Toast Q2 2025 Earnings Report

Toast EPS Results

• Actual EPS: $0.13
• Consensus EPS: $0.23
• Beat/Miss: Missed by -$0.10
• One Year Ago EPS: $0.02

Toast Revenue Results

• Actual Revenue: $1.55 billion
• Expected Revenue: $1.52 billion
• Beat/Miss: Beat by +$26.64 million
• YoY Revenue Growth: +24.80%

Toast Announcement Details

• Quarter: Q2 2025
• Date: 8/5/2025
• Time: After Market Closes
• Conference Call Date: Tuesday, August 5, 2025
• Conference Call Time: 5:00PM ET

Toast (NYSE:TOST) operates a cloud-based digital technology platform for the restaurant industry in the United States, Ireland, and India. The company offers software products for restaurant operations and point of sale, such as Toast POS, Toast now, multi-location management, kitchen display system, Toast mobile order and pay, Toast catering and events, Toast invoicing, Toast tables, and restaurant retail; and hardware products, including Toast flex, Toast flex for guest, Toast go 2, Toast tap, kiosks, and Delphi by Toast. It provides toast online ordering and toast takeout, first-party delivery toast delivery services, and third-party delivery integrations and orders hub; and loyalty, email marketing, and toast gift cards. In addition, the company offers payroll and team management, Sling by Toast, Toast pay card and payout, and tips manager, as well as partner-enabled products comprising insurance and benefits; supply chain and accounting products, such as xtraCHEF by toast; and financial technology solutions consisting of payment processing, toast capital, and purchase plans. Further, it offers reporting and analytics, Toast shop, and Toast partner connect and application programming interfaces. The company was formerly known as Opti Systems, Inc. and changed its name to Toast, Inc. in May 2012. Toast, Inc. was incorporated in 2011 and is headquartered in Boston, Massachusetts.

Toast Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Toast reported Q2 results ahead of expectations, with a record 8,500 net new locations, 35% growth in recurring gross profit streams, $161 million in adjusted EBITDA, and $80 million in GAAP operating income.
• Positive Sentiment: The company crossed 10,000 live locations in enterprise, food & beverage retail, and international segments, highlighted by new wins such as Firehouse Subs and Zabar’s, and launched in Australia as its fourth international market.
• Positive Sentiment: Toast formed a strategic partnership with American Express to integrate Resy, Tock, and Toast Tables reservations into the Local by Toast app and use platform data to deliver personalized guest experiences, especially for Amex card members.
• Positive Sentiment: The introduction of the Toast Go 3 handheld with built-in cellular connectivity and Toast IQ AI insights aims to enhance in-store operations by improving reliability, order speed, and upsell opportunities for staff.
• Positive Sentiment: Management raised its full-year guidance, expecting 29% growth in subscription & FinTech gross profit and $575 million in adjusted EBITDA, while emphasizing disciplined investments to sustain long-term margin expansion.

Presentation

[Operator]

Good afternoon. My name is Kate, and I will be your conference operator today. At this time, I would like to welcome everyone to Toast Second Quarter twenty twenty five Earnings Conference Call. Today's call will be forty five minutes. I'll now turn the call over to Marco Seno, Senior Vice President of Finance. You may begin your conference.

[Michael Senno, SVP - Finance at Toast]

Thank you. Welcome to Toast's earnings conference call for the second quarter ended 06/30/2025. On today's call, our CEO, Aman Narang and CFO, Elena Gomez, will open with prepared remarks, which will be followed by our Q and 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 Act and the Exchange Act.

[Michael Senno, SVP - Finance at Toast]

All statements other than statements of historical facts are forward looking statements, including those regarding management's expectations of future financial and operational performance and operational expenditures, location growth, future profitability and margin outlook, business and investment strategy, expected growth and business outlook, including our financial guidance for the 2025. Forward looking statements reflect our views only as of today and 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 uncertainties that could cause actual results to differ materially from our expectations. During this call, we will discuss certain non GAAP financial measures, including, but not limited to, non GAAP subscription services gross profit and non GAAP financial technology solutions gross profit, which we refer to collectively as our recurring gross profit streams. These are the basis for our top line guidance.

[Michael Senno, SVP - Finance at Toast]

These non GAAP 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, sales and marketing expense, research and development expense, and general and administrative expense are on a non GAAP basis. Finally, the press release can be found on the Investor Relations website @investors.tostab.com. After the call, a replay will be available on our website.

[Michael Senno, SVP - Finance at Toast]

And with that, let me turn the call over to Aman.

[Aman Narang, Co-Founder, CEO & Director at Toast]

Thanks, Michael, and thank you to everyone for joining us today. We've had a great first half of the year. Q2 results came in ahead of expectations. We've added a record 8,500 net new locations. We grew recurring gross profits 35%, and we've delivered $161,000,000 of adjusted EBITDA.

[Aman Narang, Co-Founder, CEO & Director at Toast]

GAAP operating income reached $80,000,000 At Toast, our mission is to help restaurants delight their guests, do what they love and thrive. Our strong results reflect our consistent execution across the company. And more importantly, they reinforce our belief in the significant long term opportunity ahead of us. We're seeing that opportunity play out as we grow market share in our core and accelerate our momentum across our new customer segments. In Q2, we crossed 10,000 live locations across enterprise, international and food and beverage retail, and now serve approximately 148,000 locations across our customer segments.

