Q1 2021 Toast Inc Earnings Call
Take holder from the guest to the GM or owner to the wait staff to the chef to the suppliers and the entire ecosystem together. We believe we can delight guests with fast and seamless service make employees happier with higher wages chips, and a better work experience and.
Help restaurants be more successful with increased sales deeper customer relationships and lower employee turnover. Our success is tied to our customers' success and working with them to be better together underpins everything that we do at no time was that commitment tested more.
Then during the onset of the COVID-19 pandemic, we responded by accelerating certain product releases, which empowered restaurants to provide a contactless dining experience fulfill online takeout and delivery orders and communicate with their customers as we all navigated constantly changing public health business and consume.
Pressures. In addition, we supported grassroots campaigns and lobbied Congress directly on behalf of restaurants. We are proud to see that these efforts have resulted in overall same store sales of toast customers exceeding pre COVID-19 levels and continuing to improve.
Market Research suggests that there are approximately 860000 restaurants in the U S alone collectively the industry is one of the largest employers providing jobs to more than 11 million people and generating nearly $700 billion of sales each year around.
3% of the U S. GDP yet it has one of the lowest levels of tech spend as a percentage of sales of any sector. If you've worked in a restaurant you know, it's a complex business with a lot of moving parts. They operate with low margins high employee turnover highly perishable products.
And complex regulations, yet many restaurants continue to run on legacy systems pen and paper or disconnected horizontal and point solutions, each with their own costs and barriers to scalability.
So we believe there is a massive opportunity for us to support this industry as it grows and evolves and as its tech spend closes the gap with that of other sectors. We're conservatively estimating our current serviceable addressable market or Sam at approximately $15 billion, we see it up.
Approximately 55 billion dollar total addressable market or Tam in the U S for restaurant technology spend by 2024. This Tam at least doubles, if we look globally as we continue to grow and add more products to our portfolio. We believe we have the right strategy to go out.
After this massive opportunity.
This strategy starts with our relentless focus on product innovation, our powerful platform integrate software with our payment processing system supporting over 15 products because our platform is all in one covering every aspect of our restaurants operation toast restaurants are empowered to use that data.
To unlock new insights and further optimize their businesses, which has led to higher sales and margins more seamless operations and lower employee turnover, our customers provide us tremendous insight into our product roadmap. A major example of this is our recent acquisition of extra shaft in June.
We heard from customers how challenging it has been to manage their supply chain, especially during the last year and a half in a survey over half of our customer community told us that high operating costs and food costs were a top challenge by simply snapping photos of supplier invoices coding.
In categorizing our customers will have access to digitize line item details that are accurate and available to their team from anywhere and can unlock insights into purchasing behavior supplier optimization financial performance and ultimately savings.
Our unique go to market strategy serves as a competitive differentiator for us knowing that the restaurant market is hyper local we've invested in our sales force and our customer success team of localized field based industry experts trusted by these local communities.
Our employees live in these communities and dine in these restaurants night in and night out and are true partners to our customers when we create raving fans they spread the word throughout our region. This is why approximately two thirds of our new locations come from inbound channels and one <unk>.
Fifth from customer or partner referrals. This creates further efficiency in our go to market motion and our sales productivity typically increases as our positive reputation spreads within a local restaurant community.
Our ongoing expansion is supported by our customer success team, who brings vast technical and industry knowledge to the restaurants, we work with quickly accessible through a single point of contact 24 hours a day seven days a week 365 days a year critical to avoiding downtime in an industry that is.
Always on and does so much of their business on weekends and holidays.
We also have a robust ecosystem of over 150 suppliers tech and local partners. These relationships enable us to deliver more value to customers, while providing significant visibility into customer adoption. This data can lead to valuable insights into selectively pursuing M&A opportunities.
Which was the case in our acquisition of strategy for payroll management and extra chef for invoice and accounts payable solutions.
Now I'd like to go into the details for the quarter.
In Q3, we delivered strong results across the board, we grew revenue of 105% year over year to $486 million and annual recurring run rate or are our growth 77% year over year to 544 million. This was driven by.
Strong gross payment volume or G. P V growth of 123% year over year landing at $16 5 billion and strong customer adoption of our products as of Q3, 56% of our toast locations used four or more products on top of our integrated Pos.
