PAR Technology Corporation (PAR) Earnings Call Transcript & Summary

All right. So thanks, everyone, for joining us again. Next up, we're excited to have Savneet Singh here, President and CEO of PAR Technologies. Savneet took over the role of CEO back in 2019. And since expanded PAR's product suite, expanded beyond the company's POS hardware routes and now they have the company on a path towards achieving EBITDA profitability and has pivoted the business towards a much more reoccurring and software-oriented business. So Savneet, thanks for joining us today and looking forward to the discussion.

Thank you for having me.

So maybe it'd be beneficial to the audience to do a quick overview of PAR, how the company has evolved into a more full-scale restaurant software provider.

So in specific form, we service enterprise restaurants. Think of enterprise restaurants and foodservice businesses as multiunit operators. So we're selling to the RBs, Dairy Queen, [indiscernible] world. We're not selling to your local favorite Italian restaurant. And historically, we started out as a single product company selling them point-of-sale software targeted at that very narrow mark, that sort of large market but narrow target of QSR and fast casual. And over the years, we've expanded inorganically and organically to now offer point-of-sale, back-office payments, online ordering and loyalty. And it all came from the thesis when we started in 2018 to now, the piece isn't [ cane ] that much, which is restaurants are being inundated by software. They are overwhelmed with too many products, not too few. And every single time an interesting video comes out, they go bring on a new vendor, try to plug it into their existing systems. And I think they've solved that problem. In reality, it's created more problems because that new thing they added doesn't connect well to everything else they have, something breaks here, it has cascading effect over there. And so we like to think that these food service business, and I keep saying restaurants is really much broader than that. I'm really looking for simplicity, call it, vendor consolidation, but really a unification of their ordering and their data so that they can take control back of their organization and start creating really beautiful experiences for you as a customer as opposed to managing a bunch of different vendors.

So you touched on it just now the idea of unified commerce. Maybe you can talk about what it means to bring all of these assets under one name, you've got the Punchh and the MENU assets and your engagement cloud offering, Brink and Data Central and operator cloud, you've been very acquisitive to kind of bring together all of these. What does the unified commerce platform look like at PAR?

So we look at it as a -- in order anywhere as an order everywhere. What that means is whether you're ordering on your phone, on the website, in the store and drive-thru, it should flow through the same set of systems so that you, the operator can use one system to manage it all. And that might mean everything from everything goes into the point-of-sale system, so that [ kicks ] through the kitchen and the fulfillment is the same, but more likely it means that your data is the same. So menu item here is the same as a menu item there. And that you can get intelligence from all this technology that's come out over the last few years. Today, every single type of order is a different system. The online ordering guys, the loyalty guy, that's different from the in-store drive-thru. And so you're trying to collect all the data put together and get some insights, and that's pretty hard. And so I'd like to just kind of think of it that way. From an operator perspective, so you've got this sort of unification. From the customer perspective, you're the end user, you and me ordering from our favorite restaurant, we want that same experience. We want you to feel like the experience from whether you're in the store, on your phone, online is the same beautiful. You're generating the same feelings you had online as off-line or on mobile or on a website. And so the idea is to kind of make that unification both experience both to the customer, but also to the operator.

Yes. And I guess, payments has become a more meaningful contributor to ARR and revenue. What value proposition does PAR bring in terms of payments? And when do you anticipate that to be a much greater contributor to the bottom line?

