How PAR Technology Reached $450M Revenue and $2B Market Cap While Growing 25% Per Year (Interview with CEO Savneet Singh)

Market Cap Context and Introduction

Nathan Latka

00:00But this is a market cap late last night, $1,897,000,000. What's crazy about this graph, you look at it was at a high back in 2021, but revenue has more than doubled since 2021. So why hasn't valuation also more than doubled? Please help me welcome to the stage, Sabneet Singh with PAR Technologies. Thanks

00:21for being here, man. Yeah. Yeah. Yeah.

Third Fastest Growing Publicly Traded Company

Nathan Latka

00:25Third fastest growing. Do you know who the two and one are?

Savneet Singh

00:28>> I have no idea.

Nathan Latka

00:29It's still impressive on this market to get this kind of to get these kinds of deals

Savneet Singh

00:32>> Yeah. Yeah.

Why the Market May Be Undervaluing PAR

Nathan Latka

00:33What's your take on why why the market is not valuing your revenue growth? Is it just fed and interest?

Savneet Singh

00:38>> Oh, I would I would take the opposite. I think our stocks kicked ass. So so if you look at so we're, you know, about $2,000,000,000 market cap. But most of our life, we've been around, you know, less than 2 less than 1,000,000,000 for a lot of it. In that sort of sub $10,000,000,000 software, we're the best performer sans one company over the last one, three, five years. So it's a little bit size dependent. Right? You've had

00:59>> the big stocks take away most of the gains that have kind of hit it. So the average this is a crazy statistic, but the average the median software company that's public is down 21% over the last six years, from 2018 to now. So you've actually had negative returns in software over time. So we feel great because we're up, you five x or something since that time. And then on this chart particularly, you know, was crazy. In

01:19>> 2021, our stock was trading at 30 times revenue. We were public, so we were selling shares left and right by by buying companies. So I think today, we're actually undervalued for the and and and we look forward to and I think that's why the stocks are revaluing. But anyways, long story short, we were overvalued, and I think now we're growing into it. But, you know, it's we get a lot because of the VC world, think we

01:37>> kinda missed this. But software's actually been a really horrible category to invest in for the last five, six, seven years.

Savneet Singh Background and Turnaround Story

Nathan Latka

01:42Saav's got a a deep history investing in SaaS. He's running his own private equity shop before this, had his own debt shop before this. Just, I would say, one of the savviest business guys I've met. We're gonna dive into his most recent earnings report, but I wanna just very quickly in about sixty seconds, I'm gonna talk through the context really quick so we all have it. 39 year old CEO came in recruited by the board. Actually,

02:02the board wanted you to run the recruitment process and then said, yeah, Actually, we just wanna get you addicted.

Savneet Singh

02:07>> That's right. Yeah.

Nathan Latka

02:08He's now the CEO, comes in in 2019. You can see what he's done since in terms of revenue growth. This is hard shit. This is really hard stuff, especially as a publicly traded company. This guy's taking bold bets. The company has more than doubled its revenue and so we'll talk about operations, product, and M and A strategy over the next twenty minutes. We talked about public markets. This was old par before Sov. Just so you put

02:28a visual to what the product is, it's the checkout systems. It used to just be sort of a hardware. Now, we'll talk more about this. It's way more software. Now, he comes in in 2018 as CEO and this is what their product mix looks like today. Why don't you talk maybe just for 30

02:42>> Yeah.

02:42Sixty seconds on product?

Product Overview: ERP Platform for Restaurants

Savneet Singh

02:43>> Super simple. We sell software to restaurants. We if you go into the average restaurant, you'll be shocked how many individual products run that restaurant. It's it's upwards of twenty, thirty, 40 sometimes. So we're the point of sale system. We're the loyalty software, the online ordering system, the back office. Not everybody buys all of our products. That's kind of the the dream. But we're kind of the think of us as an ERP platform to run your restaurant.

Nathan Latka

03:03Lots of rooms to room to expand ACV and wallet share

Savneet Singh

03:05>> Absolutely.

Two Major Acquisitions Explained

Nathan Latka

03:06Product suite. You really doubled down on this at our last conference in Austin.

