PAR Technology Corporation (PAR) Q2 2026 Earnings Report, Transcript and Summary

Good day, and thank you for standing by. Welcome to the PAR Technology Fiscal Year 2026 Second Quarter Financial Results Conference Call. [Operator Instructions] Please be advised that this call is being recorded. I would now like to hand the conference call over to your first speaker today. Please go ahead.

Thank you, Felicia, and good afternoon, everyone, and thank you for joining us today for PAR Technology's 2026 Second 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 Q2 financial presentation as well as in our related Form 8-K furnished to the SEC. Before we begin, please be advised that our remarks today will contain forward-looking statements. These forward-looking statements are subject to risks, uncertainties and other factors, which could cause actual results to differ materially from those expressed or implied by such forward-looking statements. For additional information on these factors, please refer to our earnings release and other reports filed with the SEC. Also today, we'll be discussing or providing certain non-GAAP financial measures, which we believe will provide additional clarity regarding our ongoing performance. For a full reconciliation of the non-GAAP financial measures discussed in this call to the most comparable GAAP measure in accordance with SEC regulations, please see our press release furnished as an exhibit to our Form 8-K filed this afternoon and our supplemental materials available on our website. Joining me on the call today is PAR's CEO, 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 thank you all for joining us today. On our first quarter call, we established clear financial and AI-adoption targets and laid out what success looks like for PAR in 2026. Since then, we've been heads down executing against our 3-pronged growth strategy, namely to: one, extend our competitive platform advantages in core markets; two, reinvest in product efficacy via powerful AI functionality; and three, aggressively expand our total addressable market in areas where we can continue to leverage our inherent platform advantage. As Ben Graham famously said, in the short run, the market is a voting machine, but in the long run, it's a weighing machine. We plan to continue to stack weights on the scale. At PAR, we're always on offense. This is evidenced by our strong Q2 results and highlights, which I'll start with today before handing the call to Bryan to discuss our financial results in more detail and provide our outlook for the remainder of the year. Q2 was a starting [ shot ] in the show-me market. We delivered results ahead of expectations, expanded our platform footprint across both restaurant and retail, grew our PAR Intelligence user base to roughly 20,000 sites, greenlit material TAM expansion initiatives in both restaurants and retail sectors, overhauled our cost structure and strengthened our outlook for the remainder of the year. Most central to the PAR thesis, we continue to prove the value and staying power of our platform strategy. Our customers are expanding their adoption across our portfolio, creating larger and more strategic partnerships. Our momentum is reflected in our ARR performance, our improving margin profile and our growing pipeline of enterprise opportunities across both restaurant and retail markets. Let me start with a few highlights. We exited the quarter at approximately $338 million of ARR, representing over 17% year-over-year growth and 12.3% organic growth and setting us up for a meaningful acceleration in the second half as communicated earlier this year. We generated adjusted EBITDA of $14.3 million in Q2, an improvement of nearly $9 million from Q2 last year. The $14.3 million of adjusted EBITDA includes $1.3 million of overperformance in the quarter, driven by a specific hardware initiative by a large legacy enterprise restaurant customer. Without this project, the Q2 normalized number is $13 million in adjusted EBITDA against the previously forecasted range of $9.5 million to $11.5 million. Our profit acceleration is done the right way by leveraging the fixed scale of our operations while continuing to improve the unit economics of each product. As an example of this, across our core product base, the 3-year blended ARPU CAGR sits at 8%, while the average platform deal term length is roughly double that of a point solution. These strong Q2 results reinforce our confidence that we can continue balancing growth and profitability while investing in the strategic opportunities in front of us. Looking across the business, we're seeing encouraging momentum in nearly every major product category. Our restaurant vertical delivered a strong second quarter, securing the pipeline and backlog for the back half acceleration we spoke about on our last call. What stands out most is the continuous success and durability of our platform strategy. Customers select PAR for its integrated solutions rather than purchasing individual products. An integrated product ecosystem is a perfect foundation to be the core restaurant AI partner of the future as performance AI features require multiple systems working together in real time. A stand-alone AI wrapper or point solution cannot replicate a feature that bridges point of sale, inventory, labor and guest data. PAR's end-to-end fully connected stack is the clear gold standard. Multiproduct attachment on Q2 new engagement sits at nearly 100%. Wins included Guthrie's Chicken, Sarku Japan, Newk's, Burgerville, Beef 'O' Brady's and Bad Ass Coffee, all included multi-products across point of sale, loyalty, ordering, payments and back-office solutions. Operationally, our deployment teams executed at scale. On the PAR POS side, we remain ahead of plan on Burger King activations and continue to see potential upside beyond our current year-end target. Additionally, we completed key development milestones in Papa John's upcoming platform deployment and are well positioned to kick off their implementation plan later this year. Separately, PAR OPS delivered its strongest quarter ever, activating nearly 700 locations. Looking ahead, we enter the back half of the year with substantial operator product backlog, identifiable expansion opportunities and a healthy pipeline. Combined, these factors position us to reach our ARR targets with additional upside if execution continues at the current pace. Now to go over engagement and ordering. Within Punchh, growth remained solid despite the planned churn we experienced in Q1. The business continues to showcase strong margins, expanding customer utilization and generating opportunities through site expansion, pricing actions and new products. We are highly confident in the long-term value proposition of Punchh as loyalty programs remain central to guest engagement and personalization strategies. With respect to PAR Ordering, we delivered our best-ever quarter in Q2, closing 6 new deals. What's especially notable is that 3 of those wins came from customers migrating off the market's largest legacy ordering provider, reinforcing the competitive strength of our offering. Customers increasingly want fewer vendors, tighter integrations and a simpler operating environment. Our single digital cockpit with PAR Ordering is exactly that, allowing you to manage all your digital menus in one place. Every ordering deal this quarter includes other PAR products, whether that was point of sale, Punchh, payments or a