Yes. So payments is a very fast-growing revenue line for us. And for us, it's unique, and that relative to our peers, we recognize it on a net basis. So it's -- if you do apples-to-apples, it looks enormous. So the payments for us is a little bit different than others. Most people bundle payments into vertical software to create more revenue. And it's -- in our view, that's eventually a race to the bottom because there's no differentiation whether you buy your payments from where you get it. What we've done is say, "Hey, we're going to offer you payments." And we're going to give you a sensibly all these benefits of simplification that you might get from having two [indiscernible]. That might be one phone call, so you don't have to go [indiscernible] people. One service desk. So the most common call into a point-of-sale help desk is an issue between the payment device and the POS, the most common call, sometimes 40% for many of our customers. Well, the beauty now is that when the [ history ] when it happens, the payment guy points to POS guy and the POS guy point to payment guy and that goes on for two days and then eventually somebody screams and things get moving forward. Now under one roof, you can solve that problem. And so one is as I mentioned, one support desk, one service desk, discounts on your hardware, blah, blah, blah, but really -- anyone can sell that if they've got multiple products. What we're trying to do is then say, "Hey, what can we give you with payments that you couldn't get if we had payment to a third party"? And for us, that's really product functionality. So what we do is we take on your payments business, we're going to take all that data, combined with the POS multidata, put it all together. One data platform that we call the [indiscernible] platform. So you've got all your data in place. So you're not pulling from a payments company and trying to reconcile that to the POS guy. The second part of that product thing is can we actually create customer experience because they are different. And so we announced in our last call that we created, what we call them, called one tap loyalty, which is that ability to instead of when you go to a restaurant and you're saying, "Hey, got this coupon on my phone, can you scan this coupon and then you're like, can I get credit for my loyalty or can you give me credit to my loyalty account? And then can I pay, it's three swipes or three taps or three scans. For us, it's just one tap. And that one tap, you can have your payment done, you can have earner points and also burn a coupon. And so that's a functionality aspect of it. And so our pitch to the customer is pretty simple. It's like "Hey, we're not going to charge you any more than you already do on payments." We're going to give you massive simplicity. You can trust us because by the way, there's not a single restaurant operator. And I challenge you to find one who doesn't think they're getting ripped off for their payments. And then we'll give you all this functionality. It's kind of hard to say no.

Yes. I wanted to hand on some of the recent deals that you've done recently. So TASK and Stuzo, kind of big catalysts for just the simplification of the business, along with the government sale, which we'll get to in a second. But if we kind of dig into some of these, could we talk through on the progress that you've made so far on both of these, understanding it's still early innings. What are some of the early takeaways that you've had?

So I'll go in chronological order. So we acquired a business called Stuzo in, I think, March or April. And it's been fantastic. I'm usually more circumspect with my feedback on things. But I think our bet here was this idea that convenient stores and restaurants were starting to become each other's worst nightmare in a sense that the fastest-growing area of growth for every single convenience or fuel store in America is food. So generally, most of these chains are growing food service anywhere from 10% to 20% year-over-year. So food has kind of become the growth engine for convenience and [ fuel ] stop. Well, that share is coming from. That share is coming from restaurants. And so we were getting pulled into that convenience space very organically because the big convenience stores were saying, "Hey, we want the same loyalty experience at that restaurants have because we're becoming big food businesses. And so we got pulled into that business. And we discovered this company Stuzo and said, "Wow, like they not only do that, they do it better than us because they think of that business not as a food service business, but they can also bring in the fuel, the tobacco, the CPG goods into the same loyalty platform. And so we bought that -- when we bought that deal, people were saying, well, like is this you guys, are you getting off thesis? Or is this sort of expenditure expense like I think today, almost unilaterally like the thesis has played out, which is "Oh my god, there is not every single week. There's an article about how quick service restaurants are losing share to convenience and fuel." Someone [indiscernible] once our biggest competitor is in [indiscernible]. And so we are kind of the picks and shovels and that fight between these two different categories. And that will only expand. And the reason why I'm so excited about this deal is obviously, you and I talked about it, but it was a great deal. We bought it for 13 or 14x EBITDA for a fast-growing software business, that's hard to do. With no churn, lots of growth in a long runway, but it's also a really interesting category in that while C-stores sell food, almost categorically is a better business than restaurants. Their margins are higher. They are far more partnership oriented. And so our price point in C-stores is almost double restaurants. The deal sizes are longer, everything just feels like a real win-win. And so we're very excited. And then I think the team and culture we brought in was pretty fantastic. So I think our -- if you were to ask people work probably say, "Hey, that one has got to work well internally." I think externally, you'll see the results of that the next couple of years as we won more of these big deals. And again, it is -- you will all see this happen soon as EV charging takes off and stuff, but restaurants are going to start having EV chargers. And EV charging companies are going to be a gas station offering your food, and there's going to be a real share fight between two and we like kind of being able to provide both of them. And I think it was always a kind of let’s get ahead of the curve, and this is happening, but also defensive too, because it's just to say we didn't do it and one of our peers did it or somebody else that they would create a [indiscernible] compete in restaurants. And so I think we've got a nice job, both defense and offense. The second deal is called TASK. We're less than two months in, so it's hard to say, but everything looks great right now. TASK is our attempt to grow internationally. We support so many large U.S. QSR chains and almost all of them are growing internationally far more than they are domestically and we don't have a solution. And then I think we have this call option, we call it, which is they have hooks into a couple of large brands, mainly McDonald's, where they have tremendous relationships, tremendous performance, more importantly, and that creates an opportunity for us to potentially grow that business over time. So we like it a lot. And from an engineering perspective, we think the team is really, really fantastic.

