Savneet Singh: Yes, it’s nothing meaningful. But when we acquired menu, it had a large — not large, but an international base. And we made a decision to direct the business to the US And so — it’s kind of the idea is to sort of say, let’s not focus on an international business that’s unprofitable, let’s bring it to the US where you think you can quickly get it to profitability. And then given that our first major customer was BK, we kind of need all hands on deck to get that win.
Jeremy Sahler: Got it. That’s useful color. And then maybe following up on the rebates that you guys issued last quarter. I know there was some infrastructure maybe you had to invest in. I guess are you all cut up there? Are there still kind of investments you need to make to kind of get that up speed?
Savneet Singh: Well, I just saw we had the gross margin jump back pretty quickly here. Part of that was just the investments that we made the ROI, Part of that was not having any credits in this quarter. So, we didn’t have the credit issue on this quarter because we kind of addressed that spike we had last quarter, and we feel good about that. There’s always ongoing investments. I don’t ever expect and knock on wood, our gross margins ever dropped to where they were in Q2 again. So, we feel pretty good. And like I said, in the short run, we want to get these — short and medium, we got this to be 70% plus and the long run wanted to get to be much higher. And again, the vast majority of that will be tied to us constantly making Brink more scalable, because that’s where we have the most aggressive usage of DevOps cost and then the ramping of payments and menu who are — we’ll both have very high margins but are really early in their life cycle.
Jeremy Sahler: Got it. That’s really useful color. Maybe if I could squeeze one last one in. We saw earlier this week from a competitor, one large brand, they turned off to take their tech house — the tech stack in-house. Is there any concern about becoming maybe a broader trend? Are you seeing that among any of your prospects?
Savneet Singh: We’re seeing the opposite. I think Brink being a great example of that, and we’ve got others we’ll talk about later. But we see the opposite. And I think that dynamic is very much — if you’re a single product company doing one verticalized need of the restaurant, you are really exposed to that risk. When you’re the POS, it is such an enormously large product that’s not something you can — you really do want to take in and the expense to do that. And then, I think if you’re a POS company like us and you can say, hey, we can do this, but we can also offer you a loyalty on my ordering back office. It’s a lot easier to transition your systems because then you’re again not managing multiple vendors. So, we’re seeing the opposite in our market. And I think that’s just the nature of the product we have, but also the family of products we have. It really makes it a different conversation.
Jeremy Sahler: Got it. That makes a lot of sense. Thanks very much taking my questions, guys.
Savneet Singh: Maybe I would say differently, if we were a verticalized product like you mentioned and that product was deeply integrated to the POS or the loyalty, I don’t think you’d have that churn. So I think it’s really being unified as what keeps you sticky.
Jeremy Sahler: Right. Thanks guys.
Operator: All right. Thank you. One moment for our next question. Our next question comes from the line of Adam Wyden of ADW Capital. Your line is now open.
Adam Wyden: Thanks guys. I’ve got three questions. First one, really impressive on the gross margin pickup and the burn and all sort of makes sense with piloting menu last quarter and the punch. If I just sort of do some back of the envelope math, assuming no sort of gross margin degradation, if you guys add pick a number, 5 million of ARR next quarter. I’m sure you’ll likely add more than that. But like at 80% incremental gross margin or even 70%, it’s fair to assume that with OpEx flat, you’re going to be EBITDA positive in the fourth quarter. Is it unreasonable to think that you guys could be at EBITDA breakeven in the fourth quarter or very close to it? And is it fair to assume that from — obviously, you’ll sort of make investments here and there.
But I mean is it fair to assume that your — you have a path to getting to Rule of 40 without M&A? I mean, obviously, M&A will accelerate it, but I mean, do you feel like there is a stand-alone path to low-40. I mean, it looks like there is based on the numbers I’m just trying to understand.
Savneet Singh: Yes. Listen, I think we can get to the low-40 without M&A. I’ll — let me answer that two ways. First is, this deal for BK will accelerate our growth in the out year, right? So we would likely — I’m guessing, and again, we’ll talk about it in our next call of guidance, we likely go faster in 2024 than 2023. And as I mentioned, this is not the only deal. There are deals coming down the pike that are going to expand us even more. And so I think we’ll be really good on the revenue side. And as I mentioned on the call, our entire burn this quarter was menu. And so the moment that we can inflect menu to positive, which we think is coming — we announced some really scooters, these are big brands now coming on menu.
This will also help. So I think there’s a path to Rule of 40 on our own, and we will get there no matter what. We have no choice and we will, and that’s our goal. M&A though will accelerate it. And it’s because the deals that we are working on are cash flow positive, not dilutive to our growth and I think, accretive to a Rule of 40 stores. So it should help us get there faster. And we’ve talked about a lot we are really good on the G&A side. We are really good at cutting lots of areas of G&A and then reinvesting those in areas of growth. G&A. I mentioned the $9 million of our OpEx goes went to menu — the BK ramp-up in IT systems. We did that without growing the OpEx, and we do that again on the next M&A deal. And so I feel really good that if we acquire something, we can get a lot of operating leverage out of our operating expenses, particularly G&A and sales and marketing.
So it will certainly get us there faster.
