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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. [Operator Instructions] 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 -- excuse me, 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 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. Savneet?

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 restaurants and the feature-rich capabilities upon which a 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 out our enterprise reach and 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 the ability to uniquely partner and innovate with our multiproduct offering. Our pipeline continues to be robust with ample white space for cross-sell. Our client and intention are to continue to expand our relationship within our RBI and their restaurant logos. RBI has over 30,000 restaurants globally with brands that include Tim Hortons, Popeyes, Louisiana Chicken and Firehouse Subs along with Burger King. What's more, as we execute against the Burger King plan, we anticipate building deeper partnership with Burger King and we'll look to push out the longer-term road map 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 the financial aspect of PAR. This selection by Burger King , one of the largest and most iconic restaurant brands is something that we will build upon for the years to come. Burger King will be a strong driver for a strong revenue driver for PAR over the next two years as we work through our rollout plans with Burger King this quarter, we'll update you on our Q4 call with the financial impact and expectations on timing of that growth. Both PAR and BK are committed to an aggressive push working in partnership to deliver 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 a PAR payment services more than doubled from Q3 2022 and 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 to name just a few. We completed the system-wide rollout with Smoothie Kings 100 -- 1,100 stores went live and initiated rollouts with CHOP and clean eat [ph]. Customers are increasingly attaching PAR payments via Brink, MENU and Punchh, again validating our unified commerce strategy. Moreover, customers are seeing robust ROI in our Unified Commerce integration and innovation. One Top 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, bundle savings and incremental ROI at a time when tech spend is under scrutiny. Moving to guest engagement ARR, that includes our leading customer engagement at Punchh and digital ordering platform menu. Guest engagement ARR grew 8.2% in Q3 when compared to Q3 2022 and totaled approximately $62.2 million. We again saw record usage across Punchh platform and are encouraged by the increased customer value we are delivering on a daily basis. We went live with new customers, including Booster juice, SmokinJoe [ph] Barbecue and DASH during the quarter. Equally important, we are seeing the pipeline build up from a slow start in the beginning of the year and expect to announce some exciting deals in the coming quarters. Even more interesting, while Punchh has very low churn, and we are even seeing some of the few brands that have 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 price in the renewal cycles. The other important piece in guest engagement is our digital ordering engine MENU. MENU is signing up new customers at a rapid place. 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, menus integration was fully certified on DoorDash, Grubhub along with Uber Eats, and we successfully piloted RBI on those integrations as well. In Q3, we went live with our first customer in the US 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 acquiring menu and menu was a key part of our win at Burger King. Back office and data Central delivered a solid quarter. Reported ARR of $12.4 million in Q3 was 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 continue 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, onetime items and investment spend brought down Q2 gross margins, and we saw a strong return from those investments this quarter and the reduction of onetime credits. Our goal in the medium term is to get adjusted gross margins to 70% plus in the long run to be in the mid-70s and higher. Over the last year, software transition to become our largest business, and similar to how we broke out subscription services as a revenue line this year, in our coming releases 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 girl 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 to be 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 emerging have slowed our efficiency here a bit, but we'll see continued improvement going forward. And as many 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, but we think we'll get that investment back in spades in time. Again, in the coming releases, we'll provide more details so that you can track our progress to our long-term targets. These improvements have been layered on a G&A base that we are continuing to hold tight on. But what I think has hit it in our results is that we've been able to expand gross margin and hold operating expenses near flat while making a tremendous investment in menu, ramping headcount rapidly for Burger King and making a large internal investment into IT systems. These three large investments are being made without adding to our operating expenses. We estimate that while OpEx has been nearly flat for the last four quarters, we've actually made incremental investments of approximately $9 million in new internal IT, of Burger King ramp-up and the additional menu investments needed for the US market, all without adding to our OpEx space. This has been done by reallocating our capital and teams to investment areas and becoming tremendously more efficient within Brink, Punch and Data Central. To highlight just how efficient we've gotten. If we hypothetically were to remove menu from our P&L, our adjusted EBITDA will be positive for this quarter, an incredible accomplishment when you think about where we were just one year ago. I highlight this to make two points. First, our core business of Brink Punch and Data Central have gotten efficient and efficient fast. While the spend on Menu and Burger King cover this up, it shouldn't be lost how efficient our teams are getting. Second though is that we believe our investments in Menu, IT and Burger King will be worth the short-term pain. Menu’s win at Burger King was the first of many proof points to come. Our plan is simple to continue to drive strong revenue growth while holding operating expenses very tight. We're going to push aggressively towards the Rule of 40, and our path here will be accelerated the additional acquisitions we see coming around the corner. Bryan will now review the numbers in more detail, and I'll come back at the end. Bryan?

