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Par Technology Corp  (NYSE:PAR)
Q4 2018 Earnings Conference Call
March 14, 2019, 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, ladies and gentlemen, and welcome to the PAR Technology FY 2018 Fourth Quarter and Year End Financial Results. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. (Operator Instructions) As a reminder, this conference is being recorded.

I'd now like to introduce one of your host for today's conference, Mr Chris Byrnes, Vice President of Business and Financial Relations, you may begin.

Christopher R. Byrnes -- Vice President of Business and Financial Relations

Thank you, Tiffany, and good afternoon, everyone. I'd also like to take this opportunity to welcome you to the call today for PAR's 2018 fourth quarter and full year financial results review. Complete disclosure of our results can be found in our press release issued this afternoon, as well as in our related Form 8-K furnished to the SEC.

To access the press release and the financial details, please see the Investor Relation in News section of our website at www.partech.com. At this time, I'd like to take care of certain details in regards to the call today. Participants on the call should be aware that we're recording the call this afternoon and it will be available for playback. Also, we are broadcasting the conference call via the World Wide Web, so please be advised if you asking questions and will be included in both our live conference and any future use of the recording.

I'd also like to remind participants that this conference call includes forward-looking statements that reflect management's expectations based on the currently available data. However, actual results are subject to future events and uncertainties. The information on this conference call related to projections or other forward-looking statements may be relied upon and subject to the Safe Harbor statement included in our earnings release this afternoon and in our annual and quarterly filings with the SEC.

Joining me on the call today is PAR's CEO and President, Savneet Singh; and Bryan Menar, PAR's Chief Financial Officer. I'd now like to take -- to turn the call over to Savneet for the formal remarks portion of the call, which will be followed by general Q&A. Savneet?

Savneet Singh -- Interim Chief Executive Officer & President

Thanks, Chris, and good afternoon, everyone. I thank you all for joining us today. I'll begin today's call with an overview of our fourth quarter results for fiscal 2018. I'll then turn the call over to Bryan Menar, our CFO, who will review our financial performance in further detail. I will then conclude today's prepared remarks by discussing our segment performance and milestones related to our growth drivers and steps we're taking to improve the execution of our strategic plan.

To begin, I'm very happy to have this opportunity to speak to you regarding PAR and how we are transforming our company. My immediate focus has been on rightsizing our operations to support Brink, aligning our management toward a set of goals that drive shareholder value and emphasizing a framework and how we should look at reinvestment. That focus will allow our company to win new customers, allocate capital to where returns are highest and deliver value to our loyal shareholder base.

In my brief tenure at PAR, I've been impressed by the company's solution portfolio and our opportunities to deliver long-term value to all of our shareholders. I'm working closely with the management team to develop strategies for accelerating growth and improving profitability, as the company continues to transition to subscription software revenues. I'm committed to disciplined capital allocation and carefully monitoring the return on that invested capital to -- to ensure that part of investing in the correct initiative to increase value in our company.

While we have immense respect for the heritage and legacy of our past, we understand that we must change and provide a level of transparency to our employees, customers and shareholders. Now to review our results for the fourth quarter 2018.

This afternoon the company reported fourth quarter revenues of $46.6 million compared to $55.5 million in the fourth quarter last year, a 16% decrease. This decrease was due to the continued disruption and typical hardware revenues associated with our Tier 1 customers and an 8% decline in government contract revenues versus Q4 last year. We reported a net loss of $6.1 million and a loss per share of $0.38 in the quarter which included non-GAAP adjustments totaling $3.3 million, which are detailed in our press release.

On a non-GAAP basis, PAR reported a net loss of $3.6 million and loss per share of $0.23 in the quarter. This compares to a non-GAAP net loss of $18,000 and $0.00 loss per share last year.

I would now like to turn the call over to Bryan for a more detailed reporting on the quarter's financials. Bryan?

Bryan Menar -- Chief Financial Officer

Thank you, Savneet, and good afternoon, everyone. I would now like to take this opportunity to provide some additional details surrounding our fourth quarter results.

As Savneet stated earlier, GAAP net loss was impacted by $3.3 million of non-GAAP adjustments for the quarter. Non-GAAP adjustments included to one-time non-cash charges related to SureCheck. A $1 million reserve on hardware inventory and $1.6 million software impairment charge.

Now on to revenue for the quarter. Product revenue for the quarter was $16.1 million, down $8.4 million or 34% decrease compared to Q4 2017. Our hardware sales in the Restaurant/Retail reporting segment were down versus prior year as one of our Tier 1 domestic customers completed a major hardware refresh project at the end of 2017.