Savneet Singh

03:09>> Had Oh,

Nathan Latka

03:10you were fresh off two of these big deals. So these are two of the big deals you just did earlier this year. Paid $2.00 6,000,000 for a company called TASS, which is 40,000,000 top line, 6,000,000 EBITDA, about a 34 x EBITDA multiple, five x ARR multiple, which some people might say, oh my gosh, so I've got a great deal, this is incredible. We'll talk more about that in a second. Second big deal, you know, very close,

03:28paid another $170,000,000 for this business, 40,000,000 top line, 14,000,000 EBITDA. What's cool about this is you've now had time to sort of sync all these things together Yep. Around this product map and vision. You're focused on ARR per share. Again, I'm going to this quickly now. We'll come back and dive deep. I want to get to this though. Because when you look at the top line, something special happened. How do you go from burning a bunch

03:48to cash, you know, profiting Yeah. A word.

From Hardware to Software: Revenue Transformation

Savneet Singh

03:50>> It's crazy. We're now making money, which is which is crazy. But, you know, when we the chart kind of five or six slides ago of our revenue from 02/2004 was kind of hiding something. When we took over the company, the revenues were about $1.70, $1.80, and they were $5,000,000 of software revenue, a 165 of hardware and services. Where today, we'll be, you know, whatever, $4.50 of revenue, but $2.50, $2.60 will be software. The software has sort

04:12>> of grown, you know, you know, forty, fifty x during that period of time. And part of that though was our core product, our point of sale product was broken. So you all work in software, but we were the the the first SaaS product in restaurants. But we were shipping product once a year. Wow. If you went to a Dairy Queen, there was a decent chance we would take down the store as opposed to actually processing a

04:31>> transaction. And so we had to put in tens of millions of dollars to stabilize and rebuild the product while growing. So we had to do an incredible amount of reinvestment. Now we're getting the benefit of we've been we're public, so we disclosed this, but we haven't grown our operating expenses in almost two years. Yet we've grown our revenue 25% a year over those periods of time, so way well over doubled. Also, the SEC filings are kind

04:52>> of complicated, so we didn't actually lose this much money. You know, we sold the business, and so that's the 77,000,000 there. So but generally, you know, we've we've kind of been able to while we work through this turnaround, we try to burn, you know, 2 to 4,000,000 a quarter while keeping the top line, know, relatively high, now it's obviously inflected nicely to profitability.

Nathan Latka

05:11Talk about setting strategy and then divesting non core assets. You sold, I think it was your defense.

Savneet Singh

05:15>> Yes.

Nathan Latka

05:16What did that thing even do? How much revenue to represent? Why'd you sell it?

Savneet Singh

05:18>> So when when you're public, you don't have necessarily the beauty of when you're private, you can do whatever the hell you want. And so, you know, when we were it's I hate to take a lot of time, but PAR was founded fifty or sixty years ago as a defense contracting company. In 1978, we invented the point of sale terminals, the device you check out on, and then went public in '82. And pretty much since that point,

Divesting the Defense Business

Savneet Singh

05:36>> we sucked. We were when when when we stepped in to run the company in 2018, the market cap of the company, which is the value of the company, was lower than when we went public in 1982.

05:47So

05:48>> for forty years, we had no shareholder value creation. If you had just taken all the money at par at the time of the IPO and invested in this S and P 500, you'd be worth $15,000,000,000. And so an incredible story of shareholder value destruction. And so what we realized was that we couldn't keep doing the same thing. And so we had to do a crazy dramatic shift. And so what I think we learned along the way

06:10>> was that and I know this is not your question at all, but I think probably helpful for you all is that getting in software sounds like a better business model. But more often than not, it is not big enough to be a scalable public company or to be a venture backed business. And when I took over the business, I wasn't sure if the product we had was like venture backable or public. And so we had this

06:31>> government contracting business that was printing $10,000,000 a year. And so it kinda

Nathan Latka

06:36On the top line or bottom?

Savneet Singh

06:37>> On the bottom.

06:37Was top on that?

Nathan Latka

06:38>> The top was probably 70.

