PAR Technology Corporation ($PAR)

Good day, and thank you for standing by. Welcome to the PAR Technology first quarter financial results. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Chris Byrnes, Senior Vice President, Investor Relations and Business Development. Please go ahead.

Thanks, Antoine. Good afternoon, everyone, and thank you for joining us today for PAR Technology's 2026 First 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 Q1 financials 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, again, please refer to our earnings release and our other reports filed with the SEC. In addition, we will be discussing or providing certain non-GAAP financial measures today, 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, again, see our press release furnished as an exhibit to our Form 8-K filed this afternoon in 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?

Thank you, Mr. Byrnes. I'd like to start today with a core conviction. PAR fundamentally been miscast in the public markets. Historically, we've been heads down, but starting today, for the first time, we'll be providing additional forward-looking financial guidance along with our previously stated mid-teens ARR growth target because we believe in the power of what we've built and how we are building to drive true shareholder value. Today, you'll see that we're not focused on site of hand announcements, financial engineering or AI washing results. We're focused on execution, and we're focused on the dollars and cents that are going to drive real value to our investors and to our customers. We fundamentally believe that our business is in an amazing position to capitalize on our future AI vision of PAR Intelligence, that we have a strong foundation shielded from perceived AI market incursions and that the pipeline we have ahead of us is going to drive material upside to our financials. Now turning to our Q1 performance. Q1 marks a good start to the year and a purposeful shift in PAR's operating strategy and execution. Our goals are clear: one, materially improve PAR's profitability via sustained operating leverage; and two, utilize PAR Intelligence to expand TAM and long-term growth. In Q1, we scaled our AI-first restaurant retail platform, eliminated structural cost and inefficiency, expanded recurring revenue and delivered meaningful year-over-year improvement in profitability. Total revenue for the quarter was $124 million, representing 19% year-over-year growth, driven primarily by strength across subscription services and hardware. Importantly, we improved adjusted EBITDA by nearly 2x year-over-year, reflecting tighter cost discipline and stronger operating leverage. This theme will continue throughout the year. OpEx will decline sequentially every quarter in 2026, while ARR, gross profit and EBITDA all continue to grow simultaneously. In Q1, ARR reached $330 million, up 16% year-over-year with organic growth of over 11%. This performance reinforces the durability of our SaaS-based model and the increasing strategic value customers place on our omnichannel data-driven platform. Importantly, we continue to grow year-over-year while managing out the low-price customers we referenced last quarter. While gross margin was impacted by hardware-related tariffs and cost pressure, we're making real progress expanding profitability. Further, we are seeing improved success of deploying AI across G&A functions. OpEx as a percentage of revenue declined from 50% to 43% year-over-year with sales and marketing at 9%, R&D at 16% and G&A at 18%, respectively. As we scale and improve our fundamentals, our progress with AI has become an increasingly important driver of momentum, especially on the product side. PAR serves multi-unit restaurant and retail operators competing in a complex, margin-sensitive environments, and that's exactly where our Better Together and PAR Intelligence strategy is focused. What's driving our competitive wins is not any single feature. It's the combined value of a core platform with expanded feature depth via Better Together integrations as well as the premise of PAR Intelligence functioning as an agent harness that drives profitable actions. Together, we see our PAR Intelligence AI vision as an amplifier of our platform and future growth. In particular, we are more bullish than ever in our ability to drive sustained profitable growth through AI. Brands moving away from legacy solutions consistently tell us the same thing. Fragmented technology stacks slow them down. When your core data lives in one platform like ours, you unlock the ability to deploy agents across the entire tech stack, not just with a single siloed product. Our multiproduct enterprise deals are precisely possible because of the binding power of a modern point of sale tying together all the facets of the data tech stack. That's a structural advantage. Context equity is the cornerstone of winning in the AI era. Customers are signing near decade-long multiproduct deals with PAR precisely because they know the difference between an agentic platform based on deep workflows and shallow dashboarding. We believe these long-term contracts are a key proof point that we are becoming the trusted AI partner for our category. Let's dig into the Q1 performance in detail. On the Operator Cloud side, momentum was led by PAR POS and Data Central with continued execution against the Burger King rollout and wins such as An Pizza, Tijuana Flats, Sarku Japan and Pizza Factory. The PAR POS Burger King implementation is running at a sustained pace of over 400 sites per month, and we have a strong plan into more than 3,000 additional sites that will go live this year. We continue to work and lockstep with our most recent Tier 1 win, Papa John's, as we kick off their dual POS and data center implementation plan late this year for all of their U.S.-based restaurants, and the full system will be live by the end of 2027. We are seeing exciting pipeline traction in pizza vertical with this sector poised to be disrupted as the market is fragmented, lacking new entrants and primarily run off legacy custom-built tech stacks. PAR POS is the foundation of our platform, and we are quickly progressing with agentic OS capabilities. Across the portfolio, attach rates are the story as nearly 90% of new operator deals in Q1 were multiproduct, yet the average customer still uses fewer than 2 of our core software solutions. PAR is not reliant on home run Tier 1 deals to meaningfully drive growth. The continued expansion of multiproduct cross-sell into existing accounts by itself provides meaningful runway. On the engagement side, ARR growth is driven by cross-sell, upsells and pricing actions as well as the initial contribution from Bridg. In the quarter, Punchh had a onetime strategic contraction that we previously called on last quarter's call. This offboarding of customers was necessary due to the materially unfavorable legacy pricing deals in place and the lack of pricing flexibility amongst a very small set of customers. In most cases, the pricing was an 80% discount from our standard