's cash flow and balance sheet position. [indiscernible] As of 12/31/2024, we had cash and cash equivalents of $108,000,000 and short term investments point $5,000,000 For the year ended December 31, cash used in operating activities for [indiscernible] was $21,000,000 versus $32,000,000 for the prior year. Representing an improvement of $11,000,000 Cash flow metrics improved throughout 2024. And we exited the year with positive operating cash flow of $3,000,000 for the fourth Cash used in investing activities was $180,000,000 for the year ended December versus $8,000,000 for the prior year, Investing activities included $3.00 $9,000,000 of net cash consideration connection with our recent acquisitions and capital expenditures of $6,000,000 for developed technology costs associated with our software platforms.

Partially offset by $96,000,000 of cash consideration received in connection with the disposition of par government and $37,000,000 of proceeds from net sales of short term investments. Cash provided by financing activities was $279,000,000 compared to cash used of $2,000,000 for the prior year Financing activities were substantially driven by a private placement of common stock to fund the Stuzo acquisition, and the credit facility entered into to fund the TASK acquisition. Subsequent to the 2024 fiscal year end, the company issued $115,000,000 of convertible notes.

And utilized the net proceeds from this offering to repay in full the credit facility. These transactions enhanced our capital structure, by extending our debt maturity profile and significantly reducing our go forward cash interest [indiscernible] would now like to take a moment to reiterate and thank our PAR. On how they managed a successful and action packed year. Both from an operational and business development point of view. We pride ourselves on making accretive capital allocation decisions. And through our focus on operational execution, position PAR for sustained growth and success. As a result, the PAR exiting 2024 is a marked and and better positioned organization than when we entered the year. This is clearly demonstrated by some key financial metrics. ARR more than doubled during the year increasing 102%. Locations utilizing our SaaS solutions doubled with over 140,000 locations at the end of twenty twenty four. Non GAAP consolidated gross margin increased by seven twenty basis the 50.3% Q4 non GAAP OpEx as a percent of revenue improved from 900 basis points compared to prior year. And Q4 adjusted EBITDA improved by 13,100,000 compared to Q4 prior year. We are proud of what we have been able to achieve but we are by no means content in where we stand and look forward to continue executing to our strategy as we progress through 2025.

I'll now turn the call back over to Sabineet, for closing remarks prior to moving to Q and A. The call for Q and A. We PAR pleased to have closed it on a positive note with a strong Q4 performance and maintaining category leadership in foodservice tech. Had a key objective in 2024. That was to grow sustainably and efficiently to build our business for the long term. To this end, our team executed on three main areas: First, we focused on driving organic ARR growth and sustained momentum in our software business. We worked on initiatives to improve our products and operations, cross sell our entire software portfolio, sign new customers. As we spoke about earlier, all of our POS deals in the quarter were multiproduct deals, and equally important was our upsell into our biggest POS customer. Our flywheel continues to expand through better together strategy which is based on product innovation and ROI, not predatory pricing tactics. Second, we execute on a targeted and meaningful acquisition strategy to strengthen our product offerings. Expand our TAM and build out a global capability to serve foodservice enterprises. Our expansion into C stores and international markets has created a truly new TAM for us and our acquisition of Delegate is already accelerating our flywheel for existing customers including our largest and most strategic.

We also divested our legacy government business that now enables to 100% focus on our core markets. M and A is core to our product strategy. And our integration efforts are what drive our robust cross sell. PAR has over many years invested in building a deep leadership bench that can digest and optimize investments. As companies join, they become part of a cohesive, culturally aligned PAR where we add to, not detract from, their project aspirations and go to market motions. We cross pollinate leaders quickly and unite core operating structures this synergistic approach to M and A is what sets us apart from other foodservice technology companies or sector investors who operate a collection of siloed entities and masquerade as multiproduct. While really just being single threaded multiple times over. And I'm extremely proud that the vast majority of our executive leadership team has risen the ranks at par over many years in multiple roles. Is our key to turning inorganic growth into sustained future organic growth. We are a team of seasoned operators who a holistic view of our business and industry. Finally, we remain fanatical about managing our operating expenses by continually optimizing our cost structure As a result, we maintained top line revenue growth have now delivered two quarters of strong adjusted EBITDA growth. [indiscernible] I'm extremely proud of our revenue expansion, I'm equally proud that non GAAP gross profit grew organically by 30% this quarter.

