Toast (TOST) Q4 2025 Earnings Call Summary

1Key Financial Results and Metrics

Recurring Gross Profit: Increased by 33% year-over-year.

Adjusted EBITDA: Reached $633 million for the year, with a margin of 34%.

Net Location Adds: 30,000 net new locations added in 2025, totaling 164,000 locations.

Annual Recurring Revenue (ARR): Grew by 26%, exceeding $2 billion.

Payment Volume (GPV): $195 billion in 2025, up 22% year-over-year.

SaaS ARPU: Mid-single-digit growth anticipated for 2026, with core ARPU growing faster than total.

SaaS Gross Margins: Expanded to 80%, up 300 basis points year-over-year.

Free Cash Flow: $608 million generated in 2025.

2Strategic Updates and Business Highlights

Product Innovations: Over 500 new features launched, including ToastIQ, a conversational AI assistant that enhances operational efficiency.

Market Expansion: Successful entry into new markets, including Australia, and signing of major enterprise clients like Applebee's and Firehouse Subs.

Customer Adoption: Increased engagement with the platform, with a SaaS net retention rate of 109%.

AI Integration: AI is being leveraged to improve customer support and operational workflows, with plans for further automation in various business functions.

3Forward Guidance and Outlook

2026 Expectations:

Recurring gross profit growth projected at 20% to 22%.

Adjusted EBITDA forecasted between $775 million and $795 million.

Continued focus on net location growth and mid-single-digit SaaS ARPU growth.

Investment Strategy: Emphasis on disciplined investment in growth initiatives, particularly in new markets and AI capabilities.

4Bad News, Challenges, or Points of Concern

Higher Costs: Anticipated 150 basis points of negative impact from increased memory chip costs affecting hardware.

Market Conditions: Potential headwinds from elevated hardware costs and the need for ongoing investment to maintain competitive advantage.

Competitive Pressures: Concerns regarding software commoditization due to AI advancements and new entrants in the market.

5Notable Q&A Insights

SaaS ARR Breakdown: Core SaaS ARPU is growing faster than total company metrics, with new TAMs expected to improve as they scale.

Net Adds Composition: Future net adds are expected to mirror 2025, with new TAMs contributing significantly to growth.

AI as an Opportunity: Management views AI not as a threat but as a means to enhance their platform and customer experience, with ToastIQ being central to this strategy.

Drive-Thru Product: Planned rollout of a drive-thru product aimed at capturing a larger share of the enterprise market, which has been previously underserved. Overall, Toast demonstrated strong performance in 2025, with significant growth in key metrics and a clear strategy for future expansion, despite facing some cost pressures and competitive challenges.