[Aman Narang, Co-Founder, CEO & Director at Toast]

We're excited to welcome Firehouse Subs, a 1,300 QSR enterprise brand, as well as Zabars, the iconic New York grocer to the Toast platform, further signaling our progress in enterprise and retail. Internationally, we launched in Australia. This is our fourth international market, extending our reach beyond The UK, Ireland, and Canada, and another step towards building the leading platform, global platform for restaurants. We're also thrilled to announce an exciting partnership with American Express. This collaboration will bring together reservation listings from Resy, Tock, and Toast tables into Local by Toast, our mobile app, to make it easier to find and book tables.

[Aman Narang, Co-Founder, CEO & Director at Toast]

We also plan to use the reservation data and the power of our platform to enable personalized experiences for diners at the point of sale, including American Express card members. We're excited about the value our two companies can deliver together for both restaurants and diners through this exciting partnership. At the start of the year, we laid out four key priorities. Number one, scale locations and market share in our core US restaurant business. Number two, demonstrate that these new market segments can be material drivers of growth third, increase customer adoption of our broad platform and drive differentiation through data and AI And lastly, continue to hold ourselves to a high bar and invest against our most important priorities while gradually expanding margins.

[Aman Narang, Co-Founder, CEO & Director at Toast]

All right. So let's jump into number one, starting with our core restaurant business. We have strong momentum driven by our purpose built restaurant platform and our local go to market teams. As a result of positive customer feedback and the brand investments we've made, we've seen the largest year over year increase in brand consideration in our peer set. We grew share in nearly every SMB market we operate in.

[Aman Narang, Co-Founder, CEO & Director at Toast]

In our top 10 markets, we continue to see higher rep productivity and higher market share gains relative to our averages. The fact that we're still seeing strong gains in these markets where we have over 30% penetration across large and small metro areas is a clear sign our flywheel strategy is working. We're also expanding the breadth of our platform with new products and features like Toast Go three and our new AI powered intelligence engine, Toast IQ, which reflect the steady drumbeat of innovation that's core to our strategy. Behind every update is our focus on the thousand little things that make the Toast platform such a great tool for restaurants. An example of this is Supper Club, a neighborhood restaurant and market in Richmond, Virginia.

[Aman Narang, Co-Founder, CEO & Director at Toast]

A deciding factor in their switch to Toast was our catering and events product, which replaced a third party app that was cumbersome for them and their customers. Since switching to Toast, Supper Club has seen a nearly 40% jump in catering sales. Toast catering is both easy to use and seamlessly integrates into the Toast platform, including our point of sale devices and handhelds, which has allowed them to take on significantly more business and even open a second location in March. It's a great example of how when our customers grow, we grow right alongside them. Second, moving gears.

[Aman Narang, Co-Founder, CEO & Director at Toast]

Our second priority is demonstrating that these new market segments can be material drivers of growth. We crossed 10,000 live locations across enterprise, food and beverage retail, and international, and these new customer segments are on track to surpass $100,000,000 in ARR collectively by the end of the year, a milestone that took six years in our core business. In enterprise, our vision is to have the most iconic restaurant brands in Toast and drive innovation for the entire industry. Our investments are paying off, and we'll keep enhancing the platform to meet the needs of large scale operators. We're also seeing strong interest from customers to use more of our platform, which will contribute to scaling enterprise ARPUs over time.

[Aman Narang, Co-Founder, CEO & Director at Toast]

In food and beverage retail, we're off to another strong we're off to a strong start, and the early signals are really promising. We're building deeper inventory management tools, expanding integrations, and scaling our dedicated sales team. Total ARPU for retail customers is already above 10 k, a clear indication our value proposition is resonating. Food retailers like Zabar's New York City are using Toast Retail to handle their large, fast paced operation, manage over 30,000 SKUs across the 30 20,000 square foot store, and process more than 2,500 transactions daily. Zevar shows how Toast supports complex, high volume retail environments.

[Aman Narang, Co-Founder, CEO & Director at Toast]

Across The UK, Ireland, and Canada, rolling out more of our products is driving a steady increase in booked ARPU. We're also seeing greater traction among full service restaurants, which now make up the majority of our new wins in these regions, showing that product improvements investments in our go to market teams are paying and in our go to market teams are paying off. We're launching Australia with the same products we have in our other international markets today. Our fast comprehensive launch down under is thanks to the learnings and infrastructure from our first three markets and the localization investments we've made over the past few years. We took our first customer, Grace Craze, live in Australia this summer.

[Aman Narang, Co-Founder, CEO & Director at Toast]

Grace Kays is an existing Toast customer in The US, and we were top of mind when they decided to expand Australia. They initially opted for a local provider at launch, but couldn't find another POS provider that matched Toast's capabilities. So they were excited to transition to Toast when we would when we would when we could support their Australian operations. They're now using our guest facing displays, kitchen display screens, and online ordering products to solve for the operational friction and reporting gaps they experienced with the local system at launch. And they plan to add more products like email marketing and loyalty to help drive demand and above store tools, including multi location management and reporting to power their continued expansion across Australia.

[Aman Narang, Co-Founder, CEO & Director at Toast]

Shifting gears, our third priority is increasing customer adoption of our platform and driving differentiation through data and AI. We were a pioneer in bringing purpose built handhelds to market seven years ago, redefining in store operations and service to restaurants. And since then, billions of orders have run through Toast Go handhelds, giving us a deep understanding of what works on the restaurant floor. Our our new Toast Go three handheld builds on that foundation and continues to push the industry forward. It's the only device that combines ToastIQ, Toast Intelligent Vision with built in cellular connectivity so staff can take orders, process payments, and print receipts seamlessly across Wi Fi and cellular networks.