Our adjusted EBITDA well more than doubled quarter over quarter. Today, our sales and marketing R and D expenses are now well within our long term goals of 1525% respectively, far ahead of schedule And I believe this shows the upside to our long term margin goals for the company. 2024 firmly in the rearview mirror, we look towards '25 with confidence and optimism. 2025, we feel confident and committing to continue to grow our business at 20% plus annual rates for the year. Our growth quarter to quarter will never be linear, but I feel confident that over the course of the year, we'll continue to hit our targets while continuing to drive EBITDA. What's more, we see a number of key levers that create upside to our year. There's still a lot of work ahead of us, we are confident that our balance sheet cost discipline and execution strategies will enable us to continue to grow our business sustainably. As always, I want to thank my PAR teammates for their hard work in driving these results share belief that today is day one drives our collective hunger and ambition. Also want to express a deep appreciation to our customers, partners and shareholders Operator?

Our first question comes from [indiscernible] Tandon with Needham. Your line is open.

Thank you. Good morning. Congrats, Abhneet Chris and Brian on the quarter. Savneet, I wanted to start with the upsell into BK Does this change the timeline of the rollout? I believe the rollout was expected to be completed sometime in spring of twenty twenty six.

Does this in any way change the timeline of the 7,000 plus locations And also does it change the ARR opportunity, which I believe was something in the order of low 20s millions? Is that going to be meaningfully different based on the upsell?

Yes, yes, to both. So it will probably push us out a quarter, quarter and a half. Q1, as I referenced, we're sequencing the rollout, so that's starting in Q2, we can do a combined rollout. So while it will slow down, call it Q1, just a pure POS rollout, it will really accelerate Q2 onwards.

As I mentioned, it's a that's a trade with you all day long, because to your second point, it significantly adds to the ARR in that opportunity. As you know, we've disclosed the POS deal was around low 20s. This adds that pretty meaningfully. We haven't disclosed that number quite yet. But we feel really excited. As I said, while it pushes out the rollout a little bit, dramatically increases the LTV and operating cash flow that this deal will generate over time.

Got it. And then maybe as a follow-up, I would just ask around the quarterly cadence, I get it. You said it's not going to be linear. There'll be some volatility. But any color you can provide in terms of the various revenue buckets, how we should think about the quarterly cadence? And also the same question around margins, should we expect sequential improvement Or are there other factors we should consider as we're modeling for 2025?

Yes. So I think that you should see meaningful margin expansion in the second half of the year.

As well as acceleration of revenue growth in the second half of the year.

High to this PAR to this Bergen question you just asked. Remember, we're going from one product to two products. So it's it's a lot more revenue opportunity and in a condensed period of time. So you'll see that. So Q1 and Q2, we'll be investing aggressively to make sure we can knock that rollout out. And again, you should take it and everyone else should take it. The fact that we're expanding our relationship is a hugely positive sign that we're doing a hopefully doing a good job in earning their trust. So you'll see in the back end more revenue growth, more significantly more EBITDA expansion because of that rollout accelerating. Plus, as we mentioned on the call, we have a large payment services deal rolling out that also hits the second half. As well as the convenience store deal that I mentioned on the call These are all really exciting things, very forecastable. These aren't sort of like, let's hope These are all in forecast. And as I mentioned, we've already booked over 1,500 BKs and we're in January, right, so or in February rather. So there's a lot of room for excitement that can Great. That's all good to hear.

