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?