[Aman Narang, Co-Founder, CEO & Director at Toast]

It does all this while being lighter, faster, and more durable than before with a twenty four hour battery life. With Toast iQ, staff now get real time context about their guests to help increase check sizes. Personalized notes and guest details from Toast tables show up directly into our Toast Go three handhelds and terminals. And our Amex partnership aims to build in this technology to deliver these personalized experiences for Amex card members as well. Hey, Wire restaurant in Texas calls the Toast Go three a game changer.

[Aman Narang, Co-Founder, CEO & Director at Toast]

They used to lose Wi Fi in certain areas of this of their three story concrete building, but now with Toast Go three cellular functionality, they can seamlessly transition between cellular and Wi Fi to stay connected and take payments without getting interrupted. The new handheld meet the demands of the restaurants, including drops on their concrete floors or servers working double shifts who can now carry handheld all day long without needing to charge it. PayWire also sees the Toast Go three as a tool for growth, giving them a reliable way to generate sales at community events and festivals and open the door to sales they wouldn't access otherwise. Lastly, our fourth priority is to continue to invest with discipline while expanding our margins. Our updated full year outlook reflects the strength of our execution and the scalability of our business.

[Aman Narang, Co-Founder, CEO & Director at Toast]

We've reached the medium term margin guidance we laid out at our Investor Day ahead of plan, and we're confident in our ability to continue investing behind what's most important to fuel long term growth while balancing margins over time. As I close out, I wanna thank every toaster, our customers, and our investors. The progress we're making is a direct result of the team's incredible execution and the confidence our customers and investors have in what we're building. Our platform helps local businesses thrive, and I've never been more excited about the about the opportunity that's in front of us. Thank you.

[Aman Narang, Co-Founder, CEO & Director at Toast]

And with that, I'll turn the call over to Elena.

[Elena Gomez, President & CFO at Toast]

Thank you, Aman, and to everyone for joining. To start, I would also like to thank our incredible team for another strong quarter, which came in above our expectations. In the second quarter, ARR grew 31% and total FinTech and subscription gross profit, our recurring gross profit streams increased 35% year over year. Total take rate across SaaS and FinTech gross profit was 93 basis points in the quarter, an increase of eight basis points from a year ago, reflecting our growing share of wallet and the increasing value we are providing our customers. Adjusted EBITDA was $161,000,000 for the quarter with margins expanding eight percentage points year over year to 35%, and GAAP operating income was $80,000,000 We also increased our full year guidance to reflect our strong quarter and the operating momentum we have heading into the second half of the year.

[Elena Gomez, President & CFO at Toast]

We posted a record quarter with approximately 8,500 net location additions, and we ended Q2 with 148,000 locations, up 24% from a year ago. Our results reflect deeper penetration in our core customer segment complemented by growing momentum across our new customer segments. As Aman mentioned, across international, enterprise and food and beverage retail, we crossed 10,000 locations in Q2. We're excited about the new bellwether brands like Firehouse Subs and Zabar showing the versatility of our platform to serve a wide range of customers across all segments. The traction we're seeing is a testament to our investments to serve these new customer segments across both product and go to market, and our confidence in the trajectory of these new customer segments continues to grow.

[Elena Gomez, President & CFO at Toast]

We expect these new TAMs to become increasingly meaningful parts of our business over time and contribute to sustained long term growth. As a result, we are investing behind our success. We're building out the product to serve deeper parts of these new towns and scaling go to market to accelerate our progress. That includes expanding into new geographies over time, and we're excited to have our first customer live in Australia. Looking out to the remainder of the year, we remain on track for more location net adds in 2025 versus 2024, driven by our consistent go to market execution and comprehensive product offering in our core, complemented by the growing scale from new customer segments.

[Elena Gomez, President & CFO at Toast]

SaaS ARR grew 30% year over year, driven by location growth and a 5% increase in SaaS ARPU on an ARR basis. Subscription revenue increased 37% and gross profit grew 43%, benefiting from the improved ARR to revenue conversion we discussed last year. As a reminder, beginning next quarter, we will lap the step up and the associated one time benefits we saw in Q3 and Q4 of last year, and therefore expect subscription revenue to more closely mirror SaaS ARR growth beginning in Q3. Payments ARR increased 32% and FinTech gross profit grew 30% in the second quarter. GPV was $50,000,000,000 growing 23% year over year with GPV per location down 1% versus last year.

[Elena Gomez, President & CFO at Toast]

FinTech net take rate was 57 basis points and Payments net take rate was 49 basis points. Both increased three basis points from a year ago from a combination of ongoing optimization efforts, small targeted pricing moves and new products, including surcharging. Non payment FinTech solutions led by Toast Capital contributed $40,000,000 in gross profit and eight basis points in take rate. Capital's take rate contribution was in line with Q2 last year, and as a reminder, is seasonally lower in Q2 due to higher GPV. Toast Capital remains healthy with solid demand from customers, and defaults remain in line with our expectations.

[Elena Gomez, President & CFO at Toast]

Looking ahead, we continue to expect Toast Capital's contribution and net take rate to remain in the 10 basis point range. Excluding $19,000,000 of bad debt and credit related expenses, operating expenses increased 18% in Q2. That's primarily from a 28% increase in sales and marketing expenses as we grow our go to market footprint across international and retail. In the core, we're making targeted rep additions and supporting our brand campaign to deliver ongoing share gains. R and D grew 9%, reflecting investments in our highest priority areas.