Thanks, Mike. Thank you. Our next question comes from Stephen Sheldon with William Blair. Your line is open. Hey, thanks for taking my questions and a lot seems like to be excited about just want to follow-up on Burger King. Can you just remind us what all is included in that contract I think it's initially par POS potentially menu link. I think you're saying now the contract includes PAR ops. Obviously, as you talked about, very encouraging expansion. But when you say PAR offs, I mean, are they adding both Data Central and Delegate or just maybe just talk about all the products that they're actually Sure. So there are our core deals for POS and historically parts of menu link, but POS is the vast majority of it. And our expansion into PAR ops is on data central, but without question, we're sixty days into the Delayed acquisition. We'll certainly be trying to bring that opportunity into that as well. No guarantee it happens. But I think the better together point is resonating with them and obviously all of our customers given the attachment rates right now. So it's still PAR with one and hopefully we can add more if we Got it.

That's helpful. And then just on 2025, I appreciate the commentary that you're confident in 20% annual growth rates, but just is there any way to roughly frame how you're thinking about organic ARR next year, just given what you can see in the pipeline and kind of current implementation schedules? Just any way to refine that a little bit more?

Yes.

I mean, I think from what we see today, Like I said, the second half will have sort of higher growth rates in the first half. Partly because of the three deals I mentioned, the payment services deal going live, Burger King, acceleration from end of Q4 And then convenience store deal that goes live as well. So we have a lot of visibility into second half of that acceleration. And so the way I think about it is Yes, 20% plus you should have higher than that in Q4, lower than that in Q1. Again, Q1 being the slowest one because of the hurricane coordination we talked about. But in aggregate, we feel really, really good about the year We have never had so much visibility when it comes to the rollout of of these deals that I mentioned. So we feel super confident in the year. With the visibility we have today. And as I mentioned, those three deals that I mentioned that have our key for the second half of the year. These are signs committed book. These aren't sort of pipeline.

Got it. That's helpful. Thank you. Thank you.

Our next question comes from Will Nantz Goldman Sachs.

Your line is open. Hey guys. Good morning. Congrats on all the good things you guys have going on. I wanted to ask just on the restaurants space more broadly, there's been a lot of focus on the consumer and specifically the trends in restaurant sales and you guys obviously have a very differentiated look into the different pockets of the restaurant space. Are you what are you guys seeing on the ground? And what does it tell you about the health of the consumer? It's not categorical. There are we see sort of a wide disparity of In the full service dining space, we see a slowdown Ironically, that's been really helpful in our punch business because those firms are really investing in loyalty. And I think you heard me say, we had a couple of people that had previously left Punch to try consumer data platform type products come back to Punch. I think that's a direct result of what's happening in in that sort of full service dining market.

And then in our kind of core QSR fast casual space, it's certainly seeing a slowdown. It's not what it was but we're not seeing negative comps across our base. In fact, our base is still up low single digits. So we've sort of been lucky in that the customers we sell to have tended to outperform the restaurant industry in aggregate. So in general, our base is still growing. There are bankruptcies happening, but there are a very small portion of our base And again, that's just a little bit of luck in the makeup of our current customer base. Where we see the most disruption I would say it's significant [indiscernible] single stores and small chains. We see numerous chains sub-thirty units, 40 units. Again, we don't play a ton here. But we see that space and there are a lot of those ones that are experiencing tremendous pain. And I think the reason why is that when you're at that size, don't yet have a big enough brand to sort of have those sticky customers. You haven't been around a lot a long time generally. And then two, I don't think you have the investments in technology to fight back.

And so the larger brands, I think, are going to do better because they have the ability to invest in punch as an example, the ability to invest in our data platform. To bring customers back in. So in aggregate, our base is still growing single digits, which is great, low single digits. So it's better than restaurants, but there's a lot of disparity amongst the chains.

Got it. Super helpful. Appreciate all the thoughtful detail there. And just maybe a quick follow-up on the hardware inflection that you guys saw. We heard from one of your competitors yesterday It sounds like they're expecting around a 20% drop in hardware revenues. So I guess what have you guys been able to do differently to reaccelerate that business? Are any is any of the momentum that you're seeing competitive wins And just how are you thinking about the hardware refresh cycle?

