PAR Technology Corporation

Good day and thank you for standing by. Welcome to the PAR Technology Strategic Announcement 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 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Chris Burns, Senior Vice President of Business Development and Investor Relations. Please go ahead.

Thank you, Liz, and good morning, everyone, and thank you for joining us on such short notice for this very important and exciting conference call. This morning, we announced two strategic acquisitions that expand our global vision and extend our unified commerce offerings. The press release is available on the Investor Relations page of our website at partech.com where you can also find the in-depth presentation covering the acquisitions, as well as in our related form AK furnished to the SEC this morning. I'd like to 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 are related to projections of other forward-looking statements. may be relied upon and subject to the forward-looking statement included in our press release this morning in our annual and quarterly filings of the SEC. Joining me on the call today to review the acquisitions 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 his remarks, which will be followed by Q&A. Savneet?

Thank you, Chris, and thanks, everyone, for joining. Today I'm going to walk through a slide deck that we've posted on our website at parrtech.com, and I'll go through it quickly so we leave time for Q&A. Before starting, I think it's good for us to kind of walk through the vision we're building at Parr before giving the details of the acquisitions we pushed forward this morning. So on slide four, we laid our vision, which is to become the largest enterprise food service technology company by 2030. This vision hasn't changed, and these acquisitions in many ways accelerate that. If you flip to slide seven in the deck, you'll see the way that we define the global food service TAM. Today, primarily, PAR operates in the first two categories, restaurant and retail. The majority of our business operates in that QSR and fast casual markets, and we've grown into C-Store through our punch business line. And as you'll see, our vision is not just to be a restaurant company, but to expand our TAM in serving all food service. Because in many ways, we're moving to where our customers are expanding. The restaurants that many of us are used to trafficking are moving. They're moving to stadiums, senior C-stores, grocery, and hospitality. And so our solutions need to expand with those. On slide eight, we walked through our playbook. And we've tested this playbook now on a number of acquisitions, and we feel confident that we can continue to execute on it. We believe that we can acquire best-in-class products that focus on the enterprise and drive that product leadership with unmatched performance and marquee customers. And we couple that with deep vertical expertise, and that expertise helps us build an ecosystem unmatched in every single vertical we plan. And then we build better together innovation. And our idea here is that by combining more products, you, our customer, get more. And together with this playbook and this large TAM, we feel very confident we're executing on a value creation strategy. If you flip to slide nine, you'll observe our ARR since new management came in in 2018. And you can see that while we've had plenty of organic growth, the inorganic growth has been a huge part of our strategy. And during this time, we feel that we've not only created value in an aggregate basis, but if you flip to the next slide, you can see that on a per share basis, our ARR per share continues to grow at an accelerated pace. We believe this metric is incredibly important because underneath each dollar of ARR, we think is meaningful cash flow. And these two acquisitions today, which in aggregate bring us well over $20 million EBITDA, I think are proof to that story. Flipping to slide 17, you can kind of see the penetration we have at PAR today. Today, if every customer at PAR acquired all of our products, we'd be making well over $10,000 per store. We've got 80,000 unique customers, and then the average customer today maybe uses 1.25 to 1.5 products, although this number is increasing dramatically. And what's so exciting about this is that as we've acquired products, we've demonstrated an ability to have those products run in more and more of our customers. Our recent acquisition of Menu is a really strong example of this. So let me flip to the acquisitions we made today. If you flip to slide 13, you can see the overview of the task business. We announced this morning that we signed a deal to acquire Task, who we believe is the premier global platform for restaurant and hospitality outside the United States. The acquisition is roughly $206 million, made up of both cash and stock consideration. The combination of cash and stock will be determined during the closing process, we suspect, over the next three to five months. Cash consideration would become in the form of 81 cents a share, and then share consideration would come in at 0.015 shares of par stock, which equates to today around 95 cents per share. The stock portion of this consideration can flex from 18% all the way up to 50%, And so the total EV will adjust over time. In total, the business does well over $40 million of recurring revenue and $6 million of adjusted EBITDA. But at PAR, what we find so exciting is actually the product underneath TASK. If you flip to slide 14, you can see the ecosystem that TASK has built. And this slide might look similar or familiar because it's very similar to what we have today at PAR, except it's the global presence of what TASK is bringing to PAR. We believe that TAS truly has built something close to unified commerce abroad, and we're excited to have our customers grow that way as well. One of the most interesting