combination of all 3. A specific highlight this quarter was seeing growing traction from our catering capabilities. Catering was a component of 2 of our 6 PAR Ordering wins, and that's particularly meaningful because catering was our largest road map investment last year. We're now beginning to see those investments translate into customer demand and commercial results. It's a great example of how disciplined product investment can create new growth vectors over time, not only increasing ARPU, but separately enhancing overall product competitiveness. The relative competitive viability is evidenced by PAR Ordering delivering win rates above 50%, the highest success rate of any major product in our portfolio. Given the demand environment we're seeing, combined with the fact that payments is attached to every ordering deployment, we feel very confident in our ability to continue to grow this business consistently quarter-after-quarter. On the holistic product innovation front, we continue to meaningfully accelerate deployment across the organization. Compared to a year ago, we've increased delivery velocity roughly threefold. Simply put, we're building and shipping products faster than ever before, which allows us to respond more quickly to customer needs and extend our leadership position in the market. Another area where we are seeing progress is AI. Our strategy has always been to leverage the unique data, workflows and operational context that already exist across the PAR platform. As customers adopt more of our products, the value of AI capabilities increases because they are trained in a richer and more connected view of restaurant operations. We're beginning to see that play out in the market. We're also preparing for a significant expansion regarding PAR Intelligence with over 20,000 locations planned to go live in the third quarter. These deployments validate what we're hearing from our customers. They want practical AI that helps operators make faster decisions, improve guest engagement and drive measurable business outcomes. As previously expressed in our Q1 earnings, we view 2026 as an adoption year for PAR Intelligence and the focus remains on embedding AI into customer workflows, proving value at scale and expanding usage across our installed base. We're moving from a platform that reports what happens to one that optimizes in real time. As an example, customer loyalty initiatives can quietly leak money through promo abuse, misconfigured offers, unproven renewals, unclaimed funding, silent customer drop-off and operators usually find out weeks later, if at all. We're building a system that catches this continuously and delivers a fix, not just the finding. This works because the data already lives in PAR, growing sharper with every order, every loyalty event and every new site. The operator sets intent and approves the action, protecting margin and growing basket size, business and upsells without growing the team. As adoption grows, we believe 2027 becomes the inflection point where AI contributes more meaningfully to revenue growth through premium capabilities, expanded product attach rates and deeper customer engagement. The combination of data, scale and workflow integrations creates a long-term competitive advantage and further strengthens the value proposition of the PAR platform. Now moving on to Retail. This segment also continues to perform exceptionally well. We are particularly encouraged by the scale of opportunities we are pursuing today. On the platform side, we launched Bolla Energy as well as 2 other enterprise retailers during the quarter. The PAR Intelligence footprint expanded to roughly 17,000 PAR Retail sites in the quarter, surpassing our initial adoption goal and moving us rapidly into optimization ahead of future monetization of PAR Intelligence. On the R&D front, PAR Retail completed a full rollout of agentic AI to all developers. This will improve engineering productivity and accelerate innovation. Now turning to our newest product add to PAR Intelligence, Bridg. we're encouraged by the progress we've made since closing the acquisition in late March. What we're seeing is a rapid transition from integration to execution with early proof that Bridg is not just another product in our portfolio, but an increasingly important part of the data and intelligence foundation that will power PAR's long-term AI strategy. In just a few months since closing, Bridg has added more than $1.3 million in new committed ARR from 2 signed customers, including an existing PAR restaurant customer. Importantly, both customers have signed agreements extending through 2029, demonstrating confidence in the value Bridg delivers and underscoring the long-term opportunity we see ahead. These early results validate both customer demand and how Bridg will become a central component of true future -- a future of AI monetization. The story is not simply about Bridg itself. It's about the unique data foundation we're building across PAR that enables better insights, stronger customer outcomes and a differentiated AI platform for restaurants and retailers. Turning now to PAR's TAM expansion efforts. Our business unit leaders are evaluated in part on their ability to place bets that increase our ARPU or bring us into new product categories entirely. I touched upon some of these initiatives already, including PAR Intelligence and Bridg, where we are seeing sizable cross-vertical potential and traction. In addition, on the restaurant side, we are shortly launching both an AI-native kitchen display system as well as an AI-powered audio technology for drive-thru. On the retail side, we have existing customers engaging us on technology expansion initiatives across our forecourt and backcourt systems as a system orchestrator rather than an integrator. Before handing the call to Bryan, I'd like to cover a few summary points. One of the most encouraging developments in the first half of this year has been our ability to improve profitability while continuing to grow. Several operational initiatives are driving that progress. First, our Point-of-Sale business is benefiting from ongoing support efficiency improvements and automation initiatives. Our agents are using intelligent tooling to handle more volume per person while putting the customer first with a focus on speedy resolution. Second, ordering is beginning to experience the benefits of scale as fixed costs are leveraged across a growing customer base. Here again, intelligent tooling has had a material impact in driving efficiencies. Third, we are pushing aggressively on AI investments and closely tracking and optimizing the relative spend to efficacy ratio. 100% of our full-time employees are enabled on and using AI tooling, and we have recorded $14.9 million per year of estimated time savings and workflow optimization across our team in functions, including sales, support, customer success, product implementation, finance and engineering. Our focus remains on converting efficiencies to realizable impact, whether that be dollar savings, deployment speed and capacity or per product person support coverage. These efforts are contributing to meaningful operating leverage and helping create a clear path towards our long-term profitability objectives. Separately, the breadth of our pipeline and our TAM expansion initiatives gives us confidence in both our near-term outlook and our long-term growth trajectory. With that, I'll turn the call over to Bryan. Bryan?