[Elena Gomez, President & CFO at Toast]

In the core, Toast Go three and newly launched Toast IQ features highlight our continued focus on extending our product differentiation and driving tangible customer outcomes. Across our new customer segments, we are taking the same vertical approach that has driven our success in the core. We're serving the needs of our customers more deeply in each segment, such as enhancing our inventory solutions for retail, bringing Tosco three internationally and expanding our functionality and integrations in Enterprise. Adjusted EBITDA was 161,000,000 with a margin of 35%. Our strong Q2 results reflect healthy top line growth, including better than expected GPV, as well as our focused execution and disciplined capital allocation.

[Elena Gomez, President & CFO at Toast]

In addition, the seasonality of GPV contributed to the seasonally high margin in the quarter. Free cash flow was $2.00 $8,000,000 driven by strong adjusted EBITDA and a benefit from working capital due to the seasonality of our payments business. GAAP operating income was up $80,000,000 up from $14,000,000 a year ago. That's both the strength in adjusted EBITDA and our prudent approach to managing stock based compensation. Stock based comp as a percentage of recurring gross profit was 14% in Q2, down six percentage points versus a year ago.

[Elena Gomez, President & CFO at Toast]

We continue to be on a path for stock based comp to be in low double digits as a percentage of recurring gross profit. Turning to guidance. For the third quarter, we expect total subscription and FinTech gross profit to grow in the range of 23% to 26% year over year and adjusted EBITDA to be 140,000,000 to $150,000,000 We raised our full year outlook due to our strong results and continued momentum across the business. At the midpoint, we now expect 29% growth in FinTech and subscription gross profit and $575,000,000 in adjusted EBITDA, a margin of 32, up five percentage points versus twenty twenty four. Let me provide some context on our margin profile in the second half of the year.

[Elena Gomez, President & CFO at Toast]

As a reminder, Q4 margin is typically lower relative to the rest of the year due to the seasonality of payments. In addition, we will have higher tariff expenses in the second half of the year. We take a disciplined approach to scaling the business and based on positive signals in our growth initiatives, we are unlocking incremental investment across both core and our new customer segments to move faster in these areas and position ourselves for sustained long term growth. Overall, we are on track for another year of both strong top line growth and expanding profitability and are confident we can continue to deliver durable growth while driving towards our long term margin target. To wrap up, we had a great first half reflecting our consistent execution.

[Elena Gomez, President & CFO at Toast]

Our momentum in the core is strong, and we are really excited by our progress in new customer segments. Looking ahead, we're excited and confident about the opportunity in front of us and believe we are just getting started. Now I'll turn the call back over to the operator to begin Q and A.

[Operator]

Your first question comes from the line of Will Nance with Goldman Sachs. Your line is open.

[Will Nance, Vice President at Goldman Sachs]

Hey guys, great results today. I wanted to ask a question on the new disclosure on retail ARPUs being, I think, north of 10 ks. Obviously, great to see. And you've talked about this being a very large average merchant side. Was wondering if you could talk through that number and maybe give some context on the breakdown between payments and software.

[Will Nance, Vice President at Goldman Sachs]

And then, you know, you mentioned further enhancements to the product. Where are you in kinda now versus where you wanna be on the software suite for that vertical? And, you know, what what types of things do you think could be on the road map? Appreciate it.

[Aman Narang, Co-Founder, CEO & Director at Toast]

Yeah. Well, thanks for the question. You know, if you go back and look at our core business and you look at how we've been able to both SaaS ARPU and fintech ARPU over time, it's taken a while to get us to where we are today where our core ARPU is. And so if you look at how quickly we've been able to get retail ARPU up over 10 k, I think this really shows that it's a really good opportunity for us. That's why we're investing in sales capacity.

[Aman Narang, Co-Founder, CEO & Director at Toast]

We're gonna continue investing in the balance of the year. And and and I think the data we're seeing from some of the early reps that we've scaled up, this this dedicated team for retail is really, really positive. Know, I think a lot of the products that we have, you think about payments, capital, payroll, scheduling, lot of that applies, but there are also some very specific products around inventory and that are very specific to retail that we continue to build out. And by the way, they're specific to subcategories within retail. So what's needed in grocery versus liquor stores versus convenience stores and and such, there's some differences as well.

[Aman Narang, Co-Founder, CEO & Director at Toast]

But net net, I think if you look at where we are, I think we're ahead of expectations, and the potential for you know, my confidence in the in the potential of the business is the highest it's ever been.

[Will Nance, Vice President at Goldman Sachs]

Oh, that's great. I used the loyalty module at a grocery store in my neighborhood this weekend. Save me a dollar. Just on the That's fine. Some of the mac on some of the macro dynamics in in GMV, I was wondering if you could maybe provide kind of latest and greatest breakdown breakdown of some of the GPV per location trends across the base.

[Will Nance, Vice President at Goldman Sachs]

Obviously, as you just talked about, you've got maybe an upward bias coming from retail, maybe a downward bias from some of the location adds internationally. We've been seeing negative same store sales for a while now in restaurants. So just kind of wondering if you could stack right some of those drivers and talk about any notable changes there. Thanks.

[Aman Narang, Co-Founder, CEO & Director at Toast]

Yes. Since we asked about retail right now, Will, even though at Analyst Day, we talked about how retail GPVs are higher than restaurants, because we're newer, we're still growing into that. And so I just wanna clarify that. But overall, if you look at GPV trends, you know, it's been largely flat for us, and GPV per location was down 1%. It's been on this narrow band.

[Aman Narang, Co-Founder, CEO & Director at Toast]

And it makes a very small component of it. Like, if you look at our customer base overall, GPV has been largely been about flat. I think it's up like a very small amount. And then if you look at the rest of these segments, know, retail is a little bit higher, international is a little bit lower. But I think over time, in each of these businesses, what Laina and team are doing a great job of is really looking at unit economics.