Yes. Maybe just quickly on the government business. I know there's been a focus on kind of where that business is headed and the general focus was on divesting it over time. Now -- that's now mostly in the rearview mirror. Just what did that divestiture sort of unlock from just a focus, simplification, resources perspective?

Honestly, not much internally in a sense that I was probably [indiscernible], it's been any time and again, it wasn't a lot of time. We ran it really as an independent subsidiary with its own CEO almost in there. I think what it did more than anything else was actually clean up our story to the investor community. And so it made it a lot easier to figure out what we're doing, what business we're in to compass. And then I suspect, for companies that one day want to acquire us. I think it makes it like, okay, now I don't have to manage a government service business and get U.S. government approval to buy this company like there's that aspect, too. And so I think it cleaned up the story a lot, which should help us move forward. . And then small things like recruiting, you recruit senior executive and they like what's the thing over here like don't look over there like so if they get clean things up.

Sure. Yes, that makes sense. You touched on the international opportunity in TASK just a minute ago. I think a lot of people are excited about the opportunity, both like the strategic customers that it brings with it, but also just the international footprint, the ability to sell internationally. So how would you kind of -- how are you prioritizing international expansion with the significant opportunity and backlog that you've got domestically right now?

Yes, it's not priority one. I think priority one we talked vocally about this getting our [indiscernible] live running and super happy. And I think we're doing a great job there. But international opportunity is a long-term bet because it's not like you're [ owing ] a customer like here's the international business. It's like it [indiscernible] here is the U.K. business. Here's the German business here. And so you go market by market. And so we're I think very carefully figuring out what can we play, where does our product fit best and where do we have to invest to grow, and it's going to be based on ROI. And so I think it's exciting because I know unilaterally, our U.S. customers would love for us to do what we do for them internationally. The question is, do we want to be in those businesses? Do we want to be in those markets. It's not like you want to take a big QSR chain, they're like "Hey, I love you." [indiscernible], like that's going to be like 10 stores with learning all the language, but you have to make your money back. You got to go to say, okay, give [indiscernible], and then we want all of yours and so it's really taking on ROI before we do anything else. But I think the early returns have been like, wow, everybody really wants us to do this. Now it's on us to figure out where we want to play.

Yes. I just want to hit on the gross margin point, a second just because one of the big kind of results of that pivot towards software will be seeing more of that kind of software gross margin profile over time. And I think some of the deals that have done have kind of set the company back a little bit just from having to make investments that kind of weighed on gross margin in the near term. How do you kind of paint the road map for getting gross margins towards more of a software-oriented level?

Yes, we're not super far off now. We're in the sort of high 60s. And I think we want to eventually in the mid-70s, but I think we'll get to 70 hopefully soon. We used to be 71, I think 1.5 years ago, but we did one deal that really diluted our margin. Now, we were pretty vocal about it. We've been pretty transparent about that one deal which a short menu. And to me, you got to take those bets. You got to take those bets that are nonconsent is hard to do. And I think so far, we would say like before we do it again? Like yes, we want [indiscernible] with it. And so -- this to me is just a matter of when, it's not a matter of [ anything ], it's just scaling that one product that's got to get up there. And then our payments business because it's still nascent, is also not that mid-70s margin, but it's working its way out there as well. And so to me, it's just a matter of time, and we're moving really quickly. . What I hate about it, though, is that it does kind of how profitable the core business is going because I said this a few calls ago, but that acquisition we did burns, I think at the time, I said $12 million a year. Well, that's like our entire company or negative -- our Q2 EBITDA when you adjust for the purchase price accounting and stuff is $1.8 million, right? So it's all this one product, right? And what's amazing about that is that the operating leverage has been extreme. It's just been hitting because we did one acquisition. Now again, we would do this acquisition 10 out of 10 times because I think we want to sort of take our shot in that ordering space. But that's one thing I don't love about it because it's kind of hiding how efficient the existing businesses has become. And that will come forward. And I think, sorry, one other point of the margin I think is interesting is in Q2, our adjusted EBITDA loss was negative 1.8 excluding the government business. But if you -- it includes the government business, which actually we had during that quarter, then we probably breakeven in that quarter. And again, on a same-store sales basis, that's a pretty drastic change of just [indiscernible] but again, kind of hidden in this change. But anyway, what I'm excited about it is it's a clean story now. You don't have that disruption in Q3, Q4, so on and so forth. And we feel really great. I mean the core -- the margin growth is coming from the core products that we've owned organically, just becoming very efficient.

