Par Technology Corp Q4 FY2022 Earnings Call

Good day, and thank you for standing by. Welcome to the PAR Technologies Fiscal Year 2022 Fourth Quarter Financial Results. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Chris Byrnes, Senior Vice President of Business Development. Please go ahead.

Thank you, Catherine, and good morning to everyone. I'd also like to welcome you today to the call for PAR's 2022 fourth quarter and year-end financial results review. The complete disclosure of our results can be found in our press release issued this morning as well as in our related Form 8-K furnished to the SEC. To access the press release and the financial details, please see the Investor Relations and News section of our website at www.partech.com. At this time, I'd like to take care of certain details in regards to the call this morning. Participants on the call should be aware that we are recording the call this morning, and it will be available for playback. If you ask a question, it will be included in both our live conference and any future use of the recording. I'd also like to remind participants that this conference call includes 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 Bryan Menar, 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 thanks to everyone for joining the call this morning. I'm pleased to report that our growth momentum continues as we aggressively expand our unified experience to new and existing customers, drive our business to cash flow positive, and deliver customer satisfaction rates that are the highest in the industry. As I've done on prior calls, I'm going to break today's call into three sections. First, a review of our recent quarter results; second, a review of strategic highlights that will lead to future results; and finally, some thoughts on 2023. So first, our results. As I stated previously, I'm convinced that ARR remains the best metric to measure our success as each dollar of ARR is considerable future cash flow. At the end of Q4, ARR reached $111.4 million, delivering a 26.4% year-over-year increase, demonstrating the continued growth and scaling of our subscription services engine. Contracted ARR now stands at $127.3 million, a 21% year-over-year increase from the end of '21 and an 8% increase sequentially from Q3. Today, our unified experience consists of operator solutions, guest engagement, and back office. Operator Solutions, which is Brink in payments, ARR grew 29.6% to $41.6 million in Q4 when compared to the same period last year. During Q4, Operator Solutions added 183 new store activations and new bookings totaled approximately 1,611. Churn continues to be extremely low at 4.3% annualized for Brink in the quarter. We continue to be aggressive in attaching payments to all new Brink deals and see a significant majority of our new customer wins in 2022 have done just that. And in just this past quarter, we went live with 17 new customers. As we've mentioned in the past, this impressive growth has been somewhat muted by supply chain limitations of payment devices, which we expect to clear up later this year. What I like most about payments is that it creates an avenue to consolidate transaction data across all channels, reframing conversations with our customers. Moving to guest engagement ARR that includes our leading customer engagement platform Punchh and newly acquired Menu. Guest engagement ARR grew 26.2% in Q4 when compared to Q4 '21 and totaled $58.9 million. Punchh signed several new customers in Q4, including a 3,000-store fast-casual enterprise and went live in 10 new logos in the quarter. Punchh continues to be best-in-class for loyalty, but we saw some softening in demand at the very end of Q4 and the beginning of '23, as restaurants rely on marketing development dollars to fund loyalty rollout and expansion. Cautions around inflation and price elasticity for restaurants have impacted marketing development funds and in turn, we're expecting a minor slowdown in new customer demand for Punchh in the first half of this year. I continue to be very bullish on Punchh's opportunities going forward, but as always, we prepare for the reality we're giving today. Even with this headwind, we are forecasting total ARR growth across our unified portfolio to be consistent with our 2022 year-over-year growth. Updating the progress of introducing Menu to the United States, we are very encouraged and excited by the early interest and rave reviews we have received from prospective Menu customers. We're already participating in a fair number of RFPs and feel our opportunities for rapid acceleration of new customer wins and revenue growth is upon us. In Q4, we completed the fully integrated ordering capabilities of Menu with Brink, which allows us to start targeting existing customers aggressively. We hope to start booking customer wins starting next quarter. Back Office and Data Central continued its turnaround with the market more focused on cost control. Reported ARR of $10.9 million in Q4 was a 16% increase from last year's Q4. We went live in seven new logos in Q4 and continue to sell into existing Brink and Punchh customers. Notably in the quarter, we signed a popular casual dining wings brand that will add meaningfully to ARR in '23. Also in this deal, we displaced the market leader for labor scheduling, validating the work we did earlier to reinforce our own scheduling module. We had activations of 350 stores in Q4 and a strong booking space of new stores being signed this quarter. We continue to see increased demand for back-of-house technology and applications to control food and labor costs that have a direct impact on improving margins and profitability as inflation, labor, and supply chain issues seem to be ever-present. Moving on from the results, I want to spend a bit of time on three of our strategic initiatives. Last quarter, I talked about our focus on freezing R&D spend and the shift of our R&D resources from technical debt to new product development. We continue to see momentum behind this journey and feel confident the natural shift from technical debt to future development will allow PAR to increase new products without adding new R&D spend. Additionally, our go-to-market plan enables PAR to have a 360 review of our customers to better effectuate cross-sell and the promotion of Unified Commerce. In Q4, we consolidated parts of our sales team to create an account management team to own each of our existing accounts. This allows our customers to have one sales contact across all PAR products, providing a more streamlined view of PAR and a 360 review of the customer's relationship with PAR to enhance our cross-sell. It also gives us accountability on an account-by-account basis to understand our performance with every concept we sell to and help drive performance at the account level. A good example of this momentum is our recent signing of a large restaurant enterprise that has implemented both operator solutions and guest engagement with our Brink POS and Punchh platforms in tandem to enhance their customer experience and drive efficiency in their 900-plus stores. As we roll out and deliver value, our account manager will be tasked with working closely with their team to find avenues for new products that can solve their needs and deliver our unified experience. The second large strategic move PAR made in Q4 was Brink's entry into the table service market. We've been cautious and not overpromising too much, but in Q4, we received commitments from two notable and well-known table service chains. Table service opens up our addressable market to a large and new base that we previously avoided. Table service clients generally pay higher monthly subscription rates as they require more terminals and functionality than our QSR customers and will drive continued ARPU expansion. What's exciting about our first two commitments is that both customers also took our back office and payments offerings, highlighting the strategic fit of our products. While much is made about new technology, the digitization of the restaurant and the move away from in-store, today our customers more than anything else want their products to work and work seamlessly. The third strategic update I want to touch on is data. In today's challenged global economy, PAR unified experience is becoming a must-have for enterprise restaurants. Business complexity continues to increase and homegrown solutions can no longer keep pace. This creates a sustained opportunity for PAR as restaurants adapt and change their business models and evolve their technology platforms. Digital transformation within restaurant enterprises is creating enormous data flows that are all unmanageable with conventional approaches to analytics and data. As restaurants mature in their data analytics practices, the approach becomes unwieldy. PAR is delivering significant value to our customers through the capture and management of this data as the enterprise serves their customers day in and day out. To the unified experience offering, PAR has massive amounts of real-time actionable data for customers that provides the foundation for machine learning-based personalization and analytics. This includes transactional data for Brink, customer identity data for Punchh, and employee inventory data for Data Central. As an example of this scale, three out of every five adults use a Punchh-powered loyalty program and generate $4.7 billion in transactions a year. We make these analytical insights and raw data available to our customers in various ways. Customers can form self-service analytics right in the product itself, including campaign performance analytics, employee reporting, and guest analytics. Customers can export this data on demand for their own analysis and visualization. This capability allows enterprise restaurants to use this mission-critical data to optimize customer engagement, drive operational efficiencies, and ultimately optimize their profitability. As the world embraces artificial intelligence, these datasets and models, we believe will become critical in that automation. Now I'll turn the call over to Bryan for more details on the numbers.