In addition, international hardware revenue was down $2.1 million. Hardware sales related to Brink were $2.9 million, down $0.2 million, an 8% decrease versus the high hardware attachment period of Q4 2017. But up $0.3 million or 12% sequentially versus Q3 2018.

Service revenue for the quarter was $14.7 million, up $0.9 million, a 6.5% increase compared to Q4 2017. The increase was primarily due to a $0.8 million or 43% increase in Brink SaaS and service support revenue related to Brink. The increase in Brink related revenue was driven by an increase in installing base of 81% from December 2017 to December 2018. We exited the quarter with $11.3 million of Brink annual recurring revenue from SaaS contracts compared to $7 million as of December 2017.

Contract revenue from our Government operating segment was $15.9 million, down $1.4 million, an 8% decrease compared to Q4 2017. This decrease was driven by a $3.8 million decrease in our intelligence, surveillance and reconnaissance business line, partially offset by $2.4 million increase in our mission systems business line. The contract backlog continues to be healthy, noting a total backlog of over $138 million as of December 31, 2018, and a trailing 12-month book-to-bill of 1.4.

In regards to margin performance for the quarter, product margin for the quarter was 14.1% compared to 26.5% in Q4 2017. The decrease in product margin was primarily due to a $1 million write-off for SureCheck hardware, in addition to reduction overhead absorption as a result of lower volume. Service margin for the quarter was 17.5% compared to 25% in Q4 2017, the decrease in the service margin was due to a $1.6 million impairment for SureCheck software, partially offset by favorable product mix with the growth of Brink SaaS.

Government contract margin for the quarter was 11.9% compared to 12.8% in Q4 2017, the decrease in margin was primarily due to a strong margin quarter in Q4 2017 from our ISR business line. The Q4 2018 rate of 11.9% was favorable from both in historical trending for government segment and from an industry perspective.

Now to operating expenses. GAAP SG&A was $9.4 million, down $1.2 million versus Q4 2017. The reduction in cost was driven by $0.9 million in cost saving initiatives, $0.9 million reduction in non-GAAP charges, partially offset by $0.6 million increase in investments for Brink sales and marketing.

Non-GAAP SG&A was $8.9 million, down $0.2 million versus Q4 2017. Non-GAAP SG&A adjustments for Q4 2018 included $0.2 million related to investigation of conduct in our China and Singapore offices and $0.3 million for equity-based compensation.

Research and development expenses were $3.3 million, down $0.5 million versus Q4 2017, driven by $1.1 million in savings related to SureCheck and hardware development offset by increased investment in gross Brink development by $0.6 million.

Now to provide information on the Company's cash flow and balance sheet position. For the 12 months ended December 31, 2018, cash used by operations was $3.8 million, primarily driven by a net operating loss, partially offset by decrease in net working capital requirements. Cash used from investing activities was $6.7 million for the 12-months ended December 31, 2018, versus cash used of $8.9 million for the 12 months ended December 31, 2017. In the 12-months ended December 31, 2018, we capitalized $3.9 million in costs associated with investments in our Restaurant/Retail segment software platforms, in line with the same period in 2017.

Non-software CapEx costs were $3.9 million for the 12-months ended December 31, 2018, down 1.2 million versus 2017 due to a $1.2 million decrease in costs associated with the implementation of our new ERP system and IT infrastructure. During 2018, the company received proceeds of $1.1 million related to the sale of rental property at the company's headquarters campus.

Cash provided by financing activities was $7.3 million for the 12 months ended December 31, 2018, with $6.9 million of net borrowings from our line of credit and $0.9 million of proceeds from exercised employee stock options. The company also paid down the remaining $0.4 million mortgage upon the sale of rental property. As of December 31, 2018, the inventory balance was $22.8 million, an increase of $1 million from December 31, 2017, and a decrease of $1.5 million from September 30, 2018.

Inventory turns were 3 times for our domestic and international operations. Accounts receivable of $26.2 million decreased $3.9 million or 13% compared to December 31, 2017. Receivable balance was broken down between the Government segment of $8.5 million, the Restaurant/Retail segment of $17.7 million. Restaurant/Retail segment days sales outstanding decreased from 57 days as of December 2017 to 52 days as December 2018. Government days sales outstanding increased from 37 days as of December 2017 to 45 days as of December 2018.

I would now like to turn the call back over to Savneet.

Savneet Singh -- Interim Chief Executive Officer & President

Thanks, Bryan. I will take this opportunity to review our segment performance. First for Restaurant/Retail technology, we continue to make progress, aligning our organization to support Brink and the significant opportunity we see in front of it. Our strategy includes rapidly expanding our Brink installed base of major accounts, while continuing to support our strategic initiatives across the rest of the industry.