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 holding operating expenses flat, while allocating investments for menu and internal enterprise systems and Burger King. 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, driven by a 21% increase in active sites and 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 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 strategy from international to North America in addition to 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. $7.2 million of the professional services revenue in the quarter 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 government's ISR Solution product line. The increase was driven by continued growth of 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 30th 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 better inventory and cost management with kitchen displays, mobile and drive-through products. The team continues to effectively execute on managing costs in addition to pricing where deemed appropriate. We continue to expect overall hardware margins of at least 20% as we go 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 of our hosting and customer support costs. Sequentially, subscription services margin of 50.6% improved compared to 43.3% in Q2. Subscription services margin during 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 onetime 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. In regard to 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. Backing out menu and non-GAAP adjustments, the growth in R&D is $1.1 million or 7%. The increase is related to personnel hired as we continue to improve and diversify our product and service offerings, including the ramp-up needed for our recent Burger King win. Sequentially, 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 appropriately manage the effectiveness of our R&D investments. Total non-GAAP operating expenses was $37 million, an increase of $1.6 million versus Q3 2022. I backing out 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 exit rate. Net interest expense was $1.7 million compared to $2.1 million recorded in Q3 2022. The decrease is 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 resulting from our freeze 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 9 months ended September 30, 2023, and included capital expenditures of $5 million for internal enterprise system software, a $3.4 million for developed technology associated with the restaurant retail software platforms, partially offset by $3.6 million from 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, financing activities for 2023 and was 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, and to 60 days as of September 30, 2023. We expect DSO levels to come back to historical levels of 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, while not growing the R&D and G&A base in a meaningful way. 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 announcement of Burger King. I will now turn the call back over to Savneet for closing remarks prior to moving to Q&A.

Thanks, Brian. 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 spend 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 [Audio Gap] existing expense base. We are funding tomorrow's growth engines without net new expense. 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 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 take that new revenue live. Meaning that for every dollar of new gross profit generated from this new ARR a dollar has been falling 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 and between reinvesting in our products to maintain long-term revenue growth and maximize our TAM. But more is to come, and we'll use that same focus on profitability we have shown on our existing products on MENU once it scales. This has also given us tremendous confidence to move faster on acquisitions broadly as our playbook is working. In summary, our competitive position has never been stronger. Our strategy is winning and is the right path to this market at the right time. It's a special opportunity that we are not taking likely. Restaurants need to consolidate vendors, unify their systems and data and PAR is the only player of enterprise scale we think worthy of their trust. In closing, I'd like to thank our global team for their efforts and dedication on their continued success at PAR. With that, I'll open the call to the Q&A. Operator?

Thank you. At this time, we will conduct a question-and-answer session. [Operator Instructions] 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. 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 time line is on that wave? And then maybe on the BK win specifically, could you maybe give us a little bit 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 challenges like yourself? And then how do you think about the competitive positioning going forward with this win under your belt? Thanks.

Yes. So on the first question, we feel like we're in the beginning of that title wave. I'd say just in 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. And we also see that in loyalty within punch. And so it seems to have kicked off, and I don't think it was coordinated, but there is this movement by the large players to now look at third-party software, because of the reasons I think we've talked about in the past, which is it's incredibly expensive to maintain your own IT systems. And it's very hard to keep them modern and the advantage of having a modern software product is you get the benefit of the development we do for everybody. So I think we see that happening and the RFPs that have kicked off, again, that we've been just notified in the last couple of months here are far more than we've ever had literally since been at PAR. So it's very exciting to see that. As it relates to our big win, all processes are competitive and for a deal this large that's an exclusive and a mandate -- it's incredibly competitive. The competition, I'd say, historically are the large enterprise players. There isn't another large sort of upstart like ourselves in the enterprise space that can handle the scale volume and innovative demands of a brand as large as BK. And so in the end, I think it came down to one, our product. I think our product sit on its own and I think if you talk to anybody there, I think they would say we went clearly on product. But two, I think there was a sense of majority, a sense of culture and alignment of, hey, unifying POS is a big project, we want to do it really fast. And I think they felt that really came from who we were in our culture. And they've been an incredible partner through that. So I think you showed all the best parts of PAR. It showed our product, it showed our culture, our speed, but also our ability to roll out quickly.

