All right, so we'll get started here. Next up, we have Toast. We've got both Aman and Elena here to talk through the business. Really excited for the discussion today, and thanks again, I think this is the third time coming to the conference, so-
Yeah, thanks for having us.
Great to have you.
Thanks for having us.
Okay, so you hosted an investor day earlier this year. Maybe we can kick off with an overview about how you're framing the strategy from here to extend the lead and being a purpose-built platform for restaurants.
Yeah. Thanks, Will. Thank you all for being here. So Toast is a platform for restaurants. You know, we're purpose-built for the restaurant industry across our SaaS software, our hardware, and our payments. And really, from day one, like, we chose to focus on solving the needs of restaurants better than anybody else in the world. As we think about the strategy from here, number one, it's continuing to gain market share and expand locations. Number two is to expand the surface area of the products we offer to expand with existing customers. We're expanding our TAM, so across things like international and enterprise restaurants, as well as hotel restaurants, continue to expand the TAM in terms of the availability of what our sales team can go after.
And then, you know, continue to grow revenue faster than expenses to expand margins as we do all of this. Our core differentiation really is at the intersection of our go-to-market team. We've got boots on the ground across all 50 states, as well as our R&D platform, which is why if you look at one of the stats that's shared often, is density of customers for us is a tailwind. As we get more customers in the city, that drives faster growth, that drives more location adds. And then on the expansion side, the R&D platform we're building, and we're focused on continuing to build all of the needs that restaurateurs have. And at the analyst day that we had earlier this year, we talked about the thousand little things that restaurateurs need to run a great business.
And since it's in our DNA, we continue to build the platform, the differentiation in the platform, to continue to stay ahead, and that's really what's going to drive our growth. And so at 13% share in the U.S., we have a lot of confidence that we can continue to grow and scale.
Yeah, great. So the business has evolved rapidly over the last few years. You quickly scaled locations, you just called out 13% market share. You've expanded into international and adjacent verticals.
Mm-hmm.
You've had a CEO transition.
Mm-hmm.
Before getting into some of those, you know, how have you positioned the organization to continue to adapt and scale, and how are you feeling about how the team is executing?
Yeah. Look, I'll start by saying I'm really proud of the way the team has executed in the first half. You know, we have seen really strong growth. I think the numbers speak for themselves. We've expanded margins as we've accelerated growth, and we've expanded margins while making sure that we don't shortchange our most important long, long-term growth levers, and so, you know, whether it's things like our new growth opportunities, whether it's the core efficiency needs that we have in the business to set up the business to scale, so you know, we've had to, in many ways, reset the focus on the team, and it's really helped us have a great first half.
You know, I look at my job at the highest level, and really the senior team, starting with just making sure they've got the right team at the top, rowing in the same direction. One of the things I talk a lot about is just making sure at the senior team level, there's no daylight between us, because that creates all sorts of issues downstream. Making sure that our strategy and our vision is well documented. In fact, one thing I'm working on is just making sure it's crisper, so everybody in the company understands what are the most important priorities. So we've gone fairly deep in terms of explaining where we're going and why. Next is just making sure our resource allocation of the company is aligned with our most important priorities.
So that requires us to go assess how are we investing our capital? Is it prioritized against the most important priorities? And then lastly, just making sure that myself and the senior team are setting the right tone on culture, okay? And this is... You know, if you think about one of the things we did earlier this year was reset our values, and that was really about bringing the senior team, the leadership team, closer to the work. It was about helping everyone understand the importance of talent density as we want to grow and scale the business, making sure that everyone has perspective, like context in the business, and what we're doing and why we're doing it, and just more business acumen. And so, you know, it's never done, like we're not... you know, the work is never done.
We're gonna always working to make it get better. But overall, when I sit back and look at where we are versus where we were year, you know, the start of the year, really proud of the progress the team has made.
Great. Now, the market's been highly focused on the health of the consumer, with some of the choppy macro recently. Your guidance is calling for stable GPV per location, which is like where most of the macro would show up in the business. Based on what you've seen kind of quarter to date, are there any meaningful changes in consumer behavior that you've witnessed?