subscription pricing. The proof point is that our organic ARPU and engagement increased by 27% year-over-year. Another long-term benefit will be the reduced OpEx and more efficient gross margins over time. This represents another shift in our mentality from revenue at any cost to profitable growth. Excluding this, Punchh had a solid growth quarter with a greater than 50% win rate on competitive deals. More than 80% of engagement deals this quarter were multiproduct, and the exciting thing is that is becoming the norm. In Q1, PAR Ordering closed 3 brand new deals, all including multiproduct attachment. The quality and scale of these wins matter. One of these wins is particularly notable. This was a competitive win taking share directly from the largest legacy ordering provider. It's a 70-plus unit brand driving meaningful ARR. That's exactly the profile we want: scale, intentional platform selection with the ability to sell an additional functionality and meaningful economics. Another important example is the selection by Pizza Factory. This is an all-powerful platform deal across 100-plus locations. Adding Ordering to our bag gives a strategic weapon versus POS or loyalty-only players. Full platform plus pizza is a powerful combination, and it's a strong validation of how well our solutions work together in a highly complex environments. We continue to see strong demand from brands migrating off legacy online ordering to providers and standardizing on PAR Ordering. Moving to retail. We continue to see strong momentum in our retail business and the fuel and convenience space most notably with the success of Q1 launches of Stinker Stores, HNS Energy and Parker's. Our pipeline for the remainder of the year remains strong with several Tier 1 enterprise brands in active negotiations. In Q1, we released our touchpoint self-checkout including loyalty expansion, and we're excited about the market opportunities as we expand our footprint inside the four walls of a C-store. On the AI front, PAR Intelligence is now alive across nearly 1,700 retail sites, including enterprise scale deployments at Parker's Kitchen and Cumberland Farms. We are currently in discovery mode using real-world operator data to refine our models and eliminate hallucinations. Our road map is aggressive. Following this initial scale-up, we will move into the action phase, introducing agentic program management and automated campaign creation, combining the agentic insights with the autonomous ability to act instantly, showcasing the power of AI orchestration, the agentic operating system and our vertical software. Looking further ahead, we'll add a strategy layer, incorporating external signals like weather and market conditions to guide site level management automatically. We are exceedingly confident that we'll be the AI partner for our customers in this vertical. Overall, Q1 reflects continued progress in retail as we scale our customers, extend our product capabilities and embed intelligence to the platform in ways that support AR expansion and long-term value creation. Briefly on hardware. Q1 was a remarkably strong quarter. We're ahead of plan and the full year is tracking nicely. While tariffs continue to pressure margins at the edges, demand remains strong, and our PAR terminal continues to serve as the enterprise standard during a major refresh cycle. Crucially, we're seeing continued partnership velocity with McDonald's across both hardware and services sales. I also want to update you on our acquisition of Bridg, which is an integral part of the PAR Intelligence platform. Bridg is an identity resolution platform that enables multiunit operators to unlock the value of first-party data by resolving identity across their entire transaction base, not just loyalty members. Today, most retailers only see a fraction of transactions through their loyalty programs, which limits measurement, personalization and, ultimately, monetization to a fraction of a retailer's customer base. The value Bridg delivers to customers is best evidenced by our work with a large national retailer with over 15,000 sites, where our identity resolution supports a marketable base of 100 million customers and contributed to a reported 44% sales lift. Even in the brief time since we closed on the deal, we now have a strong pipeline across Tier 1 restaurants and other national retailers and existing PAR customers. Bridg is crucial in our ability to drive AI outcomes for customers that we can monetize versus the basic dashboarding of our peers. Before turning the call over to Bryan for a deeper dive into the numbers, I want to emphasize the importance of PAR Intelligence for our customers. PAR Intelligence is not a new point solution and it's not a generic AI tool. It is a harness that sits across and above the PAR platform, unifying data, reasoning on real operator economics and orchestrating outcomes across the business without adding additional headcount, hours or manual effort. Where traditional platforms stop at dashboards and alerts, PAR Intelligence moves from data to outcomes. PAR Intelligence unites data across point-of-sale, ordering, loyalty, payments, back office, retail and third-party systems. All of this is powered by something incredibly hard to replicate: PAR's ability to process more than 12 billion annual transactions, 640 million guest profiles in over 20 years as a data backbone of the largest restaurant and reco operators in the world. PAR Intelligence leverages enterprise-level context versus reasoning, unit P&Ls, labor concentrates, menu performance and guest interactions. It executes actions for AI agents always within the defined rules of the operator. Adoption of PAR Intelligence is accelerating because the use cases are clear. The platform is going from reporting what happened to recommending and, in some cases, automating what to do next. Customers like Parker's Kitchen, 100-plus unit C-store chain are seeing immediate ROI with Parker's CEO highlighting, "Better outcomes are being driven by PAR's agentic operating system." Because PAR Intelligence sits across and above the PAR platform it's ultimately enhancing value, thereby, the stickiness of our beachhead products. Importantly, PAR does not have the same pricing exposure as some of our SaaS peers, who have a per seat monetization construct that can be undercut by AI and its potential impact on customer team sizes. PAR overwhelming contracts on a per store basis. The viability of this model is tied to enterprise site counts, which remain stable versus customer staffing levels. AI is not a separate initiative for PAR. It's an embedded capability that extends our platform value and supports long-term profitable growth. PAR Intelligence will not cannibalize existing PAR software revenue, rather, the continued introduction of intelligence-driven capabilities serves as a fully incremental revenue stream. Our confidence here comes strictly from the deep engagement we have with our customers and their rapid earlier adoption of our first set of tools. With that, Bryan will dive into the numbers in greater detail.