Got it. Very well and then, look, just maybe a question, the contract business, obviously firing on all cylinders right now. And I know you previously said you wanted to make sure that the market appreciated the kind of momentum at that business and the size of some of the recent contract wins. And it keeps getting better. So I guess the question is, is now the time to evaluate a process for that business can the performance get better? And then, I sort of ask in the context of you've got a lot going on, huge win now. It sounds like you're going to be ramping expenses to kind of absorb BK win, you're talking more acquisitions. I know you're working on menu as well. So when you think about all that, like how are you thinking about priorities for kind of like simplifying the business and maybe recycling some of the capital?

Yeah. No doubt the time is right. And in our Q2 MD&A, you can kind of see we're continuing on those strategic alternatives for that business, and we'll push forward aggressively because we do think it's the right time. And I think we would look to deploy that capital exactly how you suggested. As it relates to ramping up for working and stuff, the beauty of our deal there is that while we ramp up quickly, we're very quickly compensated for it. So there's short-term spend a long-term, it's incredibly profitable. So I'm not too worried about there. So I think the investment will be primarily in M&A for what we're looking to do. We don't need to potentially divest the business to fund the go-forward growth we see in menu and in Burger King another 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, so curious in terms of the capacity for what you can rollout, in other words, how quickly you did 1,200 units, this quarter. Can you give us a sense of what the capacity is without substantial cost increases?

I would say today, if we did nothing, would be probably double that. Obviously, we'd ramp up what we needed to. This quarter, we're kind of working out the rollout plans with BK. And so next quarter, I'll be able to kind of announce how we see that ramp up going. It will be aggressive and it will be a push, but I think a big part of their evaluation of PAR was could we handle that and how we'd handle the burst and overages on expectations. And so I think that was a big part of the reason why we won.

As you're looking at these large scale RFPs, how many of them are focused on the point of sale versus a broader unified solution as you think of it?

I would say they all the time start off as POS and then we're able to bring in more to the table. And so our goal is to always start every customer out with at least two products. BK was a great example. But I think as I look at the ones coming down the pipe, most of them will also be two product deals. We've got one that's a four-product deal we're working on right now. And so the market is definitely -- my comments when I meant that the opportunity in TAM was the market is kind of now turned to our strategy, I think, there is just this tremendous desire to have simplification, vendor consolidation and I think, I guess at a big part of the reason that we won Burger King was we had the menu offering built into Brink. And so I think that helped us differentiate ourselves. I think other brands will look at that the same way, particularly if they're saying, well, you can also do online ordering, and you can also do back office. It helps the story and the ROI equation gets stronger and stronger for the brand.

Just one clarity question. When you get into a four-product deal opportunity, the list of competitors gets extremely short. Is that correct?

I don't think there's anyone else is generally saying, hey, I can part do this or I can put together three or four other vendors. And you can just imagine in an environment when tech spend is being scrutinized where you've got small IT teams, that pitch is pretty attractive.

Understand. 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. On the guest engagement churn, you mentioned it briefly in your opening remarks, it was related to taking menu to the US market. Can you maybe elaborate a little more on that? What exactly do the churn?

Yes, it's nothing meaningful. But when we acquired menu, it had a large -- not large, but an international base. And we made a decision to direct the business to the US And so -- it's kind of the idea is to sort of say, let's not focus on an international business that's unprofitable, let's bring it to the US where you think you can quickly get it to profitability. And then given that our first major customer was BK, we kind of need all hands on deck to get that win.

Got it. That's useful color. And then maybe following up on the rebates that you guys issued last quarter. I know there was some infrastructure maybe you had to invest in. I guess are you all cut up there? Are there still kind of investments you need to make to kind of get that up speed?

Well, I just saw we had the gross margin jump back pretty quickly here. Part of that was just the investments that we made the ROI, Part of that was not having any credits in this quarter. So, we didn't have the credit issue on this quarter because we kind of addressed that spike we had last quarter, and we feel good about that. There's always ongoing investments. I don't ever expect and knock on wood, our gross margins ever dropped to where they were in Q2 again. So, we feel pretty good. And like I said, in the short run, we want to get these -- short and medium, we got this to be 70% plus and the long run wanted to get to be much higher. And again, the vast majority of that will be tied to us constantly making Brink more scalable, because that's where we have the most aggressive usage of DevOps cost and then the ramping of payments and menu who are -- we'll both have very high margins but are really early in their life cycle.

