All right, good afternoon. Thank you for joining for the PAR Technology session. I'm Stephen Sheldon. I'm an analyst in the tech group at William Blair covering vertical technology, including PAR. Please visit our website at williamblair.com for a complete list of research disclosures and potential conflicts of interest. It's great to have the PAR team back at our conference again this year. A lot to dig into, especially with its continued strong sales momentum into the enterprise restaurant landscape. They built out, as most probably know, they built out the most comprehensive tech stack that we've seen, kind of a SaaS platform for targeting larger restaurant brands, you know, and they're kind of going into convenience stores, going into new areas of the addressable market. You know, we think its profit-free cash flow should ramp pretty quickly here as some of these large contracts go live.
We think it's a great time to continue looking at this one. From the company today, we have President and CEO Savneet Singh. We have Senior VP of Business Development and IR, Chris Byrnes. I thought he was sitting in the front row somewhere. Oh, he's in the back now. Okay, so he's back there. I will pass it over to Savneet for a quick overview. With any remaining time, we'll move into a Q&A. I'll pass it over to Savneet.
Great, thanks. I'm going to run through some quick slides to ground everyone in what we do. At a high level, our goal at PAR is to build a platform to run your enterprise restaurant. The way we think about it is we're trying to connect everything from the guest experience all the way back to the employee experience, with the operator being in the middle. The reason kind of how we ended up here is that running a restaurant has gotten more and more complicated over time, not just because we as consumers have become more demanding, but because the amount of technology flowing into those four walls has kind of become a burden to manage and oftentimes takes away the benefit of actually installing these great products. We've been working really hard to create a more unified experience for that guest.
By doing that, we think we can unlock a tremendous amount of upside to their business, both on the bottom line and top line. We power some of the most exciting brands and largest brands in the world. I like to say we power everybody from Sweetgreen and Cava all the way up to Burger King and everything in between. A lot of our success is a commitment to being really focused on best in class and working what we call better together. There are very few companies that I think can scale at this kind of size. What's unique about us is that while we try to convince you that everything we work with is better together, you can always plug and build on top of. A lot of this has benefited from us having been in the industry for over 40 years.
We've got a really strong reputation with our customers. In general, I think if you are either an emerging chain that wants to be an enterprise, we're probably the one-stop shop. Additionally, if you're already an established brand, we think we've got the best name recognition. I sort of mentioned this, but it's worth double-clicking on. The end market we serve is QSR and fast casual tier one restaurant, tier one to one and two restaurant chains. These are big businesses that run a bunch of small businesses. What makes it really, really challenging is that they are being inundated with new demands, both from the corporate level and from the store level. Trying to create, make that actually work efficiently has not worked.
You guys have all probably experienced that dynamic where you go to a restaurant or you're waiting in line to order food, and the cashier is just filling the DoorDash racks, and you're sitting there trying to still place an order, and you're waiting for the DoorDash driver doesn't come. You know, that lack of orchestration is a technology problem or an operational problem that can be solved. The reason why it hasn't been solved is all these different parts of technology are just not integrated well together. At the same time, you have that challenge on the labor side, the experience for the employee. All of these things have just put an intense amount of pressure on the individual store operator. As a result, you've had this explosion in technology. There are something like, I forget the number, 10,000 restaurant technology startups that exist.
You know, I'd argue 90% of them shouldn't exist. The reason why they exist is that every time there's a problem in the restaurant, there's someone who says, "Hey, I'll go create a startup to go do that." The challenge with that is that every time you add one of these new products to your store, the system itself crumbles because you have so many point-to-point integrations that it's really hard to make it all work. A really amazing example is, you know, within a restaurant, you might have one for Uber Eats, one for the in-store, one for the drive-thru, one for the loyalty, online ordering, and none of them run off the same service. You're really managing all these menus at the same time. It makes no sense. You'll have a tax calculator, the POS, you have one on the online ordering system.
