Earnings Call: Q2 2021

Aug 9, 2021

Good day and thank you for standing by. Welcome to the Par Technology Fiscal Year 2021 Second Quarter Financial Results Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker for today, Mr. Chris Burns, Vice President of Business Development. Please go ahead. Thank you, RJ, and good afternoon. I'd also like to welcome you today to the call for Par's 2021 Second Quarter Financial Results Review. The complete disclosure of our results can be found in our press release issued this afternoon as well as in our related Form 8 ks 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 today. Participants on the call should be aware that we are recording this call This afternoon, it will be available for playback. Also, we are broadcasting the conference call via the World Wide Web. So please be advised, if you ask a question, It will be included in both our live conference and any future use of the recording. I'd 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 afternoon and in our annual and quarterly filings with the SEC. Joining me on the call today is Par's CEO and President, Savneet Singh and Brian Menar, Parr'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 and A. Savneet? Thanks, Chris, and good afternoon, everyone, and thank you for joining our call today. To begin, I first want to welcome the Punch team and shareholders to par. Together, our firms are working quickly towards building a unified commerce platform. I'm pleased to report on our continued progress in this quarter as we reported sequential and strong year over year growth in our business and see strong momentum within our Brink business lines early in 1st, update you on the Punch acquisition and our success in the 1st 3 months post closing and move on to review the quarter's results. As you know, we completed the acquisition of Punch during the Q2 on April 8. With the purchase price of approximately $500,000,000 Approximately 40 of the largest 100 restaurant companies. We believe that the combination of punch and par provides tremendous opportunities for The combined company is a market leader in providing a unified commerce cloud platform for large enterprise We plan to use Punch's technology suite to expand our customer reach. We also have an opportunity to leverage Punch's strong brand and customer relationships to deliver the PAR platform at the enterprise level for restaurants. We discussed our vision for those opportunities on our investor call in early May. I'm pleased with the progress we've made towards the initial objectives in our 3 months in the 3 months that Punch has been a part of Parr. Our teams have prioritized our opportunities and are very engaged Our pre acquisition impressions regarding the dependability of the backlog came true in the high degree of compatibility between the cultures of the 2 organizations Our product teams have begun to work together and we are excited as we learn more about each company's strengths and how complementary they are. We'll quickly be on combined roadmaps, combining guests, transaction, payment and back office. The goal is to deliver a platform to our customers that can run their restaurant, but also give our customers control over their destiny. They can build on top, configure or integrate on top of. While restaurant technology has Tremendously over the last few years, most restaurant companies have yet to truly mark a win in their technological journey. Said differently, As I said earlier, restaurants are in the midst of remarkable bounce back of their business from the hardships caused by the COVID pandemic. Many of Par's restaurant customers are experiencing record growth in same store sales, Now to briefly review the 2nd quarter reported numbers before Brian gives further details. In Q2, we reported revenues of $69,000,000 51% increase from 1 year ago. Today, we also reported a GAAP net loss of $10,000,000 or $0.39 loss per share compared to a GAAP net loss of $9,000,000 or $0.49 loss per share for the same period in 2020. On an adjusted basis, non GAAP net loss for the Q2 of 20 21 was $9,200,000 or $0.36 loss per share compared to a non GAAP net loss of $4,000,000 or $0.21 loss per share for the same period in 2020. Now moving to our business performance. We reported ARR of $76,700,000 a 166% increase aided by the acquisition of Punch. The growth is led by Punch and Brink with Data Central still in a period of recovery. Adjusting for Punch's Q2 2020 contribution, The combined ARR growth would be around 42.5%. The underlying growth at Punch in Q2 continued the strong momentum we saw in Q1. Brink growth this quarter was notable as we activated 1099 new stores this quarter, solid performance in the face of several challenges in the hardware supply chain. More important though is the velocity of activations in Brink exiting Q2 and should lay the foundation for strong ARR growth through the second half of the year. We're seeing record activations and expect and hope that to continue. In Q2, we reported Brink ARR of 27 point $1,000,000 a 29% increase from Q2 2020. This growth came from improved activation and as I mentioned earlier, the exit velocity was very strong. At the end of Q2, we now have 13,234 active stores and our reported open order backlog number within the 2nd quarter was over 3,100 Ring bookings for Q2 came in at 10 12, a 24% increase from Q2 2020. Bookings are assigned for