Got it. That's really useful color. Maybe if I could squeeze one last one in. We saw earlier this week from a competitor, one large brand, they turned off to take their tech house -- the tech stack in-house. Is there any concern about becoming maybe a broader trend? Are you seeing that among any of your prospects?

We're seeing the opposite. I think Brink being a great example of that, and we've got others we'll talk about later. But we see the opposite. And I think that dynamic is very much -- if you're a single product company doing one verticalized need of the restaurant, you are really exposed to that risk. When you're the POS, it is such an enormously large product that's not something you can -- you really do want to take in and the expense to do that. And then, I think if you're a POS company like us and you can say, hey, we can do this, but we can also offer you a loyalty on my ordering back office. It's a lot easier to transition your systems because then you're again not managing multiple vendors. So, we're seeing the opposite in our market. And I think that's just the nature of the product we have, but also the family of products we have. It really makes it a different conversation.

Got it. That makes a lot of sense. Thanks very much taking my questions, guys.

Maybe I would say differently, if we were a verticalized product like you mentioned and that product was deeply integrated to the POS or the loyalty, I don't think you'd have that churn. So I think it's really being unified as what keeps you sticky.

Right. Thanks guys.

All right. 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 one, really impressive on the gross margin pickup and the burn and all sort of makes sense with piloting menu last quarter and the punch. If I just sort of do some back of the envelope math, assuming no sort of gross margin degradation, if you guys add pick a number, 5 million of ARR next quarter. I'm sure you'll likely add more than that. But like at 80% incremental gross margin or even 70%, it's fair to assume that with OpEx flat, you're going to be EBITDA positive in the fourth quarter. Is it unreasonable to think that you guys could be at EBITDA breakeven in the fourth quarter or very close to it? And is it fair to assume that from -- obviously, you'll sort of make investments here and there. But I mean is it fair to assume that your -- you have a path to getting to Rule of 40 without M&A? I mean, obviously, M&A will accelerate it, but I mean, do you feel like there is a stand-alone path to low-40. I mean, it looks like there is based on the numbers I'm just trying to understand.

Yes. Listen, I think we can get to the low-40 without M&A. I'll -- let me answer that two ways. First is, this deal for BK will accelerate our growth in the out year, right? So we would likely -- I'm guessing, and again, we'll talk about it in our next call of guidance, we likely go faster in 2024 than 2023. And as I mentioned, this is not the only deal. There are deals coming down the pike that are going to expand us even more. And so I think we'll be really good on the revenue side. And as I mentioned on the call, our entire burn this quarter was menu. And so the moment that we can inflect menu to positive, which we think is coming -- we announced some really scooters, these are big brands now coming on menu. This will also help. So I think there's a path to Rule of 40 on our own, and we will get there no matter what. We have no choice and we will, and that's our goal. M&A though will accelerate it. And it's because the deals that we are working on are cash flow positive, not dilutive to our growth and I think, accretive to a Rule of 40 stores. So it should help us get there faster. And we've talked about a lot we are really good on the G&A side. We are really good at cutting lots of areas of G&A and then reinvesting those in areas of growth. G&A. I mentioned the $9 million of our OpEx goes went to menu -- the BK ramp-up in IT systems. We did that without growing the OpEx, and we do that again on the next M&A deal. And so I feel really good that if we acquire something, we can get a lot of operating leverage out of our operating expenses, particularly G&A and sales and marketing. So it will certainly get us there faster.

Got it. Yes. No, I mean, look, when you look at the sales and marketing at 15% at scale and you look at gross margin, I mean, this thing can clearly be a 40% EBITDA margin business at scale. And so if there's revenue growth in 30%, 40% EBITDA margins and your rule of 40. Let me ask you something about the cross-sell. Your competitor or he who will not be named has had a very hard time sort of cross-selling you're starting to see cross-sell. I mean if I sort of add up all the products, bring at 3,000 payments at a couple of thousand PAR Pay, maybe another 1,000 data centre of 1,500, menu at 2,000 punch in 2,000, you're well into the double-digit thousands. I mean, where do you think you are in terms of really getting everything under one house and really getting -- I mean, I know you're sort of -- a lot of the call has been talking about, but the unified commerce is creating the stickiness and we're seeing it with your competitors losing customers. But I mean, when do you expect to sort of get that $2 million AUV restaurant, basically paying $10,000, $12,000 for everything. I mean, is that something that could be a possibility? I mean, could we have a large chain really taking every single one of our products at MAX in 2024?