Savneet Singh

06:39Okay. So what is that? That's like 40% of the total business.

06:42>> Oh, it's it's huge. Yeah. And from profits, it was all of our well, we were losing money. Right? So it's it was 200% of our profits. And so, you know, when we got there, everyone said, well, go sell the government business. Like, why are you if you're trying to build a software company, why are you trying to hire a government business? I was like, we could do that. But then when I disclosed the market that that

06:57>> government business is printing $10,000,000, they're gonna see that our software business is on fire and that our customer NPS is negative 60. Our CSAT was negative 99. We didn't have one one customer that was green on our on our our CSM scores. Right? And so it was meant in many ways to kind of let give us time to candidly two years to rebuild our products so that we could then say, alright. Now we don't need this

07:20>> government thing to keep us going. So that's why we kept it for a long time. We sold it and immediately deployed it back in this acquisition you showed. And so, you know, our capital allocation philosophy has sort of been, we don't wanna sit on your cash as a public company. We wanna deploy it. And if you got nowhere to put it, we'll give it back to you.

07:33>> Yep.

Nathan Latka

07:34What did you sell the defense business for?

Savneet Singh

07:35>> We sold it in two different two we broke it into business a little bit, like, $102,103,000,000.

Nathan Latka

07:39Okay. So that that came as cash back to your balance sheet?

Savneet Singh

07:42>> That's right. And then we

07:42funded it

07:43>> right back. That's right. One of them.

Nathan Latka

07:45One of them. Okay. So walk us through this is now sort of putting everything together, and it gives you a chance to talk about the different kinds of revenue you're doing today. Yep. Two acquisitions you're building in, hardware over software. Walk us through this.

Three Revenue Lines: Hardware, Subscriptions, Services

Savneet Singh

07:56>> Now So it's a lot simpler. So we have three lines of revenue hardware. So when you go to a restaurant, that device the cashier is pounding on, we still sell that. You know, we try to sell 80 to 100,000,000 of that a year. That's got sort of 20% gross margins, 21, 23 in a good year. This is a shitty year for it. So sorry, bad year for this. And so this will be bit lower. Subscription services,

08:14>> that's our software line. So if you look, this is a quarter. So 45,000,000 we did last quarter. Times it by four, you can get the run rate. Then we close an acquisition. Now we're kind of run rating two forty to 50. Then professional services, is everything from install to repair, warranty, and other services. The juice is all in SaaS business. Subscription services is our payments and our SaaS business. So that's where we get the multiple. That's

08:39>> where Wall Street gets excited about our story. That's where all the growth is. And so you can see in our public commentary, we literally spend sixteen seconds on the rest of the business and everything is on our ARR and gross margins.

Nathan Latka

08:51Yep. When you guys think about really quick, think about your current revenue or maybe last month's MRR multiplied by 12, and then what you spent on total paid, sales and marketing, salaries, commissions to sales reps, LinkedIn ads. What percent are you guys spending as a as a percent of your ARR on sales and marketing? Anyone off the top of your head? Is it like 5%, 25%? Do the math really quick. Ben, what do you I mean,

09:13what do you see? You look at p and l's all day long from SaaS companies. What are they spending?

Sales and Marketing Efficiency at 14 Percent

Nathan Latka

09:25So founder led sales, what he's saying is the founder is leading a lot of the sales. They can get away with spending maybe less than 10% of total revenue on sales and marketing. If it's not founder led, then they have to go higher for that function. He's seen it get as high as 50%. I feel like you've got some arbitrage here because you got 9,800,000 of total sales and marketing.

Savneet Singh

09:41>> Yeah. So we're great. Yeah. Yeah. We're we're we're getting there. So what's really cool about our model is the reason why the invest investors gave us such a break, right, we were losing money and growing and our stock kept going up, is that the economic model, could kinda see through it. So today at par, we spend around 14% of our revenues on sales and marketing. Yep. We've

Nathan Latka

10:01Which I mean, correct me if I'm wrong. That feels like that's world class.

