Good day and thank you for standing by. Welcome to PAR Technologies’ Fiscal Year 2023 Third Quarter Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. 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 Byrnes, Senior Vice President of Business Development. Please go ahead.

Thank you, Steven, and good afternoon, everyone. And thank you for joining us for today’s call to review our third quarter financial results. Following the close of trading this afternoon, we released our financial results. The earnings release is available on the Investor Relations page of our website at partech.com, where you can also find the Q3 financials presentation as well as in our related Form 8-K 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. The 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. As Steven said, I'd like also 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 is subject to the Safe Harbor statement included in our earnings release this afternoon, and in our annual and quarterly filings with the SEC. Finally, as Steven said earlier, I'd like to remind everyone that this call is being recorded, and it will be made available for replay via a link available on the Investor Relations section of our website. 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.

Thanks, Chris. Good afternoon, everyone, and thank you for joining us on today's call. I'm pleased to report we delivered a strong third quarter. We grew subscription revenue by 24.6% and ARR by 20.4% year-over-year. Adjusted EBITDA improved by over 65% from the same period last year to negative $2.6 million, and contracted ARR came in at $143 million in the quarter. Our gross margins rebounded as we messaged last quarter, and we continue to hold OpEx flat while making important internal investments. Operator Solutions ARR grew 38.3% to $53.8 million in Q3, when compared to the same period last year. Operator Solutions ARPU increased by 20% from the same period last year due to higher value projects, often with multiproduct bundling, price increases, and PAR payment service implementations. We are seeing continued elasticity of demand in this business unit and expect this trend to continue. Churn continues to be extremely low at 4.1% annualized for Brink in the quarter. We continue to win new customer opportunities with Brink due to its mission-critical position within the restaurant industry and the feature-rich capabilities of our proven, stable, and scalable cloud platform. Brink is the growth enabler for enterprise and emerging enterprise restaurants. This proved out in Q3, as we announced the signing of Burger King as our next exclusive Brink and MENU customer, with our products to be rolled out across our 7,000 domestic stores. This deal proves our enterprise reach and signals the beginning of what we expect will be a wave of Tier 1 brands transitioning from legacy third-party and internally developed systems to modern SaaS-based products like Brink. Brink is uniquely positioned in this environment, both due to its status as a category-leading cloud-native product, as well as our ability to partner and innovate with our multiproduct offerings. Our pipeline continues to be robust with ample white space for cross-sell opportunities. Our intent is to expand our relationship within RBI and their restaurant brands. RBI has over 30,000 restaurants globally with brands that include Tim Hortons, Popeyes, and Firehouse Subs, along with Burger King. Moreover, as we execute against the Burger King plan, we anticipate building deeper partnerships with Burger King and we'll look to push out the longer-term roadmap of unified commerce, starting with Brink, MENU, and Data Central. It's hard to express how transformative this new customer will be from both the strategic and financial aspects of PAR. This selection by Burger King, one of the largest and most iconic restaurant brands, is something that we will build upon for years to come. Burger King will be a strong revenue driver for PAR over the next two years as we work through our rollout plans with them this quarter, and we will update you on our Q4 call with the financial impact and timing expectations of that growth. Both PAR and BK are committed to an aggressive push to deliver on BK's goals of unified POS. I see this as a turning point for PAR in our broader industry as we are well positioned in the market to secure additional deals as other large enterprise restaurant companies look to unify their POS, consolidate vendors, and bring on a growth enabler like Brink. Moving to payments, in Q3, we saw ARR from PAR payment services more than double from Q3 2022, and we expect this growth trajectory to continue. This is incredibly impressive as we report payments on a net basis after all third-party and interchange costs. We saw momentum in the third quarter with customer adoption across our in-store, online, and one-tap loyalty programs. In Q3, we signed brands such as Rocky Mountain Chocolate Factory, Hat Creek Burger, and Coconut Kenny’s. We completed the system-wide rollout with Smoothie King across 1,100 stores and initiated rollouts with CHOP and Clean Eat. Customers are increasingly attaching PAR payments via Brink, MENU, and Punchh, again validating our unified commerce strategy. Furthermore, customers are seeing robust ROI in our Unified Commerce integration and innovation. One-Tap loyalty, which combines Brink, Punchh, and payments, is driving a 70% increase in loyalty program sign-ups for Apple Wallet users and a 23% increase in repeat visits per customer using Apple Wallet. We believe that PAR's multiproduct offering gives us a strong competitive advantage and moat in the current market climate, providing bundled savings and incremental ROI at a time when tech spend is under scrutiny. Moving to guest engagement ARR, which includes our leading customer engagement platform Punchh and the digital ordering platform MENU. Guest engagement ARR grew 8.2% in Q3 compared to Q3 2022, totaling approximately $62.2 million. We