Q2 2023 Olo Inc Earnings Call
Yes.
Good afternoon, My name is substantial and I wouldn't be a conference operator today at this time I would like to welcome everyone to the <unk> second quarter 2023 earnings Conference call. All lines have been placed on mute to prevent any background mice. After the speakers' remarks, there will be.
A question and answer session I would now like to turn the call over to Brian <unk> from ICR. Please go ahead.
Thank you good afternoon, everyone and welcome to <unk> second quarter 2023 earnings Conference call.
Joining me today are no glass, although its founder and CEO and Peter <unk> CFO .
During our call today, some of our discussions and responses to your questions may contain forward looking statements, which represent our beliefs and assumptions only as of the date such statements are made.
These forward looking statements include but are not limited to statements regarding our expectations of our business our industry, including with respect of technological enhancements future financial results, including revenue and non-GAAP operating income and other key performance metrics revenue expectations for order pay and engage suites.
Total addressable market and growth opportunity guidance and strategy benefits from strategic partnerships restaurant order process in trends our ability to increase the usage of our platform and upsell, including with respect to our opportunity to expand in our growth in average revenue per unit.
And the durability of new and existing customer adoption of multiple modules.
Forward looking statements are subject to risks and uncertainties may cause actual results to differ materially from those described in our forward looking statements and such risks are described in our earnings press release and our risk factors included in our SEC filings.
Including our quarterly report on Form 10-Q that was filed today and our other SEC filings.
You should not rely on our forward looking statements as predictions of future events. We undertake no obligation to update any forward looking statements made during this call to reflect events or circumstances after today.
Also during this call we'll present, both GAAP and non-GAAP financial measures.
Reconciliations to the most directly comparable GAAP financial measures are available in our earnings release, which we issued a short while ago.
The earnings release is available on the Investor Relations page of our website and is included as an exhibit in the form 8-K furnished to the SEC.
Finally in terms of our prepared remarks or in response to your questions. We may offer incremental metrics. Please be advised that this additional detail maybe onetime in nature, and we may or may not provide an update in the future on these metrics.
I encourage you to visit our Investor Relations website at investors that all O dot com.
To access our earnings release Investor presentation periodic SEC reports, a webcast replay of today's call or to learn more about O L.
With that let me turn the call over to Noah.
Thank you, Brian Hi, everyone. Thank you for spending time with us today.
Our second quarter results demonstrate the consistent positive momentum we built over the past few quarters.
We generated $55 $3 million in total revenue of 21% increase year over year as our platform supported increased module adoption within our existing customer base.
With that we increased average revenue per unit or <unk> to $716 up 32% year over year and 13% sequentially.
Net revenue retention was approximately 115% this quarter and we ended the quarter with approximately 77000 active locations on the platform.
We're proud of our results and believe our second quarter updates illustrates how although we will continue to shape the restaurant of the future for our customers.
We're at the early stages of a massive market opportunity as the restaurant industry moves toward 100% digital.
We're excited about our mission to be the engine of hospitality, helping our customers collect analyze and leverage the data they get from on and off premise digital orders payments and engagements to create amazing experiences for their guests.
We truly believe <unk> is in the best position to drive the industry's digital transformation with our order pay and engage product suites.
Although had another successful quarter with new and existing customers across all three product suites.
We are especially thrilled to see increased adoption of our PE and engage modules among enterprise customers.
Additionally, emerging enterprise customers continue to show strong adoption of multiple modules.
This quarter, we welcomed salad and go and enterprise fast casual restaurant chain salad and go launched our order and pay modules with the goal to drive operational efficiencies and advance its mission to make fresh nutritious food convenient and affordable for all.
In PE news Cold stone creamery, and ice cream parlor chain launched old. Okay. This deployment represents the fourth consecutive quarter.
Existing enterprise customer deployed all OPEC, showing our continued ability to sell our pay suite to large brands a key driver of <unk> expansion.
The engaged suite also saw enterprise customer adoption, California Pizza kitchen, a casual dining chain began the launch of our full engaged suite of products, starting with guest data platform sentiment and front of house manager host.
This is a great example of large brands embracing the value of using guest data and technology to boost growth and customer loyalty.
Denny's, a casual dining chain that deployed our marketing automation and guest data platform solutions last quarter revamped their rewards program with new gamification challenges that encourage specific guest transactions and engagements.