Thank you, Savneet, and good afternoon, everyone. Q1 marked a strong start executing to our 2026 operating plan. We continue to drive organic growth across our products and the verticals we serve, and our disciplined management of OpEx allowed the margin contribution to flow through to the bottom line. For the fifth quarter in a row, adjusted EBITDA has grown sequentially with reported Q1 adjusted EBITDA of $8.9 million a $4.4 million improvement compared to Q1 for the prior year. And we are well positioned for accelerated trajectory as we continue to refine our operating model. Now to the financial details. Total revenues were $124 million for Q1 2026, an increase of 19% compared to the same period in 2025, including 15% subscription service revenue growth. Net loss from continuing operations for the first quarter of 2026 was $16 million or $0.39 loss per share compared to a net loss from continuing operations of $25 million or $0.61 loss per share reported for the same period in '25. Non-GAAP net income for the first quarter of 2026 was $3.9 million or $0.10 earnings per share, an improvement of $4.2 million compared to a non-GAAP net loss of $0.2 million or $0.01 loss per share for the prior year. Adjusted EBITDA for the first quarter of 2026 was $8.9 million, an improvement of $1.9 million sequentially from Q4 2025 and $4.4 million compared to Q1 2025. Now for more details on revenue. Subscription service revenue was reported at $79 million, an increase of $10 million or 15% from the $68 million reported in the prior year and represents 63% of total par revenue. ARR exiting the quarter was $330 million, an increase of 16% from last year's Q1 with Engagement Cloud up 20% and Operator Cloud up 12%. Total organic ARR was up 11% year-over-year. Sequentially, Q1 organic ARR was flat versus Q4 2025. The incremental ARR from our continued successful rollouts of Tier 1 Operator Cloud customers was offset by planned exits in Engagement Cloud. As we previously messaged, this quarter, we managed planned exits for select legacy Engagement Cloud customers who are using a portion of our Engagement platform as a component of their solution. This has enabled us to increase ARPU and derisk forward churn by exiting these low-priced non-platform customers. As a result, organic Engagement Cloud ARPU increased 27% year-over-year. To connect overall ARR, please note at the end of Q1, we completed the acquisition of Bridg, which includes approximately $14 million of ARR. Hardware revenue in the quarter was $29 million, an increase of $7 million or 34% from the $22 million reported in the prior year. The increase was driven by both client refresh programs and partnership expansion with our legacy customer as well as additional penetration of hardware attachment into our expanding software customer base. Professional service revenue was reported at $16 million, an increase of $3 million or 19% from the $14 million reported in the prior year. The increase was primarily driven by an increase in installation revenue associated with the rollouts of Tier 1 Operator Cloud customers. Now turning to margins. GAAP gross margin was $54.5 million, an increase of $6.2 million or 13% from the $48.3 million reported in the prior year. The increase was driven by subscription service with gross margin dollars of $44 million, an increase of $4 million or 11% from the $40 million reported in the prior year. GAAP subscription service margin for the quarter was 56% compared to 58% reported Q1 of the prior year. Excluding the amortization of intangible assets, stock-based compensation and severance, non-GAAP subscription services margin for Q1 2026 was 66% compared to 69% in Q1 2025. As we've discussed previously, our subscription service margin continues to reflect the impact of the fixed profit contract we acquired from one of our 2024 acquisitions. The year-over-year decrease in margins reflects a shift in revenue mix driven by growth in this contract in 2025. Excluding margin related to this contract, which is not reflective of core operational performance, non-GAAP subscription service margin was 71% for the quarter, in line with what we've seen consistently in recent quarters. Hardware margin for the quarter was 22% versus 25% in the prior year. The decrease was driven by a shift in hardware product mix and higher costs related to the tariffs and increased demand in processor chips. Pricing enhancement plans initiated in the back half of 2025 have partially mitigated these cost increases. We continue to expand the pricing plans in Q1, and we'll continue to evaluate our pricing strategy on a quarterly basis. We expect hardware margin percent to stabilize in the lower 20s moving forward. Professional service margin for the quarter was 28% compared to 25% reported in the prior year. The increase in margin year-over-year was primarily driven by improved margins as a result of reduced third-party spending and improved cost management. In regard to operating expenses, GAAP sales and marketing was $12 million, relatively flat from the $12 million reported in the prior year as the benefits of cost reduction actions implemented during the quarter were largely offset by nonrecurring severance costs related to the restructuring events. GAAP G&A was $30.7 million, an increase of $1.4 million from the $29.3 million reported the prior year. The Increase was substantially driven by nonrecurring severance costs. GAAP R&D was $22 million, an increase of $2 million from the $20 million reported in the prior year. The increase reflects continuing investment in product development, including