Thank you, Savneet, and good morning, everyone. Before going into the financial details, I'd like to highlight an important change to our financial reporting presentation. We have retroactively split the presentation of our services financial statement line items across new subscription services and professional services. This change is a result of PAR's transformation into a true technology platform provider. With our subscription services line items, consisting of revenues and costs related to our SaaS solutions, recurring software support, and transaction-based payment processing services, subscription services represent 100% of our annual recurring revenue metric. Professional services revenues and costs relate to our portfolio of other support services, including implementation, training, on-site and technical support, as well as hardware repair and installation. In addition to splitting the services line items, we have changed the product line items name to hardware. Now on to the financial performance. Total revenues were $97.7 million for the three months ended December 31, 2022, an increase of 19.7% compared to the three months ended December 31, 2021, with growth coming from both restaurant retail and government segments. Net loss for the fourth quarter of 2022 was $13.5 million or $0.50 loss per share compared to a net loss of $25.6 million or $0.95 loss per share reported in the same period in 2021. Adjusted net loss for the fourth quarter of 2022 was $7 million or $0.26 loss per share compared to an adjusted net loss of $9.8 million or $0.36 loss per share for the same period in 2021. Adjusted EBITDA for the fourth quarter of 2022 was a loss of $2.8 million compared to an adjusted EBITDA loss of $4.9 million for the same period in 2021. Hardware revenue in the quarter was $29.6 million, a decrease of $2.6 million or 8.1% from the $32.2 million reported in the prior year. Both periods were historically high for hardware sales. We continue to see strong hardware sales both with our Tier 1 legacy customers and across our print customer base. Subscription service revenue was reported at $27.9 million, an increase of $8.9 million or 47% from the $18.9 million reported in the prior year, driven by revenue from our guest engagement solutions. Q4 subscription services revenue included approximately $0.6 million of year-to-date adjustments within our guest engagement solutions. The annual recurring revenue exiting the quarter was $111.4 million, an increase of 26.4% compared to Q4 2021 with operator solutions up 29.6%, guest engagement of 26.2%, and back-office up 16%. Professional service revenue was reported at $13.5 million, an increase of $1.9 million or 16.1% from the $11.6 million reported in the prior year, driven by hardware repair services, guest engagement, and operator solutions implementations. Our total recurring revenue base, which includes both subscription services and hardware support contracts within professional services, continues to expand with $34.9 million reported in Q4 2022, an increase of 34.2% compared to the $26 million in Q4 2021. Contract revenue from our Government business was $26.7 million, an increase of $7.9 million or 42.1% from the $18.8 million reported in the fourth quarter of 2021. The increase in contract revenues was driven by a $7.5 million increase in our ISR solutions. The increase in ISR solutions was driven by task orders resulting from the AFRL Counter Small UAS contract awarded in 2021. The contract backlog associated with our government business as of December 31, 2022, was $334 million, an increase of 71% compared to the $195 million backlog as of December 31, 2021. Total funded backlog as of December 31, 2022, was $86 million, a 124% increase compared to the funded backlog of $39 million for the prior year. Now turning to margins. Hardware margins for the quarter were 23.8% versus 23.4% in Q4 2021. We continue to strategically manage market changes in both supply chain and pricing to continue to provide premium products to our customers at competitive pricing while maintaining our margins. Subscription services margin for the quarter was 53% compared to 43.5% reported in the fourth quarter of 2021. We have been successful in driving multi-year subscription services margin improvement with improved hosting utilization, process improvements within support services, and more pricing rigor as we validate our value proposition to our customers. We continue to see additional opportunities for improvement as we enter 2023. Subscription service margin during the three months ended December 31, 2022, included $5.3 million of amortization of identifiable intangible assets compared to $5.1 million of amortization during the three months ended December 31, 2021. Excluding the amortization of intangible assets, total adjusted subscription service margin for the three months ended December 31, 2022, was 72% compared to 70% for the same three months ended December 31, 2021. Professional services margin for the quarter was 23.3% compared to 13.2% reported in the fourth quarter of 2021. The improvement was driven by hardware repair margins. Government contract margins were 4.3% as compared to 6.7% for the fourth quarter of 2021. The decrease in margin was driven by an increase in mission system direct material and labor costs, along with an increase in loss reserves. We expect margins to revert back to historical norms of 6% to 8% in the following quarters. In regards to operating expenses, GAAP SG&A was $25.9 million, an increase of $1 million from the $24.9 million reported in Q4 2021. SG&A decreased $0.6 million or 2.4% when excluding $1.6 million of expenses related to MENU. Net R&D was $14.9 million, an increase of $4.9 million from the $10 million recorded in Q4 2021. Backing out MENU and non-GAAP adjustments, the growth in R&D is $1.8 million or 18%. Included in operating expenses for the fourth quarter was a $4.4 million reduction in the fair value of the contingent consideration liability for the MENU acquisition. This contra expense is a non-GAAP adjustment. Total operating expenses, excluding the contingent liability adjustment, totaled $41.2 million. As Savneet stated earlier, our plan is to hold quarterly operating expenses flat from Q4 2022 through Q4 2023. Net interest was $1.8 million compared to $5.6 million recorded in Q4 2021. The decrease was driven by the reduction of accretion resulting from our January 1, 2022 pronouncement adoption that resulted in our convertible debt securities being wholly accounted for as debt and negated the requirement to record accretion for the conversion feature. Now to provide information on the company's cash flow and balance sheet position. For the 12 months ended December 31, cash used in operating activities was $43.1 million versus $53.2 million for the prior year. Operating cash needs were primarily driven by net loss, net of non-cash charges and additional net working capital requirements. The increase in net working capital requirements was primarily due to the growth of our business. We have been able to reduce gross inventory by $4 million since June 30, 2022, and are focusing on reducing another $3 million to $5 million over the combined following two quarters. Cash used in investing activities was $66.7 million for the 12 months ended December 31 versus $383 million for the prior year. Investing activities during the 12 months ended December 31 included $40.3 million for the purchase of short-term U.S. treasury bills and notes to be held to maturity. $18.4 million of cash consideration for the Q3 2022 MENU acquisition and $1.2 million of cash consideration for the Q1 2022 drive-through tuck-in acquisition. Capitalized software for development technology costs for the 12 months ended December 31 was $6.5 million. Cash used in financing activities was $2.6 million for the 12 months ended December 31 versus cash provided by financing activities of $443.6 million for the prior year. Financing activities for 2022 were driven by stock-based compensation-related transactions. Sales outstanding decreased within the restaurant retail segment from 58 days as of December 31, 2021, to 53 days as of December 31, 2022. These sales outstanding in the Government segment as of December 31, 2022, was 55 days and consistent with the 55 days as of December 31, 2021. Before returning the call back to Savneet, I am pleased to report that we have fully remediated the material weaknesses in our internal controls over financial reporting and are operating effectively. I will now turn the call back over to Savneet for closing remarks prior to moving to Q&A.

