PAR Technology Corporation (PAR) Q4 2018 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the PAR Technology FY 2018 Fourth Quarter and Year End Financial Results. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder, this conference is being recorded. I'd now like to introduce one of your hosts for today's conference, Mr. Chris Byrnes, Vice President of Business and Financial Relations. You may begin.

Thank you, Tiffany, and good afternoon, everyone. I'd also like to take this opportunity to welcome you to the call today for PAR's 2018 Fourth Quarter and Full Year Financial Results Review. Complete disclosure of our results can be found in our press release issued this afternoon 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 today. Participants on the call should be aware that we are recording the call this afternoon and it will be available for playback. Also, we are broadcasting the conference call via the World Wide Web. So please be advised, 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 the 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. 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 good afternoon, everyone. I thank you all for joining us today. I'll begin today's call with an overview of our fourth quarter results for fiscal 2018. I'll then turn the call over to Bryan Menar, our CFO, who will review our financial performance in further detail. I will then conclude today's prepared remarks by discussing our segment performance and milestones related to our growth drivers and steps we are taking to improve the execution of our strategic plan. To begin, I'm very happy to have this opportunity to speak to you regarding PAR and how we are transforming our company. My immediate focus has been on rightsizing our operations to support Brink, aligning our management towards a set of goals that drive shareholder value and emphasizing a framework on how we should look at reinvestment. That focus will allow our company to win new customers, allocate capital to where returns are highest, and deliver value to our loyal shareholder base. In my brief tenure at PAR, I have been impressed by the company's solution portfolio and our opportunities to deliver long-term value to all of our shareholders. I'm working closely with the management team to develop strategies for accelerating growth and improving profitability as the company continues to transition to subscription software revenues. I am committed to disciplined capital allocation and carefully monitoring the return on that invested capital to ensure that PAR is investing in the correct initiatives to increase value in our company. While we have immense respect for the heritage and legacy of our past, we understand that we must change and provide a level of transparency to our employees, customers, and shareholders. Now to review our results for the fourth quarter 2018. This afternoon, the company reported fourth quarter revenues of $46.6 million compared to $55.5 million in the fourth quarter last year, a 16% decrease. This decrease was due to the continued disruption in cyclical hardware revenues associated with our Tier 1 customers and an 8% decline in government contract revenues versus Q4 last year. We reported a net loss of $6.1 million and a loss per share of $0.38 in the quarter, which included non-GAAP adjustments totaling $3.3 million, which are detailed in our press release. On a non-GAAP basis, PAR reported a net loss of $3.6 million and loss per share of $0.23 in the quarter. This compares to a non-GAAP net loss of $18,000 and $0.00 loss per share last year. I would now like to turn the call over to Bryan for a more detailed reporting on the quarter's financials. Bryan?

