PAR TECHNOLOGY CORP Q4 FY2024 earnings call

• Revenue Growth: Q4 2024 revenues saw a more than 50% year-over-year increase. Subscription services ARR doubled to $276 million with 21% organic growth, and non-capitalized profit grew organically by 30% year over year. Adjusted EBITDA was $5.8 million, more than doubling sequentially.
• Operator Cloud: ARR grew organically by 26% in Q4. PAR POS signed eight new customer logos in Q4, with all new customers selecting multiple products. The partnership with Burger King expanded to include PAR Ops, with significant rollouts expected from Q2 onwards and around 1,500 BK sites in backlog.
• Engagement Cloud: ARR reported 15% organic growth in Q4. Had new tier-one customer wins. Punch had continued growth with customer winbacks, and PAR Retail executed the launch of a major multi-thousand unit brand and upsells, and expanded features.
• Hardware: Reversed recent trends with a 7% increase in Q4 revenues. The new PAR Wave platform was approved by key global brands, and the PAR Clear drive-through solution set standards.
• Acquisition: Acquired Delegate, rebranded the back-office initiative to PAR Ops, with strong customer interest and synergy efforts beginning to flourish.

In the fourth quarter of 2024, PAR Technology Corporation reported total revenues of $105 million, a year-over-year increase of over 50%. Subscription services revenue stood at $64 million, a 95% jump from the prior year, accounting for 61% of core revenue. Annual recurring revenue (ARR) ended the quarter at $276 million, a 102% rise from the previous year's Q4, with Engagement Cloud ARR up 150% and Operator Cloud ARR up 60%. Hardware revenue was $26 million, a 7% increase from the prior year. Professional service revenue was $15 million, a 17% increase. Gross margin was $45 million, an 86% increase from the prior year. Subscription services margin was 53% in Q4 2024. Hardware margin was 26% in Q4 2024, and professional service margin was 28% in Q4 2024.

PAR Technology Corporation expects 20% plus annual growth rates in 2025. The second half of 2025 is anticipated to have higher growth rates due to deals like the accelerated Burger King rollout, the payment services deal going live, and the convenience store deal. Margin expansion is expected in the second half. Lap of acquisitions will lead to faster organic revenue growth as acquired businesses are growing faster than PAR Technology Corporation. Confidence in executing growth targets with visibility into key deals in the second half.

Actual results are subject to future events and uncertainties related to forward-looking statements. Market trends towards disjointed multi-vendor solutions pose challenges, but PAR Technology Corporation's ownership of the full technology stack and first-party data is a moat. Potential risks include execution of rollouts, especially combined rollouts like Burger King, and integration of acquisitions.

Q: Mayank Tandon inquired about the timeline of the rollout into BK and its impact on ARR opportunity.

A: Savneet Singh stated it would push out the rollout by a quarter to a quarter and a half but significantly increase the ARR opportunity.

Q: Stephen Sheldon asked about framing organic ARR next year and what's included in the BK contract.

A: Savneet Singh said the second half will have higher growth rates due to key deals, and the BK contract initially includes PAR POS and is expanding to include PAR Ops with Data Central and potential Delegate.

Q: Will Nance asked about what's seen in the restaurant space and hardware inflection.

A: Savneet Singh said there was disparity in the restaurant space, and hardware growth was driven by attachment to software customers and investments in the drive-through product.

Q: Samad Samana asked about AI in drive-through hardware, why customers churned and came back to Punch, and Delegate's financial profile.

A: PAR Clear is a cloud offering with an API for voice AI companies, customers churned for guest data platforms but returned as they realized the ROI of Punch, Delegate had approximately $19 million in recurring revenue, grew in the mid-thirties, and exited 2024 marginally profitable.

Q: Eric Martinuzzi asked about subscription service gross margin and pro forma share count.

A: Bryan Menar said gross margin was expected to improve by 50-150 basis points per quarter, and the pro forma share count was just north of 40 million.

Q: Adam Wyden asked about gross margins on subscriptions and M&A.

A: Bryan Menar said services were the growth driver, and Savneet Singh said M&A was a product strategy to increase organic growth and profitability.

Q: Andrew Hart asked about conversations with enterprise CTOs and 2025 growth drivers.

A: Savneet Singh said conversations were evolving as restaurants focused on digital efforts, and 2025 growth drivers included executing on deals, levers in PAR Retail, and folding in acquisitions.

Q: Charles Nabhan asked about the international opportunity and hardware margin.

A: Savneet Singh said focusing on the APAC region first, and Bryan Menar said hardware margin was in the mid-twenties and expected to be modestly improved.

Q: Anja Soderstrom asked about the tier-one pipeline and rollout with BK.

A: Savneet Singh said the tier-one pipeline remained strong, and the rollout with BK wouldn't significantly impact the core POS pipeline as they over-invested in rollout execution.