PAR - NYSE

Good day, and thank you for standing by. Welcome to the PAR Technology 2025 Third Quarter Financial Results Conference Call. [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 IR and Business Development. Please go ahead.

Thank you, Elliot, and good afternoon, everyone. I'd like to thank you for joining us today for PAR Technologies 2025 Third Quarter Financial Results Call. Earlier today, 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 financial 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. A 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. I'd also like 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, 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 are PAR's CEO and President, Savneet Singh; and Brian Benard, 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?

Good afternoon, everyone, and thanks for joining us. Q3 was another strong quarter for PAR, one that shows the progress we're making on all fronts: growth, profitability, and cash generation. We delivered $119 million in revenue, up 23% year-over-year, driven by software subscription and hardware revenue growth. Our adjusted EBITDA came in at $5.8 million. This number includes $800,000 of accounting adjustments for non-period costs, which, when further backed out, brings our adjusted EBITDA to $6.6 million, continuing a nice march upward in EBITDA and cash flow. Our commitment to a flat cost base also played out. Non-GAAP OpEx was 44% of revenue, down from 60% just 18 months ago. This result was driven by our commitment to improving our operating leverage and our ability to begin to realize the operational savings being driven by AI utilization internally. Our ARR hit $298.4 million at the end of Q3, up 15% organically, reflecting steady execution across both sides of our platform. All told, ARR grew $12 million sequentially in Q3, and we expect that number to increase in Q4 to take us to our goals for the year. Now, to dig into our business performance in the third quarter. Q3 was another quarter of solid execution for Operator Cloud. ARR increased 31% year-over-year, including 14% organic growth. In Q3, we proved we can scale large enterprise deployments, innovate with AI, and keep customer satisfaction high, all while maintaining a disciplined focus on expense management and pursuing additional multiple large Tier 1 opportunities. Our POS business continues to perform exceptionally well. Our Burger King implementation cadence during the quarter accelerated dramatically with high efficiency, and we're pacing to meet Burger King's target for 2025, which then creates great visibility for 2026. Our OPS platform had a steady quarter as we ramped into Burger King and another large Tier 1 enterprise. The real story, though, in PAR OPS is the momentum in new launches and innovation. We brought Coach AI to market, an AI-driven assistant that allows operators to prompt operational questions in natural language and get immediate answers from their data. This innovation comes from combining delegate and data center product suites, and we see cross-sell and upsell possibilities across our wider base. We also launched AI chatbot support, helping users self-service faster and reduce support ticket volume, a meaningful productivity win. We expanded our international functionality and onboarded a Burger King franchisee in Canada across all sites, including French language functionality in Quebec, showcasing our ability to deliver for global customers. The PAR OPS operational groundwork and product expansion we put in place will pay off nicely in 2026 as we enter the year with a record backlog and customer commitments. Turning to TASK. As we mentioned last quarter, we pushed that rollout to next year in preparation for large RFP work. As we now move from RFP to actual development, our goal will be to maintain our launch schedule for next year with new customers while we begin our aggressive build schedule for this Tier 1 opportunity. That's a major validation of both product and team capability, and hopefully, we will have more to share publicly in time. What is crucial is that 2025 is proving to be the strongest bookings year in the history of the Operator Cloud segment, paving the way for years of sustained growth. On last quarter's call, I mentioned that we had $20 million in POS contract value that has not yet been rolled out. Our late-stage and weighted pipeline on PAR POS more than doubles this number again, ensuring a robust growth foundation for years to come. Now turning to the Engagement Cloud, which also had a strong Q3. Engagement Cloud ARR grew 16% from Q3 last year, including 15% organic growth. We continue to see real momentum and investment in digital engagement in the markets we serve, as brands look to connect more deeply with their guests. What's exciting is that, similar to last quarter, 70-plus percent of new deals signed in the quarter were multiproduct, including loyalty ordering intake, showing that customers increasingly see the value in the full engagement ecosystem, not just one solution, but the whole connected platform, a single cockpit to manage your entire digital business. We also saw renewals and upsells for Punchh with 3 major Tier 1 brands, proving that our long-term partnerships continue to grow stronger over time. On the innovation front, we launched new capabilities for the Engage for engagement in catering and games, both of which enhance the competitiveness of our solution and add real differentiation to our overall engagement platform. Moving to PAR Ordering. I'm encouraged