Toast (TOST) Q4 2025 Earnings Call Transcript

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DATE

Thursday, Feb. 12, 2026 at 5 p.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Aman Narang
• Chief Financial Officer — Elena Gomez
• Head of Investor Relations — Michael Senno

TAKEAWAYS

• Recurring Gross Profit Streams -- $2 billion annualized run rate, up 33% year over year, with Q4 recurring gross profit up 28%.
• Adjusted EBITDA -- $633 million for the full year, with a Q4 margin of 32% and full-year margin of 34%.
• Net Location Adds -- 30,000 net new locations in 2025, ending the year with 164,000 locations; 8,000 net adds in Q4.
• Annualized Recurring Revenue (ARR) -- 26% growth year over year, exceeding $2 billion, driven by broad expansion across segments.
• Payment Volume (GPV) -- $195 billion for the year, with Q4 GPV of $51 billion, up 22% year over year; GPV per location down 1% year over year in Q4.
• Fintech Gross Profit -- 25% year-over-year growth in Q4, with a net take rate of 58 basis points; payments take rate rose to 48 basis points, up two from prior year.
• SaaS Revenue and Gross Margin -- SaaS ARR and subscription revenue grew 28% year over year; SaaS gross margin expanded 300 basis points to 80% in Q4.
• SaaS Net Retention Rate -- 109% for 2025, supported by upsell and location expansion from existing customers.
• Stock-Based Compensation -- 12% of recurring gross profit for Q4, a decline of nearly five percentage points from prior year.
• Hardware and Professional Services Gross Profit -- Represented negative 12% of recurring gross profit streams, reflecting higher tariff costs and hardware investments.
• Operating Expenses -- Full-year OpEx rose 15% (excluding credit-related costs), generating eight percentage points of operating leverage; Q4 sales and marketing expenses grew 21%, and R&D expenses increased 7%.
• Adjusted EBITDA Guidance -- Projected at $775 million to $795 million for 2026, implying year-over-year margin expansion.
• 2026 Recurring Gross Profit Guidance -- Management forecast 20%-22% annual growth in recurring gross profit streams.
• Share Repurchases -- 8 million shares repurchased for $235 million since 2024 authorization; board approved an additional $500 million for future buybacks.
• Artificial Intelligence (AI) Initiatives -- Over half of Toast customer locations used Toast IQ within four months of launch, sending more than 8 million queries; management claimed "Toast IQ is the foundation of [the] strategy" for operational efficiency and actionable insights.
• Customer Adoption Trends -- Mid-single-digit SaaS ARPU growth sustained, with ARPU in the core segment growing faster as product adoption broadens.
• International and New Markets -- New enterprise customers signed (Applebee’s, Firehouse Subs); Australia launch cited as key international milestone; early retail market entry showing faster growth than historical core segment expansion.
• Cost Headwinds -- Guidance includes approximately 150 basis points of negative impact in 2026 from higher memory chip and hardware component costs, primarily in the latter half of the year.
• Payback Periods -- Core segment payback remains at 14 months; new markets require longer payback but on a clear path to under 20 months as scale improves.

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RISKS

• Elena Gomez said, "our guidance also includes approximately 150 basis points of negative impact from higher memory chip costs for our hardware," signaling margin pressure from global chip demand expected to affect results mainly in the second half of 2026.
• Hardware and professional services gross profit represented negative 12% of recurring gross profit stream due to higher tariff and input costs, potentially pressuring unit economics if elevated costs persist.

SUMMARY

Toast (NYSE:TOST) delivered 33% recurring gross profit growth and 34% adjusted EBITDA margin for the full year, achieving 30,000 net new location adds and expanding ARR above $2 billion. CEO Aman Narang highlighted rapid adoption of Toast IQ across customers, positioning AI as central to future operational efficiencies and workflow automation. CFO Elena Gomez reported non-GAAP SaaS gross margin reached 80%, and announced 2026 guidance for 20%-22% recurring gross profit growth and increased EBITDA, while incorporating the impact of higher memory chip and hardware tariffs. Management emphasized continued investment in product innovation, AI, and go-to-market expansion, with new verticals and international markets scaling faster than prior core segments. Guidance indicates a willingness to reinvest incremental gains for long-term growth, with operational discipline to protect margin targets despite identified component cost risks.

• Toast doubled U.S. SMB/midmarket restaurant market share to 20% over three years, supporting claims of continual share gains across diverse geographies.
• Net SaaS retention rate held at 109% for 2025, driven by broader product attach and multisite expansion among existing customers.
• Toast IQ's integration delivered tangible workflow improvements, with measurable customer engagement exceeding 8 million AI-driven requests in the initial months.
• Board authorized a $500 million share buyback expansion after repurchasing 8 million shares, reflecting capital return alongside growth investments.
• Expanded product roadmap to address drive-through, non-English operators, and vertical-specific features, broadening TAM and customer acquisition opportunities into 2026 and beyond.

INDUSTRY GLOSSARY

• GPV: Gross Payment Volume—the total dollar value of transactions processed through the Toast platform, excluding refunds and chargebacks.
• TAM: Total Addressable Market—the aggregate market demand for a product or service, across all potential customer segments relevant to Toast.
• Toast IQ: Toast's conversational artificial intelligence (AI) assistant integrated across the platform, used for analytics, workflow automation, and operational support for restaurant and retail customers.
• SaaS ARPU: Average Revenue Per User for Software as a Service subscriptions, a key performance measure of monetization per active customer location.

