Restaurant technology provider PAR Technology (NYSE:PAR) fell short of the market’s revenue expectations in Q1 CY2025, but sales rose 48.2% year on year to $103.9 million. Its non-GAAP loss of $0.01 per share was 76.7% above analysts’ consensus estimates.
Revenue: $103.9 million vs analyst estimates of $105.4 million (48.2% year-on-year growth, 1.4% miss)
Adjusted EPS: -$0.01 vs analyst estimates of -$0.04 (76.7% beat)
Adjusted EBITDA: $4.54 million vs analyst estimates of $4.09 million (4.4% margin, relatively in line)
Operating Margin: -15.2%, up from -38.2% in the same quarter last year
Annual Recurring Revenue: $282.1 million at quarter end, up 51.9% year on year
Market Capitalization: $2.53 billion
Company Overview
Originally founded in 1968 as a defense contractor for the U.S. government, PAR Technology (NYSE:PAR) provides cloud-based software, payment processing, and hardware solutions that help restaurants manage everything from point-of-sale to customer loyalty programs.
Sales Growth
Examining a company’s long-term performance can provide clues about its quality. Any business can have short-term success, but a top-tier one grows for years.
With $383.8 million in revenue over the past 12 months, PAR Technology is a small player in the business services space, which sometimes brings disadvantages compared to larger competitors benefiting from economies of scale and numerous distribution channels. On the bright side, it can grow faster because it has more room to expand.
As you can see below, PAR Technology grew its sales at an exceptional 14.2% compounded annual growth rate over the last five years. This shows it had high demand, a useful starting point for our analysis.
PAR Technology Quarterly Revenue
We at StockStory place the most emphasis on long-term growth, but within business services, a half-decade historical view may miss recent innovations or disruptive industry trends. PAR Technology’s annualized revenue growth of 5.6% over the last two years is below its five-year trend, but we still think the results were respectable.
PAR Technology Year-On-Year Revenue Growth
We can dig further into the company’s sales dynamics by analyzing its annual recurring revenue (ARR), or the revenue it expects to generate from its existing customer base in the next 12 months. PAR Technology’s ARR reached $282.1 million in the latest quarter and averaged 53.9% year-on-year growth over the last two years. Because this performance is better than its normal revenue growth, we can see the company generated more revenue from its existing customers than new customers. Holding everything else constant, this is a positive sign as it should lead to lower sales and marketing expenses.
PAR Technology Annual Recurring Revenue
This quarter, PAR Technology achieved a magnificent 48.2% year-on-year revenue growth rate, but its $103.9 million of revenue fell short of Wall Street’s lofty estimates.
Looking ahead, sell-side analysts expect revenue to grow 22.1% over the next 12 months, an improvement versus the last two years. This projection is eye-popping and suggests its newer products and services will fuel better top-line performance.
Today’s young investors likely haven’t read the timeless lessons in Gorilla Game: Picking Winners In High Technology because it was written more than 20 years ago when Microsoft and Apple were first establishing their supremacy. But if we apply the same principles, then enterprise software stocks leveraging their own generative AI capabilities may well be the Gorillas of the future. So, in that spirit, we are excited to present our Special Free Report on a profitable, fast-growing enterprise software stock that is already riding the automation wave and looking to catch the generative AI next.
Operating Margin
PAR Technology’s high expenses have contributed to an average operating margin of negative 19.4% over the last five years. Unprofitable business services companies require extra attention because they could get caught swimming naked when the tide goes out. It’s hard to trust that the business can endure a full cycle.
Looking at the trend in its profitability, PAR Technology’s operating margin decreased by 6.3 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability. PAR Technology’s performance was poor no matter how you look at it - it shows that costs were rising and it couldn’t pass them onto its customers.
PAR Technology Trailing 12-Month Operating Margin (GAAP)
In Q1, PAR Technology generated a negative 15.2% operating margin. The company's consistent lack of profits raise a flag.
Earnings Per Share
We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.
Although PAR Technology’s full-year earnings are still negative, it reduced its losses and improved its EPS by 18.7% annually over the last five years. The next few quarters will be critical for assessing its long-term profitability. We hope to see an inflection point soon.
PAR Technology Trailing 12-Month EPS (Non-GAAP)
In Q1, PAR Technology reported EPS at negative $0.01, up from negative $0.36 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street is optimistic. Analysts forecast PAR Technology’s full-year EPS of negative $0.33 will reach break even.
Key Takeaways from PAR Technology’s Q1 Results
We were impressed by how significantly PAR Technology blew past analysts’ EPS expectations this quarter. On the other hand, its revenue and ARR fell short of Wall Street’s estimates. Zooming out, we think this was a mixed quarter. The stock remained flat at $62 immediately after reporting.