Thank you, Savneet, and good afternoon, everyone. In Q2, we continued to execute to our 2026 operating plan, delivering both total revenue and adjusted EBITDA that exceeded the high end of the guidance we introduced last quarter. We continue to drive organic growth across our products and the verticals we serve and our disciplined management of OpEx is allowing the incremental margin contribution to flow through to the bottom line. For the sixth quarter in a row, adjusted EBITDA has grown sequentially, reaching $14.3 million in Q2, up 158% compared to Q2 prior year. Now for the financial details. Total revenues were $133 million for Q2 2026, an increase of 19% compared to the same period in 2025, inclusive of subscription service revenue growth of 16%. Net loss for the quarter -- second quarter of 2026 was $17 million or $0.41 loss per share compared to a net loss of $21 million or $0.52 loss per share reported for the same period in 2025. Non-GAAP net income for the second quarter of 2026 was $7.5 million or $0.18 diluted earnings per share, an improvement of $6.9 million compared to a non-GAAP net income of $0.6 million or $0.01 diluted earnings per share for the prior year. Adjusted EBITDA for the second quarter of 2026 was $14.3 million, an improvement of $5.3 million sequentially from Q1 2026 and $8.7 million compared to the same period in 2025. Our sequential and annual improvement are result of our ability to drive both growth and profitability. Now for more details on revenue. Subscription service revenue was reported at $83 million, an increase of $11 million or 16% from the $72 million reported in the prior year and represents 63% of total PAR revenue. ARR exiting the quarter was $338 million, an increase of 17% from last year's Q2. Total organic ARR was up 12% year-over-year. We're entering the second half of the year with a large backlog of go-lives driven by both Burger King and Papa John's rollouts in addition to a healthy pipeline across our products and verticals we serve. As such, we expect second half ARR growth to be meaningfully larger than the first half, a growth phasing that is similar to what we experienced in 2025. Hardware revenue in the quarter was $35 million, an increase of $8 million or 31% from the $27 million reported in the prior year. This was our strongest hardware sales quarter in at least 10 years. The volume was driven by both refresh activity and expansion of partnership with our legacy customer as well as continued penetration of hardware attachment into our expanding software customer base. Professional service revenue was reported at $15 million, an increase of $1 million or 10% from the $14 million reported in the prior year. The increase was primarily driven by an increase in installation revenues associated with the rollouts of Tier 1 customers. Now turning to margins. Gross margin was $57 million, an increase of $6 million or 11% from the $51 million reported in the prior year. Increase was driven by subscription services with gross margin dollars of $46 million, an increase of $6 million or 16% from the $40 million reported in the prior year. GAAP subscription service margin for the quarter was 55.2% compared to 55.3% reported in the prior year. Excluding the amortization of intangible assets, stock-based compensation and severance, non-GAAP subscription service margin for Q2 2026 was 65.1% compared to 66.4% in Q2 2025, with a modest change reflecting a shift in product mix as Q2 included a full quarter of Bridg operations. We expect this baseline reset to reverse over the next few quarters as we execute to plan business model changes to Bridg post the acquisition. Hardware margin for the quarter was 20% versus 27% in the prior year. This quarter's performance is in line with recent quarterly results, which reflect the current tariff and supply chain constrained environment. We expect hardware margins to continue to be in the low 20s percent range moving forward. Professional service margin for the quarter was 23% compared to 29% reported in the prior year. This quarter's result was negatively impacted by timing of some of our hardware-related service contracts. Our outlook on go-forward professional service margins has not changed, and we expect a range of the mid- to upper 20s percent. In regard to operating expenses, GAAP sales and marketing was $11.6 million, a decrease of $0.7 million from the $12.3 million reported for the prior year, driven by a reduction of organic sales and marketing expenses of $1.2 million, partially offset by $0.5 million of expenses from the recently acquired Bridg product line. GAAP G&A was $26.3 million, a decrease of $5.4 million from the $31.7 million reported in the prior year. The decrease was