Thank you, Savneet, and good afternoon, everyone. I would now like to take this opportunity to provide some additional details surrounding our fourth quarter results. As Savneet stated earlier, GAAP net loss was impacted by $3.3 million of non-GAAP adjustments for the quarter. Non-GAAP adjustments included two one-time non-cash charges related to SureCheck, a $1 million reserve on hardware inventory and a $1.6 million software impairment charge. Now on to revenue for the quarter. Product revenue for the quarter was $16.1 million, down $8.4 million, a 34% decrease compared to Q4, 2017. Our hardware sales in the Restaurant/Retail reporting segment were down versus prior year as one of our Tier 1 domestic customers completed a major hardware refresh project at the end of 2017. In addition, international hardware revenue was down $2.1 million. Hardware sales related to Brink were $2.9 million, down $0.2 million, an 8% decrease versus the high hardware attachment period of Q4 2017, but up $0.3 million, or 12%, sequentially versus Q3 2018. Service revenue for the quarter was $14.7 million, up $0.9 million, a 6.5% increase compared to Q4 2017. The increase was primarily due to a $0.8 million or 43% increase in Brink SaaS and service support revenue related to Brink. The increase in Brink-related revenue was driven by an increase in installment base of 81% from December 2017 to December 2018. We exited the quarter with $11.3 million of Brink annual recurring revenue from SaaS contracts, compared to $7 million as of December 2017. Contract revenue from our Government operating segment was $15.9 million, down $1.4 million, an 8% decrease compared to Q4 2017. This decrease was driven by a $3.8 million decrease in our intelligence, surveillance, and reconnaissance business line, partially offset by $2.4 million increase in our mission systems business line. The contract backlog continues to be healthy, noting a total backlog of over $138 million as of December 31, 2018, and a trailing 12-month book-to-bill of 1.4. In regards to margin performance for the quarter, product margin for the quarter was 14.1% compared to 26.5% in Q4 2017. The decrease in product margin was primarily due to a $1 million write-off for SureCheck hardware in addition to reduction of overhead absorption as a result of lower volume. Service margin for the quarter was 17.5% compared to 25% in Q4 2017. The decrease in service margin was due to a $1.6 million impairment for SureCheck software partially offset by favorable product mix with the growth of Brink SaaS. Government contract margin for the quarter was 11.9% compared to 12.8% in Q4 2017. The decrease in margin was primarily due to a strong margin quarter in Q4 2017 from our ISR business line. The Q4 2018 rate of 11.9% was favorable from both a historical trending for Government segment and from an industry perspective. Now to operating expenses. GAAP SG&A was $9.4 million, down $1.2 million versus Q4 2017. The reduction in cost was driven by $0.9 million in cost-saving initiatives, $0.9 million reduction in non-GAAP charges partially offset by $0.6 million increase in investments for Brink sales and marketing. Non-GAAP SG&A was $8.9 million, down $0.2 million versus Q4 2017. Non-GAAP SG&A adjustments for Q4 2018 included $0.2 million related to the investigation of conduct in our China and Singapore offices and $0.3 million for equity-based compensation. Research and development expenses were $3.3 million, down $0.5 million versus Q4 2017 driven by $1.1 million in savings related to SureCheck and hardware development offset by increased investment in gross Brink development by $0.6 million. Now to provide information on the company's cash flow and balance sheet position. For the 12 months ended December 31, 2018, cash used by operations was $3.8 million, primarily driven by a net operating loss partially offset by a decrease in net working capital requirements. Cash used from investing activities was $6.7 million for the 12 months ended December 31, 2018 versus cash used of $8.9 million for the 12 months ended December 31, 2017. And in the 12 months ended December 31, 2018, we capitalized $3.9 million in costs associated with investments in our Restaurant/Retail segment software platforms in line with the same period in 2017. Non-software capitalized costs were $3.9 million for the 12 months ended December 31, 2018, down $1.2 million versus 2017, due to a $1.2 million decrease in costs associated with the implementation of our new ERP system and IT infrastructure. During 2018, the company received proceeds of $1.1 million related to the sale of rental property at the company's headquarter campus. Cash provided by financing activities was $7.3 million for the 12 months ended December 31, 2018, with $6.9 million of net borrowings from our line of credit and $0.9 million of proceeds from exercised employee stock options. The company also paid down the remaining $0.4 million mortgage upon the sale of rental property. As of December 31, 2018, the inventory balance was $22.8 million, an increase of $1 million from December 31, 2017, and a decrease of $1.5 million from September 30, 2018. Inventory turns were 3x for our domestic and international operations. Accounts receivable of $26.2 million decreased $3.9 million or 13% compared to December 31, 2017. The receivable balance was broken down between the Government segment $8.5 million and the Restaurant/Retail segment of $17.7 million. Restaurant/Retail segment days sales outstanding decreased from 57 days as of December 2017 to 52 days as of December 2018. Government days sales outstanding increased from 37 days as of December 2017 to 45 days as of December 2018. I would now like to turn the call back over to Savneet.