acceleration of PAR Intelligence innovation. Operating expenses excluding non-GAAP adjustments was $54 million, a modest increase of $2 million or 4% versus Q1 2025. Exiting Q1, non-GAAP OpEx as a percent of total revenue was 43.3%, a 650 basis point improvement from 49.8% in Q1 of the prior year, demonstrating our ability to scale efficiently and drive operating leverage. As mentioned in our prior earnings call, the realignment of our business teams into two verticals and the accelerated adoption of our operating AI tool set across our organization has enabled us to resync the operating model within our OpEx teams. The realignment plan is two-pillared: simplify the organization and simplify the operations. We finalized the realignment plan at the beginning of Q2. The phasing of this plan will predominantly be in Q2 with the remaining transitions in Q3. Operational efficiencies and additional scale already being realized. As such, we expect operating leverage to continue to improve throughout this year, driving continued expansion of adjusted EBITDA trajectory. Now to provide information on the company's cash flow and balance sheet position. As of March 31, 2026, we had cash and cash equivalents of $77 million. For the 3 months ended March 31, cash used in operating activities from continuing operations was $17 million, unchanged from the prior year. Cash usage this quarter was primarily driven by seasonal net working capital needs, which included annual variable compensation of $13 million and a sequential increase in current receivables driven by an $8 million increase in March billings versus December. In addition, as in prior demanding macroeconomic climate, we have strategically increased inventory $4 million to lock in pricing of chips and stabilized hardware margins for the year. As previously estimated, our DSO stabilized in Q1 and we are seeing meaningful improvement in Q2 as we execute our working capital improvement plan. We expect operating cash flow to improve meaningfully with positive quarterly operating cash flow for the remainder of the year driven by continued profitability and the benefit from working capital with improved DSO and modest improvement in DIO. Said differently, our cash flow will receive a tailwind from working capital and continued profitability. Cash used in investing activities was $3 million for the 3 months ended March 31 versus $6 million for the prior year. Investing activities primarily included capital expenditures of $2 million for developed technology associated with our software platforms. Cash provided by financing activities was $18 million for the 3 months ended March 31 versus $11 million for the prior year. Financing activities primarily consisted of net proceeds in the 2031 notes of $257 million, of which $206 million was used to repurchase a portion of the 2027 notes and $33 million was used to repurchase shares of the company's common stock. To recap our performance, Q1 marked meaningful profit improvement while continuing to grow the top line. This momentum is evident across the following key financial metrics. Revenue grew 19.4% year-over-year with subscription services revenue up 15%. Non-GAAP OpEx as a percent of total revenue improved 650 basis points from Q1 2025. And adjusted EBITDA was $8.9 million for the quarter, an improvement of $4.4 million from Q1 2025. Now let me share our expectations going forward. As I mentioned, we are initiating formal financial guidance for the second quarter and full year of 2026. This reflects the increasing visibility we have into our business, the durability of recurring revenue base and our confidence in the operating model we have built. We are committed to providing guidance that reflects both our visibility into the business and the discipline we apply to our operating plan. For the second quarter of 2026, we expect total revenue in the range of $122.5 million to $127.5 million and adjusted EBITDA in the range of $9.5 million to $11.5 million. For the full year 2026, we expect total revenue in the range of $500 million to $515 million and adjusted EBITDA in the range of $44 million to $47 million. A few points of context on our outlook. Our healthy backlog and pipeline provides us with strong visibility into revenue growth. On hardware, we expect continued momentum from Tier 1 rollouts and refresh activity with margins stabilizing in the low 20s as our price actions continue to offset tariffs and component cost pressures. On profitability, our adjusted EBITDA outlook reflects a meaningful step-up from 2025, driven by both continued top line growth and a structurally lower cost base. The reorganization we executed at the end of Q1 and early Q2, together with a simpler AI-enabled operating model, are expected to get a step down in our organic operating expense run rate beginning in Q2 and continuing through the back half of the year. As a result, we expect adjusted EBITDA margins to expand sequentially from the Q1 starting point with the full impact of our cost actions more meaningfully reflected in the second half. At the same time, we continue to invest in our highest return opportunities, most notably PAR Intelligence and our agentic platform but we are doing so within a disciplined framework that prioritizes durable, profitable growth. Our full year 2026 guidance also includes approximately $10 million in subscription service revenue from the recently completed acquisition of Bridg. The acquisition will have minimal impact on adjusted EBITDA. I will now turn the call back over to Savneet for closing remarks prior to moving to Q&A.

