PAR Technology Corporation (PAR) Earnings Call Transcript

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

Thank you, Felicia, and good afternoon, everyone, and thank you for joining us today for PAR Technologies 2026 Second Quarter Financial Results Call. Earlier today, we released our financial results. The earnings release is available on the Investor Relations page of our website at partech.com, where you can also find the Q2 financial presentation as well as in our related Form 8-K furnished to the SEC. Before we begin, please be advised that our remarks today will contain forward-looking statements. These forward-looking statements are subject to risks, uncertainties and other factors, which could cause actual results to differ materially from those expressed or implied by such forward-looking statements. For additional information on these factors, please refer to our earnings release and other reports filed with the SEC. Also today, we'll be discussing or providing certain non-GAAP financial measures, which we believe will provide additional clarity regarding our ongoing performance. For a full reconciliation of the non-GAAP financial measures discussed in this call to the most comparable GAAP measure in accordance with SEC regulations, please see our press release furnished as an exhibit to our Form 8-K filed this afternoon and our supplemental materials available on our website. Joining me on the call today is PAR's CEO, Savneet Singh; and Bryan Menar, PAR's Chief Financial Officer. I'd now like to turn the call over to Savneet for the formal remarks portion of the call, which will be followed by general Q&A. Savneet?

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

Thank you, Savneet, and good afternoon, everyone. In Q2, we continue to execute to our 2026 operating plan. delivering both total revenue and adjusted EBITDA that exceeded the high end of the guidance we introduced last quarter. We continue to drive organic growth across our products and the verticals we serve, and our disciplined management of OpEx is allowing the incremental margin contribution to flow through to the bottom line. For the sixth quarter in a row, adjusted EBITDA has grown sequentially, reaching $14.3 million in Q2 up 158% compared to Q2 prior year. Now to the financial details. Total revenues were $133 million for Q2 2026, an increase of 19% compared to the same period in 2025, inclusive of subscription service revenue growth of 16%. Net loss for the quarter -- second quarter of 2026, was $17 million or $0.41 loss per share compared to a net loss of $21 million or $0.52 loss per share reported for the same period in 2025. Non-GAAP net income for the second quarter of 2026 was $7.5 million or $0.18 diluted earnings per share, an improvement of $6.9 million compared to a non-GAAP net income of $0.6 million or $0.01 diluted earnings per share for the prior year. Adjusted EBITDA for the second quarter of 2026, was $14.3 million, an improvement of $5.3 million sequentially from Q1 2026 and 8.7% when compared to the same period in 2025. Our sequential and annual improvement a result of our ability to drive both growth and profitability. Now for more details on revenue. Subscription service revenue was reported at $83 million, an increase of $11 million or 16% from the $72 million reported in the prior year and represents 63% of total PAR revenue. ARR exiting the quarter was $338 million, an increase of 17% from last year's Q2. Total organic ARR was up 12% year-over-year. We're entering the second half of the year with a large backlog of go-lives driven by both Burger King and Papa John's rollouts in addition to healthy pipeline across our products and verticals we serve. As such, we expect second half ARR growth to be meaningfully larger than the first half, a growth phasing that is similar to what we experienced in 2025. Hardware revenue in the quarter was $35 million, an increase of $8 million or 31% from the $27 million reported in the prior year. This was our strongest harvest sales quarter in at least 10 years. The volume was driven by both refresh activity and expansion of partnership with our legacy customer, as well as continued penetration of hardware attachment into our expanding software customer base. Professional service revenue was reported at $15 million, an increase of $1 million or 2% from the $14 million reported in the prior year. The increase was primarily driven by an increase in installation revenues associated with the rollout of Tier 1 customers. Now turning to margins. Gross margin was $57 million, an increase of $6 million or 11% from the $51 million reported in the prior year. The increase was driven by subscription services with gross margin dollars of $46 million, an increase of $6 million or 60% from the $40 million reported in the prior year. GAAP subscription service margin for the quarter was 55.2% compared to 55.3% reported in the prior year. Excluding the amortization of intangible assets, stock-based compensation and severance, non-GAAP subscription service margin for Q2 2026 was 65.1% compared to 66.4% in Q2 2025, with a modest change reflecting a shift in product mix as Q2 included a full quarter of Bridg operations. We expect this baseline reset to reverse over the next few quarters as we execute the planned business model changes to Bridg post the acquisition. Hardware margin for the quarter was 20% versus 27% in the prior year. This quarter's performance is in line with recent quarterly results, which reflect the current tariff and supply chain constraint environment. We expect Hardware margins to continue to be in the low 20s percent range moving forward. Professional Service margin for the quarter was 23% compared to 29% reported in the prior year. This quarter's result was negatively impacted by a timing of some of our hardware-related service contracts. Our outlook on go-forward Professional Service margins has not changed, and we expect the range of the mid- to upper 20s percent. In regard to operating expenses, GAAP sales and marketing was $11.6 million, a decrease of $0.7 million from the $12.3 million reported for the prior year, driven by a reduction of organic sales and marketing expenses of $1.2 million, partially offset by $0.5 million of expenses from the recently acquired Bridg product line. GAAP G&A was $26.3 million, a decrease of $5.4 million from the $31.7 million reported in the prior year. The decrease was substantially driven by strategic reorg changes implemented earlier this year. GAAP R&D was $22.5 