Good day, and thank you for standing by. Welcome to the PAR Technologies Fiscal Year 2022 Fourth Quarter Financial Results. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Chris Byrnes, Senior Vice President of Business Development. Please go ahead..

Thank you, Catherine, and good morning to everyone. I'd also like to welcome you today to the call for PAR's 2022 fourth quarter and year-end financial results review. The complete disclosure of our results can be found in our press release issued this morning as well as in our related Form 8-K furnished to the SEC.

To access the press release and the financial details, please see the Investor Relations and News section of our website at www.partech.com. At this time, I'd like to take care of certain details in regards to the call this morning.

Participants on the call should be aware that we are recording the call this morning, and it will be available for playback. If you ask a question, it will be included in both our live conference and any future use of the recording.

I'd also like to remind participants that this conference call includes forward-looking statements that reflect management's expectations based on currently available data. However, actual results are subject to future events and uncertainties.

The information on this conference call related to projections or other forward-looking statements may be relied upon and subject to the safe harbor statement included in our earnings release this morning and in our annual and quarterly filings with the SEC.

Joining me on the call today is PAR's CEO and President, Savneet Singh; and 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, and thanks to everyone for joining the call this morning. I'm pleased to report that our growth momentum continues as we aggressively expand our unified experience to new and existing customers, drive our business to cash flow positive and deliver customer satisfaction rates that are the highest in the industry.

As I've done on prior calls, I'm going to break today's call into three sections. First, a review of our recent quarter results; second, a review of strategic highlights that will lead to future results and finally, some thoughts on 2023. So first, our results.

As I stated previously, I'm convinced that ARR remains the best metric to measure our success as each dollar ARR - under each dollar of ARR is considerable future cash flow. At the end of Q4, ARR reached $111.4 million, delivering a 26.4% year-over-year increase, demonstrating the continued growth and scaling of our subscription services engine.

Contracted AAR now stands at $127.3 million, a 21% year-over-year increase from the end of '21 and an 8% increase from sequential to Q3. Today, our unified experience consists of operator solutions, guest engagement and back office.

Operator Solutions, which is Brink in payments, ARR grew 29.6% to $41.6 million in Q4 when compared to the same period last year. During Q4, Operator Solutions added 183 new store activations and new bookings totaled approximately 1,611. Churn continues to be extremely low at 4.3% annualized for Brink in the quarter.

We continue to be aggressive in attaching payments to all new Brink deals and see a significant majority of our new customer wins in 2022 have done just that. And in just this past quarter, we went live with 17 new customers.

As we've mentioned in the past, this impressive growth has been somewhat muted by supply chain limitations of payment devices, which we expect to clear up later this year. What I like most about payments is that it creates an avenue to consolidate transaction data across all channels, be framing conversations with our customers.

Moving to guest engagement AAR that includes our leading customer engagement platform Punchh and newly acquired menu. Guest engagement ARR grew 26.2% in Q4 when compared to Q4 '21 and totaled $58.9 million. Punchh signed several new customers in Q4, including a 3,000 store fast-casual enterprise and went live in 10 new logos in the quarter.

Punchh continues to be best-in-class for loyalty, but we saw some softening in demand at the very end of Q4 and beginning of '23, as restaurants rely on marketing development dollars to fund loyalty rollout and expansion.

Cautions around inflation and price elasticity for restaurants have impacted marketing development funds and in turn, we're expecting a minor slowdown in new customer demand for Punchh in the first half of this year. I continue to be very bullish on Punchh's opportunities going forward, but as always, we prepare for the reality we're giving today.

Even with this headwind, we are forecasting total ARR growth across our unified portfolio to be consistent with our 2022 year-over-year growth. Updating the progress of introducing menu to the United States. We are very encouraged and excited in the early interest and rave reviews we have received from prospective menu customers.

We're already participating in a fair number of RFPs and feel our opportunities for rapid acceleration of new customer wins and revenue growth is upon us. In Q4, we completed the fully integrated ordering capabilities a menu with Brink, which allow us to start targeting existing customers aggressively.

We hope to start booking customer wins starting next quarter. Back Office and Data Central continued its turnaround with the market more focused on cost control. Reported ARR of $10.9 million in Q4 was a 16% increase from last year's Q4. We went live in seven new logos in Q4 and continue to sell into existing Brink and Punchh customers.

Notably in the quarter, we signed a popular casual dining wings brand that will add meaningful -- meaningfully to ARR in '23. Also in this deal, we displaced the market leader for labor scheduling, validating the work we did earlier to reinforce our own scheduling module.

We had activations of 350 stores in Q4 and a strong booking space of new stores being signed this quarter.

