PAR Technology (PAR) Q3 2026 Earnings Call Transcript

DATE

Thu, Nov. 5, 2026

CALL PARTICIPANTS

• Investor Relations - Chris Byrnes
• Chief Executive Officer - Savneet Singh
• Chief Financial Officer - Bryan Menar

TAKEAWAYS

• Total Revenue -- $137.1 million, an increase of 15% year over year driven by growth across all three revenue streams.
• Adjusted EBITDA -- $17.1 million, representing a $11.3 million increase versus the prior year and the seventh consecutive quarter of sequential improvement.
• Annual Recurring Revenue (ARR) -- $354.5 million, up 18.1% year over year with $16.5 million in incremental growth during the quarter.
• Organic ARR Growth -- 13% year over year, representing the second strongest organic growth quarter in the company's history.
• Net Loss -- $9.0 million, an improvement from the $18.2 million loss reported in the third quarter of 2025.
• Non-GAAP Diluted EPS -- $0.24, compared to $0.05 in the same period last year.
• Subscription Service Revenue -- $86.0 million, representing 63% of total revenue and an increase of 15% year over year.
• Hardware Revenue -- $34.4 million, up 15% year over year reflecting strong demand from legacy Tier 1 accounts for product refreshes.
• Professional Service Revenue -- $16.9 million, an increase of 16% year over year.
• Free Cash Flow -- $17.7 million, representing the third consecutive quarter of sequential growth and supported by $10.0 million in customer prepayments.
• Cash Balance -- $94.5 million as of Sept. 30, 2026, an increase of $17.0 million from the prior quarter.
• Active Sites -- 174,400 as of Sept. 30, 2026, reflecting the impact of decommissioning smaller concepts with single products.
• Non-GAAP Subscription Margin -- 66.0%, representing a 90 basis point sequential improvement from the second quarter due to business model changes for the Bridg product line.
• Operating Leverage -- Non-GAAP operating expenses were 38% of revenue, an improvement of 550 basis points from 43% in the third quarter of 2025.
• Inventory -- $41.3 million, up from $27.4 million at the end of 2025 as the company strategicially pre-purchased memory chips.
• Q4 Revenue Guidance -- $138.0 million to $142.0 million.
• Q4 Adjusted EBITDA Guidance -- $17.5 million to $19.0 million.
• Full-Year 2026 Revenue Guidance -- $532.5 million to $536.5 million, raised from the prior range of $516.0 million to $523.0 million.
• Full-Year 2026 Adjusted EBITDA Guidance -- $57.9 million to $59.4 million, raised from the prior range of $50.0 million to $53.0 million.
• Burger King Implementation -- 5,000 sites activated through September, with management expecting the rollout to be principally finished by year-end.
• Papa John's Deployment -- 3,000-plus U.S.-based stores scheduled to begin implementation of PAR POS and PAR OPS in the fourth quarter.
• Multiproduct Adoption -- 80% of new customer deals signed in the quarter included multiple products from the PAR platform.

Need a quote from a Motley Fool analyst? Email pr@fool.com

RISKS

• Singh stated, "Current market dynamics have restaurant and retail operators being squeezed between margin pressure and a consumer who is more sensitive to affordability," which creates a challenging environment for brand growth.
• Menar warned that fourth quarter free cash flow would be "more muted" than the third quarter due to a reduction in seasonal working capital tailwinds.

SUMMARY

PAR Technology Corporation (NYSE:PAR) reported record quarterly revenue and adjusted EBITDA for the third quarter of 2026, prompting management to raise its full-year financial outlook for both metrics. Management reported that growth was driven by consistent ARR expansion and increased operating leverage following a business realignment into two primary verticals. The company is transitioning its strategy toward an agentic operating model, utilizing its PAR Intelligence layer to unify data across transactions, loyalty, and operations. Management stated that the platform is designed to help operators maximize individual store performance as rising interest rates and inflationary pressures limit the appeal of new store openings.

