And then on things like our guest management suite, we’re leveraging AI to drive campaigns, again leveraging all that guest data that’s in our platform. So that’s another big area of focus for the team.
Operator: Your next question is from the line of Harshita Rawat with Bernstein.
Harshita Rawat: So Elena, you talked about 30% to 35% margin target long term as you think about percentage of gross profit. As now we think about the operating leverage you’re achieving in the business and also kind of driving the gradual adjustment as a component, is there a change in thinking about that long-term profitability target? And also, how should we think about long-term GAAP profitability as well?
Elena Gomez: Sure, great question. So I’ll provide context on our long-term financial profile at Analyst Day. But just sort of pivoting back to 2024, our guidance shows significant progress on margin. And you’ve seen us deliver that efficiency and scale over the course of the last several quarters. So we’re going to continue with that discipline. And you heard Aman talk about his strategic priorities as he’s laid out. We’re positioning the company really to drive ongoing operating leverage while we’re balancing that with growth and innovation. So I don’t have an update today but we’ll update you at Analyst Day. And you had a question on GAAP, actually, that’s a really good point. You had a question on GAAP. Overall, just keep in mind, we’ve been very focused on stock-based comp as well as you’ve heard us talk about that. So that’s really what’s driving our confidence in the updated guidance on GAAP on this call.
Operator: Your next question is from the line of Tien-Tsin Huang with JPMorgan.
Tien-Tsin Huang: Sorry, can you hear me?
Elena Gomez: Yes. Now we can.
Tien-Tsin Huang: Just on the — I was following up on Dave’s question on GPV per location. Beyond the second quarter, I know some of the compares will help. We do see that on our side as well. But just given some of the mix shifts and different focus upmarket, downmarket, any sort of directional view on GPV per location structurally beyond the macro?
Aman Narang: Yes, Tien-Tsin, thanks for the question. Nothing material to report there. I mean, if you look at the bulk of our growth, that is still being driven by our core SMB business. And the same effect we’ve talked about is as we gain share, we’re seeing the same flywheel effect. It’s taken us a decade to get — build a business we’ve built in our SMB business. And while we’re excited about the potential internationally in enterprise and other segments of the market, that’s not what’s materially driving any changes in GPV. I mean, I think some of this is just if you think about restaurant sales trends, they’re stable, but year-over-year, there was some small decel that we saw. Now it’s stabilized in a narrow band.
Elena Gomez: Yes, and I would just add that as we extend the different parts of the TAM, any mix shift will be very gradual over a long period of time.
Tien-Tsin Huang: Makes sense. Yes, you got a big base here. Okay, just my quick follow-up maybe for you, Aman. Just we get a lot of questions on competitive intensity and a lot of your peers are upgrading tech and verticalizing and adding more software content around these verticals. Are you seeing any change there? And does it change your sort of focus around product velocity or going into adjacencies, that kind of thing?
Aman Narang: Yes. I mean, look, we’re also investing in a big way to continue to innovate for our customers. I talked about some examples with how we’re leveraging data and AI to just really help this customer community with this unique data asset that we have. And we had a good — maybe I’ll start by saying that a great quarter. You saw 6,000 net adds, I think great momentum in the business. Back to our — this really speaks to the team’s execution but also our platform and our go-to-market engine. And this is always — we’ve said this before in calls but it’s always been a competitive market. I think we continue to see great execution, good win rates, productivity from our team is strong. And we continue to believe the biggest thing, the biggest factor that’s going to drive our growth long term is our own execution, getting more of these markets into flywheel, getting word-of-mouth, getting customer experience to be the best it can be.
So nothing material to report. We track a lot of this very closely across competitors, nothing material to report at the moment.
Operator: Your next question comes from the line of Peter Heckmann with D.A. Davidson.
Peter Heckmann: Some of my questions echo what we’ve already heard, but when you think about that roughly 850,000 restaurant locations in the U.S., I guess how do you feel about how much of that is addressable by your current solution, either the turnkey option or software, hardware but not with payments? I guess, how difficult is it for — will it be as you move upmarket to displace more modern software or more modern payment players?
Aman Narang: Yes. Thanks for the question, Pete. Look, I think if you look at the overall TAM, we see there’s a lot of room for us to continue to grow in our core TAM. Overall, Toast is about, I think, 13% of U.S. restaurants, as Elena mentioned. Within SMB and mid-market, that penetration is a little bit higher in mid to high teens. And of course, enterprise is still nascent and it’s early. Even in these markets that are the most penetrated where we’ve got 25%, 30% share, these are the flywheel markets we talked about, we still see some of the strongest growth in terms of net adds in those markets. And so the #1 focus of the team is to get all of our markets into flywheel state. As we think about in enterprise, you asked about upmarket, I think at least what we see is that the adoption of cloud upmarket is lower.
There’s more of legacy solutions. And I think part of why we have expanded our platform to support a partner like FreedomPay is to make the platform more accessible in ways that customers want to buy, so we’re more flexible upmarket based on what our customers need. And of course, we’ve got hundreds of partners as well that are on top of our platform that can build on our solution as well. So I think certainly, like it’s — as we think about going upmarket, it’s — we’re happy with the momentum and the progress we’re making. But we also want to be balanced about making sure that the customers we take on are in line with where the platform is going. So we don’t want any one customer to take over our road map, for example.
Peter Heckmann: Okay, that’s helpful. And then have you talked about what’s implied from a net revenue retention basis in your annual guidance that you think we can see that uptick after the downtick in 2023?
Elena Gomez: Yes. We haven’t commented on that specifically so nothing new to report on that today.
Operator: Your next question is from the line of Stephen Sheldon with William Blair.