We continue to see increased demand for back-of-house technology and applications to control food and labor costs that have a direct impact on improving margins and profitability as inflation, labor and supply chain issues seem to be ever present. Moving on from the results, I want to spend a bit of time on three of our strategic initiatives.

Last quarter, I talked about our focus on freezing R&D spend and the shift of our R&D resources from technical debt to new product development. We continue to see momentum behind this journey and feel confident the natural shift from technical debt to future development will allow PAR to increase new products without adding new R&D spend.

Alongside this R&D focus, though, is a go-to-market plan that allows PAR to have a 360 review of our customers so that we can better effectuate cross-sell in the promotion of Unified Commerce. In Q4, we consolidated parts of our sales team to create an account management team to own each of our existing accounts.

This allows our customers to have one sales contact across all PAR products, thereby giving our customers a more streamlined view of PAR and simultaneously our sales team of 360 rereview of the customer's relationship with PAR to enhance our cross-sell.

It also gives us accountability on an account-by-account basis to understand our performance with every concept we sell to you and help drive performance at the account level. These account managers are partnered with a direct sales team that is still in the hunter logo, and we provide strong products and technologies to our customers.

As the utility of a more unified integrated offering becomes more evident, we'll see a greater and greater need to manage our accounts at a more strategic level, balancing price, LTV and customer satisfaction, thereby also making this group the right point of contact for renewals and upsells.

A good example of this momentum is with our recent signing of [indiscernible] a large restaurant enterprise that has been implemented -- that implemented both operator solutions and guest engagement with our Brink POS and Punchh platforms in tandem to enhance their customer experience and drive efficiency in their 900-plus stores.

As we roll out and deliver value, our account manager will be tasked with working closely with the [indiscernible] team to find avenues for new products that can solve their needs and deliver our unified experience. The second large strategic move part made in Q4 was Brink's entry into the table service market.

We've been cautious and not overpromising too much, but in Q4, we received commitments from two notable and well-known table service chains. Table service opens up our addressable market to a large and new base that we previously have stayed out of.

Table service clients in general, pay higher monthly subscription rates as they require more terminals and functionality than our QSR customers and will drive our continued ARPU expansion.

What's exciting about our first two commitments is that both customers also took our back office and payments offerings, highlighting the strategic fit of our products and candidly highlighting how simplicity wins.

While much is made about new technology, the digitization of the restaurant and the move away from in-store, today, our customers more than anything else wants their products to be -- wants the products to work and work seamlessly. The third strategic update I want to touch on is data.

In today's challenged global economy, PAR unified experience is becoming a must-have for enterprise restaurants. Business complexity continues to increase and homegrown solutions can no longer keep pace. This creates a sustained opportunity for PAR as restaurants adapt and change their business models and evolve their technology platforms.

Digital transformation within restaurant enterprises is creating enormous following on data that are all unmanageable with conventional approaches to analytics and data and analytics. As restaurants mature in their data analytics practices, the approach becomes unwieldy.

PAR is delivering significant value to our customers through the capture and management of this data as the enterprise serves their customers day in and day out. To the unified experience offering, PAR has massive amounts of real-time actionable data for customers that provides the foundation for machine learning-based personalization and analytics.

This includes transactional data for Brink, customer identity data for Punchh and employee inventory data for Data Central. As an example of this scale, three out of every five years adults use a Punchh power loyalty program and generate $4.7 billion transactions a year.

We make these analytical insights and raw data available to our customers in a variety of ways. Customers can form self-service analytics right in the product itself, including campaign performance analytics, employees reporting and guest analytics. Customers can export this data on demand for their own analysis and visualization.

This capability allows enterprise restaurants to use this mission-critical data to optimize customer engagement, drive operational efficiencies and at the end of the day, optimize their profitability. As the world embraces artificial intelligence, these data sets and models, we believe will become critical in that automation.

Now I'll turn the call over to Bryan for more details on the numbers..

Thank you, Savneet and good morning, everyone. Before going into the financial details, I'd like to highlight an important change to our financial reporting presentation. We have retroactively split the presentation of our services financial statement line items across new subscription services and professional services, FSLIs.

This change is a result of PAR's transformation into a true technology platform provider. With our subscription services line items, consisting of revenues and costs related to our SaaS solutions, recurring software support and transaction-based payment processing services. Subscription services represents 100% of our annual recurring revenue metric.

Professional services revenues and costs related to our portfolio -- relate to our portfolio of other support services, including implementation, training, on-site and technical support as well as hardware repair and installation. In addition to splitting the services line items, we have changed the product line items name to hardware.