• The company launched Guest360, a customer data platform that identifies and segments guest data across different transaction channels to measure revenue impact.
• Management reported locking in memory chip supply at prices 30% to 40% lower than current market rates through strategic advance commitments.
• CEO Singh stated, "Optimization within the existing 4 walls and closing the gap between the best and worst performing sites, on average, a 6.4x difference in profitability offers a material uplift in earnings at a fraction of the spend."
• Management signed a five-year partnership with a Tier 1 major oil company for PAR Retail and its self-checkout solution.
• The company is developing a next-generation version of its POS platform for release in 2027, featuring a modern architecture built specifically for agentic AI functionality.
• CEO Singh noted that 250 million-plus verified identities in the Bridg database allow for identity resolution of 90% of the U.S. population.

INDUSTRY GLOSSARY

• ARR: Annual Recurring Revenue, calculated by annualizing monthly recurring fees from subscription services.
• Active Sites: Individual customer locations utilizing PAR's subscription software services.
• Agentic AI: Artificial intelligence designed to function as an autonomous agent that can understand, approve, and measure actions within an operating workflow.
• Brink POS: PAR's cloud-based point-of-sale software platform.
• Punchh: An enterprise-level customer loyalty and engagement platform.
• Bridg: An identity resolution platform that identifies anonymous shoppers to enrich customer profiles.
• PAR Intelligence: A unified AI layer that connects signals across transactions, loyalty, and operations to provide localized operational guidance.
• LTV: Lifetime Value, representing the total projected revenue from a customer relationship.
• CAC: Customer Acquisition Cost, the total expense required to sign a new customer.

Full Conference Call Transcript

Operator: Good day, and thank you for standing by. Welcome to the PAR Technology 2026 Third Quarter Financial Results Conference Call. [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. Please go ahead.

Chris Byrnes: Thank you, Jacinda, and good afternoon, everyone. We appreciate you joining us today for PAR Technology's 2026 third quarter financial results call. Earlier today, we released our Q3 financial results. The earnings release is available on the Investor Relations page of our website at partech.com, where you can also find the Q3 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, 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, please see our press release furnished as an exhibit to our Form 8-K filed this afternoon and our supplemental materials available on our website. Joining me on the call today is PAR's CEO, Savneet Singh; and Bryan Menar, PAR's Chief Financial Officer.

I'd now like to turn the call over to Savneet for the formal remarks portion of the call, which will be followed by general Q&A. Savneet?

Savneet Singh: Thanks, Chris, and thank you all for joining us today. In Q3, PAR remains squarely focused on delivering against our long-term growth strategy. We expanded our platform functionality with the release of a customer data platform, launched 6 new PAR Intelligence coaches and agents while tracking to exceed our full year live site target of 50,000 stores and saw cross-vertical traction with our customer identity resolution offering. All the while aggressively investing for the future, we also managed to deliver record revenue, record adjusted EBITDA and record free cash flow. We reported $137.1 million of revenue, up 15% year-over-year. Adjusted EBITDA was $17.1 million, nearly 3x the level we produced a year ago and a $2.8 million increase sequentially.

Free cash flow came in at $17.7 million. This marks our third consecutive quarter of increased sequential growth. Growth, profitability and cash conversion expanded because of the continued success of our product suite in market, led by our push of PAR Intelligence and bundled platform deals, climbing unit economics and continued expansion of our operating leverage. This is a model we have been building towards a scaled platform where each incremental customer, product, and workflow makes the system more valuable while the economics improve underneath it. We exited Q3 with ARR of $354.5 million. The $16.5 million sequential increase from Q2 was the strongest ARR add of the year and brought organic year-over-year growth to approximately 13%.

Our continued top to bottom line financial improvements are indicative of our ability to grow while also operating more efficiently within our cost of sales and OpEx. Current market dynamics have restaurant and retail operators being squeezed between margin pressure and a consumer who is more sensitive to affordability. In that environment, an integrated platform earns its customers by helping brands run more consistently, innovate faster, and simplify the operating environment. Moreover, prevailing high interest rates ensure that brand growth is no longer over-indexed on new store openings.

Optimization within the existing 4 walls and closing the gap between the best and worst performing sites, on average, a 6.4x difference in profitability offers a material uplift in earnings at a fraction of the spend. Importantly, AI has increased the relevance of our platform approach in this historically best-of-breed market. PAR unifies every transaction and every guest to deliver a foundation for Agentic AI and customers identify PAR as their principal partner to build towards an Agentic future. We saw this across the portfolio. Turning first to our restaurant performance. In Q3, new customers, Poulet Rouge and Carvel selected Punchh, our industry-leading loyalty and engagement product. Adding Carvel now brings the complete GoTo Foods portfolio on to PAR.