substantially driven by strategic reorg changes implemented earlier this year. GAAP R&D was $22.5 million, an increase of $1.6 million from the $20.9 million recorded in the prior year. The increase was primarily driven by R&D expense stemming from post-acquisition operations of the Bridg product line as organic R&D expense was relatively flat year-over-year. Operating expenses, excluding non-GAAP adjustments, was $51 million, a decrease of $3 million or 5% versus Q2 2025. For Q2, non-GAAP OpEx as a percent of total revenue was 38%, a significant 1,000 basis point improvement from 48% in Q2 of the prior year, demonstrating our ability to scale efficiently and drive operating leverage. The realignment of operations of the 2 verticals and the accelerated adoption of our AI tool set within our operations have enabled our teams to realize operational efficiencies and additional scale. Now to provide information on the company's cash flow and balance sheet position. As of June 30, 2026, we had cash and cash equivalents of $77 million. Our cash balance was flat when compared to the prior quarter, with free cash flow of $3 million, offset by cash used of $3 million for the final payout of the 2026 notes. Free cash flow for the quarter improved $11.5 million when compared to Q2 2025, outpacing adjusted EBITDA improvement of $8.7 million during the period. We expect free cash flow conversion to continue to improve meaningfully for the remainder of the year as we continue to drive additional adjusted EBITDA critical mass and execute to additional working capital tailwinds. To recap performance, Q2 marked another quarter of meaningful acceleration of profitability while continuing to grow the top line. This momentum is evident across the following key financial metrics. Revenue grew 19% year-over-year with subscription service revenue up 16%. Non-GAAP OpEx as a percent of total revenue improved 1,000 basis points from Q2 2025. And adjusted EBITDA was $14.3 million for the quarter, an improvement of $8.7 million from Q2 2025 and a $5.3 million sequential improvement from Q1. Now let me share our expectations going forward. When we introduced formal guidance last quarter, our goal was to give investors greater transparency into the business. This quarter, both total revenue and adjusted EBITDA came in above the high end of the outlook provided. We are raising our full year 2026 outlook for both metrics. These results reflect the visibility in our business while also driving operating leverage. For the third quarter of 2026, we expect total revenue in the range of $128 million to $132 million and adjusted EBITDA in the range of $13.5 million to $14.5 million. For the full year 2026, we now expect total revenue in the range of $516 million to $523 million, up from the prior range of $500 million to $515 million and adjusted EBITDA in the range of $50 million to $53 million, up from our prior range of $44 million to $47 million. A few points of context on the outlook. We expect subscription service revenue growth to continue to strengthen in the back half of the year as we continue to roll out multiple Tier 1 accounts and go live with recent Tier 2 and Tier 3 platform wins and continue to build momentum, expanding our platform within our customer -- current customer base. On hardware, Q2 was a historic quarter and benefited from elevated Tier 1 refresh activity, and we expect hardware revenue to begin to normalize in the second half. Additionally, we anticipate hardware margins will stabilize in the low 20% range as our pricing actions continue to offset component cost pressures. On profitability, adjusted EBITDA of $14.3 million in the second quarter, combined with our outlook for the full year reflects substantial improvement over 2025, driven by both continued top line growth and a cost base we have structurally reset. Taking the elevated hardware revenue into consideration, a more normalized Q2 adjusted EBITDA would be $13 million when considering an appropriate baseline to build out second half of the year expectations. The restructuring actions we executed earlier this year are driving a step down in our operating expense run rate with the second quarter reflecting the larger step change in that run rate. Looking to the balance of the year, we expect OpEx to stay relatively flat to modest growth as we plan to drive additional operating efficiencies that help support reinvestments into our highest return opportunities, most notably PAR Intelligence and our agentic platform. That investment builds through the back half of the year within a disciplined framework that prioritizes durable and profitable growth. I'll now turn the call back over to Savneet for closing remarks prior to moving to Q&A.