each order and continue to be a significant KPI for our company that demonstrates the loss of our business. It's important to point out this metric is not totally linear from quarter to quarter As order patterns from customer to customer vary, our pipeline is deep not only with signed customers but also new customers as well. While lower than the number reported in Q1, I'm very confident in our pipeline. Turning to Punch. Their contribution to Q2 results is as of April 8 and as expected, they did not disappoint. Our Punch product line added 2,774 new live sites in Q2 and now has a total of nearly 40,400 sites at the end of June, a 56% increase in Live Sites over the last 12 months. Punch's ARR at the end of Q2 was reported at $40,300,000 a 61% year over year increase and a $4,400,000 increase since just the end of Q1. Contracted ARR at the end of Q2 totaled $16,500,000 a significant number that proves the value and demand for loyalty and customer experience by restaurants. We're extremely pleased and fortunate that added this industry leader to the PAR platform. Data Central, our back office software acquired in the Restaurant Magic transaction saw improved bookings in the quarter at 346, a 67% increase from last year's Q2 and ARR was reported at 8.8. Combined ARR with Brink and Restaurant Magic is now $36,400,000 at the end of Q2. As I mentioned last quarter, we continue to see some near term weakness in demand for non customer facing technology in restaurants. I'm encouraged by the bookings improvement within Data Central and expect more normal bookings pace 2021 progresses and similar to our expected growth in Brink activations for the back half, we expect Data Central to also improve as 2021 plays out. Now I'd like to quickly review our product business in the quarter that is our point of sale hardware and drive thru communication systems business. Product revenues in the quarter improved dramatically from the COVID impacted Q2 2020 quarter. Product sales were reported at $23,900,000 in this recently ended quarter, a 94% increase. As we are seeing favorable impact of vaccine rollouts and improving capital purchase environment of restaurants, We will continue to see higher sales throughout 2021. Important to note, the current industry wide challenges such as supply chain constraints, price inflation and significant increases freight and logistic costs require ongoing management and vigilance. We've experienced a margin impact with the costs associated with the current supply chain rallies, including dramatic growth in shipping charges. To mitigate this pain, we've put through price increases and other addressable actions and are already seeing margin improvements in Q3, which I hope to continue into Q4. Well, we don't know how long supply chain challenges will exist. Our customers have stayed committed to us and allowed us to pass on parts of this challenge to them. Now to review our government segment. Our government business reported revenues of $17,800,000 a minor decrease of 1.1% when compared to Q2 of last year. Our contract backlog at the end of Q2 was $141,600,000 We continue to seek out contract opportunities where we can leverage our decades long experience and performance excellence, specifically in value added revenue contracts that include more direct labor and high-tech contract work with our Intel Solutions business line. In summary, we have considerable optimism as the entire restaurant industry is in the midst of record store sales and customer traffic levels. We had a busy and active 2nd quarter, we closed on a transformative acquisition with Punch, announced large new customers and the new customer pipeline continues to be strong. Looking towards the second half of twenty twenty one, we anticipate accelerated deployments in Q3 and Q4 of Brink, which should drive strong ARR growth. Given the success of the Punch acquisition, we will look to continue to build out our platform both organically and inorganically that will increase our subscription rate and make us more attractive to more customers. And with that, I'll turn the call over to Brian for more details on the Q1 numbers and then take your questions. Thank you, Savneet, and good afternoon, everyone. Product revenue in the quarter was $23,900,000 an increase of $11,600,000 or 94% and the $12,300,000 reported in the prior year. Our product revenue during the quarter was the highest compared to the preceding 12 quarters. Growth was driven by multiple factors, including continued growth in drive thru and kitchen display systems, Hardware refresh investment by some of our Tier 1 legacy accounts and hardware revenue associated with the rollout of Ring POS to new customers. Service revenue that includes revenue streams from our subscription software was reported at $27,200,000 an increase of 11,900,000 77.8 percent from the $15,300,000 reported in the prior year. The increase was primarily driven by the inclusion of punch revenue of 8,100,000 A $1,700,000 increase in other software revenue and a $1,700,000 increase in implementation revenue. The company continues to expand our recurring revenue base, which includes both software related services and hardware support contracts. In total, the recurring software revenue streams contributed $9,600,000 of the increase in service revenue. Of the $27,200,000 of service revenue reported in Q2 2021, dollars 23,000,000 where 85% is comprised