Of the new customer deals signed in Q3, more than 80% were multiproduct. Habit Burger, Kura Sushi, Goodcents, and Jack's Family Restaurants also renewed with product uplifts or expansion offerings. PAR Ordering had another strong quarter signing new customer deals, including our largest ordering agreement to date with a large national restaurant chain that we'll talk about post-launch next year. This will be a highly visible and important competitive takeaway. Capriotti's, a sandwich chain also selected PAR Ordering for their 175-plus stores. These larger and consistent wins continue to prove out the appeal of one connected digital cockpit and the advantage of solving ordering, loyalty payments, and catering together rather than through disconnected products.

Critically, customers are seeing ordering as a natural platform extension of their existing PAR products, ensuring a robust and growing pipeline with active brand dialogue. Our POS business is executing well, and our current large enterprise rollouts are proceeding at accelerated time lines. We remain ahead of plan on Burger King's point-of-sale activations and have crossed over 5,000 sites through September and we will kick off Papa John's implementation at scale in Q4 as we roll out PAR POS and PAR OPS to their 3,000-plus U.S.-based stores. On the new innovation front, this quarter, we launched Guest360, a customer data platform integrated into Punchh that expands PAR's guest intelligence beyond loyalty members to the broader restaurant base.

By unifying transactions and engagement data across channels, Guest360 enables brands to identify, segment and activate guests directly within Punchh and measure resulting revenue. What's more, we continue to make tremendous strides on the next major version of our POS, which we will release next year, completely agentic and built for this new world where time to delivery and innovation is tantamount. It will continue to drive PAR POS as a leader within restaurants. This innovation will reimagine the next generation of PAR's POS platform while continuing to invest in the customers and products that got us here. It will be a new cross-platform experience on a modern architecture.

The goal is simple: create a clear path forward for every customer regardless of where they start and make it easier for them to benefit from everything we are building across PAR. Now turning to PAR Retail. PAR Retail delivered another strong quarter of platform momentum. A Tier 1 major oil company signed a significant 5-year partnership with PAR. The relationship also has meaningful expansion potential as the customer grows its network and adopts additional products, including our self-checkout solution, touchpoint and most importantly, PAR Intelligence. Kwik Fill, part of United Refining, selected PAR Retail and PAR Intelligence across more than 300 locations. These customer wins reinforce a core part of our advantage.

We can bring together hardware, software, data and intelligence across convenience, retail and food service. Similar to restaurants, the PAR platform playbook is working. This is a result of a concerted effort in bringing together our hardware and services offering, combining it with engagement software onboarded via the Stuzo acquisition in 2024 and building new functionality on top of the existing stack via PAR Intelligence. Bridg also expanded its strategic relevance to PAR in the quarter. While our engagement products power loyalty and campaigns and PAR Intelligence turns data into decisions and actions, Bridg adds the ability to recognize and understand shoppers beyond the loyalty program by connecting previously anonymous purchases to enrich customer profiles.

That expands the audience brands can reach, gives PAR Intelligence a more complete view of customer behavior to turn fragmented signals into better decisions and strengthens the measurement of marketing's impact on sales. The scope of Bridg is potent. 250 million-plus verified identities covering more than 90% of the U.S. population means that product market fit is incredibly high if coupled with the likes of PAR Intelligence. An additional national retailer selected Bridg in the quarter after moving from a competing identity resolution platform. Our recently released Bridg 2.0 launched in October, and we believe the product is increasingly central to how we extend PAR Intelligence beyond a single vertical or workflows.

In summary, all of what we do centers around our platform and AI strategy. PAR Intelligence represents the next evolution of the PAR platform, a unified AI layer designed to improve execution and profitability across every customer location. Its differentiation rests on PAR's extensive industry-specific data and ability to embed autonomous agents across its integrated software ecosystem. Already deployed agents support operational insights, personalized offers and software development, creating a foundation for an expanding portfolio of AI-powered capabilities. A restaurant or retailer does not create value by asking more questions. It creates value by making better decisions faster across thousands of locations.