Thanks, Bryan. I will take this opportunity to review our segment performance. First, for Restaurant/Retail technology. We continue to make progress aligning our organization to support Brink and significant opportunity we see in front of it. Our strategy includes rapidly expanding our Brink installed base of major accounts, while continuing to support our strategic initiatives across the rest of the industry. We have also kicked off a new initiative to expand our average store revenue by providing additional products to existing customers. Our upcoming launch of merchant services is an example of this. While growing store count is important we don't want to lose sight of the ability to drive significant revenue growth by providing high-quality solutions to our existing clients base, many of whom routinely request these services. I'm also pleased to report that in the fourth quarter, we signed a master services agreement with our largest Brink customer to-date, a restaurant organization with over 6,000 restaurants. I congratulate our team across all levels of our organization for this new customer win. This will be a multi-year deployment process to get all stores on boarded in the concept. To ensure we ramp up – to ensure we ramp this customer up, we're making the appropriate investments in Q1 and Q2 to support what we expect to be a strong back half of the year. We fully expect to hit our internal top line targets for the year, but we expect to shift to revenues from the first half of the year into the last two quarters to support this new customer. I am fully supportive of this move as we believe this customer has the ability to be transformative for our organization. I would like to see core business accounts 11 of the top 17 restaurant organizations as PAR customers. It's worth noting that, within the Tier 1 customer base is the opportunity to extend and expand our relationship by transitioning these customers to PAR's Brink software platform. Of the 8,000 restaurants booked to-date for Brink, none were existing Tier 1 hardware customers of PAR. We fully expect to transition at least one of our existing Tier 1 hardware customers to Brink in 2019, also worth noting that the concepts we have signed onto Brink total approximately 17,000 sites. At the end of 2008, we had activated or received a purchase order for 8,300 stores. These numbers bear out that we have only penetrated 48% of the existing logos we serve with Brink. More than 8,700 restaurants are in our line of sight of our existing Brink sign concepts. In the quarter, we deployed/activated 752 new Brink sites, a 37% increase from Q4 2017. We also booked 800 stores in Q4, have 604 stores booked and yet to be deployed in the backlog in the quarter as more. These new Brink deployments increased our MRR by 62% in the quarter versus Q4 2017 revenues. And at the end of 2018, the annualized run rate now totals $11.3 million. We are motivated to increase the MRR when possible and payment in merchant services is a great way to do that. It provides stickiness with the customer and small- to mid-sized restaurants are looking for an integrated POS and payment solution. We intend to roll out our payment solution midway through 2019. We will continue to build our Brink solution in ways that allow for increased MRR, higher customer retention rates and increased bookings. Switching to SureCheck. Our food safety and automated checklist solution, I'm please to report that SureCheck Version 10 has been released for general availability. Version 10 provides improved scalability and performance that necessarily details enhancement asked for by our customers along with future parity. In Q4, we also released PAR IoT for remote monitoring of temperature failure and tower disruptions. In the quarter, we engaged with two new separate opportunities within large hospitality gaming resorts and their large foodservice operations along with a table service restaurant company with 45 sites, demonstrating the broad appeal of SureCheck. Now turning to our Government segment. Our Government business reported 8% lower quarterly revenue in the fourth quarter of 2018 compared to last year. This reduction was expected in our forecast, as the timing of certain contract awards and contracts ending/starting is not always seamless. We reported strong contract margins of 11% for the quarter and this segment had a strong 2018 with total revenues increasing 10% from 2017 and net income before tax improved by 7% for the year. We continued to focus new business development efforts on Intel solutions to support intelligence agencies, armed services and tactical edge war fighters with a specific emphasis on the AFRL in Rome and New York, Wright Patterson Air Force Base, Ohio and the national capital DC region. In Q4, we received two large contract awards from the U.S. Navy for LaMoure, South Dakota and Aguada, Puerto Rico with a combined contract value of over $15 million. Our Government segment continues to provide stability, G&A release and cash flow during this exciting transition of our restaurant segment to subscription SaaS revenues. In closing, I'd like to touch on what I think is the biggest change we have made within the organization, but the one least evident from the outside culture. The PAR management team has gone through significant change in the last couple of months that we all believe will lead to outperformance in the future. While we cannot touch on all those changes here, I thought important to highlight one of these important changes. And that is as the management team, we have transitioned from being focused on revenue as the goal to one focus on return on invested capital. This metric while simple aligns us all on focusing our investment dollars to where they receive the highest return. By developing ROIC hurdles at each executive level and tying compensation to those metrics, we'll be able to drive stronger decision-making and create far more accountability on an individual basis. This rigor will drive the team to constantly rationalize excess costs, focus on areas of success and walk away from areas not consistent with our goals or return hurdles. This focus has allowed us to already reduce our existing G&A base, to begin inventory reduction plan that includes a removal of excess queue that tie up capital management time and create distraction. It's allowed us to completely revise our sales compensation plans to encourage behavior that aligns with shareholder value creation and it's placed a renewed emphasis on CAC to LTV for every single customer. I have highlighted these changes not to suggest that these things are running perfectly, but our culture and compensation will drive behavior, which will drive results over time. As many of you have heard, we are very focused on creating shareholder value and are constantly questioning every premise we stand on and every asset we own. Nothing has held us sacred and we will continue to monitor all alternatives to create shareholder value. I'll look forward to updating you in the coming weeks and months on the progress we are making. It's my objective to ensure that our employees, customers, partners and you our shareholders receive value from our exciting opportunities. This concludes my remarks. I would now like to open the call for questions.