of recurring revenue contracts as compared to $13,200,000 or 86 percent of Service revenue in Q2 2020. Contract revenue from our government business was $17,800,000 a decrease of $300,000 or 1.7 percent from the $18,100,000 reported in the Q1 of 2020. The decrease in contract revenues was driven by a $500,000 decrease in our ISR solution product line, partially offset by a $300,000 increase in our Mission Systems product line. Contract backlog continues to be significant, noting a Total backlog of over $141,000,000 as of June 30. Now turning to margins. Product margin for the quarter was 22.8% versus 19.1% in Q2 2020. The increase in margin was primarily due to more effective absorption of overhead fixed costs compared to Q2 2020, which was a low product revenue quarter. The favorable impact from absorption was partially offset by higher material costs. Service margin for the quarter was 30.3% compared to 35.2% reported in the Q2 of 2020. The decrease in margin is primarily driven by an increase in amortization expense for the $2,900,000 acquired developed technology intangible and the Punch acquisition in addition to incremental costs incurred while transitioning our field operations organization. Important to note, service margin would be 40.8%, excluding the amortization of punch intangibles. Government contract margins were 7.9% as compared to 7.4% in the Q2 of 2020. The increase was driven by productivity improvements on existing contracts. GAAP SG and A was $22,900,000 an increase of $12,900,000 from the $10,000,000 reported in Q2 2020. The increase was primarily driven by $9,800,000 in total punch related expenses of which $2,700,000 were acquisition costs and $7,100,000 were operational expenses. Punch operational expenses included $2,500,000 for stock based compensation assumed as part of the transaction. Other drivers included increases of $800,000 for sales and marketing, dollars 1,000,000 for variable compensation, dollars $700,000 for internal technology infrastructure costs and $600,000 for corporate management expenses. Net R and D was $8,600,000 an increase of $4,100,000 or 91 percent from the $4,500,000 reported in Q2 2020. The increase is driven primarily by $2,900,000 for Punch and $1,100,000 related to the additional investments in our existing product development organization. Net interest expense was $4,900,000 compared to $2,100,000 recorded in Q2 2020. The increase is driven by the Alawak credit agreement we entered into as part of the Punch acquisition. Net interest For the quarter includes $1,700,000 of non cash accretion of debt discount and amortization of issuance costs compared to $1,100,000 for the same period last year. In regards to taxes, there was a net tax benefit for the quarter of $12,300,000 driven by a $12,300,000 partial release of the company's deferred tax asset valuation allowance as a result of the deferred tax liability created by the Punch acquisition. A net tax provision of $1,000,000 for Q2 2020 was driven by a $1,000,000 adjustment to the 3rd tax benefit recorded in 2020 for the 20 26 notes issuance. Now to provide information on the company's cash flow and balance sheet position. For the 6 months ended June 30, 2021 net cash used in operating activities was $33,100,000 versus $13,600,000 for the prior year. Cash used for the 6 months ended June 30, 2021 was primarily driven by net operating losses, net of non cash charges and additional net working capital requirements, primarily driven by an increase in inventory of 8,800,000 and other current assets of $11,000,000 which is driven by an increase in prepaid assets as the company took advantage of repricing opportunities with key strategic partners. Cash used in investing activities was $381,700,000 for the 6 months ended June 30, 2021 versus $4,600,000 for the 6 months ended June 30, 2020. Investing activities during the 6 months ended June 30, 2021 included $377,300,000 of cash consideration in connection with the Punch acquisition. Capitalized software for the 6 months ended June 30, 2021 was 3,800,000 was associated with the investments for various hospitality software platforms versus $4,600,000 for the 6 months ended June 30, 2020. Cash used by financing activities was $319,300,000 for the 6 months ended June 30, 2021 versus $49,100,000 for the prior year. During the 6 months ended June 30, 2021, We received net proceeds of $155,700,000 from the private placement of our common stock with Act III and certain funds and accounts advised by T Bone Price Associates and net proceeds of $170,700,000 from the term loan under the Alrock Credit Agreement. During the 6 months ended June 30, 2020, We received net proceeds of $49,700,000 from the $120,000,000 issuance of the 20 26 notes, offset by the repurchase of majority of the 2024 notes. Inventory increased from December 31, 2020, by $8,800,000 We increased our inventory on hand to mitigate some of the supply chain shortages and delays, While ensuring we can meet our enterprise customers' demand for installations in the second half of twenty twenty one, accounts receivable increased 1,500,000 December 31, 2020 due to increased sales volume. Days outstanding improved within restaurants and Retail from 74 days at December 31, 2020 to 61 days at June 30, 2021. Days outstanding increased within government from 51 days at December 31, 2020 to 55 days at June 30, 2021. This concludes my formal remarks, and