We've also kicked off a new initiative to expand our average store revenue by providing additional products to existing customers. Our upcoming launch in merchant services is an example of this. Our growing store count is important, we don't want to lose sight of the ability to drive significant revenue growth by providing high quality solutions to our existing client base, many of whom routinely request these services.

I'm also pleased to report, that in the fourth quarter we signed a master services agreement with our largest Brink customer-to-date, a restaurant organization with over 6,000 restaurants. I congratulate our team across all levels of our organization for this new customer win. This will be a multi-year deployment process to get all stores on boarded in the concept. To ensure we ramp up -- to ensure we ramp this customer up we're making the appropriate investments in Q1 and Q2 to support what we expect to be a strong back half years. We fully expect to hit our internal top line targets for the year, but we expect to shift to revenues from the first half of the year into last two quarters to support this new customer. I'm fully supportive of this -- of this move, as we believe this customer has the ability to be transformative for our organization.

Our legacy core business counts 11 of the top 17 restaurant organizations at PAR customers. It's worth noting that within the Tier 1 customer base is the opportunity to extend and expand our relationship by transitioning these customers to PAR's Brink Software platform. Of the 8,000 restaurants booked to date, for Brink, none were existing Tier 1 hardware customers apart. We fully expect to transition at least one of our existing Tier 1 hardware customers to bring in 2019.

Also worth noting that the concepts we have signed onto Brink totaled approximately 17,000 sites. At the end of 2008, we had activated or received a purchase order for 8,300 stores. These numbers bear out, that we have only penetrated 48% of the existing logo's we serve with Brink. More than 8,700 restaurants are in our line of sight of our existing Brink signed concepts.

In the quarter, we deployed fast activated 752 new Brink sites, a 37% increase from Q4 2017. We also booked 800 stores in Q4, have 604 stores booked and yet to be deployed in the backlog in the quarter as more. These new Brink deployments increased our MRR by 62% in the quarter for Q4 2017 revenues and at the end of 2018, the annualized run rate now totals $11.3 million.

We are motivated to increase the MRR when possible and payment in merchant services is a great way to do that. It provides stickiness with the customer and small to midsized restaurants are looking for integrated POS and payment solution. We intend to roll out our payment solution midway through 2019. We will continue to build our Brink solution in ways that allow for increased MRR, higher customer retention rates and increased bookings.

Switching to SureCheck, our food-safety automated check with solution, I'm pleased to report that SureCheck Version 10 has been released for general availability. Version 10 provides improved scalability and performance. The necessary detailed enhancements asked for by our customers along with feature parity. In Q4, we also released PAR IoT for remote monitoring of temperature failure and tower disruptions.

In the quarter we engaged with two new separate opportunities within large hospitality gaming resorts and our large food service operations along with the table service restaurant company with 45 sites, demonstrating the broad appeal of SureCheck.

Now turning to our Government segment. Our Government business reported 8% lower quarterly revenue in the fourth quarter of 2018 compared to last year. This reduction was expected in our forecast as the timing of certain contract awards and contracts ending/starting is not always seamless. We reported strong contract margins of 11% for the quarter and the segment had a strong 2018 with total revenues increasing 10% from 2017 and net income before tax improved by 7% for the year.

We continue to focus new business development efforts on Intel Solutions as for intelligence agencies, armed services and tactical edge war fighters with a specific emphasis on the AFRL in Rome, New York, Wright Patterson Air Force Base, Ohio and the National Capital DC region.

In Q4, we received two large contract awards from the US Navy for LaMoure, South Dakota, and Aguada, Puerto Rico with a combined contract value of over $15 million. Our government segment continues to provide stability, G&A relief, and cash flow during this exciting transition of our restaurant segment to subscription SaaS revenues.

In closing, I'd like to touch on what I think is the biggest change we've made within the organization, but the one leased evident from the outside, Culture.

The power management team has gone through significant change in the last couple of months that we all -- we all believe will lead to out performance in the future. While we cannot touch on all those changes here, I thought important to highlight one of -- one of these important changes. And that is as a management team, we have transitioned from being focused on revenue as the goal to one focused on return on invested capital. This metric, while simple, aligns us all on focusing our investment dollars to where they received the highest return. By developing ROIC hurdle that each executive level and tying compensation to those metrics, we will be able to drive strong -- stronger decision making and create far more accountability on an individual basis. This rigor will drive the team, that constantly rationalized excess cost, focus on areas of success and walk away from areas not consistent with our goals or return hurdles. This focus has allowed us to already reduce our existing G&A base to begin inventory reduction plan that includes the removal of excess queue that tie up capital, management time and create distraction. It's allowed us to completely revise our sales compensation plan to encourage behavior that aligns with shareholder value creation and it's placed a renewed emphasis on CAC to LTV for every single customer. I highlight these changes, not to suggest that these things are running perfectly, but our culture and compensation with drive behavior, which will drive results over time.