[Operator Instructions] And our first question comes from Brian Kinstlinger with Alliance Global Partners. Please proceed.

Great. Thanks so much. The first question I'll ask you mentioned obviously this large 6,000 store install. I'm assuming implementation begins in the second half of the year if you can confirm that. And then I know Arby's has led to some pressure on your MRR. Will this customer have the same impact? Or would you be able to get more traditional pricing for Brink?

So let's talk about the second half first. Every customer is different and we don't talk about specific customer pricing or engagements, but we feel we've got a deal that works really well for PAR and for our customer and it is a bit of a different set of services than we did with Arby's earlier. On your -- the first question relates to the rollout. All these deployments are different. So we've already started working with this customer and we expect a significant pickup in the second half of the year as we get lined up here in the first couple of quarters.

Great. And then can you update us on the timing for merchant services? When do you expect to begin being offered in generating revenue? And then I know Toast mandates. They are small Tier four and even smaller customers to take merchant services. How do you plan on going to market with it?

So, the second half of the year, we expect to generate revenue. As it relates to how we roll out, it's going to be sold through our sales force and our channel. If not going to be mandated a big part of I think why Brink distinguishes itself from competitors is that we are open. We think we've got a very, very strong value proposition to our customers, which is why we're offering it, but we won't ever mandate it.

Got it. And then I think in our conversations, one of the discussions we've had is the time it takes between saline installation is one of the areas that needed some change in your review. Can you talk about or detail any plans to -- of how you plan to reduce that over time? Is that increasing resources? Is it being more efficient? Thank you.

Yes, I think across a couple of areas. So, the first is, it's no question that we've been short on resources to tackle what we've had. And as you can see with the G&A reduction, we've focused on return on invested capital. I think we're addressing that as best as we can. The second part about it is I think driven by how we operate as a management team and culture and I think as we've really got and going here the first couple of months, a lot of layers have continued to be rationalized within the company as it relates to decision-making. And so I think our ability to go faster is very much impacted by how we run the company. And so, as I referenced at the end of the call, culture is a big part of that. And so I think you'll see us get a lot better at that. We're very, very focus on our speed today and so I think the combination of us generating capital to support implementations and then focusing as a group on executing -- having -- delivering with speed to our customers we feel pretty good we'll be able to fix that.

Great. Two more. The first one is I realize payments is the first major functional add for Brink. Can you talk about what do you think the next two or three or whatever you see as the next updates you think that either address the market size or a need for the customer?