to report that this is our biggest win quarter for PAR Ordering to date, highlighted by 6 new customer wins, all upsells and multiproduct deals, including a 400-plus location enterprise chain, a clear signal that our products are winning at scale. In the quarter, we were also able to sign 2 new customers that were previously using the largest online ordering provider in our space. We hope this creates a template to accelerate our growth in 2026, as PAR Ordering is not only a best-in-class platform now, but also an incredibly easy proof point of our Better Together thesis. Customers of Par ordering and Punchh, and POS can now update menus in one place, push changes to third-party delivery channels, and manage every aspect of their digital business from just one system. It's one of those few times in the enterprise software world where the demo just speaks for itself. Our solution for fuel and convenience stores, PAR retail, had a standout quarter, demonstrating what execution and innovation look like working together. In Q3, we hit key integration milestones and launched new features that are driving record engagement and customer success. We also added 4 new enterprise wins, including a successful Punchh to AT Retail migration in the quarter. It's important to note that, as we finalize the transitions from Punchh to PAR Retail, there's an opportunity for us to expand gross margins by taking out Punchh convenience store costs and taking up the price for moving customers to the more robust PAR retail platform. From a product perspective, we made Command Center smarter and more dynamic and introduced the messaging center and audience experts, making it easier for retailers to launch campaigns and analyze audience data in real time. And all of this hard work and achievement is working. Nearly every customer hit an all-time high in active program membership this quarter. So a great overall quarter for PAR Retail in which continues to lead in digital trade and engagement with strong customer results and clear momentum heading into 2026. A few summary thoughts here before turning it over to Brian for a deep dive on our numbers. I briefly mentioned this earlier, but this quarter marks a major milestone in PAR's journey to redefine restaurant technology with the launch of PAR AI, our new intelligence layer built natively across the PAR platform. The first product in the suite, Coach AI, is now live and already transforming how operators manage their business. PAR AI is different. It's built in, not bolted on. We've embedded AI intelligence directly into the operational workflow across POS, back office, loyalty, drive-through, and payments. This approach turns every PAR product into an active decision engine, creating a connected intelligent restaurant ecosystem, all pulling data from a clean pane of glass. Coach AI is our first step. It's an operational intelligence assistant that enables restaurant leaders to ask natural language questions and instantly surface live insights from POS, labor, and inventory data. No spreadsheets, no extra apps, no manual reporting. Importantly, it dramatically lowers the know-how required to be an operational expert, allowing more employees to engage with the product and, most importantly, saving brands hours of time. Early customers like Charter Foods have already eliminated the need for traditional BI tools and are realizing meaningful time savings and better decision-making. What's next? Later this year, we'll introduce a marketing intelligence assistant with the PAR engagement platform, enabling marketers to instantly analyze campaign performance, loyalty data, and customer engagement metrics in real time. Imagine being able to build, segment, launch, and execute a promotional campaign all within a prompt-like interface. This is more than a product launch. It's a strategic shift to an AI-native future. As I've said before, it's not about building tools. It's about owning the workflows so that AI is in the places where we as users are actually living. This new foundation will fuel capabilities like ROI ranked operational recommendations, voice-enabled ordering, and real-time audience targeting, all designed to make restaurant operations faster, smarter, and more adaptive. As Gen AI becomes embedded in the fabric of enterprise software, we believe the platform strategy is quickly emerging as the key to long-term value. It's not just about building tools anymore. It's about building AI native workflows. Companies that act as platforms, not point solutions, are in the best position to win. Why? Because they're integrated where work actually happens. That means deeper engagement, better data, and a natural fit for generative AI features that drive real, measurable impact. Moreover, by leveraging tooling and a tool set that you already understand, you lower the bar for training and adoption, a massive issue in today's early AI products. This is exactly where PAR shines. We don't just automate tasks. We connect entire workflows across departments. While point solutions to stuck in silos, PAR brings teams together, streamlining operations, and enabling collaboration at scale. For restaurants, this isn't a nice-to-have. It's the foundation for running a smarter, faster, and more agile business. We feel deeply passionate that AI makes PAR stronger because it brings the value of better together to life faster and improves the ROI of doing more with PAR. We believe it helps take a deeper moat and also pulls more of the ecosystem our way. Bryan will now walk through our numbers. Bryan?