<unk> is proud to enable this functionality for denny's along with partner Spark fly. It's a great example of how brands can leverage the seamless connection between all those modules across product suites, and Bath ecosystem of partners to launch innovative solutions that drive guest lifetime value.
And while we are encouraged by the progress we're seeing with engage suite, we're still in the early stages of adoption.
In addition, although continued to see strong multi module adoption within the emerging enterprise segment. This quarter several fast growing brands deployed four or more modules, including Anthonys coal fired pizza and wing Maple Street Biscuit company and Metro diner.
All of these customers launched with all those core order solutions ordering dispatch and rails along with overpay.
While many emerging enterprise brands choose our white label front and serve Anthonys worked with one of our partners to launch their online ordering with a custom built front and a great example of the customization and flexibility although offers to brands of all sizes through our open Apis.
Anthony has joined over 100, although brands that use custom front end on top of all those ordering API.
We believe more emerging brands will continue to launch with or adopt multiple OLED modules, which will boost <unk> overtime, our investments in sales and marketing will continue to enhance this opportunity further.
In the second quarter, we released a number of exciting future updates across our three product suites.
Within the order suite, we continue to refine our capacity management capabilities to help restaurants provide more accurate wait times to guests and delivery service providers. We officially launched a further enhanced version of order ready AI all those machine learning based solution that enables brands to provide.
More accurate quote times.
By training and deploying models using historical order data and retaining the models on an ongoing basis brands will have more accurate ready time predictions instead of manual inputs.
This progression of AI is role within our capacity management tool unlocks more optimization service for our customers. We believe this will continue to give <unk> and our customers a competitive edge going forward.
Next our piece, we continue to innovate and scale with milestone updates this quarter, although officially launched in store payments by our kiosks marketing overpay as expansion into card present payments, representing a large tam expansion at 85% of restaurant transactions are still considered non digital.
Digital payment processing on premise will simplify reconciliation refunding and avoiding processes for restaurants, bringing together, they're in restaurants and off premise transaction in a single dashboard.
It's also exciting as this launch marks all those first in store guest facing brand exposure guests can expect the same simplified experience overpay offers in non card present transactions, including the ability to pay with mobile wallets like Apple pay.
This launch is fulfilling the promise we made when we announced our partnership with Amgen last quarter, and we look forward to continuing our product roadmap with the <unk> team to enable more instances of card present digital payment processing in late 2023 and beyond.
Currently this technology that live in partnership with bite kiosk ordering software and we will look to expand to other kiosk providers soon <unk>.
Additionally, this launch brings the restaurant of the future vision, we discussed on our last earnings call. One step closer as bite has available today. The same facial recognition technology, we depicted in our vision of the future.
In more pay news, we made borderlands product enhancements on top of seeing encouraging early results. This quarter, although launch functionality that enables guests to earn and redeem loyalty rewards while enjoying the accelerated password list checkout experience provided by borderlands.
Loyalty programs are important to our restaurant customers and the ability to link borderlands accounts with loyalty profiles is a huge win we believe will help further increase Bordeaux is adoption moving forward.
We also wanted to share results from one of our early <unk> adopters Din Tai Fung, which demonstrates the power of what <unk> can do for restaurants.
Thanks to the convenience board with checkout process, we estimate that existing Din Tai Fung guests, who signed up with board was placed 61% more orders throughout the year or one five more orders per existing guests compared to those who have not signed up for boardwalk.
After board was enabled Din Tai Fung saw guests Simons, although legacy and borderlands before placing an order jumped from 31% to 65%, a 109% increase suggesting that strong guest engagement drives an increase in orders.
With the introduction of board was 46% more Din Tai Fung guests opted to save their credit cards on file for smoother checkouts in the future.
These results demonstrate meaningful increases in frequency and guest data all while providing guests with a more convenient ordering experience a true win win for restaurants and guests. We continue to believe borders will be a game changer, and we look forward to expanding its capabilities in the future.
Lastly, we have more AI news this time with product enhancements in the engaged suite.
Thrilled to announce that although engage now leverages generative AI in our marketing product. The E Mail template editor has an AI assistant on standby waiting to assist on title paragraph list and button content blocks.
Powered by open AI and chat GPT for this new AI assistant can be prompted multiple times to get the message just right before applying to a customer's E mail template.