So I think there's two PAR. To two parts to it. So one is we sell to enterprise. And I'd like to say, enterprise is a product business. You got to have the better product. And so I think if you look at the data, we think our products are winning because they are standalone best in class products. So I think that really helps us. Specifically, of our hardware product to our software customers.

So even I won't name it, but even even a large dealer PAR that we're not picking for hardware have now started to adapt more and more for hardware. And it's that better together functionality I mentioned idea that your hardware company is also your software company, so it's also your service company, your call center, it makes life a lot easier. So it's the same better together thing that's happening. And so continue to see call it attachment into the Our core software customers drove it.

On the legacy non software customer side, it's not been a big change, but we have made some real investments into our this drive thru product. And as you've probably read in all the restaurant companies, there's a big move to voice AI in the drive thru. And so we believe we'll be the preferred partner there.

Given that we are a software company that sells hardware now. And so I think that will be a nice driver of hardware growth going forward. Brian, anything else?

I was just going to add in regards to the software attachment, the fact that our location size has doubled has been given us that much larger audience to be able to have that attachment to. And so that's happening as where some of the hardware only type of competitors are actually seeing a downturn. Maybe in certain areas, we actually continue to have a larger white space to be able to support that. So that's been able to help us. Against what you're seeing in other areas. Awesome. Appreciate all the color guys.

Thanks.

Our next question comes from Samad Samana with Jefferies.

Your line is open.

Hey, good morning. Thanks for taking my question.

Maybe Sandy, first, just I know you mentioned the drag from hardware and how it it's kind of like leading class analog, your customers will leverage AI My ears perked up a little bit about that. Is that AI that you guys have homegrown that will be embedded in that? Is that you guys working with third party platforms as Enable It? And then maybe help me understand the path to monetization there through a APIs or is it is it your own product that you're providing? And then I have one follow-up.

Yes, fantastic question. So what we are we build the drive through hardware. So think of that as the headsets, the base stations. But we are also in the PAR clear it's a cloud offering.

So we will be charging subscription software to allow you to manage your drive through. Now why that's important is that through that to your point there will be an API that allows the voice AI companies, which there are dozens of them out there, plug in directly to the base station so that they can run their tech. So we aren't going we aren't yet going to be the company that's sort of selling voice AI technology directly and trying to be an ordering company of the year. There yet. It might be something we explore in time, acquisition and not, but we're kind of watching carefully. However, if you're plugging into our base station, you're going to be paying us fees to do that and to enable that. And so it's a way for us to make money on the potential growth, but importantly, we're giving them a service that makes it a lot easier for them to run their platforms at these restaurants.

Great. And then maybe just switching gears a little bit. On the On the pipe side, it's great to hear about the customers boomeranging back. Maybe could you give a little bit color of maybe what made them churn in the first place And with that context in mind, what convinced them to come back, right? Just putting those pieces together I think would be very helpful.

So, we had a couple customers, I don't exactly want to be a year ago, two years ago, just say, hey, we don't want to do a loyalty program We want to use something more like a a CDP system or a guest data platform. The idea being we'll be targeting customers directly, we'll always see customers PAR 20% of our base, we want to target everybody else. And candidly, those are really good sales pitches.

But in reality, they don't they're not yet developed enough to drive the ROI loyalty program today. And in the end, I think brands need both. I think you need an awesome CDP system that can target customers on a very personalized level, but still need these loyalty programs that build really engendered loyalty. Loyal customers are repeat visitors, they're high margin, they are the advocates of your brand everywhere you go. So I think what those brands realize is, hey, we thought we're going to going to have loyalty across our entire set of customers, so why do we need just loyalty product? And they ended up moving back realizing, one, products that exist today that are trying to build that promise aren't yet ready. And two, candidly, ROI went down dramatically. And so it really was validating that the Punch product creates real true ROI back to the customer. And then I think as those customers continue to evolve data platforms, they'll end up picking the PAR data platform because when you can combine their loyalty first party loyalty and par, [indiscernible] they're sort of called tokenized data in the data platform. Plus all the operations back office we have that's sort of the point that I was making.

