TOST — Toast, Inc.

Toast (TOST) Q4 2025 Earnings Call Summary

1. Key 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.

2. Strategic 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.

3. Forward 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.

4. Bad 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.

5. Notable 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.