aspects of our business is that today, every one of our large customers, almost every one of our large customers expects more growth outside the United States than inside the United States. And having a platform now to bring our customers abroad increases our ability to win, but importantly, also allows us to help bring global brands back into the portfolio. If you flip to slide 15, you can get an idea of how well-penetrated or how well-liked Task is across some of the premier brands internationally. Task is potentially most known for running the McDonald's loyalty app in over 66 countries. So as you travel globally and try that McDonald's app, more often than not, you're experiencing the Task experience, and that's how we in part discover Task. Today, TASC covers over 110 customers, $40 million of revenue, over $40 million of recurring revenue, and almost half a billion dollars of transactional users in 70 countries. It's an incredible set of products, an incredible team, and one we're really excited to move to par. If you flip to slide 16, you can see some of the vanity metrics around the scale of TASC. Not only are they deployed in 70 countries, they have 4 billion annual loyal transactions, 10.5 billion API calls. This is a business that, while small compared to PAR has incredible scale from a technology perspective, and that, again, gives us great confidence in combining our two businesses. Flipping to slide 17, you can see the vision, which is today we think PAR is delivering on its promise of unified commerce in the United States, adding tasks, takes us global, and gives us one united organization to help serve our customers. If you flip to slide 18, you've got high-level view of the metrics. Again, you'll see $40 million of revenue, $6-plus million EBITDA. That accounts for zero synergies, and we expect there to be many, and a very, very high degree of visibility into that revenue stream. In short, we have been working with the task team now for almost three years to effectuate something here, and I don't think we've ever felt such a great strategic fit. So we're excited to bring this product to our customers, but most importantly, we're excited to bring the task team into PAR. I'll flip to slide 20 and tell you about our second acquisition of Stuzo. Stuzo is the industry leading guest engagement platform for convenience store and fuel. We at PAR have run into Stuzo numerous times as our punch business and Stuzo go head to head quite often. The business ended 2023 at $40 million of recurring revenue and over $14 million in EBITDA. So it's a fast growing but also very, very profitable business in a category that we have been growing organically and very, very quickly. We paid $190 million for this business in the form of $170 million in cash and $20 million in par shares. We think that we can combine the Stuzo platform with Punch and build the ultimate platform for our convenience store and field retailers. If you flip to slide 21, you can get a view of why food service is so important in C-Store. When we stumbled into C-Store, it was because C-Stores were evolving in adding food to their location and they were pulling Punch through. They wanted the same sense of loyalty that our restaurant customers were driving. And as that market started to evolve, we started to see increased demand from our customers, demanding more and more loyalty solutions for C-Store. And while we were doing a good job at PAR, it became very clear that for us to win this market, we needed to partner with Suzo, who we believe had the best solution. Slide 22 talks about their wallet-steering technology, and what we love about it is they've really mastered this idea of one-to-one loyalty, where every guest is measured on the ROI of that one individual guest. And again, we've been touching on this through PAR, but Suzo really takes it to the next level. Slide 23 is maybe my favorite slide in that it touches on all the aspects that STUSO's open commerce platform is integrated in today. So similar to our PAR platform, where we're deeply integrated into the ecosystem of restaurants, STUSO does that within the C-Store. And that's everything from the same POS and back office organizations we're used to, but also into car wash, gas stations, EV chargers, all of these areas of evolving needs. And within all of these evolving areas, you'll continue to see food service pull through. Slide 24 shows the power of Punch and Stuzo together. You can see that not only do we have incredible scale of customers and of members, but we also have an incredible suite of customers touching some of the best brands in the industry. Slide 25 gives you a view of how we think we can grow within this market. We think there's plenty of room to grow in C-Store. While we're starting with our loyalty and engagement solutions, we think we'll expand through back office, point of sale, but also move down market where today our market is almost exclusively focused on the enterprise tier one set of customers. We think there's a lot more room to grow here and are excited to kind of push that forward. And on slide 26 is the high level view of Stuzos Financials. And as you can see, I don't know if we've seen a business of better unit economics during our time apart. The business LTM did $40 million of recurring revenue, $14 million just EBITDA, very, very high margins and a strong degree of visibility and net retention. And in aggregate, between the two acquisitions, we're adding $80-plus million of ARR, increasing our ARR per share meaningfully while adding $20 million of cash flow. And as I said, all these numbers are pre-synergy and looking back to LTM. So we're very excited to welcome to PAR. We think together with our existing solutions, we can cross-sell, up-sell, but most importantly, integrate so that our customers feel like it's one PAR. So with that, I'll pause in opening up to questions from the analysts.