$200M Turnaround: Savneet Singh of PAR Technologies

but this is a market cap late last night $1.89 s billion what's crazy about this graph you look 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 Sab need s with par Technologies thanks for being here man yeah yeah yeah um third fastest growing do you know who the two and one are I

have no idea it's still Rive on this Market to get this kind of get these kinds of deals done what's your take on why why the market is not valuing your Revenue growth is it just fed an interest oh I would I would take the opposite I think um our stocks kicked ass so so if you look at uh so we're you know about $2 billion dollar market cap uh but most of our life we've been around you know less than two less than a billion for a lot of it um in that sort of sub1 billion dollar software where the best performer uh stands one company over the last one three five years so um it's a little bit size

dependent right you've had 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 uh 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 know 5x or something since that time and then on this chart particularly um you know it was crazy in 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 uh I think today we're actually undervalued

for the and and and we look forward to I think that's why the stocks for reing 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 of because of the VC world I think we kind of miss this but software's actually been a really horrible category to invest in for the last five six seven years sav's got a deep history investing in SAS was 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 um we're going to dive into his most recent earnings report but I want to just very quickly in about 60 seconds I'm going to

talk through the context really quick so we all have it 39-year-old CEO came in recruited by the board actually the board wanted you to run the recruitment process and then said H actually we just want to get you addicted and in he's now the CEO comes in in 2019 you can see what he's done since in terms of Revenue growth this is hard 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&a strategy over the next 20 minutes we talked about

public markets this was old par before SV just so you put a visual to what the product is it's the checkout systems right 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 60 seconds on product uh super simple we sell software to restaurants um 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 20 30 40 sometimes so we're the point of sales

system where the Loyalty software the online ordering system in the back office um not everybody buys all of our products that's kind of the dream but we're kind of the think of us as the Erp platform to run your restaurant lots of rooms to room to expand ACV and wallet sh product sweet you really doubl down on this at our last conference in Austin you had just you were fresh off to these big deals so these are two of the big deals he just did earlier this year paid 26 million for a company called task which is 40 million Topline 6 million eitaa about a 34x eitaa multiple 5x ARR multiple which some people might say oh

my gosh s got a great deal this is incredible we'll talk more about that in a second second big deal you know very close paid another 170 million bucks for this Business 40 million Topline 14 million EA what's cool about this is you've now had time to sort of sync all these things together around this product map and vision you're focused on AR per share again I'm going through 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 to cash you know profiting what million it's crazy we're

now making money which is which is crazy but you know when we the the chart kind of five or six lives ago of our revenue from 2004 was kind of hiding something when we took over the company the revenues were about 170 180 and they were um $5 million of software Revenue 165 of hardware and services where today will be you know whatever 450 of Revenue but 250 260 will be software the software sort of grown you know um you know 40 50x during that period of time and um part of that though was our core product our Point sell product was broken so you all work in software but

we were the the the first SAS product in restaurants um but we were shipping product once a year wow our if you went to a Dairy Queen there was a decent chance we would take down the store as opposed to actually processing your 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 and now we're getting the benefit of you know we've been you know we're public so we disclose this but we haven't grown our operating expenses in almost two years yet we've grown our Revenue you know 25% a year over those periods of time so way well over doubled

and so also the SEC filings are kind of complicated so um we didn't actually lose this much money you know we sold the business and so that's the 77 million there so um but generally you know we we've kind of been able to while we work through this turnaround we try to burn you know two to four million a quarter while keeping the Top Line you know relatively high and now it's obiously inflected nicely to profitability talk about setting strategy and then divesting non-core assets you sold I think it was your defense yes what did that thing even do how much revenue it represent why did you sell it so 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 this but par was founded 50 or 60 years ago as a defense Contracting company in 1978 we invented the point of sale terminal so the device you check out on and then we imp public in ' 82 and pretty much since that point we sucked we were uh 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 so for 40 years we had no shareholder value

creation if you had just taken all the money AP par at the time of the IPO and invested in this S&P 500 you'd be worth $15 billion and so an incredible story of shareholder value destruction and so um what we kind of realized was that we couldn't keep doing the same thing and so we had to do a crazy uh you know dramatic shift and so what I think we we learned along the way was that and I know this is not your question at all but that I think probably helpful for you all is is that being um getting in software sounds like a better business

model but more often than not you it is not big enough to be a scalable public company or to be a venture back business and when I took over the business I wasn't sure if the product we had was like venture bable or public and so we had this government contracting business that was printing 10 million bucks a year and so it kind of top line or bottom on the bottom what was top on that the top was probably 70 okay so what is that that's like 40% of the total business it was it was huge yeah in put from profits it was all of our you know we were losing money right so it's it was 200% of our profits and

so um 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 government business I was like we could do that but then when I disclosed the market that that the government business is printing 10 million bucks they're going to see that our software business is on fire and that our customer NPS is60 our cat was 99 we didn't have one one customer that was green on our on our our CSM scores right and so um it was in many ways to kind of let give us time to cly two years to rebuild our

products so that we could then say all right now we don't need this 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 into this acquisition you showed and so you know our Capital allocation philosophy sort of been we don't want to sit on your cash as a public the company we want to deploy it and we got nowhere to put it we'll give it back to you yep what did you sell the defense business for uh we sold in two different we broke it into business like 102 103 million something okay so that came as cash back to your balance sheet that's right and then we put that right back that's right one of them one of them one of them okay so um

