PAR Technology Corporation

Good day and thank you for standing by. Welcome to the PAR Technology 2025 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 1-1 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 your speaker today, Christopher Burns, Senior Vice President of Investor Relations and Business Development. Please go ahead.

Thank you, Daniel, and good morning, everyone, and thank you for joining us today for Part Technology's first quarter financial results call. Earlier this morning, we released our Q1 financial results. The earnings release is available on the Investor Relations page of our website at partek.com, where you can also find the Q1 financials presentation, as well as in our related form, AK 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 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 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 Menard, 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 morning, everyone. We reported $104 million in revenues in Q1, an increase of more than 48% year-over-year. Subscription services revenue increased by 78% in the quarter to $68.4 million from last year, and 20% organic growth was compared to Q1 2024. Total ARR was reported at $282 million and grew 52%, including 18% organic from Q1 last year. Accounting for constant currency, sequential ARR grew $10 million from Q4. Alongside this revenue growth, our non-GAAP gross profit grew organically by nearly 35% year-over-year, and we ended the quarter with subscription service gross margins of over 69%. Adjusted EBITDA came in at $4.5 million for the quarter and nearly $15 million improvement from Q1 last year. This is primarily driven by organic improvements, excluding M&A, showing the tremendous operating leverage we've demonstrated in our core assets. Our commitment to investing in long-term duration of profit dollars continues to really play out. Now to dig into our business with further detail. Total operator solutions ARR grew 49% in the quarter, with organic growth at 18% when compared to the same period last year. ARR for this business unit now totals $117 million. As you messaged on last quarter's call, in Q1, we paused the PAR POS implementation of Burger King in order to recalibrate for a dual PAR POS plus data central implementation with the customer. I'm happy to report that the rollout has since restarted, and we are receiving highly positive feedback from corporate and franchisee stakeholders alike. We are forecasting a strong ramp up in the second half, with install velocity expected to peak in Q3 and Q4 for both product offerings. Crucially, the BK slowdown this quarter was offset by strong performance on other initiatives within our operator business. We continue to see a broader and healthy operational buying environment in the marketplace, demonstrated by the signing of five new PAR POS customers in Q1. Continuing the trend from last quarter, all deals were multi-product in nature. The impact of these multi-product roles has yet to flow into our P&L and will provide strong revenue opportunities in the second half of this year and well into 2026. As we've mentioned before, these multi-product deals increase LTV meaningfully without an additional dollar of acquisition cost. Our better together thesis is working. Further, our task platform is seeing continued traction under the PAR umbrella. We have been successful in positioning this product line alongside PAR POS domestically, as well as standalone to global-minded prospects. The task platform pipeline is at a record high, and we believe PAR's total POS offering now ensure full coverage of the enterprise hospitality POS market. Outside of POS, our operator solutions business unit continues to scale via our back office catalog. In March, we successfully launched our new PAR Ops product line at a large industry conference. ParOps includes Data Central and the newly acquired Delegate and delivers an enhanced and feature-rich back office offering that is calibrated to meet both corporate and franchisee needs. The new and combined ParOps pipeline is showing strong and consistent growth as enterprise food service businesses emphasize back office initiatives to drive operational efficiencies that ensure favorable and improved operating margins and labor productivity. More specifically, we have been successful in positioning delegate-related functionality with our existing customers, while similarly cross-positioning the existing PAR catalog with the large delegate customer base. Validating this rising importance of back office in today's business environment, I'm excited to announce that we were recently selected by Popeyes Louisiana Kitchen as the preferred back-of-house vendor for their network of 3,500-plus stores. This news along with the previously reported back office partnership with Burger King, underscores our valued and strategic partnership with RBI and validates our investment thesis into operator products. ParOps has the largest weighted pipeline we have seen to date. We anticipate macroeconomic pressure to continue the ongoing drive of concepts, upgrade their back office technology, and optimize efficiency. Now on to payments. In Q1, par payment services continue to drive high transaction counts and processing volumes across our customer base. Despite being a seasonally slower period, PARP payments continued to grow and added five new concepts to its base. In the quarter, we rolled out Lenny's Grills and Sub, Rocky Mountain Chocolate Factory, Hooters of America, and Cha Time Canada. Additionally, we saw continued multi-product adoption with the signing of Mr. Pickles and Cargo Coffee on both our wallet and ordering solutions. The launch of PARP gift card offering further enabled our customers to benefit from increased customer engagement, operational efficiencies, and cost savings. In short, PAR is uniquely positioned and hedged in the market to service both the dual need of revenue maximization and cost control. Moving to the engagement cloud. In today's environment where consumers are more wallet conscious than ever, digital engagement is no longer a luxury, it's a necessity. Loyalty programs and personalized digital offers are now central to driving traffic and frequency. We're seeing this shift play out across our platforms with record growth in engagement and usage. Brands are doubling down on guest engagement, and our tools are making measurable impact. The number of digital offers distributed and loyalty programs users reached reached record highs in Q1, feeling growth at scale in both restaurant and retail. We believe this trend will accelerate as more businesses move beyond just getting online to investing in infrastructure that provides ROI, operational leverage, and actionable guest insights. Winners in the market are embracing seamless identification, app-less loyalty, gamification, AI, and connected technology. This is where integrated platforms like ours, offering a better together approach, drive superior outcomes. Our engagement cloud business delivered standout financial performance at Q1. We exceeded internal targets with ARR increasing 54%, including 18% organic growth when compared to Q1 last year. This was driven by our excellent growth retention of over 95% and the addition of a multi-product tier one burger brand. This reflects our ability to execute consistently, offering best-in-class product with better together functionality. Our flywheel is real in getting momentum across all sectors of PAR, which positions us for continued success. We're winning multi-product deals at an impressive rate. In Q1, 57% of new signed engagement deals were multi-product, including punch, ordering, and payments. This is a major leap from just 16% in Q1 2024. Much of this is driven by ordering. In Q1, we soft-launched Ordering 2.0, marking our best sales quarter in online ordering in over two years. After a year of deep market analysis and product enhancements, Ordering 2.0 now offers true enterprise menu management and features like order throttling to help kitchens manage high volumes. Our latest version of ordering also provides for AI-driven upsells, seamlessly leveraging Punch's guest cohort data that enables more personalized upselling and higher check sizes. With over 200 million guests on Punch, we're positioned to build one of the most powerful upsell models in the restaurant industry. Additionally, our new POS import feature ensures real-time menu management across all ordering channels, streamlining operations for customers. This is a powerful set of features that we don't believe any point-to-point integration can solve, proving our better together model. In our C-Store and field business, we're laying the groundwork for our flywheel. The highlight in Q1 was EG Group's launch of smart rewards across 1,500-plus sites. EG anticipates a 275% lifted engagement sign-ups this year, which is an outstanding expectation even before their full marketing strategy kicks in. In Q1, we also made our first retail acquisition with the acqui-hire of GoSkip. GoSkip provides self-checkout kiosks and scan-and-go solutions. Integrating GoSkip into our platform isn't just about adding a feature, it's about bringing our technology in the store. We've seen in our restaurant business that a connected, Full-stack solution in-store and above-store truly unlocks the power of data and the business flywheel. GoSkip enhances the utility and stickiness of our digital loyalty solutions, delivering more data, more engagement, and the opportunity to attack the growing retail media network. This acquisition is a great way to grow par retail. We see immediate runway to drive incremental revenue within our existing customers and will continue to be acquisitive in a convenience and retail industry. Before digging into Q1 hardware numbers, I want to briefly comment on the tariffs. The uncertainty around these actions, along with retaliatory tariffs imposed by other countries, have introduced increased volatility in global trade policies and supply chains. Fortunately, after the COVID supply chain disruptions, we purposely reduced our reliance on China and distributed our sourcing to other countries in Southeast Asia. On average, we import less than $1 million of peripheral devices per quarter from China. We're continuing to evaluate the current environment and will take the necessary steps to mitigate the impacts on our business to the best of our ability. Fortunately, hardware now only comprises 21% of our revenues, and so our confidence is high that we can manage and mitigate any negative impacts resulting from the tariffs. In regards to our hardware business in Q1, we reported improved performance and increased hardware revenues by 20% in Q1 versus the same quarter last year. In the quarter, we saw good demand for our newest platform, the ParWave, and we are seeing increases in both domestic and global sales. Also contributing to the turnaround was the new ParClear drive-thru solution, that is setting the standard for drive-thru communications and is positioned to be the industry leader in QSR drive-thru systems. In summary, we continue to deliver on our Better Together philosophy of multi-product innovation, which is core to our go-to-market flywheel. A great example of this came in Q1 with the completion of PAR POS-powered in-store loyalty sign-up and intelligent upsell. By leveraging punch code within PAR POS, our customers are able to instantly acquire loyalty customers within the four walls of their restaurant and via AI Insights upsell personalized product offerings. This functionality is keenly desired by our largest customers and recently drove a loyalty upsell into a fast growth tier one POS concept. Separately, our work on the PAR data platform continues at full speed. PAR's multifaceted product portfolio affords an unmatched breadth and depth of data that when connected unlocks powerful proactive analytics. Not only are we able to leverage AI to produce comparative performance insights, We're also delivering proactive analytics that prompt operators, for example, to sell expiring inventory via specially designed incentives that maximize profits and minimize operational costs. In an uncertain future, leading brands want an edge. We utilize smart data to give this edge to them. Our three-tier strategy of best in class, better together, and open continues to be validated by the market. We believe we're only scratching the surface with our product-led cross-sell initiatives. but cross-sell must also be matched by new logo adoption. A little over a year ago, post our Burger King win, we had communicated that we had an additional seven tier ones in our pipeline. I'm happy to report that since that time, we have now won four of those seven deals, and our pipeline has since then been replenished. We think this dynamic will continue, creating a deeper opportunity set to go multi-product over time. This holistic approach is a key validation of our platform thesis. In the long run, platforms, not point solutions, will dominate. Brian will now review the numbers in more detail. Brian?