Full Conference Call Transcript

Michael Senno: Welcome to Toast, Inc.’s earnings conference call for the fourth quarter and full year ended 12/31/2025. On today’s call are CEO, Aman Narang, and CFO, Elena Gomez, who will open with prepared remarks which will be followed by our Q&A session. Before we start, I would like to draw your attention to the safe harbor statement included in today’s press release. During this call, we will make statements related to our business that may be considered forward-looking within the meaning of the Securities Act and the Exchange Act.

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 first quarter and full year 2026. 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. 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 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 at investors.toasttab.com. After the call, a replay will be available on our website. With that, let me turn the call over to Aman. Thanks, Michael. Thank you, everybody, for joining us today. I am really proud of the Toast team. What we accomplished in 2025. We grew recurring gross profits 33%, expanded adjusted EBITDA margins to 34% and added over 30,000 net locations on the platform. Our core continues to grow at a rapid pace, with strong incremental margins as we scale, while our emerging TAMs across retail, international, and enterprise doubled ARR in 2025.

Including iconic independent restaurants, we welcomed some amazing brands to Toast, Inc.’s platform in Q4 such as Carmine’s, Chef Daniel Boulud’s restaurants, multiple enterprise chains, including Papa Murphy’s, and noteworthy retailers, including Meadowlane. Our product team released over 500 new features, including Toast IQ, our conversational AI assistant. Customer feedback and adoption has been tremendous. Toast IQ not only generates reports and insights about restaurant performance, it executes tasks directly in Toast ranging from menu management to inventory updates. For example, Toast IQ can analyze and update menus, tell an operator why their Thursday nights might be slow, or why a certain daypart is successful, and analyze results across locations.

It can also quickly answer questions like, events and weather should I pay attention to this week? Or who is working on a Friday night? Now AI is also reshaping how we work internally, from how we provide customer support to how we build software and how we sell and market our products. This is making our teams more productive, which opens up capital to invest against our most important long term priorities. We have strong momentum as we head into 2026. We expect another year of record net location adds building on top of a strong Q4, and consistent ARPU growth as we execute against the priorities we laid out last year.

Number one, growing market share in our core. Number two, demonstrating that new markets will be material growth drivers. Number three, increasing customer adoption of our platform. And lastly, gradually expanding margins as we invest with discipline. Longer term, if we can do these well, we are positioned to drive durable growth from over $2,000,000,000 in ARR today plus $5,000,000,000 and $10,000,000,000 and beyond. Starting with our first priority, growing market share at our core U.S. SMB and mid market restaurants. We continue to grow market share year after year and now power 20% of SMB and mid market restaurants in the U.S. This has nearly doubled over the past three years.

We have seen success across all market types, including urban, suburban, and rural markets, as well as ones that had high and lower density of those restaurants. In fact, our sales productivity in our top 10 geos continues to outperform our average, which shows that we have plenty of headroom to continue to gain share. Our vertical platform across software, hardware, fintech, and networking is purpose built for restaurants and continues to get better. Over the past year, we launched over 500 platform enhancements, including plus

Aman Narang: three, the latest evolution of our handheld device designed to help restaurants drive throughput while elevating the customer experience and improving tips for staff. Other new releases include Toast IQ and Toast Advertising that are helping customers drive efficiency and guest demand. And Toast support has been reimagined with AI, with over half of all support interactions now starting digitally through an AI agent, and 70% of those never getting to a human.

Operator: Our relentless focus to improve our platform for restaurants

Aman Narang: has helped us improve win rates with new customers and build a durable referral engine where two thirds of our demand is inbound. And existing customers are the largest source of referrals. And it is why many of the busiest and highly operators continue to choose Toast, Inc. A great example is Alicarte, the group behind New York’s legendary restaurants, including Carmine’s and Virgil’s Barbecue. Carmine’s is one of the busiest independent restaurants in the country, with over $40,000,000 in annual sales and up to 3,000 covers per day. After 25 years as an existing provider,

Aman Narang: they decided on Toast, Inc. for the depth, speed, and reliability necessary to support their scale. And the first few deployments have gone so well that accelerate their post rollout across all locations to leverage the benefits our platform offers. We hear stories like this from successful operators all the time. And we are committed to building the best innovation engine to help restaurants of all types and sizes stay ahead during a time when the technology landscape is evolving rapidly. Have plenty of market share in front of us,

Elena Gomez: and continue to invest to serve deeper parts of the TAM. For example, in 2026, we will launch better support for non native English speaking operators and features to support bars, pizzerias, and membership plus even better. These investments in our product and our best in class go to market engine supports our path to doubling market share in ARR time. Our second priority is demonstrating that our new markets will be material growth drivers. 2025 was a great year for new markets. We signed our two largest enterprise customers Applebee’s and Firehouse Subs, and successfully launched Australia, our fourth international market.

And for the first time, we scaled a dedicated go to market team outside restaurants and have seen great results in retail. A few years in, each of these new markets is growing faster than our core was at a similar time period. This growth combined with the size of TAM in these new markets gives me confidence they can be material drivers of growth over the long term. We are seeing the success because we are building on top of a proven vertical playbook. Vertical depth across product, go to market, customer success drove our early success in U.S. SMB restaurants. We are applying the same approach when we built for retail, enterprise, and international markets.

We are very comfortable leaning into the product and platform complexity necessary in these markets versus a horizontal one size fits all approach. We are seeing customers switch from legacy on prem solutions similar to what we saw in restaurants ten years ago. And as we continue to scale and our platform gets better, we are confident we will see even higher win rates, rep productivity, and ARPUs over time. We In enterprise, our pipeline and active rollouts have never been bigger. In Q4, we expanded our relationship with MPY Group and signed Papa Murphy’s, a thousand plus unit pizza chain.

