PAR Technology Corporation

Good day and thank you for standing by. Welcome to the fiscal year 2022 first quarter financial results conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1 on your telephone. Please be advised that today's call is being recorded. If you require any further assistance, please press star 0. I would like to hand the conference over to speaker today, Mr. Chris Burns, Vice President of Business Development. Please go ahead.

Thank you, Sarah, and good afternoon, everyone. I'd also like to welcome you today to the call for PARS 2022 First Quarter Financial Results Review. The complete disclosure of our results can be found in our press release issued this afternoon, as well as in our related form, a.k.a. 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 parttech.com. I also want to be sure all participants today have access to our earnings presentation and business review slide deck that we will use later in the call to better communicate the momentum in our software business. Individuals on the webcast should have access to the deck when they logged on to the call this afternoon. For those just dialing in on the conference call, the presentation can be accessed on the investor page of our website and we also included it as an attachment on the 8K we filed this afternoon. At this time, I'd like to take care of certain details in regards to the call today. Participants on the call should be aware that we are recording the call, and it will be available for playback. If you ask a question, it will be included in both our live conference and any future use of the recording. I'd also 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 CEO and President, Savneet Singh, and Brian Minar, PAR's Chief Financial Officer. I'd now like to turn the call over to Savneet for the formal remarks portion of the call which will be followed by general Q&A. Stephanie?

