Good afternoon. My name is Hannah, and I will be your conference operator today. At this time, I would like to welcome everyone to the Toast second quarter 2022 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star followed by two. Thank you. I will now turn the call over to Michael Senno, Vice President of Investor Relations and Treasury. You may begin your conference. Thank you, Hannah. Welcome to Toast's earnings conference call for the second quarter ended June 30, 2022. On today's call, our CEO, Chris Comparato, and CFO, Elena Gomez, will open with prepared remarks. They will then be joined by our COO, Aman Narang, for our Q&A session. Before we start, I'd like to draw your attention to the Safe Harbor statement included in today's press release. During this call, we'll make statements related to our business that may be considered forward-looking within the meaning of the Securities Exchange Act. All statements other than statements of historical facts or forward-looking statements, including those regarding management's expectations of future financial and operational performance and operational expenditures, expected growth and business outlook, including our financial guidance for the third quarter and full year of 2022. Forward-looking statements reflect our views only as of today. Except as required by law, we undertake no obligation to update or revise these forward-looking statements. Please refer to the cautionary language in today's press release and our SEC filings for a discussion of the risks and uncertainty that could cause actual results to differ materially from our expectations. During this call, we will discuss certain non-GAAP financial measures. These non-GAAP financial measures are not intended to be a substitute for our GAAP results. Please refer to our earnings release and SEC filings for detailed reconciliations of these non-GAAP measures to the most comparable GAAP measures. Unless otherwise stated, all references on this call to cost of revenue, gross profit and gross margin, selling and marketing expense, research and development expense, and general and administrative expense are on a non-GAAP basis. Finally, both the press releases and a replay of this call, including the accompanying investor presentation, will be available on our investor relations website at investors.toasttab.com. With that, let me turn the call over to Chris. Thank you, Michael, and good afternoon, everyone. Toast continues to build on our operational momentum in Q2, posting strong, efficient growth, exceeding both our revenue and profit expectations, and delivering another record quarter of new location additions. This momentum stems from the consistent execution of our core growth strategy, driving location growth, deepening our ability to serve all segments of the restaurant industry, and delivering product innovation for restaurants. On that front, last month, we announced the acquisition of Sling to further expand our team management suite and help restaurants deepen their relationship with employees. We're excited to welcome the Sling team to the Toast family. While we have tremendous momentum across our business, we're also cognizant of the current macroeconomic backdrop and what it means for our customers. Restaurants are operating in a challenging environment, facing heightened food cost inflation, labor constraints, higher wages, and uncertainty in this broader economy. The restaurant industry has faced challenges many times before and proven incredibly resilient over time. Restaurants adapted and bounced back from unprecedented conditions during COVID and have successfully navigated prior economic downturns. It's a testament to how much people enjoy the restaurant experience. Even in the most challenging times, people love eating out, and restaurants are often at the center of our communities. Turning to our results for the quarter, revenue increased 58% year-over-year to $675 million in the second quarter, and ARR was up 59% to $787 million. GPV remains strong, growing 62% year-over-year to $23 billion in Q2. We also continue to drive strong location growth. After adding over 5,000 net new restaurant locations in a quarter for the first time in Q1, we now exceeded 6,000 net new restaurant locations in Q2. Just incredible growth that is being driven by our strong bookings pipeline as well as continued low churn. As a result of our consistent execution and first half performance, we are raising our full year revenue guidance by 5% at the midpoint of the range, which implies 55% year-over-year growth. Driving toward profitability is a key priority for our team, and the progress is clear in the significant adjusted EBITDA margin improvements in Q2. With the increased focus on efficiency and rigorous prioritization of our investment opportunities, we expect to sustain these improvements, and we're raising our adjusted EBITDA outlook for 2022 by $35 million at the midpoint to reflect that. Elena will provide more detail on our outlook shortly. With the restaurant industry in the midst of a generational shift to cloud-based digital solutions, we continue to seamlessly execute our proven go-to-market strategy to capitalize on that opportunity. As we increase density in more established territories, we benefit from the flywheel effect that drives referrals and inbound leads, driving higher and more efficient productivity. At the same time, we're gaining traction in less developed markets and are on a path to replicate that flywheel effect as we gain share. In addition to the strong growth in new locations, customer churn remains low. Our industry-leading platform adds tremendous value for our customers, helping them grow and creating a passionate and loyal customer base. The success of the Toast restaurants we support lie at the heart of our business model. We grow as our customers grow. In Q2, we continued to see success with all formats and types of restaurants. I'll highlight a few examples. In enterprise, we expanded our relationship with Jamba Juice by 40 locations, bringing our partnership to more than 700 total locations. As part of the expanded relationship, Jamba is piloting the addition