As many of you have heard, we are very focused on creating shareholder value and are constantly questioning every premise we stand on, in every asset we own. Nothing has held us sacred, and we will continue to monitor all alternative to create shareholder value. I'll look forward to updating you in the coming weeks and months on the progress we're making, it's my objective to ensure that employees, customers, partners and new our shareholders receive value from our exciting opportunities.

This concludes my remarks. I would now like to open the call for questions.

Questions and Answers:

Operator

(Operator Instructions) And our first question comes from Brian Kinstlinger with Alliance Global Partners. Please proceed.

Brian Kinstlinger -- Alliance Global Partners -- Analyst

Great. Thank you so much. First question. As you mentioned obviously, this large 6,000 store install, I'm assuming implementation begins in the second half of the year, if you can confirm that. And then I know Arby's has led to some pressure on your MRR? Will this customer have the same impact, or will you able to get more traditional pricing for Brink.

Savneet Singh -- Interim Chief Executive Officer & President

So I will talk about the second half, first. Every customer is different and we don't talk about specific customer pricing or engagements, but we feel we've got a deal that works really well for PAR and for our customer, and it is a bit of a different set of services than we did with Arby's earlier.

On your first question is relates to the rollout. All these deployments are different. So we've already started working with this customer and we expect a significant pickup in the second half of the year as we get lined up here in the first couple of quarters.

Brian Kinstlinger -- Alliance Global Partners -- Analyst

Great. And then, can you update us on the timing for merchant services, when is -- when you expect could begin being offered in generating revenue. And then, I know Toast mandates. They are small Tier 4 and even smaller customers to take merchant services. How do you plan on going to market with it?

Savneet Singh -- Interim Chief Executive Officer & President

So, second half of the year we expect to generate revenue. As it relates to how we roll out, it's going to be sold through our sales force in our channel, it's not going to be mandate a big part of -- I think why Brink -- distinguishes itself from competitors that we are open. We think we've got a very, very strong value proposition to our customers, which is why we're offering it, but we won't ever mandated.

Brian Kinstlinger -- Alliance Global Partners -- Analyst

Got it. And then, I think in our conversations, one of the discussions we've had is the time it takes between saline installation is one of the areas that needed some change in your view. Can you talk about or detail any plans to reduce -- how you plan to reduce that over time, is that increasing resources, is it being more efficient. Thank you.

Savneet Singh -- Interim Chief Executive Officer & President

Yeah. I think across a couple of areas. So, the first is -- it's no question that we've been short on resources to tackle, what we've had in and as you can see with the G&A reduction in the focus on return on invested capital. I think we're addressing that as best as we can.

The second part about it is, I think driven by how we operate as a management team and culture, and I think as we've really got and going here the first couple of months, a lot of layers have continued to be rationalized within the company as it relates to making. And so I think, our ability to go faster is very much impacted by how we run the company. And so -- as I referenced at the end of the call, culture is a big part of that. And so I think you'll see us get a lot better at that, we're very, very focused on our speed today. And so I think the combination of us generating capital to support implementations and then focusing as a group on executing -- having delivering would speak to our customers. We feel pretty good. We'll be able to fix that.

Brian Kinstlinger -- Alliance Global Partners -- Analyst

Great. Two more. The first one is, I realize payments is the first major functional ad for Brink. Can you talk about what do you think the next two or three or whatever you see as the next update you think that either address the market size or a need for the customer.

Savneet Singh -- Interim Chief Executive Officer & President

So, I don't want to give you specific example only because we're in a competitive market and they are still being made. But here's what I'd say, and I think this is a really powerful statement. This point-of-sale system is very much the center of a restaurant. Points-of-sale centers goes down, it's very hard to operator a restaurant. And as a result, many of the solutions that we're talking about are integrated into our solution today. And so we have a very strong feel for what our clients care about, what they need and where they're not getting the products that they -- they've actually need. And so after lots and lots of customer conversations, we've got a pretty strong roadmap of what our customers need and asking us for. And so we are prioritizing about what we think has a high degree a chance of success. And also the market size and cost and effort to get there. So I'd say is, I'm not going to sort of lay out what we're going to do for competitive dynamic. But we feel pretty strong of our ability to actually execute on it.

Brian Kinstlinger -- Alliance Global Partners -- Analyst

Great. My last question. In January, you announced some cost-cutting programs. Can you quantify how much of that might be reinvested into Brink. So we might not see all of that in terms of cost savings, if any.