Now on to the financial performance. Total revenues were $97.7 million for the three months ended December 31, 2022, an increase of 19.7% compared to the three months ended December 31, 2021, with growth coming from both restaurant retail and government segments.

Net loss for the fourth quarter of 2022 was $13.5 million or $0.50 loss per share compared to a net loss of $25.6 million or $0.95 loss per share reported in the same period in 2021.

Adjusted net loss for the fourth quarter of 2022 was $7 million or $0.26 loss per share compared to an adjusted net loss of $9.8 million or $0.36 loss per share for the same period in 2021. Adjusted EBITDA for the fourth quarter of 2022 was a loss of $2.8 million compared to an adjusted EBITDA loss of $4.9 million for the same period in 2021.

Hardware revenue in the quarter was $29.6 million, a decrease of $2.6 million or 8.1% from the $32.2 million reported in the prior year. Both periods were historically high for hardware sales. We continue to see strong hardware sales both with our Tier 1 legacy customers and across our print customer base.

Subscription service revenue was reported at $27.9 million, an increase of $8.9 million or 47% from the $18.9 million reported in the prior year, driven by revenue from our guest engagement solutions. Q4 subscription services revenue included approximately $0.6 million of year-to-date adjustments within our guest engagement solutions.

The annual recurring revenue exiting the quarter was $111.4 million, an increase of 26.4% compared to Q4 2021 with operator solutions up 29.6%, guest engagement of 26.2% and back of house up 16%.

Professional service revenue was reported at $13.5 million, an increase of $1.9 million or 16.1% from the $11.6 million reported in the prior year, driven by hardware repair services, guest engagement and operator solutions implementations.

Our total recurring revenue base, which includes both subscription services and hardware support contracts within professional services continues to expand with $34.9 million reported in Q4 2022, an increase of 34.2% compared to the $26 million in Q4 2021.

Contract revenue from our Government business was $26.7 million, an increase of $7.9 million or 42.1% from the $18.8 million reported in the fourth quarter of 2021. The increase in contract revenues was driven by a $7.5 million increase in our ISR solutions.

The increase in ISR solutions was driven by task orders resulting from the AFRL Counter Small UAS contract awarded in 2021. The Contract backlog associated with our government business as of December 31, 2022, was $334 million, an increase of 71% compared to the $195 million backlog as of December 31, 2021.

Total funded backlog as of December 31, 2022, was $86 million, a 124% increase compared to the funded backlog of $39 million for the prior year. Now turning to margins. Hardware margins for the quarter was 23.8% versus 23.4% in Q4 2021.

We continue to strategically manage market changes in both supply chain and pricing so we can continue to provide premium products to our customers at competitive pricing while maintaining our margins. Subscription Services margin for the quarter was 53% compared to 43.5% reported in the fourth quarter of 2021.

We have been successful in driving multiyear subscription services margin improvement with improved hosting utilization, process improvements within support services and more pricing rigor as we validate our value proposition to our customers. We continue to see additional opportunities for improvement as we enter 2023.

Subscription service margin during the three months ended December 31, 2022, included $5.3 million of amortization of identifiable intangible assets compared to $5.1 million of amortization during the three months ended December 31, 2021.

Excluding the amortization of intangible assets, total adjusted subscription service margin for the three months ended December 31, 2022, was 72% compared to 70% for the three months ended December 31, 2021. Professional services margin for the quarter was 23.3% compared to 13.2% reported in the fourth quarter of 2021.

The improvement was driven by hardware repair margins. Government contract margins were 4.3% as compared to 6.7% for the fourth quarter of 2021. The decrease in margin is driven by an increase in mission system direct material and labor costs, along with an increase in loss reserves.

We expect margins to revert back to historical norms of 6% to 8% in the following quarters. In regards to operating expenses. GAAP SG&A was $25.9 million, an increase of $1 million from the $24.9 million reported in Q4 2021. SG&A decreased $0.6 million or 2.4% when excluding $1.6 million of expenses related to MENU.

Net R&D was $14.9 million, an increase of $4.9 million from the $10 million recorded in Q4 2021. Backing out MENU and non-GAAP adjustments, the growth in R&D is $1.8 million or 18%. Included in operating expenses for the fourth quarter was a $4.4 million reduction in the fair value of the contingent consideration liability for the MENU acquisition.

This contra expense is a non-GAAP adjustment. Total operating expenses, excluding the contingent liability adjustment totaled $41.2 million. As Savneet stated earlier, our plan is to hold quarterly operating expenses flat from Q4 2022 through Q4 of 2023. Net interest was $1.8 million compared to $5.6 million recorded in Q4 2021.