So, I don't want to give you a specific example only because we're in a competitive market and they're still being made. But here's what I'd say and I think this is a really powerful statement. This point-of-sale system is very much the center of a restaurant. If the point-of-sale system goes down, it's very hard to operate a restaurant. And as a result, many of the solutions that we're talking about are integrated into our solution today. And so we have very strong feel for what our clients care about what they need and where they're not getting the products that they actually need. And so after lots and lots of customer conversations, we've got a pretty strong road map of what our customers need and are asking us for and so we're prioritizing it by what we think has a high degree of chance of success and also the market size and cost and effort to get there. So, I'd say this, I'm not going to sort of lay out what we're going to do for competitive dynamics, but we feel pretty strong about our ability to actually execute on it.

Great. My last question in January you announced some cost-cutting programs. Can you quantify how much of that might be reinvested into Brink, so we might not see all of that in terms of cost savings if any?

So, yes so effectively all of it. So, every dollar we free-up goes into supporting Brink. And I think a lot of the early lessons of the first couple of months here is we've gotten a lot smarter about saying what's our minimum return hurdle to have $1 not go to Brink and it's very high. And so there will be cost savings in the G&A front that will flow through that had nothing to do with Brink and that's just us transitioning from a hardware business to really a software business and aligning our G&A base with that. But a chunk of it and we won't detail it here but we can detail it in the future I think is going right back into Brink to fix some of the issues that you touched on earlier.

Great. Sounds like some exciting changes. Thanks.

Thank you. And our next question comes from William Gibson with ROTH Capital Partners. Please proceed.

Thank you. You threw out a lot of numbers regarding Brink, Savneet. How many locations were installed at year-end?

So, we had -- as Savneet mentioned earlier, we're at 8,000 in the middle of this quarter and we were at 7,700 as we exited active sites in 2018.

Good. And the new master service agreement you signed that is not a legacy customer, is that correct?

That's correct.

And does preparing to roll them out slow down going after the other 8,700 in your line of sight?

So, it does. It does. But it's more of a slip into Q3 and Q4 than losing them. So, those are customers that we will add on. But it's very much getting us ready for this large transformative customer. So, I don't -- we don't look at it as a loss. We look at it as let's make the right capital allocation decision and focus on where we think we can get the highest return and do the best for our customer. And so for us, yes, it obviously, limits our resources to go after other new customers, but for the ones that we have today, we feel pretty good, we could get still get them what they need.

Thank you. And I know you mentioned being focused on inventory reduction. Could there potentially be other charges coming this year?

We're always analyzing how we're actually controlling our inventory right now. The reductions that we're talking about there was related to the other business line that we have in the food safety. And that was more of a one-time charge due to a specific type of product that we had in there. As we go through depending upon the actual lead time with regard to ramp-ups for some of our customers and if there's going to be hardware attachment too there, there’s going to be some flux in that. As we go forward, we're also looking at how we actually streamline our hardware offerings as Brink becomes a larger component of the hardware requirements for across our business area, right and reducing the number of SKUs we're in -- traditional hardware centric space that we're in that was more customized type of hardware, which then allotted for us to actually have larger inventory size out there across our customer base. So we can bring that down as we streamline as we move into Brink.

Okay. And then lastly you mentioned sales and spending program changes there and aligning that. What are the changes? Is it less upfront, or is it strong gross margins?

