Participants

Chris Byrnes; Sr. Vice President of Investor Relations and Business Development; PAR Technology Corp

Savneet Singh; President, Chief Executive Officer; PAR Technology Corp

Bryan Menar; Chief Financial Officer, Chief Accounting Officer, Vice President; PAR Technology Corp

Mayank Tandon; Analyst; Needham & Company

Stephen Sheldon; Analyst; William Blair

Will Nance; Analyst; Goldman Sachs

Samad Samana; Analyst; Jefferies

Eric Martinuzzi; Analyst; Lake Street Capital Markets

Adam Wyden; Analyst; ADW Capital

Andrew Harte; Analyst; BTIG

Charles Nabhan; Analyst; Stephens Inc

Anja Soderstrom; Analyst; Sidoti

Presentation

Operator

Good day and thank you for standing by. Welcome to PAR Technology fiscal year 2024 fourth-quarter financial and year-end conference call. (Operator Instructions) Please be advised that today's conference is being recorded.
Now we'll pass the call over to tour speaker today, Christopher Byrnes, Senior Vice President of Investor Relations and Business Development. Please go ahead.

Chris Byrnes

Thank you, Daniel. Good morning, everyone, and thank you for joining us today for PAR Technologies 2024 fourth quarter and year-end financial results call. Earlier this morning we released our Q4 financial results.
The earnings release is available on the investor relations page of our website at partech.com, where you can also find the Q4 Financial presentation as well as in our related form 8_K urns to the SEC. During our call today, we will reference non-GAAP financial measures which we believe to be useful to investors and exclude the impact of certain items. The description and timing of these items, along with the reconciliation of non-GAAP measures to the most comparable GAAP measures can be found in our earnings release.
I'd also like to remind participants this conference call may include forward-looking statements that reflect management's expectations based on currently available data. However, actual results are subject to future events and uncertainties. The information on this conference call related to projections or other forward-looking statements may be relied upon and subject to the Safe Harbor statement included in our earnings release this morning and in our annual and quarterly filings with the SEC.
Finally, I'd like to remind everyone that this call is being recorded, and it will be made available for replay via a link available on the investor relations section of our website. Joining me on the call today is PA'Rs CEO and President, Savneet Singh; and Bryan Menar, 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?