You've got employee labor and employee schema in three different systems. None of it's meant to integrate to each other because, again, as you have all these problems, every time you have a problem, you'll say, "Let me go add another piece of software to go solve that." None of them really speak to each other and connect. We think that in the end, it's led to this challenge where you have really two bad options. You either continue to buy a point solution to solve each one of those little tiny problems you have, or you try to build a software yourself. You know, I would argue that both of these options slow restaurants down. In the end, these are restaurant businesses. They should be focusing on delivering great food and employee experiences, not building software.
As we talked about this point-to-point idea of, "Let me create a, let me kind of magically manage 20 different vendors," you really become a glorified vendor manager, not an experience creator. We believe that our platform really does make it simple to do what the restaurant does best, which is build these great customer experiences. You know, we sort of look at this as our racetrack slide, but really what we think is special is that we kind of hold the engagement side of your business, which is the interactions with your end customer, to the operational side and unify it into one so that if you have, you can manage that opportunity both sides. As we get into a world of artificial intelligence, you can actually use those insights to do really, really special, create special outcomes for your customers.
As an example, you know, we're going to be coming out this year with some really cool technology connecting the back office and loyalty. You know, you might be in a restaurant and get a flag that says, "Hey," I'll use this example, "but you know, hot dogs are expiring in 12 days." Normally, that individual little restaurant is going to try to figure out how do I sell hot dogs because that's a franchisee or individual store problem. What we'll be able to do is, "Hey, press this button to go build a loyalty program automatically or a loyalty campaign automatically to go push it out to your customers in your little zip code that, hey, we're going to go sell hot dogs.
There's a big hot dog sale happening at our restaurant or a big promotion for it. If you say, "Yes, I want to run that promotion," that's a super complicated thing to do, but GenAI allows you to target the right customers, whether it's text, email, so on and so forth. It will then go back to the back office software and provision extra labor units to go service that customer. It is a beautiful way of connecting the front to back of house through one platform. That would never happen if these were all different pieces of software. The fact that we have them under one roof allows us to do really innovative things like this. Our platform is squarely built on food service. Today we cover everything from online ordering and loyalty, which we call engagement, to back office, payments, and POS.
We do have a large hardware business that supports the POS business. Our playbook has been pretty simple since we started, which is we look to build or acquire best in class products. I will stress the best in class. We really, really care about having the best product. In the end, we are selling to big enterprises, and the best product wins, not the best marketing. We then take that product and we couple it with really deep vertical expertise.
I think if you were to talk to our customers, they sort of repeatedly tell you, "We really, really understand the customer we serve." The most important part of what we do is that when we acquire or build a product, we combine it with our existing suite of products, making what we call better together outcomes, meaning that if you bought two products from PAR, you should be able to have a differentiated product outcome than if you bought them from two separate vendors, like the example I kind of gave you with the hot dogs. We really want to convince you that as you buy more, you get more functionality. You are not buying a bundle. You are actually getting more product when you buy them from one roof. This is a bit of our flywheel.
It's relatively simple, but I think it works, which is we try to land with a hero product. In the sample point of sale, if we do a good job, we get the right to sell you a second product. Now we're selling you two products for the cost of one acquisition. That then gives us greater economics than our individual point solution competitors to go reinvest in this more unified platform and build a go-to-market. This is what's really, really working for us. I think some of the margin expansion that Stephen mentioned is being a result of this. We've had a really sort of rapid rise, I would say. Our business has been around for a long time, 50, 60 years, but we got really reinvented six or seven years ago when we kind of went all in on the software business.
You can see we've had tremendous organic growth, but we've also been very, very successful on the inorganic side as well. We're very active in the M&A part of the world. I'd say that what's unique about our M&A motion is that it's highly focused on product. It is an R&D initiative, not a financial initiative first, which is, are we solving a product gap, meaning that can we acquire a product, can we then integrate it into our products to create a unique customer outcome? What's been great is that I think over time, if we look at our acquisitions, they aren't run as disparate little companies. You're not betting on a capital allocation of a private equity fund. You're actually building on a vertical strategy that seems to have worked. Our M&A is really, really precise.