Thanks, Bryan Menar. In PAR, AI is not just a customer-facing strategy. Internally, AI is fundamentally transforming everything we do as a company. One example is our ability to rapidly enhance our procurement function and pinpoint areas of vendor waste with millions of in-year savings. Crucially, AI is also enhancing our development velocity, and we're now seeing this translate into tangible output across the business. In our engagement platform alone, the road map we committed this year is 5x larger than last year, and we're delivering roughly twice as many incremental noncommitted features quarter-over-quarter, capacity that simply didn't exist before. At the same time, speed and productivity are improving. Time to ship is down more than 25%. In parallel, we are investing what we call an agentic software factory, an internal platform designed to orchestrate planning, development and testing through autonomous agents, effectively enabling end-to-end backlog execution and improving daily developer output by 20% without sacrificing quality. So this isn't just about adopting AI tools faster than others. It's about building a fundamentally different development engine, one that we believe will become a durable competitive advantage over time. PAR's strategic value lies in the fact that we power some of the most complex, high-volume restaurant and retail operations in the world with technology that is both mission-critical and deeply embedded. As the industry continues to consolidate around fewer, more capable platforms, we believe PAR is uniquely positioned to be a long-term system of record for our customers. PAR Intelligence unlocks a fully agentic operating model for every multi-unit operator. Our in-year adoption target for PAR Intelligence is greater than 50,000 sites. Aligned to this is our progress towards the Rule of 40. This is the clearest external measure that we're building a business that can both grow and compound value over time. For us, it's not about optimizing a single quarter or choosing growth at an expense of profitability or vice versa. It's about steadily improving the underlying economics of the model. The progress you're seeing today reflects deliberate execution, not financial engineering, and we believe sustained improvement in Rule of 40 performance is a strong indicator that PAR is becoming a more durable and higher-quality software company. This quarter doesn't mark the finish line, but it does mark progress. We believe the market has us miscast to date, and we intend to let consistent execution quarter by quarter correct that. Over the coming quarters and years, we will prove that PAR offers an irreplaceable solution to brands, PAR is adapting to the times of AI and PAR will deliver transformative results. With that, operator, we can open up the call for questions.