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 y to Acquisitions you're building in Hardware ver software walk us through this so now it's 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 million of that a year uh that's got sort of 20% gross margins 2123 in a good year um this is a shitty year for it so sorry bad year for this and so this will a b lower um subscription Services that's our software line so if you look uh this

is the quarter so you know 45 million we did last quarter uh you know times it by four you can get the Run rate um then we close an acquisition so you know now we're kind of run rating 240 250 and then Professional Services which is everything from install to repair warranty and other sort of services the the the juice is all in this in the SAS business right subscription Services is our payments and our and our SAS business so that's where we get the multiple that's where wer gets excited about our story and that's all where all the growth is and so you can see in our public commentary we literally spend 16

seconds on the rest of the business and everything is on our a and um and gross margins Y when you guys think about really quick think about your current revenue or maybe last month's Mr multiplied by 12 and then what you spent on total paid sales and marketing salary commissions to sales reps LinkedIn ads what percent are you guys spending as as a percent of your AR 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 what do you see you look at pnls all day long

from sass companies what are they

spending okay so founder Le 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 they have to go higher for that function that he's seen it get as high as 50% I feel like you've got some Arbitrage here because you got 9.8 million of total sales Market yeah so we're great yeah we're getting there so what's really cool about our model is the reason why the in investors gave us such a break right we were losing money and growing and our stock kept going up is that the economic model you can kind

of see through it so today at par we spend um around 14% of our revenues on sales and marketing um we've uh which I mean correct me if I'm wrong that feels like that's world class that's world class yeah so so the average stas compan is around 25% um this is public I'm using public info um the average R&D spend is about 25% we're like at 31% so we're kind of within swinging distance um and then GNA which is your overhead cost um is sort of the rest of it and you know I it's very much

to me tied to your price point so I think people get kind of again we you and I talk a lot SAS is not SAS um and so you know our average customer is spending you know hundreds of thousands millions of dollars with us and so that is a a suit carrying you know briefcase salesperson not a download a free demo and so in a when you're selling to SBS when you're selling to individuals your your sales market cost is just High because it's it's ground swell it's it's it's it's it's deal by deal versus Enterprise deals you know we we signed a

deal um in December of last year that was a $230 million 10year deal $23 million a year that took one salesperson right um that's the same s and so that that you can think of the cact LTV on customer yes Burger King it it will be um you know we just did a deal with a you know a big another big chain five million year one salesperson and so you know Enterprise companies have the ability to be world class on that sales and marketing side the just the real where you see the real win in margins and and U and you think your last guest

was talking about multiproduct or Tuco is that can you sell multiple products to from different buyer personas from the same bag what that means is is your first product selling to a CMO and your next product going to 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 marketing that is really really really hard to do because inevitably your sales teams like well I'm the expert on CMOS and I know their budget and I know the CFO and your product teams are like well we should have two product teams one that's when businesses get really complicated that's kind of why what we've done really well which we've been able to penetrate the same customers over and over again just

to make this land because you're very inspirational but you're at 400 million of Revenue to make it maybe actionable for a five or $10 million 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 trying and figure out how to get the same sales rep selling to both don't resist the urge to split it or if it doesn't work immediately recognize that and figure out a super efficient way to do it and and so canly for us a part we went relatively decentralized so our org designs are really U much more like Amazon than they are a clean SAS business because I believe in

accountability and so every product manager or GM has a p&l it's really objective it's an intense environment but it's also a fun place to work because uh you know if I look at the average this is we don't hire based on age but the average age of the GMS who run $100 million pnls at our company is like 30 m you know we've got somebody that's 26 or 27 we got somebody that's like 35 W and so it create when you have a decentralized work chart it gives you creates a lot more opportunity right because you can be like I'm the GM of a $5 million Revenue line um you still feel like that's yours that's your baby you own every single decision and so um

the point I'm making is if you've got multi-product with multi-p Persona figure out quickly if you can do out a one bag or two and then if you do two rebuild your or design off that we've got about five more minutes left with Sav and then when we have Nicholas on stage next with shle Piper we'll talk more about how they've increased their ACV from 6K to 30k which might be more actionable versus selling which is incredible at $23 million per was that per year customer Burger that's this is wild how many of those can you sell in a year how many Burger Kings are there you try oh that's our biggest we generally try to get a few of these sort of plus

