Achieved 25% growth in Annual Recurring Revenue (ARR) and closed one M&A transaction while announcing a second.
Subscription services ARR organically grew by 25% year-over-year. With Stuzo’s contribution, ARR now stands at $185.7 million, a 60% increase from Q1 last year.
Expects to be EBITDA positive by Q3.
Operator Cloud ARR grew 39% to $78.5 million in Q1 compared to the same period last year.
Payments revenue more than doubled year-over-year, reaching an annualized gross processing volume run rate of $2.4 billion.
Engagement Cloud’s ARR, including Stuzo, now exceeds $107 million.
Total revenues for Q1 2024 were $105.5 million, a 5% increase year-over-year.
Net loss for Q1 2024 was $18.23 million, or $0.62 loss per share.
Adjusted EBITDA for Q1 2024 was a loss of $7.2 million.
Subscription service revenue increased by 37.2% to $38.4 million.
Hardware revenue decreased by 31.9% to $18.2 million.
Professional service revenue slightly decreased by 2.7% to $13.5 million.
Government contract revenue increased by 11.2% to $35.4 million.
Operational Highlights
Excluding Stuzo, organic subscription service revenue grew by 27% compared to the prior year.
The acquisition of Stuzo contributed $41 million to the ARR within the engagement cloud as of March 31.
Excluding Stuzo, total organic annual recurring revenue was up 24.8% year-over-year.
Strategic Developments
The recent acquisition of Stuzo and TASK is expected to drive deal volume, customer adoption, and materially higher margins.
The company made adjustments to the sales and marketing organization to enable more efficient growth.
Cash used in operating activities increased to $23.6 million, driven by a net loss from operations and additional net working capital requirements.
Future Outlook
Expects Burger King implementation to significantly impact year-over-year growth and profitability, with growth projections ranging between 20% to 30% depending on the rollout speed.
Aims to be EBITDA positive in Q3 2024 and continue towards meaningful profits.
Focus will shift towards free cash flow per share, reflecting the substantial growth in ARR per share as a proxy for future cash flow.
Question and Answer
Pipeline of Opportunities and Customer References
Question
Is the company experiencing any pushback or increased encouragement from its pipeline of opportunities, given the large Burger King and Wendy’s rollouts?
Answer
The company is experiencing increased encouragement from its pipeline of opportunities.
Winning large customers like Burger King and Wendy’s serves as a reference point for other brands, demonstrating the company’s ability to handle scale and execute successful rollouts.
International Opportunities and TASK Acquisition
Question
How are discussions with international opportunities evolving, particularly with the upcoming TASK acquisition?
Answer
Historically, the company faced challenges with international opportunities, but the pending acquisition of TASK has been positively received by customers and future customers.
The TASK acquisition addresses a pain point for many customers who require an international solution, and it provides confidence that PAR will execute on its international strategy.
The integration of TASK into the PAR family will enable cross-selling opportunities for payments, hardware, and additional modules, leading to potential acceleration in the TASK business.
SG&A Spend and One-Time Items
Question
Were there any one-time items in SG&A spend during the quarter that may not recur?
Answer
Yes, there were one-time items related to M&A transaction fees and reorganization costs.
The non-GAAP adjustment in OpEx reflects a 7% organic increase year-over-year.
Product Roadmap Post-Stuzo Acquisition
Question
How will the product roadmap evolve post-Stuzo acquisition? Will there be two separate product lines for enterprise restaurant brands and C-Stores?
Answer
The company is actively working towards consolidating into one application, combining the functionality of Punchh and Stuzo into a single product.
The consolidation process will be multi-year, but initial customer feedback has been excellent, and the company anticipates faster cross-selling of additional PAR products into this market than initially expected.
Hardware Business and Growth Outlook
Question
Can you provide more details on the hardware business, its historical performance, and the outlook for growth?
Answer
The weakness in the hardware business is primarily in the non-Brink base.
The company anticipates that the hardware attachment on Brink will be the driver of future growth, with the potential to reach and exceed $100 million annually.
While achieving this level in the current year is not guaranteed, the company is optimistic about the opportunities presented by the strong Brink pipeline and recent deal wins.
Burger King Rollout and Implementation Progress
Question
How is the Burger King rollout progressing, and what is the level of confidence in having the right headcount for successful implementation?
Answer
The Burger King rollout is progressing well, and the company is confident in its delivery and execution.
The coordination between teams is tight, and the company does not anticipate the need for additional support or increased OpEx.
Adjusted Gross Margins and Product Performance
Question
Can you provide insights into the adjusted gross margins for different products and whether the areas of drag are moderating?
Answer
The adjusted gross margins for products range from low 60s to mid-70s, with Punchh and Data Central at the high end and MENU at the bottom.
MENU is a drag on margins but added a significant number of sites during the quarter, which will contribute to improved margins as revenue grows.
Payments also need to reach target margins, but the company is confident in its growth trajectory.
Burger King Rollout Hurdles and Visibility
Question
What are the potential hurdles to achieving the higher end of the Burger King revenue guidance, and what factors could impact the timeline and visibility?
Answer
The company’s own performance is the primary factor that could influence the Burger King rollout, and the team is confident in its execution and communication with Burger King.
The main variable outside the company’s control is the coordination with Burger King and the choreographed nature of the rollout.
Any potential delays would likely stem from Burger King’s internal processes or the need for additional time, but both parties are incentivized to expedite the rollout.
Wendy’s Win and Deal Details
Question
Can you provide more details on the Wendy’s win, including whether it was a full rip-and-replace or a more complementary solution?
Answer
The Wendy’s win was a significant full rip-and-replace deal, representing a major initiative and a comprehensive solution within Punchh.
EBITDA Breakeven and Profitability
Question
Given the organic ARR growth and potential cost reductions, is EBITDA breakeven or profitability achievable in the second quarter?
Answer
Achieving profitability in the second quarter is possible, but the company is providing guidance to ensure it meets its commitments.
The software business is performing well, with expanding margins, and the company is actively managing expenses.
The first quarter results are not directly comparable to the fourth quarter due to one-time items, but the company is confident in its progress towards profitability.
The core business (Brink, Punchh, Data Central, and Payments) is driving meaningful profitability, and the addition of Stuzo and TASK will further contribute to overall financial performance.
Hardware Business Headwinds and Outlook
Question
Are there expectations for additional headwinds in the hardware business, or is the situation expected to improve in the second quarter?
Answer
The company is not anticipating significant declines in the hardware business in the second quarter, and in fact, expects a potential improvement.
Organic Revenue Growth and OpEx Flow-through
Question
How should we think about the flow-through of organic revenue growth to OpEx, particularly with the expectation of flat OpEx?
Answer
The flow-through of organic revenue growth to OpEx is based on the company’s gross margin rate, which varies by product.
The company budgets for flat gross margins, but anticipates margin expansion over time, particularly in lower-margin products as utilization improves.
Incremental Gross Margins and Profitability Timing
Question
Can you clarify the incremental gross margins for different products and whether profitability could be achieved sooner than expected?
Answer
Incremental gross margins are expected to be around 70%, with potential for higher margins as utilization improves, particularly in lower-margin products like MENU.
Based on the assumptions and calculations, achieving profitability in the second quarter is a possibility, but the company is being conservative in its guidance.