Thank you, Bryan. Q2 was an aggressive starting [ shot ] but we are far from done. First, we expect the back half of the year to see continued movement up in growth. ARR growth accelerated from Q1 to Q2, and we expect it again to pick up in the second half of this year, similar to 2025. This is driven by the backlog of large deals we've spoken about as well as a new influx of mid-tier wins. Second, our multiproduct model continues to expand. I'm very excited to see how nearly all new deals are platform-based and the resulting impact on ARR will give us strong growth in later years. As restaurants begin to adopt more and more AI solutions, I expect the need for an end-to-end vendor will only expand. Third, our profitability expansion. Our numbers reflect the incredibly strong unit economics we're seeing in our business model. We continue to be encouraged how efficient an incremental customer add can be, and we will continue to march our business towards best-in-class margins. Our ARPU is up across all core products. Our LTV to CAC ratio has more than doubled between platform versus point solution deals and our contract lengths are increasing throughout. OpEx efficiency remains a focus. And in the quarter, non-GAAP R&D expense as a percentage of sales was 15%, sales and marketing expense was 8% and G&A was 14%. Fourth, our aggressive trajectory on PAR Intelligence adoption. We rounded out Q2 with roughly 20,000 live sites and have another 20,000 sites set to go live in Q3. We remain firmly on track for our 50,000 live site commitment for fiscal year 2026 and are developing additional functionality with clear commercialization potential. Finally, our continued commitment to aggressively expanding our TAM. We have made investments to organically launch new products across restaurant and retail. Our intense focus on margin expansion has not come at the cost of investments in our core products, and we remain committed to spending more on products development than the bulk of our enterprise peers. I believe the ultimate key to a successful business is its ability to reinvest its capital at high rates of return while not sacrificing areas requiring innovation. The rush to AI will be no different. While AI is often looked at as technical word, we think there will be as much cultural -- in a world where every company will ostensibly have the same or similar AI tooling, it will be a race to the average. The companies that have a culture that allows them to take a leap of faith on AI will gain the competitive advantage. Simply using tooling to optimize the way we work in the past will not lend itself to a differentiated competitive position. Instead, it will reinforce the status quo. We think you need to actually leverage AI in places that make you incredibly uncomfortable, where the power of intelligence leads to an enhanced judgment. Illustratively, we think winners will be companies that enable their managers to be both ICs and managers. Such companies will expect the leaders to take on more teams and more projects, not to be stuck in the org designs and best practices of the past. Winners will not only let AI filter resumes, but actually trust AI to filter interview and present final candidates. Or in the case of restaurants, I think winners will be the ones who let restaurant managers press autopilot and let AI order inventory, create labor scheduling and manage order flow while allowing the operator to focus on the highest value customer touch points. A company culture willing to accept the risk to reinvent how it works, how it organizes and how it leads will be the one that achieves differentiated competitive positioning. As I said earlier, PAR is always on offense, always. That culture sets us up to win and adapt to today's opportunities. With that, operator, we can open the line up for Q&A.