There are 20 companies that we think are a great fit, and we focus on trying to eventually bring those companies into the fold. It's not programmatic. We've gone two and a half years without doing it, and then last year we did three. I always get a little defensive when people say we're acquisitive. We are product acquisitive, and it is really the timing of the M&A really depends on the product, the availability of that product at that time. We will not go buy the biggest company that exists. We will buy the company that has a product that fits within our flywheel better. This is a sort of a repeat slide, so I'll skip it, but we really think we're just getting started. Global food service is a relatively large market. Today we're focused on restaurants. We've expanded to convenience.
Over time, we think we'll build a global business to do the same. Food service is kind of interesting in that we usually think of food service as restaurants, but the fastest growing category for food in the United States is actually convenience stores. Convenience stores are compounding their food service offerings at 14% and 15% a year. Restaurants are barely growing. Our goal is to kind of swim to where the puck is going or skate to where the puck is going as the delivery of food changes more and more over time. You probably noticed this when you go to stadiums. You now have the ability to get delivery at your seat. You have the ability to get loyalty. You're going to see more and more demand for food service technology solutions as the market grows.
We'll continue, I think, to kind of expand our playbook, which is really focused on the food service vertical. We'll continue to see if there's products that make sense for us to add. Most important is going back into the well of upselling back to our base in an integrated offering because we've really, really seen that if we can make one plus one equal three from a product perspective, the cross-sell kind of happens. We just reported a few weeks ago, and we had now two quarters in a row where every single one of our POS deals is multi-product. Almost all of our engagement deals are multi-product. We're kind of at this point now where we used to be 100% new logo driven. Today we have this cross-sell element that's kind of neat. We're growing rapidly both through cross-sell, upsell, international expansion, new verticals.
At its core, we're still really early in the digital transformation of our core market. Most of our growth is still new logo, which I think is very, very exciting. As I kind of round up, our brand promise, though, is to continue to always be best in class. We are obsessed that we have to have the best product. We really kind of demand that of our product managers. We have ways to measure it. Simplistically, if someone on our team says they have the best product, we always go back and say, "Are you the highest priced?" If you're not, you're probably not the best product. We really do focus on how do we have the best product. We never want to win on the bundle. We want to win on actually having the best product.
We're obsessed on being open, meaning, "Hey, if we don't have the best product, you should be free to have your own innovative ecosystem that you want to build yourself. If you think you can build it better than us, go build it." Lastly is this idea of better together, which has really, I think, been the unlock for us going forward. I think like most companies, we think we've got a unique culture, but I'd say our culture is intense. If you read our values, they aren't super fun. It's not like curiosity. They're like urgency, ownership, speed. We really obsess on winning. It is a culture that is super harsh. I think our values oftentimes scare new recruits and attract them, and that's kind of what we want, why they were built that way. We think we're at day one.
Long story short, I think we've sort of transformed historically a hardware business into hopefully a category leader within software. We've got a playbook that we think is repeatable. I think that our flywheel for growth is moving really nicely, but has room to grow as we've now kind of unlocked this cross-sell opportunity. That's it.
That's great. You really do. You're a notorious fast talker. I always know I'm going to have more time with you, which I think you guys take the value of speed very seriously, even in how you present. That was great. Maybe starting here, as we think about, I think you had a slide there showing all the pain points that kind of restaurants have faced. Can you maybe talk about how those have changed as we've progressed through the last four to five years?
I think back to the pandemic, and it's like it was all about e-commerce facilitation, how do you meet your customers when they can't physically come into your store? How has that changed as we've kind of progressed over the last two to three years?
Yeah, I think so you've had this switch from the, you know, let's get digital to let's kind of clean up the back of house. I would say the biggest challenge today is just getting the stuff you have to work. The lack of these point-to-point integrations are really challenging. You see it like every which way.
I think that while there's definitely more focus today on cleaning up the back of house, making sure the kitchen can operate in a world where you now have 10 different ways to order your food, it's actually getting the stuff to be tied together that's been the biggest challenge. Every restaurant company in the world wants to talk about AI, but nobody can implement it because your data is in 10 different places. Everyone's like, "Oh, you'll see, I'm sure you'll see this soon." I'm pretty sure every single company that on that map, my diagram is going to have, "Here's the agent to use for your restaurant. Here's the agent to use for your restaurant." Our view is the winner there is going to be the one that has the largest platform.
Anyways, I think the big challenge is actually getting the stuff you have to work rather than one area in the industry now.