million, an increase of $1.6 million from the $20.9 million recorded in the prior year. The increase was [indiscernible] by R&D expense stemming from post-acquisition operations of the Bridg product line. as organic R&D expense was relatively flat year-over-year. Operating expenses, excluding non-GAAP adjustments was $51 million, a decrease of $3 million or 5% versus Q2 2025. For Q2, non-GAAP OpEx as a percent of total revenue was 38%, a significant 1,000 basis point improvement from 48% in Q2 of the prior year, demonstrating our ability to scale efficiently and drive operating leverage. The realignment of operations into two verticals and the accelerated adoption of our AI tool set within our operations has enabled our teams to realize operational efficiencies and additional scale. Now to provide information on the company's cash flow and balance sheet position. As of June 30, 2026, we had cash and cash equivalents of $77 million. Our cash balance was flat when compared to the prior quarter, with free cash flow of $3 million, offset by cash use of $3 million for the final payout of the 2026 notes. Free cash flow for the quarter improved $11.5 million when compared to Q2 2025. The outpacing adjusted EBITDA improvement of $8.7 million during the period. We expect free cash flow conversion to continue to improve meaningfully for the remainder of the year as we continue to drive additional adjusted EBITDA [indiscernible] mass and execute to additional working capital tailwinds. To recap performance, Q2 marked another quarter of meaningful acceleration of profitability while continuing to grow the top line. This momentum is evident across the following key financial metrics. Revenue grew 19% year-over-year, with Subscription Service revenue up 16%. Non-GAAP OpEx as a percent of total revenue improved 1,000 basis points from Q2 2025, and adjusted EBITDA was $14.3 million for the quarter, an improvement of $8.7 million from Q2 2025, and a $5.3 million sequential improvement from Q1. Now let me share our expectations going forward. When we introduced formal guidance last quarter, our goal was to give investors greater transparency into the business. This quarter, both total revenue and adjusted EBITDA came in above the high end of the outlook provided. We are raising our full year 2026 outlook for both metrics. These results reflect the visibility in our business while also driving operating leverage. For the third quarter of 2026, we expect total revenue in the range of $128 million to $132 million and adjusted EBITDA in the range of $13.5 million to $14.5 million. For the full year 2026, we now expect total revenue in the range of $516 million to $523 million, up from the prior range of $500 million to $515 million and adjusted EBITDA in the range of $50 million to $53 million, up from our prior range of $44 million to $47 million. A few points of context on the outlook. We expect Subscription Service revenue growth to continue to strengthen in the back half of the year, as we continue to roll out multiple Tier 1 accounts go-live with recent Tier 2 and Tier 3 platform wins and continue to build momentum expanding our platform within our customer -- current customer base. On Hardware, Q2 was a historic quarter and benefited from elevated Tier 1 [indiscernible] activity, and we expect Hardware revenue to begin to normalize in the second half. Additionally, we anticipate Hardware margins will stabilize in a low 20% range as our pricing actions continue to offset component cost pressures. On profitability, adjusted EBITDA of $14.3 million in the second quarter, combined with our outlook for the full year reflects substantial improvement over 2025, driven by both continued topline growth and a cost base we have structurally reset. Taking the elevated hardware revenue into consideration a more normalized Q2 adjusted EBITDA would be $13 million when considering an appropriate baseline to build out second half of the year expectations. The restructuring actions we executed earlier this year are driving a step down in our operating expense run rate with the second quarter reflecting the largest step change in that run rate. Looking to the balance of the year, we expect OpEx to stay relatively flat to modest growth as we plan to drive additional operating efficiencies to help support reinvestments into our highest return opportunities, most notably PAR Intelligence and Agentic platform. That investment builds through the back half of the year within a disciplined framework that prioritizes durable and profitable growth. I'll now turn the call back over to Savneet for closing remarks prior to moving to Q&A.

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

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

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

Yes. We feel very good from now at the end of the year, we've got good visibility on the Operators, Cloud side, the Retail side, and we're getting there on Engagement Ordering. So we feel pretty good where we are now. Visibility has increased, which is why we gave the commentary that we feel good about the second half ramp.

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

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

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

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

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

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

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

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

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

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

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

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

I think 2 metrics. So 1 is just ARR growth. I think as we have ARR growth, it's representative of that multiproduct growth. And the second is ARPU as we have, obviously, ARR and second -- so you can see the ARPU. And if you kind of look at it going backwards, you can see it continue to sign up, climb up, climb up and that's relative to the multiproduct attachment that you see. So we're trying to make it simpler. And as you said, with the platform strategy, breaking it up, it becomes too challenging or also think too complicated. And so having one metric or one site count allows us to [indiscernible] metrics, which we're excited about.

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

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