Busy marketers now have more time to focus on sending powerful content to their guests to increase recency frequency and ultimately guests lifetime value.
You can see a full list of new features at <unk> Dot Com Slash quarterly dash release, and a full case study on Din Tai Fung experience with board with an older Dot Com Slash case studies.
And finally as I typically do on earnings calls I'd like to provide an organizational update this quarter, we made strategic changes to set <unk> up to successfully execute the opportunity. We see ahead of us in mid June although announced a restructuring of our product and engineering teams to better reflect and support our three product suites.
Order.
And engage.
With the restructure we consolidated our product teams around the product suites and centralized our engineering team to enable more efficient resource allocation as priority shift across the full business.
And further unlock that potential we also announced that Joanna Lambert with joined <unk> as our Chief operating officer, leading our engineering organization and product teams.
As previously shared we believe Joe is uniquely positioned to empower OLED business and areas of opportunity as she has more than two decades of executive experience as your product and operations leader, including senior executive roles at American Express Paypal, including a stint overseeing venmo as business and most recently at Yahoo, where she.
Led the consumer business importantly for payments experience will be crucial given our plans to prioritize and scale overpay in the coming years. She started with US on July 5th and we're thrilled to have her onboard.
Additionally, I'm excited to announce that Sherri Manning will be rounding out our executive team joining <unk> as our chief people Officer next week.
He brings more than 20 years of experience in the human resources domain, providing strategic leadership during rapid expansion post IPO development and acquisitions are globally recognized companies and late stage startups prior to joining US sure. He served as chief people officer at Big Commerce, and previously held leadership roles at IBM Universal Peg.
<unk> Q2 and Dell.
I look forward to seeing the positive ways, Joe and Sherry will impact our team and our business.
Looking ahead to the rest of the year, we're energized by our performance in the first half and remain focused on helping our customers utilize the digital transformation of the restaurant industry to their benefit as we bring to life, our vision of the restaurants of the future.
And with that I'll hand, it over to Peter to discuss more detailed results.
Thanks, Noah today, I'll review, our second quarter results as well as provide guidance for the third quarter and the full year 2023.
In the second quarter total revenue was $55 3 million, an increase of 21% year over year.
Platform revenue in the second quarter was $54 6 million, an increase of 23% year over year.
We saw strong performance across all three of our product suites, most notably all okay, which is tracking ahead of our expectations.
I'll provide more color on this momentarily.
In terms of key metrics <unk> for the second quarter was approximately $716, representing a 32% increase year over year, and a 13% increase sequentially.
Further growth in <unk> was driven by continued progress in driving the average number of modules adopted by our customer base, including higher <unk> solutions like <unk> as well as the impact of subways departure.
Net revenue retention was approximately 115%.
Up 100 basis points sequentially.
The ongoing strength in net revenue retention is being driven by <unk> growth as we successfully execute on our cross sell strategy.
And lastly in terms of active locations. This quarter, we added approximately 1000 net new active locations to the platform.
Ending the quarter with approximately 77000 active locations. We continue to target 6000, net new active locations additions for the full year.
For the remainder of the financial metrics disclosed unless otherwise noted I will be referencing non-GAAP financial measures.
Gross profit for the second quarter was $38 2 million. This compares to $33 8 million a year ago.
Year over year increase in gross profit was driven by continued growth in revenue, including from <unk> adoption. As a reminder, <unk> gross margin profile varies from our other businesses. So as <unk> scales. We are seeing an expected decrease in gross margin.
Sales and marketing expense for the second quarter with $9 7 million or 18% of total revenue. This.
This compares to $7 3 million, 16% a year ago.
We have made significant progress building out our go to market team and aligning it with the product suites and cross sell strategy. We've added much of the capacity we were targeting for 2023 already so we would expect to see only modest growth in the second half of the year.
Research and development expense for the second quarter was $14 $5 million or 26% of total revenue compared to $14 1 million or 31% of total revenue a year ago.
On a dollar basis, we increased investments in R&D in order to unlock future growth opportunities related to overpay board with capabilities and on premise ordering.
General and administrative expense for the second quarter with $9 5 million or 17% of total revenue.
This compares to $10 $4 million and 23% a year ago.