Savneet Singh -- Interim Chief Executive Officer & President

Yeah, this is so. Effectively all of it, every dollar we free up goes into supporting Brink. And I think a lot of the early lessons of the fiscal month here is we've gotten a lot smarter about saying what's our minimum return hurdle to have -- a dollar not go to Brink. And it's very high. And so there will be cost savings in the G&A front that will flow through that have nothing to do with Brink and that's just as transitioning from a hardware business to really a software business and aligning our G&A base with that. But a chunk of it and we won't detail here, but we can detail in future I think is going right back into Brink to fix some of the issues that you touched on earlier.

Brian Kinstlinger -- Alliance Global Partners -- Analyst

Great. Sounds like some exciting changes. Thanks.

Operator

Thank you. And our next question comes from William Gibson with ROTH Capital Partners. Please proceed.

William Gibson -- ROTH Capital Partners -- Analyst

Thank you. If you had a lot of numbers regarding Brink's shop meet, how many locations were installed at year-end?

Bryan Menar -- Chief Financial Officer

So we have -- as Savneet mentioned earlier, we're at 8,000 in the middle of this quarter, and we were at 7,700 as we exited active sites 2018.

William Gibson -- ROTH Capital Partners -- Analyst

Good. And the new master service agreement you signed, that is not a legacy customer, is that correct?

Bryan Menar -- Chief Financial Officer

That's correct.

William Gibson -- ROTH Capital Partners -- Analyst

And, does preparing to roll them out slowdown going after the other -- 8,700 in your line of sight.

Savneet Singh -- Interim Chief Executive Officer & President

So, it does, it does, but it's more of a flip into Q3 and Q4 then losing them. So those are customers that we will allow, we will add on. But it's very much getting us ready for this large transformative customers. So I don't -- we don't look at it as a loss, we look at it as a -- let's make the right capital allocation decision focus on where we think we can get the highest return and do the best for our customer. And so for us, yes, it obviously limit our resources to go after new -- other new customers, but for the ones that we have today, we feel pretty good. We could get still get them what they need.

William Gibson -- ROTH Capital Partners -- Analyst

Thank you. And I know you mentioned being focused on the inventory reduction. Could there potentially be other charges coming this year.

Bryan Menar -- Chief Financial Officer

We're all always analyzing how we're actually controlling our inventory right now. The reductions that we're talking about there was related to the other business line that we have in the food safety. And that was more of a one-time charge due to a specific type of product that we had in there. As we go through, depending upon the actual lead time in regards to ramp-ups for some of our customers and if there's going to be hardware attachment to there, there's going to be some flux in that.

As we go forward, we're also looking at how we actually streamline our hardware offerings as Brink becomes a larger component of the hardware requirements for across our business area right, and reducing the number of skews were in traditional hardware centric space that we're in that was more customized type of hardware which then allotted for us to actually have larger inventory size out there across our customer base. So we can bring that down as we streamline as we move into Brink.

William Gibson -- ROTH Capital Partners -- Analyst

Okay. Thank you. And then lastly, you mentioned sales and spending program changes there and aligning that. What are the changes is less upfront or is it the strong gross margins or?

Savneet Singh -- Interim Chief Executive Officer & President

Yeah, I love this question. So it's -- I'd say it's a few-fold. So, the first is, I think what we've historically done is basically giving everyone the same compensation plan. And one of the things we've realized is signing a large Tier 1 customer is a very different process in signing a 50 store customer. And so we need to look at how we compensate the different roles and -- not saying everyone is the same.

And so during our payments based on customer size and return -- and margin dollars as per day. The second part is actually splitting up the way we pay. So, instead of paying on a customer signing, do we sign on first dollar and really incentivizing our sales force to continue the process of saying, hey is that a pilot, we've got it a test market and rolling out. And so it's very much keeping that hungry to keep moving down the path.

And the last one is, what you talked about, which is really, really under getting a good feel for what our return on that new customer. I think the part of the challenge of very fast-growing organization is you never take a breather to say, hey, or do we make the same money on every account. And if we don't, then we shouldn't be compensating our sales force that way.

And so, when you can effectuate changes in the compensation system to tie it, to margin or customer type you create the right behavior. And so early on, early on, you may have people running at the same speed to go after two -- what we think are similar customers. But as you sort of peel the onion back, you noticed that, hey, that one customer is -- to have a customer that we'll do a better job on, will make more margin. And so sort of changing the targets for different types of customer profiles of the last part of it.

William Gibson -- ROTH Capital Partners -- Analyst

Thank you.

Operator

Thank you. And our next question comes from aid Adam Wyden with ADW Capital. Please proceed.