I love this question. So it's -- I'd say it's a few-fold. So the first is, I think what we've historically done is basically given everyone the same compensation plan. And one of the things we realized is signing a large Tier 1 customer is a very different process than signing a 50-store customer. And so we need to look at how we compensate the different roles and not saying everyone is the same, and so tiering our payments based on customer size and margin dollars is part A. The second part is actually splitting up the way we pay. So instead of paying on a customer signing, do we sign on first dollar and really incentivizing our sales force to continue the process of saying, hey we've got pilot, we've got a test market and rolling out. And so it's very much keeping that hunger to keep moving down the path. And the last one is, which you talked about, which is really, really getting a good feel for what's our return on that new customer. I think part of the challenge of a very fast growing organization is you never take a breather to say, hey do we make the same money on every account. And if we don't, then we shouldn't be compensating our sales force that way. And so when you can effectuate change in the compensation system to tie it to margin or customer type, you create the right behavior. And so early on you may have people running at the same speed to go after two -- what we think are similar customers. But as you sort of peel the onion back you notice that hey that one customer is -- to have a customer that we'll do a better job on, will make more margin and so sort of changing the target for different types of customer profiles is the last part of it.

Thank you.

Thank you. And our next question comes from Adam Wyden with ADW Capital. Please proceed.

Hey, Savneet, thank you. I just wanted to make the comment first. For those of you who were on the last conference call, I think we can all agree that this one’s gone a little bit differently than the last one that was listen-only. So I really like what we're hearing and congratulations and look forward to hearing more. Here are my questions. So you mentioned a couple of the numbers. I think Bill asked you about them. I think one was you had 8,300 installed but 17,000 I guess stores within existing Brink contracts, i.e. Arby's Five Guys, all the guys that are already signed up. You have 17,000 that are yet to be installed within your existing banner portfolio. And then I guess the other question is you mentioned the MSA for 6,000, which is not an existing Brink Tier 1 customer, I think is Dairy Queen. But then you also mentioned another guy who was a Tier 1 hardware customer that you expect to have signed up in 2019. Those are not the same customer? Those are my first questions.

Okay. So they're not the same customer. We can't comment on who the other customer is. So I'll ignore that one. And then on your first question, the math is 8,300 sites that are booked or installed and the remaining store count within those existing customers is 8,700. So think of it as we're 8,300 penetrated within 1,700 [ph] potential stores in the contracts we signed. A little bit less than 50% penetrated.

Got it. And obviously that doesn't include SMB that you're selling through with -- type. So that's being sold on a day-to-day basis. That's not included. So 8,300 of 17,000 and doesn't include the new 6,000. It doesn't include the other Tier 1 that you expect to get, correct?

It doesn't include SMB. It includes a portion of the 6,000. And it doesn't include anything in channel. SMB and channel as you know are relatively large portions of our business. So it's a -- I would say, it's 50% penetrated in large logos that we have signed agreements with today and likely underestimating the true potential because channel and SMB are not included.

And also it doesn't include that second Tier 1. So I mean just high level within your existing stuff that you have where you have 8,300 installed, you have 17,000 of which some of the 6,000 included but not all and also doesn't include the Tier 1. So I mean you guys really do have line of sight to this being a 20,000, 30,000, 40,000 unit. I mean, the numbers are -- the pipeline can get you there.

Yes it's all about our ability to execute. Yeah, it's all about our ability to execute. And like what we said, we're really focused on Q3 and Q4. Generally it is our bigger half, but also because the pipeline is very strong and we want to make sure that we execute appropriately. So it's an execution play.