Maybe with that, you've done three acquisitions. You talked about it. You didn't do anything. You did Punch a while ago. You did three over the last year. Where are you at in the integration process with all these different assets? What's gone well on the integration side? Where is there still more work to do?
We move fast on the integration. Generally, within 90 days, we've got sort of defined goals we want to get to. Those goals are in three buckets. The first is the organizational design. How we set up the organization, who reports to who. It's always an awkward thing when you acquire a company and a bunch of people with a C-level title all of a sudden are VPs.
How you manage that is really important. We kind of hit that upfront. We've got a 90-day culture playbook. That culture playbook is everything from, "Here's when the Slack changes. Here's what your email signature looks like. Here's a logo change." It is about, "Here's how we're going to connect the cultures of the company. Here's how we're going to update the values." "Here's how you're going to meet the sequence of town halls you're going to have with leadership." The product side is the most important one. That is the one that takes the longest because you've got to actually make sure that you can create that one plus one equaling three.
If I look at our last couple of acquisitions, once we're a year past the deal, we should assume that the customer has real unique functionality they didn't get before. What's great is our last deal, Delaget, which was done the last day of 2024, we've already gotten to the point where the products are really integrated, where we've released functionality where customers can say, "Hey, oh, I had both these products. I just got all this new stuff I didn't have before." That's been kind of fun to do at a faster pace than normal. Usually it's like a real year before you can prove the product synergies. In the back office side, it's definitely shorter. Got it.
Maybe talk about purchasing behavior because I think one thing that surprised me when I was first digging into this space is it seemed like a lot of these big restaurant brand CIOs talk to each other. It seems like there is a big referential motion to this. Maybe talk about the purchasing behavior. You've had some big wins. Do you think some of these wins might help you get the next tier one customer and the next? How do you think that'll play out?
References are huge in any vertical market because they're all relatively narrow markets. For us, it is probably our best sales motion is a reference from an existing customer. I've always argued we are probably the worst marketers in our category. We've just not been good at getting the word out there in the right way.
We've won a lot because our references are the cool kids on the block, like a Sweetgreen or Cava, all the way up to a Dairy Queen or Burger King. We have great references across whatever your restaurant type might be. I think the other part that matters a lot is point of sale is the most critical product within a restaurant. If it goes down, your online ordering does not work. Your loyalty does not work. Literally nothing works. If you can do a good job on the most important product, you have an incredible influence on that brand to partner with you for a long time. If you can figure that part out, you are in an amazing spot. Conversely, if you screw it up, the chance of an upsell is like zero or negative.
We kind of obsess on making sure that we hit our promises. I think that in software, generally, if you deliver your products in Q5, we really commit to delivering on time. That reputational part also matters a lot, which is not just that we did a good job, but when we built new functionality, told them it's going to be on a certain date, we hit it.
Got it. Your biggest recent win has been Burger King. It seems like you're going to be starting. You talked last quarter, I think, about 2Q. We've probably started to see some of the implementations. 3Q, I think you've talked about being the heaviest. Maybe just talk about any updates on how that's going with that rollout since it's such a big win for you guys.
Yeah, we kicked off the rollout, I want to say, sometime towards the end of April. So far, so good. It looks really great. We have the business book for Q3 and most of Q4, so I feel really good about it. Generally, it's kind of back on track and moving the way we need it to move.
Got it. I think you've talked about the pipeline being bigger now, I think, with tier one restaurants than it was even when you won Burger King. I think at the time it was four, seven tier one opportunities out there that were in RFP. You've won four of them. Maybe just talk about the pipeline. What are you seeing there? Just any updates on the pipeline?
Yeah, I think we managed the optimism of business on weighted pipeline more than anything else.
We really try to figure out tier one deals are not going to make or break a year anymore. It's the entire sort of span of customers. We have just seen continued expansion of that pipeline. We manage it really—I have said this to a few people today—we manage it really tightly. We are certainly pitching firms like McDonald's, these enormous customers, but we do not put those in pipeline because even if you put them at 10% or 5%, this just screws up the numbers. We have five stages of our funnel. Each have a weighting, and then we sort of overrule where we think, even if we are in the final stage, if we think we are winning or not. That pipeline is as big as it has ever been for us.