again saw record usage across the Punchh platform and are encouraged by the increased customer value we are delivering daily. We went live with new customers, including Booster Juice, Smokin' Joe Barbecue, and DASH during the quarter. Equally important, we are seeing the pipeline build after a slow start at the beginning of the year and expect to announce some exciting deals in the coming quarters. Notably, while Punchh has very low churn, we are even seeing a few brands that churned from Punchh over the last few years return as they now realize Punchh delivers the most value in the marketplace. We have invested in our platform to better support our customers' business requirements and are proactively adding features to increase our addressable market and the ability to raise prices in the renewal cycles. The other important component of guest engagement is our digital ordering engine, MENU. MENU is signing up new customers at a rapid pace. Excluding Burger King, we signed over 750 locations in Q3. Scooters Coffee, Coconut Kenny's, and Restaurant Services Limited all signed during the past quarter. The new customer pipeline for Q4 is healthy and will drive additional logo signings. In Q3, MENU's integration was fully certified on DoorDash, Grubhub, and Uber Eats, and we successfully piloted RBI on those integrations. We went live with our first customer in the U.S. and now have over 1,100 sites signed up on MENU. The majority of our MENU signings include payment attachment. We continue to believe these early customer signings validate our investment thesis on MENU and that MENU was a key part of our win with Burger King. Back office and Data Central delivered a solid quarter, with reported ARR of $12.4 million in Q3, a 21% increase from last year's Q3. We now have more than 7,500 active stores. In the quarter, we went live with Hoda's Restaurants, Earl Enterprises, and expanded our relationship with Love's Travel Stops. Briefly touching on hardware, we had another solid quarter and continued to see high attachment rates with Brink and also in shoulder markets that have rugged environments with high traffic and require maximum hardware performance and industry-leading reliability. Moving to the operating levers of our financial model within subscription services, adjusted gross margins for subscription services year-to-date expanded to 67%. As we spoke about last quarter, one-time items and investment spend brought down Q2 gross margins, but we saw a strong return from those investments this quarter and a reduction of one-time credits. Our goal in the medium term is to achieve adjusted gross margins of 70% plus in the long run, aiming for the mid-70s and higher. Over the last year, our software transition has made subscription services our largest business, and similar to how we broke out subscription services as a revenue line this year, in our coming releases, we will begin to provide more detail on the makeup of not just our gross margin, but the operating expenses supporting the growth in subscription services. As a start, when looking at Q3, we roughly estimate sales and marketing expenses for our subscription services to be around 25% of ARR. As we continue to grow revenues at a strong pace, we expect this number to continue to work its way down to our long-term goal of 15% or less. As we work through shared cost allocations, we'll provide more detail in the coming releases on how this number is trending. R&D expense as a percent of ARR in Q3 was estimated at around 41%. R&D efficiency has been a huge focus for PAR, and we'll continue to work this number down to our long-term target of 25% of ARR. Our investment in MENU has slowed our efficiency here a bit, but we'll see continued improvement going forward. As our revenue expands, we will see this move rapidly. Without MENU, our R&D expense as a percent of ARR would have been 400 basis points better. However, we believe we'll get that investment back in spades in time. Again, in the coming releases, we'll provide more details so you can track our progress towards our long-term targets. These improvements have been layered on a G&A base that we are continuing to hold tight on. But what's notable in our results is that we've been able to expand gross margin and keep operating expenses nearly flat while making tremendous investments in MENU, ramping headcount for Burger King, and making significant internal investments into IT systems. These three large investments are being made without adding to our operating expenses. We estimate that while OpEx has remained nearly flat for the last four quarters, we've actually made incremental investments of approximately $9 million in new internal IT, Burger King ramp-up, and the additional MENU investments needed for the U.S. market, all without adding to our OpEx base. This has been achieved by reallocating our capital and teams to investment areas and becoming tremendously more efficient within Brink, Punchh, and Data Central. To highlight just how efficient we've become, hypothetically, if we were to remove MENU from our P&L, our adjusted EBITDA would have been positive for this quarter, a remarkable accomplishment when considering where we were just one year ago. I mention this to underscore two points. First, our core business of Brink, Punchh, and Data Central have become efficient very quickly. While our spend on MENU and Burger King may obscure this, it shouldn't be overlooked how well our teams have been performing. Secondly, we believe our investments in MENU, IT, and Burger King will be worth the short-term pain. MENU’s win at Burger King is the first of many proof points to come. Our plan is simple: to continue driving strong revenue growth while maintaining tight control over operating expenses. We're pushing aggressively towards the Rule of 40, and our path here will be accelerated with the additional acquisitions we expect in the near future. Bryan will now review the numbers in more detail, and I'll come back at the end.