Yes. No, and particularly the payments, I mean it's very clear. The incremental margins there are very high. So maybe on that, both menu and payments, just how are you thinking about the ramp of some of these newer initiatives? And how would you kind of characterize the growth contribution from menu?

Menu still pretty small, still single digits. But we've announced -- the last of calls we announced some of the wins. We won one large chain called Scooters, which is, I think, [ 700, 800 ] 900 stores. That's kind of crazy because I don't think anyone thought we'd play in that scale yet. Obviously, we won Burger King for a portion of their technology stack and a number of other chains. So the business is growing and it's growing off of the existing PAR base. Every customer of menu has come from existing PAR customer. And so I think it's proving our model of when we acquire a product, we can create revenue growth out of it by selling into our base. But we'll know, like I said, we started selling in the United States really in earnest in the beginning of the year. And so -- or sorry, deploying it at the beginning of the year. And so we'll know like a year from now, if do we -- is this going to be fast forward five years, $100 million of revenue? Or is it going to be 50, 40 or 20, it's not going to be 0. And so I think it'll make return. The question is how big and we'll really know that as we get going. And then on payments, payments is growing 50% to 100% a year. It's been growing historically off of the [ big ] base where we are bundling it into our POS deals, but the growth being driven for the second half of this year from payments. And then I think the [ out ] years is actually going to happen equally from our POSs, but also from our [indiscernible] and MENU online ordering businesses because we try to -- we Punchh in particularly this one tap loyalty, I mentioned, that's very much driven by the Punchh having that base where you already have our loyalty app and adding that functionality on. So that will be a nice thing to see, which is now we're deploying payments not just in our [indiscernible] premise, but also our off-premise business.

Yes, makes sense. I want to talk about just kind of cross-sell in the organization. So you kind of layered on a lot of products over the last couple of years. I think the numbers we are serving over 70,000 customers, in total 122,000 customers between Engagement Cloud and Operator Cloud. How would you -- I guess this kind of suggests there's a decent amount of cross-sell opportunities to kind of harmonize the customer base across products. How would you kind of -- how are you thinking about that opportunity?

Yes. I think it's the -- other than Burger King, Wendy stuff, which is crazy exciting to have our two biggest deals, our growth rate, not decelerating and all that. I think most of the thing that's happened is that we've kind of figured across whole thing out. So I think what you'll see in the next couple of years is that a portion of our growth will be driven by pushing our existing products into our base. So as I mentioned, I think MENU's in 11, 12, 13 different customers or something like that, every single one under the PAR customer. Our back office product called Data Central, has its biggest pipeline ever. And every single -- that is because of Brink. And as I said, our payments products are all coming from cross-sell. And so cross-sell is really working well for us. It's also validating our M&A thesis. And so I think [ I said ] on our last call, but our sales and marketing spend in '24 is going to be less than it was in '23, yet we'll sign way more bookings and [indiscernible] in '24 that we did in '23, and that's the cross-sell, right? We don't [indiscernible], we need two, and then we need one and you're kind of consolidating that. And we've found that. We've kind of figured out that a lot now. Now, people always ask me what percentage of your sales will be in '25 and '26, and I would say, unfortunately, it's never -- it's not going to get -- I want to get it to one day it would be 50-50. The problem is we're just winning something new logos that is kind of, those new logos are still the bigger jumps in ARR, but it is definitely been the unlock that we are most excited about internally.

Yes. No, that makes sense. It's very exciting. Maybe we can talk about competition. I mean there's a number of kind of notable SMB players in the restaurant space and POS. I think there's a little bit less kind of investor familiarity or focus on the enterprise side. So maybe you can touch on how you kind of view your primary competitors? And what you've seen -- how you've seen the competitive environment evolve over the last couple of years?

