Toast, Inc. Q2 FY2025 earnings call

Core Restaurant Business

• Strong momentum with largest year-over-year increase in brand consideration in the peer set, grew share in nearly every SMB market, and had higher rep productivity and market share gains in top 10 markets. Expanded platform with new products like Toast Go 3 and ToastIQ.

New Market Segments

• Crossed 10,000 live locations across enterprise, food and beverage retail, and international. Retail ARPU above $10,000, international launched in Australia, enterprise investments paying off with wins like Firehouse Subs and Zabar's.

Data and AI

• Toast Go 3 handheld with ToastIQ provides real-time context for guests to increase check sizes, and partnership with Amex aims to deliver personalized experiences for Amex card members.

Disciplined Investment and Margin Expansion

• Updated full-year outlook reflects strength, investing in go-to-market, R&D while expanding margins, with seasonality of GPV contributing to seasonally high margin in Q2.

In the second quarter, recurring gross profit streams (non-GAAP subscription services gross profit and non-GAAP financial technology solutions gross profit) grew 35%. SaaS ARR grew 30% year-over-year, with SaaS ARPU up 5% on an ARR basis. Payments ARR increased 32% in Q2. GPV was $50 billion, growing 23% year-over-year, with GPV per location down 1% versus last year. Nonpayment fintech solutions led by Toast Capital contributed $40 million in gross profit.

Third Quarter 2025

• Total subscription and fintech gross profit expected to grow in the range of 23% to 26% year-over-year and adjusted EBITDA to be $140 million to $150 million.

Full Year 2025

• Expect 29% growth in fintech and subscription gross profit and $575 million in adjusted EBITDA, a margin of 32% (up 5 percentage points versus 2024). Mentioned seasonality in GPV and tariffs impact in the second half.

Risks

• Potential actual results differing from expectations due to risks and uncertainties in SEC filings.
• Seasonality of GPV and tariffs affecting margins.
• Competitive dynamics in the enterprise segment.

Q: Question on retail ARPUs and product enhancements, including breakdown between payments and software and road map for retail software suite.

A: Aman Narang responded that retail ARPU is over $10,000 showing good opportunity, investing in sales capacity, and there are specific retail products like inventory solutions being built out.

Q: Question on GPV per location trends across the base, including drivers like retail and international.

A: Aman Narang stated GPV has been largely flat, GPV per location down 1%, mix a small component, and retail is a bit higher, international a bit lower, but unit economics and margins are being focused on.

Q: Question on third quarter EBITDA being sequentially down and tariff expenses.

A: Elena Gomez explained that they are increasing investment in new customer segments to accelerate progress, and tariffs have a bigger impact in the second half of the year.

Q: Question on Toast Go 3 upgrade cycle from existing customers.

A: Aman Narang said it's both for new customers starting with it and existing customers as their hardware refresh cycles come up.

Q: Question on competitive dynamics in enterprise segment, including incumbent vendors' actions.

A: Aman Narang stated it's about leveraging modern tech like cloud, not really about price, and focus is on customer obsession to solve enterprise brands' problems.

Q: Question on sales coverage in major cities and beyond, and use of third-party channels.

A: Aman Narang said they have coverage in most markets, are surgical about adding coverage in underpenetrated areas, and have a robust partner ecosystem but own the end-to-end experience in core direct strategy.

Q: Question on SaaS ARPU strategy to price for value.

A: Elena Gomez said it's a combination of focusing on ARR and locations, innovating, and honing upsell motion to drive ARPU.

Q: Question on nonpayment portion of gross profit (Toast Capital) decline.

A: Elena Gomez stated the program is healthy, with seasonality and softer demand at start of quarter, but defaults in line with expectations.

Q: Question on enterprise products Firehouse Subs uses and international expansion beyond Australia.

A: Elena Gomez said Firehouse Subs uses payments and breadth of Toast's platform, and Aman Narang mentioned Australia launch with same products as other international markets, but no announcement on more countries yet.

Q: Question on net adds composition between core business and TAM expansion, and 10,000 location breakdown.

A: Aman Narang said core business drives bulk of growth, new businesses contributing more as scaling, with retail seeing increased sales capacity, international ARPU and rep productivity comparable to U.S. SMB, and enterprise wins gradual but all three areas contributing.

Q: Question on SaaS ARPU growth drivers (new customers vs upsell).

A: Elena Gomez said it's both, with upsell team contributing to ARPU growth from existing and new customers.

Q: Question on Amex partnership enhancing the flywheel.

A: Aman Narang said combining inventory into Toast Local to broaden options and providing personalized experiences for guests, including Amex card members.

Q: Question on Sous Chef AI-powered assistant, customer feedback, and differentiation.

A: Aman Narang said customer feedback is positive, highlighting human interface for insights and recommendations, with plan to GA the platform later this year.