[Operator Instructions] The first question comes from the line of George Sutton of Craig-Hallum.

Nice results. So I was pleased to hear about the confidence in the second half ramp in ARR. I'm wondering if you could give us a little more of a picture. I understand much of this is driven by deals you've already won and have planned rolled out. When we talked a quarter ago, I think you talked about 80% of your opportunity had been signed for the year. Can you give us an update there?

Yes, we feel very good. From now to the end of the year, we've got good visibility on the Operator Cloud side, the Retail side, and we're getting there on engagement ordering. So we feel pretty good where we are now. Visibility has increased, which is why we gave the commentary that we feel good about the second half ramp.

So on PAR Intelligence, so it sounds like you had 20,000 in Q2 and you're adding 20,000, I believe, in Q3 and 50,000 for the full year, up against, I think, a base of about 170-plus thousand locations. Can you give us a sense of the breadth of the wins that you're seeing relative to other competitors bringing their AI solutions in?

Yes. I think the scale of rollout is obviously going faster than we expected. I think that's partly -- obviously, there's a rush to try these tools, but also the early wins that our customers are getting are learning from it. We just won a retail deal where I think a core part of us winning was candidly what we showed them on PAR Intelligence. So I think we continue to be excited and the opportunity to sort of put product in front of our customers and then learn from that, iterate from that. And then as I talked about, really monetize in 2027. Vis-a-vis our competitors, I haven't seen tremendous push from most of our competitors to sort of become the agentic solution in the future. In fact, I'm not aware of somebody that's got sort of the installs that we have and the road map we have. And I think that's partly because it's very hard to give something useful to a customer when you are only providing utility in one part of their operations, whether that be in the back-office or loyalty or ordering. I think the AI value comes when you have it across your products. And so there are only a few vendors that could potentially do that. So we have not seen a lot of momentum from our competitors here yet.

The next question comes from the line of Stephen Sheldon of William Blair.

First, just wanted to clarify the ARR expectations in the back half. So I think you're saying that you'd expect to get back to 2025 levels, which I believe was 15% organically. I guess could you get there in 3Q? Or is that more like a 4Q expectation? And then, Savneet, I think you said that if PAR keeps executing the way it has been recently, and it sounds like implementations are all going really well, there could be some upside to that. So I just wanted to -- am I kind of hearing and thinking about that all correctly?

Yes, Stephen, it's Bryan. Good question. So the reference also to on the phasing, if you recall from 2025, we did a significant amount of our ARR increase in the second half, close to $30 million of incremental ARR. And so we know we're lapping that, but we actually have more momentum going into the second half than we did last year. So we'll be higher than we were last year. This is going to allow us then to go from the 12% up to a higher percent in teens in regard to Q3 and Q4, but that will come steadily in Q3 and Q4.

And then to your second part of your question of the ability to exceed. Yes, I think if we continue at the fast pace we're going now, there's always that potential. So we are feeling -- right now, things are going very well.

Got it. And then on PAR Intelligence, I think you have a lot of options on ways to commercialize those capabilities. And I think you talked about probably seeing more commercialization next year. So can you maybe just update us on how you think it will impact monetization? I'm sure it helps with retention, might help with pricing. Could you sell some capabilities separately where are you on a subscription or usage-based? I guess just how are you -- how should we think about the commercialization of that?

Yes. Actually, I think, we're going to look at commercialization as a subscription-based product more than likely. We're going to test out a few models, but I think from the early goings, it looks like it will be subscription-based. I suspect it will be an add-on to what we do in the back-office and/or the loyalty side of our business where we see the most actionable insights, where we see the customers have the most interest in paying and where we're driving the most ROI today. But we're using this year to really figure out where do they get -- where they spend the most time, where do they get the most value and then kind of coming back and [indiscernible] making a win-win for them and for us.

The next question comes from the line of Ella Smith of JPMorgan.

So first, I was hoping to ask about the EBITDA margin strength that you've experienced in the past few years. And as we look to 2027, how do you think about the sources of that expansion? Is there still meaningful room for cost cuts or operational efficiencies, particularly from past acquisitions? Or do you expect most of the forward expansion to come from operating leverage versus your existing cost base as revenue scales?

I think it will come from both. I think more of it will come from operating leverage. We're growing and we expect growth rates to accelerate in the second half of the year, as I mentioned. And we're not adding cost to the fixed cost or the operating cost structure. So I think it will come more from operating leverage, although we do think there's opportunities to continue to take out excess costs within the infrastructure of the business. And so I think we'll see from both parts, but I think it will be more driven by what we're doing from a growth perspective.