Savneet Singh

10:03>> That's world class. Yeah. Yeah. So so the average SaaS company is around 25%. This is public I'm using public info. The average r and d spend is about 25%. We're like at 31%, so we're kind of within swing distance. And then G and A, which is your overhead cost, is sort of the rest of it. And, you know, I I it's very much to me tied to your price point. So I think people get kind of

10:23>> again, we and I talk a lot, SaaS is not SaaS. And so our average customer is spending hundreds of thousands of millions of dollars with us. And so that is a suit carrying briefcase salesperson, not a download a free demo. And so in a when you're selling to SMBs, when you're selling to individuals, your sales and marketing cost is just high because it's it's groundswell. It's it's it's it's it's deal by deal versus enterprise deals. Know,

10:47>> we we signed a deal in December of last year That was a $230,000,000 ten year deal, $23,000,000 a year. That took one salesperson. Right? That's the same sale and so that's the that that you can think of the CACTLTVM.

Burger King Deal: $23M Per Year Largest Customer

Nathan Latka

10:59Is that your largest customer?

Savneet Singh

11:00>> Yes. Burger King. It it will be. You know, we just did a deal with a, you know, a big another big chain, 5,000,000 a year, one sales person. And so enterprise companies have the ability to be world class on that sales and marketing side. The real where you see the real win in margins, and and I think your last guest was talking about multi product or two years ago, is that can you sell multiple products from

11:20>> different buyer personas from the same bag? What that means is, is your first product selling to a CMO and your next product gonna sell to a CFO? And if you can do that from the same go to market organization, that's when you get sub 15% sales and marketing. That is really, really, really hard to do because inevitably your sales team is like, well, I'm the expert on CMOs and I know their budget and I know the

11:36>> CFO. And your product teams are like, well, we should have two product teams and one product. That's when businesses get really complicated. That's kind of why what we've done really well, we've been able to penetrate the same customers over and over again.

Nathan Latka

11:45So just to make this land, because you're very inspirational, you're 400,000,000 of revenue. To make it maybe actionable for a 5 or $10,000,000 founder in the audience is the is the lesson, hey, if you guys have a sales team and you're trying to sell to a CMO but also the CTO, try and figure out how to get the same sales rep selling to both. Don't resist the urge to split it.

Savneet Singh

12:02>> Or if it doesn't work, immediately recognize that and figure out a super efficient way to do it. And and so candidly for us apart, we want relatively decentralized. So our org designs are really much more like Amazon than they are a clean SaaS business because I believe in accountability. And so every product manager or GM has a PNL. It's really objective. It's an intense environment. But it's also a fun place to work because, you know, if

12:23>> I look at the average and this is we don't hire based on age, but the average age of the GMs who run $100,000,000 PNLs at our company is like 30. You know, we've got somebody that's 26 or 27. We got somebody that's like 35. Wow. And so it create when you have a decentralized org chart, it gives you it creates a lot more opportunity. Right? Because you can be like, I'm the GM of a 5,000,000 revenue

12:38>> line. You still feel like that that's yours. That's your baby. Own every single decision. And so the point I'm making is if you've got multi product with multi persona, figure out quickly if you can do it at one bag or two. And if you do two, rebuild your design or design off that.

Nathan Latka

12:51We've got about five more minutes left with Saab. And then when we have Nicholas on stage next, Sleep Hyper will talk more about how they've increased their ACV from six k to 30 k, which might be more actionable versus selling, which is incredible at $23,000,000 per was that per year customer burger?

Savneet Singh

13:04>> Yeah. That's this is wild.

Nathan Latka

13:05How many of those can you sell in a year? How many Burger Kings are there?

Savneet Singh

13:09>> You try oh, that's our biggest. We generally try to get a few of these sort of plus $5,000,000 plus deals here.

M and A Strategy and Integration Discipline

Nathan Latka

13:14Yep. Yep. I mean, so this is is this still actively how you're thinking about product roadmap? Any big m and a on the on the horizon?