of the Toast kiosk product to streamline checkout and help combat heightened labor costs. Jamba Juice showcases how Toast is designed to increase throughput in high-volume environments like QSR and fast casual, and how some of our largest customers continue to adopt more of our platform to increase efficiency and drive growth. Chip Cookies selected Toast in Q2 to support its growing 13-location business. From making its back of house more efficient with our payroll, xtraCHEF, and multi-location management products, to using our point of sale and delivery services to more efficiently serve customers, Chip Cookies saw the value of Toast as an all-in-one solution that could help them grow while managing their business more efficiently. By leveraging more than 10 of our modules, Chip Cookies is a great example of how the benefits to customers increase as they leverage more of our integrated platform. While Chip highlights how new customers are using more of our platform, we also have a significant opportunity to help customers find more ways to leverage the full extent of our platform to create value for their businesses. Our e-commerce offering, Toast Shop, provides customers an efficient self-service option to seamlessly add products and has been a consistent source of incremental SaaS ARPU. Last year, we also started a growth sales team solely focused on selling to our existing customers to complement Toast Shop. We've continued to invest in and evolve that team, and the second quarter marked the first time the entire growth team was selling our full product set. This enables each of our reps to efficiently partner with customers on ways to utilize the full breadth of our platform. A good example of the benefit our growth team can bring customers is Maize Mexican Grill, a fast casual restaurant group. Maize Mexican Grill initially inquired about adding our loyalty product across its locations. Our growth team worked with the customer to highlight the benefits of our full platform, which led to them adopting several of our guest products as well as payroll and xtraCHEF. This showcases the power of having a team focused on upsell and reps equipped to help customers take advantage of the full power of our integrated platform. While we are pleased with the initial results, we're still early on in this area. We see a big opportunity to drive broader adoption of our platform among existing customers. One of Toast's key differentiators is our focus on restaurants and our ability to deeply serve different customer segments, regardless of size or format. Earlier this year, we announced Toast for Hotel Restaurants, a powerful new solution designed to meet the unique needs of hotel restaurant operators by seamlessly integrating leading hotel property management systems with the Toast platform. As a result of that new capability, in Q2, we signed a regional hotel chain for its full-service restaurant concept across over 10 locations. This hotel chain will use our handheld point of sale for tableside order and pay, our kitchen display systems to expedite orders, and our multi-location management to efficiently manage menus. This is evidence of the opportunity we have to go much deeper in the hotel restaurant segment with our new offering. Shifting to product, as we continue to enable our customers to deeply connect with all of their stakeholders, I want to focus on the critical employee touch point. In the midst of an extremely challenging labor market, winning the hearts and minds of employees is more important than ever. Last month, we announced the acquisition of Sling, a leading employee scheduling and communication solution. Integrating scheduling and communications into our platform alongside our other team management products, including payroll, tips manager, and pay card, will help restaurants deepen their relationship with employees, more efficiently manage labor, and create a differentiated employee experience. Employee communications and scheduling is a high engagement product, and it's also an important new touch point for Toast with the more than 11 million restaurant workers in the U.S. Similar to our prior acquisitions, our relationship with Sling started as a partnership, which launched early last year. The strong customer signal informed our view on how the product can enhance our entire team management suite. After incorporating Sling into our sales motion, our win rate was higher when customers evaluated Sling and payroll together compared to when only quoting payroll. This offers early proof of how Sling complements our existing team management suite and can enhance the overall value proposition to our customers. With Sling as part of the Toast family, we plan to fully integrate the offering into our platform to provide customers a seamless experience. The acquisition also allows us to accelerate product development in alignment with the roadmap for our team management suite and continue to build features specifically targeted for our restaurant customers and their employees. Sling makes our team management suite more robust, and is another example of how with our cloud-based platform, purpose-built to meet the specific needs of restaurants, no partner is better positioned to help the industry adapt and thrive than Toast. While restaurant industry sales have fully bounced back from COVID and are above 2019 levels, as I noted earlier, restaurants are facing challenges. Labor and food are the two biggest expenses for restaurants, and the current environment has amplified the pressure on both. Inflation is at a multi-decade high, and the restaurant workforce is still about 6% below pre-pandemic levels, creating staffing constraints. Our platform is built to help restaurants navigate these challenges. We provide restaurants with an array of products to automate processes and increase efficiency across their workflows, so they can focus on what matters the most, the food, their guests, and their employees. xtraCHEF not only automates manual invoice processing and inventory management, it also provides restaurant managers with real-time data on food cost trends to inform decisions on menu pricing and