Yeah, no, no real change in consumer behavior, and I'll just start by just in Q2, growing GPV, you know, 26%, just a testament to the health of the business, but you know, as we look at the quarter into Q3, we're seeing effectively the same stable, kind of in the same zone in terms of GPV per location. So in Q2, we were down 3%. Most of that's driven by same-store sales being down to a lesser extent mix, but just zooming out, you know, we think when you look at restaurants over cycles, over various economic cycles, there's a resilience in this customer base.
Right.
And so we believe that will continue. But the market's dynamics, we're always watching, and like we always do, it's... And we'll continue to do that.
So the other piece of kind of macro touching the business would be around kind of churn and new business formation. You know, we've seen new business formation slow a bit this year, and I think in the past quarter, you called out a modest uptick in churn. Can you just help dimensionalize that further, unpack any of the trends that you've seen within the customer base?
Yeah, sure. You know, like Aman said, we started the year really strong, 8,000 record adds for us. And when we look at the complexion of those adds, it's really fairly balanced between new restaurant openings and existing customers or switchers, is what we call them. And when you look at the win rates across both of those cohorts very consistent as well. So overall, the top of funnel dynamics aren't materially changing. Looking at churn, you know, we're at roughly slightly above 10% on an annualized basis. And when we look at the trends over, say, the last several quarters, it's very much in the same zone. And when I think about, you know, the churn itself, if you look at the complexion of that churn, most of it is customers going out of business.
And so when you think about it that way, the reason that's important is because those customers aren't really processing a lot with us, so the impact to ARR is just not as material. So overall, just the health of the business and so on, I feel pretty good about, and it's very balanced.
Yeah, makes sense. So this past quarter, you called out a little bit higher investment spending in the near term to position the company for growth into next year. Could you unpack your expectations around some of that investment spending, and then how you've reinvested some of the savings from the headcount reduction earlier this year?
Yeah, sure. It's a great question. So, at the start of the year, we had a restructure. And as we thought about that restructure, one of the key principles behind that restructure was, let's get lean to go faster, but also, more importantly, let's point our investment to the most strategic initiatives, and Aman laid out some of those earlier today. And so that's exactly what we intended. That was reflected in our initial guide at the beginning of the year. It has not changed. So we still feel very confident about that. As we zoom out and think about our investment philosophy, even our capital allocation philosophy, it's always really balanced against, you know, shorter and longer term initiatives.
And so some of this investment is to continue to grow and invest in our core, some of the things that Aman laid out at the beginning. But also, we put a long-term lens on the business and say: How do we sustain this growth that we're really proud of in an enduring way? How do we think about that growth over the long term? And that's why you see us talk about things like international and retail, which are really longer term bets, but we realize that they will take some time to really have meaningful impact on our business. So that investment is really a balance across both.
Got it. And then maybe switching gears to the monetization side. I think this quarter, we expect to see, or to begin to see some of the impacts of some of the pricing strategies, play out. Can you help investors understand what this initial action could mean in terms of take rate in the business, and then longer term? You know, you talked about this being, a more regular annual pricing muscle. Just could you help us understand how the approach to pricing has changed longer term?
Yeah, sure. So a couple of things. One, as we think about pricing, really, as we think about the growth in the business, we think about a few vectors of growth, right? The TAM expansion and the growth in our locations. We think about increasing attach, really driving ARPU, and then pricing is another lever. And so it's one of many levers to grow the business. And some of the principles that we talk a lot about internally as we think about pricing is, one, let's take a holistic view of the customer. We can monetize against both SaaS and fintech, number one. Number two, and really, really important, is making sure we're always driving value through our innovation that customers can see and feel every day.
And if we believe we are doing that, then it positions us in a way where we can really monetize across both of these sectors. What we started and implemented this year is our first cohort of customers on the fintech side. So you'll see a small impact to our take rate in the back half of the year. And again, it's a small cohort of customers, but over time, to the point you're making, you'll see us build this muscle because the reality is, for our existing set of customers, this is the first time we've actually taken price. And so we're building that muscle over time so that, it just becomes part of the normal course of business, as opposed to something that's very episodic and, sort of blunt, if you will.
