PAR Technology Corporation

Good day and thank you for standing by. Welcome to the PAR Technology Fiscal Year 2025 Fourth Quarter Financial Results Conference Call. At this time, all participants are in a listen-only mode. After this previous 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 your first speaker today, Chris Burns, Senior Vice President, Investor Relations and Business Development. Please go ahead.

Thank you, Stephen. Good afternoon, everyone, and thank you for joining us today for Part Technology's 2025 Fourth Quarter Financial Results Call. Earlier this afternoon, we released our financial results. The earnings release is available on the Investor Relations page of our website at parttech.com. where you can also find the Q4 Financials presentation, as well as in our related form, AK Furnished to the SEC. Before we begin, please be advised that remarks today will contain forward-looking statements. These forward-looking statements are subject to risks, uncertainties, and other factors which could cause actual results to differ materially from those expressed or implied by such forward-looking statements. For additional information on these factors, please refer to our earnings release and our other reports filed with the SEC. Also, we will be discussing or providing certain non-GAAP financial measures today, which we believe will provide additional clarity regarding our ongoing performance. For a full reconciliation of the non-GAAP financial measures discussed in this call to the most comparable GAAP measures in accordance with SEC regulations, please see our press release furnished as an exhibit to our Form 8-K filed this afternoon and the earnings presentation available on the investor relations section of our website. Joining me on the call today is PARCE CEO, Savneet Singh, and Brian Menard is PARCE 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?