I think it's a real note that we have that nobody will be able to compete with. Great.

I mean, as squeeze the third one in here. Any type of information you give assigned delegates financial profile, maybe growth rate, margin structure, and how you're thinking about it through 2025?

Sure. So, when we closed the deal, it was about $19,000,000 of recurring revenue. Historically, the business had grown well over 30%. I want to say mid-30s And so it's been a high it's been a really fast paced grower. It exited 2024 marginally profitable. And we're hoping for this year, obviously for that too. To be our fastest growing product outside of payments and ordering. And we will certainly drive meaningful EBITDA. So It's kind of exciting to have a product that we think we can push through quickly. And as you've kind of seen, when we acquire business, we tend to ramp up revenue quickly. What's exciting about Delegate is that it's so synergistic that once we figure out single sign on real time data flow, it'll be hard for customers to say no.

So I'm not saying it's going to keep growing 35%, but it will be I certainly believe it will be additive to our growth rate.

Great.

Congrats on I'm really transformative 2024.

Thanks a lot. Thank you. Our next question comes from Eric Martinuzzi with Lake Street Capital Markets. Your line is open. I wanted to ask about the subscription service gross margin. That non GAAP number was 64.7%. It was below what we were forecasting for Q4. In your commentary, it sounds like you expect that to be a trough. But I was just curious, where do you expect it either for the full year 2025 or a year from for Q4 twenty five? Eric, appreciate the question.

Yes, you're correct. There was came down from a year ago. It was really driven by our most recent acquisitions and kind of absorbing that in. Across our products, we continue to see the margin improvement. [indiscernible] It may have then kind of reset a baseline and as the community kind of grow off that. So how you've been seeing the margin in quarter over quarter, not significant amounts, but call it your your 50 to 150 basis points. We expect that to continue as we move forward here in the near to medium term.

Okay. And then just a housekeeping item here. Your pro form a share count you finished out Q4 with $37,200,000 of diluted weighted average shares what is that post delegate Yes, we're just north of 40.

Thank you. Sure.

Thank you. Our next question comes from Adam Wyden with ADW Capital.

Your line is open.

Hey, guys. Really, really, really good profit. So, just couple of things. On the gross margin again, Brian, so some of this is from the purchase. You expect so if you expect that gross margins are going to improve 50 to 150 basis points per quarter, you would expect your incremental gross margin rate to be materially higher on your subscription software pretty much every quarter throughout the year, is that right?

Correct. And that's going to be so both top line, right, physician services being our growth driver, right, now it's 61% of our total revenue.

And as Sabine mentioned, we expect call the 20% -plus increase year over year within the margin actual improving itself. Would actually have a multiplier effect in regards to the gross profit margin increase.

Right. Yes.

I mean, look, I would think that payments and delegate and all these things, I mean, Stuzo, that you don't have a ton of like piloting and hosting. I mean, I would think that your incremental gross margins on some of these I don't know test very well, but I would think the incremental gross margins PAR a lot of these products should be seventy, seventy five, 80, maybe even more. Something like menu also, you're sort of getting you're leveraging all the R and D and as you ramp menu, I would think you'd have really high gross margins on a lot of these on the organic sort of prospectively. So I know last couple of quarters you've had some sort of purchase accounting stuff and I know you had something with with Stuza that lowered gross margin that was sort of a purchase accounting thing. But I would think like sort of prospectively as you ramp 20% organic ARR plus, you would You would get high incremental gross margins going forward?

Yes. And it's not going to be like a significant increase from what we've what we've seen trended over time, right? It's a nice it's I wouldn't say it's modest, it's something we kind of pride ourselves on how we improve it. And as you know, it varies also depending upon the kind of types of products, right? Generally, a POS kind of product might have little bit heavier in R and D and then a back office and you can see that across the industry. Right. But we have to focus on each of our areas to make sure that we see and push the teams in each of the areas to incrementally improve their margins.

