PAR Technology Corporation

Good day and thank you for standing by. Welcome to the 2022 second 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 will need to press star one one on your telephone. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Chris Burns, Vice President of Business Development. Please go ahead.

Thank you, Michelle, and good morning to everyone. I'd like to welcome you today to the call for PAR's 2022 Second Quarter Financial Results Review. The complete disclosure of our results can be found in our press release issued this morning, as well as in our related Form 8-K furnace to the SEC. To access the press release and the financial details, please see the investor relations and news section of our website at www.partech.com. I also want to be sure all participants today have access to our earnings presentation and business review slide deck. Individuals on the webcast should have access to the deck when they logged on to the call this morning. For those just dialing in on the conference call, the presentation can be accessed on the investor page of the website and also included as an attachment on the 8K we filed this morning as well. 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 this morning, 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 like to remind participants that this conference call includes forward-looking statements that reflect PAR management's expectations based on currently available data. However, actual results are subject to future events and uncertainties. The information on this conference call related to projections or other forward-looking statements may be relied upon and subject to the Safe Harbor Statement included in our earnings release this morning and in our annual and quarterly filings with the SEC. Joining me on the call today is PAR's CEO and President, 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. Savneet?

Thanks, Christopher, and thanks to everyone for joining us to review PAR's second quarter 2022 results. During the second quarter, we continue to drive growth in our subscription services revenue and saw a strong gross margin expansion as we continue to realize the benefits of scale and operational efficiency. The business is performing and the strategy is working. We continue to measure against near-term expectations while simultaneously making strategic progress against this large opportunity that's in front of us. As a company, we delivered a strong second quarter with a reported total Q2 revenues of $85.1 million a 23.4% increase from one year ago. Our revenue growth was driven across all business lines and specifically around our software recurring revenues, resulting in $98.6 million of total live ARR at quarter end and a year-over-year growth rate of 29% from Q2 last year. This acceleration continues to be driven by a 32% growth in ARR coming from Punch and a 31% increase coming from Brink. Equally important as we scale is the dramatic improvement we have been able to drive in gross margin on our subscription services revenue. At the end of Q2 2022, we've now achieved a 73% gross margin, a significant improvement from the 53% we reported at the end of 2020. We expect this positive trajectory to continue to expand over time. This growth has been driven by intense ROI-focused engineering, improved brink architecture, and economies of scale. Strong results this quarter continue to be driven by a high level of execution across the business and the continued strong demand for PAR's unified commerce. We've established strong momentum and have continued to build on that throughout the quarter. In Q2, we activated 962 new Brink sites, and on that basis, after churn, Brink active store count now totals over 17,700, a 34% increase from one year ago. Brink bookings total nearly 950 stores in the quarter. We expect both metrics, activations, and bookings to increase in the second half of this year, as inventory concerns are subsiding alongside strong visibility in a ramp-up in go-live dates for new customers. Additionally, we continue to see ARPU expansion in our pipeline, which will help the revenue momentum. We continue to see impressive low turn rates for Brink, approximately 4% annualized. This low turn rate shows the trust our customers have in our products and ensures our ability to provide and also capture value for PAR in the long run. Now turning to Punch. We continue to outperform with Punch and added more than 3,500 sites in the quarter and now total more than 62,300 sites, a 29% increase in the last 12 months. We signed 12 new customer logos in Q2 that added to our impressive contracted store list. Punch further enhanced its impressive list of integration partners with the addition of nine new partners in the quarter. We also added important product features and enhancements that include campaign management, mobile framework, multi-platform offers management, along with machine learning and AI. Applications like Punch make it easier for brands to connect with their most loyal customers and increase customer lifetime value. We're also beginning to see momentum within the grocery and C-store segment, and hope to announce future customer wins later this year. The growth in these emerging verticals is a validation of the work the team has put in to expand our TAM the last couple years. PAR payment services had another strong quarter, and we're extremely excited by the pipeline of customers who have engaged with PAR for our integrated payment services. They're attracted to PAR payments for their competitive pricing, transparent costs, and full integration with Brink and Punch. PAR payments cuts across all PAR customer types, and we look forward to sharing more data later this year. Even though it's still early on in our payments initiative, We've seen notable customer wins during 2022 and believe this revenue stream will be meaningful and an accelerator to our future financial performance and gives us strong confidence in hitting our 2022 goals. To update you on Data Central, we experienced a solid bounce back in Q2 and saw net new activations at more than 350 stores as we went live with California Pizza Kitchen and signed a sizable franchisee of a noted Tier 1 chain. I'm encouraged about the opportunity that Data Central has ahead of it because it's a proven solution that solves the biggest challenges the restaurant industry faces today. labor and food management. For the last two plus years, restaurants have focused tech spend on the front of house with CRM, loyalty, digital, and delivery. Now that most restaurants have upgraded the front of house tech stack, they're struggling with operational issues and profit leaking out the back door via food and labor challenges. We've added to our sales staff to take advantage of this opportunity and importantly have improved the scheduling features of the product and expect to accelerate sales in the marketplace around labor solutions. As we