[Operator Instructions] Our first question comes from Mayank Tandon from Needham.

Savneet, Bryan and Chris, congrats on the print and also the guidance framework. I think that's very helpful. So Savneet, let me just start with your expectations on ARR. Could you just unpack the various levers you have? So when I'm thinking about ARR, how should we think about pricing, location growth? And then also, have you reflected any Tier 1 wins in your expectations of the reacceleration in ARR growth over the balance of 2026?

Great question. So we continue to sort of target mid-teens area growth without the inclusion of any of large mega deals in there. So we continue to be conservative. Until those happen, we don't want to throw it into that target. In terms of levers of driving our growth, we really have two levers today, new site count and upsell into the base, i.e., ARPU. Where we're seeing really strong success is now being able to sell multiproduct at the time of the initial sale. So more growth is being driven by the new customer motion, but that is primarily driven the success of the co-sell or cross-sell motion that we have. At the same time, we are still upselling into our existing base. But I think it shows just how early we are in our TAM that new sales is still the majority of our revenue growth. .

Got it. And then I have to get an AI question in. So let me ask you. You talked about the efficiencies with AI. But on the revenue side, as you launched PAR Intelligence, which I know is very recent, I'm just curious, have you gotten any feedback from clients, what the interest level is? And is there a way to monetize this? Is that something we'll see potentially in 2026? Or is this more of a longer-term initiative to be able to drive revenue off this?

Yes. Let me answer the second part because I think it's the more important one. We wouldn't be doing it, putting so much emphasis on it if we didn't think we can monetize it. I think what we feel far more convicted this quarter than we did last quarter or the quarter before is that given our engagement with customers, we think not only enjoy the product, but they'll pay for them. And so the way we kind of think about it is today's products give them, call it, AI discovery, the ability to interact, chat, pull reports. But tomorrow's products will give them predictions, and then the future products will give them automated actions, meaning can you run your store on autopilot. And I think as we get to that point, we'll absolutely get to monetize it. And so we look at AI as an incremental revenue stream that will happen in this year. And again, we don't sort of assume massive assumptions within our guidance, but the mandate to our product teams, the mandate to our general managers is that, that revenue must come this year. So the reason we're so excited about it is we believe it's going to be an incremental level of revenue growth, not replacement and certainly not something that will cannibalize the value of the core products we have today. So I think that confidence, candidly, just comes with the fact that we launched our retail product as an example this quarter, and we had 1,700 stores already up and running on it. When we launch a product, it's adopted so much faster and it makes the entire base sticker. So long answer, but it's something we'll monetize and something we expect to start monetizing this year.

