Toast (NYSE:TOST) Q4 2025 Earnings call February 12, 2026 05:00 PM ET Company ParticipantsAdam Frisch - Senior Managing DirectorAman Narang - CEODominic Ball - Equity Research AssociateElena Gomez - CFOMatt Coad - DirectorMichael Senno - Senior VP of FinanceTimothy Chiodo - Managing DirectorWill Nance - VPConference Call ParticipantsDan Dolev - Senior AnalystJosh Baer - Executive Director and Software Equity Research AnalystTien-tsin Huang - Senior AnalystOperatorGood afternoon. My name is Tiffany, and I wi ...

Financial Data and Key Metrics Changes - Recurring gross profits increased by 33% in 2025, with adjusted EBITDA margins expanding to 34% [5][26] - Annual recurring revenue (ARR) grew by 26%, reaching over $2 billion, while payment volume hit $195 billion [26] - GAAP operating income rose to $292 million from $16 million a year ago, driven by strong adjusted EBITDA and tight management of stock-based compensation [27][30] Business Line Data and Key Metrics Changes - SaaS ARR and subscription revenue each grew by 28% year-over-year, with SaaS ARPU in the core growing even faster than total SaaS ARPU [29] - Subscription gross profit increased by 33%, with SaaS gross margin expanding by 300 basis points year-over-year to 80% in Q4 [30] - Payments ARR grew by 24%, and fintech gross profit increased by 25% in Q4 [30] Market Data and Key Metrics Changes - The company added a record 30,000 net locations in 2025, ending the year with 164,000 locations [26] - The SaaS net retention rate remained healthy at 109% in 2025, supported by upsell and location expansion from existing customers [30] - The company continues to gain market share in its core U.S. SMB and mid-market restaurants, now powering 20% of these restaurants [8][9] Company Strategy and Development Direction - The company aims to double its market share and ARR over time, with a focus on growing market share in its core and demonstrating that new markets will be material growth drivers [8][12] - Investments in product differentiation and AI are prioritized to enhance customer adoption and drive differentiation [18][21] - The company plans to launch new products, including a drive-thru solution, to capture additional market segments [72] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in sustaining high growth for the next 5-10 years, with a focus on reinvesting in growth initiatives [38] - The company anticipates 20%-22% growth in recurring gross profit streams and adjusted EBITDA of $775 million-$795 million for 2026 [36] - Management highlighted the importance of disciplined capital allocation while expanding margins over time [24][35] Other Important Information - The company has repurchased approximately 8 million shares for $235 million since the inception of its buyback authorization in 2024 [35] - The company is experiencing cost pressures from higher memory chip costs, which are expected to impact margins in the second half of 2026 [36][37] Q&A Session Summary Question: SaaS ARR per location and enterprise metrics - Management confirmed confidence in mid-single-digit SaaS ARPU growth for 2026, with core SaaS ARPU growing faster than total company metrics [41][43] Question: Net adds and new verticals contribution - Management indicated that net add growth in 2026 is expected to be higher than in 2025, with new TAMs contributing significantly to this growth [47][49] Question: AI disruption and competitive landscape - Management views AI as an opportunity to enhance the platform and drive innovation rather than a threat, emphasizing the unique value Toast provides [50][54] Question: R&D investment and margin framework - Management confirmed that the margin framework allows for increased R&D investment to capitalize on AI opportunities while targeting long-term margin goals [58][62] Question: Drive-through product rollout - Management stated that the upcoming drive-through product will open up new market opportunities, particularly in enterprise [72][73]

Toast (NYSE:TOST) Q4 2025 Earnings call February 12, 2026 05:00 PM ET Speaker8Good afternoon. My name is Tiffany, and I will be your conference operator today. At this time, I would like to welcome everyone to Toast's fourth quarter and full year 2025 earnings conference call. Today's call will be 45 minutes. I'll now turn the call over to Michael Senno, Senior Vice President of Finance. You may begin your conference.Speaker7Thank you, operator. Welcome to Toast's earnings conference call for the fourth qua ...

Summary of Toast's Conference Call Company Overview - **Company**: Toast - **Industry**: Restaurant technology and payment solutions Key Highlights - **2025 Performance**: - Recurring gross profit is projected to grow by **32%** with a **33% margin** [3][4] - Achieved a significant milestone of crossing **$2 billion** in revenue [4] - Adjusted EBITDA margins expanded by over **600 basis points** [3] - **Market Expansion**: - Focus on penetrating core Total Addressable Market (TAM) and expanding into new TAMs, including enterprise, international, and food and beverage retail [5][7] - Successful launch in Australia and significant deals won [5][6] - **Emerging Businesses**: - Achieved over **$100 million** in Annual Recurring Revenue (ARR) from emerging businesses [5] - Different Average Revenue Per User (ARPU) profiles expected across new segments, with gradual expansion anticipated [10][11] Financial Metrics - **Net Location Adds**: - U.S. SMB net adds expected to remain stable in 2025 and 2026, despite potential tapering as the base grows [12][13] - Core business still has significant growth runway [14] - **SaaS ARR per Location**: - Expected to remain in the mid-single digits, with core ARPU growing faster than total ARPU [19][20] - **Gross Payment Volume (GPV)**: - Trends remain stable, with gradual impacts from new segments [21] - **Net Payments Take Rate**: - Increased year-over-year due to cost optimization, targeted pricing, and innovation in digital products [22][24] 2026 Outlook - **Growth Projections**: - Recurring gross profit growth expected to exceed **20%** with margins flat to slightly up [26][27] - Investments focused on both core and new TAMs, with a disciplined capital approach [30][32] - **Sales and Rep Capacity**: - Increased investment in sales rep capacity to drive growth in both core and emerging businesses [33][36] Product Innovations - **Toast IQ**: - New AI-driven product designed to assist restaurant operators with insights and performance management [41][42] - **Partnerships**: - Strategic partnerships with American Express and Uber aimed at enhancing customer experience and integration [44][46] Competitive Landscape - **Market Share Goals**: - Aim to double market share in the core business, with strong execution and win rates observed [15][17] - **Enterprise Payments Attach**: - Most enterprise customers are adopting payments as part of the overall platform, with ongoing opportunities for growth [47][48] Miscellaneous - **Visa/Mastercard Settlement**: - Potential long-term impact on interchange rates, but not expected to be material for Toast [51][52] This summary encapsulates the key points discussed during the conference call, highlighting Toast's performance, strategic initiatives, and outlook for the future.