PAR Intelligence is designed to connect the signals already moving through PAR, including transactions, loyalty, ordering, inventory and operations and turn those signals into actions an operator can understand, approve and measure. We remain focused on adoption and measurable outcomes in 2026, while building the premium capabilities in market and product attachment that can make AI a more meaningful revenue contributor in 2027. The current use cases include offer performance, member growth, basket analysis, operational efficiency, in-store and drive-through throughput speeds, financial review and operating issue resolution. Although customers are currently paying for different facets of our intelligence, it's premature to force an artificial AI revenue metric just to satisfy the moment.

We will show adoption, customer outcomes, and monetizations as they become measurable and repeatable. Before turning the call over to Bryan, let me make some big picture items -- let me make some comments about big picture items for our company. The improvement in our profitability is not coming from a retreat in product investment or a onetime certain savings. Through the first 9 months of 2026, adjusted EBITDA reached $40.4 million compared with $15.9 million in the prior year period. At the same time, our R&D investments increased on a GAAP basis, while G&A declined. We are investing in new product innovation to ensure continued growth acceleration while leveraging AI to drive efficiencies at traditional cost centers.

Our platform strategy is building customer relations over time versus maximizing prices in the short run. The current landscape makes PAR more indispensable to its customers than ever. As I recently shared, brands must get more out of their existing 4 walls as they are faced with depleting margins on the revenue front via punishing third-party delivery tax and inflationary labor and inventory environment and rising interest rates. The ability to enhance individual store outcomes with localized guidance made possible by PAR Intelligence spotting what is affecting operational and guest performance in real time at any unique location and driving context-aware actions will ultimately narrow the gap between the best and worst performing stores.

Enabling the maximization of an individual outcome at a store and guest level is what AI catalyzes, something we could not do before this AI moment. With that, I will turn the call over to Bryan to review the financial results and outlook in more detail. Bryan?

Bryan Menar: Thank you, Savneet, and good afternoon, everyone. In Q3, we continue to demonstrate growth with profitability, delivering both total revenue and adjusted EBITDA that exceeded consensus and the high end of the guidance. Our 15% year-over-year growth for the quarter was driven by all 3 revenue streams and across the verticals we serve. Combined with our focus on OpEx operational improvement, we delivered incremental margin dollars down to the bottom line. For the seventh quarter in a row, adjusted EBITDA has grown sequentially, reaching $17.1 million in Q3, up $11.3 million or 193% compared to Q3 prior year, and an improvement of $2.9 million sequentially from Q2 this year. Now to the financial details.

Total revenues were $137 million for Q3 2026, an increase of 15% compared to the same period in 2025, inclusive of subscription service revenue growth of 15%. Net loss for the third quarter of 2026 was $9 million or $0.22 loss per share compared to a net loss of $18 million or $0.45 loss per share reported last year. Non-GAAP net income for the third quarter of 2026 was $10.8 million, an improvement of $8.8 million compared to $2 million in Q3 2025. And non-GAAP diluted earnings per share for Q3 2026 was $0.24 compared to $0.05 for the same period in '25. Now for more details on revenue.

Subscription service revenue was reported at $86 million, an increase of 15% from the $75 million reported in the prior year and represents 63% of total PAR revenue. ARR exiting the quarter was $354.5 million, an increase of 18% from last year's Q3. Organic ARR was up 13% year-over-year. ARR grew $16.5 million incrementally during the quarter, resulting in our second strongest organic ARR growth quarter ever. Hardware revenue in the quarter was $34 million, an increase of 15% from last year's $30 million. Professional service revenue was reported at $17 million, an increase of 16% from last year's $15 million. Now turning to margins.

Gross margin was $60 million, an increase of 22% from the $49 million reported in the prior year. The increase was driven by subscription services with gross margin dollars of $48 million, an increase of 16% from the $41 million reported in the prior year. GAAP subscription service margin for the quarter was 55.8% compared to 55.3% last year. Non-GAAP subscription service margin for Q3 2026 was 66%, relatively unchanged compared to 66.2% in Q3 2025. As discussed last quarter, we anticipated sequential margin improvement as we executed planned business model changes for the Bridg product line. This quarter's results reflect progress on those changes with non-GAAP subscription margins improving 90 basis points sequentially from Q2.