sourcing to help preserve profitability. With the help of xtraCHEF, Underbelly Hospitality Group in Texas was able to reduce costs by 3% on average across their locations, saving over $330,000 per year. This is an invaluable tool with food costs rising at historic levels, and we are seeing adoption of xtraCHEF increase as restaurants seek to optimize margins. Products like our Toast Go handheld, kiosks, and mobile order and pay allow savvy operators to better manage labor expenses and employees to handle more orders per hour, leading to higher tips while also providing a better guest experience. More QSR and fast casual restaurants are rolling out these digital touch points for guests to overcome staffing shortages while meeting evolving customer preferences, and Toast is well positioned to lead that transition. For example, New England Lobster Market and Eatery, a fast casual restaurant, is using our mobile order and pay solution for the majority of its on-premise transactions. In addition to requiring less staff, tips have more than doubled and are automatically split amongst employees, helping the restaurant significantly reduce turnover without incremental wage pressure. In summary, the Toast platform is more relevant and valuable than ever to our customers as they navigate these changing conditions. As customers use more of our platform, they can drive efficiency across their business to mitigate costs while continuing to offer a great guest experience. Simply put, our goal is to give restaurants all the tools they need to adapt and thrive. Restaurants deserve a trusted partner who shares their vision for a future where the restaurant and the entire industry thrives and their businesses flourish. A partner who helps restaurants spend more time delighting customers and less time confused by technology. A partner who will advocate for the industry, and Toast is that partner. In closing, I want to thank our employees for a great first half of the year. I'm proud of how we're executing and our team's tireless effort to add value for our customers. Now I'll turn the call over to Elena. Thanks, Chris, and thank you everyone for joining, and a big thank you to the Toast team. All your hard work and dedication to serving our customers led to another quarter of great results. Both revenue and adjusted EBITDA came in ahead of expectations in Q2. The power of our integrated software and payments model together with our industry-leading platform continued to drive strong top-line growth, and our commitment to cost discipline was evident in our significant adjusted EBITDA margin improvement. Not only are we proud of the strong results this quarter, we're also excited to welcome the Sling team to Toast. As Chris mentioned, Sling strengthens our team management product suite and will serve to further differentiate our platform as we focus on being the technology backbone for the restaurant industry. Our proven go-to-market strategy and investments to scale the sales team continues to pay off. Net new location adds further accelerated in Q2 to over 6,000, increasing the number of total live locations on our platform to approximately 68,000. The continued market share gains highlight the tremendous value our platform provides restaurants, which also contributes to our consistently low churn rate. It's worth noting that Q2 is seasonally our strongest quarter for net location adds. Summer is the peak season for restaurants and with some less likely to switch platforms during their busiest period, we typically add fewer new locations in Q3 than in Q2. We've seen this seasonal pattern in our business over several years and expect the same this year. That said, our pipeline remains strong, the value proposition is clearly resonating, and we are well-positioned to sustain our momentum. Turning to our quarterly results, total revenue grew 58% year-over-year to $675 million. ARR, which is our core operational metric, ended Q2 at $787 million, up 59% year-over-year and 24% compared to Q1. Total ARPU eclipsed $11,000 for the first time, driven by strong growth in both our recurring revenue streams, SaaS and payments. Subscription services revenue increased 100% year-over-year in the second quarter, benefiting from our location growth and increased product adoption as both new and existing customers leveraged more of our platform. As of the end of Q2, 61% of our Toast locations used four or more products on top of our integrated POS and payment solution, but even a higher percentage of new live customers joined the platform with four or more products. As a result, SaaS ARPU continues to increase for each new quarterly cohort of live customers and is above the average for our platform. As we think about our long-term ARPU potential, we also believe upsell will be a big contributor. As Chris mentioned, our Toast Shop e-commerce store has been an efficient channel for existing customers to add products. With our growth sales team now complementing the e-commerce solution and all those reps selling our full array of products, we have an opportunity to drive deeper adoption of our products like xtraCHEF and Payroll, and help customers leverage more of our integrated platform to create value for their business. Total upsell across Toast Shop and our growth sales team contributed over 20% of the incremental SaaS ARR in Q2, and we see a big opportunity to unlock incremental ARPU growth over time. On the Fintech solution side, revenue grew 59% to $562 million, and gross profit was up 54% year-over-year to $114 million in the quarter. As a reminder, SaaS revenue and Fintech gross profit comprise what we operationally view as recurring revenue. Fintech gross profit benefited from sustained strength in GPV, which increased 62% to $23 billion in Q2. Average annualized GPV per processing location was up 16% year-over-year to $1.4 million. The growth in GPV per processing location is a result of both higher average ticket and the continued rebound in customer transactions, which was slightly below 2019 levels in Q2. The net take rate of 49 basis points was within the range we expect in the near term. Debit mix declined quarter-over-quarter in