Right, okay. And I guess here's my second question. Obviously let's get the elephant out of the room here. We wrote two letters to the board last year. I can totally understand why the company has not made a direct response. And I want to make it clear to everyone on the call and the company that I'm totally not averse to building this business given the robust software market valuation and the benefits of having a public company cost of capital and a real CEO now who gets return on invested capital. If we look at Twilio I mean the company that trades for 25 times revenue and uses currency to acquire several businesses in a stock-for-stock transaction obviously there are advantages of having a publicly cost of capital and SaaS and growing and building. And obviously just last week, Lightspeed completed its IPO in Canada. It is remarkable how much investor interest there is for fast-growing cloud point of sale. If you look at Lightspeed investors are paying nearly 35 times run rate ARR for an inferior product growing only 30%. Brink grew what 81% in the fourth quarter. If we apply the same multiple to Brink, I mean that gets us to nearly $30 per share for just Brink and doesn't credit the payments ramp-up, doesn't give you any credit for hardware or government. You can get to like $50 a share for Brink and its legacy assets and really not even giving you credit for 2020 and unit growth and the rest and payments. I mean the value gap has never been larger in this company's history. I mean can you walk me through the steps you personally plan on taking to close the valuation gap and having a real public company cost of capital, so we can do stuff like Twilio and build this into a multibillion-dollar restaurant software company? I mean the pieces are in place here. I guess how confident are you? And what are the pieces that you plan on taking such that we'll look like everybody else? A – Savneet Singh: So I think -- honestly, I'm incredibly limited on what I can say. But there is a road map. Listen, we have immense amount of opportunity in front of us given the pipeline that exists with just our existing customers today. And I think as you mentioned and others have said, we need to execute on that road map before we have any view on doing anything more. In my short time here, I can tell you that in my dozens and dozens of customer meetings, I feel more and more excited that we actually have a product that people truly care about and we found that product market fit. And I think that's represented by the relatively low churn that we have and our ability to upsell product which merchant services is just the first widget of that. And so I feel very excited about actually just continuing our existing path which is we need to get these rollouts done, we need to get merchant services going, we need to execute on our pipeline. And then I could see us going very much going to the plan that PAR laid out years ago which was you can become the brand of the restaurant. There's a lot more that you can add to that. But first and foremost, we just have to execute on what's right in front of us and I think that will close the valuation gap. As I mentioned in my remarks, we're looking at all alternatives to create value. And so nothing is sacred and this is now a management team that can -- every single person knows how to calculate return on invested capital and that really doesn't really matter on how we make decisions. And so I think our goal is to close the valuation gap by just executing on exactly what's in front of us. It's not that -- it's not too much more dramatic than that. Q – Adam Wyden: All right. That sounds great. Last question. So you mentioned you had 8300 booked or installed. I think you clarified this at Needham. But your ARR, your annualized recurring revenue includes SaaS component, but also the mandatory service component of it. And so I think the number you gave at Needham was about 2000 per box of what I would call recurring revenue of which some of it is subscription maintenance and some of it is subscription SaaS. So I mean is it fair to assume that your ARR on 8300 is close to the 17 million? And then on top of that another thing is the company really hasn't even taken pricing up in the last 10 years or so on its core product. I mean obviously in some ways pricing even come down as you've migrated from SMB to enterprise. I mean I guess my question is what do you see as the opportunity in terms of increasing like-for-like pricing? Obviously you talked about layering on additional modules. But I mean what do you see as the opportunity to increase like-for-like pricing? And then the other question. A – Savneet Singh: Yes. So on your first question so the revenue is just pure SaaS. It does not include any of the service revenue that we charge. And so when you add that in there it's closer to around $15 million of accrued revenue. And both of them show lockstep as you referenced. And obviously very, very high retention rates on both of those. As it relates to pricing, so pricing in the industry is actually very challenging given that most of our competitors generally have some sort of bundle whether that be payments as someone referenced earlier, whether that be bundling hardware. It's sometimes challenging to get what's like-for-like on a pure software basis because interestingly there's not a lot of people that do pure software although it's growing. The way we look at it is we've got our price. We've committed to our customers on this price and we're going to hold on that price. Given how much demand there is I don't see a need for us to go off that price. Where we see the ability to expand that pricing is our ability to add these modules or work with our existing partners and say hey, if we're going to be servicing your product that integrate into our product there's a fee for that. And so we're being much more conscious about saying listen if we're going to allocate resources for someone else's revenue, but that's not going to be free anymore. But first and foremost, we are holding strong on our pricing because there's demand for that product. And then it will be coming from modules and eventually from our partners who -- listen we want them to be successful and I think they want us to be successful. So I don't think it's a crazy ask. Q – Adam Wyden: Right. So just to confirm the 2000 of ARPU per box, I mean that's consistent, right? So as those 8300 get booked and sold obviously your ARR is going to go up. I mean it is still around $2000 per box correct? A – Savneet Singh: Yeah, it's a little bit up from $2,000 right now, but growing every year.