Savneet Singh

Thanks, Chris, and good morning, everyone.
We reported $105 million in revenues in Q4, an increase of more than 50% year-for-year. Subscription services ARR more than doubled to $276 million from last year and 21% organic growth when compared to Q4 2023. Alongside this revenue growth, our non-gap gross profit grew organically 30% year-over-year.
Adjusted EBITDA came in at $5.8 million more than doubling the sequential previous quarter, continuing to show the long-term margin expansion potential. The growth and profitability in the quarter was driven by both operator and engagement clouds. Operator cloud ARR grew organically by 26% in Q4 when compared to the same period last year.
ARR for this business unit now totals approximately $117 million including delegates. Operator cloud growth is being driven by increased new customer wins, upsells, and bookings from planned rollouts with existing customers. PAR POS signed 8 new customer logos in the fourth quarter, with all of those new customers selecting multiple products from PAR.
This continues to validate our Better Together thesis while increasing our LTB per customer meaningfully with no additional costs to acquire. We're excited about the projected velocity for Burger King as well in 2025 across both PAR POS and PAR POS. Having recently expanded our partnership with Burger King to include our PAR-OPS product line, we're working closely with BK and using Q1 to fine tune the sequencing of rollouts between both products to enable a combined and mutually agreed upon implementation rollout for 2025.
We expect significant and accelerated implementations from Q2 onwards. This is an exciting change as it demonstrates our Better Together thesis working at one of our largest POS customers. We currently have approximately 1,500 BK sites and backlog with a robust white space, ensuring excellent 2025 visibility and acceleration and potential. While combining a second product to the BK rollout temporarily slows our pure POS rollout in Q1, adding a second module dramatically increases our LTV.
We would make this trade every time and importantly, a combined rollout is the right thing for franchisees as well. We will never sacrifice customer success for short-term gain. Partnership is what drives our long-term strategy. At the very end of the quarter, we announced the acquisition of Delegate, and we immediately kicked off a rebrand of our back-office initiative into the new PAR OPS, which includes the delegate and data center product modules.
Our integration with Delegate and the team has been better than expected, and we are seeing strong customer interest, including among Marquee Tier 1 accounts, as we continue to build out our PAR data platform. Delegate not only boasts a highly synergistic product offering that will accelerate cross sales, it also affords entry into more than 25,000 sites covering 40 of the TOP50 restaurant concepts. Further, it comes with a season management team now driving the combined PAR ops business.
It's important to note that Data Central finished up the year with a strong Q4 through targeted cross-se growth across our customer base. This growth will accelerate as we are forecasting PAR apps to have its strongest growth year yet in 2025. We have begun the work on product unification efforts with delegate that include single sign-on and real-time data flow, a big step in building towards our data platform.
The initiative is highly strategic and underscores our continued drive towards a Better Together platform that is not replicated anywhere else in the enterprise market. We will be sharing additional details as the year progresses on this exciting initiative. Now to report on our payments business.
As we exit 2024, part payment services continues to drive high transaction counts and processing volumes across our customer base. As we look to more stores, to take more stores live while driving better payment processing economics. Notably, we continue to see strong interest in our Punchh wallet with more customers on boarding every quarter, including Paris baguette, Goldstar Chile, and Ranza in Q4. Additionally, we successfully cross sold a Tier 1 customer with approximately 1,000 locations on our payment services.
This customer's conversion will positively impact our results over the coming quarters and is a further example of our Better Together project wins. As our customers continue to unify their above store and in-store processing of PAR-pay, the scale of our data sets across loyalty, ordering, and POS products puts PAR in a unique position to leverage tokenized information to drive actionable insights, mapping known and unknown customers, and personalizing communications to drive higher ROI and increased lifetime value.
We are the only company in the enterprise who can link off-premises and on-premises tokenized data with loyalty data all the way to the back of house. This is a moat that is hard to replicate. There's a growing trend in the industry towards disjointed multi-vendor solutions that attempt to stitch together guess data, payments, and ordering across multiple third parties, but integrations alone don't create intelligence. First party data does.
Many attempts to take pieces of payment data and combine them with external systems, but because PAR owns the full technology stack, everything we do is first party, ensuring true data integrity. Some would have you believe that restaurant technology should be run outside the POS, fragmenting operations across multiple platforms, we see it differently.
POS is and will always be the true control center of the restaurant. After all, 80% of transactions still happen at the POS. It's where real-time transactions, menu data, and guest’s interactions all converge. Payments, loyalty, and ordering are not separate systems. They are part of a restaurant's mission critical platform. That's what makes our approach fundamentally different from the rest.
Rather than layering on third party processors and intermediaries, we are removing inefficiencies, giving our customers lower processing costs, higher authorization rates, and full control over the guest relationship. Looking ahead for the year, our pipeline remains a robust for our payment offering across both PAR clouds, ensuring we capture new growth opportunities.
Moving to our engagement cloud. Engagement cloud Aarar reported 15% organic growth in Q4 when compared to the same quarter last year. ARR now stands at approximately $159.1 million for the engagement cloud and includes flexor and PAR retail. Our strong execution in this business has led to several new Tier one customer wins. Our engagement cloud continues to exceed standards and dominate the loyalty offers and engagement market with consistently strong interest from existing and new customers.
With increasing customer headwinds in 2025, many brands are doubling down on digital technology to drive increased consumer frequency and retention, notably through enhanced investments and loyalty programs. Punchh Inc continued product and sales consistency by delivering growth both with new customers and expansion with existing brands.
Punchh is the market leader for restaurant loyalty and delivers stability and innovation to our customers. This quarter we achieved multiple large customer win backs who had previously churned from Punchh for pure guest data platforms but then returned back to Punchh. Most notably, a Tier 1 table service chain and two well-known casual dining enterprises are part of this transition back to Punchh.
Moving to PAR retail. In the convenience and fuel industry, our team executed the launch of a major multi-thousand-unit brand and additional major up sales with our largest customer in Q4. We brought to market the first fully integrated major oil and branded retailer program in the industry. Beyond our exciting customer wins, the PAR retail product continues to expand to serve the fuel and convenience industry.
In Q4, we successfully launched gamification, updated unified e-receipts, enhanced Punchh card functionality, and optimized member surveys with our focus on developing features that drive incremental outcomes like more visits, more gallons, and bigger baskets that continue to deliver value for our customers. As our customers look up to us to expand our platform into the industry-specific white space, we're looking to accelerate innovation efforts in the retail vertical through M&A.
We are targeting strategic opportunities in the near-term that will add additional value to our customers and their members. Moreover, we're beginning to see our integration synergy efforts begin to flourish as we have streamlined our efforts across the retail and restaurant space. We've seen already that this is allowing us to focus our R&D and sales efforts between industries to maximize profitability, accelerate innovation, all while improving customer satisfaction.
Briefly touching on hardware, I'm pleased to report that we have reversed recent trends and increased their hardware revenues by 7% in Q4 versus the same quarter last year. Several key global brands have approved our newest platform, the PAR wave, and we are seeing increases in both domestic and global sales. Also contributing to the turnaround with our new PAR drive-through solution that is setting the standard for drive-through coms.
With an open architecture that will enable users to leverage the power of AI for the drive-through. [PAR clear] is positioned to be not only the industry leader in QSR drive-through systems today, but also the preferred platform for the future. Our hardware and POS software divisions are partnering closely on product to ensure that [Parlear] adds to our strategy of Better Together innovation.
To summarize, we remain very bullish about the future of food service technology and PAR's continued role as a leading enterprise provider. In 2025, we foresee our ability to execute on both our historical growth rates and deliver on the biggest M&A pipeline we've seen to date. I view this time as a great opportunity for us to make bold bets and strengthen our market position. I'm confident in our ability to consistently innovate and provide value to our customers for years to come.
Persistence trumps everything, and I believe we will come out as the winner in the enterprise. By raising the bar for execution and investing in our products and teams for the long term, we are well positioned to drive durable growth in the category where the opportunity will continue to grow for the foreseeable future.
Brian will now review the numbers in more detail. Brian?