Payment solution compared to 44% a year ago.
We continue to see a consistent trend of guests returning to restaurants as well as off premise trends such as online ordering delivery and takeout sustain which demonstrates that these consumer behaviors are here to stay for the long term.
Let me now share with you some customer wins in the quarter.
We signed a new deal with fat Tuesday, a national chain known for its frozen drinks fat Tuesday is rolling out toast at 40 locations nationwide and will build its entire technology stack on toast, starting with our point of sale order and pay at the table kitchen display screens and Multilocation management.
Products.
Organic juice bar clean juice has franchise locations in 28 states and is making ordering payment and delivery more seamless with toast in Q3 clean juice expanded with toast renewing its agreement for 121 locations and adding our commitment to bring toast to 50 net.
New locations clean juice uses toast point of sale Taxco devices toast flex terminals toast kitchen display systems and kiosks, along with our gift card software multichannel location management and API ecosystem integrations.
We also expanded our relationship with eggs up grill, a rapidly growing breakfast brunch and lunch brand eggs up Grill. Currently uses toast point of sale toast flexes taxco devices and toast printers. This quarter. They signed an agreement to expand toast to an additional 30 locations with <unk>.
New revenue channels developed during the pandemic eggs up grille saw a 13% increase in 2021 sales compared to 2019 and 60% ahead of 2020.
Next week on November 16th will host spark our inaugural restaurant innovation event at spark wheelchair major new product releases and provide a sneak peek into our innovation road map. The name for our event is a reference to the spark that lights, a stove or an oven.
To make the magic of our restaurant happen. It also alludes to the spark of imagination that leads to innovation and transformative change. This all virtual two hour event will consist of keynotes product updates and guest speakers, including world renowned chef restaurant her humanity.
Aerion and toast customer Jose Andres, you'll hear about how we're moving the restaurant industry forward with innovative new products that empower the restaurant the guests and employees.
If you'd like more information on attending the event. Please contact our Investor relations team at IR at <unk> Dot com or visit our website for more information and to sign up.
As part of our continued efforts to support the restaurant community. We recently signed a public letter from the independent restaurant coalition advocating for a replenishment of the restaurant revitalization Fund. We've also joined the pledge, 1% movement to donate our capital to fund social impact programs.
Through our philanthropic group Tostado Org.
Before I turn the call over to Elena to walk you through the financials I wanted to thank our employees our customers our partners and our shareholders for their support in helping us achieve a major milestone and becoming a public company restaurants are resilient and they make up the social fabric.
Our community and we believe our commitment to aligning our success with the success of the restaurant community will lead to a stronger and exciting future ahead, now I'd like to hand, it over to our CFO Elena Gomez.
Thanks, Chris before I begin I want to take a moment to recognize the entire coach team on their efforts should become a public company and a special call out to my own toes finance team, it's because of the collective efforts of this team that we're where we are today I also want to thank our existing and new shareholders.
We are excited to be on this journey with you as a public company.
We are proud of this milestone we are just getting started as Chris mentioned, we believe we have a total addressable market of 55 billion in the U S and we estimate the global Tam to be twice as large as the leader and one of the world's largest industries. We've built a unique business model to address this opportunity and support rapid growth at scale.
Before I go into the results for the quarter, Let me share with you why we have a powerful business model first we have proven we can achieve high growth at scale second we have an integrated software and payments model. Thus, we benefit from not only the predictability of SaaS, but also from the increase in transaction volume.
As our customers grow.
Third our all in one platform combined with our boots on the ground go to market strategy keeps our customers happy and drive strong retention.
Finally, as our customers continue to expand with US we've been able to maintain strong unit economics now let me walk you through how we generate revenue we generate revenue in four ways subscription services financial technology solutions hardware and professional services, we consider subscription services and financial.
All of these solutions as our recurring revenue streams subscription services revenues generated from our SaaS products, such as digital ordering and delivery and team management to name a few financial technology solutions revenue is generated primarily from facilitating payment transactions and also includes fees earned for loans.
We offer through our coast capital program.
We recognize our financial technology solutions revenue on a gross basis.