Thank you, Savneet, and good afternoon, everyone. Total revenues were $107.1 million for the three months ended September 30, 2023, an increase of 15.5% compared to the three months ended September 30, 2022, with growth coming from contracts and subscription services revenue, partially offset by hardware and professional service revenue. Net loss for the third quarter of 2023 was $15.5 million or $0.56 loss per share compared to a net loss of $21.3 million or $0.79 loss per share reported for the same period in 2022. Adjusted net loss for the third quarter of 2023 was $5.8 million or $0.21 loss per share compared to an adjusted net loss of $11.9 million or $0.44 loss per share for the same period in 2022. Adjusted EBITDA for the third quarter of 2023 was a loss of $2.6 million compared to an adjusted EBITDA loss of $8 million for the same period in 2022. This improvement was driven by an increase in subscription services margin and our continued commitment to maintaining flat operating expenses, while allocating investments for MENU, internal enterprise systems, and the Burger King rollout. Hardware revenue in the quarter was $25.8 million, a decrease of $5.5 million or 17.6% from the $31.3 million reported in the prior year. The $25.8 million revenue recorded in Q3 is consistent with Q1 and Q2 results and in line with expectations. Subscription Services revenue was reported at $31.4 million, an increase of $6.2 million or 24.6% from the $25.2 million reported in the prior year. The increase was primarily driven by increased subscription services revenue from our Operator Solutions business of $4.2 million, which was driven by a 21% increase in active sites and a 20% increase in average revenue per site. The remaining increase of $1.7 million was driven by increased subscription services revenue from our guest engagement business, driven by a 1.5% increase in active sites and a 5% increase in average revenue per site. The 1.5% increase in guest engagement sites is a result of approximately 6% site growth, partially offset by 5% site churn. We've managed churn as we transition MENU's strategy from international to North America while managing the inflection point of Punchh's product maturity to enable continued site growth and noted increase in product usage from our existing customer base. The annual recurring revenue exiting the quarter was $128.3 million, an increase of 20.4% from last year's Q3, with Operator Solutions up 38%, guest engagement up 8%, and back-of-house up 21%. Professional services revenue was reported at $11.5 million, a decrease of $0.3 million or 2.8% from $11.8 million reported in the prior year. Of the professional services revenue in the quarter, $7.2 million consisted of recurring revenue primarily from our hardware support contracts. Contract revenue from our government business was $38.4 million, an increase of $14 million or 57.4% from the $24.4 million reported in the third quarter of 2022. The increase in contract revenues was driven by a $14.6 million increase in our government's ISR Solution product line, which saw substantial growth from Counter-UAS task orders. Contract backlog with our government business as of September 30, 2023, was $327.5 million, a decrease of 5% compared to $344.8 million as of September 30, 2022. Total funded backlog as of September 30 was $88.3 million. Now turning to margins, hardware margin for the quarter was 25.3% versus 18.8% in Q3 2022. The increase in margin year-over-year was driven by improved inventory and cost management with kitchen displays, mobile, and drive-through products. The team continues to effectively manage costs in addition to pricing where deemed appropriate. We continue to expect overall hardware margins of at least 20% as we move forward. Subscription services margin for the quarter was 50.6%, compared to 48.1% for the third quarter of 2022. The increase in margin is driven by continued improvements in our hosting and customer support costs. Sequentially, the subscription services margin of 50.6% improved compared to 43.3% in Q2. Subscription services margin for the three months ended September 30, 2023, included $5.8 million of amortization of identifiable intangible assets compared to $5.3 million for Q2. Excluding the amortization of intangible assets, total adjusted subscription services margin for