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

Savneet, you talked about an upcoming strategy layer. I wondered if you could just walk through what that might mean for you.

Yes. As related to what we're doing on PAR Drive, which is in our retail suite, but we'll eventually -- I think strategy will expect everything we do. When you sort of think about AI today, as I mentioned, is you have sort of the first wave of AI tools within enterprise software, which is ostensibly giving you that ChatGPT-like experience on the front of the product. I think it moves from there to, call it, the predictability of your business. Hey, this is going to happen. Do you want to do this? And then it moves to these actions and sort of autopilot, hey, hot dogs are running out. Why don't I order all those hot dogs for you? But where I think it's really exciting is this idea down the road where it becomes more of a strategic partner for you where it says, hey, there's a snowstorm coming next week. Do you want to load up on hot chocolate? Where it takes into account weather, traffic patterns, competitive dynamics and promotions to build that strategy layer. And so we're building that out today. As I mentioned, we're still testing out the models. We're still working through hallucinations. But we will be in market this year with a strategy component to our customers. So it's really becoming a partner to our customers that will live every single day in that store.

Could you give us an update on the Tier 1 opportunities in your pipeline in terms of your level of confidence? Any sense of timing or move forward from the prior quarter?

Well, we continue to make tremendous progress there. There's been some good movements as it relates to personnel. These organizations, I think, look favorably upon PAR. We expect to sort of have the outcomes in the second half of this year and we continue to feel pretty good about it. Tier 1 deals are always 50-50 in my experience. And what I think I'm excited about is we feel very confident about the movement in those organizations. But as I said, what I think we're even feeling more confident about is the ability to drive more growth through pushing multiproduct to the customer base outside of that. So the revenue growth side of PAR, I think, is what's exciting us as we turn the first quarter here.

Our next question comes from Stephen Sheldon from William Blair.

And very good to see some formal guidance now. First is, as we think about -- I guess just any rough sense you can provide on the drag to ARR this quarter from offboarding those customers you mentioned? Was that predominantly around Punchh? Or was there any notable offboarding efforts around other solutions? And then are you effectively through that process? Or is there kind of more to go in the coming quarters as we think about the ARR trajectory?

Yes. So we're through it. So think about it as deals that were lapsing at the very end of last year, call it, or at the beginning of this year, Jan 1-ish or February. So we're through it. You won't see that impact again. It was heavily levered towards Punchh, one particularly large customer. And as you can see, ARPU jumped 27%. That's not because we repriced the base to 20% increase. It's because we removed multiple customers that were at 80% discounts. So we're through it. And I think it's amazing we still grew in double digits given the impact of that. But what's great is we don't have any more of that. And as I said, the growth motion is still moving forward really nicely.

Steve, I'll just add to that too, right, is that this was active like a pull-in of churn for us for this year, right? So over 60% of our churn for this year was like in Q1. And so we were able to manage that out effectively. But we do not expect to have a higher rate of churn this year than we recently typically have.

Okay. Got it. That's good to hear. And then just as a follow-up, it would be great to get an update on your overall traction and monetization with convenience stores on the retail side. It sounds like you have multiple Tier 1 opportunities there that you're going after. So curious how convenience store revenue has been trending and the outlook for expanding that monetization beyond the primary source right now, which I think is still just predominantly loyalty.

Yes. It's a phenomenal question. I would say we're very bullish on what's happening in C-stores. So our loyalty product continues to grow. We've got a strong Tier 1 pipeline, as I mentioned, multiple deals in negotiation, including within the major oil base. And that's a business that I think we are, similar to Punchh, the 800-pound gorilla, where we've got the best product, best team and the best outcomes. And so I think that will continue to grow at or above company rates. What's exciting is, for the first time, we've now expanded beyond that. So we launched our touchpoint product in Q1. Touchpoint, if you recall, we carved out the assets of a kiosk-like product about a year ago. And so that brings loyalty in the store. Think of a screen in the store where you can engage with loyalty, upsell promotions, so and so forth. And so we'll hopefully have our first customers on that this year. That will be an extension of loyalty but more in the sense that it can also provide self-checkout. The really exciting part that I think we've discovered within retail is on the AI front, where PAR Drive, our first product that is sort of the agentic layer across store, already has 1,700 stores on it. And we are using real data to refine that model. And I think we're going to have tremendous success pushing that through the retail side of the business. Our retail leadership is all in on AI. We've rebuilt our product teams, engineering teams to be focused on it. So I think you'll see the retail side, if we're successful on the endeavor, grow at faster rates of the restaurant side.