Hardware margin for the quarter was 23% versus 18% in the prior year. This quarter's performance is in line with recent quarterly results. Professional service margin for the quarter was 26% compared to 18% reported in the prior year. Prior year margins were negatively impacted by a cost adjustment in that period. In regard to operating expenses, total GAAP operating expenses for the quarter were $65.5 million, down 2% from $66.9 million in Q3 2025. On a non-GAAP basis, operating expenses were $51.9 million, relatively consistent with the $51.7 million in the prior year. Excluding expenses stemming from recently acquired Bridg, non-GAAP operating expenses decreased $1.5 million year-over-year.

In the current period, non-GAAP OpEx as a percent of total revenue was 38%, a meaningful 550 basis point improvement from the 43% in Q3 last year, demonstrating our ability to continue to scale efficiently and drive operating leverage. Our ability to drive operating leverage and additional scale is a result of our teams identifying and driving integration improvements post the realignment of business operations into 2 verticals earlier this year, along with embedding our AI tool set as a strategic component of our operating model. Now to provide information on the company's cash flow and balance sheet position.

As of September 30, 2026, we had cash and cash equivalents of $94 million, an increase of $17 million compared to the prior quarter, driven by $17.7 million of free cash flow with cash provided from operations of $21 million, partially offset by investing activities of $3 million driven by capitalized software. The improvement in free cash flow conversion this quarter is consistent with the expectation we outlined on our last call as we drove incremental profitability along with seasonal working capital tailwinds, including $10 million of customer prepayments. Through Q4, we expect incremental modest positive free cash flow, driven by continued profitability improvement, but with more muted working capital support. Now let me share our expectations going forward.

For the second consecutive quarter, both total revenue and adjusted EBITDA exceeded the high end of our guidance. We continue to grow the business while translating that growth into stronger profitability and cash flow. For the fourth quarter of 2026, we expect total revenue in the range of $138 million to $142 million and adjusted EBITDA in the range of $17.5 million to $19 million. For the full year 2026, we now expect total revenue in the range of $532.5 million to $536.5 million, up from the prior range of $516 million to $523 million and adjusted EBITDA in the range of $57.9 million to $59.4 million, up from our prior range of $50 million to $53 million.

A few points of context on the outlook. We expect subscription service revenue growth to continue to strengthen in Q4. And on hardware, we expect revenue to stay at historical levels in Q4, primarily due to product refreshes in our legacy Tier 1 accounts. On profitability, adjusted EBITDA of $17.1 million in the third quarter, combined with our outlook for Q4 reflects consistent strengthening of our financial profile, driven by both continued top line growth and consistent discipline managing our cost base. We expect additional gross margin flow-through from the increased Q4 revenue to be partially offset by a modest increase in OpEx in key investment areas within R&D and sales and marketing.

I will now turn the call back over to Savneet for closing remarks prior to moving to Q&A.

Savneet Singh: Thanks, Bryan. Before we open the call to your questions, let me leave you with 4 important points. First, our platform strategy is working. Our consistent ARR build only strengthened in Q3 and multiproduct adoption continues to deepen our customer relationships. Customers see economic and functional value in our bundled offerings. This is leading us to have strong confidence, not only in Q4, but what we see shaping up for a strong first half of next year. Second, PAR Intelligence is moving from adoption to outcomes. Ultimately, the value is not a better dashboard. It's a better decision embedded in the operating workflow and measurable at the store level. Third, the economics of our business are attractive and growing.

We are growing gross profit, improving cash flow, expanding adjusted EBITDA and becoming more efficient while continuing to invest in the products that can drive the next stage of growth. Greater operating leverage has been the principal catalyst while our multiproduct contracting module and improvements to ARPU, ARR to CAC and longer contract run times ensures continued multiyear trajectory. Fourth, we remain firmly on offense by investing in future growth opportunities. We will not compromise on the long-term durability of our business, whether this be by aggressively taking price in the short run or underfunding or rejecting high potential opportunities because of a multiyear project time line.

Enterprise tech requires continuously making principal bets and executing against the vision with staying power. This quarter, our dual mandate of platform and PAR Intelligence has led to the release of a CDP system and the launch of 6 coaches and agents. The move to AI, though, is not just about an ordering agent or a chat interface. It's about the complete rebuild of the operating model of our category. Most companies are spending millions improving customer experience their next customer will never see. They're redesigning websites, building better apps and adding AI chatbots. But what happens when the customer stops showing up? We think the next great disruption in business won't just be AI replacing employees.