Thank you, Savneet, and good afternoon, everyone. In Q3, we continue to execute our plan of driving organic growth across our products and the verticals we serve while also driving profit and cash flow improvement, all while ensuring the company has the right resources to execute with excellence on our large Tier 1 opportunities. Subscription services continued to fuel organic growth and represented 63% of total Q3 revenue. The growth from higher-margin revenue streams resulted in a consolidated non-GAAP gross margin of $57.5 million, an increase of $7.4 million or 15% compared to Q3 prior year. We managed the growth while continuing to drive efficient leverage of our operating expenses. Now to the financial details. Total revenues were $119 million for Q3 2025, an increase of 23% compared to the same period in 2024. Driven by subscription service revenue growth of 25% and inclusive of 16% organic growth. Net loss from continuing operations for the third quarter of 2025 was $18 million, or $0.45 loss per share, compared to a net loss from continuing operations of $21 million, or $0.58 loss per share, reported for the same period in 2024. Non-GAAP net income for the third quarter of 2025 was $2.5 million or $0.06 earnings per share, an improvement of $5.6 million compared to a non-GAAP net loss of $3.1 million or $0.09 loss per share for the prior year. Adjusted EBITDA for the third quarter of 2025 was $5.8 million, an improvement of $3.4 million compared to the same period in 2024. Q3 adjusted EBITDA of $5.8 million included $0.8 million of accounting charges for non-period costs. Removing these non-period charges, adjusted EBITDA would have been $6.6 million and more indicative of our current normalized operating profit. Now for more details on revenue. Subscription service revenue was reported at $75 million, an increase of $15 million or 25% from the $60 million reported in the prior year, and represents 63% of total PAR Revenue. Organic subscription service revenue grew 16% compared to the prior year, when excluding revenue from our trailing 12-month acquisitions. ARR exiting the quarter was $298.4 million, an increase of 22% from last year's Q3, with Engagement Cloud up 16% and Operator Cloud up 31%. Total organic ARR was up 15% year-over-year. As stated in our Q2 earnings call, we expected incremental ARR growth to accelerate in the first half of the year to the second half. During Q3, incremental ARR increased $12 million versus $5 million in Q2 when excluding the GhostSkip asset acquisition, signaling the return to stronger growth momentum, which we expect to continue in Q4. Our growth is being driven by both site growth and increased ARPU, reflecting the successful execution of our Better Together thesis, which is driving both multiproduct deals and cross-selling into our existing customer base. Hardware revenue for the quarter was $30 million, an increase of $7 million or 32% from the $23 million reported in the prior year. The increase was driven by continued penetration of hardware attachment into our expanding software customer base and increased sales volume from customer demand that was pulled forward in advance of anticipated tariff impacts. Professional service revenue was reported at $14.5 million, relatively unchanged from the $14.2 million reported in the prior year. Now turning to margins. Gross margin was $49 million, an increase of $6 million or 14% from the $43 million reported in the prior year. The increase was driven by subscription services with gross margin dollars of $41 million, an increase of $8 million or 25% from the $33 million reported in the prior year. GAAP subscription service margin for the quarter was 55.3% and in line with the 55.3% reported in Q3 of the prior year. Excluding the amortization of intangible assets, stock-based compensation, and severance, the non-GAAP subscription service margin for Q3 2025 was 66.2% compared to 66.8% in Q3 2024. The modest year-over-year decline was driven by the impact of a fixed profit contract that we acquired from one of our 2024 acquisitions. Excluding this contract, which is not reflective of core operational performance, non-GAAP subscription service margin was over 70% for the quarter, an improvement of 150 basis points versus the prior year. This contract is up for renegotiation in 2027, and we expect that the renewal process will provide an opportunity to improve the underlying economics. Hardware margin for the quarter was 17.8% versus 25.5% in the prior year. The decrease in margin year-over-year was substantially driven by increased supply chain costs resulting from recently implemented U.S. tariff policies. The company began implementing pricing adjustments during the quarter to mitigate the impact of tariffs in future periods. We expect hardware margins to return to the mid-20% range moving forward. Professional service margin for the quarter was 17.6% compared to 29.2% reported in the prior year. The decrease in margin year-over-year was primarily driven by a reclass of non-period costs from R&D and incentives offered on SaaS implementations to facilitate adoption of the recurring subscription revenue streams. We expect professional service margins to return to the mid-20% range going forward. In regard to operating expenses, GAAP sales and marketing were $12.5 million, an increase of $2 million from the $10.5 million reported for the prior year. The increase was primarily driven by inorganic increases related to our acquisitions, while organic sales and marketing expenses increased by a modest $0.7 million year-over-year. GAAP G&A was $31.7 million, an increase of $4 million from the $27.4 million reported in the prior year. The increase was substantially driven by certain noncash or nonrecurring expenses, of which $3.5 million are non-GAAP adjustments, while organic G&A, excluding non-GAAP adjustments, remained flat year-over-year. GAAP R&D was $19 million, an increase of $1 million from the $18 million recorded in the prior year. The increase was entirely driven by inorganic expenses, while organic R&D expenses actually decreased $0.2 million year-over-year. Operating expenses, excluding non-GAAP adjustments, were $52 million, an increase of $4 million or 8% versus Q3 2024. But when excluding inorganic growth, operating expenses were flat year-over-year. Exiting Q3, non-GAAP OpEx as a percent of total revenue was 43.4%, a 590 basis point improvement from the 49.3% in Q3 of the prior year, demonstrating our ability to scale efficiently and drive operating leverage. Now, to provide information on the company's cash flow and balance sheet position. As of September 30, 2025, we had cash and cash equivalents of $92 million and short-term investments of $0.5 million. For the 9 months ended September 30, cash used in operating activities from continuing operations was $15 million versus $24 million for the prior year. Operating cash flow has steadily improved throughout the year as we continue to drive incremental profitability and reduce our net working capital needs. Q3 operating cash flow was positive, with the cash provided by operating activities of $8 million for the quarter. Cash used in investing activities was $11 million for the 9 months ended September 30, versus $178 million for the prior year. Investing activities included $4 million of net cash consideration in connection with the tuck-in asset acquisition of Go Skip, capital expenditures of $3 million for fixed assets, and capital expenditures of $4 million for developed technologies associated with our software platforms. Cash provided by financing activities was $12 million for the 9 months ended September 30, versus $279 million for the prior year. Financing activities primarily consisted of the net proceeds from the 2030 notes of $111 million, of which $94 million was utilized to repay the credit facility in full. To recap, following a slower first half, Q3 marked a pivot to meaningful growth and continued incremental profitability for the second half of 2025. This momentum is evident across key financial metrics, $12 million or 17% annualized sequential ARR growth. Non-GAAP subscription service gross margin percent improved 150 basis points from Q3 2024 when excluding the nonoperational impact of the aforementioned acquired fixed profit contract. Non-GAAP OpEx as a percent of total revenue improved 590 basis points from Q3 2024. Adjusted EBITDA improved $3.4 million from Q3 2024, and operating cash flows were a positive $8 million for the quarter. I will now turn the call back over to Savneet for closing remarks prior to moving to Q&A.