line with typical seasonal patterns, partly offset by the benefit of our continued cost optimization efforts. Total gross profit grew 33% year-over-year and 24% quarter-over-quarter to $125 million, resulting in gross margin of 18.5%. Looking at our recurring stream, subscription and Fintech gross profit totaled $169 million, up 67% year-over-year, driven by our continued location growth and strong ARPU increases across both SaaS and Fintech solutions. Looking at customer acquisition costs, we continue to tightly manage unit economics to maintain healthy payback periods, even as we navigate headwinds on the hardware side and invest to scale the business. As we noted last quarter, hardware margin declined quarter-over-quarter. We expect hardware margins to improve in the second half of the year as we benefit from the shift to lower cost shipping methods. Our decision to strategically increase inventory not only drives cost savings on shipping, but also insulates us from short-term supply chain disruptions, allowing us to continue to seamlessly serve our customers. Before discussing our other cost lines, I want to provide context on the pace of our overall operating expense growth. Over the past year, we accelerated hiring across the business to rebuild our teams following the staff reductions in early 2020, to sustain our momentum as the business rapidly scales and to position Toast to capitalize on this large opportunity ahead. We're now largely past that ramp in hiring. With what's reflected in our updated outlook for the rest of 2022, we believe our cost structure will align with the scale and growth trajectory of the business. That positions us to continue investing in key growth areas to sustain top-line momentum while further improving profitability going forward. Sales and marketing expense declined as a percentage of recurring revenue in Q2. The initial benefit from scaling our sales team is already evident in the strong location and ARPU growth. Last quarter, we discussed how our go-to-market strategy creates a flywheel effect. As we increase market share in a territory, inbound traffic and referrals grow, and our sales reps deliver higher productivity. We expect that to be a tailwind going forward, particularly as we gain traction in the less penetrated territories that we're investing into. In addition, our sales reps naturally become more productive as they gain experience. By ramping hiring over the past year, the average tenure of our sales force has naturally declined. With our sales rep base closer to our target level, we plan to increase the team at a more steady state and expect our average tenure to increase, which historically led to increased productivity. We expect both of these dynamics to contribute to increased efficiency in sales and marketing expenses over time. Research and development is another area where we accelerated investment over the past year. This includes continuing to develop and broaden our platform and scaling the team to support the incredible growth we've experienced over the past two years. We now have more than double the number of locations on our platform from the onset of COVID, and our ambitions have grown significantly. We're investing to build platform scalability and stability in order to support hundreds of thousands of restaurants over the coming years. Product innovation also remains core to our growth strategy. Our strong ARPU growth gives us conviction on the ROI of our product investments, and we still have a huge opportunity to add more products that restaurants want and provide features and functionality that will enable us to both broaden and more deeply penetrate our TAM. In the first half of 2022, approximately 20% of our R&D spend went towards products and initiatives that represent less than 5% of our ARR today. We expect these areas to become important drivers over the next few years. That investment is skewed towards products where we've already seen initial traction, like our team management suite, notably payroll. A smaller portion is allocated to initiatives that we expect to be meaningful drivers in the medium term. We're committed to maintaining a balanced R&D profile, investing to drive continued innovation in our core products, and to scale our platform while allocating capital to emerging areas that we have high conviction can increase our ARPU potential and expand our market opportunity. Moving down the P&L, the year-over-year growth in general and administrative expenses continues to be primarily related to public company related expenses. The growth in G&A should decline to a more steady state level in Q4 as we fully lap the initial step-up from late last year. We intend to remain disciplined in managing overhead and expect to deliver operating leverage in G&A starting in 2023. Total Q2 adjusted EBITDA was -$33 million, well ahead of our guidance, and margins improved 350 basis points quarter-over-quarter to -4.9%. Our increased focus on efficiency and cost discipline contributed to the beat. Additionally, with GPV seasonally higher, we typically see greater quarter-over-quarter margin improvement in Q2, and that was amplified with GPV exceeding expectations. Now turning to guidance. For the third quarter, we expect revenue to be in the range of $700 million-$730 million, which represents 47% year-over-year growth at the midpoint, with adjusted EBITDA expected to be in the range of -$40 million to -$30 million. Following our strong first half of the year, we are increasing our revenue expectations for the full year by 5% at the midpoint. We now expect full-year revenue to be in the range of $2.62 billion-$2.66 billion, a 55% year-over-year increase at the midpoint. We are also raising our adjusted EBITDA guidance range to -$160 million to -$140 million for 2022. This includes the integration of Sling, which is a modest drag on EBITDA. The midpoint of our updated range is a $70 million and 360 basis point margin improvement compared to the initial 2022 guidance we gave in February. In addition to our strong execution and continued top-line momentum, the improvement reflects our increased cost discipline and current pace of hiring as