It chose Toast, Inc. because of our flexible platform across multiple service models, including QSR and casual dining, as well as the feature depth necessary to support large pizza chains. In 2026, we will continue to invest in the to support the needs of our largest customers, including the launch of our drive through product, which is planned for later this year.

Operator: We are confident

Elena Gomez: enterprise is well positioned to continue to drive strong growth into 2026 and beyond. Internationally, we are seeing strong location growth, including great early signals from our launch in Australia last year, customer feedback, tools have been strong. And we hear from successful restaurants across Canada, UK, and Ireland that Toast, Inc. is making their businesses better. As we continue to build out support for the full platform of these markets, including the launch of our TrustCo three handheld, as well as inventory management, I am confident we will drive even stronger win rates in ARPUs as we scale.

Over the next few years, you should expect us to continue to scale in our card markets, while opening up new countries thoughtfully where we have a right to compete and win. In retail, we built out our go to market team last year and have seen incredible results so far. Our product can already support convenience stores, grocery chain, bottle shops, butcher shops, and more, because our platform offers the feature depth necessary to support businesses with high SKU counts and complex inventory in high throughput environments.

Many of these customers are coming from legacy on prem solutions and have never experienced a cloud based solution with the platform capabilities Toast, Inc. offers across point of sale, guest facing products, employee management, payments,

Aman Narang: capital,

Elena Gomez: and inventory. Customers especially love when we can support many different concepts within a single back end across their locations, from restaurants and retail shops in a hotel to a grocery store that also has a cafe or a restaurant inside it. A great example is La Cartesaria Meat Market. A 25 location butcher and grocer replaced guest work with data by deploying a platform, automating inventory and invoices, and understanding their costs better. Automated SKU management kept on manual work, and the rollout was smooth thanks to our Spanish speaking sales and support. It is a clear example of how Toast, Inc. helps operators run more efficient profitable businesses.

As we look to 2026, we will continue to deepen the retail platform with more tailored onboarding support and integrations, including a new partnership with Instacart that allows retailers to sync in store inventory with Instacart’s marketplace. Our success in food and beverage retail reinforced the something we have believed for a long time. Our platform works well beyond restaurants. We are layering in the vertical specific capabilities to meet the needs of different customer types and we are starting to see early success with retail customers outside of food and beverage retail as well.

Just as restaurants with hybrid restaurant retail concepts pull us into retail, we will use the signal from our customers and our retail go to market team as testing the new verticals and be disciplined about where we expand. Now zooming out, our new growth markets have been incredibly successful so far and we will continue to drive outsized growth in 2026 and beyond. As we gain market share and invest in our platform, we expect these new TAMs to drive strong growth and profitability just as we have in our core.

And over the long term, we will continue to invest to expand the opportunity from new verticals to new countries where we believe Toast, Inc. has product market fit and can help these businesses run more successfully. Moving on, our third priority is increasing customer adoption of our broad platform and driving differentiation through data and AI. For thirteen years, we have been at the center of this shift in restaurant technology from on premise to cloud. We have spent that time listening to our customers and solving their toughest problems, which has allowed us to evolve from a point of sale solution into a comprehensive system of

Aman Narang: record.

Elena Gomez: That helps them manage operations, employees, guests, and suppliers. As we have delivered more value and built out the partner ecosystem, we have seen broader attach of our platform as well as higher ARPUs. When talking to customers, what I consistently hear is while they love the Toast, Inc. platform, they do not have enough time in their week to leverage everything we have to offer. Many of them are small business owners that are stressed in to deliver great customer experience while managing their staff and their suppliers. They do not have enough actionable alerts and insights make good decisions about their business in real time.

And they outsource a lot of the work for marketing, demand generation, bookkeeping, or accounting, all the work that is critical to ensuring they have a profitable business. We believe our AI road map built on years of data insight can help our customers get more from the Toast, Inc. platform. Toast IQ is the foundation of the strategy. Less than four months post launch, over half of Altos locations have used Toast IQ, collectively sending over 8,000,000 queries, and tens and thousands of locations are already using it each week. We believe this early success out of three things.

Toast IQ is built on more than a decade of deep restaurant expertise, it is tightly integrated into the core Toast experience customers already rely on, and is designed to take action, not to set this insight, that can help operators run key workflows faster and get more done. We are seeing this impact firsthand with customers like Alicante, an early Toast IQ adapter that now uses it daily. Toast IQ helps their teams quickly make decisions and turn hours of manual analysis into clear, actionable insights in just minutes.

Recently, the team used Toast IQ to identify many combinations to boost check sizes helping them spot opportunities to improve service and drive sales at some of the busiest restaurants in the country. We are still in the early stages of what AI will do. Today, customers are using it to get support, analyze data, make back end configuration changes such as updating menus or generating content to build an email campaign. We are investing for Toast IQ to evolve from an assistant to automating workflows and eventually to running a team of agents that will handle more of the work restaurants have to do manually today.

For example, we expect Toast IQ to run workflows like operating within a budget to optimize marketing spend, or to understand inventory levels and get ahead of a out of stock scenario and then place an order from approved vendors. And over the long term, we expect these AI agents to start to own whole functions from marketing to managing payroll and tax accounting and bookkeeping. We believe because our data powers much of this work, we are uniquely positioned to both do it better and cheaper. Switching gears, our fourth priority is continuing to invest with discipline in our most important priorities while expanding margins over time.

Aman Narang: We are operating from a position of strength.

Elena Gomez: We have achieved our medium term margin targets, including 40% margins in our core ahead of schedule. And I have confidence we can both innovate and grow while working towards our long term margins of 40% plus by holding a high bar on our execution our capital allocation. I think we have an opportunity to build a much more material business over the next decade that can both have a much bigger impact for existing customers and expand the opportunity across new markets where we are seeing great early success.