Yeah, makes sense. So then just switching over to the software side, sort of in the same vein, you've done a lot to move towards a more kind of bundle-centric approach, on pricing on software. What's your latest thinking on software pricing? And, you know, how do you think about pricing as an accelerant to the current mid-single digits ARPU expansion that we've seen in the business?
Yeah, I mean, I think the just building on what I just commented on, really, we think about this as a long-term muscle for us. The near term, mid-single digits is it's a good zone for us in the near term. But to the point on whether it's extending TAM, driving more attached, pricing is a supplement to that. And so I think about the surface area and innovation that will continue, along with pricing, which over the long term, will have an impact on ARPU. Yeah.
Yeah.
This pricing change this year was on fintech, so it's not going to impact SaaS software.
Yeah.
The one we did, one we just did this year.
Yeah. No, that's clear.
Yeah.
Got it. You know, I think the investments on the upsell team has been, you know, a big initiative over the past couple of years. It's been a big kind of additional layer of sales that you've added. What drove the decision originally? And then as we get kind of deeper into that strategy, have you seen the intended effect of that strategy play out?
Sure. Thanks, Will. When we started the business ten years ago, initially it was about selling this point-of-sale and payments platform. And so the complexity and the surface area, what we offered, was different than it is today. And so the team that we built up and go to market, you know, was focused on expanding locations. And, you know, these are the boots on the ground throughout the country in all 50 states. And over the past five years, as we've expanded the platform, you know, today we've got ten different-ten plus products across these five product areas in commerce and fintech, gas and employee and supplier. And so what we realized was, in some cases, you know, our reps are incented to maximize the ARR, so they're maximizing attach and location.
In some cases, you know, it doesn't make sense to sell everything up front. For example, if you're a brand new restaurant, you might want to use everything from Toast upfront. If you've got an existing customer with many locations, the decision maker that's deciding on the core tech in the restaurant, the point of sale, might be someone, an IT consultant or the restaurant owner, whereas for the expansion products like payroll, it might be the accountant. That's where the beginnings of the upsell team came from. That team's about two years old, and, you know, we're continuing to improve the partnership between the new business team and the upsell team, just in terms of how they work together. We're working on the tools and the data they need to be more effective.
And then, of course, we're working on the maturity of our products. If you look at our point of sale and our payments platform, you know, it's 11 years old, the newer products are not as mature, and so all those things together, you know, continue to play a part. But let me make no mistake, like, that team, the upsell team, is very much has been a huge positive for the company. You know, they're contributing a big chunk of the ARPU growth that we just talked about. And so we're continuing to be measured about how we scale that up as, you know, the tools for that team improve and the products continue to mature.
That upsell team, that's, it's a big focus of some of the investments that you talked about earlier in the back half of the year?
It's one of many. I'd say, like, if you think about all... In fact, we just came out of an off-site this week, and we're talking about all the growth vectors in the business. When you think about our core business, of course, and it's scaling locations at 13% share, that's really important. The work we're doing internationally, the work we're doing in retail, work we're doing in expansion upsells, all of those things are really, really important, enterprise, and so it's about allocating our resources the best we can, across all of them.
Yeah. So I'd love to talk about the SMB retail announcement earlier this year.
Mm-hmm.
I thought this was one of the cooler announcements at the Investor Day.
Mm.
So, you know, not only are you expanding into a new TAM, you already invested the R&D resources, and you built a pipeline there before you announced it.
Mm-hmm.
So really nice to see kind of the progress and the unveiling at the Investor Day.
Yeah.
Can you talk about just the rationale for getting into that? You know, what was the opportunity that you saw? And then, you know, maybe on the technical side, what kind of build-out did that require?
Yeah. The work in retail really came from our existing customers. If you look at a lot of restaurants, especially through COVID, you saw them expanding into this light retail. So you might have, like, a light convenience store or wine shop or even selling just basic merchandise. And we got feedback from our go-to-market team that that was a gap as they were going after restaurants because they couldn't sell those locations as effectively or sometimes those groups as effectively. So if you've got five locations and one of them is a wine shop, they want to use a single platform from a data perspective, right? To centralize everything. And so our restaurant team started to build out the capabilities to expand into that TAM, just like we've built hotel capabilities or, you know, enterprise capabilities.