Thanks, Bryan. In short, Q3 was a strong execution quarter, and we possess the scale, product, subscriber base, and financial strength to lead the enterprise foodservice technology category. What's in front of us is significant business opportunities with major Tier 1 deals, an aggressive acquisition strategy to deliver sustained additional inorganic growth, and a pointed AI product approach. Moreover, our growth into new large TAM industries continues to validate our PAR Advantage, and the investments we're making should bear fruit in years to come. In 2025, we're on track to deliver nearly $450 million in revenue, approximately 2/3 of which is recurring SaaS. We're also driving gross margin expansion, building a solid cross-sell and upsell motion, and seeing results across our global installed base of over 100,000 restaurants and retail stores. The long-term plan is for PAR to be the clear enterprise winner. First in restaurants, later with C-stores, and over time in the next vertical. Being the anned winner in this niche market creates a unique market dynamic that will warrant evaluation commensurate with others who've done similar work in different verticals. We are convinced that this foundation we have built has set PAR OPS to compete for and win the largest of Tier 1 restaurant technology deals in history. In the short run, our priorities remain clear. First, continue to grow ARR in the mid-teens organically or higher; second, execute on a unified better together product road map while building and commercializing new AI-driven functionality. Third, drive operating leverage and expand EBITDA. And fourth, close and announce large strategic Tier 1 deals to provide further visibility for long-term revenue growth. A critical aspect of our story now is revenue growth visibility. While especially operator cloud products rollouts can take time, given the in-store nature of the deployments, PAR has accrued a very sizable backlog, coupled with a late-stage Tier 1 pipeline. We have a very strong foundation to build off of. In other words, the short-run priorities I just mentioned are just our baseline. This is the minimum expectation I have of our team. Our mandate continues to be to leverage our existing business to pursue more aggressive, accretive, and creative M&A opportunities. This is a buyer's market, and PAR is a proven value creator. Multiples across our sectors have compressed dramatically, allowing for the potential for creative asset acquisitions. More importantly, though, we have the expertise and grid to actually pull it off. Our current flywheel of multiproduct deals expansion is great proof of this. During our time here, we have evolved from an unfocused, hardware-driven, and money-losing business with a singular software product to a profitable platform SaaS company bidding for and executing the biggest deals in the industry. This will absolutely happen again and again. We intend to further consolidate our existing markets while building out the PAR flywheel in new verticals. Our ambition is to be larger and faster, predicated on an ever-expanding better together platform. And this ambition is deeply rooted in every single member of our team. Thanks again for your time and your continued confidence in PAR. We're happy to take your questions. Operator?