The year over year improvement on both a dollar and percentage basis represents continued optimization of expenses as our organization scales.
Operating income for the second quarter was $4 $5 million compared to $2 million a year ago.
Net income in the second quarter was $6 $4 million or <unk> <unk> per share based on approximately $177 8 million fully diluted weighted average shares outstanding.
Turning our attention to the balance sheet and cash flow statement.
Our cash cash equivalents and short and long term investments totaled $431 2 million as of June 32023.
Pursuant to the share repurchase program, which we announced in September 2022 in the second quarter, we repurchased one 4 million shares for a total of approximately $10 million since the introduction of our share repurchase program, we have repurchased $6 7 million shares for $50 million, we have 50.
Remaining on our authorization.
<unk> cash flows net cash provided by operating activities was $2 million in the quarter as compared to breakeven in the quarter a year ago.
Free cash flow was negative $1 9 million compared to negative $3 million a year ago.
I'll wrap up by providing our guidance for the third quarter and full year 2023.
For the third quarter of 2023, we expect revenue in the range of $56 million and $56 5 million and non-GAAP operating income in the range of $5 1 million and $5 $5 million.
For the fiscal year 2023, we expect revenue in the range of $220 million and $221 million and non-GAAP operating income in the range of $17 million and $17 8 million.
A few things to note as you consider our guidance. We are very pleased with the performance and customer adoption of <unk>. We now expect <unk> revenue for the full year to be in the low $20 million range up from our prior outlook and the mid to high teen millions the.
The order engaged suites are tracking to our expectations and their revenue outlook is unchanged from an expense perspective, the cost reduction actions taken during the second quarter were across each part of the organization with a more significant impact to R&D, our updated profitability guidance reflects a combination of flowing a pause.
<unk> of the savings to the bottom line and reinvesting some back into the business to support our strategic priorities.
To wrap up we are pleased with our performance in the first half of the year and our ability to increase both our top and bottom line guidance for the remainder of the year. Our results reflect the success, we are having with our expanded product portfolio and the ability to serve a growing portion of a restaurant's orders.
I would now like to turn it over to the operator to begin the Q&A session operator.
Thank you.
We will now be conducting a question and answer session.
If you would like to ask a question. Please press star one on your telephone keypad.
Formation tone will indicate your line is in the question queue.
You May press Star two if you would like to remove your questions from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys one.
One moment, please pull for questions.
Our first question comes from the line of Terry Tillman.
But <unk>. Please go ahead.
Yes, Thank you Hey, Noam Peter.
Wait to see some of this multi product traction and kind of the platform monetization playing out one question I have for you just to start it off.
It's great to see the expansion sales and monetization of the broader products, but I'm curious as we look at like top of the funnel and bringing in net new customers, whether it's enterprise brands are emerging enterprise brands could you give us a sense on kind of how that sales activity and pipeline is and how that differs versus 90 days prior in terms of potential new logos coming into the fold over there.
Next couple of quarters, and then I had a follow up for Peter.
Sure Terry. Thank you for the question I'd say I'd characterize it as a healthy pipeline across the enterprise and emerging enterprise I wouldn't characterize it as dissimilar from the way that it was 90 days ago.
While we've talked about 1000 net new locations this quarter, there's a little bit of rounding in Wichita.
Forecasting the 6000 total adds for the year.
And we're excited about enterprise and emerging enterprise and really the <unk> growth as the largest opportunity and you saw that again this quarter the <unk> growth and we experienced a net revenue retention of 115% that we experienced and we think that's a really healthy sign that we are mission critical.
For our customers they are looking to although as their digital consistently area and they wanted to do more with us as they go further on their digital transformation journey.
Got it thanks, Noah and I guess, Peter Thanks for the color on a low paying it sounds like it's definitely ahead of expectations, but I'm curious about is that low $20 million.
What kind of revenue level expectation does that include potentially another step up from card present and the second part is how do we think about like gross margins. When you start to get kind of more of a full attach rate of oh, well pay into the installed base. Thank you.
Yeah. Thanks, Terry So in terms of card present contribution. So we don't have any revenue forecasted this year related to card present, we talked a bit about last quarter.
During our product announcements as well as our prepared remarks, we're just getting started on that front initially.
Partnership with bi and which we are powering kiosk card present payments.