Very clear, Savneet. And for a follow-up, since you made the decision to stop disaggregating ARR and active sites between Engagement Cloud and Operator Cloud, citing the growing prevalence of multiproduct arrangements, how should investors think about tracking your go-to-market progress and attach rates across the products going forward? And what metrics do you think best capture the health of that bundling strategy?

I think, there are 2 metrics. So one is just ARR growth. I think as we have ARR growth, it's representative of that multiproduct growth. And the second is ARPU. As we have obviously ARR and site count, so you can see ARPU. And if you kind of look at it going backward, you can see it continues to climb up, climb up, climb up, and that's a result of the multiproduct attachment that you see. So we're trying to make it simpler. And as you said, with the platform strategy, breaking up the 2 becomes too challenging or also, I think, too complicated. And so having one metric or one site count allows us to provide more traditional metrics, which we're excited about.

And what I'll just add to that, Ella, right, is the fact that it's actually clear now what a true ARPU is, right, because we now have all the unique sites in there. So there could have been at times where there were sites that were both in EC and OC, Engagement Cloud and Operator Cloud. And now with the kind of unique brought together, you actually get true ARPU of that and you get a better sense of what the white space is in our existing customer base. right? So for instance, in some of these multiple product deals that we're doing, doing 10,000 ARPU in those sites, you can actually do the calculation and see what our ARPU is of total sites and see the multiple above that in regard to white space just in our current customer base. So we want to be able to give you guys that kind of clarity to understand how to build out the modeling and understanding both from new logo growth and existing customer growth where the opportunities come.

[Operator Instructions] The next question comes from the line of Mayank Tandon of Needham.

Savneet, I wanted to just get an update on the Tier 1 RFPs. I know you've talked about several potential opportunities. I believe one is global and two were North America. I could be wrong on that. But if you could just give an update in terms of where you are on those RFPs and if there are maybe more that are in the pipeline that you think you could also potentially convert on?

Yes, we're making good progress. When we get a win is we've also got to wait for our customers to put out the release. So there's a lag effect from winning to the information getting out there. But the market is very ripe right now. We continue to have growth in pipeline, as I said in the remarks. I think it's the difference from this year and maybe last year, it's a much more diversified pipeline where we still have great momentum on the Tier 1s, but we're seeing more and more of these mid-tier customers like Pizza Factory we talked about on the last call and others like that, where you're able to do a multiproduct deal that would be the value of a Tier 1 point of sale deal as an example. So I think the difference from this year and last year is Tier 1 is still strong. It's the mid-tier deals that are -- we like because they're also a little bit of faster sales cycle and I think even stickier because of the multiproduct nature.

Got it. Just to clarify, there are still 3 Tier 1s in the potential opportunity bag? Or would you say there are more at this point?

I'd say, still, there are 3, and I would say we've got more in early stage, but not yet where we put them in, call them out.

Okay. And then just as a follow-up, I wanted to ask you more on the market. Are you sensing more of an urgency on the part of customers to modernize their tech stack? Just we've heard that from a couple of your peers that have recently reported. It seems like the backlog is converting a lot faster than it was maybe some months ago or some quarters ago. Just wondering if you're seeing that trend as well, and that could have been maybe part of the reason you delivered a very strong quarter and obviously raised guidance as well. I just want to get a sense of the overall market urgency on the part of customer behavior in the era of AI.

I think it's a continued urgency. I don't know if I would say we saw something different this quarter to last quarter, but I think it's a continued urgency. I think we certainly see a lot more focus on getting your infrastructure, your core foundation in place than we have in years past. But I think it's just a continued momentum from what we saw last quarter.

The next question comes from the line of Andrew Harte of U.S. Bancorp.

Nice results. Savneet, multiproduct adoption, I think, keeps coming up in a lot of your answers. And I appreciate. I think there was a comment about 100% of new customers were coming in with multiproduct adoption. I guess can you talk to us about a couple of things. Maybe one, if you look at your existing installed base, like what do you see that cross-sell opportunity as? I assume it's still really big. And then what products are you leading with and then eventually taking out as well?

Yes. I think when we look at our base, the average customer probably has about 2 products, and that's grown from 1.5 products just a couple of years ago or not even that. And our expectation is that we will continue to grow. If you look at the TAM, that would essentially say we've got, I don't know, 5x the size of the base. But if you go into detail, we looked at that there's probably about a 3x opportunity within the core base. So if you think about it as a TAM, SAM and SOM. And so I think if you look at it as a SOM, we think that there's probably 2 to 3x the core base that we still have to go in there. To the second part of your question, we're usually always trying to lead with point of sale or loyalty as we think those are the 2 plant-the-flag type products. And then from there, we're upselling the rest of the suite. But if we land with point of sale, we have a tremendous opportunity to win the rest of the tech stack. And so we prefer to start there. But given the market today, particularly the push on AI, you are seeing that continued growth in loyalty. And so we'll work the other way on those leads.