we focus on delivering durable, efficient growth. Our current outlook puts us on track for 130 basis point margin improvement in the second half of the year compared to the first, while continuing to make targeted investments in key growth areas to position Toast for a sustained location and ARPU growth for years to come. Improving profitability is a top priority across the company. Our results and our improved outlook are indicative of our focus on efficiency and cost discipline. These efforts will enable us to drive toward profitability faster. As we look ahead, while our business remains healthy into Q3, we recognize the economic outlook in the U.S. is mixed. Given that, we have been measured in our guidance for the rest of the year to factor in that uncertainty and the potential for slower consumer trends. Overall, we've made great progress on positioning our cost structure for the scale and growth profile of our business, which will enable us to deliver operating leverage and move even faster on growth opportunities to sustain top-line momentum. It also gives us the flexibility to adapt quickly to any change in the business or macro environment. Looking back at the first half, while we are very pleased with our performance, we're still early, in the early innings with only 1% penetration of this massive $55 billion market opportunity. We remain focused on our goal to serve as a technology backbone for the restaurant industry, continually bolstering our platform with more products and features to add value for our customers and then to help them outperform their competitors. We're confident that continuing to execute on our mission will drive sustained location and ARPU growth and create significant long-term shareholder value. Now I'll turn the call back over to the operator to start our Q&A session. At this time, I would like to remind everyone that in order to ask a question, press star, then the number one on your telephone keypad. We will pause here for just a moment to compile the Q&A roster. The first question is from the line of Will Nance with Goldman Sachs. Please proceed. Hey, guys. Good afternoon. Nice results today. I wanted to ask on some of the comments that you made around operating leverage starting in next year, as well as, you know, a lot of the progress that you've made year to date in controlling costs and obviously raising the EBITDA margin expectations for the year. I don't think you guys have given a long-term profitability target, but I think last quarter you guys talked about kind of getting to cash flow breakeven over the near term. I'm wondering if you can kind of update us on your latest thoughts on, you know, when you guys would expect to get there over the next couple of quarters, particularly, you know, as we look out to 2023 and you're kind of signaling more operating leverage to come. Yeah, thanks for the question. Hopefully you can tell that improving profitability is one of our biggest priorities. We've made great progress in the first half of the year on EBITDA, and you can see that reflected in our guidance. We believe we'll exit this year in a position to balance the investments of growth and margin improvement. I just wanna be mindful of the macro. I mentioned in my prepared remarks that our guidance reflected some of that, which is also part of the reason we didn't wanna give guidance beyond 2022 because we wanna be incredibly balanced in that. We also frankly wanna take advantage of this market opportunity that's presented to us. We still believe and have a ton of conviction that there's a lot of growth to come, and we're in the early innings. We're trying to balance that growth with also, you know, cost discipline as you guys can see in our results. Got it. That's helpful. Maybe just to follow up on some of the take rate dynamics in the quarter. I know you mentioned mix, and then some of the optimization things going on. Any color on the recent kinda small business interchange changes that the networks announced and how much, how meaningful that was to you guys' net take rate? Yeah. The biggest impact really was the mix shift from debit to credit. That's really the primary driver offset by some of our own cost optimization efforts. I would say that's the primary story. There's nothing different to report on that. Got it. Appreciate you taking the questions. Thank you. The next question is from the line of Josh Baer with Morgan Stanley. Please proceed. Thanks for the question, and great quarter. Wanted to ask about the 6,000+ location additions. Any more commentary on regions of strength or market segments that were, you know, driving the location additions or any big restaurant groups, restaurant chains? Just looking for more context on that success on the location number. Yeah, Josh, good question. You know, on the whole, the bookings trends remain really solid, and we're pleased with how the sales team is executing across the board. We're pretty encouraged with the incremental demand from some of our recent product announcements. The team continues to do quite well in FSR as well as QSR. You know, I'd say it's broad growth across the board, and there's no segment specific breakout. It's really just been across the board. Okay. Got it. One on Sling. Any financial impact to the model to call out? The impact of Sling is just not material to the numbers today, so we're not gonna call it out. Okay, great. Thank you. Thank you. The next question comes from the line of Stephen Sheldon with William Blair. Please proceed. Hey, good afternoon, and congrats on the really strong performance here. Wanted to ask about consumer behavior. I know, I think you said you're being a little cautious with your assumptions there in the guidance. Just based on the visibility you have there been any shifts in the way consumers are engaging with your restaurant clients as the macro environment has gotten tougher as consumer sentiment has weakened here? Any general changes to call out there during the quarter and into July? Sure. Thanks, Stephen. You know, first, we're not seeing any signs of a drop in consumer demand or pullback in spending in our business. Restaurants are seeing