Thank you, Stephanie, and good morning, everyone. We started 2025 with the same successful execution of our strategy as we displayed exiting 2024. Substitution services continue to fuel our organic growth and represented 66% of total Q1 revenue. Equally important, Our consolidated non-GAAP gross margin continued to improve at 54%, driven by improved subscription services non-GAAP gross margin of 69%, all while continuing to drive efficient leverage over operating expenses. As a result, for the third quarter in a row, we reported positive adjusted EBITDA, reporting $4.5 million, a $14.7 million improvement compared to Q1 prior year. We are executing to our company plan while also being aware of the ever-changing macro environment, analyzing and appropriately adjusting our execution depending upon impacts to our vendors, customers, and ultimately to the consumers they service. Now to the financial details. Total revenues were $104 million for Q1 2025, an increase of 48% compared to the same period in 2024. driven by subscription service revenue growth of 78%, inclusive of 20% organic growth. Net loss from continuing operations for the first quarter of 2025 was 25 million or 61 cent loss per share, compared to a net loss from continuing operations of 20 million or 69 cent loss per share reported for the same period in 2024. Non-GAAP net loss for the first quarter of 2025 was approximately 250,000 or one cent loss per share, a significant improvement compared to a non-gabinet loss of 14 million or 47 cent loss per share for the prior year. Now for more details on revenue. Subscription service revenue was reported at 68 million, an increase of 30 million or 78% from the 38 million reported in the prior year and now represents 66% of total par revenue. Organic subscription service revenue grew 20% compared to prior year when excluding revenue from our trailing 12-month acquisitions. ARR exiting the quarter was $282 million, an increase of 52% from last year's Q1, with engagement cloud up 54% and operator cloud up 49%. Total organic ARR was up 18% year over year. Accounting for constant currency, Sequential ARR grew 10 million or 3.7% from Q4, 2024. Hardware revenue in the quarter was 22 million, an increase of 4 million or 20% from the 18 million reported in the prior year. The increase was driven by both tier one enterprise customers and the continued penetration of the hardware in our expanding software customer base. Professional service revenue was reported at 13.6 million, relatively unchanged from the 13.5 million reported in the prior year. Now turning to margins. Gross margin was 48 million, an increase of 22 million or 86% from this 26 million reported in the prior year. The increase was driven by subscription services with gross margin of 40 million, an increase of 20 million or 100% from the 20 million reported in the prior year. GAP subscription service margin for the quarter was 57.8% compared to 51.6% reported in Q1 of the prior year. The increase in margin is driven by a continued focus on efficiency improvements with our hosting and customer support contracts, as well as accretive margin contributions from recent acquisitions. Excluding the amortization of intangible assets, stock-based compensation, and severance, Total non-GAAP subscription service margin for Q1 2025 was 69.1% compared to 65.7% for Q1 2024, demonstrating strong margin growth from our core business. Hardware margin for the quarter was 24.6% versus 22.3% in the prior year. The improvement in margin year over year was substantially driven by favorable product mix, as well as year over year reduction in expense as we aligned our hardware-related workforce with organizational priorities. Professional service margin for the quarter was 25.4% compared to 16.5% reported in the prior year. The increase primarily consists of margin improvement in field operations and repair services substantially driven by improved cost management and reductions in third-party spending. In regard to operating expenses, GAP sales and marketing was $12 million, an increase of $1 million from the $11 million reported for the prior year. The increase was primarily driven by inorganic increases related to our acquisitions, while organic sales and marketing expenses decreased $1.4 million year over year. GAP G&A was $29 million, an increase of $4 million from the $25 million reported in the prior year. The increase was once again primarily driven by inorganic increases. while organic G&A expenses decreased by 1.4 million year-over-year. Gap R&D was 20 million, an increase of 4 million from the 16 million recorded in the prior year. The increase was primarily driven by inorganic expenses, while organic R&D expenses increased 0.4 million year-over-year. Operating expenses excluding non-gap adjustments was 52 million, an increase of 9 million or 22% versus Q1 2024. And when excluding inorganic growth, operating expenses actually decreased 3%. The organic decrease was primarily driven by a reduction in sales and marketing expenses. The acceleration of new multi-product deals, along with efficient execution of cross-sell wins, is enabling us to realize synergies in our sales operating model. Exiting Q1, non-GAAP OpEx as a percent of total revenue was 49.8%, a 1,060 basis point improvement from 60.4% in Q1 of the prior year, as we continue to scale efficiently and demonstrate strong operating leverage. Now to provide information on the company's cash flow and balance sheet position. As of March 31st, 2025, we had cash and cash equivalents of $92 million and short-term investments of 0.5 million. For the three months ended March 31st, cash used in operating activities from continuing operations was 17 million versus 24 million for the prior year. Cash usage this quarter was primarily driven by seasonal networking capital needs, including annual variable compensation and an increase of accounts receivable primarily related to an annual contracts we have been collecting post Q1. We expect operating cash flow to improve meaningfully back to positive for the remainder of the year. Cash used in investing activities was $6 million for the three months ended March 31st versus $152 million for the prior year. Investing activities included $4 million of net cash consideration in connection with the tuck-in asset acquisition of GoSkip and capital expenditures of $1 million for developed technology costs associated with our software platforms. Cash provided by financing activities was $11 million for the three months ended March 31st versus $191 million for the prior year. Financing activities primarily consisted of the net proceeds in the 2030 notes of $111 million, of which $94 million was utilized to repay the credit facility in full. Before handing the call back over to Suneet, I would like to provide some insights in how we are managing the fluid environment around tariffs, international trade, and the respective impact they're having on capital expenditure velocity. As Avneet stated, our direct tariff exposure is specifically tied to our hardware business. Our international vendor relationships are primarily with Southeast Asia, and we strategically reduced our exposure to China when we addressed the supply chain challenges resulting from the COVID-19 pandemic. The go-forward tariff baseline is still being negotiated with the respective countries, but considering our country allocation exposure, we are in a competitive position and can execute the appropriate supply chain adjustments while minimizing price impact to our customers. We also continue to analyze potential impact of businesses waiting on the sideline to make capital expenditure decisions until a clear economic picture emerges. As of now, we have not seen a direct impact, but we will continue to monitor closely. I'll now turn the call back over to Savneet for closing remarks prior to moving to Q&A.