$5 million plus deals a year y yep I mean so this is is this still actively how you're thinking about product roap any big m&a on the on the horizon we're taking a breather on m&a because we you know we we've um m&as work categorically well for us you know when we announced these deals our stock was 39 bucks today it's you know 50 plus um but more importantly when we look at m&a we go in before we close the deal with a financial plan an organizational design plan like who reports to who and a cultural plan which is how we're going integrate these cultures and um you know

if you the rigor I think we do upfront allows these deals to work so I would tell you if you ask people at our leadership team uh you know did this company STS that we bought work we'd be like holy crap not only did the deal is the deal a home run like it changed us for the better and so we do a ton of work up front now the challenge is that it creates a lot of change inside right you've got a bigger or you got a bigger sales or 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 I just announced our uh 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 um but um short answer is we are 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 to five and we want us to be 80% of that and so we will continue to sort of look to build by uh but today it's it's built Yep this acquisition you guys are seeing on the screen many Founders today doing 10 20 million bucks of Revenue would say man I'd love to get a 10x forward looking AR multiple or a

forward looking you know 15x forward looking AR multi or if you're raising around you'd love to raise at a 20x right ARR multiple this guy got a deal done out of 14x IA multiple so ignore top bottom line what is that what would be the equivalent AR yeah 4.5x AR I me your eugenius negotiator how did you get this done tell us the how you got leverage on a company like this to sell to you for so cheaply um well I I would say this the founder after we got the deal done didn't talk to me for 30 days because he was so pissed but um we're now really good buddies that's how you know you got

a good deal um so listen I'll turn that more to advice for people in the room um if you're building your company to be sold um 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 come to this conference and and and part of the reason I love it is I'll people say hey I'm growing 100% a year I'm worth 10x and I'm like well what's your turn what's your ACV I'm like nah you're worth like four and and the reason why as as an acquirer of software companies

th those 10 15x 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 is gone and so you should be build you should be building assuming the long-term stat index for literally 20 years since sap and Oracle started disclosing their recurring revenues is 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 million Revenue company you're going to get a lower multiple if you're a $20 millioner you might get higher multiple because you know the size helps but that's kind of what you should Bank on and if you're banking on the 10 or 20

or 30 you're really you're getting you're getting crazy because it can happen but it's tough and we we as a company have spent 15x but our stock was trading at 30X and so it's tough but any I would anchor yourself on the median and and work backwards can you talk to us more as we wrap up here a little bit more on why you choose to pull this specific graph out in your public calls yeah and I think for all you to think of it this way too which is AR is not a tool for fundraising AR is a tool because it's a future proxy of cash flow the reason why AR became a metric in

software is that in hypergrowth for software investors back in the day didn't understand that when you signed a deal that Revenue was going to be there for two years five years 10 years 20 years and so they created this metric of ARR but the reason why it's important is that investors will say Okay under every dollar of AR there is 10 cents 15 cents 20 cents of future free cash flow and that's actually what they're underwriting they're underwriting your Revenue they're undering your future free cash flow and so when we were a money losing company for a long time I wanted a way to tr go to the market and say well how can I tell you I know we're

going to be crazy profitable and I'm going to 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 sh 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 over time you should be thinking about if I've you know your your number of shares on the bottom and your AR on top and that should be growing incredibly quickly so not like 10% that should be growing should be clear because I know

most most private companies you're like okay crap I don't even know how many outstanding shares if I have like log into Carta go look at your go Pi up that old Google drive folder that you forgot what you named it's going to take you 30 minutes to search the right terms to look it up but you have somewhere where you have an outstanding number of shares take that number divide into your AR and that's you can way to think about is let's just pretend you're growing 100% a year and then you raise a growth round for $25 million you sell a thir your company now your share count is a third bigger but if your growth rate goes from 100 to 110% you actually didn't create

value and so I often times look at that when we're requiring companies of hey did you actually need that money or was that money just like a a press release and so it's a really interesting way to kind of look back and say hey did like didn't make sense can you actually put that put that money to create more rout value so guys I would say a genius dealmaker one of the youngest publicly traded SAS cosos back in 2018 at 39 years old has sense more than double the business was it 34 oh my God my God Mak me old now I feel like I haven't accomplished anything all right status

open's growing we're going to have 20,000 people by way super shout out for Nathan one of the the biggest mistakes um 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 dilutive Venture Capital money and so I am a wild champion of the services that his his business offers because Kandy it sets the market in the way that it should be run uh and so a big fan well I 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 want to give up control I didn't want to give up Equity are you haven't asked are you comfortable Shing these numbers yes so how much did you put in in the series a I don't remember you don't remember that's a good problem that means you're not thinking about me wonderful it was H it was 8 million on a on a on a on a 90 pre right and that 8 million we basically still all have in the bank because we have a team of 12 people doing you know north of 10 million say north of 10 10 million of Revenue so uh but you allowed us to do that we've stayed disciplined we'll keep staying

disciplined we only care about AR per employee uh because we want to be here as a lender in 10 years managing a billion 20 30 billion so thank you for that but anyways back to soft 34 year old in 2018 third fastest growing publicly traded company to on a percent basis has transitioned the business from heavy Hardware to heavy SAS catch him in the hallway if you can it's going to be a fast-paced fun conversation also as deploying hundreds of millions in m&a bringing it all together and again this in the very hard Spotlight of being a publicly traded CEO please help me give

it up for S sing thanks a thanks man appreciate you