we will now move to Q and A. Your first question comes from the line of Samad Samana from Jefferies. Your line is open. Hi, good afternoon and thanks for taking my questions. Maybe first, Savneet, if I start with you, when I think about maybe the demand environment and bookings, I know you talked about trajectory, but can you maybe help us understand how the bookings environment has looked, especially as now, I think there Obviously, concerns around the Delta variant. And then to the extent you can comment on the 1st 30 days of the Q3, I think it would be helpful for us to understand maybe what Bookings activity looks like both in 2Q and then so far into 3Q? We haven't seen any impact yet On the Delta variant as it relates to the bookings or activations, obviously, we have a huge push on activations just given the backlog Built up over the pandemic and so a lot of focus there and we haven't seen any change there nor on the bookings front yet. That all can all change as it did a year and a half ago. So I haven't seen any big changes there. I would say the early in this quarter bookings are sort of fine, they're on track. A lot of our bookings come in the last month. So what happens in July is not super What could happen for the quarter just because there's always a rush at the end of the quarter. So too early to say, but I'd say, where we would first The pain would be if there doesn't bear with causing issues would be on the activation side because that requires us to come in store or party come in store. We haven't seen that at all. In fact, like I mentioned, we're seeing incredible momentum on the acquisition side, which is turning on ARR. Great. Which I guess brings me to my follow-up question. If I think about activations over just the last 12 months, So the low was the Q2 of last year, but in the past, you guys have averaged or been able to do kind of well north of like 700, 800 this quarter And again, I think it would be helpful if you helped us understand what maybe that increased velocity looks like. Are we on track for another 1,000 plus Sites activated type of quarter or should we kind of get back to that more of a 2H20 type of assumptions level in our model? Yes. I expect us to clear Q2 very easily in Q3. I think it will be a significant Quarter over quarter growth in activations. I hope that continues in Q4. Obviously, we'll see when we get closer. But I think we're on pace for a very meaningful Continued upswing in the activations, which is just a reflective of we have all the facts that we built up over the pandemic that's now just ready to go. So, I wouldn't expect us to come anywhere back I wouldn't expect us for some time to go back to where we were second half twenty twenty. Okay, great. And then just as I think about the Punch acquisition, it seems like the Early folding them into the organization is off to a good start. How should we think about maybe, the technology integration? How long should we take that think that that will take? And then similar question on the go to market model. Are you starting to kind of Give incentives to the 2 different company sales organizations to go out there and sell, just maybe an update on the integration process? Yes. So I'd say the first we were 3 months in. The 1st few months have been focused more on call it the G and A functions getting together there, more strategic. Kicking off in a month or 2, we'll combine product and tech orgs so that we have a combined roadmap. That's the most important part. We want to make sure that the roadmaps get tied together. And that will not only help us on our internal product development, but also guide a lot of our M and A strategy. So that will be next. And then I think sales would be last. And the key will be us proving that we can make 1 plus 1 equal 3 on each one of those G and A, Product and Tech and then obviously sales. So I'd say we're doing the G and A, we're moving on to Product and Tech, which is a long process, but the one we're We are certainly seeing the ability for strong upsell amongst it. We haven't yet got to the point where we're Dramatically commentating, that's just because we haven't got to the point of sales force yet. Great. And then maybe one more for me. I don't want to hog too much of the Q and A, but for the supply chain issues, could you maybe double click into that a little bit more? Just Is that impacting more the kind of traditional your point of sale terminal business or is this is it impacting Brink as well and how should we factor that into maybe The backlog, I know it's down only modestly quarter over quarter, but is it having any impact on the ability to close deals for Brink? Not yet. There was a little bit of that in Q2, nothing now. I don't expect that to continue. What has impacted The cost of what we the inputs to what we buy has gone up as well as the shipping and that was hitting margins hit our margins In Q2, albeit because we had strong revenue, we more than recovered and had strong margin growth Year over year, it would have been even stronger if not for those impacts. There will be impact in margin in Q3 and Q4, but I said it should get better as We've put through some price increases, our customers have accepted it, been really supportive and done some mitigation activities. So I think it's the margin where it has impact. I think we feel pretty good on now on bookings and activations not being slowed