The decrease was driven by a reduction of accretion resulting from our January 1, 2022 pronouncement adoption that resulted in our convertible debt securities being wholly accounted for as debt and negated the requirement to record accretion for the conversion feature. Now to provide information on the company's cash flow and balance sheet position.

For the 12 months ended December 31, cash used in operating activities was $43.1 million versus $53.2 million for the prior year. Operating cash needs were primarily driven by net loss, net of noncash charges and additional net working capital requirements. Increase in net working capital requirements was primarily due to the growth of our business.

We have been able to reduce gross inventory by $4 million since June 30, 2022, and are focusing on reducing another $3 million to $5 million over the combined following two quarters. Cash used in investing activities was $66.7 million for the 12 months ended December 31 versus $383 million for the prior year.

Investing activities during the 12 months ended December 31 included $40.3 million for the purchase of short-term U.S. treasury bills and notes to be held to maturity. $18.4 million of cash consideration for the Q4 -- sorry, the Q3 2022 MENU acquisition and $1.2 million of cash consideration for the Q1 2022 drive-through tuck-in acquisition.

Capitalized software for development technology costs for the 12 months ended December 31 was $6.5 million. Cash used in financing activities was $2.6 million for the 12 months ended December 31 versus cash provided by financing activities of $443.6 million for the prior year.

Financing activities for 2022 was driven by stock-based compensation-related transactions. These sales outstanding decreased within restaurant retail segment from 58 days as of December 31, 2021, to 53 days as of December 31, 2022.

These sales outstanding within Government segment as of December 31, 2022, was 55 days and consistent with the 55 days as of December 31, 2021. Before returning the call back to Savneet, I am pleased to report that we have fully remediated the material weaknesses in our internal controls over financial reporting are operating effectively.

I will now turn the call back over to Savneet for closing remarks prior to moving to Q&A..

Thanks, Bryan. Transitioning to our outlook for 2023. We continue to see strong demand across our business at PAR. While we see -- expect to see some slowness from our Punchh product line, given the macro environment, we feel strongly in the growth in every other segment of our business.

Our operator solutions of Brink and payments has become a dynamic combination in the attachment of Data Central and soon MENU comes next. Our goal for this year is to continue to grow our ARR at rates similar to 2022 between 20% and 30% a year.

As we look and see decelerating growth around the sector, we think our ability to maintain our growth rates is differentiated, driven by the unified approach. Our customers continue to buy more than one product and once unified, we're able to drive price in the given the value we provide.

The macro is not an excuse at PAR, and we'll ensure our teams know that no matter what happens, we must deliver a win for our shareholders.

Part of this push is that we must continue to demonstrate ROI to our customers such that they are not looking at buying one product from PAR but the entire experience and thereby making our growth even more defensible.

As we roll out new product offerings in 2023, I believe we'll have strong proof points to show and clearly demonstrate this to our customers. In addition to our efforts to maintain our revenue growth, we want to reaffirm our focus on driving to profitability.

As we stated on our last call, we are keeping operating expenses flat from Q4 2022 to Q4 2023, allowing every added dollar of gross margin to hit the bottom line. Our focus on cost control is not new. A good example to highlight is our historical cost controls around SG&A expense.

Excluding MENU, our MENU acquisition, during 2022, PAR SG&A actually declined while ARR grew 26.4%. We've been able to continually grow revenue while not increasing overhead. What this number hides though is that while costs have come down with this growth, we've been able to increase investments in needed areas of sales and internal IT.

As we've proven our ability to hold SG&A costs, we now intend to demonstrate that same discipline on the R&D line. So while the macro environment may be challenged for '23, we at PAR hope to continue to grow through the environment and do so in an incredibly efficient manner.

As always, I'd like to thank all of PAR's employees for the dedication and effort over the past quarter. Across the organization, people have stepped up to ensure we meet the needs of our customers, while at the same time, embracing the changes necessary to create a company for long-term sustainable success. With that, I'll open the call for Q&A.

Operator?.

Thank you. [Operator Instructions] Our first question comes from Will Nance with Goldman Sachs. Your line is open..

Hi, guys, good morning. Appreciate you taking the questions.

Savneet, I want to follow-up on some of the weakness that you called out towards the latter part of Q4 and early 2023 in Punchh, I guess, could you maybe provide a little bit more color across of what you're seeing in the market? And I guess just could you talk about confidence level of the demand kind of coming back in the back half of '23?.

Sure. So we thought, you know deal push out in the very end of December for Punchh. And - most of it tied to the economy and Punchh is funded through what's called marketing development funds or basically the marketing royalties that concepts Brink in from their franchisees. And during these challenge times they tend to cut back on these expenses.