I don't think it has evolved that much over the last couple of years. The players in the SMB market are incredible. They are businesses. I have business [indiscernible]. They're fast moving. They sell to customers that will buy the cross-sell products on day one, so you only need to build a cross-sell motion and their sales cycles are relatively small. In our world, we compete primarily against more of the legacy installed players with the large installed base. And in that world, it hasn't changed that much. So it could change. We get asked a lot about [indiscernible] and I would say it's not often we see them in RFP let alone as a finalist. And that's not because those products aren't great or amazing. They just weren't built for this market. . And the [ analogy ] I like to use is, if I was the designer of a semi-truck and you designer of Porsche and we switched jobs like we can probably figure out how to make those things go from A to B, but it will take you a long time to figure out the nuance of the semi- truck driver. I mean to understand the Porsche driver and how that works before we could build a product that actually could compete with each other and that's a little bit how I look at this market.

Yes, makes a lot of sense. So you've had a number of chunky wins with very notable clients. I think it kind of help the level set and contextualize the value proposition behind PAR's offerings versus what's kind of out there in the market.

Yes. I mean we've -- in the last year, when our two biggest deals of all time and Wendy's loyalty product, Burger King for our point-of-sale product. And I think what's exciting to me is the pipeline now for large deals is bigger than it's ever been. And so I don't know, people would like to ask me, is this because of the Burger King, and I am like maybe? Is it because of some of those big legacy providers that have huge market share because they're struggling or they look from the outside like they're struggling maybe? Or is it because digital transformation in the cloud is now accepted in food service. I'm not really sure which one of those levers has led to it. But I would say, without question, we feel like something has changed over the last year or two, where the pipeline is strong and it's not stopping. And so we have not seen a drop off since we've had these large customers. And I think we'll sign more this year than we've ever had in the year before it, and hopefully, that continues in '25 and '26. So this idea of digital in the restaurant and the food service is -- it's nowhere near like stopping. We're still in the very early innings of it. And I would say, if you look at our customer base, we have customers today that still have less than 5% of their orders come through a digital channel. We have customers that are over 50%. But if you look at the average across all of them, it's still like [indiscernible]. I think it's still really, really early on. And when I say digital, digital might be you're still in the store, but you just decide to order on your phone versus touching a kiosk, you're going to a customer, right? So -- and so those -- that penetration of digital, I don't think there's a single restaurant CEO that's going to argue that's -- I can go the other way. Like I don't think you think people are going to go back to wanting to talk to the human being as [ sad ] as that may be for us. That's not going to stop. And so that's a world that you now actually live in that reality, which is, okay, this wasn't a pandemic thing. This is say, "Hey human beings for some reason, prefer to do things on their own, on their own device." You're going to have to make those investments. And then at the same time, you've got to figure out how to make a really efficient kitchen and back office because those are really complicated. We think of restaurants as simple, but they're quite complicated when you get to the level of supply chain management and so on and so forth. And so I think these businesses are far from kind of being at the end. And the last thing I'd say that I think is a tailwind and no one says, but I always say, just I think if you were to graph the stock charts of the best-performing restaurant companies over the last 3, 5, 10 years, and then graph, their R&D spend, it's probably pretty linear, which is like the firms that invested in R&D have outperformed those. So think of like McDonald's, Chipotle, Cava, Sweetgreen. I mean, these companies have put incredible money of into R&D around their digital experience. And they happen to be the best performing [indiscernible]. I mean, these are enormous amounts of investments they're putting -- and so I do think that's the road map for every other restaurant chain because you look at those guys and you're like, well, I need to have that experience as well. And if they do, we're probably a good place to call.

Yes. So maybe speaking of that, I think a lot of people in the enterprise space know that there's a lot of kind of in-house software that's been kind of accumulated by some of these larger brands. So when you think about maybe an acceleration of the R&D cycle, how do you think about a kind of [ sea ] change in the way that some of these large brands are thinking about their technology stack and what that could mean for you?