Thanks, Brian. Let me wrap up with a few key messages before we open the call for Q&A. We had a strong Q1 with solid growth, excellent gross margin expansion, and adjusted EBITDA. While much of our focus is on revenue, it's really worth highlighting that our OPEX organically came down year over year. Today, our sales and marketing expense is 14% of subscription service revenues, and R&D is 26% of subscription service revenues. Both are now near our long-term goals of 15% and 25%, respectively. We've continued to show success in cutting expenses while growing at a rapid rate. I believe this margin expansion will continue over time. Earlier, I talked about how our product flywheel is really working, as we had more multi-product deals this quarter than ever before, repeating the trend from last quarter. While this is an incredible demonstration of our product muscle integrating our acquired products, it's also important to acknowledge the tremendous financial impacts that can come from an integrated suite of products. An often misunderstood aspect of software M&A is that a roll-up can create value in simply acquiring businesses. I think that model is flawed, as disintegrated roll-ups provide value as capital allocation vehicles, not operating vehicles. The underwriting of those investments are really investments in an allocator versus investing behind an operating strategy with defined allocation goals. What I've learned from PAR is that as we acquire new products, we're able to accelerate growth through technology integration in consolidated sales and product teams. When we integrate an acquired product, we make it easier to buy our product, but also prove that two products integrated contain new features unavailable before an acquisition. This leads to greater sales. As customers buy more products from PAR, our products become far stickier. It's harder to rip out three integrated products than one siloed module. This stickier base then has a longer and larger customer value, with higher retention, thereby increasing the ROIC of each equity dollar invested, and in my opinion, suggest arguing for a higher and durable trading multiple than a disaggregated roll-up. The key is that each new acquisition actually accelerates growth once integrated, lowers churn, and increases the duration of the customer cash flow stream, hence expanding LTV and increasing the value of PAR far more than standard M&A. This is why we view our M&A motion as both a product and financial initiative. Today, it's clear that restaurants and food service businesses are seeing a slowdown in traffic. To combat this, they will need to embrace more technology. Those that lean in will be the winners. The impact of the macro uncertainty is hard to time. Today, while demand for par products continues to be strong, we're fully prepared to deal with any potential slowdown. We operate in a market where large deals can take multiple quarters or even years to execute, where upfront R&D is at times needed to win large deals, and where maximizing lifetime value of a customer can come at the expense of quarterly metrics. We will always choose the path of maximizing long-term value. We are not a reactive organization. We have built an unparalleled and parallel sector flywheel. This will not change, irrespective of short-term macroeconomic gyrations, tariffs, or otherwise. This is the secret of our longevity and why our flywheel is only in its infancy. But this is our time to be aggressive. The fear in the market excites our team at par because we know this is where we are at our best. While others are fearful, we'll continue to make investments organically and and inorganically to expand and accelerate our flywheel. As always, I want to thank my PAR teammates for their hard work in making these results possible. At our company, it's our day one mentality that drives our collective hunger and ambition. Thank you for the time this morning, and we will now open the call up for questions.