Good afternoon, everyone, and thank you for joining us. Before sharing details of the strong Q4 today, I want to reaffirm PARCE thesis. PAR is becoming an AI-driven hospitality platform company. Our two verticals, restaurants and retail, are individually mid-teens ARR growers with significant white space anchored by mission-critical systems of record with deep domain expertise. The compounding nature of PAR's enterprise platform is driven by simultaneously allowing customers to play offense and defense via revenue generation and cost efficiency. This is especially true in times of underlying market instability, We're falling behind in digital adoption, and its resulting margin loss is a formula for customer pain. Aggressive investment into our AI platform will deepen our performance and provide further customer expansion opportunities. We have never felt more confident about our positioning and the opportunity set in front of us. Now to review the numbers. In Q4, we delivered revenue of $120.1 million, up 14% year over year, driven primarily by continued strength in subscription services and an increase in hardware revenue. On a non-GAAP basis, we generated $2.6 million in net income, marking our third consecutive quarter of non-GAAP profitability. Adjusted EBITDA on the quarter was $7 million. Full-year revenue reached $455.5 million, up $105 million year-over-year, including 21% organic growth, with subscription services growing 40%. Most importantly, full-year non-GAAP net income improved by over $30 million year-over-year, proving that our operating model is scaling. We continue to stress operating expense efficiency as we scale our business, and Q4 was no different. As a percentage of subscription revenue, R&D came in at 25%, and sales and marketing at a solid 13%. Respectively, at ahead of our targets, respectively at or ahead of our targets. Turning to ARR. We exited Q4 with ARR of $315.4 million, representing 15% organic growth. Crucially, second-half growth was more than double first-half growth and was powered by cross-sell, with over 80% of deals being multi-product. Growth was broad-based, led by POS momentum and the resumed Burger King rollout, along with continued steady performance from Punch and Plexure. The former continues to win new marquee brands, while the latter benefits from McDonald's international expansion, including a successful Japan launch. We also saw improving trends in ordering and payments. Now to review our business performance in Q4, starting with the operator solutions business. Q4 revalidated our platform strategy. We were selected by Papa John's for a decades-long partnership and their 3,200 sites, and we'll be rolling out par POS and par ops to power their in-store tech stack. This win builds our momentum in the pizza category, with TAM expansion already reflected in significant pizza pipeline for 2026. Further, we anticipate increasing our partnership with Papa John's in the future, with both expansion to select international markets and continued expansion within our platform. In addition to this marquee project, our bookings exceeded internal expectations and hit record highs, with over 25 million booked for PAR POS alone. The mix skewed heavily towards enterprise, multi-unit, multi-product deployments. Enterprise customers are not buying point solutions. They're buying a unified platform with POS as the gateway into the broader PAR ecosystem. Our attach rates confirmed this. Nearly 90% of Q4 operator deals were multi-product in nature. Additionally, we continued to progress on our large tier one opportunities, The world's largest brands continue to show more and more interest in the PAR platform and will update investors as we convert these opportunities to bookings. We're hopeful that our intense focus on AI helps accelerate these opportunities as these brands are looking for ways to become AI-driven ahead of their peers. PAR Ops, our back office offering, is evolving from analytics to intelligence, and even more importantly, product capability accelerated. Our first AI product, Coach AI, is now being utilized by nearly 1,000 stores with roughly 1,000 active users, indicating high usability and market fit. Since launch, we've added enhancements and improved both usability and contextual awareness. The current version of Coach AI moves us into prescriptive operator recommendations, not just showing personnel what happened, but telling them what to do next. Crucially, we are embedding AI directly into daily workflows and are building towards a full self-driving product that is capable of direct and immediate store optimization. This is not incremental enhancement. This is margin driving capability for operators. The industry does not need more dashboards. It needs fewer decisions and better ones. Our goal is to embed intelligence into every operational layer such that actions drive outcomes. One of the most encouraging signals this quarter was the breadth and quality of momentum across our engagement cloud, both with new logos and existing customers. Starting with Punch, we signed two new noteworthy brands, including Shake Shack, and also expanding meaningfully into the adjacent e-tertainment vertical with Lucky Strike Entertainment, which opens up a compelling new category for us. These wins reinforce Punch's position as a category leader and validates our ability to extend the platform into new high-value segments. Ordering continued its strong momentum, adding six new brands in the quarter, including Savvy Sliders and Smokey Moe's. Importantly, these weren't standalone wins. They increasingly came as part of a broader multi-product engagement, which speaks to how customers are buying the platform rather than the point solution. Across PAR engagement, co-sale and cross-sale momentum continues to build. More than 80% of new deals are now multi-product, consistent with last quarter and still trending higher. This quarter included the first large sale of PAR catering to Condado Tacos, where we successfully displaced a competitor. We also had the first major deployment of PAR games with Smoothie King and the first significant sale of PAR Smart Passes. Our retail delivered a strong quarter that demonstrated continued scale, engagement, and execution across the platform, particularly with our largest enterprise customers. One of PAR Retail's newest and largest C-Store customers is driving improved results as their program now exceeds 3.6 million members and continues to drive measurable changes in customer behavior. We are seeing higher visitor frequency, richer customer data, and clear monetization benefits across categories. We continue to see broad adoption of PAR retail as three new customers launch on the platform in Q4. But it gets better. I'm also excited to announce the launch of our newest AI product for C-stores and fuel retailers, PAR Drive AI. a fully integrated AI suite built directly into our unified platform. This isn't AI layered on top. It's intelligence embedded into the systems convenience and fuel retailers you already use every single day. Not only making us AI native, but building AI in the workflow our customers run today alongside the security, data, and intelligence our customers trust today. We also saw strong performance in the quarter driven by increased hardware demand by our restaurant customers and deployment activity across several of our large enterprise customers. Some of this acceleration is due to the switch over by restaurants to edge compute. Later this year, we'll be coming out with Par's own portfolio to help support this move. We also saw strong momentum with new store openings and continued kiosk expansion, reinforcing the role of self-service and digital ordering within large QSR environments. In Q4, we experienced steady demand across large POS enterprise brands, including Dairy Queen and Burger King, where ongoing remodel activity, platform upgrades, and new unit growth continue to drive consistent deployment volume. Even with a strong Q4, we saw significant cost pressures on key components, including solid-state drives, memory, and processors being driven by significant demand from AI infrastructure build-outs, which is tightening availability and creating elevated pricing across the broader compute supply chain. We're moving early and aggressively with measures to protect our core hardware product lines, while also rationalizing configuration and offerings based on component availability and evolving customer needs. As of today, we expect component cost pressures and constrained availability to persist until supply more fully catches up with demand, which we believe could extend into 2027. Importantly, we remain focused on mitigation through supplier diversification, product flexibility, and the pricing discipline to ensure we can continue supporting customers. Before turning the call over to Brian, I wanted to share a perspective on AI and its impact on software, and even more specifically on PAR. The market fear around the durability of software in an AI-first world is palpable. I would be tone deaf not to address this directly. PAR has suffered an extreme sell-down. We are at one of those rare moments where a technology shift is structural. For those of us in the restaurant technology space, we believe this moment represents an opportunity to lead. There are two key realities that guide us as we position PAR to be the leader in AI technology for restaurants. First, food service chains are among the most compelling environments for AI to create real, measurable value. Food service is a performance business. Brands compete on speed, consistency, and quality, and their guests are already conditioned to engage digitally. At the same time, rising costs Structural labor challenge and tight margins mean AI isn't being evaluated as a future capability, but rather as a near-term operational imperative. We believe that among all physical businesses, restaurant AI adoption by end users will be amongst the fastest. And second, PAR is uniquely positioned to be the company that delivers it. PAR owns and is the ecosystem of record for tens of thousands of restaurants. Every transaction, every labor input, every menu item, every guest interaction, every payment event, PAR is best positioned to be the provider that delivers an intelligent operating system where POS captures the data, payments enriches the data, loyalty identifies the guest, PAR Ops structures the insight, and PAR AI delivers prescriptive action. We believe that the winners of AI have three key components. A massive trove of industry-wide first and third-party data. Second, the complex integration into an end-to-end workflow. And third, customer trust. The least measurable and hardest to come by of the three. For PAR, we have all three. Our AI strategy isn't about adding a chatbot on top of our products. We are rethinking our entire product suite to deliver measurable outcomes autonomously. The vision stated plainly. we are building a platform that gives every restaurant brand the firepower of the biggest brands in their segments. A single marketing manager at a 200 location chain should be able to execute with the precision, personalization, and speed of the entire marketing department of the world's largest restaurant. We'll empower them with a team of AI agents that actually do the work, strategize a new plan, build segmented audiences, configure campaigns, deploy one-to-one offers, optimizing in real time and reporting back what worked and what didn't. Or imagine the regional ops leader overseeing 150 stores, empowering them with the situational awareness of a Fortune 500-fueled organization through an AI layer that watches every location and flags what matters, recommends what to do, and executes the fix before it becomes a problem. Now zoom in to the general manager opening the store at 5 a.m. This lead should walk in with the preparedness of an executive chef running Eleven Madison. knowing exactly what to prep, who's coming in, what's trending, and where yesterday's gaps were. A guest pulling into the drive-thru should experience something that feels like their favorite local spot remembers them and they're talking to a friend. The pattern is the same in every case. AI eliminates the gap between what small teams can do and what the best operators in the world actually do. Nobody needs another chat interface. What brands need is a system that advises you before you ask, assists while you execute, and answers when you need it, across every function, at every location, with the ultimate goal of driving profitable revenue. That level of scale and dependency makes PAR well-situated in the deterministic orchestration layer of this new world. AI won't replace enterprise orchestration, but rather leverage it. We are seeing this firsthand with our customers today. Brian?