Okay. And then just one more on PAR Intelligence. I guess what are you doing -- I appreciate that the monetization for it is at least a year out maybe. But I guess what are you doing to make sure the customers are actually utilizing it and like maximizing the value prop? Is there a customer success team or like a human element where PAR is providing resources to make sure that the product is maximizing its potential?

Yes, we do have a customer success team that's engaged and working on it. I think the best way to answer your question is we're engaged with them. We put the product in their hands. We take a look at what's being used, what's not being used, who's using it, how they're using it. And then we've got to keep iterating. And that's really what we're using these press releases to really push that out and figure out what's adding value to the customers, what's not. And if it's not, why not? Why are they not -- is there a reason they're not using it because it's technical? Is it not giving them ROI. So it's a lot of variation right now. I think we feel pretty confident that there's definitely product to monetize in here. And so now we're trying to narrow where that is and where we spend our investment dollars to double down.

The next question comes from the line of Samad Samana of Jefferies.

This is Teddy Farley on for Samad. Congrats on the strong quarter. One more on PAR Intelligence. Can you talk a little bit about the customer demographics or characteristics among the cohort that has been using it? Anything to call out versus your overall customer base?

I think it's definitely been more from the engagement side of our suite. On retail, we certainly have a lot of early traction and adoption. Very, very focused on -- I think the digital department is trying to figure out how to do one-to-one targeting, personalization, data integrity exercises. So I'd say it's heavy on the engagement side. And -- but I don't know if we're yet at a point where we can say something is categorical. I think we're still just getting the product in people's hands before we have any strong insights.

The next question comes from the line of Will Nance of Goldman Sachs.

I want to go back to the earlier question just on KPIs on the consolidated reporting. And as you look out, talking about getting back to 20% ARR growth, any color you would share on just what the right mix between site count and ARPU lift is just kind of as you see it under the new reporting and how that could change over time as some of these deals get implemented?

I think historically, we were pretty much driven by site count where site count drove the vast majority of our growth. I think it will be more balanced going future. I don't know if we have a perfect formula of it's going to be half from one part and half from the other. But I think what I'll say is after the Q1 experience, site count is going to continue to grow but given the multiproduct success we're having, ARPU will be a much bigger driver than it has been historically. I think that's excellent because it provides a lot more TAM for us. It allows us to sell back into our base, not just depend on a net new logo. So I don't know if I have the perfect formula, but I think growth is going to have to come from both sides.

And what I would just add to that, Will, is also each -- the dollar value of each site growth is actually meaningfully higher now than it used to be. It used to be one product for each site growth, right? So you work really hard for each of those sites for the one product and try to cross-sell in. Obviously, you still work hard for each site right now, but now it's like 3x the value, right? So it's -- the metrics then you think about it to Savneet's point about the LTV to CAC ratio changes noticeably on those new logo deals.

Got it. That's really helpful. And then just given the focus on companies trying to get their data aligned, the focus on kind of making sure you've got a clean system of record in order to harness some of the benefits of AI, just how is that impacting your go-to-market? Or imagine Data Central is a big part of that. But what are you doing to kind of make sure that clients understand that working with the newer system will help them move faster in other aspects of trying to kind of move forward on AI adoption and things of that nature?

I mean you've got the pitch there. But I think without question, the back-office side, clearly, Data Central is an awesome place to start kicking off those conversations, that understanding. A little bit too is just the maturity of our market. As one of the funny things about software is as you buy software, you end up buying more software to manage that software. And obviously, AI [ is that ] on steroids. So I think the market is -- it doesn't really need to pitch. It's more about who can implement it, who can scale with them and then who can bring in those AI solutions. And as I talked on the call, I think we're getting to the point where more and more organizations are realizing it only works if you've got the data across your systems. It's going to be very hard to create true utility if you're just looking at one part of your system, i.e., if you're just looking at ordering or you're just looking at point of sale, it's hard to get utility out of that.

This concludes the question-and-answer session. I will now turn the call back over to Christopher Byrnes for any closing remarks.

Thanks, Felicia, and thanks, everyone, for joining us today. We do look forward to updating you further in the coming weeks. Have a good evening.

This concludes the conference call. You may now disconnect.