[Operator Instructions] Our next question comes from Maxwell Michaelis from Lake Street Capital Markets.

A few for me. First, can we go to Punchh? 50% win rate, I think you mentioned in the quarter. I mean what's sort of resonating with the customer base right now when you go to market? And then also, can you share historically what the Punchh win rate is that?

Yes, certainly. So I think the core reason we're winning is certainly always been Punchh is the best product in the market. Obviously, I'm subjective there. But I think objectively, through data, we are the largest product and continue to grow faster than the market. And so that is not only the depth of the product, but the breadth of the product and what we can do with that product across. Loyalty is a very, very robust initiatives. It's millions and millions of profiles. And so if you're a large restaurant organization or a retail organization, you're not going to go with something you've vibe coded or a start-up. You need something that has reliability, stability and, obviously, the security that you need for that. And so we think we're the best in the market and we continue to take share.. But the other part is, as mentioned in the call, this ability to sell ordering and payments alongside of it. It makes the product far more seamless for our customers and gives them a single digital cockpit to manage their menus. It is a real unlock for our customers. And so what's been exciting about that is I think the ability to have a real e-commerce or online ordering product alongside Punchh will help increase the win rates from both because it simplifies the journey for our customers. And again, in an AI world, I think you want your data for both those products in one place so that you can let agents on wild. So I'm pretty excited by the continued success there. To our historical win rates, they're historically, I'd say, 35%, 40%. So this is definitely a step-up and hopefully that continues.

Perfect. And then last one for me. Obviously, you're going to be monetizing PAR Intelligence. But curious to know how you plan on pricing that when you go to your customers. So that can be subscription-based? Or do you plan on instituting sort of a usage-based model?

It's a great question. One of the cool things that I mentioned on our call that we realized is we, at PAR, price on a per site basis. So we aren't sort of tied to the amount of humans using a product. In fact, it's one of the reasons I think our AI products could be even higher margin than our core products because as we deploy AI at the corporate level, you need less and less people to engage with it. Specifically, the first product you're thinking will be a SaaS-like billing because that's what our customers are used to, that's how we can upsell and bundle it into the existing contracts that we have. So the customers that we are engaging with today, the customers that were letting us test their data on, we have communicated that, that's helping with the pricing. But I think as we move to this world, as I mentioned, of where we are the strategic recommendation items to them or running their stores in autopilot, we could explore other forms, also as we figure out what the cost model will be. But right now, we're thinking about it as a SaaS model.

Our next question comes from Andrew Harte from BTIG.

Can you hear me?

Yes.

Just one from my end. Savneet, if you could just kind of talk about how you just feel the business is standing on better ground today than it was a few quarters ago and what really gave you the confidence to provide quarterly guidance and annual guidance.

I think we feel incredibly confident about our market position today. We are, I think, without question, the furthest ahead when it comes to AI within the restaurant, within the C-store. We printed a $9 million EBITDA quarter and, as Bryan mentioned, we think that's going to expand meaningfully for the rest of the year. As Bryan mentioned, we're going to be generating operating cash flow for the rest of the year. And that puts us in a position that we've never been before, where our products are winning at rates they've never before, our agentic capabilities are far ahead of our peers and we've got the cash flow engine that we can use to leverage to find ways to create shareholder value. And so as we sit today, I think that confidence comes from market positioning, but also the scale of the business in which we generate cash. And nothing feels better than sort of winning. And so I think winning begets winning in our category. So we're incredibly strong where we are today and it's all going to amount to our ability to deliver products to our customers in this sort of AI world that we can monetize and show the value there. And that's why we feel so confident.

This concludes the question-and-answer session. I will now turn it over to Chris Byrnes for closing remarks.

Thanks, Antoine, and thanks to everyone for joining us this afternoon. We look forward to updating you and speaking with you further in the coming weeks. Have a good night.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.