healthy demand. Consumers continue to spend on services like dining, and the GPV trends are strong. That said, we're pretty mindful of the mixed macroeconomic signals, and we're monitoring closely. We still haven't even through July seen any pullback on consumer demand. You know, while we're not immune, you know, consumer spend at restaurants has held up relatively well during past recessions, and we've been looking at past recessions. We feel pretty confident in what consumers will spend within the restaurant market. Then the last point I'd make is, for restaurants, our platform becomes even more valuable in a tough market. If we did see signal, you could rest assured that we've got scenarios planned, and we feel like our platform's in a good spot to help restaurants adapt and navigate uncertainty. We feel pretty good on that consumer dimension. Very helpful. Thanks. Just as follow-up. You know, as you talk about a bigger focus on profit and margins, just wanna make sure I understand how you plan to manage things there. Is that more of the margins will continue to stabilize, or are you also expecting absolute losses to moderate as we think about, you know, 2023 and beyond? Yeah. I mean, I think the way to think about it is, you know, what you guys probably don't see is, you know, we're metering our hiring and really focusing on investments in high ROI areas. We're taking a deep inspection in areas that don't drive revenue today and being incredibly ruthless in our prioritization there. As we think about margins, you should see a steady improvement over time and a commitment from this management team to get to breakeven and profitability over the near term. Thank you. The next question is from the line of David Hynes with Canaccord Genuity. Please proceed. Hey, guys. Thanks for taking the question, and congrats on the results. Chris, just thinking strategically in context of, you know, the industry challenges you mentioned, right? You guys have tons of data. You have areas of regional concentration. You talked about heightened food costs. Is there an opportunity to create a group purchasing solution? Like, would that make sense as part of the finance suite? I know there are others that do this, but I just think that you guys would be really well-positioned to participate in that opportunity. Yeah, DJ, it's a good question. I'm not gonna comment specifically on that opportunity, but as Elena had mentioned in her script, you know, about 20% of our R&D investment goes towards medium and longer term growth initiatives. This includes opportunities that sit within our existing product portfolios. For example, xtraCHEF and what we could be doing with xtraCHEF over the long term. You look at team management and what we could be doing with payroll now with Sling and with pay card in the future. Each of our product lines of business within the platform have substantial innovation ahead of them. Then on top of that, we continue to experiment and invest in new ventures. These are things that I'm not gonna talk about today, but we're planting the seeds for how restaurants will thrive in the future. We're talking 5-10 years down the road, basically the next acts for how we think restaurants will operate. This 20% of our R&D is super important because you'll continue to see us experiment, listen to our customers, and then adapt to their needs. I'm not gonna speak specifically to group purchasing as an idea. Yeah. Yeah. Understood. We'll stay tuned there. Elena, just on the 68,000 locations, can you remind us the ballpark mix of quick serve versus full service and how that feeds into, you know, the distribution curve of GPV per location? Okay. Hey, DJ. This is Aman, by the way. Look, if you look at our quick serve segment of the market, we have had customers in quick serve for a long time. That's been core to how we've grown. Over time, we have added capability within our platform to help serve this segment better. Couple things. One, in Q2, we saw that as a percentage of our overall bookings, QSR increased, and we're confident that can continue going forward as well. As Chris mentioned, you saw Jamba, right, piloting even the enterprise space. Jamba piloting our kiosk solution. Really, if you look at our core capabilities that we offer, that QSR really depend on, some of the things that I'll highlight are, one, our guest-facing display, right? Our self-ordering kiosks, our kitchen display screens, online ordering and loyalty. Some of the capabilities that I think are unique to the Toast platform that QSRs really benefit from are things like, you know, it's a little bit specific, but text and fulfillment. Instead of a buzzer, for example, the ability for a KDS to text someone when their food is ready. Mobile order and pay, the ability to add to your order until you go through the line and then add a coffee or dessert later, right? Toast delivery services, the ability to have integrated deliveries via online ordering, or single-use promo codes. There's a lot within our platform that's easily accessible for QSR, and that's what gives us confidence in our opportunity ahead in the segment. Okay. Thanks. Thanks for the color, guys. I appreciate it. Thank you. The next question is from the line of Timothy Chiodo with Credit Suisse. Please proceed. Thank you. Appreciate you taking the question. Given your comments about the restaurant operating environment, I wanna see if you could give us some more context around when we look at your gross adds, so not the net adds, but the gross adds, and we think about what portion of those are coming from either a brand-new restaurant that was just started and just a brand-new company versus an existing restaurant that either is using another system or no system. What is the mix of that within your gross adds? Then the follow-up is, has the trend in that mix been pretty stable, or has it changed over time? Yes. Tim, it's a good question. It's really a balanced growth across our bookings and our net adds. We certainly see restaurants that are already operating move to Toast, and they believe in a digital platform, and these are existing restaurants that our hyper-local go-to-market team knows how