Right. Very right. Yeah. No. I mean, look all the checks that we've done when we talk to restaurants, is that the restaurant share of wallet for software is far higher than the $2,000. I mean, obviously, payments or dollars that are being spent elsewhere. But obviously, back of the house inventory, management, HR. Obviously, the software is all about return on invested capital in and of itself. So, if you can provide efficiencies within a very low margin business you can generate a lot of value. So, I don't -- I suspect that $2,000 will go up over time as you get payments and all this other stuff. So, yeah, it's great to hear a voice that has been ingrained with return on invested capital. And obviously, as that permeates, hopefully the stock market starts to realize who's running the ship now. A – Bryan Menar: Great. Thank you, Adam.

Thank you. [Operator Instructions] Our next question comes from David Polansky with Lowell Blake & Associates. Please proceed.

Hey, guys. Thanks for taking my question. I was just curious -- real quick on that 17,000 stores, does that include the new 6,000 unit concept?

It does, a portion of it.

Okay. And could you comment specifically -- I know you were talking about this broadly, but specifically there's been a 30,000 unit target. I think that was booked and installed by year-end 2020. Could you comment on that?

So, as a policy right now, the company doesn't offer guidance. It is something we're looking at in the future, but we can't touch on that today.

Okay. And then I heard a few times you talk about high retention, low churn. I was wondering if you could possibly disclose specifically what the churn is, and if not when we could expect some more standardized KPIs from you guys.

Fantastic question. So, our annual churn is usually around 7% to 8%. And most of that churn, I should mention, happens in our SMB business. So, we've got very, very, very high retention at the larger customers. We will be introducing a set of KPIs that we share publicly to our shareholders, our employees, our customers. So, it's our desire to become more transparent as we go forward. And so a lot of these questions targets, I think, will become self-explanatory as we get going on changing some of the historical precedents.

All right. Great. And could you give us a bracket around win rates maybe on new contracts?

I don't have a comment. So, I don't want to give you any correct number. Here's what I'd say. Head-to-head, we believe against every large competitor we have, we don't -- we're never underwater. So, we've never had a losing win rate against any competitor that we've had. But as for an industry set, I don't have one for you. But it's maybe something we can look at producing down the road. It is obviously a little bit challenging given how many segments that we play in, but broadly speaking we feel like we've got a greater -- we have a higher win rate against our competitors than they do against us.

All right. And then one more. Could you comment on PAR Pay, the module specifically? I think it's been -- what has it been six to eight months since you've rolled it out and if you could give us any updates on performance with that.

It's actually going very well. PAR Pay is a payment module that we charge a recurring fee for. Our customers and our sales team are finding actually very relatively high attachment rates and so, we are pushing it a lot harder now. The first quarter or two was to make sure there was customer demand, make sure that customers have strong adoption. It also has led to interesting externalities. So, less calls to our call center for payment terminals that are not ours. It's obviously a little bit more seamless, because we built the software. So it's an interesting play that not only generates incremental recurring revenue, but also helps lower the expense based on the servicing inside and because our customers have shown desire to -- I'm sorry, the customers have actually shown to actually like it and our sales teams feel very confident about their ability to sell, I think you'll see us push that harder coming Q2, 3 and 4.

Great. And what was the monthly fee on that? Was it $30 to $40 a month?

That's right. Sometimes higher. It depends on sort of -- it depends on customer size and ...

Correct. It will range from the mid $30 to $50.

Depending on number of terminals per store, number of stores and so on and so forth. There are lots of different variables.

All right. Thanks, guys.

Thanks David.

Thank you. And at this time, I'm showing no questions in queue. I'd like to turn the call back over to Savneet Singh for further remarks.

Thank you all for joining today's call. We look forward to updating you on our progress and continuing to be more transparent as a company. Thank you.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may now disconnect. Everyone have a wonderful day.