It will be AI replacing customers, not the demand, but the humans making purchasing decisions. But the bigger disruption isn't who places the order, it's what happens to the business on the other side of it. When customers become software, entire organizations built around selling to, servicing and coordinating with humans will need to be redesigned. The way companies price, operate, make decisions and deliver products will fundamentally change. This moment excites us as a team and positions us to be a true partner to our customers living through the most intense disruption of their lifetimes. We said 2026 would be a show-me year.

Our third quarter was in the spirit of this and has set us up to close the year out strong, including, amongst other things, the combination of ARR growth with a compounding adjusted EBITDA trajectory. This is the third consecutive year we are doubling adjusted EBITDA. Importantly, the underlying market dynamics support a very long runway. I want to sincerely thank our team members for their incredible commitment to serve our customers while continuing to do more each and every day. It's not easy to achieve the results we have, and it's only been possible because of a dedicated team committed to a long-term vision.

We've asked a lot from our people, and we continue to raise the bar, and they continue to deliver. I couldn't be prouder of the team we've built. With that, operator, we can open the line for questions.

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

Mayank Tandon: Congrats on the quarter. I wanted to start with your comments around just the end market being healthy, that was my sort of takeaway and the fact that you're obviously winning these multiproduct deals that are ramping up. So any initial thoughts on 2027? Is it conceivable that you can accelerate ARR growth just given some of the tailwinds as you exit '26 into '27? How should we think about that? And the same question on profitability. There have been obviously levers to drive margin expansion. How sustainable are those to drive further margin improvement in 2027?

Savneet Singh: Thanks, Mayank. I think this quarter, we grew 13% ARR growth, up from the prior quarter and up from the quarter before that. We absolutely think there's opportunity for that to grow as we continue to win new deals and with this multiproduct attachment really starting to kick in, it's certainly quite plausible. In terms of margin, absolutely. I think we've done a good job of growing while holding costs and that DNA is kind of with us. And so we'll continue to hold ourselves -- hold us up there, and we want to expand what we do in '27 on the bottom line as much as we do on the top line.

Mayank Tandon: Got it. Now I know you're not overly reliant on Tier 1 deals just given the deal activity this year and wins that you called out. But any updates in terms of large enterprise opportunities, what the pipeline looks like, the RFP activity, where you stand on some of these opportunities as you go into 2027?

Savneet Singh: We can't comment on anything specific, but I think the Tier 1 pipeline is strong across both engagement and operator, and we feel confident in our position. And as I kind of touched on the call, as we get the next major version of our product out on the POS side, in particular, I think it will help us win more deals, but also accelerate deals in time. But the pipeline is strong. We can't unfortunately comment on anything specific, but it tends to be really healthy.

Operator: Our next question comes from Stephen Sheldon at William Blair.

Stephen Sheldon: First one just on active sites. That was pretty flat sequentially, and I think most were expecting to see that tick somewhat higher given the large deployments that are underway. So was there offsetting churn to consider? If so was it concentrated to any specific product categories? And should we be expecting an uptick in active locations in 4Q?

Bryan Menar: Yes, there was an offset where it was, was in our -- a couple of our smaller concepts with single products that were not kind of the core products. And so you actually kind of see that offset to see the ARPU increase significantly again quarter-over-quarter. And so that's the offset then with sites that we put on were also with multiproduct sites.

Stephen Sheldon: Got it. Makes sense. And then on subscription gross margins, it's been in a very tight range this year. I know there are a lot of moving pieces. So maybe just refresh us on some of the puts and takes there if possible. It sounds like Bridg improvements helped some this quarter. But -- so yes, I would love some of the puts and takes there. And maybe just early thoughts on how you think that could trend next year and going forward, especially as we continue to see these Tier 1 go-lives.

Bryan Menar: I just want to make sure I'm understanding your question directly. And the puts and takes on some of the products that we're rolling out?

Stephen Sheldon: Sorry, just the subscription gross margins, like it's been in a tight range, just lower than it has been. It's been as high as low 70s going back a few years ago. So is there a -- do you see a pathway to getting that back closer to 70%?