Okay. Great. And then my second question is is back on M and A. Obviously, we've seen some other companies buying stuff, I guess smaller stuff, but When I look at sort of other companies that sort of are sort of one of one assets in enterprise, I guess maybe one example would be like ServiceTitan, although they're sort of a vertical stack software for small businesses, they sort of are the only game in town sort of the vertical sort of end to end product.

Those companies are sort of growing high teens and they're trading at like 12 times revenue. I'm sort of curious how you think about sort of doing M and A in the context of where your cost of capital is? I mean, on our math, I mean, obviously, going into today, you guys were sort of in the 5s on an EV to ARR basis depending on how you value the hardware business. I mean, it doesn't feel like you have a ton of spread on the companies that you're buying. I'm just curious like how do you think about sort of getting your cost of capital up to do M and A Is it do you think that you're going to get your multiple back up Maybe comment on that and just sort of the duration of the growth that it's not just about 20% ARR growth year, but that you have a multiyear runway to it. I mean, I'd love to sort of see how you think about sort of those two concepts together because the multiple structurally hasn't really expanded over course of the last twelve months, right? I mean, if you really think about where the business was sort of 16 or whatever fourteen months ago pre government, pre task, pre delegate, your ARR per share has grown meaningfully faster.

Than sort of the multiple so I'm just curious Yes, let me just jump in because we got three more four more calls after. So short answer is, in the end, numbers matter more than anything else. Accounting is a language of business and our numbers will dictate how our stock performs. I think our numbers are great and strong and getting better and better. And I believe that Marcus' reward the durability of revenue, ostensibly believing the durability of cash flow. And I think are continuing to demonstrate that over and over again. And I believe the multi we will get rewarded for that. In the end, software companies multiples should contract when growth slows, when your TAM gets to the end of it and you become your rule of 40 flips to all cash flow versus growth. We don't have that situation here. In fact, as you heard in my commentary, while our growth won't be linear, like there's a lot of really nice upside here in the second half of the year that will also happen the following year. And so I think that I don't know how you get to the five number, but I think we feel really confident that we're one of the few software companies our size that will be able to continue to grow at rates that are higher well above the median, if you will, and continue to drive impressive profit numbers.

And so the multiple rewarded, the numbers went in the end. Doesn't matter what I say or do is in the end, the numbers matter and we'll get there.

Specifically to your point on M and A, you and I have talked about this extensively, but when you're using multiples, it's a relative game. If we're trading at, I don't know, seven times current ARR, we will set the benchmark for the market. And there are very few companies that have metrics good as ours. And so I expect that we will buy them at a discount to that multiple. Now are there certain assets that we might not be able to buy because we're not trading at a while multiple? For sure, but there's not a lot of those and not a lot of that we want and not a lot of that would make sense in our flywheel. So as I said in the script, we've got a really strong M and A pipeline Every time I've said that, we've executed upon that. I think you'll see us continue to do that. And the critical part in my script was, M and A for us is a product strategy. It's not a let's go buy some bunch of revenue. It's how do we create add a product to increase our organic growth and then our long term profitability.

And so we feel really good about that today. And if I didn't, I would tell you, hey, M and A is not going to be part of our strategy, but we're on the first call of the year and we're talking about it here. So I think you can take that as feel the multiples holding us back from being acquisitive right now.

I was just going to clarify on the ARR multiple like when you look at sort of ServiceTitan and even Tagilis post sell off, those companies are still trading at like double digit sales multiples on this year. And I was talking about sort of a five, five point five times on '26. And when you look at the company on a 26 ARR, or 26 EBITDA, I mean, there's a massive gap between companies like Toast and ServiceTitan and even Agilisys post a 40% decline. So I'm just highlighting the fact that like we're executing on many levels better than these other companies from a growth and incremental margin perspective. But we continue to trade at a discount. So I hope we can figure out a way to narrow that discount discount, because I think this is a best in class company.

And let the numbers drive that. So our numbers will drive it and I feel confident we'll get there.

Thank you. Our next question comes from Andrew Hart with BTIG. Your line is open.

Hey, thanks for the question. Savneet, obviously, I think a big message today was the better together that you were pushing on. I guess as ARR has doubled the past year, business has scaled much more robust platform right now.