We'll use the balance of this year to learn and iterate and then hopefully 2024 is where youll start to see the impact of those efforts in terms of revenue contribution.
From a margin perspective, what we have shared is overtime pay.
Goal of achieving 20% gross margin on payments on a blended basis.
Admittedly, we're not there yet it's still very early there is.
Scale, and which will allow us to get closer to that to that target margin and card present is also an important component of how we get there, but again very early days on that.
On that on that path, but we definitely see a path to get there over time.
Thank you all and good luck in the second half.
Thank you.
Yeah.
Thank you next question comes from the line of Stephen Sheldon William Blair. Please go ahead.
Hey, Thanks, and nice results here.
First on the margin side it seems like the updated guidance assumes close to 10% adjusted operating margins in the second half so really good to see the trends there I think we've been assuming more like mid single digits before so curious how much of that is due to the workforce reduction and the savings that youre letting flow through there versus.
Just stronger topline growth with some of the success cross selling that you talked about with what I assume there would be pretty high incremental margins.
What's driving the margin improvement in the second half.
Yes, so I'd say the majority of that is being driven by the <unk>.
Cost actions we.
We had taken in late June and a continuation of <unk>.
Ongoing expense management as we move throughout the balance of the year with performance being in the back half of the year outperformance being in large part driven by full of PE given the relative margin profile of a pay less of that is dropping to the bottom line.
And therefore contributing to the incremental operating income guidance, it's more driven by the ongoing expense management.
Got it that's helpful.
And then as a follow up I think you said the engaged suite is tracking to your expectations. This year.
Curious, how youre thinking about the potential ramp in monetization of the broader engaged to meet over the next few years given conversations your team is having and would also be curious how much interest you're seeing.
Typically for the guest data platform side because.
I think you can see a lot of demand there over the next few years, but it sounds like it's still very early in the monetization of any detail on engage demand trends youre seeing.
Stephen This is Noah I'll jump in there by Peter to to add on if he wishes.
I think we are long term very bullish on engage and what restaurant brands are now able to do with all of the data digital transformation manifests and I think we're not alone that sentiment restaurants G that opportunity the sophisticated tools like.
Guest data platform as a way of harnessing that data about their guests of course with the guest permission and then being able to really personalize their experiences personalize their communications and enhance the overall guest experience I think this is a paradigm shift beyond.
Simple earn and burn loyalty programs that had been in Vogue I think theres a lot more to do on the marketing front on the engagement front than just that.
One of the things that we're excited about.
Let me tangential to your question, but we talked about the borderlands capability being able to interface with loyalty programs and I think that understanding that were helping brands to bridge from a loyalty based engagement suite to something more sophisticated like the guest data platform add marketing automation.
With AI tools built into it sentiment analysis et cetera.
Is really how we are educating our customers and cross selling into marketing departments and so from that perspective, we're very bullish and we believe that there is a great opportunity and it is very early days for the engage suite in total.
Got it.
Incremental wins there as you think about the next few years does it seem like it would be a full suite of products versus buying one or two kind of modules within the engaged suite would it be more of a big bundle that you would think customers really purchasing.
Well, it's interesting even just in this quarter. We highlighted an example of each of those things, we highlighted California pizza kitchen, and bundled approach to taking all of the engage capability is starting with the host table management platform and marketing automation and <unk>.
The Mems and then we have other examples like Denny's, which are great. Examples of the land and expand motion that we're seeing within the engage suite expanding now into guest data platform and marketing automation with that capability of challenges, which was a great innovation that <unk> brought to life in.
With our partner spark fly, but really showing the power of an open platform with open AI is in a great partner network.
To allow brands to really choose our own venture when it comes to how they want to engage with their guests.
I don't know that I would characterize it as one or the other I think the answer is all of the above some brands will want to dip a toe in the pool with one module or two of the four in total others want to go all in and have all of the engage module working from day one.
And we're excited to see that level of excitement from the enterprise and emerging enterprise customer base.
Great to hear thank you.
Thank you.
Thank you next question comes from the line of Gabriela Borges with Goldman Sachs. Please go ahead.
Oh.
Hi, Tim Yes, thanks for taking our questions. This is Max on for every dollar a couple from us.
One question on macro can you give us more color on the general business environment more specifically your restaurants willing to invest and how have trends in sales and implementation cycles trended this year.
<unk>.