As a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. In the interest of time, we ask that you please lend yourself to two questions to allow the opportunity for everyone to have a chance to ask. Please stand by while we compile the Q&A roster. Our first question comes from Mayank Tandon with Needham. Your line is open.

Thank you. Good morning. Savneet, it sounds like with the BK rollout and these new deals that you won, there might be a step function in growth in the back half. To that extent, could you speak to the cadence of the growth as we look across the next three quarters and as these go-lives start to impact your revenue? And in that sense, are you still looking at a 20% ARR organic growth number for the year, or do you think it could actually be better because now you have some of these new deals that could go live in the back half?

We're still going to continue to target 20-plus percent organic growth for the year. What's been really exciting, as I mentioned, is we had those seven tier one deals we talked about a little over a year ago. We won four of them. I think the most exciting part about the company is that almost all the deals we're signing now are multi-product, which create far more revenue than an individual deal in our past. As you suggested, we'll see more impact from these deals and our big POS rollout in the second half of the year. You'll see gradual Q2 and Q1 be relatively similar, and then you'll see a nice pickup in Q3 and Q4. And I think what's going to be super exciting is that you'll also see significant EBITDA expansion towards the end of the year because we are now at a scale where we're getting the operating leverage on the individual large customers we launched in the last, call it, 12 months. So it's a really exciting second half of the year, and I think you know, given the continually high RIN weights across these tier one deals, it also makes for a pretty strong 26.

So, Nathan, just as a quick follow-up, I would love to hear if you could provide more details on the five new logos of multi-product wins. I think you mentioned Popeyes as one of them. I'm assuming that's one of the tier ones you won this quarter. But if you could maybe reconcile the two new tier ones that I believe you won this quarter, because you already had won two last year, and then the five new logos, you know, Could you share any ARR metrics around that and any other details you can provide on those wins?