Adam Wyden -- ADW Capital -- Analyst

Hi, Savneet, thank you. Just wanted to make the comment first, to those who are on the last conference call, I think we all agree that this one has gone a little bit differently than the last one that was listen only. So really like what we're hearing and congratulations and look forward to hearing more. Here my questions. So, you mentioned a couple of numbers, I think, Bill asked you about them. I think one was, you had 8,300 installed, but 17,000 I guess stores within existing Brink contracts, i.e., Arby's, Five Guys. All the guys that are already signed up. You have 17,000 that are yet to be installed within your existing banner portfolio. And then I guess the other question is you mentioned the -- MSA for a 6000, which is not an existing Brink Tier 1 customer, I think it very clean, but -- then you also mentioned another guy who was a Tier 1 hardware customer that you expect to have signed up in 2019. Those are not the same customer. Those are my first questions.

Savneet Singh -- Interim Chief Executive Officer & President

Okay. So they're not same customer. We can't comment on who is the other customer is. So I'll ignore that one. And then on your first question, the -- the math is 8,300 sites that are booked or installed and the remaining -- the remaining store count within those existing customers is 8,700. So think of it as we're 8,300 penetrated within 1,700 potential stores in the context, we signed. A little bit less than 50% penetrated.

Adam Wyden -- ADW Capital -- Analyst

Got it. And obviously that doesn't include SMB that you're selling through with it -- so that's being sold on a day-to-day basis, that's not included. So the set 8,300 of 17,000 and doesn't include -- doesn't include the new 6,000 and doesn't include the other Tier 1 that you expect to get. Correct?

Savneet Singh -- Interim Chief Executive Officer & President

It doesn't include SMB, it includes portion of -- of the 6,000, and it doesn't include anything in channel. Our SMB in general as you know, relatively large portions of our business. So it's a -- I would say, it's 50% penetrated in large logos that we have signed agreements with today, and likely under assuming the true potential, because channel and SMB are not included.

Adam Wyden -- ADW Capital -- Analyst

And also it doesn't include that second Tier 1. So, I mean just high-level within your existing kind of stuff that you have. We have 8,300 installed, you've 17,000 of which some of the 6,000 include but not all, and also doesn't include the Tier 1. So I mean you guys really do have line of sight to this being a 20,000, 30,000, 40,000 unit. I mean it's the numbers that ...

Savneet Singh -- Interim Chief Executive Officer & President

Some of that...

Adam Wyden -- ADW Capital -- Analyst

The numbers, the pipeline can get you there.

Savneet Singh -- Interim Chief Executive Officer & President

Yeah, it's all about (Multiple Speakers). Yeah, it's all about the way of executing, and like what we said, we're really focused on Q3 and Q4, generally it is our bigger half, but also because the pipeline is very strong and we want to make sure that we execute appropriately. So it's an execution play.

Adam Wyden -- ADW Capital -- Analyst

Right. Okay. And I guess, here's my second question, I mean, obviously, now let's get the elephant out of the room here. We wrote two letters to the Board last year. I can totally understand why the company has not made direct response. And I want to make it clear to everyone on the call and the company that I'm totally not averse to building this business, given the robust software market valuations and the benefits of having a public company cost of capital. And our real CEO now who gets return on invested capital.

If we look at Twilio, I mean, the company that trades for 25 times revenue and use its currency require some more businesses in the for-stock transaction, that obviously there is advantages of having a public company cost of capital in SaaS and growing and building. And obviously, just last week, Lightspeed completed its IPO in Canada. It's remarkable how much investor interest there is for fast growing cloud point-of-sale. If you look at Lightspeed, investors are paying nearly 35 times run rate IRR for an inferior product, growing only 30%. Brink grew 81% in the fourth quarter.

If we apply the same multiple to Brink, I mean, that gets us to nearly $30 per share for just Brink and doesn't credit the payments ramp up, doesn't give you any credit for hardware, government, you can get to like $50 a share for Brink in its legacy assets and really not even giving you credit for 2020 and unit growth in the last in payments, I mean, the value gap has never been larger in this company's history. Can you walk me through the steps, you personally plan on taking the closed evaluation gap and having a real public company cost of capital. So we can do stuff like Twilio and build this into a multibillion-dollar restaurant software company. I mean, -- that the pieces are in place here. I guess, you know, how confident are you in one of the pieces that you plan on taking such that we look like everybody else.

Savneet Singh -- Interim Chief Executive Officer & President

So I think, as I'm incredibly limited what I can say. But there is a roadmap. Listen, we have immense amount of opportunity in front of us, given the pipeline that exist with just our existing customers today. And I think as you mentioned and others have said, we need to execute on that roadmap before we have any -- any view on doing anything more.