the three months ended September 30th was 69% compared to 61% in Q2. The increase in margin is driven by the reduction of one-time credits and efficiencies from investments we made in Q1 and Q2. Professional service margin for the quarter was 23.8% compared to 7.4% reported in the third quarter of 2022. The increase in margin was driven by timing adjustments, including identified use cases in Q3 2023 for previously reserved service inventories. We expect professional services margin to transition back to the mid- to high teens as we end the year, consistent with the professional services margin of 17% for the nine months ended September 30, 2023. Government contract margins were 7.9% as compared to 10.4% for Q3 2023. Margins bounced back to normal historical levels during the quarter as the team transitioned to internal direct labor to properly support task orders and improve margins compared to the 4.3% recorded in Q2 2023. As for operating expenses, GAAP SG&A was $26.2 million, a decrease of $0.3 million from the $26.5 million reported in Q3 2022. The decrease was driven by lower benefit expenses and corporate expenses. Net R&D was $14.7 million, an increase of $1.8 million from the $12.8 million recorded in Q3 2022. Excluding MENU and non-GAAP adjustments, R&D grew by $1.1 million or 7%. The increase relates to personnel hired as we continue to enhance and diversify our product and service offerings, including the ramp-up needed for our recent Burger King win. Sequentially, the net R&D expense of $14.7 million in Q3 was down $0.2 million from the $14.9 million reported in Q2 as we continue to manage the effectiveness of our R&D investments. Total non-GAAP operating expenses were $37 million, an increase of $1.6 million versus Q3 2022. Excluding MENU, we are flat versus Q3 2022. As we indicated at the end of 2022, we will continue to manage the growth of our business while keeping 2023 operating expenses flat compared to 2022's exit rate. Net interest expense was $1.7 million compared to $2.1 million recorded in Q3 2022. The decrease was driven by increased interest revenue from our short-term investments in 2023. Now to provide information on the company's cash flow and balance sheet position. For the nine months ended September 30, cash used in operating activities was $18.5 million versus $33.6 million for the prior year. The reduction in cash burn compared to the prior year was due to management of net working capital, primarily resulting from improved inventory management as well as the impact of operating leverage stemming from our flat OpEx. Cash used in investing activities was $4.8 million for the nine months ended September 30 versus $64.3 million for the prior year. Investing activities during the nine months ended September 30, 2023, included capital expenditures of $5 million for internal enterprise system software, $3.4 million for developed technology associated with the restaurant retail software platforms, partially offset by $3.6 million from the transfer of short-term investments. Cash used in financing activities was $1.8 million for the nine months ended September 30 compared to $2 million for the prior year, driven by stock-based compensation-related transactions. Days sales outstanding for the restaurant and retail segment increased from 53 days as of December 31, 2022, to 60 days as of September 30, 2023. We expect DSO levels to return to historical levels in the lower 50-day range. Days sales outstanding for the government segment decreased from 55 days as of December 31, 2022, to 46 days as of September 30, 2023. As we reflect on our Q3 performance, we delivered on improving margin rates and allowing those margin gains to flow through to the bottom line as we continue to manage OpEx investments to drive profitability improvement. As Savneet mentioned, we've made considerable investments in internal IT and MENU development without materially increasing the R&D and G&A base. This reallocation of resources highlights the agility of our team. ARR and corresponding subscription services revenue are our growth drivers, and we are confident there is significant growth runway ahead of us with both cross-sell acceleration and new logo wins such as our recent Burger King announcement. I will now turn the call back over to Savneet for closing remarks prior to moving to Q&A.