[Aman Narang, Co-Founder, CEO & Director at Toast]

They're looking at payback periods and margins. And, you know, we've confidence that all these businesses are got great opportunities over time.

[Will Nance, Vice President at Goldman Sachs]

Awesome. Thanks for taking the question.

[Aman Narang, Co-Founder, CEO & Director at Toast]

All right. Thank you, Will.

[Operator]

Your next question comes from the line of Tian Tian Wang with JPMorgan. Your line is open.

[Tien-tsin Huang, Senior Analyst at JP Morgan]

Hey, thanks. Lots of fun momentum here. Just wanted to clarify on the third quarter EBITDA expected to be sequentially down, it looks like. Is that the unlocking of certain investments that you called out there? Elena, can you just elaborate on that maybe and how discretionary that is?

[Tien-tsin Huang, Senior Analyst at JP Morgan]

I also heard tariff expenses. I just want to get all that straight. Thanks.

[Elena Gomez, President & CFO at Toast]

Yes. Thanks. It's a great question. Look, we've got a lot of momentum in our customer segment. So what you're seeing in the second half in terms of our margin is that we're increasing our investment in these areas to accelerate our progress.

[Elena Gomez, President & CFO at Toast]

You heard Aman talk about 10,000 live locations, pacing to $100,000,000 in ARR. So we want to continue to invest behind that, and that's really what you're seeing. Tariff is also playing a role for sure. It's a fluid environment, definitely tariffs have a bigger impact in the second half of the year than the first half of the year. But we've got a lot of conviction to invest to grow to drive sustained growth over the long term, which is what you're seeing us invest behind in the second half.

[Tien-tsin Huang, Senior Analyst at JP Morgan]

Okay, great. Then my quick follow-up just on Toast Go three, heard a lot of good things about this. Are you do you expect an upgrade cycle from existing customers using prior versions of Toast Go, or is this more about, you know, attaching to to new sales? Just trying to understand the how that layers in.

[Aman Narang, Co-Founder, CEO & Director at Toast]

Yeah. I think it's both, Vincent. If you look at certainly, new customers will will will will likely start start sales go through device. But for a lot of existing customers, as their hardware refresh cycles come up, I think a lot of them are really excited about being able to use this device because it's got the cellular backup, especially if you've got big spaces. They like the the ability to be able to use both Wi Fi and cellular, at the same time.

[Tien-tsin Huang, Senior Analyst at JP Morgan]

Perfect. Thank you, guys.

[Operator]

Next question comes from the line of Deji Heinz with Canaccord. Your line is open.

[David Hynes, MD - Software Lead Analyst at Canaccord Genuity - Global Capital Markets]

Hey. Thank you, guys. Congrats on the nice quarter. So, Aman, we've had several quarters now with really nice enterprise momentum. I'm curious what you're seeing incumbent vendors at the end of the at that end of the market doing to sort the threat that Toast creates?

[David Hynes, MD - Software Lead Analyst at Canaccord Genuity - Global Capital Markets]

Right? Are are they are they trying to innovate? Are they getting more aggressive on price? How price sensitive are the enterprise buyers? Just any color on kind of competitive dynamics in the enterprise segment would be would be helpful.

[Aman Narang, Co-Founder, CEO & Director at Toast]

Sure, DJ. You know, if you zoom out and look at what's happened, in the core independent restaurant business, the adoption of cloud was actually faster, upmarket and enterprise. And so a lot of what we continue to see is a lot of legacy on premise solutions that TOS is displacing. And so I don't think it's really about price. I think it's about leveraging modern tech where you can use the cloud.

[Aman Narang, Co-Founder, CEO & Director at Toast]

And and that's really what's driving some of our growth. We're investing in a big way now with Firehouse Subs, not just in the non drive thru segment, but we're also starting to invest on the drive thru segment. And certainly, if you look at the competitive environment, we've said this before. It's always been a very competitive environment in the space, and I think our focus is just on customers. Like, the more customer obsessed we can be about solving the problems these enterprise brands have, I think that's what's really driving, you know, our growth and our success.

[Elena Gomez, President & CFO at Toast]

Yeah. And I would just build on, DJ, we've begun investing in enterprise really a few years ago, and that's what you're starting to see show up is our capabilities have matured in a way where you're starting to see the likes of Applebee's, and we closed Marriott a couple years ago. And if you take Firehouse as an example, one of the reasons they chose Toast was really about the capabilities in store. They really wanted to focus on performance in store. They wanted to increase staff efficiency.

[Elena Gomez, President & CFO at Toast]

They wanted to improve guest experience, reliability. And so to me, that's a very much a capability. We were able to meet that demand, and that's why you're seeing our that's just one example. But you're seeing our pipeline really improve as a result of this investment, which has taken a couple of years to mature.

[David Hynes, MD - Software Lead Analyst at Canaccord Genuity - Global Capital Markets]

Yeah. Yeah. And then, Elena, can you just remind me, like, a 1,500 location win, a 1,300 location win? Like, how long does it take to sand those up? When do they start hitting into net ads?

[Elena Gomez, President & CFO at Toast]

Yeah. It depends. We we would collaborate with the with the, you know, the the new customer and decide what what their pipeline is or when they're ready for implementation. But it could be like Firehouse, we already have some locations live. So it just depends on the velocity at which they want to go.

[Elena Gomez, President & CFO at Toast]

But generally speaking, it's not that far after we book. And then it can take the course of one to two years depending on how fast they wanna go. Some customers wanna go faster, but generally, a a land like that will take you know, could take four or six quarters on the outside, maybe two years.