Thanks, Bryan. Transitioning to our outlook for 2023, we continue to see strong demand across our business at PAR. While we expect to see some slowness from our Punchh product line, given the macro environment, we feel strongly in the growth in every other segment of our business. Our operator solutions of Brink and payments have become a dynamic combination in the attachment of Data Central and soon MENU comes next. Our goal for this year is to continue to grow our ARR at rates similar to 2022, between 20% and 30% a year. As we look and see decelerating growth around the sector, we think our ability to maintain our growth rates is differentiated, driven by the unified approach. Our customers continue to buy more than one product and once unified, we're able to drive prices given the value we provide. The macro is not an excuse at PAR, and we'll ensure our teams know that no matter what happens, we must deliver a win for our shareholders. Part of this push is that we must continue to demonstrate ROI to our customers such that they are not looking at buying one product from PAR but the entire experience and thereby making our growth even more defensible. As we roll out new product offerings in 2023, I believe we'll have strong proof points to show and clearly demonstrate this to our customers. In addition to our efforts to maintain our revenue growth, we want to reaffirm our focus on driving profitability. As we stated on our last call, we are keeping operating expenses flat from Q4 2022 to Q4 2023, allowing every added dollar of gross margin to hit the bottom line. Our focus on cost control is not new. A good example to highlight is our historical cost controls around SG&A expense. Excluding MENU during 2022, PAR's SG&A actually declined while ARR grew 26.4%. We've been able to continually grow revenue while not increasing overhead. What this number hides, though, is that while costs have come down with this growth, we've been able to increase investments in needed areas of sales and internal IT. As we've proven our ability to hold SG&A costs, we now intend to demonstrate that same discipline on the R&D line. So while the macro environment may be challenged for '23, we at PAR hope to continue to grow through the environment and do so in an incredibly efficient manner. As always, I'd like to thank all of PAR's employees for their dedication and effort over the past quarter. Across the organization, people have stepped up to ensure we meet the needs of our customers, while at the same time, embracing the changes necessary to create a company for long-term sustainable success. With that, I'll open the call for Q&A.