Hi, Max this is Noah I'll take that I think.
We would characterize the past couple of years as being a challenge operating challenging operating environment for restaurants, and we've talked about that in earlier calls.
And the impact of Covid Omicron, and then into inflation and commodity price increases it's been a whole bunch of challenging issues. The restaurants that had to overcome labor included et cetera. I think there is some light at the end of the tunnel and we feel like things are starting to normalize on a number of those fronts.
Certainly guest demand for restaurants is strong digital demand is durable and growing.
I think from our perspective that will take some time to flow through into sales cycle improvements and deployment cycle improvements, but we're hopeful based on what we're seeing in the end market that this is a time when restaurants are seeing the wisdom in enabling more technology solutions with platforms like <unk>.
<unk> and enabling themselves then do more with less from our R&D budget perspective, and from an operator perspective.
Taking some of those learnings from these challenging times and using them to enhance their business going forward and better delight their guests.
Thanks, a lot and then another question that I have is I wanted to ask about initiatives in China.
Such as drive through automation could you give us an update on those initiatives and then how do you think about competition from some of the larger horizontal software vendors in the space, but that's one example, being googles partnership with vendors.
Sure Yeah. So in terms of drive thru AI, specifically, we've talked about that.
All of calls now a number of pilots that larger quick service restaurant drive thru oriented brands are doing with a variety of partners that are.
Providing that interactive voice response, IV are or AI kind of ordering capability on top of the <unk> API.
I would still characterize those as early kind of test beds, not fully deployed broadly throughout the system and all of them notably.
Human operator backing up.
AI in case, something goes wrong, and you have a guest who wants to speak to a human.
So I think that's an area of innovation broadly in restaurant technology.
Not something that we're directly doing as as although but we are doing through the OLED ecosystem through a variety of partners.
In a variety of customers who are experimenting.
I guess I would characterize our perspective, our philosophy on competition from horizontal technology providers as we're big believers that vertical solutions that are custom built for specific vertical there problem statement. Their use cases are going to ultimately be better than <unk>.
Horizontal solutions that are more general and less specific for that vertical.
Don't think of Google as a competitive solution with regard to their work with Wendy as I think about Google as part of our partner ecosystem. One of those partners that we work with closely on a number of different fronts I think when it comes to the solutions that we provide across order pay and engage although is.
Working very closely with our restaurants with our product Advisory Council, specifically to make sure that we're building the solutions that they need specific to their needs and the needs of their guests.
Very helpful. Thank you.
Thank you.
Thank you next question comes from the line of Andrew Hot.
Please go ahead.
Hey, Noam Peter Thanks for the questions and congrats on the quarter, it's nice to see that clubs don't overpay when coming through an extended enterprise momentum just two quick ones for me here.
Can you share like how conversations for all opaque Congress.
<unk> or going in general what are some of those key considerations from customers and the potential hurdles to switching.
And then second we estimate all of pay penetrations in the 2% to 3% context today and oftentimes our conversations with clients are about the path to 10% or 10% plus penetration how would you frame up that although pay penetration opportunity longer term and how its card present capabilities change that opportunity if at all thanks.
Andrew This is Noah I'll take the first part and I'll, let Peter speak to the second part I'd say really good conversations with brands about a better payment experience and a better payment experience.
For both the gas and for their operators that is what led to really the initial idea for OLED pay the charter for URL for OLED pay if you will and is truly what we're seeing in the market. We've talked in the past about things like higher authorization rates and how we've been able to accomplish.
That through our partnership with stripe and our partnership with AD yen doing located fraud, scoring helps with authentication. It also helps to dramatically reduce fraud that has borne out in reality, we're hearing that from our customers.
We're also in innovation like borderless doing away with passwords in enabling a digital pleasant experience for our guests to be signed in to have all the benefits of being signed in and then on the other side, enabling the brand to capture that data about the guest I think all of those things are part of why although pay is being seen.
As.
Our new breath of fresh air in payments by our restaurant customers.
Now some of them are.
Evil to deploy payments system wide and able to do that in one fell swoop others have.
Payments that over time have been.
Decisions made by a different operator groups and so it will take some time for us to get the at bat with all of our customers.
Also here, we have heard we would like to have a single payment platform for card not present, which overpay started out being able to do and also for card presence and now we're thrilled to be able to offer card presence and be able to meet that need of having card not present and card present in one management platform.