Yeah, of course. So let me just clarify the numbers. So we won five new POS deals in this quarter. We won, I believe, eight in Q4. So there's a bunch of deals that we've won on that side. And then we've won similar amounts on the engagement cloud as well. So the number of deals is actually quite high. I unfortunately can't talk about any deal size and logo together, you know, given contracts and stuff. But, you know, generally what we're finding is that on these larger deals, we are really well situated to come in, make an impactful, you know, launch, and then bring in the second product relatively quickly, as we saw at Burger King and others. On these smaller deals, or we call it the mid-sized deals, you know, that's where we can, you know, bundle multiple products at the time of the deal. And so, that's the other part of it, which is we're kind of balancing these larger deals, which are generally single product, then you add in the second product, you know, within a year of launch. The mid-sized deal is you can sell a multi-product at the time of the initial sale. So, unfortunately, I can't actually, you know, give sizes on these deals with a specific logo. That's their private information. But, you know, like we said in the call, what's exciting is even though we've won, you know, the deal that we talked about a year ago, you know, the pipeline has been replenished, you know, pretty meaningfully. And so, It's sort of the digital transformation within the underlying category continues to be there.

Thank you. Our next question comes from Stephen Sheldon with William Blair. Your line is open.

Hey, good morning. Thanks for taking my questions and congrats, a big congrats on the sales momentum. First, it looks like reported ARR for the third and fourth quarter were brought down, just to touch on what you reported last time. Can you give some detail on that? I guess it has something to do with acquired ARR, but just any additional context there would be great.

Yeah, it's actually FX. So the business we acquired in the second half of last year, TASC is almost entirely revenue from outside the United States, and so it's the FX adjustments.

And so when you account for the constant currency, Steve, and that's where I kind of referenced the earnings and going from Q4 to Q1, we saw the 10 million, 3.7% incremental growth on constant currency.

Okay, got it. Thanks. And then maybe following up on the last question, I mean, you've got a lot of encouraging wins here. And if we're just assuming somewhat reasonable implementation schedules, I guess, do you have any early read on what organic ARR growth could potentially look like next year? Or just generally, how much visibility do you have now, especially with the four tier one wins that you've talked about? Do you already have a good line of sight to over 20% growth next year, given what you've already won?

I don't think we have enough visibility, you know, in the beginning of May for 26 yet. What I would say is we feel, you know, really good right now because not only are we winning these deals, but we're also, you know, attaching multiple products, right? And so, you know, the value of the deal is higher than we've historically been used to, where it was usually one deal, one deal. Now it's sort of two. So right now, I don't think we can sort of, you know, we can say, hey, we're there, but I think we're certainly going to shoot for it, given what's happened so far.

Thank you. Our next question comes from Will Nance with Goldman Sachs. Your line is open.

Hey, I appreciate you taking the question. I appreciate the detail on FX. I think that may have got lost in some of the morning shuffle. So if I'm hearing that right, it sounds like a lot of, is it Australia dollar? I mean, I think most currencies have weakened year to date, but I think the Aussie dollar is actually stronger year to date. So just wanted to confirm that that's the case. And maybe you could give us an update on the currency exposure so we can think about constant currency going forward.

Yeah, that's right. So it's New Zealand dollar and Australian dollar. New Zealand is actually bigger. And so that's where the FX is. If you adjust for constant currency, the sequential AR grows with $10 million. So it does have an impact going forward. Yep.

Oh, that makes sense. That makes sense. Okay. So did you have a number on just like the percentage of ARR that is outside of the U.S.? ?

25, 20, 20. It's less than that. It's just under 20%. It's under 20%.

All right. Very helpful. Appreciate that. Okay. And then, uh, just an update on the competitive environment. Uh, you've seen, you know, some of the down market competitors making some traction up market. What are you seeing in, uh, the RFP processes and, uh, any notable changes in, uh, in conversations?

Um, you know, I think we, we, we still, we're really happy with our competitive position. Um, certainly on table service deals, as we've talked about in the past, we're growing in there and I think starting to make real impact into those sales processes. Those ones in particular are very long sales processes. That's where we see some competitive positioning, but nothing that I think is worrying us in that when we're head-to-head in the lab with a customer, I can't think of a time where the customer said, we don't have the product to win. Now, that doesn't mean we always win. There might be Economic things that change, there might be relationships, but generally from a product perspective, we feel really strong. And I think in the end, in enterprise software, product wins. So we feel really, really good. And as I mentioned, on these tier one deals, we're still winning at a very high clip. And so I feel pretty good right now, but we obsess over every little competitor too. So we're constantly kind of seeing how we stack up.

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

Hey, thanks for the question, Sidney. You talked a lot today, I think, about just multi-product adoption. I guess when you think about how the PAR platform as a whole has evolved over the past year or so with all these different solutions and different ways to serve customers, what does the cross-sell opportunity or pipeline look like, I guess? What would fully-baked ARPU look like for a customer versus what it's like today, just trying to get an idea of what the penetration of that cross-sell is and how much room for growth there is going forward. Thanks.

Yeah, you know, I think, you know, Brian and I have kind of said this before, which is, you know, we could, if every customer bought every product, you know, it's at least a 4X from where we are today in our revenue. So it's really, really meaningful. Now, that won't happen. There are certain customers that that won't happen, but there's a lot of opportunity there. And the critical part, Andrew, why I've been the last two quarters been talking about this is that there's two elements to this. The first is, are products being integrated in a way that makes competitive dynamics, to the last question, incredibly favorable? I referenced this in the call, but we had a really unique customer win this quarter where we won a really, really impressive large tier one chain because they realized that they could have their loyalty data, if you will, at the POS. And so, you know, if you combine Punch and ParPoS in-store, your cashier can be prompted with AI-suggestive upsells. They can see the loyalty data, the loyalty points, prompt you. Same with the drive-through. You know, that's an example of what we may think is simplistic functionality that nobody else really has right now. And I think that's just crazy powerful. And so as we build these technical features that combine the products, it really makes the cross-sell a lot easier because then it's almost like, how can I not choose that because I can't get these sets of features and functions? So one is that sort of technical integration that's now coming out from PAR that is really exciting and leading to the cross-sell. So it's not that we've amped up sales. In fact, our sales team has come down in size and gotten more efficient. It's that technical side that's actually winning the deals. And same on the ordering side that I spent some time on today, which is really growing nicely. The second part of the multi-product side is the resulting financial impact. Now, as I mentioned, we haven't seen that flow through the P&L yet. That's why I'm really excited for the second half of the year in 2026. But when you sell two products for the price of one, if you will, on the acquisition cost, it really is highly, highly profitable. So, you know, we still have that really interesting lever as it relates to our profitability, you know, in the next couple of years here.