Bryan Menar

Thank you, Savneet. Good morning. We closed out 2024 with another successful quarter for PAR. Subscription services continue to fuel our organic growth while our team continues to execute with fiscal responsibility.
As a result, adjusted EBITDA for the quarter improved $3.4 million sequentially from Q3, and $13.1 million compared to Q4 prior year. This positive movement is indicative of our ability to continue to drive growth with profitability. Now to the financial details.
Total revenues were $105 million for Q4 2024, an increase of 50% compared to the same period in 2023, driven by subscription services revenue growth of 95%, inclusive of 25% organic growth. Net loss from continuing operations for the fourth quarter of 2024 was $25 million or $0.68 loss per share, compared to a net loss from continuing operations of $22 million or $0.77 loss per share reported for the same period in 2023.
Non-GAAP net loss for the quarter of 2024. Was $37,000 or effectively $0.00 per share. A significant improvement compared to non-GAAP net loss of $12 million or $0.43 loss per share for the prior year. Now for more details on revenue.
Subscription services revenue was reported at $64 million, an increase of $31 million or 55% from the 33 million reported in the prior year and now represents 61% of the PAR revenue. Excluding PAR retail and task group, organic subscription services revenue grew 25% compared to prior year. ARR exiting the quarter was $276 million an increase of 102% from last year's Q4, with engagement cloud of 150% and operator cloud of 60%.
Excluding PAR retail, casts group, and delegate, total organic annual recurring revenue was up 21% year-over-year. Power revenue in the quarter was $26 million, an increase of $2 million or 7% from the $24 million reported in the prior year.
Sequentially, compared to Q3 this year, hardware was up $3 million or 15%, driven by an increase in volume attached to our software customers. Professional service revenue was reported at $15 million, an increase of $2 million or 17% in the $13 million reported in the prior year. The growth was driven by recurring revenue service contracts. $9 million of the professional services revenue in the quarter consisted of recurring revenue, a 25% increase versus prior year.
Now turning to margins. Gross margin was $45 million, an increase of $21 million or 86% from the $24 million reported in the prior year. The increase was driven by subscription services with a gross margin of$ 34 million, an increase of $18 million or 116% from the $16 million reported in the prior year. Subscription services margin for the quarter was 53% compared to 48% reported in the Q4 of the prior year.
The increase in margin is driven by a continued focus on efficiency improvements with our hosting and customer support costs, as well as accretive margin contributions from recent acquisitions. Excluding the amortization of intangible assets, stock-based compensation, and severance, total non-GAAP in shipment services margin for Q4 2024 with 64.7% compared to 65.3% for Q4 2023.
The modest takedown was driven by a shift in product mix post 2024 acquisitions. Gross margin continues to improve across our products, and we expect total non-GAAP subscription services margin to continue to improve from this current baseline. Hardware margin for the quarter was 26% versus 29% in the prior year. Hardware margin in Q4 2023 was positively affected by one-time inventory adjustments.
Our focus of demonstrating value for our price with improved operational efficiency has allowed us to improve hardware margins during the year and finished 2024 with full year hardware margin of 24%. Professional service margin for the quarter was 28% compared to 10% reported in the prior year. The increase primarily consists of increases in margins for field operations and repair services, substantially driven by improved cost management and reductions in third party spending.
In regard to operating expenses. GAAP sales and marketing was $10.5 million, an increase of $1 million from the $9.5 million reported for the prior year. The increase was primarily driven by inorganic increases related to our acquisitions, while organic sales and marketing expenses decreased $0.3 million year-over-year.
G&A was $31 million, an increase of $12 million from the $19 million reported in the prior year. The increase was primarily driven by non-gap adjustment items for M&A transaction fees and stock-based compensation, as well as inorganic increases related to our acquisitions. GAAP R&D was $17 million, an increase of $3 million from the $14 million recorded in the prior year.
The increase was primarily driven by inorganic increases related to our acquisitions, while organic R&D expenses decreased $0.5 million year-over-year. Our team was able to effectively drive cost efficiency and properly prioritize resource allocation, which enabled us to continue to drive innovative outcomes without incremental costs during 2024.
Operating expenses excluding non-GAAP adjustments was $47 million. An increase of $9 million or 25% versus Q4 2023. And excluding inorganic growth, organic operating expenses increased a modest 2%. The organic increase was primarily driven by variable compensation and benefits. Exiting Q4, non-GAAP OpEx as a percent of revenue was 45%, a 900-basis points improvement from 54% in Q4 prior year.
Now to provide information on the company's cash flow and balance sheet position. As of December 31, 2024, we had cash and cash equivalents of $108 million and short-term investments of $0.5 million. For the year end of December 31st, cash use and operating activities from continuing operations was $21 million versus $32 million for the prior year, representing an improvement of $11 million.
Cash flow metrics improved throughout 2024, and we exited the year with positive operating cash flow of $3 million for the fourth quarter. Cash and investing activities was $180 million for the year ended December 31 versus $8 million for the prior year. Investing activities included $309 million of net cash consideration in connection with our recent acquisitions and capital expenditures of $6 million for developed technology costs associated with our software platforms partially offset by $96 million of cash consideration received in connection with the disposition of our government and $37 million of proceeds from net sales of short-term investments.
Cash provided by financing activities was $279 million for the year ended December 31st compared to cash use of $2 million for the prior year. Financing activities were substantially driven by a private placement of common stock to fund the doo acquisition and a credit facility entered into to fund a task acquisition. Subsequent to the 2024 fiscal year end, the company issued $115 million of convertible notes and utilized the net proceeds from this offering to repay in full the credit facility.
These transactions enhanced our capital structure by extending our debt maturity profile and significantly reducing our go-forward cash interest expense. I would now like to take a moment to reiterate and thank our PAR team on how they managed a successful and action-packed year, both from an operational and business development point of view.
We pride ourselves on making a freedom capital allocation decisions, and through our focus on operational execution, position PAR for sustained growth and success. As a result, the PAR exiting 2024 is a marked, improved and better positioned organization than when we entered the year. This is clearly demonstrated by some key financial metrics.
ARR more than doubled during the year, increasing 102%. Locations utilizing our SaaS solutions doubled with over 140,000 locations at the end of 2024. Non-GAAP consolidated gross margin increased by 720 basis points to 50.3%. Q4 non-GAAP op as a percent of revenue improved 900 basis points compared to the prior year. And Q4 adjusted EBITDA approved by $13.1 million compared to Q4 prior year. We are proud of what we have been able to achieve, but we are by no means content in where we stand and look forward to continue executing to our strategy as we progress through 2025.
I'll now turn the call back over to Sanveet, closing remarks prior to moving to Q&A.