Bryan Menar: Yes, it's going to be -- it will be over time, right? So we're -- I think in each of our individual products, we've actually seen -- we haven't seen any kind of margin rate degradation. When we initially acquired Bridg, we knew we were acquiring at a time that had lower margin rates, but we also saw visibility on how we continue to improve those. We actually saw that actually transpire here in Q3, which I kind of hinted at in the earnings script. What I would say is probably -- we're at 66%. Going up at 66% to 67%, 68% is probably in the foreseeable future where we're at right now as we blend those margins in.

We still have the headwinds also from, as we know, the acquisition that we had with the Plexure account that we're working through, and that's something that as we work through with that actual contract through the exit of next year, have an ability to change those margin rates as well.

Operator: Our next question comes from Eric Martinuzzi at Lake Street Capital Markets.

Eric Martinuzzi: Yes, at least versus my own model, it looks like there was a good chunk of outperformance on the hardware side. Wondering just kind of what -- if there was any particular 1Z, 2Z behind that? And then the expectation for Q4 for hardware, could you cover that again?

Savneet Singh: Yes. As Bryan mentioned in his script, we continue to see stronger hardware demand from our historical large Tier 1 accounts on the hardware side. And I think -- we sort of continue to say we don't think it will continue to stay as high, but I think it will start to come back to normal levels over the next couple of quarters here because we've had this very, very strong outperformance this year. And also, I think part of it is our strategic management of our supply chain allows us to be in a better position than many of our peers to support our customers during this time. So I think we've won more share.

Hopefully, that leads to us also then continuing more share from a service perspective and then eventually from an [indiscernible] perspective. And so I think it will continue to be very high in Q4, maybe not quite as high as it is now. And then we'll see how '27 looks.

Eric Martinuzzi: And is that -- I saw the inventory uptick between Q2 and Q3, that's to support those large Tier 1 accounts in this demand kind of my words, not yours, but a bit of a bubble here over the next couple of quarters?

Bryan Menar: Yes. And it's also some pull. We've talked about our commitments we were making earlier this year on the memory chips. And so in Q3, we had some of the -- some of our phased payments of those going in too. So you're correct. I think inventory was up about $41 million here. But we're feeling good that what we've actually negotiated early this year takes care of us from a memory chip standpoint, at least a year out from where we're at right now, and we're able to actually lock in versus current chip rates, probably 30%, 40% cheaper pricing because of that.

So we were willing to make that bet out there knowing that we had committed amount from our customers. So that's probably -- that in addition to the increased revenue activity you're seeing in the near term is why the inventory level is where it's at.

Eric Martinuzzi: Okay. And then terrific performance on the profits. It's really nice to see the plan come to fruition here on the adjusted EBITDA expansion in the back half of the year. As far as the SG&A that I think you said it was $51.9 million on the non-GAAP OpEx. What's the expectation for Q4?

Bryan Menar: It's just -- it's going to be a modest increase, right? So I mean, when we talk about modest, you're talking like maybe $1 million to $2 million tops that's in there. We continue to manage through on the G&A. It's more some incremental investment in R&D and a little bit in sales and market.

Operator: Our next question comes from Ella Smith at JPMorgan.

Eleanor Smith: So first, I know it's early to talk about monetization, but I'm curious how you're thinking about the road map to monetizing PAR Intelligence? And what do you think is the right pricing model for it?

Savneet Singh: From a road map perspective, our goal has been to get our product in the hands of as many users as possible, see how they use it, see how they engage with the telemetry data to make sure we're adding value and then look to monetize next year. I think what we've observed so far is that the value we create is significant. And the key point for us will be to prove to our customers that the value we're creating could not have been created without PAR Intelligence, which we're excited to sort of get that out the door the next quarter or so here. And I think once we prove that, monetizing -- monetization will come right after.

In terms of how we monetize, today, we're envisioning it as a more traditional SaaS model, but it sort of depends on what outcomes we can create going forward. But I think the categories that we serve, that's -- I think they've been used to that model, and I think that's what you'll expect us to continue with.

Eleanor Smith: Very clear. And Savneet, on Burger King, can you please give us a lay of the land? What has already been accomplished? And what has yet to be deployed in 4Q and in 2027?