Can you just discuss a little bit how some of your conversations with these larger enterprise CTOs have evolved, just from a brand perspective and sales pipeline perspective?

Absolutely. Listen, thank you for pulling out [indiscernible] Listen, like I said, we signed eight POS deals in the quarter, which is impressive in the enterprise space. All of them picked multiple product. We upsold our largest customer another product. Clearly, the flywheel that I talked about is working and delegate is really going to accelerate it. Adam, or sorry, the color before Adam talked about it, but it's a beautiful thing when that's working. My conversations with these organizations I think we're setting up for a really interesting outcome. As consumers there's consumer uncertainty right now, so restaurants are now really focusing on digital efforts because they're trying to create efficiencies in the back of house and pull you in the front end. And so they're creating more investments in technology. However, they're making those investments in technology without increasing their staff. In fact, many restaurant companies are flat staffed, operations and IT space. And so how are they going to do that? Probably don't want to add three more vendors. They probably want to attach it into PAR. So I've had a couple of sales process I've been a part of where it's very clear that that the reason why they love us is not just because our products are best in class, it's because they can just trust the existing par relationship.

And so we've spent an incredible amount of time and effort rejiggering our teams focusing on that account management side, so that we can bring in those products And I just want to be clear, we do not win because we bundle, we win because the products work better together. And my push to the delegate team that now runs PAR combined Parag Data Central is, the win for here us is not is that a year from now or six months from now, a customer looks and says, oh, when I had delegate in par as two separate vendors, it was a different experience than when I had it under one roof at par.

And that and I can't stress you how powerful that is to the end customer. And we've got a lot of amazing examples of we're winning deals by just showing that in a demo saying, hey, what happens. If you've got and brink, look at this unique functionality, you can have it with POS that others can't. So it really is a theme. I think candidly we're probably really too early on this thesis. We've been talking for a long time, but it's certainly playing out. And again, I never would have dreamt that all of our deals in a quarter were multiproduct deals. That's a really exciting change for us. Thanks. And then thinking about 2025, you talked about the Burger King expansion, the payments deal, the convenience deal.

I think there's a lot of moving pieces. Another one is, I guess, StuZO gets layered into organic and TASK gets layered into organic. So can you maybe talk about some of the things that can drive much higher than 20% growth, some of the things that you really have to execute on? And when you think about your staff in Task and Stuos getting layered into organic, how have those business has been coming along as we get ready for 2025?

Great question. So one is getting our acquisitions to become organic will certainly help us. SUSO, I suspect will grow faster than 20% a year. The task task has two businesses task, complexure task itself will grow greater than 20% a year.

Flexjet will be sort of closer to the engagement cloud growth rate.

Then delegate will go well above 20%. So as we lap the acquisitions, you will have faster organic revenue growth because the acquisitions in general, we look to buy stuff that's growing faster than us. That's just mathematically a nice part of it. Hope that happens. And actually I didn't mention on the other question, but that will also help back half of the year as those acquisitions. Second though, and listen more importantly, it's our ability to execute upon the deals that we have in place. So our plan, if you will, to get to 20% plus growth assumes a relatively conservative rollout at our largest POS customer. We want to blow through that. And I know our partners at that company we can do even double of what we're going to do. And so that's number one. Can we execute on that? Number two is PAR par retail, the team has done an incredible job I really leadership there has done a great job of driving that business, but we have tremendous levers in driving real upside to our deals there. Because in certain deals and par retail, our pricing increases based on our performance. And so as we have great performance, the pricing goes up quite meaningfully there.

And then third, is our ability to execute and get deals live and earlier than we expect. And that's something that think our team is feeling really good about today. We'll see as it progresses. But there PAR a couple of really meaningful levers that levers to sort of that I think I see us out there. And then the last thing I'd say As we fold in these acquisitions, they do create an accelerated go to market motion because now we can pull in data center because the customer already uses Delegate as an example. We can pull in stuff faster. And so it's just short in our sales cycle. That might not be the big lever, but I think over time it creates a nice [indiscernible] Thanks, Liam.