We consider other two revenue streams hardware and professional services revenue as one time and effectively part of our customer acquisition costs with pricing competitively to minimize barriers to entry.
Since the majority of our revenue comes from financial Technology solutions, We believe annual recurring run rate or air or which excludes transaction based costs and see operational metric that best reflects the scale and growth of our business. You can find the full definition of air are in our earnings press release, and our Form 10-Q for the third quarter.
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The key drivers of Bayer are include growth of restaurant locations on our platform the adoption of our SaaS products in the total G. P D processed.
Before I turn to the results for the quarter. Please note again, we'll refer to both GAAP and non-GAAP financial measures. Please refer to today's press release for the reconciliation of GAAP to non-GAAP financial performance and additional disclosures regarding these measures.
Now I'll turn to the results for the third quarter, we delivered strong performance in the first quarter as a public company in Q3, we continue to see growth from both new locations as well as an increase in G. P V on our platform as the restaurant industry continues to recover. Additionally, customers continued to adopt more test products.
As a result in Q3, we delivered revenue of 486 million up 105% year over year and are are at 544 million up 77% year over year.
Our subscription services grew 67% year over year to 46 million in the third quarter driven by the increase in customers adopting more of our SaaS products and.
In Q3, 56% of our test locations used four or more products on top of integrated P. O S and payment solution as compared to 44% a year ago.
Our financial Technology solutions revenue grew 115% year over year to $404 million in the third quarter driven by our strong G. P V of $16 5 billion in Q3.
Mm, 123% year over ear.
We anticipate our financial technology solutions revenue to normalize as G. P V per location returns to normal patterns.
For the third quarter non-GAAP gross profit, which excludes stock based compensation expense came in at 89 million up 75% year over year, driven by growth in our customer base and higher revenue per location driven by an increase in SaaS ARPA and elevated G. P D.
As we shared with you previously our freight costs are elevated in Q3 due to supply chain dynamics, while they're not as high as anticipated and we do believe they will remain elevated through the near term. Despite increased costs. We continue to be very confident in our ability to deliver hardware for our customers.
Now, let's turn to our operating expenses, which I will review on an adjusted non-GAAP basis, which exclude stock based compensation expense for each line item before I do I do want to remind you that we use customer acquisition cost and payback metrics to measure the performance of our business and guide our investment decisions.
With this in mind in Q3, we continued to invest in sales and market sales and marketing and research and development to capture a Tam and build out our platform general and administrative expenses were elevated due to our transition to a public company and rebuilding the foundation to scale our business.
Adjusted EBITDA for the third quarter was negative $10 million compared to roughly breakeven a year ago. In Q3, we had free cash flow negative of 21 million compared to roughly breakeven a year ago and positive $53 million in Q2.
Our Q2 free cash flow result was primarily impacted by a onetime benefit related to interchange billing terms.
Now, let me turn to guidance for the fourth quarter, we expect revenue to be in the range of 465 to 495 million, which represents 98% growth at the midpoint, we expect adjusted EBITDA to be in the range of negative 50 to negative $40 million.
For the full year 2021 we expect revenue to be two revenue to be in the range of $1 655 million to 1.685 million, which represents a 103% year over year growth at the midpoint and adjusted EBITDA to be in the range of negative $46 million to negative $36 million, while I'm not providing 20.
'twenty two guidance I want to remind you that financial technology solutions revenues benefiting from elevated Che PV per location, which we anticipate will normalize as we exit 2021 into 2022.
In closing our strong Q3 performance demonstrates our success in continuing to execute and to capture market share as the industry continues rapid digital transformation built to serve a large and growing addressable market. We've shown we can execute at scale with healthy unit economics with this foundation in place we.
Believe we are uniquely positioned to drive durable growth for ourselves and for the restaurants using our platform now I'd like to turn the call back over to the moderator for our Q&A session.
Alright, Thanks, Christen Elaina, we'll go ahead and start our Q&A session. Our first question comes from will Nance of Goldman Sachs. Please go ahead.
Hi, everyone. Good afternoon, and congrats on a strong quarter.
You highlighted the strength in these same store sales at those customers and you know I think you also called out the potential for volume for live location to normalize over the course of 2022.