And so that was the beginnings of the retail capability, where we got customers that were restaurants using light retail. And then, you know, early last year, we got some. We started to get some customers that said, "Wait a minute, we can use this in our grocery store." Think of independent grocery, especially. And so we spun up a team to go look at the POS workflows, and what we found was for convenience stores and grocery and bottle shops, and liquor stores, there was actually a lot of overlap in the infrastructure we had, and it was really about customizing the POS workflows. And so this team is, think of it like a horizon three, new ventures team, small team focused on that, and they've made.
I mean, look, we've got, I think we share a thousand locations, but they made a tremendous progress. And part of the reason is, if you look at, like, the platform we have, we've got the core point of sale. That's where they've customized for retail. But things like payments or scheduling or payroll or capital and lending, there's a lot of products in our platform that are very much horizontal at its core. And so you know, it's, it's valuable to expand the attach and to expand the TAM. And so that's, that's what's allowed us to get into this business. You know, of course, we've invested, but not a significant investment because of all that overlap in the platform.
Yeah.
The team's been able to, as a result, focus on the things that matter to retailers. You know, just like in restaurants, we've started with this vertically deep approach. We're building capabilities, especially in the inventory side, where that's a big pain point we found, managing inventory really well and really effectively. And we've been able to build that in a way that if you go talk to some of the customers we have, they'll tell you that's been a huge improvement, the speed with which they can get inventory live, and using ChatGPT and AI to manage just descriptions on those inventory images. That's been really powerful.
Yeah. I mean, I think the extensibility of the products was really what shone-
Yeah
... when you announced that there was-
Yeah
... there wasn't that much that needed to be built out. What was the most kind of specialized build-out of that product?
Inventory.
Inventory.
Like, inventory in restaurants is very different than retail.
Yeah.
And so building out the ability to search your catalog, to understand what the par levels are, the ability to move inventory across different departments and groups, there was a lot there, a lot of depth there. Even adding inventory, there was a lot there. Like, one of the best things we've done is built a mobile app where you can scan a barcode, look up a universal database, figure out what that item is, load it up, and get it up very quickly. And then, like, on the ordering side, too, there's differences, like the e-commerce experience and e-commerce stack is a little different than restaurants.
Right.
That's the other area, 'cause that's a big part of our value prop, just like in restaurants, in retail, is the fact that integrated e-commerce is just built in. And so that was, that was also an area where the team has had to invest quite a bit.
Yeah.
Yeah, I think there's too a lot of legacy in retail.
Yeah
... as well, so that presents an opportunity for us to bring our modern platform to this problem. Talk about the visit you made in London to the supermarket.
Oh, yeah. Yeah, we... so back to the spending time on the front lines and visiting customers, I was in Dublin, in the U.K., maybe about two, three weeks back, and we spent some time meeting customers, and in London, we're meeting this group that had five locations. Thanks, Elena, by the way, and one of them, we walked in, was this place called the Supermarket of Dreams. That was what the place was called... and they were on Toast, and I was like, "Wow, there's a retail location in London that's using Toast," and apparently, there's multiple, and a lot of that pulled from, you know, even though we're not selling it explicitly there, it's come from customers seeing the value, right?
Where they see, again, having a single platform that can support all the different concepts, and, got really good signal, really good feedback on what they love about the platform.
Yeah. It just seems like another example of kind of the intersection of both software and payments kind of coming together. Yeah, okay.
Yeah, absolutely. I mean, like a lot of that core workflow of taking the order, taking the payment, whether it's in-store or online, like, those are the guts, and really in so many brick-and-mortar businesses.
Yeah. And then pipelines, I think you had a pretty decent pipeline, a thousand locations at the time of the Investor Day.
Mm-hmm.
Any color on how that has evolved over the last couple of months?
Yeah, really good. We continue to see really good progress, so we've got a team that's dedicated to selling retail. That's a small team. We've also got with our existing restaurant team in some select markets, we're testing, giving them some quota against retail to see what we learn in terms of achievement and win rates and conversion, and it's really informing our strategy going into next year in terms of how we think about the longer-term strategy for the retail go-to-market, both for new locations and for expansion.