Savneet Singh

Thanks, Bryan. Let me wrap up with a few key messages before we open the call for Q&A. (inaudible)
And we're pleased to have closed it on a positive note with a strong Q4 performance and maintaining category leadership and food service tech. We had a key objective in 2024, and that was to grow sustainably and efficiently to build our business for the long term.
To this end, our team executed on three main areas. First, we focused on driving organic ARR growth and sustained momentum in our software business. We worked on initiatives to improve our products and operations, cross sell our entire software portfolio, and sign new customers. As we spoke about earlier, all of our POS deals in the quarter were multi-product deals. And equally important was our upsell into our biggest POS customer.
Our flywheel continues to expand through Better Together strategy, which is based on product innovation in ROI, not predatory pricing tactics. Second, we execute on a targeted and meaningful acquisition strategy to strengthen our product offerings, expand our TAM, and build out a global capability to serve food service enterprises.
Our expansion into see stores and international markets has created a truly new TAM for us, and our acquisition of Delegate is already accelerating our flywheel for existing customers, including our largest and most strategic. We also divested our legacy government business that now enables us to 100% focus on our core markets.
M&A is core to our product strategy and our integration efforts are what drive our robust cross sell. PAR has over many years invested in building a deep leadership bench that can digest and optimize investments. As companies join, they become part of a cohesive, culturally aligned PAR where we add to, not detract from their project aspirations and go to market motions.
We cross pollinate leaders quickly and unite core operating structures, and this synergistic approach to M&A is what sets us apart from other food service technology companies or sector investors who operate a collection of siloed entities and masquerade as multi-product while really just being single threaded multiple times over.
Better Together is what we live every day at PAR, and I'm extremely proud that the vast majority of our executive leadership team has risen the ranks at PAR over many years and in multiple roles. This is our key to turning inorganic growth into sustained future organic growth. We are a team of seasoned operators with a holistic view of our business and industry.
Finally, we remain fanatical about managing our operating expenses by continually optimizing our cost structure. As a result, we maintain top line revenue growth and have now delivered two quarters of strong adjusted EBITDA growth. While I'm extremely proud of our revenue expansion, I'm equally proud that non-graph gross profit grew organically by 30% this quarter and our adjusted EBITDA well more than doubled quarter-over-quarter.
Today, our sales and marketing R&D expenses are now well within our long-term goals of 15% and 25% respectively, far ahead of schedule, and I believe this shows the upside to our long-term margin goals for the company. With 2024 firmly in the rearview mirror, we look towards '25 with confidence and optimism.
For 2025, we feel confident and committing to continue to grow our business at 20% annual rate for the year. Our growth quarter-to-quarter will never be linear, but I feel confident that over the course of the year we'll continue to hit our targets while continuing to drive you to dot. What's more, we see a number of key levers that create upside to our year.
While there's still a lot of work ahead of us, we are confident that our balance sheet, cost discipline, and execution strategies will enable us to continue to grow our business sustainably. As always, I want to thank my PAR teammates for their hard work and driving these results. Our shared belief that today is day one drives our collective hunger and ambition. I also want to express a deep appreciation to our customers, partners, and shareholders.
Thank you for your time this morning, and we will now open the call up to questions. Operator?

Question and Answer Session

Operator

(Operator Instructions) Mayank Tandon, Needham & Company.

Mayank Tandon

Thank you. Good morning. Congrats Savneet, Chris, and Brian on the quarter. Savneet, I wanted to start with the upsell into BK. Does this change the timeline of the rollout? I believe the rollout was expected to be completed sometime in spring of 2026. Does this in any way change the timeline of the 7,000+ locations? And also does it change the ARR opportunity, which I believe was something in the order of low 20s million. Is that going to be meaningfully different based on the upsell?

Savneet Singh

Yes to both. So it'll probably push us out a quarter and a half, Q1, as I referenced, -- we're sequencing the rollout so that starting in Q2 we can do a combined rollout. So while it'll slow down, call it Q1 a pure POS rollout, it'll really accelerate Q2 onwards. As I mentioned, it's a, -- that's a trade with you all day long, because to your second point, it significantly adds to the ARR in the ad opportunity.
As that we disclosed that the pure POS deal was around, low 20s. This adds to that pretty meaningfully. We haven't disclosed that number quite yet, but we feel really excited, as I said. While it pushes out the roll out a little bit, it, dramatically increases the LTV and operating cash flow that this deal will generate over time.

Mayank Tandon

Got it. And then, maybe as a follow up I would just ask around the quarterly cadence. I get it. You said it's not going to be linear. There'll be some volatility, but any color you can provide in terms of the various revenue buckets, how we should think about the quarterly cadence and also the same question around margins, should we expect sequential improvement? Or are there other factors we should consider as we're modeling for 2025?

Savneet Singh

Yes, so I think that you should see, meaningful margin expansion in the second half of the year, as well as acceleration of revenue growth the second of the year tied to this part to this breaking question you just asked. You remember we're going from one product to two products, so it's a lot more revenue opportunity and in a condensed period of time.
So you'll see that Q1 and Q2 will be investing aggressively to make sure we can knock that rollout out. And again, you should take it and everyone else should take it. The fact that we're expanding our relationship is a hugely positive sign that that we're doing, hopefully doing a good job and earning their trust.
So you'll see in the back end more revenue growth, more significantly more even to expansion because of that rollout accelerating plus, as we mentioned on the call, we have a large payment services deal rolling out that also hits the second half as well as the convenience store. That I mentioned on the call, these are all really exciting things, very forecastable.
These aren't sort of like let's hope, these are all in forecast and as I mentioned, we've already booked, we're 1,500 BKs and, we're in January, right? So in February rather, so there's a lot of room for excitement in the second half of the year here.

Mayank Tandon

Great. That's all good to hear. Congrats on the quarter.

Operator

Stephen Sheldon, William Blair.

Stephen Sheldon

Thanks for taking my questions and I a lot seems like to be excited about. I just want to follow up on Burger King. Can you just remind us what all is included in that contract now because I think it's initially PAR POS, potentially menu link. I think you're saying now the contract includes PAR ops, obviously as you talked about very encouraging expansion.
When you say PAR ops, I mean, are they adding both data central and delegate or just maybe just talk about all the products that they're actually going to be picking.

Savneet Singh

Sure. So there are, our core deals for POS, and, historically, parts of menu link, but POS is the vast majority of it. And our expansion into PAR ops is on data central, but, without question. We're 60 days into the delegate acquisition, we'll certainly be trying to bring that opportunity into that as well.
The no guarantee it happens, but I think, the Better Together point is resonating with them and obviously all of our customers given the attachment rates right now. So it's still start with one pro and hopefully we can add more if we do a good job.

Stephen Sheldon

Got it. That's helpful and then just on 2025, I appreciate the commentary that that you're confident in 20% annual, the growth rates, but just is there any way to roughly frame how you're thinking about organic ARR next year, just given what you can see in the pipeline, and kind of current implementation schedules just any way to refine that a little bit more.