Yes. I think the large brands are starting to embrace the fact that they can't do it themselves. And importantly, if they are to bring in people into their environment, they're probably not going to bring 15 different people. They need to kind of pick a vendor to trust. The win of Burger King was a big deal in the restaurant market in that, I think their original goal is to build it themselves. They had hired the CIO, McDonald's. They really made this big investment to try to do it. And I think when they gave up on that and moved to PAR, it was probably a signal for everybody else like "Hey, if they can do it. I'm not sure other people could do it." And at the same point, our ability to show success in wins in these big accounts, I think, has given other large accounts comfortable like, okay, they can actually do it because, listen, for a long time, we have less stores than our -- these brands had. And so like if you ran a 20,000 store brand, and we were in 10,000 stores, you're not going to be like, "Oh, yes, here my business." You're going to like -- there is no way you could handle my volume and scale. And so I think part of it is us getting to a scale where they can trust our ability to service them, but also them realizing like what's the point of me building out a point-of-sales system if I'm a big restaurant chain, like that's not my [indiscernible]. My [indiscernible] is my food, my experience, my guest, my operations. It's not running a point-of-sale system. And the example I've given to a couple of customers is let's just pretend you build a point of sale system or my ordering system or a loyalty or whatever you built all of these products on your own. I'm sure it's going to be better than our products for what you do because you built it for exact thing. The question is, is it going to be that in a year from now, two years from now, three years from now, when software changes at such a rapid pace, the amount of integrations you need to put into is going to change your experience like, no, which, by the way, means that you thought you're going to build this thing, have this big CapEx spend, and that's going to come right back down, probably as never -- I mean, anyone's look [indiscernible], it doesn't ever come down. It's not like you're like, "Oh, product, let me look at this again. It's like, no, you got to maintain it. You got to build integrations. You've got to do XYZ. And so I think that the financial argument is also very much in our favor, which is you can build these things, but you want to maintain it, grow it. And the last thing I'd say is 20 years ago, I would argue McDonald's or Procter & Gamble could hire better software developers than a tech company like that's clearly changed. And so I think the quality of product they're going to build is going to be slow as well.

Got it. You've referenced these big wins, Wendy's and Burger King several times today. Maybe we can focus on those for just a little bit. I know these are large wins. It is going to be a little bit longer implementation time lines. Could you help us just think about how these will kind of fold into the business over the next year or two.

Yes. So Wendy's went live in July. So you'll see that it turns on kind of overnight. So you'll see that all happen in Q3. And Burger King is a 2-year rollout. So we get to recognize and build revenue when we take an individual store live. And so we're working on a 2-year plan from April 1, '24 to April 1, 2026 of rolling out sort of region by region, if you will, at Burger King. And so you'll see it kind of come on over time and starting up flow, growing faster, faster, faster so that it's a very sequenced roll-up. And that's pretty normal on the POS side.

Yes. And then just from a capacity standpoint, you mentioned pipelines are kind of stronger than ever outside of these two deals. Obviously, these are very large deals as well. Just how are you feeling around implementation resources and capacity within the organization to kind of do both.

Feel great. These things are very sequenced, very accordingly with the brands. And so we wouldn't take anything on, we couldn't. Now listen, everybody wants to go live on the same month, that would be pretty hard. But we kind of choreograph with our customers and so that there's [indiscernible]. So I'm not worried about that -- I mean, back in the pandemic days, there was massive limitations because you couldn't get a point-of-sale hardware terminal or you couldn't get a service technician because they had COVID or they stopped working. And so most of that has kind of worked through the system now.

Got it. One thing we haven't talked too much is just how go-to-market works. Would you mind kind of talking through across the different products and across the restaurant business, how do you organize the go-to-market in the organization?

So we break up by buyer persona. So we have a group that sells to the CIO who is the buyer and a group that sells to the CMO. And so we have these two different buying groups. And it's named accounts. There's not 10,000 enterprise restaurants in America. There's 350, 400 that really matter for us and so we've got their [ signed ] to those accounts. And it's a very [indiscernible] enterprise software process. You are calling on the CIO, et cetera, making that call, working your way generally over a long period of time to get to the point of, "Hey, let me demo my product." And then you go from a demo to an RFP usually. And then from RFP, you go into what's called a lab where you are effectively testing your product, [indiscernible] mistakes store that the restaurant runs in the [ basin ] of their headquarters. And then in that lab, the brands usually bring in franchisees and people to look and say, "Hey, what do you think of this versus that.". And then if you do a great job there, they'll throw you into a store. And so you're actually running a store, and they'll sort of compare how that store operate versus our existing stores, what worked, what didn't. And then at that point, they'll sort of say, okay, you won. And so it's different in that you're tested in the field. It's not like it's different than if you're buying Workday and you kind of [ RFP ], then you had a rolling out and you're doing it. Here, you're actually testing in the store before you go live. So by the time you're actually launching that brand has a pretty good feeling for how you're going to operate, how you're going to work. And it's generally six months to a year. That's on the point-of-sale side. The rest of our products are either that sales process or the same thing, except the rollout is much faster. So with the Wendy's you're going to the CIO and CMO making this pitch, then you're kind of going through an RFP process, usually managed by a third party like one of the big consulting companies. And then once you win your sort of going through all the testing and so on and so forth, and you kind of go live. And so it's a very similar kind of 6-month, 2-year process generally for us to get away.