And so we expect this to rebound from the conversations we have with our customers. As I said, I don't - we don't think we'll have a material impact on our growth for next year. But we wanted to be sort of transparent that there's - some slowdown on marketing expenses across all restaurant chains in '23..

Got it, that makes sense. And then I guess just maybe can you talk through you mentioned table services and seeing an upsize ARPU in some of those products.

I'm just wondering if you could kind of talk through kind of ARPU trends on the - operator line and what you guys are seeing sort of like Brink ARPU, uplifts on locations like that relative to the QSR.

And then just maybe a quick follow-up on the ARPU guidance I mean, the lower range of ARPU guidance this year, kind of in line with last year, is that largely a function of some of the weakness you're seeing in Punchh or is there something else that's changing the expectations?.

Yes, I'll take the last one first, I think, we're trying to maintain our revenue growth year-over-year, which I think is unique in this environment. And again, if we felt -- we hadn't seen that slow as in Punchh, obviously, I think it would have been higher, but we want to make sure that we hit the numbers.

So, that's kind of how we got to our guidance number.

On the first part of your question, what was it Will?.

You mentioned, higher ARPU is on the table so guidance [indiscernible] there?.

Yes, for sure. So on the table server side, we've had, we've kind of kept his back pocket, but we've been working to sort of enable Brink to function in that market. We received our first two commitments, table service changed very widely in price, often times POS is priced off of the number of terminals in the store.

So you can have some table service concepts that will have, half a dozen terminals, you have some that are 20. So they do vary tremendously. In general, I'd say a table service chain will have and uplift between 40, and 100%, depending on the size of the concept.

What's I think extra special or unique is that in the first two commitments we've gotten, they've also taken two of our other products. So they were all bundled deals. And I think that's a trend we'll see going forward as a table service market. So, it's not just that I think we'll get to Brink up ARPU uplift, which is a function of the market.

I think it's also we have more ability to bundle in that market, too..

Awesome, appreciate you taking the questions. Thank you..

Thank you. One moment for our next question. It comes from Samad Samana with Jefferies. Your line is open..

Hey, good morning. Thanks for taking my questions.

So Savneet maybe just follow- up on the 2023 era outlook, how should we think about maybe what some of the underlying assumptions are between the different pieces? It sounds like Punchh maybe a bit of a downtick, but I think that implies that the core - that the core business is actually doing quite well.

So maybe just help us understand the assumptions now that there's several different products that are - driving the growth?.

Yes, for sure. So, I think every other segment of PAR on the - software side, I think, has a potential and we were planning for acceleration from '22. So, obviously payments and Brink, will have faster should have, you know faster rate of growth in '23, verse '22. Data Central will have meaningfully faster growth in '23 verse '22.

And so, the rest of the business is super, super strong. And, and you know why we're so excited. And I said, you know, Punchh rebounds, there's, reason for optimism, but we want to be cautious given what we're seeing, and really the marketing seeing..

That's helpful.

And then maybe on the payment side, now that we're some time in and you've started to see the attach rate, move up any early takeaways that we can do that we can kind of think about on the go forward side, whether it's the average size of the chain that's willing to adopt payments, or if you're seeing within a chain is it? Is it typically all the franchises are using payments, just any kind of early observations that that we can think through as we think about the potential there?.

So it's a great question. And so the first question is, it's a really wide range of customers, we have customers that are, you know, from our channel segment, which are, you know, 20 stores, if you will, all the way up to Smoothie King, which we announced earlier in the year, which is, well over 1,000 stores.

So, it's a lot wider than we expected, which is obviously a positive thing. I think as we roll into this year, you'll see a couple exciting things happening. One is our payments business is a lot more than just processing transactions, where we've expanded into a gateway business.

And we'll have some cool announcements around partnerships with Apple VAS and some really interesting ways to build software around our payments product. So I think the big trend you'll see is that not only will we have, relatively strong penetration this year 80% of Brink findings took on payments.

But we'll also see expanding product portfolio that are really natural up-sells for the customer base. So, we're seeing really strong uptake.

On your last question, all the payments deals we've signed so far, are for the entire concept, so they're a little bit different, which is - it's a positive for us that most of them end up taking, they make a deal on behalf of all their franchisees..

Great very helpful and congrats on the strong growth and the healthy margins that as well..

Thanks.

Our next question comes from Kyle Peterson with Needham and Company. Your line is open..

Great, good morning, guys. This is Kyle on for Mayank. This morning, thanks for taking the questions. And just want to touch on Data Central. Good to see the ARR is kind of heading back in the right direction there after kind of a little bit of a lull earlier in the year.