Yeah, listen, I would say absolutely. I mean I think if you just look at the numbers, right, and the growth in ARPU, that's pricing, but it's also the upsell of more products. If you look at our last couple of big deals here, one of which we announced, others that are coming -- none of the are single product deals. And I would tell you, Adam, we're seeing this cross-sell and upsell motion happen without us doing the best job of it. I would say it's the area we need the most improvement on internally, but it's just happening naturally. And when I wrapped up, I was saying that it's the right time in this market. And that's kind of what I'm referring to, which is we're stumbling into doing a good job on cross-sell and upsell. Just imagine when we get great at it and we will. So I think your guess is like, of course, we will get there. And I think you're going to see it pretty quickly, I think you're going to see us be very good at stapling Brink Payment Data Central out the box. And I think Punchinany are slammed on combo. As I mentioned on the call, almost all of our menu signings have had payments and punch. And so if you think of that the front of house and sort of the operator side, like we will get there. So I think getting up to that on a large brand is very possible. And particularly, we do a good job on this first one.

Yeah. And I think you mentioned that earlier on the call that, obviously, something you said this earlier in the call, but RBI is a large chain, but I mean I think the intent is that, if we execute well on Burger King that you would expect to move horizontally into the other brands and perhaps sell punch in the rest of menu and the rest -- I mean, there is -- obviously, everything is competitive and the deal goes the best guy, but I mean, I think it's your expectation that if you deliver that the relationship should grow meaningfully. Is that right?

That's right. I mean, I want to expand a time on that, which is -- it's going to expand in two ways. It's going to expand and that we -- I think we've been great partners to RBI. I think they've been incredible partners to us. We want to grow the relationship across the logos they have. We think we're a great fit. We are both culturally, but from a product perspective. That will be great expansion. But I also think from a product perspective, we will be pushing data center and Punchh and so on and so forth, provided we're adding value aligned to the road maps. And so, it's just an incredibly large opportunity that we will get to. And I think it's a really huge sign that they chose not Brink the Brinking MENU, understanding that they now have a sort of transaction product and an off-premise product from us is highlighting that

My third question is about M&A. My question is, we saw -- we've seen the public companies sort of materially sort of, I would say, the single product companies have materially lost their valuation multiple, largely because of stickiness around customers. And I think in the past, you've sort of said the private equity firms and everyone have sort of been hanging on to sort of 2020 and 2021 valuations. You haven't really done an M&A deal in 2.5 years. You've done a lot, but many was sort of an aqua hire and it wasn’t Burger King. I mean, what do you think the probability is that you land sort of a $100 million ARR business? Because my sense is that if you were able to sort of cross the transom and make this a $300 million or $400 million ARR business at a 40% margin that -- I mean, we're not going to be trading at 3.5 times ARR. We're trading at 10 or 12 like Agilysys. I mean, this company is massively on the value.

I think there is the there's possibility to buy $100 million ARR absolutely exists. I don't know if it's in one ticket or three, but I think that's there. And I would tell you, it's my number one priority as CEO, my KPI is to get that done is on the M&A front. And so we think it's really the right time. And again, I can't stress you enough, the fact that we got menu right on here, and obviously, we got punch really right, has just embolden us to say, we got to do this twice as fast.

What are companies thinking that are doing $200 million of ARR trading at 1.5 times revenue? What's their exit strategy? I mean my question is, what do these companies do is they are losing customers if they're not selling to you? That's my question. What is the company doing?

I think they all have a opinion. They’ll have some idiosyncratic reason right now. I think a your shareholder of that company, its hard to stay there forever without wanting to drive a return. I think that return is partnering with a firm like Park. So I think I agree with you. I think it makes a ton of sense. And in the end, I think markets are logical and objective and that benefits par.

Thank you.

All right. 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 in the payments a little bit. Good to see the growth in that area, but I wanted to understand a couple of areas better. Specifically, where and how are you winning? Is it on price or just one throat to choke consolidating vendors? And then secondly, I know it's in the early stages of scaling and it's dilutive to margins at this point. But if you could give us some color on how to think about the scaling of that payments business and when it could potentially be accretive to the gross margin?