I am committed to that we will be disciplined in how we invest, and only lean into our biggest and highest conviction opportunities where we can build differentiated and highly profitable businesses that deliver significant shareholder value.

Aman Narang: My conviction

Elena Gomez: ultimately comes from our incredible team of Toasters who care deeply about innovating on behalf of our customers. I want to thank each of them for their dedication and commitment to Toast, Inc. I also want to thank our customers and investors for their continued support. We had a great 2025, and we are confident in our momentum and our plans heading into 2026. Thank you. And with that, I will turn the call over to Elena.

Elena Gomez: Thank you, Aman, and to everyone for joining us today. I also want to thank our team for another successful quarter and for the continued execution that led to our record performance throughout 2025. Our results showcase the strength of our business model in what was another outstanding year for Toast, Inc. Net adds increased every quarter versus a year ago, and we added a record 30,000 net locations in 2025, ending the year with 164,000 locations. ARR grew 26%, and our recurring gross profit streams increased 33% for the year, an incredible accomplishment at our scale with over $2,000,000,000 in ARR and $195,000,000,000 in payment volume in 2025.

On top of strong top line momentum, we are efficiently scaling the business through disciplined capital allocation and ongoing cost management. In 2025, we delivered adjusted EBITDA of $633,000,000 and free cash flow of $608,000,000. GAAP operating income was $292,000,000, up from just $16,000,000 a year ago, driven by our strong adjusted EBITDA and tight management of stock based compensation. We entered 2026 in a strong financial position, enabling us to offensively lean into our key growth initiatives with a path to double market share in our core and accelerate expansion in our new TAM. We are confident that continuing to invest behind these opportunities

Elena Gomez: will lead to sustained top tier growth

Elena Gomez: for several years and create significant shareholder value. Turning to our fourth quarter results. Our recurring gross profit streams increased 28%. Total monetization measured by our recurring gross profit as a percentage of GPV hit 98 basis points. That is a five basis point increase from a year ago reflecting our growing share of wallet and increasing value we provide our customers. We added approximately 8,000 net locations in the quarter. We are consistently gaining market share in our core with increasing contributions across our new TAMs as they scale. Underpinning the location momentum across the business

Elena Gomez: is our best in class vertical SaaS platform and local go to market execution.

Elena Gomez: SaaS ARR and subscription revenue each grew 28% year over year. We are complementing our strong location growth with consistent mid single digit increases in SaaS ARPU on an ARR basis. SaaS ARPU in our core is growing even faster than total SaaS ARPU driven by customers continuing to adopt more products across the platform. Subscription gross profit increased faster than top line at 33% with SaaS gross margin expanding 300 basis points year over year to 80%

Elena Gomez: in Q4.

Elena Gomez: In addition to ongoing efficiency efforts across the business, the early benefit from leveraging AI to transform our customer support experience is contributing to margin expansion. Our SaaS net retention rate remained in a healthy range at 109% in 2025, led by solid contributions from upsell and location expansion from existing customers. GPV was $51,000,000,000, up 22% year over year. Payments ARR grew 24% and fintech gross profit grew 25% in Q4, with Q4 GPV per location down 1% versus last year. Fintech net take rate was 58 basis points. Payments take rate increased two basis points from a year ago to 48 basis points.

We continue to drive year over year take rate expansion from cost optimization efforts, new products, and ongoing price optimization, even after lapping the benefit from the September 2024 pricing adjustments. Nonpayment fintech solutions led by Toast Capital contributed $51,000,000 in gross profit and 10 basis points in take rate. Overall, the program continues to grow at a steady clip and defaults remain consistent and well within our risk

Elena Gomez: guardrails.

Elena Gomez: Hardware and professional services gross profit was negative 12% of our recurring gross profit stream. In addition to capitalizing on our customer acquisition momentum, we are absorbing higher tariff costs

Elena Gomez: our strong overall unit economics and

Elena Gomez: scale enable us to do this while maintaining healthy payback periods.

Elena Gomez: Moving to expenses.

Elena Gomez: We continue to balance investing in our highest priority initiatives across go to market and product while driving efficiencies across the business. Total full year OpEx, excluding bad debt and credit related expenses, grew 15%, providing eight percentage points of operating leverage. In Q4, sales and marketing expenses increased 21%. We are investing to support our market share gains in the core, expanding our account management team, and scaling the international retail go to market teams to accelerate our progress. R&D increased 7% as we invest in product differentiation and add capabilities to expand our product market fit across our new growth markets.

Elena Gomez: Adjusted EBITDA grew 47 percent $163,000,000 a 32% margin.

Elena Gomez: Stock based compensation as a percentage of recurring gross profit was 12%, down nearly five percentage points versus a year ago. That contributed to GAAP operating income more than doubling to $85,000,000. We have dramatically expanded adjusted EBITDA over the last few years, reflecting the strong unit economics of our business and focused capital allocation. Dollar based payback period for our portfolio remained in the mid teen months in 2025, consistent with the last few years. Our new TAMs represent significant ARR opportunities, and our early success and strong customer signal give us confidence in our right to win.

Payback periods across our new TAMs are above the core today, given we are earlier in building our go to market and product offering. As we scale and mature in these areas, we are confident each one is on a path to under 20 months. We have a proven track record and clear road map to improve payback periods. In the core, payback dropped from 22 months in 2019 to 14 months in 2023. During that time, we expanded our product offering to increase ARPU and built the flywheel effect

Elena Gomez: growing referrals and scaling the go to market motion.