It is great because it is a diverse pipeline from tier one down to the smaller brands. Right now it looks great.
On international, a lot of these brands also have large international presences. You are still predominantly U.S. You acquired TASK. Now you have both a loyalty and kind of the international version of PAR, I think is kind of the way that you put it. How do you think about the international opportunity? Is it going to be more about following current brands as they try to expand overseas? Just how are you thinking about pursuing international?
Absolutely. I think it was that the vision was that U.S. brands, the large U.S. brands, are growing more outside the United States than the United States. There is certainly a need to have a more holistic experience. We did not really have an option for them.
If we want to business a brand in the U.S., we didn't really know where to send them internationally. That was the original motion why we acquired the business. That is definitely happening. We've sort of got customers that were there super excited. Candidly, that business is limited in our ability to get stuff out, not demand. That is not a demand-constrained dynamic because there's nobody that really does. There's no U.S. vendor that does a great job internationally. That has been crazy exciting. I think alternatively, there are a couple of brands that are local in the company we acquired that we have no relationship in the U.S. that have now opened us up to that world, which was not something we totally expected, but has clearly been an amazing change for us.
Convenience stores, that's another big area.
You did the Stuzo acquisition, now PAR Retail. You talked about a little bit the food service, the growth of food service, I think, in convenience stores. I think you've also—so you've got the loyalty solutions, you've got the back of house, the Data Central opportunity. Maybe just talk about convenience stores and how you plan to pursue that.
Convenience is amazing and market. I wish I bought all the convenience store stocks. What's amazing about convenience stores is that they have this incredible ability to constantly find a new vertical to sell. Think about the stuff that they sell: cigarettes, fuel. These are secularly declining demand, yet these businesses have been great businesses. The new thing they're focused on is food. We stumbled into this market. This was not a market we had ever planned to be in.
A number of convenience stores have kind of made that push into wanting to be a great food service brand. As we grew and started delivering results, it kind of just compounded. We decided to go really all in on it with an acquisition that makes us the largest loyalty player there. What's been amazing about that market is we literally command twice the price that we do in convenience stores and restaurants because there isn't a good alternative, but also because we drive so much value in that market. Why do we drive more value there? Think about it. In a restaurant, there's only so many times I can get you to come back to have the same meal over there.
In a C-store, I can get you to come back one day for cigarettes or whatever, fuel or all the CPG goods that demands a unit. There is just a lot more utility for a loyalty program. The other kind of fascinating part about this is that we're going to run the same playbook we did in restaurants. We now sort of know the key parts within a retail business and what do we want to own and then ability to own and cross-sell. We have an amazing head start. When we first got into restaurants, we did not have that reference ability. There really was not a referenceable customer in our base, not even one. Here, we have the opposite where every single customer is referenceable, literally. It is the CEOs of these organizations.
is what has been kind of gets us so excited is we know that if we have strong customer seesat in a core workflow product, we can start to build a flywheel all over again. The last thing I am sorry to say is C-stores are just a lot earlier in the digital transformation than restaurants. Restaurants are now spending money on technology and still have a long way to go, but C-stores are really just at the very, very beginning of that.
How do you think about the opportunity? How do you think about the convenience store TAM and the enterprise portion of it? There are about 150,000 stores that are sort of within our TAM. We are in about 20,000 of them now for just loyalty. Obviously, we are going to build the motion for more products.
I think that, like restaurants, I do not think you are going to have more units, but I think you will have a ton of price or module expansion within there. I think it will be very similar. I do not think all the products will be twice the price like loyalty, but I do think there is not a digital ordering vendor that exists in restaurant and C-stores yet of any scale. There is not a mobile app vendor. There is not a cloud POS that exists. It is really, really early. That is what is kind of exciting about it.
Have you started to see any demand for the POS on that side?
There is not a single customer that does not ask us to do it. We just have a lot of growth in restaurant POS, and I do not want to divert our efforts yet.