Savneet Singh

I mean, I think from what we see today, like I said, the second half will have, sort of have higher growth rates in the first half, probably because of the three deals I mentioned, the payment services deal going live, Burger King, acceleration from Q1 and Q4, and then the convenience store deal that goes live as well.
So we have a lot of visibility into the second half for that acceleration. And so the way I think about it is, 20% plus, you should have higher than that in Q4 lower than that Q1. In Q1 being the slowest one because of the Burger King coordination we talked about but in aggregate, we feel really good about the year. We have never had so much visibility when it comes to the rollout of, these deals that I mentioned.
So we feel super confident in the year with the visibility we have today. And as I mentioned, those three deals that I mentioned that have, that are key for the second half of the year. These are signed, committed, books, these aren't sort of pipelines.

Stephen Sheldon

Got it, that's helpful. Thank you.

Operator

Will Nance, Goldman Sachs/

Will Nance

Hey guys, good morning. Congrats on all the great things you guys have going on. I wanted to ask just on the restaurant space more broadly, there's been a lot of focus on the consumer. And specifically, the trends in restaurant sales, and you guys obviously have a very differentiated look into the different pockets of the restaurant space. Are you, what are you guys seeing on the ground and, how, -- what does it tell you about the health of the consumer?

Savneet Singh

I'd say it's not categorical. There are, we see sort of a wide disparity of outcomes. In the full-service dining space, we see a slowdown. Ironically that's been really helpful in our Punchh business because those firms are really investing in loyalty and I think you heard me say we had a couple of people that had previously left Punch to try, consumer data platform type products come back to Punch.
I think that's a direct result of what's happening in that sort of full-service dining market. And then, in our kind of core QSR fast casual space, it's certainly seeing a slowdown, it's not what it was, but we're not seeing negative comps across our base. In fact, our base, is still up, low single digits. So we've sort of been lucky in that the customers we sell to have tended to outperform the restaurant industry in aggregate.
So in general our base is still growing, there are bankruptcies happening, but there are a very small portion of our base, and again that's just a little bit of luck in the makeup of our of our current customer base where we see the most disruption, and I would say it's significant, is in, single stores and small chains. We've seen numerous chains, kind of sub 30 units, 40 again we don't play a ton here, but we see that space and there are a lot of those ones that are experiencing tremendous pain.
And I think the reason why is that when you're when you're at that size, you don't yet have a big enough brand to sort of have those sticky customers you've been around a long enough generally. And then two, I don't think you have the investments in technology to fight back. And so the larger brands, I think, are going to do better because they have the ability to invest and Punchh as an example, the ability to invest in our data platform to bring customers back in.
So in aggregate our base is still growing, single digits, which is great and low single digits. So it's better than the rest but there's a lot of disparity amongst the chains.

Will Nance

Got it. Super helpful. I appreciate all the foil detail there and there's maybe a quick follow up on the hardware, inflection that you guys saw. We heard from one of your competitors yesterday and it sounds like they're expecting around a 20% drop in hardware revenues.
So I guess what have you guys been able to do differently to reaccelerate that business? Are any is any of the momentum that you're seeing comp competitive wins, and just how are you thinking about the hardware refresh cycle?

Savneet Singh

So I think there's two parts to it. So one is, we sell to enterprise, and I like to say enterprise is a product business you got to have the better product. And so I think, -- if you look at the data, we think our products are winning because they are stand-alone best in class products. And so I think that really helps us specifically, we had really strong attachments of our hardware product to our software customers.
So even, I won't name it, but even, a large deal or two that we're not picking for hardware have now started to adapt more and more for hardware. And it's that Better Together functionality that I mentioned, the idea that your hardware company is also your software company, so it's also your service company, your call center, it makes life a lot easier.
So it's the same Better Together fun thing that's happening and so we continue to see, call it attachment into the our core software customers drove it. On the legacy non-software customer side, it's not been a big change, but we have, we've made some real investments into this drive-through product and as you've probably read in all the restaurant companies, there's a big move to voice AI in the drive-through.
And so we believe we'll be the preferred partner there given that we are a software company that sells hardware now. And so I think that will be a nice driver of hardware growth going forward. Bryan, anything else? Yeah.

Bryan Menar

I was just going to add in regards to the software attachment, the fact that our location size has doubled. Has been given us that much larger audience to be able to have that attachment too. And so that's happening as we're some of the hardware only type of competitors are actually seeing a downturn. Maybe in certain areas we actually continue to have a larger white space to be able to support that. So that's been able to help us against what you're seeing in other areas.

Will Nance

Awesome, appreciate all the color guys nice job today.

Savneet Singh

Thanks.

Operator

Samad Samana, Jefferies.

Samad Samana

Hey, good morning. Thanks for taking my questions. Maybe you stop me at first, just I know you mentioned the drive through hardware and how it's kind of like lead class and allow your customers to leverage AI. My ears perked up a little bit about that. Is that AI that you guys have homegrown that will be embedded in that?
Is that you guys working with third party platforms that enable it? And then maybe help me understand the path to monetization there through APIs or is it your own product that you're providing and then I have one call up.

Savneet Singh

Fantastic question. So, -- well, we're, we build the drive-through hardware, so think of that as the headsets, the base stations, but we are also, in the PAR clear, it's a cloud offering. So we will be charging subscription software to allow you to manage your drive-through. Now why that's Important is that through that to your point, there will be an API that allows the voice AI companies, which there are dozens of them out there, to plug in directly to the base station so that they can run their tech.
So we aren't going, we aren't yet going to be the company that's sort of selling voice AI technology directly and trying to be an ordering company the year there yet. It might be something we explore in time, exquisition or not, but we're kind of watching it carefully.
However, if you're plugging into our base station, you're going to be paying us fees to do that and to enable that. And so it's a way for us to make money on the potential growth, but importantly we're giving them a service that that that makes it a lot easier for them to run their platforms at these restaurants.

Samad Samana

Great. And then maybe just switching gears a little bit on the Punchh side, it's great to hear about the customers boomeranging back. Maybe did you give us a little bit of color of maybe what made them churn in the first place. And with that context in mind, what convinced them to come back right, just putting those pieces together, I think would be very helpful.