In my short time here, I can tell you that in my dozens and dozens of customer meetings, I feel more and more excited that we actually have a product that people truly care about and we found that product market fit. And I think that's represented by relatively low churn that we have and our ability to upsell product which merchant services is just the first, first, first, we did of that.

And so, I feel very excited about actually just continuing our existing path, which is we need to get these rollouts done, we need to get merchant services going, we need to execute on our pipeline. And then, I could see us going very much going to the -- plan that PAR laid out years ago, which was you can become the brand of the restaurant. There's a lot more you can add to that.

But first and foremost, we just have to execute on what's right in front of us. And I think that we'll close the valuation gap. As I mentioned in my remarks, we're looking at all alternatives to create value. And so nothing is sacred, and this is now a management team that can -- every single person quote you how to calculate return on invested capital. And that really does matter how we make decisions, and so I think our goal is to close the valuation gap. I just executing on exactly what's in front of us. It's not, it's not too much more dramatic than that.

Adam Wyden -- ADW Capital -- Analyst

All right. That's sounds great. Last question. So, you mentioned you had a 300 booked or installed. I think you've clarified this at Needham. But your ARR, your Annualized Recurring Revenue includes SaaS component, but also the mandatory service component of that. And so I think the number you gave at Needham was about 2,000 per box of what I would call recurring revenue of which some of it is subscription maintenance and some of it is a subscription SaaS.

So I mean, is it fair to assume that your ARR on 8,300 is closer to $17 million. Is that in -- and then on top of that, another thing is the company really hasn't even taking pricing up in the last 10 years, just on it's core product. I mean, obviously, in some ways, pricing even come down as you've migrated from SMB to enterprise. I mean, I guess my question is what do you, what do you see as the opportunity in terms of increasing like-for-like pricing obviously talked about layering on additional modules. But I mean, what do you see as the opportunity to increase like-for-like pricing. And then the other question.

Savneet Singh -- Interim Chief Executive Officer & President

Yes. On your first question, revenue is just a pure SaaS. It does not include any of the service revenue that we charge. And so if you add that in there is closer to around $15 million of accrued revenue. And both of them so lockstep as you reference and obviously very, very high retention rates on both of those.

As it relates to pricing, so pricing in the industry is actually very challenging given that most of our competitors, generally have some sort of bundle, whether that be payments as someone referenced earlier, whether that be bundling hardware, it's sometimes talented yet what's like-for-like on a pure software basis, because it interestingly, there's not a lot of people at the pure software. Although it's growing.

And the way we look at it is, we've got our price, we've commit to our customers on these price and we're going to holding that price given, how much demand there is, I don't see a need for us to go off that price. Where we see the ability to expand that pricing is our ability to add these modules or work with our existing partners and say, hey, we're going to be servicing your product that integrated into our product, there's a fee for that. And so we're being much more conscious about saying listen, if we're going to allocate resources for someone else's revenue, that's not going to be free anymore. But first and foremost, we are -- we're holding strong on our pricing, because there is demand for that product. And then it will be coming from modules and eventually from our partners who, listen, we want them to be successful and I think they want to successful, but I don't think it's crazy ask.

Adam Wyden -- ADW Capital -- Analyst

Right. So just to confirm, the 2000 on ARPU per box, I mean, that's consistent. Right. So as those 8,300 get booked, so obviously your ARR is going to go up. I mean it's -- I mean it is still around $2,000 per box. Correct?

Savneet Singh -- Interim Chief Executive Officer & President

Yes, it's a little bit sort of 2,000 right now.

Adam Wyden -- ADW Capital -- Analyst

Got it.

Savneet Singh -- Interim Chief Executive Officer & President

But it's growing year-over-year.

Adam Wyden -- ADW Capital -- Analyst

Right. Yeah, I mean, look, all the checks that we've done, when we talk to restaurants, is it the restaurant share of wallet for software is far higher than the 2,000. I mean obviously, payments is -- are dollars that are being spent elsewhere, but obviously back of the house, inventory management, HR, obviously the software is all about return on invested capital in and of itself. So if you can provide efficiencies within a very low margin business, you can generate a lot of value.

So I don't, I suspect the 2,000 will go up over time as you get payments and all this other stuff. So, yeah, it's great to hear a voice that has been ingrained with return on invested capital. And obviously, as that permeates, hopefully the stock market starts to realize who's going to ship now.

Savneet Singh -- Interim Chief Executive Officer & President

Great. Thank you, Adam.

Adam Wyden -- ADW Capital -- Analyst

Great.

Operator

Thank you. (Operator Instructions) Our next question comes from David Polansky with Lowell, Blake & Associates. Please proceed.