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

Hi, guys, good morning. Appreciate you taking the questions. Savneet, I want to follow-up on some of the weakness that you called out towards the latter part of Q4 and early 2023 in Punchh. I guess, could you maybe provide a little bit more color across of what you're seeing in the market? And I guess just could you talk about confidence level of the demand kind of coming back in the back half of '23?

Sure. So we thought we'd see delays at the very end of December for Punchh. Most of it is tied to the economy, and Punchh is funded through marketing development funds or basically the marketing royalties that concepts bring in from their franchisees. During these challenging times, they tend to cut back on these expenses. We expect this to rebound from the conversations we have with our customers. As I said, we don't think we'll have a material impact on our growth for next year, but we wanted to be transparent that there's been some slowdown on marketing expenses across all restaurant chains in '23.

Got it, that makes sense. And then I guess just maybe can you talk through you mentioned table services and seeing an upsize ARPU in some of those products. I'm just wondering if you could kind of talk through kind of ARPU trends on the operator line and what you guys are seeing sort of like Brink ARPU, uplifts on locations like that relative to the QSR. And then just maybe a quick follow-up on the ARPU guidance I mean, the lower range of ARPU guidance this year, kind of in line with last year, is that largely a function of some of the weakness you're seeing in Punchh, or is there something else that's changing the expectations?