Savneet Singh

So we had a couple customers, about I don't exactly want to be one year ago, two years ago. Sort of say, hey, we don't want to do a loyalty program, we want to use something more like a CDP system or I guess data platform. The idea being, we'll be targeting customers directly, loyalty customers are, 20% of our base. We want to target everybody else.
And, Kennelly those are really good sales pitches, but in reality, they don't, they're not yet developed enough to drive the ROI that a loyalty program today. And in the end, I think brands need both. I think you need an Austin CDP system that can target customers on a very personalized level, but you still need these loyalty programs that build really engendered loyalty.
Loyal customers are, repeat visitors they're high margin. They are the advocates of your brand, everywhere you go. And so I think what those brands realize is hey, we thought we're going to have loyalty across our entire set of customers. So why do we need just a loyalty product? And they ended up booming back realizing, one, the products that exist today that are trying to build that promise aren't yet ready, and two, [candly] ROI went down dramatically and so it really was validating that the Punchh product creates real true ROI back to the customer.
And then I think as those customers continue to evolve data platforms, they'll end up picking the party data platform because when you can combine. Their loyalty, first part of loyalty from PAR plus, they're sort of called tokenized data in a data platform, plus all the operations back office we have, that's sort of the point that I was making. It's, -- I think it's a real note that we have that nobody will be able to compete with.

Samad Samana

Great, I'm going to squeeze the third one in here. Any type of information give us on delegates, financial profile, maybe growth rate, margin structure, and how you're thinking about it for 2025.

Savneet Singh

Sure. So when we closed the deal, it was about $19 million of recurring revenue. Historically, the business had grown, well over 30%. I want to say mid-30s, and so it's been a high, it's been a really fast-paced grower. It exited 2024, marginally profitable. And we're, hoping for this year, obviously for that too. To be, our fastest growing product outside of payments and ordering.
We'll certainly drive meaningful EBITDA. So it's kind of exciting to have a product that we think we can push through quickly and as you've kind of seen when we acquire business, we tend to ramp up revenue quickly. What's exciting about delegate is that it's so synergistic that, once we figure out a single sign on real-time data flow, it'll be hard for customers to say no. So I'm not saying it's going to keep growing 35%, but it will be, -- I certainly believe it will be additive to our growth rate.

Samad Samana

Great, congrats on a really, transformative 2024. Thank you.

Savneet Singh

Thanks a lot.

Operator

Eric Martinuzzi, Lake Street Capital Markets.

Eric Martinuzzi

I wanted to ask about the subscription service gross margin. That non-GAAP number was 64.7%. It was below what we were forecasting for Q4. In your commentary, it sounds like you expect that to be a trough, but I was just curious, where do you expect it either for the full year '25 or a year from, for Q4 '25?

Bryan Menar

Yeah, Eric, I appreciate the question. You're correct there was came down from a from a year ago. It was really driven by our most recent acquisitions and kind of absorbing that in. Across our products we continue to see the margin improvement that we've been driving towards, so nothing operationally changed. It may then kind of reset a baseline and as we continue to kind of grow off of that.
So how you've been seeing the margin improve quarter-to-quarter, not significant amounts. They call it 50 to 150 basis points. We expect that to continue as we move forward here in the near to medium term.

Eric Martinuzzi

Okay. And then, just a housekeeping item here. Your pro forma share account, you finished out Q4 with $37.2 million of diluted weighted average shares. What is that post delegate?

Bryan Menar

Yeah, we're just north of $40 million, Eric.

Eric Martinuzzi

Thank you.

Savneet Singh

Sure.

Operator

Adam Wyden, ADW Capital

Adam Wyden

Hey guys, really good profit. So just a couple of things on the gross margin again, Bryan. So some of this is from the purchase. You expect, so if you expect the gross margins are going to improve 50 to 150 basis points per quarter, you would expect your incremental gross margin rate to be materially higher on your subscription software, pretty much every quarter throughout the year, is that right?

Bryan Menar

Correct, and that's going to be so both top line services being a growth driver like now it's 61% of our total revenue and as you mentioned, that we expect to call the 20% plus, improve it increase year over year. What the margin actual improving itself would actually have a multiplier effect in regard to the gross profit margin increase.

Adam Wyden

Right. I mean, look, I would think that payments and delegate and all these things, I mean, Stuzo, that you don't have a ton of like piloting and hosting. I mean, I would think that your incremental gross margins on some of these, I don't know cash very well, but I would think the incremental gross margins on all of these products should be 70, 75, 80, maybe even more something like menu also, you're sort of getting, you're leveraging all the R&D and as you ramp menu.
I would think you'd have really high gross margins on a lot of these on the organic, sort of prospectively. So I know the last couple of quarters you've had some sort of purchase accounting stuff and I know you had something with Stuzo, that lower gross margin that was sort of a purchase accounting thing, but I would think like sort of prospectively, as you ramp 20% organic error plus, you would get high incremental gross margins going forward.

Bryan Menar

And it's not going to be like a significant increase from what we, what we've seen trending over time, right? It's a nice, it's, I wouldn't say it's modest. It's something we kind of pride ourselves on how we improve it. And as it varies also depending upon the kind of types of products, right?
Generally, a POS kind of product might have a little bit heavier in R&D than a back office, and you can see that across the industry, right. But we need to focus on each of our areas to make sure that we see and push the teams in each of the areas to incrementally improve their margins.