down. This is super dynamic though Samad. It could all change overnight, but we feel very good where we are now. Understood. And that leads me to my last question. Just as I think about last quarter, I think That the company had a lot of confidence in accelerating Brink ARR growth in the back half of the year. And so as we kind of think forward, It's been 3 months, you've done a transformative acquisition. Would you say that your confidence is the same as it was this time a quarter ago, more or less Same, just how should we think about now that we're rounding August, maybe the view on the next 6 months? Yes, I would I'd say we're more confident now than we were then just because I've seen July was a record book activations, Turning on Air Aurora, I expect that to continue August and hopefully September. So I think we feel even more confident now in Q3 being super strong and then I expect that will continue in Q4 unless There are some other extensions that we didn't predict. So I think we feel even stronger that the Brink second half will be very strong. The other part of the Brink second half is that in the first half, we activated a decent number of stores. And I would say those are sort of stores that are priced at our historical pricing or below. So there were some They were our highest priced customers. The second half, I feel the customer mix is also very positive for us. Great. Thanks again for taking my questions. I'll turn it over to the next analyst. Thanks, Budd. Your next question comes from the line of George Sutton from Craig Hallum. Your line is open. Thank you. I wondered if you could address the payment opportunity and we were excited to see that You signed your first customer, I believe Mr. Pickle, at least from a formal announcement perspective. Can you talk about the payment opportunity as you see it here? Yes, absolutely. So we're definitely starting to get some momentum. That was a good customer win for us and that they sort of buy all of our products. So That's fantastic to see. I think we've now got a full time person focused on Payment sales, so we've had a product person, we just approved the development team. Payments is going to be a meaningful part of our revenue next year. We're starting to momentum this year. And as I mentioned a few couple of months ago, I hope that by the end of the year we'll win a couple At least one, but hopefully a couple of larger customers that we were not expected there. So I think we'll see good revenue by the end of the year and then I think it will be a decent part of our revenue in 20 22, as we've learned a lot in the 1st 6 months, everything I would suggest is, while it's taking us a little bit longer to get here, I think the net of it is actually It will be a better outcome than we expected going in. You discussed a great quick service Restaurant environment to sell into right now. There are a couple of what I would define as fairly significant trends occurring and I wondered If you could address those relative to your opportunity. First, the digital design innovations that we're seeing are obviously suggesting that QSRs are going to look very different than they have in the past. And second, the labor shortages and that issue And what your product can be doing for those issues? Absolutely. So On digital design side, we win there, right? We're the platform that a lot of the stuff is pulled the data off of whether it be inside the store, outside the store, on your app. All that comes from products that we sell and where we want to be the platform that powers that. So we are a huge beneficiary of that trend. And I think that's an exciting point. And part of the point I was making was, if you look at the restaurants across par, it's not just that the average restaurant Has more same store sales than they did 18 months ago. They have higher average ticket order volume. It's not just the average, it's almost every single one of them. So It's pretty amazing to see the resiliency in physical businesses, which should hopefully allow them to reinvest in that digital Redesign that you talked about and we will be absolutely net beneficiary of that because most of those products and build are coming off of the point of sale platform or Are bundled into the customer engagement loyalty product. We relaunched Punch Pickup, which is a good example of some of that change. On your second question around the labor challenges, it's certainly an opportunity for par. Our restaurant management solution, our back office in Data Central partakes in that from scheduling labor. But I would say that it's something that we will I expect some point to address by product builder acquisition and certainly as we sort of have So we talked about most of our M and A focus being on things like digital ordering in the front of the store. I do think it's definitely given how strong our customers or talking about these labor challenges, you might see us look faster to address that hole in our solution. I think this is a problem that could continue for a long time. Lastly for me, you had an interesting article. I'm sure most people on the call were not able to see this Relative to Ambient Technology, can you just give us a quick summary of your thoughts there in your product set that will meet that opportunity? For sure. So a big part of the foundational thesis of acquiring Punch is that with Punch we sort of know the customer. With