For sure. So why are we winning? We're winning, I think, first, because of that one-third to choke the simplicity of the product, but it's so much more than that. It's the integration of that product into everything that we do, the same dashboard, like it's just so powerful to have that integrated. And so it's one choke if you've got a problem, but it's really that integration into the rest of what we do. I get an example of One-Tap loyalty on Apple Pay. I think we're the only people that can do that where you can pay with Apple Pay and get enrolled in a loyalty program and pay, it's so powerful to the brand. So that one chokes plus the innovation we can do once you're integrated across us. And I think that's why we went in and we continue to win really, really nicely. From a margin perspective, our payments business will be accretive to our operating margin now -- close to now. So we are seeing a lot of growth, because we really -- we're selling it through our same sales team, right? And we have one sprint team that works on it from a product perspective. I think the gross margins are going to take a little more time just because we're growing into the infrastructure cost. But it will no doubt be a big driver of our gross margin growth over time just because the revenue is coming in and we're not adding a lot of cost here. We account unlike our competitors on a net basis. And so on an apples-to-apples basis, we can make a revenue growth look like it was twice as big or whatever 10 times as big on a payment basis, because we're giving you the true net take.

Right. Got it. And I want to follow-up with the earlier question around guest engagement and MENU. The 8% growth, obviously, some of that is attributable to controlled churn, just wanted to get a better sense for how long that churn is going to take place? And how we should think about the normalized growth rate of that business, if there is one, as well as if you could quantify the impact of the churn this quarter, I think that would be helpful as well.

For the year, our churn is around 5%. So it's not been a high churn here. That's kind of our normal churn. So for us, how do we get the growth engine going? And I think Q3, we had a really great quarter as it relates to car, signing new logos. Q4 looks really good. We'll know in the next six, seven weeks here if that ends up, and that we'll get the growth engine going, where I think we want to get this thing much faster growth than where we are today. But this will also be the area, I think you'll see us be acquisitive because we need more products to pump into the front of the house, and this will be coming from that side of the place. So I think you'll see us be acquisitive in the part of the market, but also we are winning really good deals here now. And I think that's a testament to our leadership there. So that is starting to churn. And again, the churn has been 5% for the year. That's kind of where we want to be, year-over-year, good numbers.

And for both of those products that are in that business area, they were both at an inflection point this year, right? As you mentioned, with MENU, making the transition strategically holding off and trying to grow international where they were originally when we acquired to getting it ready for North America, which has, obviously, you can see we've done here with this most recent win, and so it was getting ready for next year's growth and going forward. Similar with Punchh where we're hitting that kind of inflection point of where it needed to continue to set itself up for continued growth going on, and the fact that we're seeing more usage in the product as our current customers are using it more and more and seeing the value in it. So it's getting that product stabilized for that. So we were not really hitting the guest on the growth engine for those. So it was kind of making sure we manage the churn during that year, knowing that we're going to have a low growth year.

Got it. Appreciate the color, guys. Thank you.

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

Hi, guys. Thanks for squeezing me in. I just had one more question I wanted to get in here. So last quarter, I think you said you had a few sizable deals in the pipeline for MENU and safe to assume BK was one of them. So I just wanted to ask how your pipeline there looks now, are there any other sizable deals we could expect to flow through in the coming quarters? And could we reasonably expect any of those to drive divergence in the profit trajectory from where we stand now?

For Sure. So BK was one [indiscernible] what I mentioned on this call. It was another big chain, really fast cringing -- press chain. We've got more around the corner. So -- the challenge for us is actually not winning business here. We're winning business. If you think about it, we've already won 1,100 stores will add more this next coming quarter. We'll be compared to our big peer in the space, we're not leaps and downs away from what they had in a year now. And so it's coming. For us, the challenge is really getting the product out the door because I just said we so rapidly brought this business in the United States. We need to make that investment. That's what we've been doing. So the way the business hasn't been a problem. It's a superior product. And want to integrate into Punchh, it's an incredible experience. It's getting the product out the door. So I think you'll see some of that happened in Q4, a bunch more in Q1. And then we hopefully have some nice flow-through of payments revenue that comes through that as well.

Very clear. Thanks, Savneet.

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

Hey, Savneet. I just want to follow up on that comment you made about M&A being your number one priority. I guess, when you think about it, what boxes do you want to check? Is it just thinking about building scale? Or is there a specific capability you'd like to acquire or focus on a region? Just want to unpack that where your focus is the most.