Elena Gomez: To increase rep productivity. We also enabled our team with customer acquisition guardrails that balance efficiency and win rate. Since 2023, we have held core payback steady. We believe operating in this range provides the right balance of growth

Elena Gomez: and discipline

Elena Gomez: and supports our long term margin profile of over 40%. We are taking the same approach in our new TAMs, expanding product capabilities to increase rates and ARPU, and scaling go to market to build the flywheel. Our near term priority is investing to gain share. Over time, we have a clear path to optimize and drive efficiencies in the unit economics as we have done in the core. These new areas also leverage our core platform and centralized functions, giving us confidence that at scale, these new TAMs will drive meaningful profitability. Moving to capital allocation. We have repurchased approximately 8,000,000 shares, $235,000,000, since the inception of our buyback authorization in 2024, including 3,000,000 in 2025 for $107,000,000.

Returning capital to shareholders is an important part of our approach to driving long term shareholder value, and the board has approved a $500,000,000 increase to our share repurchase authorization. We do not have a specific timetable to complete the authorization and will maintain the same approach to buybacks, opportunistically repurchasing shares based on market conditions to support long term shareholder value. Turning to guidance and our outlook for the year ahead. Aman and I have highlighted our strong momentum across the board, and our 2026 outlook builds on this trajectory. We remain well positioned to grow net location adds in 2026 compared to 2025 and sustain mid single digit SaaS ARPU growth on an ARR basis.

For the full year, we expect 20% to 22% growth in our recurring gross profit streams and adjusted EBITDA of $775,000,000 to $795,000,000, implying margins are slightly up year over year, consistent with the expectation we shared last quarter. In addition to the investments we are making in future growth and higher tariff costs, our guidance also includes approximately 150 basis points of negative impact from higher memory chip costs for our hardware. This headwind emerged since we shared our initial expectations last quarter with memory costs increasing from the surge in global demand for chips.

Elena Gomez: We expect the cost pressure to be weighted towards

Elena Gomez: the second half of the year as inventory with our higher cost parts roll out. We anticipate the market to stabilize over time. And while near term hardware costs will be elevated, this does not structurally change our long term financial profile. Over the past few years, we have demonstrated the power and leverage of our business model, rapidly expanding margins to hit our medium term target faster than expected while sustaining over 30% growth, investing in product innovation, and building the next set of growth levers for the company. We are positioning Toast, Inc. to sustain high growth for the next five to ten years and have high conviction and strong signal across our key growth opportunities.

As we move through 2026, our bias is toward reinvesting potential top line upside to go even faster on our growth initiatives, including new TAMs, product and AI investments, and seeding teacher growth. Our rigorous capital allocation approach is unchanged. We will only invest for the customer signal and data warrant going faster. We are confident delivering durable compounding growth with the incredible leverage and cash flow generation in our business model will maximize long term shareholder value. Turning to our first quarter guidance, we expect the same seasonal patterns in 2026, with Q1 being lighter quarters, both net adds and GPV compared to the rest of the year.

That is reflected in our Q1 guidance for total fintech and subscription gross profit growth of 22% to 24% year over year, and adjusted EBITDA of $160,000,000 to $170,000,000. To wrap up, we are executing across the board, growing our core, expanding our TAM, and maintaining healthy margins as we scale. Heading into 2026, we are laser focused on sustaining our momentum and continuing to execute at a high level across the business. We are incredibly excited about what lies ahead for Toast, Inc., and well positioned to capture the massive opportunity ahead. Now I will turn the call back over to the operator to begin Q&A.

At this time, I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad. Your first question comes from the line of Timothy Edward Chiodo with UBS. Your line is open.

Timothy Edward Chiodo: Great. Thank you for taking the question. I want to first start with

Timothy Edward Chiodo: SaaS ARR per location. So you mentioned for the full year of 2026 that you are confident in staying in that mid single digit range, which I think is great to hear. You mentioned that core midmarket, so core SMB and midmarket are doing even better than that mid single digit. There is a little bit of a drag on the front book from international, food and beverage retail, and enterprise. But I was hoping you could just break down a little bit of those components because international and food and beverage retail, yes, they are lower. But there are good signs of them improving and getting closer and closer. Enterprise is sort of a different animal. Right?

Enterprise is sold differently. Got a different LTV to CAC profile. It is very different. So really two questions related to this. One, if you could talk about the mid single digit SaaS ARR per location, maybe over the medium term. And then two is if you could talk about if you have ever considered or would you consider just breaking out enterprise separately because some of these per location metrics would just look a little bit better if enterprise, again, of a different type of business, was broken out separately. Thanks.

Elena Gomez: Hey, Tim. Hey. Thanks for the question. So lots of confidence actually in SaaS ARPU growth to remain in mid single digits in ’26 similar to what we saw in 2025. And to your point, core SaaS ARPU is actually growing faster than the total company based on exactly what you said. Right? Some of these new TAMs today have lower Sassar crews. But it is early, and we expect that as it you know, we them to grow as they scale. And just one thing that we have looked at in our data, when you look across all three of our business new TAM, SaaS ARPU is ahead of where the core was at comparable times.

Aman Narang: So as we roll out more products, and we are we are planning on doing that across all of them, we will see RP throw over the long term. And in terms of enterprise, you know, it is a really great point that it is a very different sales cycle. The way we look at it is different. We look at total ARR, really, when we look at enterprise. And we evaluate to be honest, deal by deal and the LTV to CAC per deal is really strong. Right? There is higher or low cap.

Aman Narang: Low churn. All of these elements really contributing to

Aman Narang: strong unit economics. So really encouraged by what we see in international. And as we add more products like drive through, which we have talked about, only an opportunity to continue to grow.