to tap into, and we see those restaurants move to Toast. Secondly, we're seeing restaurants already on Toast expand, and those are net adds as well. We're seeing quite a bit of expansion within our portfolio from existing customers. Then thirdly, we certainly see net new locations in the form of new constructions. It's always been a sort of a balanced attack across those three. I think, you know, as a reminder, I wanna remind you that we're still only 8% of the U.S. total addressable market. Our restaurants in these markets have a lot of surface area to go after, and we're in the early innings of them penetrating these markets to create what we call flywheel markets. It's a little bit of a balanced attack in these markets across those three dimensions. The other thing that I'll mention is beyond net adds, you know, just remember that net adds on locations is only one lever that we play with. The second lever is ARPU. As we win a customer and build trust, we're growing more of the platform that the average restaurant is using. That's a really important lever for us because restaurants are adopting more and more of our modules. It's a little bit of a balanced attack across those growth levers. Excellent. Thank you for the context. Thank you. Our next question is from the line of Josh Beck with KeyBank. Please proceed. Thank you for taking the question. I wanted to ask a little bit about some of the secondary effects of what you're seeing in the industry. Obviously, restaurants, like you said, have record inflation in a lot of their input costs. You know, I'm just curious if that is effectively pressing the case for automation and if in any way it's helping, you know, either improve the top of the funnel activity or the sales cycle in any way. Yeah. I'll start with macro and, you know, listen, we've been at this for 10 years, and at the macro, we fundamentally believe that the restaurant industry is gonna shift, and it's a secular shift, to a unified digital platform that powers all of the stakeholders across the landscape. It's been in existence for 10 years, and it's gonna continue for many years to come. We're seeing restaurants transition to digital both to drive same-store sales, to drive operational efficiency, to drive staff productivity, and then to drive automation in the back office. It's really across the spectrum, Josh. I think in the back office, there's a unique opportunity for restaurants to really understand food cost optimization. It starts with xtraCHEF, and that's why we're seeing momentum with xtraCHEF. It's gonna go beyond xtraCHEF with innovations in the back office that help restaurants understand their menu profitability, understand where they're wasting money, understand where they can drive better pricing and better food costs, as I mentioned. I think we're just in the early stages of the opportunity in and around xtraCHEF, and it's exciting for us because we're helping restaurants really adapt quickly in the back office. Aman, I don't know if you want to add anything else to that. I think, Chris, look, it's you know, the xtraCHEF launch has been strong for Toast. We only started selling this in Q1. I think what's exciting about what we're doing with xtraCHEF is how easy it is for restaurateurs to be able to process invoices just by taking a picture on their phones, right? That allows our accountants and restaurateurs to actually get a sense of food costs really efficiently. One example is one of our customers out of Cincinnati, they with all the inflation that we're all seeing noticed just through the reporting with xtraCHEF as they started scanning invoices, they saw their cost of beef and potatoes were up 20% plus. Just getting that visibility allowed them to pay attention to it, and they were able to find a different provider for beef. They looked at ways to increase to purchase in bulk. Profit increased on their burgers by 20%, which is a top item on their menu today. It's really meaningful, right, for, given just as Chris and Elena mentioned, how much of a restaurant spend is on food. Very helpful. Maybe just a follow-up on the subscription ARPU. It certainly seems to have had another nice sequential jump this quarter. My thought was that maybe that would slow down a bit as we went from, say, more front office-oriented adoption, maybe during and coming out of the pandemic to maybe more back office types of functionality. Just would be curious to unpack that within the quarter and then really how we should think about the pace of expansion moving forward. Yeah, no, I think it's a good call-out. As you can tell from our prepared remarks, increasing ARPU is such an important part of our growth strategy, and we continue to see the sales team execute. We talked about Toast Shop, we talked about our growth team and upsell team, and then really our go-to-market team. Our reps are very good at positioning the entirety of the platform. They've been trained to do that, and to really position that upfront. All of that combined with the innovation that you're seeing in team management and xtraCHEF is really coming together to drive that outcome that you're seeing. We feel confident that, you know, we'll continue to see progress on ARPU. I won't guide to it specifically, but you continue to see as we add new customers, our newer customers are actually having higher ARPU as well, which I mentioned in my prepared remarks. Really encouraging. If I look at what's really driving that, it's a combination of our core products, our core commerce products, but also xtraCHEF and payroll, which are very early for us. Really encouraging to see that growth. Thank you. Our next question is from the line of David Koning with Baird. Please proceed. Oh, yeah. Hey, guys. Thanks so much. Nice job. Maybe, if I could ask just the subscription ARPU has been going up so consistently, I think, five quarters in a row of 7%-12%. Yield growth, I guess we could say, ARPU growth in that subscription line. Do you have insight into, you know, how fast that grows in the future, or are we at a point now? I can't imagine it continuing to grow quite that rapidly on a sequential basis. But is there a way for you to almost