Yes, I'll take the last one first. I think we're trying to maintain our revenue growth year-over-year, which I believe is unique in this environment. Again, if we had not seen that slowdown in Punchh, I think it would have been higher, but we want to make sure that we hit the numbers. So that's kind of how we arrived at our guidance number. On the first part of your question, what was it Will?

You mentioned, higher ARPU for the table services, could you guide there?

Yes, for sure. So on the table service side, we've kept this in our back pocket, but we've been working to enable Brink to function in that market. We've received our first two commitments; table service varies widely in price; oftentimes POS is priced based on the number of terminals in the store. So you can have some table service concepts that will have half a dozen terminals, or some that have 20. In general, I'd say a table service chain will have an uplift of between 40% and 100%, depending on the size of the concept. What's especially exciting is that in the first two commitments we've gotten, they've also taken two of our other products. So they were all bundled deals. And I think that's a trend we'll see going forward in the table service market. So it's not just that I think we'll get to Brink up ARPU uplift, which is a function of the market; I think we'll also have more ability to bundle in that market, too.

Awesome. Appreciate you taking the questions. Thank you.

Thank you. One moment for our next question. It comes from Samad Samana with Jefferies. Your line is open.

Hey, good morning. Thanks for taking my questions. So Savneet, maybe just follow up on the 2023 ARR outlook, how should we think about maybe what some of the underlying assumptions are between the different pieces? It sounds like Punchh may be a bit of a downtick, but I think that implies that the core business is actually doing quite well. So maybe just help us understand the assumptions now that there's several different products that are driving the growth.

Yes, for sure. I think every other segment of PAR on the software side has a potential, and we are planning for acceleration from '22. So, obviously, payments and Brink should have a faster rate of growth in '23 compared to '22. Data Central will have meaningfully faster growth in '23 versus '22. The rest of the business is very strong and we're very excited about it. While we are optimistic about the rebound of Punchh, we want to be cautious given what we're seeing in marketing.

That's helpful. And then maybe on the payment side, now that we're some time in and you've started to see the attach rate move up any early takeaways that we can think about on the go-forward side, whether it's the average size of the chain that's willing to adopt payments, or if you're seeing within a chain is it typically all the franchises are using payments; just any kind of early observations that we can think through as we think about the potential there?

So it's a great question. The first takeaway is that we have a really wide range of customers - from those in our channel segment, those with around 20 stores, to Smoothie King, which we announced earlier in the year, and has well over 1,000 stores. As we move into this year, you'll see a couple of exciting expansions. One is our payments business is much more than just processing transactions; we've expanded into a gateway business. We'll have some cool announcements around partnerships with Apple VAS and other interesting ways to build software around our payments product. The big trend you'll see is that not only will we have a penetration this year, with 80% of Brink findings taking on payments, but we'll also see an expanding product portfolio that are really natural up-sells for the customer base. So, we're seeing very strong uptake. Regarding your last question, all the payments deals we've signed so far are for the entire concept, which is positive for us as most of them are making a deal on behalf of all their franchisees.

Great. Very helpful and congrats on the strong growth and the healthy margins as well.

Thank you. One moment. Our next question comes from Kyle Peterson with Needham and Company. Your line is open.

Great, good morning, guys. This is Kyle on for Mayank. This morning, thanks for taking the questions. I just want to touch on Data Central. Good to see the ARR is kind of heading back in the right direction there after a little bit of a lull earlier in the year. Should we expect that to continue or is there still a little bit of choppiness ahead for that part of the business?

You should expect it to accelerate from here. As I mentioned, we signed these table service chains that are also taking deals from Data Central. In general, we believe we've hit our stride regarding product-market fit and attachment with Brink's new logos, so expect to see substantial growth this year. Previously, we grew about 15%, 16% this year in Data Central. We expect to grow meaningfully higher than that in '23. I mentioned in the last call that we expect all the product lines to do better this year from a percentage growth perspective, outside of Punchh.

Okay, that's helpful. And then I guess, just kind of thinking about the seasonality of the year, I guess it sounds like the second half should be a little better, at least for Punchh. Should we think about that kind of ARR growth rate across the whole business getting better as the year progresses, or is the only blip or change you guys have seen thus far, is kind of within that Punchh product?