As we think about the setup for this year, I think organic ARR decelerated a little bit. It sounds like a lot of that was due to the Burger King expansion of the contract. Good problem to have. You've talked about acceleration over the back half of the year. Maybe just talk about some of the factors that should drive that and your level of confidence getting back to above 20% organic ARR growth.
Yeah. I mean, I think what I love about our business is the end market demand is strong, and I think it'll continue for years. We are just in the midst of this Burger King rollout. It has a big impact on our growth. We had 18% ARR growth in Q1 without that rollout.
This is not going to be a normal—I hope maybe hopefully it will be, but it's not going to be a normal year-to-year kind of thing. Our three big rollouts for the year all start in Q3, which is a big C-store deal, a big expansion started happening in Q3. Burger King really hits its stride in Q3 and then payments. That doesn't usually sequence that way or hasn't sequenced since I've been here, but there's that. The other part of it is in the last two quarters, almost all of our deals have been multi-product. Those are big drivers of revenue. Essentially, we don't get any of that revenue in Q1 and Q2. We get most of that in Q4. There's just a lot of momentum in the business.
I don't think quarter to quarter is perfect, but I do feel over the long run, the durability of the revenue growth will be strong.
You have kind of talked about OpEx being more or less flattish with inflation. Maybe just talk about how you've been able to do that, what you've been able to do with the cost structure to kind of maximize your leverage. How are you thinking about the need to reinvest, especially as some of these big contracts scale?
We're pretty maniacal on the cost side. We've kept OpEx close to flat for almost a couple of years, almost three years now. The way we've done it is, I think, not pennywise pound foolish. We've outsourced R&D to low-cost geographies. That was a huge tailwind for us to have plenty of R&D bodies, but at a low-cost geography.
I think I'd argue our low-cost geography is actually higher efficiency and output than we had domestically, particularly when we acquired business. We're able to push that out there. The second has been on our sales and marketing. On the R&D side, today we're about 24% of revenue is R&D. That's probably the right level as we continue to reinvest here. Second part of your question. We spent 14%-ish, I forget exactly, 14%-15% of our revenues on sales and marketing. Again, I think that's near best in class. What's happened there is that we just continue to realize that one salesperson can sell not one product, but two, three, four, five products. What is kind of fascinating is a lot of our sales headcount was the support staff, sales engineers, solution architects. As those products become one, you need less and less.
As an example, Burger King, the biggest deal ever, it was one salesperson who brought those two products, two and a half products in, one sales engineer. Normally, that would have been three people. That's really powerful. Why? Because it's running off the same code base. We just want a big loyalty deal where, because our loyalty code is now at the point of sale, it was one sales engineer. That's a really powerful tool. We've been able to right-size the sales force to do that. That's kind of second level. The only place I don't think we're best in class is on G&A, where we're kind of smack in the middle of revenue companies of our size. That, to me, is just scale. As we get larger, we'll be able to do it.
I think I'd argue that our G&A is pretty decent given that we have this legacy 45-year-old hardware and services business that just is a big part of the G&A base that we have to outgrow versus peers. I think we're going to be a super profitable business, and I think we're getting there faster than people expect.
We maybe have time for one question from the audience if anyone has one. Otherwise, I can throw in another question. Maybe talk about M&A. I mean, you've bitten off a lot. What's your appetite for additional M&A going forward?
For us, it is product-driven. It is product-related. Today, there's kind of two things we're spending a lot of time in. There are three or four sort of mega companies in our space. Again, that doesn't—mega for our world is not the big software world.
We want to take big swings at them because we always view them as super strategic from a product perspective. We are going to see if we can make those happen. Those deals are binary, and you never know when they are going to come or not come. We do not kind of bet the company on it. The second area that I think you will see us continue to look at is the in-store operations that you talked about. It is really clear that if you sit with the CIO or CEO of a restaurant and you remove their fear of, call it the macro of what is happening today in the world, their biggest insecurity is their operations. They just do not know how they are going to be able to run. Employees are unhappy. Customers are unhappy in the store. There is just so much wastage.
We'll probably continue to look for stuff in that area. Honestly, we're building so much now with AI that the bar is just getting higher to buy something.
All right. We'll end it there. Thank you so much, Savneet. The breakout's going to be upstairs in Burnham, Maine.