For OLED.
So we're very bullish our customers are very excited prospects are excited and we are mostly excited this quarter about that first.
Instead of orders that we have not done the card present and opening up what is a six X increase in the total addressable market for <unk>, given the breakdown of digital orders versus non digital orders and our ability.
Take payment for those non digital orders as well.
Yes, just to pick up on that so when we think about the I know Andrea you mentioned, there, 10% that's sort of the.
The goal I mean, we certainly have our site set higher in terms of future penetration rates and the reason for that is.
One of the things that we wanted to prove out.
During the first.
A year or so in market with all the pay is that one this is a solution for all restaurants sizes, which is something we have proven over time selling into the enterprise segment selling into the emerging enterprise segment. The second thing we want to prove out is that our go to market motions, we can be successful in bulk.
Through the new business channel wins, as well as upsell that the adoption rate.
Would be positive in both of those cases that's been.
That has been the case and that all will pay thirdly as a solution for all segments. So as we look across <unk> fast casual casual dining et cetera, we.
We have customers utilizing a little pay across all of those different segments. So again those proof points that we wanted to prove out through the first year or so and market. We've done. So now in terms of the penetration rate that you mentioned, there you're not far off and what we.
We get excited about is.
When you think about the <unk>.
Unlock from a Tam perspective card present presents to the company.
And having that initial card not present adoption rate that becomes a great lead Gen engine for those card present conversations when we're ready to have them.
Which is why again, when we think about the future penetration rates.
10% and we're more for that matter.
Very reasonable.
Thanks, and congrats again.
Thanks.
Thank you.
Before we take the next question a reminder to all the participants about the star one to ask questions.
Next question comes from the line of cloth Jefferies Piper Sandler. Please go ahead.
Hello, Thank you for taking the question.
I wanted to ask a question about the philosophy of of.
And Thats, an appetite versus expense management I think even prior to.
The cost measures that you took in in late June you were operating with profitability in and had over $400 million of cash available. So I wanted to ask it in a way of sort of what are the categories that you're most interested in increasing the investment in.
Are there places in the business, where you would expect to see head count growth.
Through the year or.
Is it still in this time period, where there is youre looking for some stabilization.
Some of those trends you mentioned.
Noah that are still stabilizing just love to get sense of investment appetite at this point and where you feel position for the rest of the year and then I have a follow up.
Yes, so I can take that one o'clock so we've.
As I mentioned in my prepared remarks, when you work your way down the P&L.
We've done a fair amount of investment in sales and marketing certainly through the first half of the year as we've ramped up the team to address a larger portion of the emerging enterprise segment as well as building out that those focus areas on the order paying engaged suite. So that we can have.
The specialization needed for those conversations to be successful from a sales perspective. So a lot of that investment has been made through the first half of the year and we expect more.
More modest.
<unk> progression as we move throughout the balance of the year in terms of R&D.
Many of the investments that we wanted to make.
In particular for low pay borda lists and card present.
Processing and we've done a lot of investment today on that front, there is still a little bit more to go there and therefore similar to sales and marketing we expect more modest progression in <unk>.
As we move throughout the year and then in terms of G&A.
I've talked about this in prior quarters in terms of having to.
Level up the team grow the teams so that we can properly support the business as a public company a lot of that is now built into the cost structure and we expect to see more leverage in G&A as we move as we move throughout the year.
Perfect. Thank you and then.
I wanted to just.
Maybe take a finer.
<unk> low pay and specifically at performing higher than your expectations in that in that guide for the low twenty's.
Is there a way to parse out what is really driving it.
So far outpacing your expectations has it been the size of merchant instead of you have seen in terms of.
That had been Onboarding has it been just a higher number of logo counts in the emerging enterprise any kind of clarification, there and then.
Just as a housekeeping item as we think about the platform and card present.
How should we think about the <unk> that the platform is touching well there'll be situations, where youre powering card present, but not but not ordering just.
How should we think about the composition if you start to go into those.
It was sort of.
Card present transaction. Thank you.
Yeah. So in terms of year to date outperformance on the PE front I would say that that is being driven by <unk>.
Greater upsells on the location standpoint, then.
Than originally anticipated so the adoption rate I'd say broadly across all segments.