Should we expect that to continue or is there still a little bit of choppiness ahead for - that part of the business?.

You should expect it to accelerate, actually, so it will get better from here. As I mentioned in the script, you know, we signed these table service chains that are also taking deals Data Central.

And in general, I think we've kind of hit our stride, as far as figuring out product market fit, attachment with Brink new logos, so you should expect it to accelerate. I think we grew sort of 15%, 16% this year in Data Central. We expect to grow meaningfully higher than that in '23.

So as I mentioned, the last call, we expect all the product lines actually do better this year from a percentage growth perspective, outside of Punchh..

Okay, that's helpful.

And then I guess, just kind of thinking about the seasonality of the year, I guess it sounds like the second half to be a little better, at least to the Punchh, but I guess, should we think about that kind of error or growth rate across the whole business maybe getting better as the year progresses or is really the only blip or change that you guys have seen so far, is kind of within that Punchh product?.

I think it'll be consistent through the year. So I think - we feel like it we'll make up, from Punchh to the other parts of business. We're not budgeting meaningful seasonality in our models..

Great, thanks, guys..

Thank you. One moment. Our next question comes from Adam Wyden with ADW Capital. Your line is open..

Hi, guys, thank you for taking my questions. I want to talk a little bit about table service because, that's been a product that you guys have been talking about for a while. And obviously, you know, a lot of guys, the incumbents are sort of slow as relates to sort of Oracle and NCR. And that's, super high product, sort of super high ARPU product.

And I just, would like to sort of, and then you mentioned sort of two big chains, like it's one of those big Buffalo Wild Wings? I mean, obviously, it's great that you're getting a huge sort of logo with lots of, units and whatever terminals. I mean.

Can you talk about sort of what the pipeline is for table service, sort of what kind of ARPU is we could expect, and sort of how quickly you can sort of roll that out? Because this is, I mean, this is sort of a big sort of game changer, I think, in terms of your product road map?.

So we signed our first two deals at the end of Q4. We'll look to start rolling them out late first half, second half of the year. And as we talked on the last question, what's exciting is they are meaningfully higher ARPU. The average, again, it varies tremendously in this market.

There are table service chains that are 25%, 30% higher than the average Brink cost and there are table service chains that are 200% to 300% higher depending on the number of terminals configurations, so on and so forth. So it's a really wide range.

And in general, we'll -- even a, let's call it, a low price table service chain will have a meaningful difference to our print ARPU. But what -- I mentioned in the last part of the call the last question I think is really interesting here is that in the pipeline we have, most of them are also almost de facto taking our payments product.

And the volume of payments transactions in a table source restaurant excuse me, are -- the GMV is meaningfully higher. And so it creates also a really strong payments opportunity and so we could potentially have higher payments ARPU within the table service chain. So there are a lot of nice tailwinds when you enter that market.

And as far as trends of the pipeline, we've got our first two. We want to get those right. We've got a nice pipeline of smaller midsized chains. And then as the larger ones come to RP, we'll look to actually enter those RFPs. Historically, we've even chosen not responses are as we weren't ready.

And I think given that the first couple of change are relatively well-known brands, we'll be able to leverage that to enter those bigger RFPs..

Good. And then another thing that we haven't really talked about is I think you mentioned sort of PAR analytics PAR data, but I mean a lot of sort of the R&D expense was getting shifted to new products. Obviously, you have MENU, but I mean a big part of, I think, was unified commerce platform and sort of all the sort of the modules around that.

Can you talk about -- you didn't really mention sort of power data analytics or sort of the UCP as sort of another driver and that plus MENU. Can you talk about -- because I mean everyone's talking about Punchh and it's like -- but you've got four other products.

I mean there should -- now that your vertical and you have all these other products, there should be some sort of natural hedging mechanism. You're seeing sort of data central offset Punchh. I mean can you talk about sort of the portfolio of new products? And then I've got one last question..

Sure. So the portfolio is doing great. As I mentioned, we're not -- we feel confident that the rest of our portfolio can make up for any potential so we see in Punchh in '23. But we also have quite a bit coming after that. This year, we launched our first unified products, which are products that are built off of multiple PAR products.

So think of them as products that you can really only get value from -- if you have the product portfolio. And so those will be launched later this year. And then we've got a bunch of other levers, as I mentioned, a couple of new payments products. And so the portfolio is growing.

And as I mentioned in my remarks, one of the exciting parts about what's happening is the ability to leverage all this data to then create new insights back to the customer. At some point, these will enter -- I hope we can create models, such that they can leverage for intelligence.