Great, thanks. And then maybe just following up on some of the questions that have been asked on ARR Growth. Obviously, I think a lot of puts and takes. I'm just hoping to maybe dissect it a little bit more. I guess on the first part of the delayed burger came to expand the relationship. I think everyone's in agreement. That's great. I guess Can you help us understand maybe what the headwinded growth would have been or was in one queue from the pause on Burger King? And it's nice to hear that it's turned back on. And then the second half of it, you talked about there was a lot of other areas where the slack was made up. Part of it was like the seven tier ones in the pipeline a year ago. Four of them have gone live. So, Nate, can you just talk about the implementation timeline for those? Like, does that give you, do those four wins give you two years of solid ARR growth, three years? I'm just trying to think about the durability of ARR growth over, you know, beyond the next couple quarters.

Sure. Let me do the second first. So those four that we won, they've been won, not rolled out. So there's still a lot of, you know, revenue to come. So just a quick verification, which again is probably, I think, really exciting, which is those deals, for the most part, are not driving the growth that we saw in this quarter. Those are still to come. So that's really exciting. And I think, you know, you know, as far as durability of revenue growth, that's where we feel really strong today because we see that, you know, we have these deals roll out plus the other deals that I mentioned on the call that we've won. So, you know, I think for the next couple of years, we see pretty strong revenue growth where we've got a nice backlog, you know, if you can call it backlog, to get rolled out. The timeline to roll out a deal, you know, varies significantly. From our engagement side of our business, it's about six months from signing to launch to get it live. And that's been pretty consistent since we've, you know, acquired and worked on the Punch product line. On the POS side, you know, from the moment you sign the deal, you know, we usually guide that if you're a 1,000-store chain, it takes us about a year to get you live, provided we have your commitment and support. And for larger chains, it can take two years. But those ones are a little harder to forecast because you're working in tandem with the corporate, but those ones give you longer visibility because you're rolling out over time, kind of like we're doing on Burger King. To your first question, you know, I feel really great. You know, without our biggest customer rolling out, we still hit 18% growth really comfortably, you know, without any other of those big deals going. And so I think that just shows, you know, we don't need to depend on large mega deals to still grow at pretty high rates. So I was really happy with the quarter.

I think I would just add to what Stephanie said there, too, is the fact that now we're seeing some acceleration on the flywheel for the cross-sell as that becomes a bigger percent of our total growth that comes over. that kind of fills in the gaps that may happen in between these large sales cycles and some of these larger logos. So that helps to smooth out the AR growth as we go forward.

Thank you. Our next question comes from Samad Samana with Jefferies. Your line is open.

Hey, good morning. Appreciate you guys taking the questions as always. Maybe first, Savvy, I'd appreciate the commentary on on what differentiates your M&A strategy versus maybe some other companies that have kind of a more of a financial sponsor type of view on M&A. And maybe if I build on the question, just as we think about all the transactions that you guys have done and the balance sheet where it is today, if you think about future potential M&A, especially if you think about something transformative, Are one, I guess, are you thinking about an opportunity like that? And if so, should we think about it as something like how would you think about approaching the balance sheet just given the where you've already spent capital recently? Just maybe any color there. And then I have a follow up as well.

That's a great question. So short answer is, you know, we're going to be aggressive. You know, I think some of the. we're, you know, a company that's constantly sort of assessing where are we great and, candidly, where do we suck? And, you know, one of the things that we learn in kind of that really sort of, you know, transparent environment is how do we continue to make our M&A better and better? And I think what I can say to you is because we're so obsessed on the product fitting within par, you know, we haven't made a lot of mistakes. If I look at M&A deals, I sort of think, you know, we really, really got it right. And a lot of that is the integration of the people. If I look at the acquisitions we made last year, you know, we retained well over 90 plus percent of those employees, well over. And that's kind of rare. And that's allowed us to kind of build the momentum from the flywheel from the product side. So that foundational point is we're going to do it again and again. And I think the transformative deals are exciting to us if they fit a product rubric that allows us to create more value to the customer. Because in the end, if we combine the products together and we create more value to the customer, we can then take more value back to par in our shareholders. So we'll absolutely do that. How we fund that, I think, is really dependent upon a few things. One, what's our cost of capital of the levers that we have at the time that we're making the deal? And so if we're buying a business at a multiple that's meaningfully discounted to our equity, we look to use equity. If it's a smaller transaction like we did with Skip this quarter, we're comfortable using cash on the balance sheet. And then I think, you know, given the success we've had in the convert market, we can continue to look at the convert and debt markets. But it really, really is dependent on what's our cost of capital at that time. And then looking at that lens of what doesn't limit our flexibility going forward. Because I think as you've seen with us, you know, we've gone through a period of two years doing nothing and then one year doing two or three deals. And so it's that combination of lowest cost of capital that doesn't mess up our flexibility for the future is kind of how I think about it.