Timothy Edward Chiodo: Great. Thank you, Elena.

Operator: Your next question comes from the line of Will Nance with Goldman Sachs. Your line is open.

Aman Narang: I wanted to ask on the net adds, really strong finish to close out the year in the fourth quarter. You are reiterating the expectations for net adds up this year. I think you mentioned in the prepared remarks that one of the goals this year is to prove out that the newer verticals can be a material driver of growth. And you have kind of given us some data points on that along the way so far. Maybe you could just talk a little bit about the mix of core versus new verticals this year. What would be a good outcome? And what should we be looking you know, to kinda gauge your success

Aman Narang: in those new parts of the of the business being a material contributor? Thanks.

Aman Narang: Yeah. Hey, Will. So I think first off, as you mentioned, we are really proud of our performance in 2025. Every quarter in 2025, our net adds were up year over year. And in fact, in 2025, the rate of growth accelerated, you know, to over 8K. So I think that is really a testament of the team’s performance. In terms of the composition, what we saw last year was the core was in the same range. And a lot of incremental growth on net adds came from these new towns. Now if you think about the core, you know, locations, the market share has doubled over the past three years.

And so when we look at this year now, what we expect is actually a very similar pattern to play out, where the call should be in a similar range to 2025, and the new TAM should grow further, which is why we have a lot of confidence that net add growth in ’26 should be even higher than ’25. Some of that is, of course, we are investing in go to market capacity. We talked about that in retail. Some of it is the sales capacity we have added ramping. And then also doing some early testing. We are learning, you know, beyond food and beverage retail.

And know, as we expand the TAM further, that will give us some upside over the long term as well. Well. Great. Appreciate that. And then

Aman Narang: I could squeeze in a follow-up, I was wondering if you could maybe just address kind of the elephant in the room around AI disruption in software. I mean, we used to talk about Toast, Inc. trading like a software company as being the bull case. But now that it is gotten caught up in this AI narrative,

Aman Narang: was hoping I could just give you the floor and you could talk about, you know, how you think about the most around this business, and why or why not new intricates leveraging new technology you know, are not a threat to the business. Thanks.

Aman Narang: Yeah.

Aman Narang: Yeah. Sure. Well, look. I think if you think about what Toast, Inc. is, we are the most important piece of technology restaurateurs use to run their business. Like, where all the work gets done. And you think about, like, you know, running the operations, front of house, back of house, kitchen, all the reporting and analytics and data, the guest experience, like a restaurant’s website, online ordering, gift, loyalty, employee management, you know, finance. And it is really broad. If you think we do not talk enough about how if you think about everything Toast, Inc. offers, it is software. It is also hardware. It is fintech, so things like lending and payments. Payroll, heavy regulatory and compliance needs.

We power the network at these restaurants. And then we have got hundreds of partners that sit on top of Toast, Inc. to extend what our platform offers. And if you if you talk to our customers, the other thing you will hear is in addition to all of the technology that we power, they also look to us to leverage all this technology, almost like an outsourced CIO. Like, all the sales and services team that enable our customers to leverage all of our technology. And so I think there is a lot to the Toast, Inc. platform. I actually think AI is an opportunity for to lean in even further.

You know, you look on the customer side, I talked a little bit about this in my prepared remarks. We are we started off early on by, you know, automating certain key workflows, like generating an email campaign or maybe it is about getting inventory on the shelf faster. And now with CoSiteQ, it is this it is this Copilot that actually can help restaurateurs leverage more of our platform, whether it is ant analysis or data, you know, automating certain workflows, making changes to the Toast, Inc. back end. Voice, I think, is another opportunity.

You think about walking up to a kiosk or a drive through or walking up to a terminal, leveraging voice to automate some of the work of placing an order. And then longer term, you know, we are investing in a big way in Toast IQ to do even more. So I talked about how restaurateurs spend a lot of they outsource, you know, work around generating demand with marketing or bookkeeping, payroll and tax. And we think there is an opportunity there. Because a lot of that is our data that is powering those experiences.

There is an opportunity there to actually make some of those workflows more authentic than they have been in the past and to create and to do them better and do them cheaper. So I look at AI as an opportunity for Toast, Inc. to lean in to and drive innovation and impact for our customers, and versus being a risk to business.

Aman Narang: Got it.

Aman Narang: Appreciate the perspective. Thanks for taking the question. Yep. Yep. Thanks, Will.

Operator: Your next question comes from the line of Tien-Tsin Huang with JPMorgan.

Michael Senno: Hey. Thanks so much. Nice results. Just to add a

Elena Gomez: on to your answer to Will’s question there, did you is your margin framework, Aman, give you the leeway to lean harder into R&D to

Aman Narang: the extent that AI creates more opportunity, more tools,

Aman Narang: product services that you just talked about that customers demand. I am just curious how you are you are balancing that if you have, again, the leeway to lean in if you need to.

Elena Gomez: Yeah. I will start, and then maybe you can chime in. But, Cintin, you are exactly right. Let us part of the reason in fact when you just think about our margin profile, we are not expanding margins faster because we are investing in R&D to really sustain this long term growth that we have talked about, innovating for our customers, solving problems for them. That said, our margin framework is to hit that head on, remains unchanged. Right? We are targeting 40% margins over the long term. And that pace, this is really important, the pace at which we drive that margin is in our control.

And then a lot of things that Aman said around AI investment, we view that as an incredible to accelerate and do more for our customers over time.