[Operator Instructions] Our first question comes from the line of Samad Samana of Jefferies.

It's good to see the progress both on the top line and on the expense side. So congrats on that. Maybe first, Savneet, just in thinking about the word record in terms of like the pipeline, I think it was described as a tipping point in some ways by Bryan for the business. So the tone is very, very positive. Can you maybe help me understand with a little bit more precision in terms of what changed between 2Q to 3Q that's giving you, I think, what seems like incremental confidence, particularly as you ended the call with that at least mid-teens growth outlook? And then I have a couple of follow-ups.

I think we had similar confidence in Q2. It's just further visibility as we signed more deals that have given us a lot more visibility for Q4 and the rest of next year, and then further progress these larger Tier 1 deals, where now we see real visibility and hopefully a couple of them, it just gives us more confidence. I think we had similar confidence, but it's rising as we get more and more deals signed. I think the other part is that we rolled out a record amount of revenue this quarter, and our backlog filled back up. And so our backlog didn't come down, which means that we're signing at a faster rate than we're actually rolling out, which I think gives us more confidence again on the visibility in the out years.

And then you mentioned valuations coming down in the space. You mentioned M&A. And I know the company has made a lot of progress in digesting some of the M&A from years past. So just should we take that as a signal that now that you're far enough along in the digestion of TASK and Stuzo Holdings and some of the other assets that you would maybe think about firing that M&A muscle back up again? Or is that more of an opportunistic view? Just help us think through that last comment.

It's opportunistic. What I meant by that is we're seeing -- obviously, our multiples compress, but what we're noticing is a lot of the assets we wanted to buy have compressed far more. And there are also unique opportunities to carve out assets and businesses that we like as well. And so we're going to be opportunistic. We're going to be super careful about using our shares. But we're seeing enough accretive deals where I wouldn't be surprised that we found something. There's nothing imminent or anything like that, but we feel pretty good about where we stand relative to the multiples we're seeing, some of the assets we've been tracking for many years.

Last question for me, and I'll turn it over. But just there's been, I'd say, some mixed performances out of certain pockets of maybe groups that aren't necessarily PAR customers, but that are representative of what's going on more broadly with consumers. And so I'm just curious if you have seen that it has any impact on customer decision-making, whether that makes it more imperative than ever to have the right technology in place, and/or if it's slowing down deal cycles, or if you're seeing both of it's netting out? Just how is some of the recent news or headlines on what's happening in restaurants translating into deal closures for you guys?

Yes. Great question, Samad. So the first half of the year was painful for, I think, our category across the board. We saw a meaningful slowdown in traffic and sales for many of them. We saw it pick back up towards the second half of this quarter. But I'd say categorically, we haven't seen a slowdown in RFP activity. In fact, we have more RFP activity at scale than we had before. Where it impacted us in Q2 was that at the franchisee level, rollouts were slower because franchisees were waiting for business to stabilize. I think that's now reversing, and we're seeing really good momentum. But the macro question is a good one because I think what we continue to see is that as sales volatility exists in our category, the investments in technology seem to be increasing, not decreasing. So we're seeing more excitement around a lot of the AI tooling we have. And I think maybe most exciting for PAR, we absolutely see more interest in consolidating vendors. And we are one of the few players that have I'd argue, close to a full suite of products. And so I think that's giving us a little wind in our sales.

Our next question comes from George Sutton of Craig-Hallum.

Nice message, guys. So, specifically to TASK, you had mentioned that last quarter, you had put off some implementations because you were focused on the RFPs. I just want to make sure I understand what the updated message is relative to that.

Yes. I think we continue with to same plan. We've got a lot of test business needs to get rolled out get rolled out in '26. And we're moving from RFP to actual development on a larger opportunity. And so it's critical for us to hold our commitments to our customers to get those deals out in '26 while also building for this large opportunity.

Now, with respect to 2026, you made multiple points through your prepared comments that there were different things setting you up very well for 2026, AI, the BK rollout, the template for products, et cetera. Can you just give us a broader sense of what this ultimately means for '26?