Maybe just expand a bit on kind of what you're seeing on a per location, how elevated <unk> relative to trend and then if I think about some other things going on today, you know, maybe a little bit higher inflation and just the fact that your customers relative to the euro.
Prior to the pandemic are using so much more technology, you called out the higher attach rates.
There are potential that we could run rate at a higher level of sales or live location on the other side just given the investments that your client base is made of technology.
Yeah. It's a fair question, let me try to characterize that so we're definitely seen elevated G. P V per location, but as we continue to go into the deeper part of the Tam. We also expect that to get closer to the average so I would just consider that as you think about your long term modeling.
Got it that's helpful. And then maybe just on the attach rates that youre, saying that you know the nice momentum and increased adoption of I think it was four or more products. I mean can you talk about where you think the biggest opportunity is from your existing product lineup is.
What's kind of resonating the most in the market.
Yeah, No definitely I mean, I think obviously, our Tesco devices in our digital products are clearly things that we're encouraged by but we're also really encouraged by the adoption of our payroll product.
And we're seeing a significant amount of our new restaurant openings attach that as we as we continue and so we're we're continuing to see that.
From a lot of like I said, our new customers at an equally starting to see a little bit of that even from our existing customer base. So one thing I talk about often is through our total arps, who are and you can see that.
I use an example, just to give you a perspective of what's possible we have a customer a doughnut shop that can do.
And then in our platform 23 care market. So just kind of speaks to you know.
What's possible with ARPA.
Although the Super helpful. I appreciate you taking all my questions and congrats again on the first quarter off the gate.
Thanks.
Okay.
Our next question comes from Josh Baer of Morgan Stanley Josh. Please go ahead.
Great. Thanks for the question I wanted to ask about Tam and the opportunity ahead from a couple of.
From a couple of different angles.
So one way within the U S like where specifically are you investing and focusing on is there a greenfield in the U S.
Yeah.
Yeah. Thanks for the question, Josh I mean listen in the U S. As of the end of Q2, we were only 6% market penetration for the Tam in the U S. So we see a broad based opportunity to go after the majority of Tam.
A few serve 860000 restaurants, we believe at least two thirds of that are accessible to toast today, both in SMB mid market and I'd say the lower end of enterprise. So we think there's a very long runway for Tim Tam adoption and location acquisition and we've seen broad based.
This momentum across the U S. There is no specific.
Geographic differences, we've just been penetrated in multiple markets in parallel.
Great and then on the.
Maybe lower end of enterprise, our upmarket are there products or features that are needed to more fully address that I dunno fast food or.
Just market enterprise like how should investors think about that opportunity within your Tam. Thank you sure. We continue to innovate on the platform for example on Multilocation management, the ability to manage menus and pricing across locations the ability to publish across multiple locations.
Those innovations are organic and continue I would say the other area I would point you to is our strong partner ecosystem, it's super Super important to have strong AP eyes, and an ecosystem of partners that you can cultivate so that you can offer to an enterprise brand. The best of breed architecture. So I'd say those are the two.
Areas that jump out at us in terms of levels of investment and what we need to do to support larger customers.
Thanks, Chris.
Congrats.
Alright. Our next question comes from Josh Beck of Keybank Shashi there.
Yeah.
Yes, Hi can you hear me.
We can think we can hear you yes.
Excellent well thank you team for.
The question here I wanted to go back to extra shelf, obviously the supply chain as you know Unfortunately really been rebel then a lot of different ways in the last year.
Year to have certainly.
Being felt in the restaurant industry. So maybe just help us understand where you are with that acquisition what type of strategic discussions, it's enabling and really where you'd like to take that in the next two years.
Sure Great Great question, Josh <unk>.
Our progress with extra shelf is going extremely well the integration process has gone well the team is continuing to.
Execute well in terms of performance and we're investing pretty heavily and backing innovation in and around what I would call accounts payable automation as well as food cost optimization, we think there's a unique opportunity to automate even more of the back office. If you think about.
Using things like Bill pay and other activities on the backend of restaurants that are critical to their success to interface with suppliers, but then also optimize their costs and optimize their inventory running a restaurant is really difficult and if you think about razor thin margins.
The focus on operational efficiency, we think extra chef really is the cornerstone of back office automation. So we're super excited about investing in that road map.