Aman Narang: Yeah. I that is well said, Lane. I just want to reinforce one point. We are here to build

Aman Narang: a generational company over the next decade. You know? If the reason we are investing across the business, including in R&D in a big way, is because we think we can we can serve many multiples of the current TAM that we serve and we can increase the impact through investments we are making across the platform. And so that is why we are investing in R&D. And if we wanted to focus on near shorter term margin expansion, we actually could do that. It is really about investing for the long term.

Michael Senno: Understood. Thank you so much. Yeah. Thank you.

Operator: Your next question comes from the line of Matthew Robert Coad with Truist Securities. Your line is open.

Aman Narang: Aman, really appreciate all the AI commentary so far. I just wanted to ask one more. Just curious, you know, with all of the broadening out of Toast IQ and out of everything it is doing for merchants, are you seeing Toast IQ kinda be a big reason why you are starting to win RFPs? And then if so, what type of merchants find the most value in these tools?

Aman Narang: Yeah. Today, the focus, I think, is really at our business. And we are certainly seeing our go to market team and our customers that shared some of the data in terms of usage and adoption play a big role in terms of why people are picking Toast, Inc. And I think what the what customers like about it, if you think about the average SMB restaurant owner, what they like about Toast IQ is that you have got this Copilot that you can query. So whether it is, you know, simple things like asking to analyze data, it is much faster than finding the specific subreport that they need.

You can generate custom views and data that maybe in the past, you have to export to Excel and create a custom view on. You can make changes to the back end of Toast, Inc. dimensions. So it is, you know, if you want 86,000, for example, or change shows up on online for online ordering, all these workflows that are so crucial, the ability to do them faster is really been valuable for our customers and certainly seeing that in our sales cycles.

We are seeing our customer sales team super excited about it and sees the impact it has because our tool is really purpose built for the restaurants because a lot of the data and the use cases are focused on the workflows that our customers care about. So it is early and, again, I would say it is early, as I mentioned earlier. I think over time, we think there is an opportunity to start to automate more and more complex workflows. So think about, like, you know, imagine almost if I am a restaurant, I wanna think about demand when I am slower. Generating marketing expense towards advertising to say, help me drive more demand.

In a budget, for example. And then over time, you know, start to make more of the work more energetic. So again, good to see the early progress, and we are gonna continue to invest to make it better and best better based upon customer feedback.

Michael Senno: Alright. Really helpful. Thank you.

Aman Narang: Yeah. Thank you.

Operator: Your next question comes from the line of Joshua Phillip Baer with Morgan Stanley. Your line is open.

Joshua Phillip Baer: Thanks for the question. Changing gears a little bit. Could you expand on the drive thru product rollout? I think that you acquired a company called Delphi several years ago that had drive through tech. I am just wondering if that is a segment of the market that you have been addressing already, or does this rollout open up that market?

Aman Narang: Yeah. So far, our focus upmarket in enterprise has been a non drive through. If you look at all of our wins so far, and the progress we have made, right, it is been in casual dining. It is been in sit down. It is not been where drive through is the primary mode of their operation. And the investments they are making now we are gonna we plan to launch our drive through product this year is gonna open up that market in a much bigger way than has been available historically.

It does not mean that some customers do not use that have got small price through small amount of price as part of their business do not use but there is a lot to supporting multilane drive thru and some of the complexity that exists there that we are launching this year.

Joshua Phillip Baer: Okay. That is really helpful. And along those lines, are there any other segments of the U.S. market that like, you are not able to address today because of product, but you know, maybe it is a potential on the product road map and opening that up down the road.

Aman Narang: Yeah.

Aman Narang: It is a good question. We are seeing, like I mean, across whether it is SMB or enterprise, there are there are parts of the TAM where we think we can create more value. And as I mentioned, like, for example, in SMB, for non English speaking operators, there is some work we have we have and we are doing that I think will help even in parts of town where we are established, like bars or pizzerias or membership clubs, making some improvements to our product that I think can drive further win rate.

And then upmarket enterprise, there is opportunity in some segments of the market, like sports and entertainment as an example, where we have got some traction, but we think improving the product can open up that opportunity further. And then you know, even other sometimes. You think about, like, golf, for example, where we think we have got some adoption, but not at scale. And so the product team is always looking at, like, all of our data in a d average way, where they are looking at what are our win rates, what is our market share, across all these sub TAMs, and then using the size of the opportunity to prioritize their road maps.

Joshua Phillip Baer: Thank you. Yep.

Operator: Your next question comes from the line of Adam Frisch with Evercore ISI. Your line is open.

Adam Frisch: Thanks and nice results. Taking a step back to put ’26 in perspective, you are still growing really well while investing heavily. Do you see it as a peak investment year? Is it at least as it relates to the current cycle then related to that, your initial guide for RGP in ’26 implies a back half deceleration. Is there anything you would like to call out there that is driving that initial guide or reasons it could prove conservative?

Adam Frisch: Thanks.

Elena Gomez: Yeah. Sure. I will take the last question first. Just in terms of how we guide, right, as we start the year, we take a pretty balanced view, as you know, looking at past years. And, obviously, with GTV, we want to be balanced, but we always aim to do better. So just keep that in mind as we progress. We will update you on that over time. And then in terms of your first question, you know, on peak investment year, as Aman said earlier, like, we are really thinking about this over the long term.

We are trying to build a generational business, right, and have ambition to find opportunities where we have the right to win, where the customer signal is really strong, and so 2026 reflects our conviction these new TAMs that we have talked about.

Elena Gomez: We have not changed our long term margin profile.

Elena Gomez: As I talked about earlier. In fact, we have a lot of conviction and even more conviction because of these hands and the fact that we have a path to sub twenty months. So zooming out, you know, what you are seeing in 2026 is our confidence that we have identified new TAMs that will drive durable growth over the very long term. And like I said earlier, driving margin and the timing of that is really in our control.