continue to strive to report meaningful metrics to our fast-growing subscription services revenue, we'll now report 12-month contracted ARR, which is live sites plus sites signed with the expectation of going live in the next 12 months, with much of that contracted ARR going live in just the next six months. This number should give investors a more accurate view of our future revenues and is a number I personally track internally. Today, 12-month CAR stands now at $115 million, paving the way for a strong rest of the year and beyond. Our product and hardware revenue continues to perform well in a difficult and challenging environment. Product revenues in the quarter continue to strengthen year over year, and we reported at $28.4 million in this recently ended quarter, a 19% increase from one year ago. The capital purchase environment for restaurants is always tricky, and this has been even more so with the pandemic, inflation pressures, and the global supply chain difficulties. As I mentioned previously, we're not immune to these challenges from the supply chain, and we have experienced some margin impact with costs associated with the current situation. We continue to monitor the supply chain environment closely and the realities occurring in Asia, and specifically China, in regards to the pandemic and the impact of specific shutdowns. Now to briefly report on the government business. Park government has delivered a strong year-over-year performance for the second quarter. Park government is up 17.4% in revenue over the same period last year, and has outpaced its Q2 2021 profitability by 48%. Enhanced focus on contract financial performance is resulting in bottom-line acceleration. Our government segment performed above plan for both revenue and earnings. Our ISR business had a solid quarter driven by increased demand for services resulting in a 28% in year-over-year revenue growth and improved contract margins. Our government segment also delivered improved performance for 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. Now to our acquisition. As most of you hopefully saw, this morning we announced that we acquired Menu Technologies, a fast-growing omnichannel ordering solution. The Menu acquisition has a robust e-commerce solution, including online ordering, kiosk, menu management, delivery management, dispatch, and much more. Menu now allows PAR to consolidate the restaurant's off-premise and on-premise orders into one unified tech stack. This is an important deal for our company. Although small in size, We believe Menu is the best-kept secret in restaurant technology. We worked incredibly hard to win the Menu team over, as we think Menu brings a level of product sophistication we have not seen elsewhere. Our logic in buying the business was simple. First, Menu provides PARP, a best-of-breed solution for off-premise ordering. Our customers have been asking us for an alternative view, and we feel we just acquired the modern version of today's incumbents, a product that gives restaurants complete configuration, end-to-end commerce, and a very special customer-focused culture. This acquisition should help significantly expand PAR's ARPU and potential and provide years of potential upsell. In enterprise software, product wins, and we think we've acquired the most innovative solution in the market. Menu already has corporate contracts with several of the largest restaurant bands in the industry, extending PAR's leadership in the restaurant tech in the upper echelons of Tier 1. Second, the Menu acquisition marks PAR's expansion into international markets. Menu is already offering solutions to enterprise restaurants in 25 countries located in Europe, North, and South America. and now allows PAR to leverage its brand and reputation to push not only Menu, but other portfolio products internationally. Third, and most important, Menu accelerates PAR's plans to unify the restaurant. Beginning immediately, PAR will initiate an effort to unify Menu within PAR's unified commerce solution, so that brands no longer need to maintain two different systems for on- and off-premise ordering. One cloud-based system will manage all transactions, become a true system of record, and allow for extensibility. As innovation accelerates the number of ordering channels, A unified system allows that channel expansion to function seamlessly while ensuring uninterrupted operations. Other benefits of adding menu to PAR include a more seamless experience that puts the customer at the center of every transaction, regardless of the channel they use to order and pay. The acquisition centralizes key functions like menu management for all systems to a shared model across both commerce and loyalty solutions. It also natively connects the kitchen management system across channels to better manage customer experience as well as manage demand into the kitchen. The combination will also provide a material reduction in cost for brands who may be managing multiple systems to offer and interview customer ordering across channels, while also accelerating innovation for brands as new possibilities are unlocked by unified commerce. I certainly hope you're as excited as I am about this addition to PAR and our unified commerce offering. We diligently thought out the correct partner we needed to acquire. We literally evaluated every player in the space and are confident Menu accelerates our path to becoming the world's largest restaurant technology company. I also want to reiterate that we're just getting started as we seek out other transactions of best-in-class companies that we can add to our unified commerce offering. Each time we allocate your capital, it's with a purpose to drive long-term shareholder value. I'm incredibly humbled about the work that's happening at PARP. We believe our vision of unified commerce gives us the opportunity to become a once-in-a-generation company. With our unit economics and technology advantages, we believe we'll win in providing unified commerce to key vertical markets. Looking ahead, we have sufficient cash to execute on our strategy. We're prioritizing and making excellent progress on integrating past acquisitions and ensuring that appropriate controls are in place, while simultaneously making notable progress on our internally developed projects as well. We feel confident in hitting our 30% to 40% growth target for the year, and while the macro environment could be challenged, we see real reasons to be optimistic at PARP. As always, I would like to thank all of PARP's employees for their dedication and effort over the past quarter. Across the organization, people have stepped up to ensure we meet the needs of our customers while at the same time embracing the changes necessary to create a company for long-term sustainable success. They continue to act as owners of our company. With that, I'd like to hand it off to Brian, who will review our financial performance in greater detail.