But first steps first we need to make sure that we execute the integration well and continue to gain adoption and youll see more of that in 2022, and I'll talk a little bit about this next week at spark.
Fantastic and maybe just.
A follow up question around the sales and marketing efficiency. Obviously, you are starting to you know rightfully invest in this opportunity.
We can look at some external metrics like incremental revenue.
Recurring revenue per sales and marketing dollars and all of these metrics look very healthy so maybe just.
Providing some qualitative.
All text with with the efficiency, how thats trending and where you'd like to see that done ahead of the future.
Yeah I'm glad you asked that question, Josh we are relentless in our focus on payback periods and just our efficiency overall and we continue to.
To see Custer.
Customers adopting in a self directed mode. As an example, so there's many ways that we can continue to monitor efficiency.
So I would say I feel very confident with what our payback periods are today and we will continue to monitor them over the next.
In the next several quarters ongoing.
Okay.
Very helpful. Thank you.
Our next question comes from Stephen Sheldon with William Blair.
Hi, Chris Thanks for taking my questions.
I wanted to ask about the labor shortages in the hiring challenges that are facing restaurants, then I guess kind of two parter one is it.
Once the urgency of restaurants to sign up for your platform or increased demand for the uptake of specific module like handhelds and order pay at the table and then to have any issue changed any priorities from a product development standpoint to bring to market solutions that could help restaurant.
Especially if you're going to be a persistent issue I know, maybe we need to wait for spark for that but just thought I'd ask.
Yeah I'll take it great question, Steven So yeah. Your premise is dead on restaurants are forced to adapt and drive as much operational efficiency as they can with minimal staff.
And much of our product around team management, and handhelds allows them to sort of adopt and engage their employees and allow them to offer a better service to consumers. So if you think about order and pay at the table and toast go devices. For example that allows the staff to be that much more efficient.
To handle not just existing guests, but even increase the number of tables within the restaurant that they can serve we've seen examples of restaurants that have increased their tables, while maintaining or lowering their staff, but becoming as efficient as they were in the past. So we think order and pay at the table and digital what we call digital.
Dine in as well as the tests go device, allowing you to build new service models within the restaurant itself are critically important and and restaurants recognize that and they recognize that these innovations really benefit them and create better employee engagement as well as better.
Tumor experiences to be honest with you. So I think that's going to continue to hold true.
Even past the Covid pandemic as far as where we're investing we're investing I'd say broadly across many of these tools.
You look at sort of the digital dining experience, we're continuing to invest heavily and scan and pay at the table order and pay at the table, we're continuing to make sure that it works in conjunction with the toast go device. So if the consumers and the wait staff need to complement each other there's this continued service model, where it's not one or the other.
But it's both that way of waitstaff can manage many more tables, but consumers can also have the delightful experience of order and pay at the table. But then we're also broadly investing in other areas of team management in and around payroll for example, the ability to manage chips. So tune in next week and you'll hear a little bit more about some of these products.
But but I'd say, it's broad based investments across the board.
Great. Thank you congrats.
Our next question comes from Brent bracelet of Piper Sandler. Please go ahead.
Thanks for taking the question here I wanted to build on the narrative of the talent shortage in the restaurant industry anecdotally, we're seeing and using the digital dining options that you guys are enabling here more often.
What is the penetration rate, what's the adoption you look at the broader customer base due or half of the customers now kind of empower and enable digital kind of ordering at the table or is there a broader opportunity to cross sell those just give us a starting point and kind of where we're at today and then the potential to help some of those.
Smaller restaurants addressed these issues and as one quick follow up for Elena.
Yes, Brent Great question I think we're in the early days of this adoption I mean, we're talking about new service models within the restaurant itself. So you see employees adapting to these new service models, but then you also see in parallel consumer's adapting to how to use these products and consumers starting to get used to it.
So I'd say, we're in the early days of adoption, but I think we're super excited about the growth ahead. Because then the methodology within the restaurant starts to change and the restaurants that are really embracing these technologies are doing much better than non toast restaurants that arent adopting a similar set of.
Apologies, so we're seeing the proof points, but I'd argue much of the runways ahead of us and much of that opportunity is ahead of US helpful. Color. There and then as we just think about the subscription services revenue it looks like growth accelerated year over year slightly versus kind of your growth last quarter.