Got it. I want to spend a brief moment on hardware. You obviously have sort of the legacy hardware business, and there's obviously hardware support for the software businesses, particularly in POS. There's been some commentary of some of the competitors about [indiscernible] softness in the overall hardware environment. What are you kind of seeing this year? And then more broadly, how do you think about the drivers of the hardware business going forward?

Yes. We've had somewhat weaker first half than we had last year. Our business, it's -- we have one huge advantage versus our peers, which is while we have a hardware business that sells to our non-software customers like McDonald's, if you will, or KFC/Taco Bell these are brands that buy our hardware, but don't use our point-of-sale software. We also sell hardware to our Brink customers, our own point-of-sale customers. And so the hardware business because of that is a lot less volatile than some of the experience that some of our peers have. And so we see that from our organic business, like call it that the business is attached to our own product, that looks pretty good, and it's kind of coming back nicely and going what we hopefully do that. And then on the sort of legacy customers that we've had for four years, you're seeing some demand come back on that side of it. I don't think our second half will be as great as it has been historically, but I don't think it's going to -- I don't -- right now, I don't -- my guess is I don't think it will also go down. You know hardware is necessary in this market. It's profitable. The service is certainly profitable. But it is -- the challenges, as you said, is a little bit lumpy and always hard to forecast. I always tell investors sort of put an EBITDA multiple on that hardware and services business and be conservative because of the lack of visibility, but the software business is obviously where [indiscernible].

Yes, makes sense. So we talked about improving the gross margin profile, top line seems to be hanging in, in the 20% to 30% range. How are you thinking about sort of the scaling of profitability over the next couple of years?

Yes, we put out our long-term targets. We want to get gross margins to the low to mid-70s. We want our operating margins to get to the 20s. The path to get there is we want our sales and marketing spend to be less than 15% of revenue. I think today, we're almost there. I think it's around 18%. So we're pretty close on the sales and marketing target. We want our R&D expense to be 25% of revenues. Today, it's 31%. And we in our G&A to be hopefully over time, less than 10%. And that's the one that we have the most work to do, but that is us just scaling the business. It's not like G&A growth revenue. It's just we have a big G&A base because of our historical hardware and services business. . So we think we can get to those sort of midterm targets. I think we've communicated to the market that we want to be EBITDA profitable next quarter. And I think it's going to continue to build on each other. Obviously, we don't think it's going to go the other way. And whatever way the hardware business [indiscernible] won't really matter that much as we -- quarter-to-quarter as we build up that. So really excited. I think it's going to be fast, and I think we're super focused on it.

Yes. So we've covered a lot. In the last minute here, how are you thinking about the business over the next two years? How do you think about the outlook for the industry? And any final words you kind of leave this with?

I think, we have never been more excited to run the company that we run today. And I mention I started in 2018, we were seven, eight weeks going bankrupt. We were kind of a -- has been a hardware manufacturer in upstate New York. And today, I would say we feel great that we kind of come so far. We're -- I think between us and a couple of other people to win the sort of enterprise food service category. But our ambition is like it's very much day one. And so I think as a team, our excitement comes from how we've got all this pipeline is going to grow, but it's really about how do we do what we did the last six years to do it all over again. And so I think my commentary would be, look from a business perspective, everything looks fine. We're not seeing slowness. Things look really great. '25 looks strong because what we see -- we've been talking about as far as our pipeline. But I think what we feel wildly excited about is the next six years of how do we kind of repeat what we just did the last six years all over again.

Great. Sounds exciting. Well, I think with that, we're out of time. Savneet, thanks for joining us. Always a pleasure.