Adam Wyden

Okay, great. And then my second question is back on M&A, obviously we've seen some other companies buying stuff, I guess smaller stuff, but when I look at sort of other companies that sort of, -- are sort of one of one assets and enterprise, I guess, maybe one example would be like Service [Titan], although, they're sort of a sort of a vertical stack software for small businesses.
They sort of are the only game in town, sort of the vertical sort of end-to-end product. Those companies are sort of growing high teens and they're trading at like 12 times revenue. I'm sort of curious how you think about sort of doing M&A in the context of, where your cost of capital is. I mean, on our math, I mean, obviously going into today, you guys were sort of in the fives on an EV to ARR basis depending on how you value the hardware business.
I mean, it doesn't feel like you have a ton of spread on the companies that you're buying. I'm just curious, like, how do you think about sort of getting your cost of capital up to do M&A? Is it, do you think that you're going to get your multiple back up, maybe comment on that and just sort of, the duration of the growth that it's not just about 20% growth this year, but that you have a multi-year runway to it. I mean, I'd love to sort of see how you think about of those two sorts of concepts together.
Because the multiple structurally hasn't really expanded over the course of the last 12 months, right? I mean, if you really think about where the business was sort of 16 or whatever 14 months ago, pre-government, pre-task, pre you know pre-delegate, your error per share has grown meaningfully faster than sort of the multiple and so I'm just curious about that.

Savneet Singh

Let me just jump in because we got three more four more calls after. So short answer is in the end numbers matter more than anything else. Accounting is the language of business, and our numbers will dictate how our stock performs, and I think our numbers are great and strong and getting better and better, and I believe that markets reward the durability of revenue, ostensibly be believe in the durability of cash flow.
I think we are continuing to demonstrate that over and over again, and I believe the multiple we will get rewarded for that. In the end, software companies, multiples should contract when growth slows, when your TAM gets to the end of it, and you become, your rule of 40 flips to, all cash flow versus growth. We don't have that situation here. In fact, as you heard in my commentary, while our growth won't be linear, like there's a lot of really nice upside here in the second half of the year, that will also happen the following year.
So I think that I don't know how you get to the five number, but I think we feel really confident that we're one of the few software companies in size that will be able to continue to grow at, rates that are higher, well above the median, if you will. And continue to drive, impressive profit numbers. And so the multiple rewarded. The numbers win in the end. It doesn't matter what I say or do in the end, the num the numbers matter and we'll get there.
Just specifically to your point on M&A, you and I have talked about this extensively, but when you're using, multiples, it's a relative game. And so if we're trading at, I don't know, 7 times, current ARR. We will set the best part for the market, and there are very few companies that have metrics as good as ours, and so I suspect we will buy them at a discount for that multiple.
Now, are there certain assets that we might not be able to buy because we're not trading while multiple for sure, but there's not a lot of those and not a lot of those that we want, and not a lot of those that would make sense in a flywheel. So as I said in the script, we've got a really strong M&A pipeline, and every time I've said that we've execute upon that.
So I think you'll see us continue to do that. And the critical part, in my script was. M&A for us is a product strategy. It's not a, let's go buy a bunch of revenue. It's how do we create add a product to increase our organic growth and then our long term, profitability.
And so we feel really good about that today. And if I didn't, I would tell you, hey, M&A is not going to be part of our strategy, but we're on the first call of the year and we're talking about it here. So I think you take that as don't feel the multiples holding us back from being acquisitive right now.

Adam Wyden

I was just going to clarify on the ARR multiple like when you look at sort of Service [Titan] and even [Gillis] post sell off, those companies are still trading at like double digit sales multiples on this year, and I was talking about, sort of a 5 and 5.5 times on '26. And when you look at the company on a '26 ARR or '26 EV to EBITDA, I mean there's a massive. GAAP between companies like Toast and Service [Titan] and even [Agilus] has post a 40% decline.
So I'm just highlighting the fact that like we're executing, on many levels better than these other companies from a growth and incremental margin perspective, but we continue to trade at a discount. So I hope we can figure out a way to narrow that discount because I think this is a best-in-class company.

Savneet Singh

And with the numbers drive that. So our numbers will drive it and I'm so confident we'll get there. All right, thanks, Adam.

Operator

Andrew Harte, BTIG.

Andrew Harte

Hey, thanks for the question. So obviously I think a big message today was the Better Together that you were pushing on, I guess, as arars doubled the past year, businesses scaled much more robust platform right now. Can you just discuss a little bit how some of your conversations with these larger enterprise CTOs have evolved just from a brand perspective and sales pipeline perspective?

Savneet Singh

Absolutely. Listen, I thank you for pulling out the script. Listen, like I said, we signed 8 POS deals in the quarter, which is impressive in the enterprise space. All of them picked multiple products. We upsold our largest customer another product. Clearly the flywheel that I talked about is working and delegate is really going to accelerate it, Adam, sorry, the caller before Adam talked about it, but it's a beautiful thing when it's working.
My conversations with these organizations, I think we're setting up for a really interesting outcome. As consumers, -- there's consumer uncertainty right now and so restaurants are now really focusing on digital efforts because they're trying to create efficiencies in the back of house and pull you in the front end. And so they're creating more investments in technology.
However, they're making those investments in technology without increasing their staff. In fact, many restaurant companies are flat staff, particularly in operations and IT space. And so how are they going to do that? They probably don't want to add three more vendors. They probably want to attach it into PAR. And so I've had, a couple of sales processes I've been a part of where, it's very clear that the reason why they love us is not just because our products are best in class, it's because they can just trust the existing PAR relationship.
And so we've spent an incredible amount of time and effort rejiggering our teams focusing on that account management side so that we can bring in those products. And I just want to be clear, we do not win because we bundle, we win because the products work better together. And my push to the delegate team that now runs the combined PAR data central is.
The win for here is not a year from now or six months from now, a customer looks and says, oh, when I had delegate in PAR as two separate vendors, it was a different experience than when I had it under one roof at PAR. And that, and I can't stress you how powerful that is to the end customer.
And we've got a lot of amazing examples of how we're winning deals by just showing that in a demo saying, hey, guess what happens if you've got Punchh and brink, look at this unique functionality you can have with the POS but others can't. So it really is the theme, I think candidly we were probably really too early on this thesis, we've been talking about it for a long time, but it's certainly playing out and again you know I never would have dreamt that all of our deals in a quarter were multi-product deals. That's a really exciting change for us.

Andrew Harte

Thanks. And then thinking about 2025, you talked about the Burger King expansion, the payments deal, the convenience deal. Like there's a lot of moving pieces, another one is I guess Stuzo gets layered into organic and task gets layered into organic, so.
Can you maybe talk about some of the things that can, drive, much higher than 20% growth, some of the things that you really have to execute on and when you think about task and Stuzo getting layered into organic, how have those, businesses been coming along as we get ready for '25.