[David Hynes, MD - Software Lead Analyst at Canaccord Genuity - Global Capital Markets]

Yep. Perfect. Okay. Thanks, guys. Congrats.

[Aman Narang, Co-Founder, CEO & Director at Toast]

Thanks, CJ.

[Operator]

Your next question comes from the line of Timothy Coueto with UBS. Your line is open.

[Timothy Chiodo, Managing Director at UBS Group]

Great. Thank you. I want to talk a little bit about what you mentioned in terms of the investment behind go to market, but I want to core U. S. Restaurants and not looking really at the growth market sales teams.

[Timothy Chiodo, Managing Director at UBS Group]

So I was hoping you could comment a little bit around your coverage in the major, major cities. I'm assuming you have salespeople in most of those. But is there more room to add in the major cities? Or is that you've kind of got the coverage? And then second, as you move into beyond those major markets, so 50 miles outside of ABC major city, is there any kind of a plan to add coverage there?

[Timothy Chiodo, Managing Director at UBS Group]

Or would you consider more going with third party distribution partners, ISOs, banks, etcetera, and to the extent you could comment on the effectiveness of those channels in selling such a vertical specific product? Thanks a lot.

[Aman Narang, Co-Founder, CEO & Director at Toast]

Thanks, Tim. It's a great question. It's actually one we debate internally all the time. If you look at the past five years, we've spent a we've invested a lot to significantly increase our sales capacity. And that's really what's driving the core of our growth.

[Aman Narang, Co-Founder, CEO & Director at Toast]

You know, the great thing is if you look at the supply will effect we've talked about, that continues. So like in these markets where we've got SMB coverage, you actually see productivity up year over year this year as an example. So it just shows that that strategy continues to work. Now in terms of, like like, what we're doing on coverage, I'd say in most markets, to your point, we've got coverage. That being said, there are some markets where we feel like we're underpenetrated.

[Aman Narang, Co-Founder, CEO & Director at Toast]

So we're being surgical about saying in certain markets, want to add coverage. And that's true whether they're metro areas or there are suburbs. And so I think it just really depends on kind of what our penetration is, what our productivity is. And so we use that to refine, let's say, the edges. It's not like a material step function change in terms of how much rep capacity we're adding.

[Aman Narang, Co-Founder, CEO & Director at Toast]

I think in terms of, like, other channels, we've always had a really robust partner ecosystem. Like, you know, 20% of our new customers come from referrals. That's, you know, food distribution partners, tech providers. And so that's certainly a key part of our funnel. But we do think that, like, it's important for us to your point about this vertical product that's that's restaurant specific that we own the end to end experience.

[Aman Narang, Co-Founder, CEO & Director at Toast]

And so whether it's the go to market, the onboarding, the support, we all own it all in house, and we think that's a differentiator in addition to our platform. And so there aren't any plans right now to open that up beyond our core direct strategy, but we're certainly always exploring. It's a it's a topic actually we talk about sometime all the time.

[Timothy Chiodo, Managing Director at UBS Group]

Thank you, Aman.

[Aman Narang, Co-Founder, CEO & Director at Toast]

Yep. Thanks, Tim.

[Operator]

Your next question comes from the line of Matt Code with Truist. Your line is open.

[Matt Coad, Director - Equity Research at Truist Securities]

Hi. Hey, guys. Thanks for taking the question here. Wanted to touch on SaaS ARPU again. You guys are rolling out a lot of different products that you talked about, whether it be on the AI front or some of the new hardware.

[Matt Coad, Director - Equity Research at Truist Securities]

So just curious, if you could provide an update on kind of your strategy to price for value here.

[Elena Gomez, President & CFO at Toast]

Yeah. Sure. So a couple things. One is, you know, our SaaS ARPU in q two was around 5%. And really how we think about our growth levers is really focusing on ARR and locations and ARPU are both the vectors we think about.

[Elena Gomez, President & CFO at Toast]

And in terms of pricing, that's really just one small part of our ARPU growth. But absolutely, we're focused on making sure we're driving value for our customers so that pricing is not an objection, if you will. But if you zoom out and think about how can we drive ARPU growth over time, we have a lot of levers available to us. We are, a, we know a lot of our products are not at terminal attach. We're gonna continue to innovate.

[Elena Gomez, President & CFO at Toast]

Data and AI will certainly play a role in that over time. And then we're still continuing to hone the upsell motion and really balance our land and expand motion. So feeling really confident that the combination of our breadth of our platform will drive ARPU over time.

[Matt Coad, Director - Equity Research at Truist Securities]

Thanks, Elena. And then, yeah, just for my quick follow-up, the nonpayment portion of gross profit, so mainly Toast Capital, it was down, I I think you said, $40,000,000 this quarter compared to 47 last quarter. Could you unpack that a little bit for us? Is that kind of just timing related that decline? Or are you guys pulling back on certain loan growth right now?

[Elena Gomez, President & CFO at Toast]

Yeah. Overall, I would say the program is really healthy. There's seasonally some dynamic there in q two. And then there was a little softer demand at the start of the quarter, but overall, we feel really good about where Toast Capital's growth is. The defaults are in line with expectations.

[Elena Gomez, President & CFO at Toast]

So feel really it's a good healthy program for us and continues to be.

[Operator]

Your next question comes from the line of Josh Baer with Morgan Stanley. Your line is open.

[Joshua Baer, Executive Director & Software Equity Research Analyst at Morgan Stanley]

Thanks for the question. A quick one on enterprise and one on international. Just wondering with regard to Firehouse, talked about some of the reasons that they adopted Toast. Just wondering, like, how that translates into actual products. Are they using if you can identify any of the suites that they're gonna adopt and if payments is is in there too.