Not yet. We're going to give guidance on the next call. But I think maybe the biggest takeaway is we have a lot more visibility now than we've had in the past because of the backlog that we've signed. And as a result, I think we can get more precision as we get to the end of the year. And then I think the other part about it is the market, to the last question, part of what we're also learning is that the market likes our strategy. Every single car ordering deal was a multiproduct deal, including payments and loyalty. We're starting to see that the thesis that we put out there and now the product execution is caught up. And so that should give us the opportunity to take a lot more share next year. And that's kind of my wish is I hope it s up for success because we've been really impressed with what's happened in Q3 and what's happening in Q4.

Our next question comes from Mayank Tandon of Needham.

Savneet, I'll just nitpick a little bit. You've been saying that you could grow ARR 20% organically for quite some time. I think you said that your target is mid-teens plus. Is there a change in the market? Or do you think this is just a function of the type of deals you're pursuing, which may take longer to land? Maybe that's a good thing long term, but maybe it slows down the revenue ramp. I'm just curious as to why the shift from 20% organic to mid-teens organic, if I heard your comments correctly.

Yes. So last quarter, we said we're going to target mid-teens. And so I'm continuing that message here. When I was running through the priorities, it was our short-term priorities, which is continuing to hit at least that and hopefully more going forward. The major delta we're talking about is 2025, where our first half was slower than we wanted. And so I think it will be hard for us to get to that 20% for this year. And so I think there's an opportunity for us to do that to accelerate in '26 and '27 as the last caller I was talking about. But right now, I think we feel really comfortable with mid-teens opportunities to go higher. And given the whole momentum we have in AI and some of these larger deals, we'll see where that shakes out on our next call. But I guess, I think we feel really good where we are. And more than anything else, I think there's more opportunity for us to get back to where we were on this call than there was last call.

And then, if I could just ask more about the competition. Just listening to Toast and other players in the market, it seems like there's obviously a share shift going on from legacy to the more modern solutions like yours and Toast and other players in the market. I'm just curious, are you starting to see each other now because they're moving upmarket? I know not in the QSR space necessarily, but making some progress in your core enterprise space. I think you've had some opportunities down market. So I'm just wondering if you're starting to maybe see each other more often and what that means for the market overall?

Not as much as you think. I mean, I think we have incredible respect for the team, the business, what they've built. And we've been competing in enterprise deals for years and years. I think at the large QSRs where we make our bread and butter, traditionally, it's still the same few folks as the incumbency, ourselves, and usually one of the other legacy providers. I think, and so today, I think if we surveyed our sales team, it would say the same all. We definitely see each other more in the smaller mid-market part of the world, where they are pushing aggressively. And so we do see each other there. But the large Tier 1s have unique dynamics when we see them. And obviously, I think we think, again, very highly of them, but we feel like we continue to expand our moat, and particularly this multiproduct dynamic, I think, is really going to help us going forward.

[Operator Instructions] Our next question comes from the line of Charles Nabhan of Stephens.

I wanted to clarify your comments around moving from RFP to development. Specifically, I haven't seen any big announcements, but are you alluding to one of the super Tier 1s that you had been targeting and talking about over the past couple of quarters?

We're generally in a market where the press release comes out quite a bit after we've won a deal, unless it's a renewal of an incumbent. So you generally won't see the press release, honestly, until well later if we won something. In regard to what I was talking about, all I'm suggesting is that we were in an RFP process and in the deal, and now we're starting to build. And then as we get details, we'll share them as we're allowed.

And as a follow-up, I feel like I have to ask the obligatory Fiserv question here. I know Clover is downmarket from you, and it's still early days. But there's obviously quite a bit of disruption going on in the payment space and negative sentiment around some of the fees that they've been charging. So with that said, do you see an opportunity to attach payments coming out of some of the disruption, the potential disruption in the payment market?

Not really. In our market, payments are a much more transparent business than it is in the SMB side of the world. And so generally, when we win payment deals, it's in 1 of 2 ways. It's a hypertransparent package with the point of sale, where we can help bring down costs, hardware funding traditional ways that point-of-sale companies win deals, or it's through our online ordering business, which is starting to grow, where our Order and Pay module is really valuable to bundle in as a package deal. So that's when we see it. As far as the disruption that's happening down there, we just don't participate in that SMB space. So it hasn't really changed anything in our area.

Our next call comes from Stephen Sheldon of William Blair.