Yeah.
But really proud of the progress the team's making and the unit economics we're seeing in that business are tremendous.
Yeah, so I know you mentioned the ARPU was higher on those, on those locations as well.
Yeah, it's right. It is. I don't know if we've shared the explicit number, but-
We haven't, but it's higher.
It is higher.
Yeah.
Yeah.
Yeah.
It'll settle in, too. We have early customers, but so far, pretty good.
Sure. Okay, another area where the company has been accelerating traction has been in international.
Mm-hmm.
I think at the Investor Day, you announced that you doubled the international locations in the company.
Mm-hmm
... in the first five months of the year. So what is sort of the latest thinking around the trajectory of international and where you are in that investment cycle? Yeah.
International is a little bit further along than retail, and we've been doing it a little bit longer and seeing, again, really good signal. In fact, one data point that's really material is if you look at the productivity of our reps in these international markets, where we don't have as much of a brand as the U.S., it's better than what we had in the U.S. at that level of scale, in terms of number of units. And so that's one thing that gives us a lot of confidence in our ability. And this is, you know, we're testing into the right territory sizes such that we could scale up sales capacity over time. We also talked in the last earnings call about how we're expanding the products. As you can imagine, it's serving these different countries.
There's some nuance in terms of the partners, in terms of the capabilities across these modules, and so we added online ordering, we added kiosks, we added gift cards, and the early signal we've seen is that the attach rates are really strong. Again, those products are still maturing, but, and that helps us with our unit economics and our payback period as we add more of the platform.
Yeah
... and our win rates. And so really good signal. You know, we're going to continue to invest, and really, the core question as we go into next year is: How do we think about resource allocation across our core business? You know, where we see- we continue to see lots of growth in these flywheel markets, our retail, our international, our enterprise, and of course, our expansion opportunities-
Yeah
while expanding margins.
What does that sales force- I mean, the fact that the sales force productivity is higher, I mean, the brand has a passport, I guess. But, like, what does that tell you about just the ability to scale and get the same sales force productivity gains that you have seen in your more mature markets in the U.S.?
Is the question about U.S. or about international?
It's about: Do you think you'll see the same productivity gains since we're starting at a higher point already?
Yeah. To be clear, just on that point, it's, it's back in time versus-
Right
... where U.S. SMB was, you know, in 2014 to 2015. So I think the main point there is the halo effect of the brand is real-
It's real, yeah.
... as is, and I think the maturity of our ability to sell probably is also real.
Yeah.
Yeah, I think there's no reason to believe, I mean, in fact, if anything, if you look at these international markets, the density across these big Tier 1 cities, right? You look at, like, in London, Vancouver, Toronto, and others, it's no different than what you see in the U.S. And so there's no reason to believe that we wouldn't see the same trajectory over time, where density of customers drives the flywheel. I think at Investor Day in the U.S., we talked about Austin as an example, where 70% of the new expansion, new openings go to Toast-
Right
... because of the social proof we've built up. And over time, you know, we expect a similar pattern to play out internationally as well. But keep in mind, it's going to take time.
Sure.
It's still very early in terms of where we are internationally.
Yeah. I guess on that note, the main focus is still in English-speaking countries, the kind of markets that you've already talked about.
Mm-hmm.
And I guess the expansion beyond that would be, you know, contingent on more success in those current markets.
Yeah, we're learning, and Elena, you can jump in here, too, but we're learning.
Yeah.
I think. If you look at Canada, for example, we're already in Canada. Quebec has needs for French, and so that's part of the strategy-
Oh, yeah
... just to support Canada. You know, even the U.S., actually, we don't talk enough about it, we've got lots of restaurants that use Toast, where English is not their primary language. And so the ability to translate the product, the ability to support different languages, has been important for Toast for a long time. And so we're starting to build that out in Canada, and over time, that'll, you know, play a part in terms of how we think about expansion beyond these core countries and the core English-speaking countries.