Appreciate that. And also, I appreciate that you use the industry standard of where do we suck to judge as well. Same here about myself. And then maybe just a follow-up for Brian. If I think about the – this is more of a housekeeping question than anything else. It looks like in the slide deck, maybe the ARR was revised for some of the historical numbers. I just wanted to know, is there any kind of divestiture – or is that being rebased because of currency? Just trying to understand what changed in the slide deck for the historical numbers. I'm curious if you knew off the top of your head.

Yes, it's purely related 100% to the FX currency, and that's why we referenced the constant currency. So you saw that in Q3, Q4, post the acquisition of task structure.

Thank you. Our next question comes from Charles Naben with Stevens. Your line is open.

Good morning and thank you for taking my question. Sounds like you're getting a lot of good traction in the payments business. My question there is, I know a few quarters ago you had mentioned that payments was still a bit dilutive to adjusted gross margin. I wanted to just get a sense for the impact on gross margin from the payments business as well as any color you could provide around the size of the size of payments relative to either subscription revenue or total revenue?

Sure. So, you know, payments are still dilutive to gross margin, but they're going in the right direction. So, you know, as you can see, we continue to have nice gross margin expansion. And so even though payments is, you know, not yet at the company-wide gross margins, it's working its way up there. In totality, payments is still less than 10% of our revenues. And remember, critical to us, you know, we collect payments or we report payments on a net basis. So You know, it's still small, but it's working its way there. And I think once it gets to a meaningful size, we'll start breaking it out. But, you know, we're not yet at 10% of total revenue, which is exciting because we have a lot of penetration still to go.

Got it. And as a follow-up, appreciate the comments on tariff exposure. And it sounds like you've made some actions over the past few years that, you know, help alleviate that headwind to some degree. But as we think about that exposure... Could you give us a little color around how quickly that book, the hardware book, turns over? I assume the exposure lies in your incremental deals as well as the contracts that are coming up for renewal. So any color around how that flows through would be helpful.

Yeah, sure. I'll answer that, and then Stephanie can fill in the blanks. But we can also make sure in our contracts that we have the ability to have flexibility in pricing when there's exposure to things such as tariffs. But at the same time, we also make sure, especially because of the high hardware attachment rate to our software as well, that we work with the customers, come to the right resolution. So I think we're feeling comfortable on where we are from a country exposure standpoint. We're being open with all our customers on where we're seeing this move. And I think it's been good conversations. We don't see there being an issue. And then I think also from a supply chain standpoint, we make sure that we have able to kind of pull in as well. And so we've been able to lock in some pricing and pull in some of our POs that we wanted later in the year so that we could actually service our customers. And many of our customers remembered how we were able to supply them back in COVID where others couldn't. And so we've also started seeing POs come in from our customers to help leverage that.

Thank you. Our next question comes from Adam Wyden with ADW Capital. Your line is open.

Yeah. Okay, so a couple things, just to clarify. You said that the four out of the seven are not rolled out. Now, can you clarify, are you talking about new tier one logos that you haven't won? Like, I guess, would you, like, so Popeye's Data Central is not included in that, but, like, for example, if you had won Wendy's point of sale, could that be that, even though you have Wendy's punch? I'm just trying to understand how you sort of think about the tier one logos. Are they brand new logo that you haven't penetrated at all in any capacity? Or is it like a major, could it be a major product like Wendy's point of sale, like that you don't already have? You understand what I'm saying? And how do you sort of define Q1 logo?

Sure. So the seven logos are the ones we refer to, I think on our, about a little over a year ago, after 1BK, when we were talking about the pipeline of, you know, we had said we were in the process, you know, RFP process of seven new customers. Of those, we won four. And we defined tier one as 1,000 stores and above. And they would be, of those seven, six would be net new logos. One would be a major upsell into an existing customer. So six of the seven would be net new logos to par.

Okay. And just to clarify, I have one other question. You're saying the four out of seven have not been rolled out, but then you also sort of said your pipeline has been replenished. So on top of that, you would argue that even though you won those four out of seven, you have another four tier one logos that are in RFP. Is that sort of how you define it being replenished?

Yeah, so I'd say of those four, one has been rolled out, not entirely, and then we've got three coming. And then as far as pipeline being replenished, on a weighted dollar basis, which is the way that we look at pipeline, the dollar value of the pipeline is more than it was when I made that comment over a year ago. Okay, amazing.

And then a little bit more on M&A. You know, obviously you've done a really nice job on M&A. Obviously, you know, you've sort of said you want to be the largest, you know, sort of player in restaurant tech. You know, I'm just curious, like, can you talk about sort of some of the things that you think might be coming to market? And obviously I know it has to be product specific and it has to be, you know, sort of, But, I mean, if you were to say, you know, like what would an ideal par look to you like in three to five years? Like what would sort of be the margin structure and growth rate and sort of scale? I mean, I'm just curious sort of like if you had a canvas and you could say, hey, this is what the business could look like in five years. Like what does that look like to you?