give some insight, like could that grow 3% sequentially for a while still? Or how should we think about that? Yeah, I just answered that. At the highest level, obviously, you know, that's something that we're completely focused on. I'm not gonna guide obviously to the future, but what I can tell you is as we're bringing on more locations, the newer customers that are coming on are coming on with more products. That should give you a sign that as we're growing and we're growing fast, you'll start to see that improve over time. Okay. Thank you. Secondly, just on the hardware revenue, you know, that's been pretty stable, $29-$31 million per quarter for a long time, but inventory has grown significantly. I think up 40% sequentially, up 100% year-over-year, give or take. Why isn't hardware revenue growing faster, and maybe how should we see that in the future? Yeah. There's a couple things. There's a couple things going on there. One is we had lower year-over-year growth in our new customers. Q2 was our strongest quarter ever for net location adds, but keep in mind, Q1 last year was still depressed by COVID, so the year-over-year growth rate in Q1 was meaningfully higher. And then, you know, even while our realized price for hardware sales improved, GAAP accounting requires us to proportionally allocate revenue across bundled products. This meant we shifted some revenue out of hardware in Q2. But on the whole, when you take out the noise, I look at the revenue and say it's been relatively consistent. Thank you. Our next question. I'll also add that, and I mentioned this in my prepared remarks, we have been strategically adding inventory to insulate us from supply chain, near-term supply chain issues, so I feel confident that our guide reflects all of that. Thank you. Our next question is from the line of Andrew Bauch with SMBC Nikko. Please proceed. Hey, guys. Thanks for taking the question. Nice set of results here. I wanted to hone in on the gross margin side and specifically trying to understand what kind of pricing flexibility you have, be it in SaaS or on Fintech solutions. Then on the cost of revenue side, can you give us a little bit more color on where you can drive efficiency in Fintech and in SaaS? Yeah. I love the question because you're reinforcing something that we think is really important to our business model, which is the opportunity to monetize both on the Fintech side and on the SaaS, so that's an important part of our model over time. On the Fintech side, we have opportunities, you know, to continue to drive more volume to our platform, which obviously would drive more GPV on our platform and higher take rate. At the same time, we've mentioned this a few times, we have a team really focused on cost optimization. These are, you know, operational things that they're doing behind the scenes, including some R&D efforts, et cetera. The combination of those two is sort of how we think about the monetization and the pricing impacts over time on Fintech. On the SaaS side, obviously, we're gonna continue to innovate, and the combination of those two really drive over time our ability to continue to grow. Got it. I know it's still early days, but a lot of questions have been asked here. Any update on, you know, the investments you've made in international and what you learned thus far that's working or maybe be scaling back? Yeah, no, we're still very committed to international. Our investment, as you guys know, wasn't a significant investment, but it's proceeding as planned. We've had some early customers. The read is really good with those initial customers. Just as a reminder, 2022 is really a year of just building the foundation. This is a multi-year journey for us. Like you said, very early innings, but we're encouraged by what we see with the initial customers we have. Thank you. Our last question will come from the line of Jeff Cantwell with Wells Fargo. Please proceed. Hey, thank you for squeezing me in. I wanted to ask you a quick one on efficiency. In your slide 11, it talks about two-thirds of your new locations are coming from inbound channels and one-fifth are coming from you know, restaurant partner referrals. Can you just remind us what that might have looked like a year ago, two years ago? I just want to get a sense of you know, how the trend has developed over time. I think that has implications for your you know, your ability to just continue to scale and grow more efficient over time. I was just hoping for any additional color you might be able to provide on that. Thank you. Sure. Thanks for the question. Look, I think we've seen consistency in our funnel, like whether across segments, as Chris mentioned earlier, you know, the percentage of inbound, percentage of referrals has remained consistent. You know, I think the thing that we're most focused on is continue to invest in our go-to-market team and our customer-facing teams, because we know that as we increase tenure on the sales reps and we increase market density, that's the number one driver of efficiency and growth in our business. Okay, great. On your ARR, can you talk just a little bit more about that? Because we noticed that you know, the growth comp from last year was just pretty impressive growth this quarter off of a growth comp from last year. Can you just remind us about you know, typical seasonality, one Q, two Q, three Q, just so we can be aware of you know, what expectations should be for ARR as we look ahead? [uncertain] Yeah. I think the way to think about it is two things. One is, both from a location standpoint, typically Q2 is our highest, or seasonally higher than Q3, and then it comes back in Q4. So that's the location side. GPV per location also tends to be higher in the summer months, so just keep that in mind. That's probably the two things I would say about seasonality. Okay, great. Got it. Thanks very much, and congrats on the results. Thanks. Thank you. I would now like to turn the call back over to the presenters. Okay, thank you, everyone. We appreciate your time. We appreciate the good questions, and we'll be in touch. Have a great night. This concludes today's conference call. You may now disconnect.