David Polansky -- Lowell, Blake & Associates -- Analyst

Hey, guys, thanks for taking my question. I was just curious, real quick on that, 17,000 stores. Does that include the new 6,000 unit concept?

Savneet Singh -- Interim Chief Executive Officer & President

It does the portion of it.

David Polansky -- Lowell, Blake & Associates -- Analyst

Okay. And could you comment specifically. I know you're talking about this broadly, but specifically there's been a 30,000 unit target. I think that was booked to and installed by year-end 2020. Could you comment on that?

Savneet Singh -- Interim Chief Executive Officer & President

So, as a policy right now the company doesn't offer guidance. It is something we're looking at in the future, but we can't touch on that today.

David Polansky -- Lowell, Blake & Associates -- Analyst

Okay. And then I heard a few times you talk about high retention, low churn. I was wondering if you could possibly disclose specifically what return is and if not when we could expect some more standardized KPIs from you guys.

Savneet Singh -- Interim Chief Executive Officer & President

Yeah. Fantastic question. So our annual churn is usually around 7% to 8% and most of that churn, I should mention happens in our SMB business. So we've very, very, very high retention at the larger customers. We will be introducing a set of KPIs that we share publicly to our shareholders, our employees, our customers. So it's our desire to become more transparent as we go forward. And so lot of these questions targets, I think will come some explanatory as we get going on changing some of the historical precedent.

David Polansky -- Lowell, Blake & Associates -- Analyst

All right, great. And could you give us a bracket around our win rates, maybe, on a -- contracts.

Savneet Singh -- Interim Chief Executive Officer & President

I don't have a comment. So I don't want to give you any quick number, here is I'd say, head-to-head we believe against every large competitor we have, we don't, we're never underwater. So we've never had -- a losing win rate against any competitor that we've had. But as for industries there, I don't have one for you. But maybe it's something we can look at producing down the road. It is -- it is obviously a little bit challenging given how many segments that we play in. But broadly speaking, we feel like we've got a great area -- we have a higher win rate against our competitors and they doing and so.

David Polansky -- Lowell, Blake & Associates -- Analyst

All right. And then one more. Could you comment on PAR Pay the modules specifically. I think it's been, what does have been 16 months since you've rolled it out. And if you could give us any updates on performance of that?

Savneet Singh -- Interim Chief Executive Officer & President

It is actually going very well. PAR Pay is a payments module that we charge a recurring fee for. Our customers and our sales team are finding actually very relatively high attachment rates. And so, we are pushing a lot harder now. The first quarter or two was to make sure that the customer demand, make sure that customers had strong adoption.

It also has led to interesting externalities. So less calls to our call center for payment terminals that are not -- that are not ours. It's obviously little more seamless, because we built the software. So it's an interesting play to not only generate incremental recurring revenue, but also help lower the expense base on the servicing side. And because our customers have shown a desire to -- I'm sorry, the customers have shown to, actually like it and our sales team it's feel very comfortable in the ability to sell, I think you'll see us push that order coming Q2, Q3 and Q4.

David Polansky -- Lowell, Blake & Associates -- Analyst

Great. What was the monthly fee on that, it was, was it $30 to $40 a month.

Savneet Singh -- Interim Chief Executive Officer & President

That's right.

David Polansky -- Lowell, Blake & Associates -- Analyst

Okay.

Savneet Singh -- Interim Chief Executive Officer & President

Sometimes higher, depends on sort of -- it depends on customer size and...

Bryan Menar -- Chief Financial Officer

Correct, it will, it will range from the mid-30s to 50.

Savneet Singh -- Interim Chief Executive Officer & President

Depending on number of terminals per store, number of stores on so forth, lots of different variables.

David Polansky -- Lowell, Blake & Associates -- Analyst

All right. Thanks guys.

Savneet Singh -- Interim Chief Executive Officer & President

Thanks.

Operator

Thank you. And at this time, I'm showing no questions in queue. I'd like to turn the call back over to Savneet Singh for further remarks.

Savneet Singh -- Interim Chief Executive Officer & President

Thank you all for joining today's call. We look forward to updating you on our progress and continuing to be more transparent as a company. Thank you.

Operator

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may now disconnect. Everyone have a wonderful day.

Duration: 44 minutes

Call participants:

Christopher R. Byrnes -- Vice President of Business and Financial Relations

Savneet Singh -- Interim Chief Executive Officer & President

Bryan Menar -- Chief Financial Officer

Brian Kinstlinger -- Alliance Global Partners -- Analyst

William Gibson -- ROTH Capital Partners -- Analyst

Adam Wyden -- ADW Capital -- Analyst

David Polansky -- Lowell, Blake & Associates -- Analyst

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