PAR Technology Corporation

Good afternoon, and thank you for standing by. Welcome to PAR Technologies' first quarter 2023 financial results. 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 1-1 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, simply press Star 1-1 again. As a reminder, today's conference is being recorded. I would now like to hand the conference over to your host today, Chris Burns, Senior Vice President of Business Development. Go ahead, Chris.

Thank you, Eric, and good afternoon, everyone. And thank you for joining us for Part Technology's first quarter 2023 financial results call. Following the close of trading this afternoon, we released our financial results. The earnings release is available on the investor relations page of our website at partech.com, where you can also find the Q1 financial presentation, as well as in our related form, 8K Furnished to the SEC. During our call today, we will reference non-GAAP financial measures, which we believe to be useful to investors and exclude the impact of certain items. A description and timing of these items, along with a reconciliation of non-GAAP measures to the most comparable GAAP measures, can be found in our earnings release. I'd also remind participants that this conference call may include 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. Finally, I'd like to remind everyone that the call is being recorded, and it will be made available for replay via a link available on the investor relations page of the website. 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, Chris, and good afternoon. PAR is off to a solid start in 2023, delivering strong results in our first quarter. Restaurants of all types and at all stages are using PAR as their growth enabler, leveraging our unified commerce technology to solve their most challenging business obstacles. These restaurants range from emerging growth brands all the way to established enterprises. Today, I'd like to focus my comments on our recent quarter performance, a view of what our customers are looking at for their technology initiatives, And then finally, a look forward to the rest of 2023 and beyond, touching on the macro environment we're observing and our own internal initiatives. We continue to deploy our unified commerce platform to help restaurants of all sizes improve operations and enhance the restaurant guest experience. Unified commerce drives our most important KPI, customer satisfaction, which leads to longer LTVs and a greater TAM over time. At the end of Q1, ARR reached $116 million delivering a 23% year-over-year increase, demonstrating the continued growth and scaling of our subscription services engine, and contracted ARR now stands at $131 million. Importantly, when adjusting for one-time items such as severance, this growth came with no increase to operating expenses from Q4 2022. Operator Solutions ARR grew 27.4% to $45.2 million in Q1 when compared to the same period last year. During Q1, Operator Solutions added more than 1,100 new store activations and new bookings total approximately 1,200. Churn continues to be extremely low at 4% annualized for Brink in the quarter. With the recent wins in table service and significant strength in our new customer pipeline, Brink is positioned well to continue scaling. The table service momentum is real, and the first two deals I mentioned on the Q4 call are gearing up for launches at the very end of this year and into 2024. While the ramp up to take these customers' lives is long, the AR contribution will be meaningful. In addition, we find ourselves with the largest spring customer pipeline in our history, suggesting continued resiliency within our customer base. Payments continues to be an important part of our growth for operator solutions and unified commerce. Rolling out new payment customer sites is slower in Q1 than we expected, but we're recouping some of that delayed business in Q2. Progress is being made, and we should see improvement through the remainder of this year. We are confident that as we cross-sell and up-sell payments to all new Brink deals and existing customers, we will continue to see significant customer wins and ARR acceleration. Combined with a set of new payment offerings, including one tap loyalty and an improved gateway, this is a strong indication for continued momentum. Moving to guest engagement ARR, that includes our leading customer engagement platform, Punch, and newly acquired menus. Guest engagement ARR grew 18% in Q1 when compared to Q1-22, in total $59.4 million. As we talked about last quarter, Punch, while being the leader in loyalty for restaurants, is currently experiencing a slowdown in the marketplace as marketing development funds have been impacted, in turn delaying rollouts and slowing down new customer opportunities as RFPs are deferred for later in the year. We also recognize some expected churn in the quarter. This was well mapped out, and we'd argue in the bucket of healthy churn for both us and the customer. Active store count on a year-over-year basis still increased by 16%, and we believe business will improve as the year progresses. In the quarter, we signed some return customers, customers who, for whatever reason, had in previous years churned and are now re-signing with Punch as they've realized Punch is best in class. We are also having success upselling additional Punch modules to existing customers as they build out their loyalty and customer engagement priorities. New leadership in Punch has started to build a foundation that we can begin to leverage and take Punch to the next level. Now to update you on Menu. We've been impressed by the early response Menu has received from prospective customers this year. We have signed nearly 500 locations to date in the United States, and this was in advance of any real sales effort. We had previously planned to wait until the second half of this year to bring Menu to the U.S., but it's