Savneet Singh

Great question. So one is getting our acquisitions to become organic will certainly help us. Stuzo, I suspect will grow faster than 20% a year. The task has two businesses task and flexure task itself will grow greater than 20% a year. Flexure might will be sort of close to the engagement, cloud growth rates. Then delegate will go well above the 20%.
So as we lap the acquisitions, you will have faster organic revenue growth because the acquisitions in general, we look to buy stuff that's growing faster than us. So that's just mathematically a nice part of it that happens and actually I didn't mention it on the earlier questions, but that will also help the back half of the year as the acquisitions.
Second, though, and more importantly, it's our ability to execute upon the deals that we have in place. So to be, -- our plan, if you will, to get the 20+% growth assumes a relatively conservative rollout at our largest POS customer. We want to blow through that, and I know our partners at that company think we can do even double of what we're going to do. And so that's number one can we execute on that.
Number two is in car retail. The team has done an incredible job, I really, think the leadership there has done a great job of driving that business, but we have tremendous levers in driving real upside to our deals there because in certain deals and for retail, our pricing increases based on our performance. And so as we have great performance, the pricing goes up quite meaningfully there.
And then third, is our ability to execute and get deals live and earlier than we expect, and that's something that I think our team is feeling really good about today. We'll see as it progresses, but there are, a couple of really meaningful levels that levers to sort of that I think I see us out there.
And then, the last thing I say is that as we fold in these acquisitions, if they do create an accelerated go to market motion because now we can pull in Data Central faster because the customer already uses delegate as an example. We can pull in stuff faster and so it should shorten our sales cycle. That might not be the big lever, but I think over time it creates a nice ability to shorten sales cycles also.

Andrew Harte

Thanks again.

Operator

Charles Nabhan, Stephens Inc.

Charles Nabhan

Hi, good morning and thank you for taking my question. I wanted to drill into the previous question a little further, specifically around task and the international opportunity. Clearly that expands your TAM it's sounds like it's growing in excess of 20%.
But I was wondering if you could speak more broadly about the international opportunity, how you see that playing out, and, any more specific color around task would be helpful as well.

Savneet Singh

Absolutely, and give us another quarter because we're going to, we're making a lot of investments and changes there. We, we'll talk about the next quarter or so. But, I think right now core markets we're focusing on Our sort of you know the APAC region where we've got really strong foothold, we're winning the sort of marquee brands in Australia, New Zealand, and that part of the world.
And we've got a long, a really nice pipeline we've got to execute on. So what we're really kind of helping the team is operationalize that part of the business so that they can become as programmatic as we can about getting sites out the door. It's a small business, so it hasn't gone through that scaling, if you will, of how do you add 1,000 sites a quarter or something like that.
So we're working to implement that, we took one of our best leaders at PAR, put him in charge of task, and he is driving that. And so we're going to focus on that region first, pull that forward, do a great job. We have already, I think brought in one or two really high-quality brands that are US brands that want to expand to that region to partner with us there. That's crazy exciting for us because then obviously we can grow them, in other parts around the globe, but we're trying to master that one region and then we'll kind of expand outside of that.

Charles Nabhan

Got it. As a follow up, I wanted to ask about the hardware margin nice little uptick this quarter. I apologize if you touched on this already, but could you maybe talk about the drivers of that expansion during the fourth quarter, as well as how we should think about that margin within hardware going forward?
Are we sort of at peak margins within that business, or could we potentially see more expansion as we move through '25?

Bryan Menar

Yes. So we've been in both the hardware and some of the professional services actually linked to the hardware, we've been able to increase margin percents year-over-year, as you saw. We're now in the mid-20s for hardware, which we're proud of, right?
Some of the best hardware products are out there like in the low 30s. So we would like to continue to increase, we understand we only be modest work where we're going to get from that. And then from the actual professional services as you saw, we went up from a 10% last year to a 28%.
And so now we've been consistently in the mid to upper 20s on professional services, and that's correlated as we continue to grow some of our hardware business that that would also increase from a revenue and then it's recurring revenue. So that gives consistent margins below that.
I would not expect this to have significant marginal improvement in both on the hardware professional services, but we are proud of how we've improved that over the past couple of years.

Charles Nabhan

Got it, appreciate all the color guys. Nice quarter, thank you.

Bryan Menar

Thank you.

Operator

Anja Soderstrom, Sidoti.

Anja Soderstrom

Thank you for taking my question. Most of them have been addressed already, and congrats on the great year here. And I have one question in terms of the Tier 1 pipeline. Have you seen that expanded and how are you talking to those potential customers in terms of upselling as well and how are you going to be able to take on a Tier 1 customer in the near future given the expanded Roll out with BK?

Savneet Singh

So, Tier 1 pipeline remains strong. I think the change we've seen is clearly the mid-market is really picking up for us. So it's kind of nice to see that. As far as, being able to roll out additional concepts, we feel very good about that, with BK, this rollout's been planned, the additional part of the rollout is a new module, a new product.
So it won't impact kind of the core POS pipeline that's been strong for some time here. So I don't think it'll have an impact. And as I said in Q1 and Q2 we're making some real investments to make sure we don't have any stumbles there. I think it's, one of the mistakes I see our peers making, we used to make years ago is, you spend all this time getting software right, but then you get the roll out.
Because you didn't, hire enough bodies or training and so we're, we overinvest in that now, because I think getting that right, pulls revenue in faster and you make it up in spades down the road.

Anja Soderstrom

Okay, thank you. That was all for me.

Savneet Singh

Thanks, Anja.

Operator

Thank you. I'm showing no further questions at this time. I would now like to turn it back to Chris Byrnes, for closing remarks.

Chris Byrnes

Thank you, Daniel, and thank you to everyone for joining us today. We look forward to updating you further in the coming weeks and days. Have a nice day and a great weekend. Thank you.

Operator

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