Thank you. Our next question comes from Charles Nobon with Stephens.

Your line is open.

Hi, good morning and thank you for taking my question. I wanted to drill into the previous question a little further, specifically around TASK and the international Clearly, that expands your TAM. It sounds like it's growing excess of 20%, but wondering if you could speak more broadly about the international opportunity how you see that playing out? And any more specific color around task would be helpful as well. Absolutely. And give us another quarter because we're going to we're making a lot of investments and changes there. We'll just kind of talk about the next quarter or so.

But I think right now, core markets we're focusing on are sort of the APAC region where we've got really strong foothold. We PAR winning the sort of marquee brands in Australia, New Zealand, in that part of the world and we've got a long really nice pipeline we've got to execute on. So what we're really kind of helping the team is operationalize that part of the business so that they can become as programmatic as we can about getting sites out the door. It's a small business, so it hasn't gone through that scaling, if you will, of how do you add 1,000 sites a quarter or something like that. And so we're working to kind of implement that We took one of our best leaders PAR, put him in charge of task and he is driving that. And so we're going to focus on that region first, pull that forward, do a great job. We have already I think, brought in one or two really high quality brands that are U. S. Brands that want to expand to that region. To partner with us there. That's crazy exciting for us because then obviously we can grow them in other parts around the globe.

But we're trying to master that one region and then we'll kind of expand out of that.

Got it. And as a follow-up, I wanted to ask about the hardware margin. Nice little uptick this quarter. Apologize if you touched on this already, but could you maybe talk about the drivers of that expansion during the fourth quarter as well as how we should think about that margin within hardware going forward.

Are we sort of at peak margins within that business or could we potentially see more expansion as we move through '25?

So we've been in both the hardware and some of the professional services actually linked to the hardware, we've been able to margin percent year over year as you saw now like in the mid-20s for hardware. Which we're proud of, right? Some of the best hardware products are out there like in the low 30s. So we would like to continue to increase. We understand we'd only be modest where we're going to [indiscernible] And then from the actual professional services, as you saw, we went up from 10% last year to a 28% And so now we've been consistently in the mid to upper 20s on professional services. And that's correlated as we continue to grow some of our hardware business that that would also increase from a revenue and then it's recurring revenue. So against consistent margins below that. But I would not expect us to have significant margin improvement in both on the hardware and professional services, but we are proud of how we've improved that over the past couple of years.

Got it. Appreciate all the color guys. Nice quarter. Thank you. Thank you. Thank you. Our next question comes from Anya Soderstrom with Sidoti.

Your line is open.

Hi. Thank you for taking the question. Most of them have been addressed already and congrats on the great year here. I have one question in terms of the Tier one pipeline. Have you seen that expanded? And how are you talking to those potential customers in terms of upselling as well? And how are you going to be able to take on a Tier one customer in the near future given the expanded rollout with BK?

So Tier one pipeline remains strong. I think change we've seen is clearly the the mid market is really picking up for us.

So it's kind of nice to see that.

As far as being able to roll out additional concepts, We feel very good about that. With BK, this rollout is planned. The additional part of the rollout is is a new module, a new product. So it won't impact kind of POS pipeline that's been strong for some time here. So I don't think it will have an impact. And as I said, in Q1, Q2, we're making some real investments to make sure we don't have any stumble there.

I think it's one of the mistakes I see our peers making we used to make years ago is you spend all this time getting software, right, but then you get the rollout because you didn't hire enough bodies or training. And so we're we overinvested in that now. Because I think getting that right pulls revenue and faster and you make it up in spades down the road.

Okay. Thank you. That was all for me. Thanks, Anya.

Thank you. I'm showing no further questions at this time.

I would now like to turn it back to Chris Burns for closing remarks.

Thank you, Daniel, and thank you to everyone for joining us today. We look forward to updating you further in the coming weeks and days Have a nice day and a great weekend. Thank you.

This concludes today's conference call. Thank you for participating. You may now disconnect.