First one here, I just wanted to see if you could help us unpack sequential trends in Operator Cloud ARR. Great to hear that the BK rollout accelerated. But just given that, I'm also a little surprised that ARR there was up less than $3 million sequentially. So, any rough sense of how much of the Burger King contract ARR, when you think about the full deployment, would be included in the 3Q ending ARR number? And are there any offsets that you saw this quarter, such as churn in the broader operator base that weighed against sequential trends? Just anything to unpack the sequential ARR growth in the operator.

No meaningful churn. I think the way to think about it is back-end weighted. The last month of the quarter was an excellent acceleration for us, and that continued into October. October was our best month. So it's more just the back-end weighted. And so that's why I think you hear Bryan's comments in mind, we feel like Q4 will potentially be a nice uptick. So it's just the back-end nature of the rollouts within the quarter. And no significant churn.

And then on loyalty, I guess, can you just talk some more about the growth you're seeing there? It seems like loyalty is becoming a much bigger focal point with brands becoming a bigger factor in consumer decision. So, how much runway is there left for part to grow in loyalty as you think about location penetration, pricing increases, et cetera? And how different does that opportunity look now between restaurants and convenience stores, broader retail?

Loyalty is a mandate. It was nice to have, and now I think we're witnessing that in times of sales slowdowns, traffic slowdowns, you really need a robust loyalty program to not just grow traffic and revenues, but also keep your margins high. And so it continues to impress us how much demand there is for that. We're earlier in that cycle for convenience than we are in restaurants. But even in restaurants, I think what it's leading to is that it's not just the loyalty that you had a few years ago. It's more upsell for a new product. It's a lot more opportunities to sell the AI initiatives I talked about. And so while our loyalty product probably won't double sites in the next year or 2, I think you'll see us continue to push up ARPU with the addition of new products, because I think early on, you had an all-encompassing loyalty product. I think in the future, it's going to be a bunch of modules that are built into that, that we can upsell and create a lot of value for the customers.

Our next question comes from the line of Adam Wyden of ADW Capital.

The first question is around M&A. I know you spoke about it, but obviously, your shares are down almost, I guess, 2/3 from where we were in November. I guess my question to you is, would this prospective M&A be accretive to your growth rate? And I mean, how do you think about doing M&A with your stock down 2/3? I mean, if I look at it on '27 or even '26, you're trading in the teens or whatever, it's 15, 16, 18, 20x EBITDA. I mean, how do you think about buying businesses while your profitability is inflecting because the '27 is on a revenue multiple basis, you're the cheapest you've ever been, and your profitability is inflecting. So I'm just curious how you think about doing M&A within that paradigm.

Yes. On the call, I think it's twofold. So one, we won't do something that's not accretive. I think we've been very strict about that in everything we've done. And so what we're observing is that while our multiples compressed, we're seeing far more compression in some of the assets that we've been tracking for a very long time. And part of that is that we think there are some carve-out opportunities that we could leverage. And so I don't think you'll see us do anything close to a big deal. I don't think you'll see us dilute you and ourselves in any way; that's irresponsible. I think you'll see us find niche assets that we can use cash on the balance sheet, or if we use our shares, there's a large margin of safety for us to make it accretive. So I think it's just relative to what we're seeing in the market; we think we can create value. It's not going to be anything crazy, but it's enough where we think we can take up the growth rate of the collective PAR by taking a product and pushing it through our distribution system now.

So anything that you buy would be accretive to your existing growth rate? Meaning, you think that will day 1 be a higher growth rate than PAR? Or you're saying, like, how do you think about the growth rate? I know that's been a challenge over the years, the last couple of deals, because it slowed down TASK for the big Tier 1. So I'm just curious how you think about adding things day 1 accretive versus.

Yes. So historically, that's always been the goal. Day 1 is accretive, and then the opportunity to accelerate beyond that. So that's definitely what we want to try to accomplish.

And then my second question is, you made a comment about something that was in development, I guess, RFP. Now, does that mean that you're -- because I know like you've been dancing around this whole Tier 1 thing. And clearly, you lost one today. And obviously, that restaurant chain is doing very poorly, and it's not crazy for them to renew something when their hair is on fire. So it doesn't particularly bother me. But when I think about the other Tier 1s, I think you mentioned 3, and it sounds like, at least based on our channel checks, there may be 4 I mean, how do you think about where you are -- I mean, are you basically saying you won one of the super Tier 1s basically because you're saying, well, we went from RFP to development. I mean, is that what you're saying? I mean, obviously, there's no press release because there's all the stuff about compliance, and everyone doesn't want to get hacked while they're doing it. But I mean, is it fair to assume that one of the super Tier 1s is basically signed and you're now in the process of rolling out? And can you comment about the other -- I guess, the other 2, and where you think you could be in that process?