Yes. So it's always product based, right? Everything we've done so far, we've taken a product been able to accelerate the revenue growth and create a better customer experience. The acquisition menu allowed us to make Brink better but also Punchh better. The acquisition of Punchh made us allowed – made Brink better a lots of things like one-tap loyalty with payments. And so we focus on there. The areas that I think, like as I mentioned, you'll see us, I think, be active on the guest engagement side, where we want to ramp up the revenue bit growth there. The other part I would say is for market share. I think PAR continues to perform and outperform our peers. And in this environment, we think it's a really good idea for us to take advantage of that by being acquisitive, bringing those businesses in-house. And again, given our ability to control costs to value. So I think it create value. So I think the market share is the other part we look at, which is how do we get faster market share because we know that as we add logos that we don't have today at PAR, we can then take our logo and penetrate with additional products, creating tremendous value on the cross-sell question that someone mentioned earlier. So we're seeing that. And then the last part, I would say, is new verticals and geographies. We are getting pulled into new verticals and geographies at the time. And oftentimes, our answer is we're not ready for that yet. But with an acquisition, we could be there and we can move quickly. So those are the three parts that we're looking at today.

Thanks. And then on our numbers, it looks like sequentially, ARPU kind of across all three ARR segments was up. We talked about PAR Pay, I think being a driver of that in operator solutions. Anything else to kind of call out on the ARPU side? And then also on guest engagement, kind of the most significant jump there. Is that just a function of kind of lower ARPU Menu customers rolling off or anything you've done on the guest engagement ARPU

Yes. So it's payments on the other side, but it's price. So we've continued to become smarter at how we take price on renewal cycles. How do we show value to our customers and then create value for PAR. So it's price is the other big lever.

Thanks.

All right. Thank you. One moment for our next question. Next question comes from the line of Eric Martinuzzi of Lake Street Capital Markets. Your line is now open.

I wanted to revisit the Burger King rollout. I know you're going to formalize the plans here in Q4. But just curious to know if you got insight on incentives that they'll be using to motivate the installed base of franchisees to adopt the new product, whether it's kind of in line with maybe historical large customer deployments or maybe something a little bit greater than?

I probably can't talk about those specifically, just because those are private to them, but I would say they're very focused on unifying their POS. That's how they introduce us. That surpassed and the franchise base is so excited for it. What I can say, Eric, is I expect this to be a relatively rapid rollout for business this size. There's just tremendous alignment between us, between them. And so this is not going to be the kind of chain that sits on this for many years. This will go very quickly. And we're contracted that way and aligned that way. And so we both want that to happen. And I think that's why it will happen.

Okay. And then a follow-up to that also tied to PK. Curious to note your hardware run rate has been in the neighborhood of $25 million to $26 million or so. Does that change with the deployment with Burger King?

It will depend -- we'll see on our next call, we'll be able to give you a little bit better guidance on that as we're working through these plans. The Burger King franchisees, something that will absolutely take our hardware in our services, and it will be our push that by 2025, all of them are taking it, but we've got to get them there. But it will be a meaningful driver over time of hardware and services. And then I think as we hopefully are able to get to the other RBI brands, it will be a staple to all of them. But it will certainly be a new customer for us to have on hardware and services going forward.

Thanks for taking my questions.

Thank you. One moment for our next question. Next question comes from the line of Kyle Peterson of Needham. Please go ahead.

Great. Good afternoon guys. Thanks for sneaking me in here. Most of my questions have been answered, but I just wanted to ask quickly on the government business here. It looks like the revenue came in really strongly. Were there any kind of onetime task orders or anything that push that to the upside? Or is what we saw in the third quarter a good run rate to use in our models moving forward?

Yes. I think from a revenue standpoint, government obviously hitting all cylinders this quarter. I mean, we expect that that was in the upper 30s we expect it to be in the lower 30s on a quarterly basis. The margin, we were able to convert that back over because the team was able to properly manage direct labor where at times, that was being passed through in some of the task orders to a third party. And the team was able to set up internally so that it actually leveraged the internal team, and that gave us higher margins. So now we're back to what would you expect your 6% to 8% margins, and that's what we expect to kind of move forward with.

Got it. That's real helpful. Thanks guys.

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

Thanks, everybody, for joining us during this exciting time. We look forward to updating you on our next call.