Is that just driven by lands with new customers that are that are taking more products and modules is that driven by cross sell what's what kind of drove some of the strength in subscription services growth this quarter.
Yeah, it's all the above I think the metric I'd point, you to Brent as the percentage of customers with more than four modules you see that steady increase over time, and we're really encouraged by that and when you look at <unk>.
At initial implementation, we still have most customers adopting more than four products.
At one time and so at initial launch so I think all of that is really driving that soft revenue multiple dimensions at a higher touch cross lands and expands thank you yep.
Yes.
Our next question comes from DJ Hynes with Canaccord. Please go ahead.
Hey, Chris Hey, Congrats on a good start here.
Of course, I want to ask look I think some of the drivers are for new restaurants to onboard toasts during the pandemic, we're a little bit unique right, yet things like online ordering and curbside pickup in <unk>.
Delivery all became really important I'm wondering if you're seeing any change or maybe normalization of the drivers of new customer acquisition to today and and maybe you could touch on some of the cohort dynamics of that Covid group expansion growth that sort of thing would be helpful.
The first thing Vijay as we I mean, we've seen.
Broad momentum if you zoom out we've seen broad momentum of growth of our platform within restaurants.
And then outside of Covid, right and I think there's three things there.
That really drive restaurants to leverage our prep platform number one the depth and breadth of the platform and the restaurant specificity to the functions and features that the restaurants need to operate so we feel like we've got the broadest and deepest restaurant specific platform in the market number two we're obsessed with.
Customers happiness and building trust on the platform and that starts in the go to market motion and carries through all the elements of toast downstream, so making sure that restaurants have a great experience when they use our platform is critically important and then number three is really the engine of innovation.
We've been innovating on this platform for nine years, I mean, we launched integrated online ordering back in 2014. So many of the products that restaurants are adopting where pre COVID-19 products that are now built into the platform simple and easy to use and we're expanding upon those products, but then also.
Looking for other control points that make the lives of restaurants difficult and what can we do to collapse those control points into this unified operating system to make their life easier. So I'd argue that restaurants are starting to see the benefits of this type of platform to their future and toast restaurants are.
Proving that they can perform and performed quite well they've been incredibly resilient and we're proud of that so.
Yeah Super helpful color, and maybe just as a follow up for Elena.
You had a comment in your prepared remarks about confidence to procure hardware to serve your customers I just want doubleclick, there and make sure that you know.
We're not gonna have any supply chain issues sneak up on us and that.
You'll have what you need to kind of onboard all your new customers in Q4, and I guess into next year, Yeah. No I think actually confident in this D. J is as you know during Covid, obviously that was we're pedal field tested in terms of supply chain and we felt it was really important to make sure. We did not disrupt our customers onboarding and making sure they had what they know.
To get going and so it's no different now I think we're paying attention of course to the elevated freight costs and being thoughtful about that.
But we're confident we are focused on not disrupting our customers and not disrupting our growth rate either as a result of supply chain issues.
Yeah, good stuff thanks, guys.
Thank you. Our next question comes from Ken Sena Wang of Jpmorgan. Please go ahead.
Hi, Thanks, Congrats on the.
On the listing and the great results advocate here, just just on the supply chain stuff I want to make sure on the hardware side. If there's anything surprising there do you have a good read on what's happening there. It looks like hardware came in quite strong in the quarter I'm, assuming that's more tied to new locations versus.
Refreshes, just curious what trends you're seeing on the hardware side.
Yeah, no, it's definitely tied to new locations and we feel really good like I mentioned with TJ about our confidence in making sure we get the hardware in the customers' hands that need it and we've been able to prove navigate that fairly well I'm actually proud of our hardware team for navigating so well during the pandemic.
<unk>.
So just.
Assuming on fourth quarter revenue got a little bit.
The midpoint is a little bit below the third quarter. So sequentially I'm just trying to think about the factors as we think about seasonality.
And another factors any any callouts there yeah, I mean, I think you I think you hit it on the head it's truly the seasonality that we typically see on the payment front.
That is reflected in our guidance, but we will continue to see growth in our SaaS revenue etcetera. So.