Unfortunately, I can't comment on any of that from my perspective. I think where we sit today, we've never felt more excited about the pipeline that's right in front of us, right here. And I think my comments touch on where we are in some of it. So, as we get information we can share publicly, I promise we will. We're not trying to be cagey, is a limited way to say. But today, we feel really good about the pipeline that's in front of us right now.

So what does it mean to go from RFP to development? I mean, what does that mean exactly?

Generally, the way our business works and it's not the same for everybody. After we win an RFP, we get to some form of development. Now it's not a guarantee by any means. You still have to do a lot of work from there, but it's generally a very good sign.

Our next question comes from the line of Maxwell Michaelis of Lake Street Capital Markets.

I want to go back to your comments in the prepared remarks around PAR Ordering. It sounds like a pretty good quarter. Wondering if you could give some more information around that segment as well as it sounded like you won a customer with 400 locations.

Yes. Listen, it's a tiny product for us today, but it's starting to really move for us. What I think is going to be interesting about it is we feel pretty good that not only can we start to continue to attach it to our loyalty wins, but we can also upsell it to our existing customers and hopefully pull in payments alongside it. So it's a really nice opportunity for us. As I mentioned, and you just suggested, we did win a 400-plus store chain. It was a takeaway from a market leader, so we felt great about that. And I think we're hopeful more of that comes. And more than anything else, I think it's just validation that the product is now at a point where we can argue it's best-in-class, and we can absolutely argue that if you have additional PAR products, you're going to get an experience and outcomes you could not get elsewhere. And that's what I meant by some of my comments, and if you see a demo of it and you work in our category, it is one of those things that it's, oh my gosh, I can't place somebody filing it that.

[Operator Instructions] Our next question comes from the line of Anja Soderstrom of Sidoti.

Just curious, and sorry if you covered this already, but in the hardware, what happened there? It seems like there was a nice upside surprise in the quarter.

Are you referring to on the revenue and the margin?

On the revenue.

Sure. Sure, and thanks for the question. What happened was we had a pull-in. We were referring to this back in Q2. We started seeing orders come in in Q2, for hardware pulled in before the kind of tariffs were getting impacted by the pricing. And so that was the execution, a lot of those actual sales and orders that got in Q2 executed and revenue in Q3.

And then you mentioned the margin was affected by the tariffs, but you're mitigating those, and do you expect them to normalize again in the fourth quarter or?

Correct. So right, those orders came in in Q2, before we actually implemented the tariff price increase. And so then we've actually implemented that during Q3. So as sales orders kind of burn off into Q4, that will be offset.

And also, you are marketing your offering better together. But how important is the data that you are generating for your customers in your value proposition?

It's hugely valuable. I mean, I think that's why Better Together is working. As I mentioned, 70-plus percent of our engagement deals for the last couple of quarters are multiproduct. And I think a huge part of it is because if you pick our loyalty and online ordering, you've got one cockpit to manage your digital experience. So you can update menus in real time. You can import the POS menu and online ordering. You can push it to third-party delivery channels. You can have distinct availability, pricing, and menu on those channels. And so that's all data that we organize in a way that I think gives us a really unique competitive advantage. And that's why we've leaned so heavily into the AI side because I think the provider that has the platform, as I talked a lot about, also has the data, and I think we can make that data actionable.

So your customers have real-time access to the data.

Through Coach AI, they have access in real time to run reports so on and so forth. And again, I think a lot of what I'm observing is that you're lowering the bar to do work. Historically, think of your traditional BI tools, you're downloading reports, trying to figure out what the margin of this campaign we did, or when we should order this product. Today, you can prompt and say, "Hey, which store should I focus my time on today? Hey, what store creates a great template for me to fix this, or what labor schedule is working, or what labor module is working? You can now really, really engage. And so in the past, I think having a lot of data was almost wasteful because it just gave you too much information. Now we can help you be decision-oriented as opposed to just flooded with a lot of reports that confuse you.

This concludes the question-and-answer session. I would now like to turn it back to Chris Byrnes for closing remarks.

Thank you, Elliot, and thank you to everyone for joining us today. We appreciate your time. We look forward to updating you in the further coming weeks. Have a nice evening.