I think it'll be consistent throughout the year. We feel like we can make up for any shortfalls from Punchh with the other parts of the business. We're not budgeting for significant seasonality in our models.

Great, thanks, guys.

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

Hi, guys, thank you for taking my questions. I want to talk a little bit about table service because that's been a product that you guys have been talking about for a while. Can you talk about sort of what the pipeline looks like for table service, the kind of ARPU we could expect, and how quickly you can roll that out? Because this is a big game changer in terms of your product roadmap?

So we signed our first two deals at the end of Q4. We'll look to start rolling them out in late first half, second half of the year. As I mentioned earlier, what's exciting is they are meaningfully higher ARPU. The average varies tremendously in this market; table service chains can be priced 25%, 30% higher than the average Brink cost, up to 200% to 300% higher depending on configurations. In general, even a lower-priced table service chain will meaningfully difference from our Brink ARPU. What's interesting here is that the majority of the table service chains in the pipeline are also taking our payments product, increasing our payments opportunity with a higher GMV.

Good. And then, can you talk a little about PAR analytics and the unified commerce platform? Can you comment on how you feel this could be a driver in conjunction with MENU?

The portfolio is doing great. We feel confident that the rest of our portfolio can compensate for any potential slowdown we may see in Punchh in '23. We have quite a bit coming after that. This year, we launched our first unified products, which are built off of multiple PAR products, bringing value to customers who have the full product portfolio. Additionally, we have several new payments products incoming. The ability to leverage data internally is very exciting because we can provide deeper insights to customers. Despite many restaurants having a lot of data, the insights pulled from it are often limited due to data integrity issues. By having a suite of products, we can change that conversation entirely and we’re already seeing more customers choosing multiple products.

I would also like to add that the unified data along with our extensive existing footprint allows us to accelerate the cross-sell opportunities we have. Our recent alignment of our sales organization will help drive and smooth out any kind of headwinds in individual products.

Got it. Lastly, regarding M&A, can you share what the environment looks like currently and your plans for meaningful M&A this year?

Certainly. The M&A market has changed significantly. Smaller tuck-in acquisitions are becoming more rational and we are evaluating several targets that can add to our product suite. We seek products that can be effectively distributed using our sales force. We're also anticipating larger strategic transactions within the next year or two as market conditions have stabilized, and the need for R&D investment will drive consolidation.

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

Hi, good morning. I wanted to ask about the subscription services gross margin. Nice bounce back higher this quarter. Can you talk about some of the moving pieces under that and your outlook for subscription services gross margin in 2023?

I think in 2023 we'll be low 70s for the year. This came back sooner than expected. Although, we still have MENU and payments operating below other products from a gross margin perspective, our run rates on core products are meaningfully higher. We expect continued margin improvement in the coming years partly because of recovering margins from Punchh and as we roll out additional customers with Payments and MENU.

We observed continued improvement in our operator solutions, both from Brink and on the efficiencies, generating further improvements in margins.

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

Thank you, Savneet. Given that you restructured the sales force, what sort of an impact do you think you've seen from that restructure? I'm particularly interested in how it has affected Punchh.

It's still early to discuss the overall impact of the restructure. However, we now have a better view of our customers. If a customer has three of our products, our salesforce can identify opportunities for cross-selling much more effectively than before. We have mapped out every account and their opportunities for upselling, which will drive performance for all accounts. The franchise sales team remains distinct and will continue focusing on small businesses.

Great. And if I could just confirm three notable points you made—17 new customers with payments, a 3,000-store fast casual enterprise, and that labor scheduling has been improving?

Correct on all points. Payment has been doing great, with the majority of Brink deals now incorporating payments. Additionally, we’ve also seen thoughtful leadership in Data Central, which is offering tremendous enhancements in labor scheduling modules. I've mentioned that we expect better growth in this business compared to '22.

Thank you. One moment for our next question. We have a question from Anja Soderstrom from Sidoti. Your line is open.

Hi, thank you for taking our questions. About data ownership, do you own it? And can you use it outside of your current customer base?

The short answer is that it depends on the customer but we can monetize that data in an anonymized way. While we don’t currently plan to do that, we are excited about the potential to build products leveraging that data. The ability to provide deeper insights will enhance the value of our relationships with customers.

Thank you. There are no other questions in the queue. I'd like to turn the call back to Savneet Singh for closing remarks.

Thanks, everyone for joining the call. We look forward to updating you on our progress on our next call.

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