But for today, all that data allows us to actually have a much more strategic conversation with the customer. So they no longer look at us as, hey, that's the POS product there. That's an online-ordering product there.

They're looking at it as a relationship for us to help them solve that data challenge because I think if you went to most restaurants, they have a lot of data. They truly do have endless amount of data.

But the insights you're pulling from it are still relatively limited because the lack of data integrity, the linearity, none of it really connects well. And so I think we -- by having the suite of products, we're able to change that conversation.

And I think you're seeing the results, which is you're seeing more and more customers choose multiple products, and I think that will continue..

I think would also to add to that as well as having the unified with the data and the fact that we also have a very large white space with our existing sites that we have is that it allows us to accelerate the cross-sell opportunity we have and now that we're aligning our sales organization for that.

That's also going to be helping to drive and take -- and smooth out any kind of headwinds we have in any one individual product..

Got it. And then going back sort of on the product portfolio, I mean, when I think about sort of PAR when it's all grown up in adult, I sort of look at it like a little market access or SS&C, SS&C bought eggs and all the rest. And I mean SS&C is sort of a one-stop shop for the asset manager.

And as I think about PAR, I think about what the business was when I invested in originally, it was just Brink low net promoter and low gross margin. Now we've got -- God knows how many more products and coming online. Can you talk sort of I look at this as sort of like many, many products.

I mean, can you talk a little bit about the M&A? I know you bought MENU, which was sort of an aqua higher tech higher.

Can you talk a little bit about that ramp? And then what the M&A environment looks like? Because a lot of companies, I know Punchh thought about going into a SPAC originally, but sort of the free money, easy money days are over for companies that are doing $10 million, $20 million, $30 million ARR that basically are funded indefinitely.

And now those companies sort of have venture funds that need sort of liquidity events and the IPO market is closed and your lender of last resort. I mean, I think this must be a really good environment to sort of do tuck-in M&A, like more sort of like on the restaurant magic, $10 million, $20 million, $30 million in ARR.

Can you talk a little bit about sort of what you're seeing in the M&A pipeline and what the realities are in terms of you being able to execute on sort of meaningful M&A this year?.

Sure. So I'm going to break it in two parts. So I think if you look at the tuck-in acquisitions, so call it acquisitions [indiscernible] you mentioned and smaller, that market has completely changed. Those are the companies that wanted the highest multiples over the last few years.

They are all relatively rational and I think potentially ready to make a deal. And so we're always engaged with a number of those targets and figuring out where we want to potentially add to the product suite. And I think the key there is making sure that we can have a product that we can leverage what we have today at PAR.

We don't want to buy something that's sort of really cool technology that we can't distribute through our sales force because that efficiency, as you can see, I think it's one of the things we haven't talked about a lot, but I think it's most impressive is we haven't really grown our SG&A expense outside of acquisitions in a couple of years, yet we continue to grow the business side of the business meaningfully.

And we want to be able to leverage that base. So there's a lot more to do there than there's been in previous years.

The other part of the market though that you didn't ask about, but I think is interesting is I think over the next, I don't know, a year or two years, but there will be much larger strategic transactions that happen in our space because I think as the markets have gotten rational, the value and synergy of scale have come fruition.

I think our customers want to work with larger partners. And I think the amount of R&D expense to keep up with the innovation is meaningful now where previously, as you suggested, VCs and their capital is funding that, I think it's hard to do on a small scale. And so a big push of ours to get to profitability is also to continue the R&D investments.

And if we were twice the size, that creates a meaningful difference versus a small competitor trying to come in. And so I think scale will also become very valuable and I think we could potentially see things loosen up in that end of the market as well, which really hasn't happened in a long time in our space.

Adam, we've got to jump to two other questions after this, but thank you for your questions..

Thank you. One moment. We have a question from Stephen Sheldon with William Blair. Your line is open..

Hi, good morning. Just one here from me. I wanted to ask about the subscription services gross margin. Nice bounce back higher this quarter. I think that happened a little sooner than I would have expected given the drag from MENU and payments.

So can you just talk about some of the moving pieces under that and how you're thinking about the potential for subscription services gross margin in 2023?.

I think in 2023, we'll sort of be low 70s for the year. Again, a little bit ahead of schedule than we thought. We do still have -- I think that hides though, is that payments and MENU are meaningfully below the rest of our products from a gross margin perspective.

And so I think our run rate gross margins on our core products and our large products are meaningfully higher. And we expect MENU and payments to eventually get there, too. And so there should be a really nice continued tailwind for gross margins in the coming years. So it came back quickly, a lot of it is some catch-up from Punchh.