Yeah. More on the financial side, on the capital front, you've added another partner this year to Toast Capital. You know, it kind of tweaks the way that the economics show up in the PNL, but obviously, you just added it to the number of kind of arrows in the quiver. How are you thinking about sort of the trajectory of that product and, you know, the kind of flexibility that the new channel affords you?
Yeah, I know Toast Capital has been a really positive program for our customers, and still the demand continues to be really healthy. It's one of our highest NPS products, actually, and a lot of our customers come back for repeat loans. So we have a few different loan sizes, 90-day or tenure of loans, 90-day, 270-day, 360 days. So we have a program that meets the needs of the breadth of our customers. But so far, we've seen really healthy demand, and as we thought about this program over time, really, we understood we needed a dual funding source, you know, to meet the demand that we're going to have over time.
And so what we always think about is managing risk, adjusted returns over time, and so this new program allows us to do that. It does have different P&L dynamics, but are really positive and accretive to the P&L. So, overall, you know, yes, we can grow the program over time. What you'll see in the near term is it's gonna still continue to be measured and prudent, but you're right, it gives us more room, more capacity to grow the program, especially as demand continues.
Is there any way to think about, you know, as you get more comfortable with sort of the risk parameters, with the multiple channels, just how much more this product can grow over time?
Yeah, I think... Look, I think so far the demand has been healthy. There's really no reason, you know, and the default rates have been exactly what we've expected in the zone that we want, and the program, like I said, overall really healthy. So I think this new program allows us to grow over time, but we're always going to be managing the risk and balancing that, and so I feel confident we can grow it over time, and actually, if the GM were here, he'd say, I have much more embedded finance I could think about for this cohort of customers, so there's just a long-term roadmap that they're thinking about, but for now, I think we're meeting the demand that we see. Yeah.
Cool.
The only thing, the only thing I'll add, Elena, is just, you know, part of the growth just comes from locations, more locations in the platform. There's more access to the capital product. I think where we have to be, as we add more products in terms of portfolio products, obviously, that's where it's really important to learn and test to make sure you're managing risk in a really thoughtful way.
Yeah, makes sense. On the profitability front, you've made significant strides this year towards your Rule of 40 targets. How are you tracking against the plans that you laid out, and then how are you weighing the balance between growth and profitability?
Yeah, this is one of the little things we talk about a lot. Look, we're managing the business to GAAP Rule of 40, and that's a guiding principle that we've talked about a lot with our management team, and we see a path to that over the next two to three years on a GAAP basis. And, you know, always balancing the growth. You know, we have all these great opportunities. We're talking about international and retail. We still have a ton of growth left in the core business that we're really excited about. And so it's really balancing both and the opportunity ahead and making sure we capitalize on this opportunity and continue to be in a leadership position. When you think about the growth equation, we've talked about, you know, 20% recurring gross profit.
We think of that as a floor for the next few years, while at the same time driving 30%-35% adjusted EBITDA margins, and so we have ambition over the long term to drive that adjusted EBITDA to 40%. That's over the long term. Really, that is in our control in terms of the timing of the long term, because we have such an opportunity here to go capture the market, but I think what you should hear from us is, we're focused on growth, but we will always deliver, you know, margin back to the business. Probably not at the same rate that you're seeing today, because we have so much opportunity in international, and retail, and enterprise. That said, it's always part of our growth algorithm. Like, as we grow, we're going to drive margin expansion.
Yeah.
Capital allocation is something we talk a lot about.
Yeah. I guess, Aman, on this point, I mean, you've been with the company since the beginning-
Mm-hmm.
and I think Toast, like a lot of companies, had to make this pivot towards growth at all costs during the pandemic.
Mm-hmm.
toward, you know, trying to find that balance, and that's-
Mm-hmm
a cultural thing that you have to manage.
Right.
So what has that been like, and how have you kind of been managing that internally?
I think the more you can share context with everybody, it helps because, you know, if you grew up in a world where interest rates are low and capital is cheap, and, you know, it's a lot of energy and growth, that is naturally what's going to happen, not just with Toast, but, you know, in tech in general, and so as you start to have conversations to say: We've got to be a lot more judicious about our capital allocation, and we've got to focus on what's most important, those conversations need context. Because if you've seen something for many, many, many years, and suddenly you see something different, you're like: Well, you know, we've always grown headcount as we've grown revenue, and so what's the issue?