Thanks, Chris, and thanks to everyone for joining us to review PAR's first quarter 2022 results. As always, there's a lot we want to share, so prepare your marks, so let's get started. Q1 saw us continue to hit our ARR growth targets of 30% to 40% growth with consistent margin expansion. Every quarter continues to prove out the long-term growth and profitability of our unified commerce initiative. As a company, we delivered a strong first quarter with quarter total Q1 revenues of $80.3 million, 47% increase from one year ago. This revenue growth was driven across all business lines and specifically around our software recurring revenues, resulting in $94.4 million of total live ARR at quarter end and a year-over-year growth rate of 172% from Q1 last year. When adjusting for the Punch acquisition, ARR grew 34% year-over-year. This acceleration continues to be driven by 40% growth in ARR coming from Punch and 35% from Brink. Contract ARR now totals more than $116 million as of March 31st, paving the way for a strong rest of the year and beyond. Equally important as we scale AR is the dramatic improvement we've been able to drive in gross margin expansion on our subscription revenues. When new management stepped in a little over a year ago, three years ago, recurring revenue gross margin was in the low 40s. At the end of Q1 2022, we've now achieved 72%, a significant improvement from just one year ago. We expect this positive trajectory to continue to expand over time, This growth has been driven by intense ROI-focused engineering and by a dramatic improvement in Brink's scalability. Our strong results this quarter continue to be driven by high-level execution across the business and continued demand for part of the unified commerce cloud. We have established strong momentum, and we have continued to build on that throughout the quarter. In Q1, we activated 1,244 new Brink sites, a solid start for the year as stores go live. On a net basis, after churn, Brink's active store count now totals nearly 17,000, a 40% increase from one year ago. Brink's bookings total nearly 1,100 stores in the quarter. In more detail, Brink's strong first quarter was headlined by strong activation numbers with higher MRR, the cross-selling of Brink's plus payments to new accounts, and operational improvements resulting in margin gains. Brink ARPU increased by $62 in the quarter, as new deals and subscription increases are now having favorable impacts. We had a 76% increase in gross new store activations from Q1 last year. Excuse me. We continue to see improvement in present low churn rates for Brink, approximately 3% annualized, and are encouraged by the progress of deals attaching par payment services to Brink that validate to our unified commerce platform. We continue to be hyper-focused on margin expansion by scaling with new customers and also driving operational efficiencies. Brink continues to be the distinguished leader in cloud POS for enterprise QSR and fast casual restaurants. Now turning to Punch. We continue to outperform with Punch and added in excess of 1,500 sites in the quarter that now total more than 58,800 active sites, a 29% increase in the last 12 months. We signed 10 new customer logos in Q1 that added to our impressive contracted store list, including C-Stores, and are beginning to build out the grocery pipeline. Digital loyalty programs are critical to the future of restaurant marketing. Applications like Punch make it easier for brands to connect with their most loyal customers and increase customer lifetime value where it counts most. As the number of channels grows, the need to understand customer LTV expands, thereby pulling more Punch demand. I want to highlight that Punch has just crossed an important milestone, showing a strong momentum in leadership in the market. There are over 200 million loyalty guests on Punch. Each of these guest relationships is unique to a brand. The number includes duplicate guests. On a dedupe basis, Punch now has over 150 million unique guest profiles. That is approximately 58% of adults in the United States. are participating in a loyalty program that is powered by Punch, clearly showing our market dominance. PAR payment services pipeline grew significantly in the quarter as well, and we were extremely encouraged by the early performance in new customer interest. Although working off a small base, AR associated payments grew by 163% from Q1 last year. We are now engaged with a steady stream of new customers who have sought out PAR for payment services due to our transparent and competitive pricing, along with the integration with Brink and Punch. Park continues to see increased interest in the pipeline, broadly across brink and punch customer bases. I'm confident additional upsell and new customer opportunities will significantly accelerate this year as more and more enterprises are seeking integrated payments offering from a trusted technology partner with competitive and transparent pricing. Although still early, our payments initiative, we have seen notable customer wins during 2022 and believe this revenue stream will be meaningful and accelerated to our future financial performance. We expect a dramatically increased CAR, in 2022 from payments alone. To update you on DataCentral, we experienced higher than normal churn in the quarter due to a one-time unfavorable renewal process. This churn negatively impacted the number of active stores for Q1, and we are now working hard to reverse this quickly. Also impacting DataCentral is the workflow interruptions to our development team based in the Ukraine, and sadly, the Consul Fair. New product development enhancement team initiatives have been impacted by 20% to 30% due to the war, and this is having an impact on DataCentral sales. For the last two plus years, restaurants have focused tech spend on the front of house, with CRM, loyalty, digital, and delivery. Now most restaurants have upgraded the front of house tech stack, and they're struggling with the operational issues and profit and margins leaking out the back door via food and labor challenges. We added three new logos in Q1, with California Pizza Kitchen and their 150 plus sites being the most notable. Data Central had a significant product release in January also, focused on labor management, and we have signed deals where we went head-to-head leading labor solutions and won, which shows our labor solution is a product that we can now sell on its own. Our product and hardware businesses continue to perform well in difficult and challenging environments. Product revenues in the quarter continue to strengthen year over year and were reported at $25.1 million in this recently ended quarter, a 35% increase. The capital purchase environment for restaurants is always tricky, and this has been even more so with the pandemic and the global supply chain difficulties thrust upon several end markets. As I mentioned previously, we are not immune to these challenges around the supply chain, and we have experienced some margin impact with the costs associated with the current realities. We continue to monitor the supply environment closely, specifically realities in Asia and specifically China, in regards to the pandemic and the impact of wide shutdowns. We will continue to diligently manage our partners and vendors through these shortages, price inflation, and increases in freight charges. We are constantly seeking out a greater diversity of supply sources while, at the same time, technology-enabled operations and management of supply chain inventory. We anticipate continued volatility in our sourcing channels and expect to closely monitor real-time upstream and downstream visibility across the supply chain to help us predict and plan for adverse events. While we don't like to carry excess inventory, we have strategically added inventory over the last year and will continue for parts of this year to ensure rollouts are not delayed. Now to briefly report on our government business. Our government had a solid Q1 financial performance as evidenced by the 20% increase from Q1 last year and reported revenues of $21.4 million. Our government segment performed above plan for both revenue and earnings. Our ISR group had a solid quarter driven by increased demand for our services. Our government segment also delivered improved performance from our mission systems and product business lines, and I'm confident this segment will continue to outperform for the foreseeable future with a solid contract backlog and future award opportunities. In addition to our solid revenue growth in 2022, we will continue to seek out additional contract opportunities where we can leverage our decades-long experience and performance excellence. Let me now talk a bit about where we see things going forward from a business perspective. We continue to work to advance the enterprise restaurant industry's vision of autonomous restaurants with our focus on creating a single cloud-based platform that is designed to enable SaaS and tech-enabled restaurant operations. Unified Commerce connects all the guest-facing channels, website, app, in-store, third-party deliveries, with one common technology platform that is built on the open web standards. This is an evolution in the industry for multi-channel and omni-channel platforms, which still require bands to do the heavy-duty integration, often at their own peril. With the current state of technology, achieving a personalized guest experience through unified commerce is no longer a holy grail. In fact, mega-brands have created their own custom technology stacks through the proprietary investments to achieve this. PAR's unified commerce democratized the access to that opportunity for thousands of brands through a SaaS model. This is similar to what Salesforce did to the CR market almost two decades ago. Brands no longer have to become a system integrator to band-aid disparate systems and still end up with a tablet nightmare. They can focus on delivering unparalleled guest experiences and building better employee engagement instead. To achieve our goals, we continue to solidify our senior management team and recently added an experienced chief marketing officer and SVP of human resources. Both of these individuals have proven track records, and these new contributors are designed to foster collaboration across our company and to establish linkages to critical It is critical to bring innovative new products to market quickly and cost-effectively while ensuring we are aligned with the needs of our customers and employees. I also want to reiterate my message from last quarter's call. We will seek to continue to deliver 30% to 40% year-over-year ARR growth driven by new customer signings along with upsell and crossover opportunities that will deliver the strong operational performance for our company. In summary, we are pleased with our results in the first quarter of 2022, and we believe we are executing well in what continues to be a challenging and dynamic environment. Our revenue growth is strong, and we expect our margins to continue to improve and improve some services specifically. We have a strong balance sheet and a solid cash system to execute our strategic plans. Most importantly, we believe our unified commerce cloud distinguishes us from the competition and positions us well for long-term growth. As I mentioned on the last quarter's call, a fairly large portion of our data central team is based in Ukraine, and it's an important location for us. Despite the ongoing war, I want to report that our entire Ukrainian-based team has remained productive with high morale. I admire the courage and dedication and the single-minded focus that they put into their work without being asked to do so. For our part, we're providing and will continue to provide support to our data central team and their families. This is a behavior that is central to the culture and integrity of our company. As always, I would like to thank all PAR employees for their dedication and efforts over the past quarter. Across the organization, people have stepped up to ensure we meet our customers' needs, while at the same time embracing the changes necessary to create a platform for long, sustainable success for PAR. With that, I'd like to hand it off to Brian, who will review our financial performance in greater detail.