Thanks, Bryan. Let me wrap up with a few key messages before we open the call for Q&A. We are at a unique point of inflection at PAR. We believe our business is winning at a higher rate than ever. At the same time, we're observing a strong change in our financial profile. What makes us even more positive is that we believe we're just at the beginning of a tidal wave of large deals coming to market, which should provide for long-term sustainable growth. In our next earnings call, we look forward to giving guidance on the details of that growth, in addition to more color on our big rollout, as well as more detail on our buckets of spending so that you can have clarity on how to get to the Rule of 40. Second, as I mentioned earlier, what I think is hidden in our results is that while it looks like we aren't growing investment spend as viewed by our flat operating expenses, in reality, we're spending large amounts on MENU, internal IT, and Burger King, all without increasing our existing expense base. Third, we are working towards a Rule of 40. This quarter, our adjusted EBITDA was negative $2.6 million. As I mentioned, if we backed out MENU from Q3, our adjusted EBITDA would have been positive. Similar to my last point, our core products of Brink, Payments, Punchh, and Data Central are becoming very profitable, allowing us to pump money into our growth engines. We are making the investments into MENU, Burger King, and internal IT because we believe we'll make a return that far exceeds the investment, and our win at Burger King has proven the value of that spend already. This also reinforces the point I made on our Q3 2022 call. I shared that for roughly every dollar of sales and marketing expense, we add about $1 of ARR. What we've shown since then is that for those incremental dollars of ARR, we have not needed to grow R&D, sales and marketing, or G&A to realize that new revenue. Each dollar of new gross profit from these new ARR has flowed to the bottom line as we have not added new OpEx. I think this highlights the scalability of our business and the underlying true cash flow of each new contract we signed. Adding new customers with our existing product suite requires little to no incremental R&D, sales and marketing, and G&A expense. We're working hard to balance our focus on profitability with reinvesting in our products to maintain long-term revenue growth and maximize our total addressable market. But more is to come, and we'll use that same focus on profitability that we have shown on our existing products on MENU once it scales. This has also given us tremendous confidence to move faster on acquisitions, as our playbook is working. In summary, our competitive position has never been stronger. Our strategy is winning and is aligned with the market at the right time. It's a special opportunity that we are not taking lightly. Restaurants need to consolidate vendors, unify their systems and data, and PAR is the only player of enterprise scale that we believe is worthy of their trust. In closing, I'd like to thank our global team for their efforts and dedication, leading to this continued success at PAR. With that, I'll open the call to the Q&A.