[Joshua Baer, Executive Director & Software Equity Research Analyst at Morgan Stanley]

And then with regard to international and and Australia, just wondering how we should think about it. Is it part of a broader wave two of international expansion and, you know, we're gonna hear about other countries and geos, or or is this kinda wave to and that's it for now.

[Elena Gomez, President & CFO at Toast]

Yeah. On Firehouse, they're they're definitely taking payments. And in terms of the suite of products, obviously, they're using our handhelds. They're using our KDS and restaurant management suite. So it's the breadth of our platform that they're using, and I'll let Aman talk about international.

[Aman Narang, Co-Founder, CEO & Director at Toast]

Yeah. Josh, on on Australia, I think your question was about, is Australia, you know, part of a broader strategy on waves two? Right? You know, I think one of the things that's been great about this Australia launch is that we've been able to launch with the same products in Australia that we have actually in our h one market. This is UKI and Canada.

[Aman Narang, Co-Founder, CEO & Director at Toast]

And it's the work it's a great work the r and d team has done to localize our platform where we can actually do that. As you know, it took us a long time UK and Canada to get all these products out and the ARPU up. And so the fact that we can now launch into new countries with the full platform, I think, is a huge advantage for us. In terms of this in in terms of whether or not we're gonna add more countries, we're not ready to announce anything at this time. But, certainly, like, you know, it's a balance.

[Aman Narang, Co-Founder, CEO & Director at Toast]

Right? On the one hand, we've gotta make sure that in the countries we're in, we're not shortchanging ourselves so that we're set up to be successful. On the other hand, I think if you look long term, like, to be inspired to do more internationally and more globally, absolutely, the answer is yes.

[Joshua Baer, Executive Director & Software Equity Research Analyst at Morgan Stanley]

Okay. Thank you. Appreciate it.

[Aman Narang, Co-Founder, CEO & Director at Toast]

Thanks, Josh.

[Operator]

Your next question comes from the line of Darrin Peller with Wolfe Research. Your line is open.

[Darrin Peller, Managing Director at Wolfe Research, LLC]

Guys, thanks. You know, for the record net adds of 8,500, just how much of that was driven by the core business versus the TAM expansion? And then just kind of doubling down on that, when you look at the 10,000 location goal, it's great to see you pass that for, enterprise international and F and B retail. Is there any way to give us a bit more granularity around the composition of these 10,000 and just where they fit within those three buckets? Thanks, guys.

[Aman Narang, Co-Founder, CEO & Director at Toast]

Yes. Hey, Darren. So if you look at our core business, that's still driving. Right? The the core the bulk of our growth we've at this obviously, we've said this before for more than a decade.

[Aman Narang, Co-Founder, CEO & Director at Toast]

And if you look at, like, the number of go lives, for example, in our core business, that's never been higher. The rep productivity is is is at a is at a really healthy level. The the most penetrated markets are are are seeing healthy gains, like, higher than the average markets where we have the most penetration. So, really, the the core business is incredibly healthy. Now are these new businesses contributing more as they're scaling?

[Aman Narang, Co-Founder, CEO & Director at Toast]

Yes. Right? If you look at retail and national enterprise, then in terms of the percentage of net percentage of go lives, certainly, that number is bigger than it's ever been just because we are now scaling in those markets as well. And that's really what's driving the record net adds, right, in the business. We're on track not only for this quarter, but for the year, as we said last quarter, to have record net adds for the year as well.

[Aman Narang, Co-Founder, CEO & Director at Toast]

In terms of the exact composition and breakdown across the three, the only thing I'll say is across all of them, we're seeing good momentum. Right? If you look at retail, we're adding more sales capacity because the margins the the ARPUs are over 10 k. The rep productivity is healthy, and so that gives us signal that we should lean in and invest. In international, we've increased ARPU, and we're seeing rep productivity be comparable to what we've seen in our US SMB business even though we don't have the level of we don't have the brand or the or the penetration that we have in The US.

[Aman Narang, Co-Founder, CEO & Director at Toast]

And so that's a good signal. And enterprise I think enterprise is gonna be gradual. Right? Because if you look at these wins while they're awesome, you know, enterprise wins, the longer sales cycles, and so you we expect them to be a gradual rip over time. And but all three of them are contributing in in all three areas, you know, we're investing to continue to open up the longer app longer term opportunity in front of us.

[Darrin Peller, Managing Director at Wolfe Research, LLC]

That's that's great to hear. Thanks. Just a quick follow-up would be on SaaS ARPU. It's still growing very well. And so when we think about how much is driven by customers coming on with higher SaaS ARPU versus just the upsell team continuing to do well, how do we, you know, distinguish that if you can help us out? Thanks, guys.

[Elena Gomez, President & CFO at Toast]

Yeah. Yeah. So it's so it's it's both. Right? We're seeing ARPU both from customers and existing customers.

[Elena Gomez, President & CFO at Toast]

And and one thing we're talking about is pulling our land and expand motion. But the upsell team is absolutely contributing to that in terms and their execution is is solid. I think over time, obviously, we wanna continue to optimize our product market fit across our whole set of products and continue to drive that. But overall, seeing really good progress across both new and existing customers.

[Darrin Peller, Managing Director at Wolfe Research, LLC]

That's great. Thanks, Lina. Thanks, guys.

[Operator]

Your next question comes from the line of David Koning with Baird. Your line is open.