par, we know the payment information, we know the transaction, we know what's going on in the back office and the kitchen. And so together this The platform should be able to power an ambient experience. And what I mean by that is, George, you should be able to walk into a restaurant one day and that restaurant should Again, if you decide to opt into this, you should be able to know who you are, adjust the menu, adjust all your preferences for you and you should be able to sit down, order your food Taking out your phone or your wallet, all your loyalty information, your punch cards, your payments, your gift cards, all sort of Done through. I say something like voice and so that's really the dream. How do you create that almost like that Amazon Go store experience at the restaurant Such that the technology is actually enhancing that in store experience. It's not sort of making you farther away from that brand, it makes you feel closer to that brand because technology help And then also having that ability outside the store. So that's really what we want to create. Beautiful. Thank you very much. Your next question comes from the line of Stephen Sheldon from William Blair. Your line is open. Hi, this is actually Pat McElwee on for Steven. I think we covered a lot of it, but I just had one more quick one here. So you touched a bit on the upsell and the cross sell with Punch, but just curious on what kind of You're seeing there, if you could talk a bit more about that and then specifically what drove the strong ARR growth this quarter? I would say across our businesses, assuming a punch was here in Q2, 2020, we had sort of 40 2.5 percent ARR growth. And A lot of that growth I think is coming from just the point that we were talking about with George on the last question, which is there is just a move to get digital quickly and we are a huge I would say the 1st few months, there's definitely been cross sell. There's been customers that have been won on the punch side that were that came from Brink. And eventually, I think that will happen vice versa and that will continue. But the real impact of that will be later in this year as we continue to sort of Get together and push this under a more formal banner. We'll see it happen. The other thing that I think was not I wasn't expecting, but The vast majority of customers and I've spoken to almost all of them, we're very excited about the acquisition because the idea of consolidating vendors It's attractive to them because today they're managing too many vendors. They're actually overwhelmed. Managing a dozen different software products per store is a lot of work. And so I think there will be Interesting customer opportunities that may have not picked Punch or not a pick Brink that we could come into those solutions and push, which I think is your point. So I think that will happen later in the year, more next Right now, it's the obvious ones where it brings in RFP or punches in RFP and we can bring in the other quickly. Okay. Makes sense. Thanks for the question. Your next question comes from the line of Adam Wyden from ADW Capital. Your line is Savneet, look, I had a couple of questions. 1, Could you give people a little bit of clarity? I know you've talked at certain conferences about gross margin and there's been some sort of, I guess misinterpretation or confusion on Twitter and among people. I mean, can you talk to people about the conservative nature of your accounting relative to your peer group and What that implies for gross margin modeling going forward and your path to EBITDA profitability? Sure. So, we are very conservative in how we account for gross margin as a business. Historically, if I was So just breakout Rink Software. So our service line includes all sorts of other stuff, Rink Software. It's historically been in the 50s of gross margins and as we talked about in the past, it's got to be 70s plus. We've got a strong path there, strong path to get there, I'd say over the next year or 2 as we get the benefits of scale, but also get to lap all of the rework we've been doing over the last 2 years here. And so we've overspent to get better and I think we're obviously seeing the results of that. The other huge tailwind we have is that our largest ARR contributor Punch It's already at, I'd call it, natural high software margins. And so, I think we'll have strong margin expansion just because we've got the benefit of the Punch revenue. The Brink Margins will continue will expand as we move forward. And again, we also have this interesting benefit that As our hardware business grows and I just saw we had pretty tremendous growth this quarter, that helps everything yet economies of scale including our service, which I'd say has been very low margin and challenge over the last year, that will now turn as well. Yes. I mean, look, I think a major part of the story for me is less about the ARR growth, although that's forthcoming, but the fact that your churn is very low and Because of the enterprise nature that once this thing gets going, I mean, this really has the potential to have best in class gross margins and EBITDA margins for that matter. So it will be exciting to see you. Adam, I think Brink was historically a very tiny business. And given as you get scale, you see And its impact. Remember the last 2 years, none of the focus of management has been on margin. It's been 100% on getting the