Thank you. At this time, we will conduct a question-and-answer session. Our first question comes from the line of Will Nance of Goldman Sachs. Your line is now open.

Hey, guys. Appreciate you taking the question. And thank you for all the helpful details looking forward to all the new disclosures in the coming quarter. I wanted to maybe start on the BK win. So you mentioned you think this kicks off a wave of Tier 1 restaurants looking to upgrade their technology going forward. Wonder if maybe you could kind of double-click on that. What are you seeing in the market? What do you think the timeline is on that wave? And then maybe on the BK win specifically, could you maybe give us a little better sense for how the RFP process went for this? How long did it take? How many competitors were in the process? And any color on whether you were seeing more legacy competitors in that process or maybe more challengers like yourself? And then how do you think about the competitive positioning going forward with this win under your belt? Thanks.

Yes. Regarding the first question, we feel like we're at the beginning of that tidal wave. Just this quarter, we've seen more RFPs and interest from the largest brands in the world than we have in my entire time at PAR as it relates to POS. We also see that in loyalty within Punchh. It seems to have kicked off, and I don't think it was coordinated, but there is this movement by large players to look at third-party software, because it's incredibly expensive to maintain in-house IT systems. It's very challenging to keep them modern, and the advantage of having a modern software product is you benefit from the development we do for everyone. We've been notified of more RFPs in the last couple of months than ever before—so very exciting. As for our big win, all processes are competitive. For a deal this size that's exclusive and mandated, it's incredibly competitive. The competition typically involves the large enterprise players. There isn't another large upstart like ourselves in the enterprise space capable of handling the scale, volume, and innovative demands of a brand as large as BK. Ultimately, it came down to firstly our product, which, if you talk to anyone there, they would attest that we prevailed clearly on product. Secondly, I believe there was a sense of culture and alignment of intent; unifying POS is a significant project, and they wanted to execute it quickly. They felt that our culture resonated with their goals. This win showcased all the strengths of PAR: our product, our culture, our speed, and our ability to execute quickly.

Got it. Very well. Regarding the government contract business, obviously, it's firing on all cylinders right now. I know you've previously mentioned wanting to ensure the market appreciates the momentum there and the size of some of the recent contract wins. Given what's happening now, is this the right time to evaluate a process for that business? Can performance improve further? And I ask in the context of the numerous initiatives you have underway, including the huge win, ramping expenses to accommodate, menu, and ongoing acquisitions.

No doubt, the time is right. In our Q2 MD&A, you can see we're continuing those strategic alternatives for that business, and we will push forward aggressively because we believe it's the right time. Regarding ramping up for Burger King, the beauty of this deal is that while we ramp up quickly, we're very quickly compensated for it. There's short-term spend, but long-term, it's incredibly profitable. So I'm confident about that. I believe our investment will primarily be for M&A in the direction we want to take. We don't necessarily need to divest the business to fund the growth we see in MENU and Burger King, among other large deals.

Got it. That's very helpful. I appreciate you taking the questions today.

Thanks, Will.

Thank you. One moment for our next question. Next question comes from the line of George Sutton of Craig-Hallum. Your line is now open.

Thank you. Savneet, congrats on the BK win! So, I'm curious in terms of capacity for what you can rollout. You did about 1,200 units this quarter. Can you provide a sense of how quickly you can scale that without incurring substantial additional costs?

I would say today, if we did nothing, we could possibly double that. Obviously, we'll ramp up as needed. Right now, we're working out the rollout plans with BK. I should be able to announce the ramp-up next quarter. It will be aggressive, and a big aspect of their evaluation of PAR was our ability to handle the scale and bursts in demand. That contributed to why we won.

As you're reviewing large-scale RFPs, how many focus on POS versus a more unified solution?

I would say they often start with POS, and then we bring more to the table. Our goal is to begin with at least two products. The situation with BK was a prime example. Looking ahead, most opportunities will also entail multiproduct deals. We also have one that is a four-product deal in progress. The market has turned towards our strategy, and there's significant demand for simplification and vendor consolidation. The fact that we had the MENU offering integrated with Brink likely provided us an edge with BK. Other brands will likely look at us similarly, particularly when considering online ordering and back-office capabilities.

Just to clarify, in a four-product deal, the list of competitors shortens significantly, is that correct?

Indeed, I don't think others claim to offer three or four products effectively. In a climate where tech spending is scrutinized, that pitch is particularly attractive.

Thank you very much.

Thank you. Next question comes from the line of Samad Samana of Jefferies. Your line is now open.

Hey guys, this is Jeremy Sahler on for Samad Samana. Thanks for taking the questions. Regarding the guest engagement churn, you mentioned it briefly in your opening remarks; it was connected to bringing MENU to the U.S. market. Can you elaborate on that? What exactly contributed to the churn?

It's nothing significant. When we acquired MENU, it had a portion of its business focused internationally. We decided to transition it to focus on the U.S., an area where we think we can achieve quicker profitability. Given that BK was our first major customer, we needed all hands on deck to ensure that win.

Thanks for the clarity. And following up on the rebates issued last quarter, there seems to be some infrastructure investment required. Are you all caught up on that, or are there still investments needed to reach full speed?