Savneet Singh

13:19>> We're we're taking a breather on m and a because we, know, we we and a has worked categorically well for us. You know, when we announced these deals, our stock was $39. Today, it's, you know, 50 plus. But more importantly, when we look at m and a, we go in before we close a deal with a financial plan, an organizational design plan, like who reports to who, and a cultural plan, which is how we integrate these

13:39>> cultures. And

13:42>> rigor the I think we do upfront allows these deals to work. I would tell you, if asked our people at our leadership team, did this company, Stuza, we bought work, we'd be like, holy crap. Not only is the deal a home run, it changed us for the better. And so we do a ton of work upfront. Now the challenge is that it creates a lot of change inside. Right? You've got a bigger product org, you've a

13:59>> bigger sales org, you've got different people who now are like, hey, I've got a different opinion. And so I think you need a little time to digest these deals and and make them swim on on the same song sheet. So literally yesterday, just announced our, you know, an updated set of values across our company that incorporates the two new companies we acquired. So they feel engendered as part of the company. But short answer is we are,

14:18>> you know, deeply focused on owning the enterprise restaurant. And so we don't want you to go to 50 vendors. We want you to go five, and we want us to be 80% of that. And so we will continue to sort of look to build or buy, but today it's it's built.

Nathan Latka

14:31Yep. This acquisition you guys are seeing on the screen, many founders today doing $1,020,000,000 bucks of revenue would say, man, I'd love to get a 10 x forward looking ARR multiple or a forward looking, you know, 15 x forward looking ARR multiple or if you're raising around, you'd love to raise at a 20 x, right, ARR multiple. This guy got a deal done at a 14 x EBITDA multiple. So ignore top on bottom line, what is

14:53that what what would be the equivalent ARR?

Savneet Singh

14:55>> Yeah. 4.5 x ARR.

Nathan Latka

14:56I mean, you a genius negotiator? How did you get this done? Tell us the dirt of how you got leverage on a company like this to sell you for so cheaply.

Savneet Singh

15:04>> Well, I I would say this. The founder, after we got a deal done, didn't talk to me for thirty days because he was so pissed, but we're now really good buddies.

Nathan Latka

15:10That's how you know you got a good deal.

Savneet Singh

15:12>> So I I'll turn it more to advice for 50 people in the room. If you're building your company to be sold, you should go in assuming that you're going to get the median multiple at best. You don't go in assuming you're 10 or 20 or 30. And the reason why is I I I come to this conference and and and part of reason I love it is, I'll meet people and say, hey, I'm growing a 100%

15:30>> a year. I'm worth 10 x. And I'm like, well, what's your churn? What's your ACV? And I'm like, nah, you're worth like four. And and the reason why, as as an acquirer of software companies, those 10 to 15 x companies are incredibly rare now. And and and they should stay that way because that's the way it's always been when that period of hype has gone. And so you should be building, assuming that the long term SaaS

15:48>> index for literally twenty years since SAP and Oracle started disclosing their recurring revenues, has always been around five and a half to six times XTM revenue. That is the median of the public companies. And so if you're a $3,000,000 revenue company, you're going get a lower multiple. If you're a $20,000,000 model, you might get a higher multiple because the size helps. But that's kind of what you should bank on. And if you're banking on the 10

ARR Per Share as a North Star Metric

Savneet Singh

16:08>> or 20 or 30, you're really you're getting crazy because it can happen, but it's tough. And by the we as a company have spent 15x, but our stock was trading at 30 x. And so it's tough. But I I would anchor yourself on the median and and work backwards.

Nathan Latka

16:20Can you talk to

16:21us more as we wrap up here a little bit more on why you choose to pull this specific graph out in your public calls?

Savneet Singh

16:27>> Yeah. And it's it's interesting, I think, for all of you to think of it this way too, which is ARR is not a tool for fundraising. ARR is a tool because it's a future proxy of cash flow. The reason why ARR became a metric in software is that in hyper growth for software, investors back in the day didn't understand that when you signed a deal that revenue was gonna be there for two years, five years, ten

16:47>> years, twenty years. And so he created this metric of ARR. But the reason why it's important is that investors will say, okay, under every dollar of ARR, there is 10¢, 15¢, 20¢ of future free cash flow. And that's actually what they're underwriting. They're underwriting your revenue. They're underwriting your future free cash flow. And so when we were a money losing company for a long time, I wanted a way to go to market and say, well, how