The guidance reflects that seasonality.
Good stuff thanks.
Okay.
Our next question comes from <unk> Tandon of Needham. Please go ahead.
So Alice good evening, Chris and congrats on the quarter.
Can I ask you more of a topical question can you share any metrics around win rates competitive takeaways to give us a feel for how Tulsa sharing versus some of your competition like let's say a touch bistro square Clover et cetera, maybe just some any metrics there would be helpful to.
Your share gains.
Perspective that'll be very helpful. Thank you so much.
Yeah, no. It's a good question I mean, we're not going to comment specifically on win rates.
Is any one competitor we've seen a lot of success across the board.
I mentioned, it's mostly due to the depth and breadth of the platform and our obsession with customer happiness and then the innovation behind that.
But in general we compete against legacy players cloud, one dot O players and point solutions, but we feel like we're in a good position to compete well and differentiate ourselves in.
Win the hearts and minds of restaurants moving forward.
They laid out a quick follow up for you could you provide any perspective on the payments margin any noticeable shift in terms of debit credit and card browsing versus not rather than just so when you think about our models into 2022, yeah. It's a fair question. So you know.
Card not present has been stabilizing but I would say its elevated a little bit above pre COVID-19 levels and we think that's in part because we've been investing in a lot of our digital products.
So.
There is a little dynamic there, but take rate obviously in Q3 came down a bit and that's on its way to normalization.
And then debit credit mix is also trending back to pre COVID-19 levels, and I would expect that over time to normalize.
Great. Thank you so much.
Thank you. Our next question comes from Dan Donlan of governments Anyhow. Please go ahead.
Yeah.
Okay.
Yeah.
Okay.
Right.
Same day, you're on mute Dan you're on mute.
Yeah.
Better now can you hear me now yeah, we can hear you.
Okay, sorry about that congrats on the first quarter out.
So on the at the S. One you gave a lot of detail on locations and correct me if I'm wrong I Didnt see that in the press release and I, sorry, I jumped on late because we were on another earnings I. Just wanted to know if that did I miss that metric or is it not available or.
Yeah, Dan So its a fair question, we were going to be disclosing our locations more likely on an annualized basis, but the primary reason is because we're focused on.
You know as we talk about our powerful business model, we talk about both integrated payments of SaaS and payments together and so.
<unk> is a metric we believe is most reflective of the growth of our business and really how we manage the business internally. So I would tell you both locations were in line with expectations, even though we're not going to disclose that number and our appeal was slightly ahead of our expectations for the third quarter.
Understood and then my follow up is on just gross payment volume and you might have covered it and I apologize because I did jump on late but kind of the sequential deceleration in our in our G. P V growth.
Q3 versus Q2, and then that big jump Q2 versus Q1 is there any are there any data points you can provide.
Some color on the on what what's causing that or maybe that <unk> was abnormally high.
But that's still typically summer months have some seasonality in there. So you should consider that in your in your models Q2, and Q3 are typically elevated but we're seeing you know as I noted in the script. Some elevated G. P V per location and we expect that over time to normalize.
Understood. Thank you and congrats again on the first quarter.
Thanks, Dan.
And our last question comes from Andrew Baum of F. N. B C. Please go ahead.
Hey, guys. Thanks for squeezing me in here.
Wanted to touch upon the the EBITDA guide here I mean, I know, whether you're investing pretty heavily against the big market opportunity, but you know thinking.
Thinking about this business in the long run how.
How should we think about what EBITDA margins would look like under certain levels of growth and maybe a sense of the you know the long run kind of profile of this business.
Yeah, you know the the.
So for the for the near term we view this opportunity is massive and we're going to invest for growth and that's what we've been talking about for some time, obviously over we will continue to focus on payback period on your unit economics are just appreciate that behind the scenes, we have that good hygiene and <unk>.
<unk> to make sure we're managing how we invest where we invest focus on investments that drive growth and so as we get further into the public markets I'll share more about our long term profitability, but for the near term you should focus on the fact that we will be investing for growth.
Okay.
Great. Thank you and looking forward to spark.
Thank you.
Alright, everyone well that concludes our call. Thank you so much for joining us today and we look forward to speaking with you next quarter.
Have a good one.
Hello.
Oh.