We've seen our gross margin rebound significantly this quarter. Some of that was linked to the investments made last quarter and the absence of credit issues. We're finding that ongoing investments are necessary, but I don't foresee our gross margins plummeting again as they did in Q2. We aim to continue improving, targeting 70% plus in the near-to-medium term and much higher long-term. A significant portion of this success depends on our ability to make Brink more scalable, which is where we face our highest operational costs. The ramping up of payments and MENU will also contribute, as both exhibit high margins but are still early in their lifecycle.

Understood. Thank you for the helpful insights. One last question—recently, we observed a competitor's significant brand choosing to bring their tech stack in-house. Does that raise concern about a broader trend in the industry? Are you witnessing that among any of your prospects?

On the contrary, we're witnessing the opposite. Brink is a great example of that, and we have other instances to discuss later. We see more enterprises recognizing the need for robust POS solutions like ours. If you're a single-product company addressing one specific need, you expose yourself to that risk. However, with our comprehensive POS capabilities, we help streamline vendor management for clients. All factors considered, we don’t see this trend becoming prevalent in our market, largely due to the versatile nature of our products.

Thanks for your insights.

Thank you. One moment for our next question. Our next question comes from the line of Adam Wyden of ADW Capital. Your line is now open.

Thanks, guys. I've got three questions. First, impressive gross margin pickup clean on the burn. Assuming no gross margin degradation, if you add $5 million of ARR next quarter, at 80% incremental gross margin or even 70%, it's fair to think you'd be EBITDA positive in Q4. Is it unreasonable to expect that you could hit that EBITDA breakeven point in Q4? And is it fair to assume you have a path to the Rule of 40 without M&A? Obviously, M&A would help accelerate, but do you feel there's a path to low-40s based on your numbers?

Yes. I believe we can indeed reach the low-40s without M&A. Let me address that in two ways. This Burger King deal is likely to accelerate our growth in subsequent years. We may see faster growth in 2024 compared to 2023. Additionally, this is not the only deal; there are more opportunities anticipated that will further expand our revenues. Regarding our current quarter burn, it primarily derives from MENU. Once we shift MENU to profitability—which we expect with the recent signings—we believe we can show strong momentum.

Understood, and when analyzing the cross-sell aspect, your competitor has had challenges; could you highlight your work in cross-sell? If I tally the products, Brink at 3,000, payments at a couple of thousand, PAR Pay, another 1,000 for Data Central, MENU at 2,000, and Punchh also at 2,000, we seem to be crossing into double-digit thousands. When do you expect to see every large chain adopting your complete suite—perhaps all products by 2024?

Absolutely, I expect we can reach that point. We are seeing recent growth in ARPU. Following last couple of major deals, many have not been one-product contracts. I can assure you we're witnessing the cross-sell and upsell happen without needing to exert our best efforts right now. Once our internal systems are optimized, the cross-sell dynamics will be even more compelling, particularly given our strong product offering.

Right. You mentioned earlier, obviously looking ahead, as you plan for M&A, you've pointed out to public companies seeing significant valuation multiples retreat. Given the uncertainty, what do you think is prompting firms to hold on to 2020 and 2021 valuations? What's the outlook for a $200 million ARR business trading at 1.5 times revenue? What's their strategy if they’re losing customers but aren't selling to you?

I assume companies have their unique perspectives, but as a shareholder of such a business, the pressure to drive returns is ongoing. I believe collaborating with a firm like PAR would be a logical move due to our operational excellence. Therefore, I agree with you; the rationale for such a decision makes sense. Ultimately, the market is rational and objective, which works in PAR's favor.

Thank you.

Thank you. One moment for our next question. Our next question comes from the line of Charles Nabhan of Stephens. Your line is now open.

Hi, good afternoon guys, and thank you for taking my question. I wanted to drill into the payments a little bit. Good to see the growth in that sector, but I want to understand a couple of areas better. Specifically, where and how are you winning? Is it primarily based on price, or are you consolidating vendors? Additionally, I understand that you're in the early stages of scaling and it's dilutive to margins in the short term. Can you provide insights on how to gauge the scaling of that payments business and when it could potentially turn accretive to gross margin?