Operator: Your next question comes from the line of Dominic Ball with Rothschild & Co. Your line is open.

Dominic Ball: Hi, Aman and Elena. Thanks for the question. Another question on AI. Know, it is very much dominating the debate with investors. The key concern, of course, is software becoming more commoditized.

Dan Dolev: So, Aman, could you speak a bit more about Toast, Inc. potentially evolving beyond the software provider into more of a platform business, particularly through the strength of your ecosystem partnerships. Any more additional color on that and how that ecosystem kind of deepens your mode over time would be really helpful. Thank you.

Aman Narang: Yeah. Sure, Dominic. I mean, if you look at Toast, Inc. today, right, it is already, I would say, more than right, a software provider for our customers. Like, we have got and I think to your point about, like, how do you deepen the moat, you know, it is continuing to invest to make the platform better and better to support the use cases that our customers want, including what they and so if you look at today, like, the Toast, Inc. platform, it is got software. It is got a broad software platform across, you know, powering operations, employees, guests,

Michael Senno: Yep.

Aman Narang: Fin fintech, I think it is less well known. We power the network in these restaurants as well. And then we have got, as you mentioned, this large partner ecosystem that sits on top. And so part of the reason the average SMB restaurant tour picks Toast, Inc. is because we simplify all aspects, right, of the technology needs they have to help them run their business. Like, they love the all in one nature of our platform. And so and I think the more we can continue to lean in to make our platform better and better, I mentioned some examples on with Toast IQ and a voice AI.

And then lastly, if you look at the average restaurant tour, they are spending a lot on fractional work. That is actually not even full time hires that the restaurants have. A good example is to drive marketing and demand, you might have someone fractionally on the team. Or to manage your books or accounting and bookkeeping or to help you with payroll and tax. And those are areas where the data, as I mentioned, comes from Toast, Inc. And so we think with Toast IQ, the vision is to start to support more and more complex workflows over time, which eventually, I think, could be actually doing some of the work.

And so that is really the vision there in terms of where we are headed with AI. And then I think in terms of your question on what Toast, Inc. does as a software provider, I would argue even already today. Right? Toast, Inc. is a lot more than just a software provider for our customers.

Dan Dolev: Makes sense. Thanks, Amal. Yep. Thanks, Dominic.

Operator: Will now take our last question from the line of Dan Dolev from Mizuho. Your line is open.

Dan Dolev: Hey, guys. Thank you. Last but not least, I guess. Quick

Aman Narang: question and a follow-up. On the back to the AI environment,

Dan Dolev: know, can you maybe talk about sort of the top four to five cross sell modules and, you know, how much of the SaaS ARR they represent, and then I have a quick follow-up. Thank you.

Aman Narang: Hey. Hey, Dan. Is the question specific to cross sell modules tied to AI? Or just to clarify the question.

Michael Senno: Yeah. Just, like, given that there is so much

Dan Dolev: focus on, like, AI and software, like, what are the most kind of important know, modules that you are selling in terms of, like, fast

Dan Dolev: Yeah. Right now? Yeah. It is a good it is a good question.

Aman Narang: If you look at the history of, like, how our platform has evolved, so initially with AI, it was about automating some of the simpler work that a restaurateur had to do. So I will give you a simple example. If I am using our marketing module to drive demand, it is really valuable to be able to actually generate those email campaigns with AI because you have got lots of data and with generative AI, can generate campaigns that is much faster. Similarly, if you want to bring inventory to your shelf or online on ecommerce, the ability to leverage our master catalog and generate images of AI, generate descriptions of AI, just makes that workflow faster.

That is really how we that is that is an example of how AI is actually embedded across our platform. And if you look at, like, features in guests, or employee, for example, with scheduling, right, being able to forecast demand, be able to automate a schedule, is an area that we are working on to automate the speed with which restaurateurs can drive an efficient labor schedule. So it is really across the board in the platform that we are we are we are we are asked our R&D teams to focus we are we are we are. And specifically, I had a question on where are we driving across that?

I would say, like, Toast IQ and the adoption of Toast IQ is really the foundation. You know, we have seen really good adoption so far, as I mentioned. It is helping us drive win rates. And over time, within that Toast IQ framework, you know, we will we will launch more, whether it is more complex workflows, agentic workflows. Examples, I think I shared were things like marketing and payroll and bookkeeping with really owning the whole function over time, and then, of course, with voice as well. So that is where we are headed.

And you know, so forth, it is and the focus really is right now is getting the Toast IQ platform to be adopted more widely.

Dan Dolev: Great. Thanks. And maybe just, like, a quick follow-up on, you know, the location metric has been obviously, like, front and center. Like, as we move forward, you know, in the outer years, is this still sort of the main metric? Or something else you would like investors and, you know, analysts to be focused on? Thank you, and great results.

Joshua Phillip Baer: Yeah. Yeah. Thanks, Ed. I can start. I think look. At the at the end of the day, it is about

Aman Narang: about driving durable growth. You know, it is about driving ARR, recurring gross profit. We guide on recurring gross profit and balancing that with healthy margins as we continue to scale. The location growth, as I mentioned earlier, like, yeah, I think the thing that gives me a lot of confidence there

Joshua Phillip Baer: is it shows

Aman Narang: that what we did in SMB restaurants for the past ten years is applying beyond SMB restaurants as well. And that is really the crux of why we think there is an opportunity to continue to drive durable net adds over the long term. Got it. Thank you so much. Great stuff. Thank you.

Operator: This concludes today’s conference call. Thank you all for joining.

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