Tim Murphy: Well, yes, so Q4, we actually think could be a little bit above Q3. Q2 was 15%. Q3 came in at 13%. We did experience some implementation delays. We have started to see those flow through the pipeline. John talked about focusing on the customer journey and the implementation experience. So that’s a key area for us to try to find ways to be more proactive and move deals through the pipeline more quickly. And toward the end of Q3 and into early Q4, we’re seeing some success with that. So I think that number will be a little bit higher in Q4, and that’s probably a good way to think about it going into next year.
Operator: The next question comes from Sanjay Sakhrani from KBW.
Steven Kwok: This is actually Steven Kwok filling in for Sanjay. The first one I have was just around the take rate, just how should we think about it moving forward? It seems like the year thus far, take rate has been stronger than expected, just if you could provide some color around that.
Tim Murphy: Yes, absolutely. So as we mentioned, we raised our revenue outlook for the year. We’re seeing a lot of strength in our revenue, as you said, year-to-date, and so we felt good raising that. And it’s a similar trend as previous quarters where some of our non-card volume-based products performed really well. Those would be the communication solutions and Instant Funding on the consumer side. And then overall, our yields in Business Payments were higher and have been increasing. So we increased the revenue guidance, which implies a little bit higher take rate than previously in Q4. The other thing I’d say is, over time, as we ramp more enterprise wins, that take rate could come down a little bit, but we’ll likely have higher GP dollars, which will lead to faster GP growth as a result of the enterprise wins.
So it’s been really strong. It gave us comfort increasing the revenue guidance, but the mix shift to enterprise could bring that down a little bit in future periods.
Steven Kwok: And then just following up around the guidance because the gross profit didn’t really change. So just wondering, if you could give a little bit more color around the cost of services and how we should think about that for next quarter and then into 2024.
Tim Murphy: Yes. I mean those products that I just mentioned are lower-margin products in general. So they don’t flow through from revenue to GP the same way. They have higher COGS. So if those are more prevalent, that could be one explanation for that. But in general, like I said, a lower margin would imply that it’s just a little bit higher cost of service related to those types of products but they’re not card volume-based.
Operator: The next question comes from Tim Chiodo from UBS.
Tim Chiodo: Also on the take rate, so the 1.16 that you mentioned, Tim, can you give us any kind of a rough sense of how much that non-card revenue is that’s contributing? I understand the take rate has a little bit of interchange there from the B2B AP. There’s a little bit of a take rate. There’s a little bit of convenience fee, and there’s a little bit of the non-card revenue. If you could give any context on the relative sizing of those or, most specifically, the non-card related revenue that basically adds to the numerator but not to the denominator when we look at take rate.
Tim Murphy: Yes. I appreciate the question. It’s about 20% to 25%.
Tim Chiodo: 20% to 25% of revenue is coming from the non-card. Okay. So if we back that out, the underlying take rate would look lower, which makes total sense.
Tim Murphy: Yes, it would, but it’s still in the 90s, call it. So we still feel really good about the card take rate. But yes, optically, it would be lower if you back that out.
John Morris: Tim, I mean, our EBITDA margins would look similar to what we previously reported this year if you…
Tim Murphy: Adjust for the revenue.
John Morris: Adjust for the revenue piece.
Tim Chiodo: The follow-up briefly, I know that Andrew mentioned this earlier, I’m sorry to come back to it, but the guidance range for gross profit, when you gave it last time, it was kind of wide, but there was still half of the year left. And now that there’s only 2 months left it just seems like kind of a wide range. Was there any reason, anything that you saw that maybe just led you to keep it at that pretty wide range?
Tim Murphy: I think it’s just a combination of year-to-date performance and how that has looked on the GP level and then the dynamic where the drivers of the increased revenue don’t have the same margin profile as the overall business. So if those are lower margin, they’re just not flowing through the same way to GP. So year-to-date performance and product mix are the two main reasons.
Operator: The next question comes from Joel Riechers from Truist Securities.
Joel Riechers: This is Joel on for Andrew Jeffrey. I had a question around the domestic health care space. And we know it’s pretty complex. And from what we’ve heard from some competitors, they talked about some to lay the implementations there. Can you speak to the health care pipeline and visibility in general and tell us if you’re seeing anything like delays that could impact the timing of RCS revenue in that vertical?
John Morris: Yes. So from our perspective, the health care vertical, predominantly for us, although we have a smaller part of that on the Consumer Payments side, a large part of that, for us, is going to be health care vertical in the Business Payments side and predominantly more on the payable side of that, which is the back office side of the hospital world. A very large enterprise, they have their own sequencing of implementation rollouts. It could have been some reasons for delay early in the year, but actually, we’ve experienced some very positive momentum with some of our health care wins here in the third and fourth quarter. And you would almost have to say it’s quite specific in the size of clients and their technical ability sometimes.
Joel Riechers: And then with the 2024 political season in mind, can you tell us just if the competitive landscape has changed at all in the last year? And if you could give us some color on what line of sight looks like for media spend, just given the tough comps that you’ve reference in B2B?
Tim Murphy: Yes. So it’s very similar competitive dynamics there. There’s really us and one other large player that participate in the AP side for political media spend. And 2022 is a non-presidential cycle. And like we said on the call, we produced about $6 million of gross profit. ’24 is a presidential cycle. And based on the market data we’ve seen, we think that could grow our gross profit by about 25%. So just based on overall market growth, the presidential cycle being bigger than the non-presidential cycle and what we see in our pipeline, that’s how we think about growth in ’24 over ’22, specifically for political media.
Operator: [Operator Instructions] The next question comes from James Faucette from Morgan Stanley.
Michael Infante: It’s Michael Infante on for James. Tim, I just wanted to ask how you’re thinking about the implied card payment volume in 4Q. Obviously, take your comments on macro broadly, but seems to be well ahead of sequential 4Q norms. So I was curious about how you’re thinking about the drivers there and sort of how you’re thinking about exit rates into next year.