Certainly. We are winning for several reasons. Firstly, it's about that 'one throat to choke' simplicity of the product, but it goes beyond that. The integration of the product into what we do makes it extremely powerful for clients—the same dashboard. For example, we're able to offer One-Tap loyalty on Apple Pay, which combines payment processing capabilities with loyalty enrollment. This is something others struggle to do effectively. Thus, our seamless integration coupled with innovative features drives client interest and adoption. Our payments business should start becoming accretive to our operating margin soon. Because we are selling it through our existing sales team, we have one streamlined product team working on it. Although the gross margins may take some time to become accretive due to our infrastructure, we're confident that upstream revenue will contribute significantly as we grow.

Right. Got it. Another follow-up on guest engagement and MENU. The 8% growth is commendable, but I know some of that is tied to managing churn. How long do you expect churn management to last? What do you think the normalized growth rate will be for that business? Could you also quantify the impact of churn this quarter?

For the year, our churn is around 5%, and we aim to maintain it there. Our goal is to revitalize the growth engine. Q3 was a great quarter regarding customer sign-ups. We're hopeful about the Q4 outlook, and in the next few weeks, when updates come in, we'll evaluate that growth engine. This will be an area where we may look to acquire additional products to enhance front-of-house offerings. We've been effective at managing churn during this transitional phase. Our churn has been consistent over the past year.

For both products in that category, we've been at an inflection point recently. With MENU, we transitioned our strategy from going international to focusing on the U.S., to prepare for the growth we've recently experienced, including the recent win. Additionally, Punchh is also at a critical turning point where it needed further development for sustained growth.

Got it. Thank you, guys. I appreciate the insights.

Thank you. One moment for our next question. Our next question comes from the line of Patrick Mcilwee of William Blair. Your line is now open.

Hi, guys. Thanks for squeezing me in again. I wanted to return to the Burger King rollout. I think last quarter, you indicated there were sizable deals for MENU in the pipeline, and it's logical to assume BK was one of them. How does your pipeline appear now? Are there other sizable deals to expect in coming quarters? Moreover, could any of these generate significant differences in profit trajectory from where you stand currently?

Certainly, BK was among one of the significant deals we've recently won. There are additional opportunities coming down the pipeline. We're winning deals more readily, but the real challenge is ensuring we can deliver the product smoothly due to the rapid pace of growth. We are making investments to ramp up our deliverables and will share updates in Q4 about new client additions and payment revenue expectations.

Understood. Thank you, Savneet.

Thank you. One moment for our next question. Our next question comes from the line of Andrew Hart of BTIG. Your line is now open.

Hey, Savneet. I wanted to follow up on your comment about M&A being a primary focus. What specific boxes do you want to check? Are you focused on building scale, acquiring specific product capabilities, or breaking into new regions? Just looking to unpack your focus areas.

It's always product-based. Everything we've done thus far has revolved around enhancing a product and accelerating revenue growth. For example, acquiring MENU has strengthened Brink and enhanced Punchh significantly. We are looking specifically at guest engagement to elevate revenue growth while boosting market share. PAR tends to outperform its competitors, and it's a favorable moment to capitalize on that through acquisitions. Moreover, we are finding opportunities for growth in new verticals and regions, and an acquisition could provide a key avenue for entering those areas.

Thanks. Lastly, I've noticed that while ARPU climbed across all three ARR segments, PAR Pay appears to have contributed significantly. What else would you attribute this growth to, especially in guest engagement where there was a considerable spike? Was most of it driven by lower ARPU from MENU clients transitioning?

The growth we're experiencing is indeed partly due to payments and pricing strategies implemented on renewals. We’ve become more strategic in how we manage pricing and highlight value to clients.

All right. Thank you. This does conclude the question-and-answer session. I would now like to turn it back to Savneet Singh for closing remarks.

Thank you all for joining us during this exciting time. We look forward to providing updates on our next call.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.