Core Insights - Toast (TOST) is valued at $21.6 billion and is establishing itself as a digital backbone for the restaurant industry through its all-in-one technology platform [1] - The company has seen a year-to-date stock increase of 1.55%, outperforming the broader market [1] Company Overview - Toast specializes in providing POS systems, banking services, and software solutions specifically for restaurants, generating revenue primarily from payment processing and subscription fees for its software [4] - The company also earns income from hardware sales [4] Financial Performance - In Q2, Toast added 8,500 net new locations, increasing its total to 148,000 locations worldwide, a 24% increase from the previous year [5] - Annual recurring revenue (ARR) rose 31% year-over-year to $1.9 billion, while Gross Payment Volume (GPV) increased by 23% to $49.9 billion [5] - SaaS ARR grew by 30%, and Payments ARR rose by 32% in the same quarter [5] Operational Metrics - Operating expenses increased by 18%, driven by sales and marketing efforts as the company expands globally and into retail [6] - Research and development expenses rose by 9% to support innovations like Toast Go 3 and Toast IQ, which utilizes AI [6] - Adjusted EBITDA reached $161 million, with margins expanding to 35% [6] - GAAP net income for Q2 was reported at $80 million, a significant increase from $14 million in the same quarter last year [6] - The company generated $208 million in free cash flow despite rising expenditures [6]

Core Insights - Toast, Inc. is enhancing its profitability through new product launches and expansion efforts, including the Toast Go 3 handheld device and the AI-powered ToastIQ [1][10] - The company has raised its full-year outlook for gross profit and adjusted EBITDA, indicating strong performance expectations [5] Product Innovations - The Toast Go 3 handheld features built-in cellular connectivity and a 24-hour battery life, facilitating easier order taking and payment processing for restaurant staff [1][10] - ToastIQ, launched in May 2025, automates workflows and personalizes experiences using restaurant data, with features like Menu Upsells and AI-Marketing Assistant [2][3] Financial Performance - Toast expects non-GAAP subscription services and financial technology solutions gross profit to be between $1.815 billion and $1.835 billion, reflecting a growth of 28–29% over 2024 [5] - Adjusted EBITDA guidance has been increased to $565 million–$585 million from a previous range of $540 million–$560 million [5] Cost Challenges - Operating expenses rose 18% year over year in Q2, with sales and marketing expenses increasing by 28%, raising concerns about profitability [6] - Management anticipates lower margins in Q4 due to seasonal payment volume slowdowns and higher tariff expenses [6][7] Market Dynamics - Gross Payment Volume (GPV) per location declined by 1%, despite a 23% year-over-year increase in overall GPV, indicating potential challenges in transaction volumes [7] - The competitive landscape is intensifying with rivals like Block and Lightspeed, which are also innovating aggressively in the cloud-based POS and payments solutions space [8][9][12] Stock Performance - TOST shares have increased by 80.9% over the past year, outperforming the Internet-Software industry's growth of 36% [13] - The price/book ratio for TOST is currently at 11.67X, significantly higher than the industry average of 6.07 [14]

Core Viewpoint - Toast is experiencing strong growth and market share gains, making it an attractive investment opportunity despite a recent dip in stock price [1][10]. Group 1: Quarterly Performance - In Q2, Toast reported a 25% increase in total revenue, reaching $1.55 billion, with subscription revenue rising 37% to $227 million and financial technology revenue increasing by 25% [5]. - The company's gross payment volume (GPV) grew by 23% to $49.9 billion, and earnings per share (EPS) increased from $0.02 to $0.13 [6]. - Adjusted EBITDA surged 75% from $92 million a year ago to $161 million [6]. Group 2: Market Expansion - Toast added a record 8,500 net new locations in Q2, totaling approximately 148,000 locations, representing a 24% year-over-year increase [2]. - The company now serves over 10,000 locations in newer segments, including large-scale chains and international markets, having recently launched in Australia [3]. - Toast is gaining market share, particularly in its top 10 markets, where it has over 30% penetration [4]. Group 3: Future Outlook - Toast raised its full-year revenue and adjusted EBITDA guidance, projecting subscription services and fintech gross profit to be between $1.815 billion and $1.835 billion, indicating 28% to 29% growth [7][8]. - For Q3, the company anticipates subscription services and financial technology solutions gross profit to grow by 23% to 26%, with adjusted EBITDA expected to be between $140 million and $150 million [8]. Group 4: Competitive Position - Toast is becoming a clear market leader in the local restaurant technology space, with significant growth potential in enterprise chain restaurants, food retailers, and international markets [11]. - The company's innovative technology is designed to help restaurant customers drive sales and operate more efficiently, benefiting Toast through its payment processing platform [10]. Group 5: Valuation - The best way to value Toast is based on its annual recurring revenue (ARR), projected to reach around $2.1 billion by 2025, with the stock trading at an 11.5 times enterprise value-to-ARR multiple, which is considered reasonable given its approximately 30% ARR growth [12].