You know, it's an impossible question because if you asked me five years ago, I'm not sure I would have designed where we are today. I would have been wrong and happier with what we have today than what I would have guessed five years ago. You know, what I think is going to happen, what we're shooting for at PAR is we are a really ambitious, ambitious team. And, you know, candidly, if we just stay in our swim lane, I think we'd all be disappointed about what we accomplished. And so I think if you look at us three to five years from now, I suspect that we'll be running the same playbook we've done in restaurants in the retail space as we've just started there. and other adjacent categories where we truly are not the restaurant leader, but the dominant food service leader across many categories more. And so you and I have talked about my love of certain businesses like Roper and others. I think we want to do that, but we want to do that in a more industry-specific manner because as I mentioned on the call, I think what I've learned at PAR is that when you can integrate M&A and create true revenue growth plus stickier customers, and that integration is really critical, I believe you actually deserve a higher multiple because, ostensibly, every acquisition actually makes your business better because it increases the lifetime value of an individual customer because whether they're more sticky or you can increase revenue, so on and so forth. And so I think that's the way that we think about it. And so I would love to create, you know, the next version of one of those businesses, but each vertical would be very, very integrated, like we've done at Park, and I think that's really served us well.

Thank you. Our next question comes from George Sutton with Craig Hallam. Your line is open.

Thank you. Particular congratulations on the Mr. Pickles deal. So, Saadmeet, I'm curious when we talk about the better together in the context of how the RFPs are coming into you. My assumption is the RFPs are typically around one specific area, and then through that process you try to cross-sell or after that process you try to cross-sell. Do you see a scenario where the RFPs graduate to a more mature thought around a broadened technology suite that really limits the potential to you as the provider?

That's an amazing question. The short answer is yes and yes. So RFPs come in, they're generally a single product in nature, and then we work to sort of introduce the other products and hopefully then convince them to do that. But the reason why I said your question is fantastic is, What you just described is what we're seeing happen today. Historically, the deals were, you know, here's an engagement deal, here's a POS deal, and today those are colliding into one. We actually are seeing more and more customers collapse the digital, which would be the digital side of restaurants historically has been the call to marketing and IT world. and the operational side would be the operators in the IT world kind of merge into one buyer. And that has been really, really instructive in how we think about our own business and continuing to collapse and consolidate what we do internally. And so the short answer is we push it the way you described. I believe the market is moving to the way where it will be combined offerings and actually saying, hey, I want these outcomes. Show me how your products get to these outcomes versus give me just a back office solution.

Gotcha. Just one question for clarity. You mentioned that 57% of your deals were multi-product this quarter versus, I believe you said 16% just a year ago. I just want to make sure I heard those numbers. To me, that's an amazing message if that's the case.

So it's even better than that. So in the operator solution side, so we run the two separate business units, as you know. In the operator solution side, 100% of deals have been multi-product the last two quarters. That's just really off the charts. On the engagement side, we're up to 57% of new deals are multi-product, up from 14%. So it's really, really been exciting. A lot of that's been driven by we rebuilt the part ordering product, and that is now being attached into a meaningful amount of deals So, yeah, it's, you know, that's why I sort of talked about it a lot on this call. It's, and again, it's apropos to your prior question, right, which is that the market is kind of coming in that direction. Perfect. Thank you.

Thank you. Our next question comes from Eric Martinuzzi with Lake Street Capital Markets. Your line is open.

Yes, curious to know on the par ops product, which is the amalgamation of the data central and delegate, what was prior to the acquisition of delegate, what was the ARR for a typical data central location?

About $1,500 a year.

Okay. And then what does that expand to if someone adds on delegate or is it just bundled in now?

So Delegate has a couple different modules. So it's anywhere from, call it, you know, $500 up to, you know, $1,300, $1,400, depending on who can buy. All three modules are just one.

Got it. And then a question regarding the hardware. Was there any evidence of people pulling ahead orders in Q1 in anticipation of potential tariff-related inflation?

We see that in Q2. So we did see some of that happen in Q2. So we think Q2 will be strong from a hardware perspective. But hardware, as Brian mentioned, is 20-ish percent of our business now. And so we don't look at that as having tremendous impact quarter to quarter. I think that's the beauty of it, which is the tariffs, while scary for some, we feel are going to manage it really well. And I think the team did such a good job during COVID that we've really got redundant supply chains, very little exposure to China. And so we have seen some of that. I think we'll see maybe a little more throughout this quarter. But, you know, I think we expect the hardware to, you know, continue to be strong for at least Q2 and hopefully the rest of the year. But we haven't, you know, I don't think we and Brian have yet seen, you know, orders getting pushed out because of hardware costs. And I think the result of that is because we've been able to avoid, you know, the China tariff. Got it.

Thank you.

Thank you. As a reminder, to ask a question, please press star 11 on your telephone. Again, that is star 11 to ask a question. Our next question is a follow-up from Adam Wyden with ADW Capital. Your line is open.

Hey, thanks, guys, for taking my question. I know you guys talked about the rebasing of the ARR of about, I guess it was like $3.5 million for constant currency. Can you talk about what the effect on EBITDA was in the quarter and what the actual effect on revenue was? Because it looks like you would have made a lot more EBITDA and a lot more revenue on a constant currency basis. And then as you sort of expect, you're going to have higher incremental margins going forward as the other businesses are sort of growing, sort of going forward. Can you just talk a little bit about that?

Yeah, good question, Adam. I think from an EBITDA or from a revenue standpoint, would have impacted probably about a million from an FX exposure standpoint, and then you're roughly below that call, $700,000 and change from an EBITDA there.

Right.

Okay. Got it. Great. That's it.

Thank you. I'm showing no further questions at this time. I would now like to turn it back to Christopher Burns for closing remarks.

Well, 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. Please have a great weekend and have a nice day.

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