clear starting earlier is the right decision. We have aggressively started tooling the business for the U.S. domestic market, and we expect revenue to start matriculating in Q3 for these deals. We feel more confident now than we did at the time of the acquisition that menu could grow into a dominant product line. The demand isn't a problem, as the RFP environment is ripe with opportunities as restaurants realize the operational benefits menu can bring to their off-premise orders, while enhancing customer satisfaction and building real customer loyalty with a deep integration into Punch. We are very early in menus introduction to the domestic U.S. market, but the early response and reaction has been nothing but overwhelmingly positive. Our teams are focused on operationalizing the business in the U.S. so that we can blitz the market later this year. SAC office continues its turnaround. Reported ARR of $11.3 million in Q1 was a 30% increase from last year's Q1. We had activations of 355 stores in the quarter and now have more than 7,000 active stores. New store bookings remain on a strong pace as we continue to penetrate a large national chicken QSR, with new stores being signed in the quarter. In summary, PAR has seen continued market traction with the execution of Unified Commerce in Q1, with various net new enterprise customers purchasing multiple products across our software ecosphere, and legacy customers opting to expand their footprint with PAR. Underpinning our Unified Commerce platform are four discrete requirements. First, best-in-class standalone products. our products must be able to stand on their own. Second, best-in-class integrations. Third, unique lighthouse functionality. And fourth, a truly open ecosystem that empowers restaurants to make choices that are best for their business. While the term unified commerce has become increasingly commoditized by our mostly single-product competitors, our multi-product offering gives PAR a strategic advantage. Innovation requires coordination, and optimal coordination requires control. Unlike competitors, we are able to sync multi-quarter roadmaps between products, own all sides of an integration, and thereby dictate quality and unlock operational efficiencies, such as singular contracts, singular account management, better SLAs, and more. Ultimately, what we offer is seamlessness and a unified experience that is scalable. As a platform, revenue may not be linear in 23, given the number of large deals we are involved with, and the rollout schedule is being worked with the customer, but the scale of our pipeline is expanding and notable. At our core, we're in the customer data business, and PAR's unified commerce value for users is in the massive amount of real-time transactional data captured via Unified Commerce for Brink, via customer identity data through Punch, and business data, including employees, inventory, and menu items through Data Central. As an example, PAR processed 4.7 billion transactions through Punch in 2022. We enrich this raw data based on machine learning to dedupe, standardize, and transform it to make it more actionable. This includes tracking the activity of each guest from multiple channels of engagement and assigning them into the right segment for analytics, targeting, and attribution purposes. PAR makes these analytical insights and data available to our customers in a variety of ways. Customers can perform self-service analytics right in the product itself, including campaign performance analytics, employee and business reporting, and guest analytics. Customers can export this data on demand for their own self-analysis and visualization. For advanced analytics, we also provide an automated ECL of raw data into their own environments through a data pipeline. This data culture sets up nicely for the wave of artificial intelligence entering our world. Most consistently, we hear that there are three distinct ways restaurants see AI as being beneficial to their business. AI can make restaurant visits more consistent and predictable. AI can improve the speed of service. And AI can improve order accuracy. It also minimizes human interaction and lets experts focus their time and skill on other tasks. AI can be a lot of things to a lot of different restaurants. For some, it may be utilizing voice-recognizing kiosks or tools for cost-cutting and reducing labor costs. For others, they are seeing conversational AI tech that improves order accuracy, while even others need tools to track employee performance and sales data along with inventory forecasting. The possibility of AI adoption is endless, and restaurant owners wanting to stay ahead of the game and those wanting to match the market are embracing yearly benefits. We believe PAR's core advantage is that we are the only enterprise firm with data across customer identity, transaction, menu, and COGS. This allows PAR and our customers to create real value as we have complete internal data to match with external sources, thereby having a stronger foundation to build large models that lead to insights and automation. The real exciting part of this is that PAR's unified commerce allows us to have these firsthand conversations with our enterprise customers, near-time integration with technology partners, and a very aggressive product roadmap that includes AI that enterprise restaurants rely on PAR to consistently deliver. Underlying all this, though, is that while our industry gets caught up in the excitement around the technology, we will never get lost that in the end we must deliver to a franchisee who must deliver an incredible experience to a guest. that the franchisee or store owner could care less what model they use or what algorithm we built. They just want the technology to work. The grit of PAR, combined with our deep understanding of the customer, along with our data advantage, set us up nicely to capitalize. Brian will now review the numbers in more detail. Brian?