So, you know, having the conversation of, like, what, you know, what might you deprioritize to go focus in some areas, this is a new muscle. But I think what I've found is, with this, and it has been a great thought partner for me on this, is just giving people that context, helping them understand, you know, how to think about those trade-offs is really important. One thing I try to use, and this is, you know, there's, like, a Bessemer post, I think, on the Rule of X. It basically just says, you know, if you think about a company, you can think of growth and margins in the equation. Of course, longer term, growth is very, very important because the end outcomes, like, for all sorts of reasons on growth, are, you know, more valuable.
But, like, I think of margins as, like, almost like, I don't know, blood pressure. It's like the health of a business, like a foundational thing that tells you, right, is the business fundamentally a good business? And so that's, like, the more education you can do on that with the broader team, I think the better.
It also starts with some principles at the outset when we plan, you know, at the beginning of the year. We sort of tell the team. We talk a lot about what are the priorities, what do we want to go do? And the starting point is, well, what can we do with the investment we already have? And that wasn't the way it was before. It was always: Well, we're going to do this, let's go add costs. And now it's to Aman's point: What can we do with what we have? And then after that, we say: Okay, now after we've sort of made these trade-offs, then let's lean into investing in certain areas. And just that subtle change has really, I would say, changed the dynamic of how our leaders think in terms of growth.
Yeah.
... I guess one output of that strategy has been you have scaled profitability quite a bit this past year. Gross margins and free cash flow have expanded meaningfully. I mean, you know, generating very consistent profitability and bottom line results. How has that impacted your thoughts on capital allocation?
Yeah, look, so it's something like I said. It's something we talk about a lot, about our capital allocation. It hasn't really changed. At the highest level, we're trying to drive long-term shareholder value and do it in a very disciplined way, both driving for enduring growth and at the same time, driving operating leverage in the business, and you have to be really maniacal about how you do that and look at every dollar really, at the end of the day, but the primary focus always will be our core business, 'cause we have just so much opportunity in that core business. We're at 15% market share. We believe we can continue to grow that.
As that business is growing in its profitability, it's really basically enabling us to invest in these longer term initiatives like international and retail, and doing so at the total company level while still driving margins. So it's a very balanced equation, and then, of course, opportunistically, the hurdle is high, but you know, M&A is something that we look at, just like any management team, as a matter of good hygiene, but we keep the hurdle on that really high because we have so much opportunity in our organic investment, and then, of course, we've done some repurchases, driving capital back to shareholders. We've done over $100 million this year.
And so what you can see is we have the freedom, as we're driving this growing profitability and cash flow, to really be more focused on these longer term bets, opportunistic if we need to, but really focused back on the core business and growing that, so really encouraged with where we are as a whole in the business, and hopefully you hear that today.
Yeah. I think one thing just, I'll just add to that, one thing Elena and team have done a nice job of is just sharing with the leadership team, even more deeper in the organization, some of the characteristics of these different products and businesses that we have, so that there's context on newer businesses and their growth trajectory and their margins relative to the more mature businesses. So you can start to break it all apart and look at it thoughtfully internally.
All right. Well, we've covered a lot of ground today. Any final thoughts that you'd leave us with?
I would say we're just excited. You know, we're excited to continue to go execute. I think we're, you know, like I said, we're seeing this momentum in the business, which we love to see, which we'll continue to focus on execution. That's what it boils down to.
Yeah, excited about the growth potential of the business. I mean, we're very focused, as a team on, in some sense, going back to our roots, on making sure we, as a team, are focused on what's most important, prioritizing what's most important, building a culture where leaders are getting closer to work, where all, all of us, the two of us included, spend a lot of time diving deep, and we see something that doesn't look right, and, and just focused on the inputs that are going to help us build a great long-term business.
Great. Awesome. Well, guys, we're about out of time. Thank you for joining us today. Really appreciate the conversation.
Thank you.
All right. Thank you, Will. Thank you, everybody.