17:06>> can I tell you? I know we're gonna be crazy profitable, and I'm gonna explain that to you, but are we more efficient or less efficient? And so what we disclosed was we said for for every share of PAR you own, you underneath that dollar, that that share one share that you own is way more recurring revenue than when you had before, which means way more future free cash flow. And so as you guys grow your businesses

17:25>> over time, you should be thinking about if I've you know, your your your number of shares on the bottom and your ARR on top, and that should be growing incredibly quickly. So not like 10%. That should be

Nathan Latka

17:35growing Just to be clear because I know most most private companies are like, okay, crap. I don't even know how many outstanding shares I have. Like log in to Carta. Go look at your go go go look at that old Google Drive folder that you forgot what you named. It's gonna take you thirty minutes to search the right terms to look it up, but you have somewhere where you have an outstanding number of shares. Take that

17:50number, divide it into your ARR, that's how

Savneet Singh

17:51>> can fix The way to think about it is if let's just pretend you're growing a 100% a year. And then you raise a growth round for $25,000,000, you sell a third of your company. Now your share count is a third bigger. But if your growth rate goes from a 100 to a 110%, you actually didn't create value. And so I oftentimes look at that when we're acquiring companies of, hey, did you actually need that money or

Advice on Valuation Multiples for Founders

Savneet Singh

18:09>> was that money just like a a press release? And so it's a really interesting way to kinda look back and say, did like did it make sense? Can you actually put put that put that money to create more value?

Nathan Latka

18:18So guys, I would say a genius deal maker, one of the youngest publicly traded SaaS CEOs back in 2018 at 39 years old, has since more than doubled the before.

Savneet Singh

18:27>> Was it 33?

18:28>> Now. Yeah.

Nathan Latka

18:29Oh my god. My god.

Savneet Singh

18:30>> It makes me old.

Nathan Latka

18:31Now I feel like I haven't accomplished anything. Alright. SaaS Open's growing. We're gonna have 20,000 people.

Savneet Singh

18:37>> By the super shout out for Nathan. One of the the biggest mistakes if any of you met me or if I've been in the room trying to buy your company or invest in your company, the single greatest mistake that founders make is TAM. They overestimate how big their opportunity is and then they go raise super diluted venture capital money. And so I am a wild champion of the services that his his business offers because it candidly,

18:56>> it sets the market in the way that it should be run. And so I'm a big fan.

Closing Remarks and Audience Shoutout

Nathan Latka

19:00Well, on on the note of being open and transparent, I will tell you guys, part of us lending money is we have to put in our own capital. So I didn't wanna give up control. I didn't wanna give up equity. Are you I haven't asked. Are you comfortable sharing these numbers?

Savneet Singh

19:10>> Yes.

Nathan Latka

19:11So how much did you put in in the series a?

Savneet Singh

19:12>> I don't remember.

Nathan Latka

19:13You don't remember?

Savneet Singh

19:14>> That's a good problem.

Nathan Latka

19:15That means you're not thinking about me?

19:17>> Well, yeah. Wonderful. It was it was 8,000,000 on a on a on a on a '90 pre. Right, and that 8,000,000 we basically still all have in the bank because we have a team of 12 people doing, you know, north of 10,000,000, let's say north of $10,000,000 of revenue. So

19:30but you allowed us to do that. We've stayed disciplined. We'll keep staying disciplined. We only care about AR per employee because we wanna be here as a lender in ten years managing a billion, $2,030,000,000,000. So thank you for that. But anyways, back to Soft, 34 year old in 2018, third fastest growing publicly traded company on a percent basis, has transitioned the business from heavy hardware to heavy SaaS. Catch them in the hallway if you can. It's

19:52gonna be a fast paced fun conversation. Also, it's deploying hundreds of millions in m and a, bringing it all together, and again, doing this in the very hard spotlight of being a publicly traded CEO. Please help me give it up for Savneet Singh.

Savneet Singh

20:04>> Thanks, Nathan. Thanks, man. Appreciate you.