And I think you'll see us sort of being in the low 70s for the year. Again, a lot of it depending on when we roll out payments and potentially MENU customers as every dollar revenue has a meaningful impact on the gross margin base there -- starting the cost base there..

Correct. And what we saw from Q3 to Q4, right, was that continued improvement on our operator solutions, both from Brink and on the efficiencies that we're getting in regards to those margins. And then in addition to that, we are starting to gather each quarter improvement on the payments as it gets more and more critical mass..

Great. Thank you..

Thank you. Our next question comes from George Sutton with Craig-Hallum. Your line is open..

Thank you, Savneet. Given that you restructured the sales force, and obviously, you previously had folks selling into Punchh at a headquarters level folks selling into Brink and others at a regional and franchise level.

What sort of an impact do you think you've seen from that restructure? And I'm obviously thinking of the Punchh perspective in particular with that question..

It's a great question. So we still separate out the franchise team, which we internally call SAM, and then our enterprise team.

So we'll always keep those distinct because as you're suggesting in its right, selling to a franchisee is selling to a small business, but to win a Brink or a Punchh or a data center deal, you guys win at the corporate level, which is an enterprise sale, which is months to years, depending on the size of the chain and the relationship we have.

So we haven't disrupted the franchise process and we'll always have that. And that is an excellent team that just is automatic and great. On the question of results, it's way too early to talk about the impact of it. But I can tell you, right now, what I enjoy about it is, we do have a view now of the customers.

So if we've got a customer that has three of our products, that salesforce now has to go and say, okay, hey, they don't have payments and their payments -- current contract ends in six months. And these are the pin points, and this is using -- and it arms us to cross-sell into our base much better.

So I look at that team's ability to effectively create leads to cross-sell into our existing base, where I think historically, we've done it, but we haven't done it in a systematic way.

Now we've mapped out every single account where the opportunities are when they're -- not when their RFPs come up, but when they -- when the next expiry of a contract happens.

And then we have so much more data now to build off of and say, okay, they have Brink, -- they have data central, they have MENU, here's the opportunity for payments and here's how that picture works. So it's really a focus on cross-sell. And as I said, it's completely delineated from the small business franchise team..

Great. And finally, if I could just give you three kind of exclamation point things that you said that I want to make sure I heard correctly. I think you said 17 new customers attached in payments, which is meaningfully more than we thought.

You mentioned a 3,000 unit fast casual enterprise, which fast casual being something, I'd say, that's significant relative to the normal quick service. And then lastly, the labor scheduling takeaway. We haven't talked much about labor scheduling. I wondered if you could just briefly address those three items..

So the first two is yes and yes. So as I said, payment is really doing great. And we have -- every year, a decent chunk of our bookings from Brink come from our channel partners and we've really found a way to push payments aggressively there. And then as I mentioned, all the new Brink deals, almost all the new Brink deals have our payments.

So it's just attack hedging really well, which I think to the prior question, that's kind of helped us feel more confident in kind of selling more from the same salesperson.

So there on the data central side, a lot of the work in strong leadership has also been around the product and effectively realizing that Data Central is more than inventory in COGS, but also a beautiful labor and scheduling module. And so we did a lot of work earlier in the year to highlight that. And now that we've got a marketing effort.

As I mentioned, I expect the growth of this business to be meaningfully more than it was in '22. And part of that is sites logos, but it's also monetizing these modules within Data Central, which we used to candidly give for free or just bundle and customers never realize it was even there.

And so it's kind of monetizing and pulling apart of those products and realizing that our products are best in class. And so it's a much more strategic way of going to market..

Super. Thank you..

Thank you. One moment for our next question. We have a question from Anja Soderstrom from Sidoti. Your line is open..

Hi, thank you for taking our questions. Actually, all of them have been addressed, but I'm just curious about the data.

Do you own that data? And can you use that sort of outside of your current customer base?.

It's a complicated question, and the short answer is, it depends on the customer. But we are able to monetize that data in anonymized way. Now I don't -- we don't have an intention to do that and I think a lot of our excitement around the data is actually suggesting that we can build products for our customers, leveraging that data.

And so I think that's what's exciting to us. But as I mentioned in the transcript, it's also a way to change the conversation because if we have a customer that has our products and payments, we know every single transaction, we can even pull up every single customer, and those insights are hard to get. So that's pretty exciting for us..

Okay. Thank you. That's all for me..

There are no other questions in the queue. I'd like to turn the call back to Savneet Singh for closing remarks..

Thanks, everyone for joining the call. We look forward to updating you our progress on our next call..

This concludes today's conference call. Thank you for participating. You may now disconnect..