Has been greater than what we originally anticipated and therefore.
For full year revenue out outpacing our original our original estimates in terms of the card present opportunity and what that unlocks one of the data points. We disclosed last year was the total amount of <unk> that we had processed over the calendar year, 2022, which was north of $20 billion of GMP.
And if you assume that the.
Digital penetration rate of digital transactions account for 15% of industry transactions.
And then you map that back to the $20 billion JV that means that we have over $100 billion of GMB just within the existing installed base that would be addressable addressable once we have a card present offering.
And that's what gets us really excited in the fact again that we've had a lot of progress on the PE front with card not present adoption that becomes a great lead Gen engine for for those card present conversation. So again early that's more of a 2020 for dynamic, but certainly something we're excited about.
Thank you much Peter.
Okay.
Thank you next question comes from the line of Matt Hedberg with RBC. Please go ahead.
Oh, Hey, guys. Thanks for taking my question.
I guess for either of you I think in the past, maybe I know you've mentioned that.
Oftentimes restaurants go through maybe a four to five year pain that reevaluation process.
Which I guess makes sense structurally, but I guess I'm wondering with all the innovations that you guys are adding to the platform.
Do you think theres, an opportunity to perhaps accelerate that reevaluation process and perhaps get people to look at you guys before they they might normally do so and if so is there anything that youre doing in particular could drive that.
Hey, Matt This is Noah, yes, so I think.
I have talked about a cycle.
During with restaurant brands tend to reevaluate payment processing relationships and again back to one of my earlier responses. It's not the whole brand every time, sometimes they're a different operator groups within the brand that are often different processors has not been kind of like with point of sale of the fragmentation that we have.
Talked about many times this fragmentation with payment processors. So in that respect there might be a component of a brand that is eligible to get up and running with all of the PE and operator group not the full brands that we can start to prove out those results ahead of the full brand being ready to deploy all of it.
There are other examples and I think we're already showing this with coming to market initially with card not present before having the full card not present and card present.
<unk> ability available, where we can kind of a wedge again with the card not present transactions that are the digital transactions running across the low ordering platform and then to Peters point on the last response makes the case at the right time for there is an even better opportunity. If we go beyond the <unk>.
Digital transactions to card not present transactions.
And with overpay address the card present transactions as well and have a unified payments platform. So we think that getting those proof points with our restaurant customers early.
And showing them improving the results that we're seeing with others within their four walls is very powerful and can lead to great success down the line.
That's great to hear and then.
When we think about <unk> growth, we think about location adds in our food expansion, obviously a bit more of that will be spent on <unk> expansion.
But on this call it certainly feels like beyond just enterprise success Youre seeing emerging enterprise customer success. There when you think about that land and expand motion.
Can you talk about how you're driving.
Sales pipeline and really converting that pipe across both of those different segments, because it feels like it could be a little different velocity with more of the emerging enterprise customers.
Yeah, So I'll try to take that one Matt.
In terms of.
Kind of the.
The initial conversations regarding emerging enterprise I mean, as we noted on the call. What we're finding is within that particular segment.
Hey.
A higher adoption of multiple modules from the onset of the relationship in particular, we've seen a lot of success there with with pay.
And that's great because that helps too.
<unk>.
It creates a higher starting point from from an RFP perspective, obviously helps with.
Stickiness et cetera within that segment and again going back to a card present commentary allows us to then leverage those card not present relationships to one day.
<unk> card present as well.
And in terms of like the actual pipeline development I mean, there's different different tactics that we use for enterprise versus our emerging enterprise I'd say a lot of focus right now within the enterprise with the Upsells are paying engaged just given the captive audience and the near term opportunity too.
Span within those existing relationships.
Pending on how we think about those two segments in slightly different different go to market approach.
Thanks, guys well done on the quarter.
Thanks, Matt.
Thank you.
There are no further questions at this time I would like to turn the floor back over to <unk> for closing comments.
Okay, well. Thank you again for joining US today, we are honored to be a mission critical platform for the restaurant industry and to serve as the engine of hospitality, helping restaurants drive sales do more with less and make every guest feel like irregular. Thank you team for your hard work and execution, we have miles to go.
Before we sleep.
Thank you.
<unk> concludes today's teleconference. You may disconnect your lines at this time thank.
Thank you for your participation.
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