product right, which was I don't want to use it over engineered, but it was a ton of focus on building on a product group, building on engineering teams, putting a ton of investment spend behind that. And so we haven't got the benefit of that of those investments, but those are to come particularly as we launch new products off of that same team. You see the margin expansion from scaling your existing products, but also each additional product should be incrementally much higher gross margin, which I absolutely expect for us to be the case. Right. So second off, just valuation perspective, I think you've been pretty clear that if you think about the PAR opportunity holistically and from a macro view, I mean, Brink is effectively the spinal cord of the restaurant called the Bloomberg call, whatever you're going to call it. And whether it's Restaurant Magic, Data Central or Punch or X, Y and Z delivery company or payments, I mean, all of these things Our relatively easier upsells in that as you noted on the call, you don't you can flick on the switch Over the cloud and you don't have to be on present, there doesn't require hardware. And so to me, this is much, much more about The M and A story, buying modules and upselling to existing clients than it is kind of Brink activations. And then against that backdrop, par today probably trades at the largest to what I would call analyst 12 month sell side targets for price, which means that it's The most mispriced relative to the sell side, and we can argue whether they're right, than it's ever been since this company has had research coverage. In fact, it's trading lower Then it was trading pre the Punch deal and then obviously on a combined basis going forward a quarter, it's even cheaper. How do you think about kind of Solving for that cost of capital now that you've got the scale, I mean, what is it that you think is missing from kind of getting that Because obviously incrementally, it's going to be more expensive to do deals even though you're executing. So just kind of curious how you think about narrowing the cost Capital gap and kind of your M and A pipeline in terms of upselling these modules because I think that that's a super exciting story for me, If you can kind of get all the balls aligned there. Yes, for sure. So I think we are super cognizant of our cost of capital. And I think we've demonstrated in our ability in the acquisitions we've done in the way that we raise capital to be very sensitive to How we look to those numbers. I think the way that you close that gap is 1st and foremost execution. We've got to continue to grow. And as I mentioned, we feel really I think we had, I guess, a 22.5 percent of KRR growth this quarter. I expect us to have really good growth in the second half of this year, and I think that's point 1. Point 2 is also continue to get the story out. I think because we've been successful in our M and A and we feel very good about it, we're going to continue to do that. And so It's vital that we do this well. And so I think it's getting that message out that when we have used our capital, I think we've cleared our hurdles. I think the last is kind of what you've talked about is we got to get a story out there. We have to let people know we exist. We do see the valuations of companies that are in our category and we really do like our position. So I think that's more of just getting the message out. Yes. I mean, I'll leave you with this. I mean, look, Goldman Sachs You know, was an M and A advisor for the company on the Punch deal and they don't really have coverage. I would say that The vast majority of these analysts on this conference call, I don't want to single anyone else, target smaller investors. And it's clear to me that at a 1,500,000,000 Market cap or whatever it is, it's kind of in between kind of microcap and midcap. And I think that this This is a super exciting story. I mean, look, as you know, we purchased our first shares for $8 a share, I believe, at 16,000,000 shares outstanding. So We purchased this thing when it was left for debt, dollars 128,000,000 market cap and roughly $7,000,000 of ARR in utter shambles. And here we are Over $100,000,000 of year end ARR and we like the story more today than we did when we bought it. I mean, look, you're there, You've got Sham and the Restaurant Magic team. I mean, you've really built a corporation and built a real entrepreneurial culture. So It's really astounding to me that we are cheaper today than arguably we've been in kind of its modern history with this corporate governance. I mean, I'm just kind of flabbergasted. So excellent execution. I encourage you guys to find creative ways to kind of get that cost of capital. And I look forward to the past of, let's say, I've owned it for 3 years. ARR has gone from $7,000,000 to $110,000,000 Call it 14x. I mean, I don't see any reason why you can't 14x ARR over the next 3 to 5 years. Maybe between now and next 3 to 5 years, we'll actually get our cost of capital, but unbelievable execution and just keep up the good work. Great. Thanks, Adam. And there are no further questions over the phone line at this time. I would now like to turn the call back to Mr. Savneet Singh. Sir? Thanks everyone for joining. We look forward to updating you next quarter. Ladies and gentlemen, this concludes today's conference call. We thank you all for participating. You may now disconnect.