[David Koning, Senior Research Analyst & Associate Director - Research at Robert W. Baird & Co]

Yes. Hey, guys. Great job. I guess, first of all, between Q3 guidance and full year guidance, we have a little insight into Q4. It looks like 21%, 22% at the midpoint in terms of recurring GP growth.

[David Koning, Senior Research Analyst & Associate Director - Research at Robert W. Baird & Co]

Is that a good if that's the exit point, is that a good insight into kind of how next year starts and maybe what might be the moving parts that could kind of move it either way over time?

[Elena Gomez, President & CFO at Toast]

Yes. Thanks for the question. So a couple of things. One is, as we always aim to do better and that's really important in how we balance our guidance. Just keep in mind, the first half of the year benefited from that ARR conversion.

[Elena Gomez, President & CFO at Toast]

So that's a dynamic at play in the second half of the year. And then GPV was better than our expectations in Q2. And so just in terms of how we guide, we really focus on being prudent and balanced as we enter into any guidance cycle. The other thing I'll tell you is our investment that we have we've talked about on this call is really in service of sustaining our growth over the long term. So we're always going aim to do better and these investments really will position us for growth not only in 2026 but beyond.

[David Koning, Senior Research Analyst & Associate Director - Research at Robert W. Baird & Co]

Great. Thanks. And just quick follow-up July trends. Obviously, Q2 got better with volume, which is great. July trends, like per location, did that start out pretty well?

[Aman Narang, Co-Founder, CEO & Director at Toast]

Yeah. It's in line with expectations.

[David Koning, Senior Research Analyst & Associate Director - Research at Robert W. Baird & Co]

Yeah. Great.

[Aman Narang, Co-Founder, CEO & Director at Toast]

I think we're in good shape in July. Yeah.

[David Koning, Senior Research Analyst & Associate Director - Research at Robert W. Baird & Co]

Yeah.

[Operator]

Your next question comes from the line of Dan Dolley with Mizuho Securities. Your line is open.

[Dan Dolev, Senior Analyst - FinTech Equity Research at Mizuho Financial Group]

Hey, guys. Great results here as always. Can you please help us understand how the Amex partnership enhances the flywheel here because it seems very cool, you know, that deal that you're doing. Appreciate that. Thank you.

[Aman Narang, Co-Founder, CEO & Director at Toast]

Sure, Dan. If you so what we're doing in this MX partnership is, one, we're combining inventory from ResyTalk and Toast tables into our app. This is Toast local. And the idea is it's you've got one place now where you can go find, right, a place to book restaurants. It's a a broad set of restaurants that are that are available.

[Aman Narang, Co-Founder, CEO & Director at Toast]

Now when you book on any of these platforms, when you check-in at the restaurant, what the Toast platform can can do is create a personalized experience for you. So it's everything from you think about allergies, notes, birthdays, but also be able to recommend menu items, whether it's your favorite drink or it is items that you love. If you think about most people, they've got these preferences in their taste profile. So they build they empower the staff, the host, and the server in the kitchen with that data is really valuable in creating personalized experiences. So I think those are two two areas of focus.

[Aman Narang, Co-Founder, CEO & Director at Toast]

One, broaden the the inventory within local, and two, provide a great experience for the guests, including for Amex card members.

[Dan Dolev, Senior Analyst - FinTech Equity Research at Mizuho Financial Group]

Thank you so much. Great stuff again. Appreciate it.

[Operator]

We will now take our last question from the line of Harshita Rabi with Bernstein. Your line is open.

[Harshita Rawat, Senior Research Analyst at AB Bernstein]

Hi. Good afternoon. So I want to ask about SUSHAF, which you announced last year.

[Harshita Rawat, Senior Research Analyst at AB Bernstein]

I know you're currently doing pilot. What are you hearing from your customers in terms of the problem they're solving with this AI powered assistant and the value you're driving and how differentiated is that product in the market? Thank you.

[Aman Narang, Co-Founder, CEO & Director at Toast]

Yeah. Thanks for the question, Rashida. We are making really good progress with FoodChef. The customer feedback has been really positive. You know, I think what people like about the the product the the product and data is if you think about most restaurant tours, you know, they're not CTOs, they're not CIOs.

[Aman Narang, Co-Founder, CEO & Director at Toast]

And so the ability to have a human interface to be able to get insights, to get recommendations, to be able to actually make changes. So this is like the this is the, you know, the ability to make act to chain make take action within the within the SUSHift capability is something that we're getting really good feedback and input on. And I think, ultimately, our goal here is to build the world's best GPT like interface for restaurants because we've got all this great data. And so we're taking feedback from customers, and then and we plan to g a GA the prep from at some point later this year.

[Harshita Rawat, Senior Research Analyst at AB Bernstein]

Thank you.

[Operator]

This concludes today's conference call. Thank you for joining.

Participants

Executives

• Michael Senno, SVP - Finance
• Aman Narang, Co-Founder, CEO & Director
• Elena Gomez, President & CFO

Analysts

• Will Nance, Vice President at Goldman Sachs
• Tien-tsin Huang, Senior Analyst at JP Morgan
• David Hynes, MD - Software Lead Analyst at Canaccord Genuity - Global Capital Markets
• Timothy Chiodo, Managing Director at UBS Group
• Matt Coad, Director - Equity Research at Truist Securities
• Joshua Baer, Executive Director & Software Equity Research Analyst at Morgan Stanley
• Darrin Peller, Managing Director at Wolfe Research, LLC
• David Koning, Senior Research Analyst & Associate Director - Research at Robert W. Baird & Co
• Dan Dolev, Senior Analyst - FinTech Equity Research at Mizuho Financial Group
• Harshita Rawat, Senior Research Analyst at AB Bernstein