Savneet Singh: Yes. In Q3, we crossed well over 5,000 sites. We hope to be principally done by the end of this year. So there's not a ton left after we get through this year. And then we'll start working a lot harder to start rolling out more aggressively PAR OPS next year. So we've still got some nice, call it, backlog, if you would, on that side.

Operator: [Operator Instructions] Our next question comes from Andrew Harte at BTIG.

Andrew Harte: Great progress on the EBITDA margins. I know we're not talking about 2027. But Savneet, would love to just kind of hear how you're thinking about the incremental margins in the business and maybe a framework you could kind of provide us so we can start putting math around where we think 2027 EBITDA and EBITDA margins can be shaking out.

Savneet Singh: Yes. I mean we continue to sort of, I think, find more efficiencies in our model. And as Bryan and I kind of both touched on, as we sell more multiproduct, we'll continue to see that because the ability to be more efficient across multiple products and the customer, I think, grows over time. And as we talked about our contracting, but also how we look at bundling services around that also increases the LTV over time. So I think today, if you look at the margin contribution of new revenue -- software revenue added is around 70%. I think that's probably a safe number to go with going forward. So it's very, very efficient and high margin for us.

And I think it's critical is that you see that we've continued to invest in R&D. And so we've yet to take any cost out there. And instead, we've made investments in R&D to kind of prove out that the velocity of innovation will actually help us expand the LTV of customers, whether it's through new products or new functionality with existing products.

Andrew Harte: Okay. And then I guess on that point of investing in R&D, I appreciate that. I guess when you also think about kind of go-to-market, like it's been over a year now where you've had international capabilities with TASK, over a year now where you've been in the C-store and then obviously, your like traditional core markets. I guess what kind of pockets or verticals are you most excited to be investing in from a go-to-market perspective where you see a lot of opportunity to win business?

Savneet Singh: Man, that's like asking what's your favorite kid. And I think we see opportunity and I hate to give you an answer like that. But on the retail side, the team has just executed beautifully, and we see so much opportunity there. We're making some really big, big innovation bets there and excited to see those hopefully hit the market sometime soon or get some commitment sometime soon. And so I'm excited to see, can we actually be disruptor again in that market where we have been for the last couple of years. Can we get another gigantic leg of the stool. So I'm super excited about that investment.

On the restaurant side, I touched on it here, but our next major version of PAR POS is coming out next year. And it's going to be incredibly helpful for us, not only in winning new deals, but also giving tremendous new functionality to our existing customers. And so that's an equally exciting investment and one that I think our entire company is focused on getting out the door. Internationally, the same type of thing. We're winning deals on the PaaS platform, leveraging that platform in the retail side in the U.S.

And so if I was to sort of simplify it, I'd say we're probably most excited about the ability to be sort of in-store as it relates to retail and then sort of the next layer of growth within PAR POS. And then obviously, of course, PAR Intelligence is probably getting the most investment.

Operator: Our next question comes from Ted Farley at Jefferies.

Thomas Farley: This is Teddy on for Samad Samana. Congrats on the strong quarter. Last quarter, you noted seeing more momentum out of the mid-tier customers, maybe relative to Tier 1. You've highlighted the strength across Tier 1s on the call already, but any color you can provide on the mid-tier? Any differences standing out on multiproduct attach rates or retention?

Savneet Singh: Yes. I think that the mid-tier is doing fantastic right now. You can sort of see just how many multiproduct deals we're winning, more often that those are in the mid-tier. And I think as we move to models of new models of sales to push deeper into that market, we'll continue to win a lot more share there. So the mid-tier pipeline has definitely grown a lot this year, but I think that's a lot more of our success and better product integration, making it simpler for these smaller organizations. So we -- what I'm excited about there is, first, getting the existing ones rolled out.

And so you can see we continue to grow revenue sequentially while growing profits and a lot of that is those multiproducts with higher ARPU. And then the continued growth of that pipeline for net new deals. So it's really exciting what's happening there.

Operator: 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: Thanks, Jacinda, and thank you to everyone for joining us today. We appreciate you setting the time aside for us. We look forward to updating you further in the coming weeks. Have a good night.

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

This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. Parts of this article were created using Large Language Models (LLMs) based on The Motley Fool's insights and investing approach. It has been reviewed by our AI quality control systems. Since LLMs cannot (currently) own stocks, it has no positions in any of the stocks mentioned. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.

The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.