Toast, Inc. Class A

quarter 2025 earnings conference call. Today's call will be 45 minutes. I'll now turn the call over to Marco Seno, Senior Vice President of Finance. You may begin your conference.

Thank you. Welcome to TOAST earnings conference call for the second quarter and the June 30th, 2025. On today's call, our CEO, Amon Narang, and CFO, Elena Gomez, will open with prepared remarks, which will be followed by our Q&A session. Before we start, I'd like to draw your attention to the Safe Harbor statement included in today's press release. During this call, we'll 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, operational expenditures, location growth, future profitability and margin outlook, business and investment strategy, expected growth and business outlook, including our financial guidance for the third quarter 2025. Forward-looking statements reflect our views only as of today and accept 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 uncertainty 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 substitute for our GAAP results. Please refer to our earnings release and SEC filings for detailed reconciliations of these non-GAAP 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 .toasttab.com. After the call, a replay will be available on our website. And with that, let me turn the call over to Amman.

Thanks, Michael, and thank you to everyone for joining us today. We've had a great first half of the year. Q2 results came in ahead of expectations. We've added a record 8,500 net new locations. We grew recurring gross profits 35% and we've delivered 161 million of adjusted EBITDA. GAAP operating income reached 80 million. At Toast, our mission is to help restaurants delight their guests, do what they love and thrive. Our strong results reflect our consistent execution across the company. And more importantly, they reinforce our belief in the significant long-term opportunity ahead of us. We're seeing that opportunity play out as we grow market share in our core and accelerate our momentum across our new customer segments. In Q2, we crossed 10,000 live locations across enterprise, international, and food and beverage retail. And now serve approximately 148,000 locations across our customer segments. We're excited to welcome Firehouse Subs, a 1,300 QSR enterprise brand, as well as Zabars, the iconic New York grocer to the Toast platform, further signaling our progress in enterprise and retail. Internationally, we launched in Australia. This is our fourth international market, extending our reach beyond the UK, Ireland, and Canada, and another step towards building the leading platform, global platform for restaurants. We're also thrilled to announce an exciting partnership with American Express. This collaboration will bring together reservation listings from Rezzy, Tock, and Toast Tables into Local by Toast, our mobile app, to make it easier to find and book tables. We also plan to use the reservation data and the power of our platform to enable personalized experiences for diners at the point of sale, including American Express card members. We're excited about the value our two companies can deliver together for both restaurants and diners through this exciting partnership. At the start of the year, we laid out four key priorities. Number one, scale locations and market share in our core US restaurant business. Number two, demonstrate that these new market segments can be material drivers of growth. Third, increase customer adoption of our broad platform and drive differentiation through data and AI. And lastly, continue to hold ourselves to a high bar and invest against our most important priorities while gradually expanding margins. All right, so let's jump into number one, starting with our core restaurant business. We have strong momentum driven by our purpose-built restaurant platform in our local -to-market teams. As a result of positive customer feedback and the brand investments we've made, we've seen the largest -over-year increase in brand consideration in our peer set. We grew share in nearly every SMB market we operate in. In our top 10 markets, we continue to see higher rep productivity and higher market share gains relative to our averages. The fact that we're still seeing strong gains in these markets where we have over 30% penetration across large and small metro areas is a clear sign our flywheel strategy is working. We're also expanding the breadth of our platform with new products and features like ToastCo3 and our new AI-powered intelligence engine, Toast IQ, which reflect the steady drum beat of innovation that's core to our strategy. Behind every update is our focus on the thousand little things that make the Toast platform such a great tool for restaurants. An example of this is Supper Club, a neighborhood restaurant and market in Richmond, Virginia. A deciding factor in their switch to Toast was our catering and events product, which replaced a third-party app that was cumbersome for them and their customers. Since switching to Toast, Supper Club has seen a nearly 40% jump in catering sales. Toast catering is both easy to use and seamlessly integrates into the Toast platform, including our point of sale devices and handhelds, which has allowed them to take on significantly more business and even open a second location in March this year. It's a great example of how, when our customers grow, we grow right alongside them. Now, second, moving gears, our second priority is demonstrating that these new market segments can be material drivers of growth. We crossed 10,000 live locations across enterprise, food and beverage retail and international, and these new customer segments are on track to surpass 100 million in ARR collectively by the end of the year. A milestone that took six years in our core business. In enterprise, our vision is to have the most iconic restaurant bands in Toast and drive innovation for the entire industry. Our investments are paying off and we'll keep enhancing the platform to meet the needs of large-scale operators. We're also seeing strong interest from customers to use more of our platform, which will contribute to scaling enterprise ARPUs over time. In food and beverage retail, we're off to a strong start and the early signals are really promising. We're building deeper inventory management tools, expanding integrations, and scaling our dedicated sales team. Total ARPU for retail customers is already above 10K. A clear indication our value proposition is resonating. Food retailers like Zabars in New York City are using Toast retail to handle their large, fast-paced operation, manage over 30,000 skews across a -square-foot store, and process more than 2,500 transactions daily. Zabars shows how Toast supports complex, high-volume retail environments. Across the UK, Ireland, and Canada, rolling out more of our products is driving a steady increase in booked ARPU. We're also seeing greater traction among full-service restaurants, which now make up the majority of our new wins in these regions, showing that product improvements investments in our -to-market teams are paying off. We're launching Australia with the same products we have in our other international markets today. Our fast, comprehensive launch down under is thanks to the learnings and infrastructure from our first three markets and the localization investments we've made over the past few years. We took our first customer, Grace K. Grace, live in Australia this summer. Grace Grace is an existing Toast customer in the US, and we were top of mind when they decided to expand Australia. They initially opted for a local provider at launch, but couldn't find another POS provider that matched Toast's capabilities. So they were excited to transition to Toast when we could support their Australian operations. They're now using our guest-facing displays, kitchen display screens, and online ordering products to solve for the operational friction and reporting gaps they experienced with the local system at launch. And they plan to add more products like email marketing and loyalty to help drive demand. And have up-store tools, including multi-location management and reporting to power their continued expansion across Australia. Shifting gears, our third priority is increasing customer adaption of our platform and driving differentiation through data and AI. We were a pioneer in bringing purpose-built handhelds to market seven years ago, redefining in-store operations and service for restaurants. And since then, billions of orders have run through Toastco handhelds, giving us a deep understanding of what works on the restaurant floor. Our new Toastco 3 handheld builds on that foundation and continues to push the industry forward. It's the only device that combines Toast IQ, Toast Intelligence Engine, with built-in cellular connectivity so staff can take orders, process payments, and print receipts seamlessly across Wi-Fi and cellular networks. It does all this while being lighter, faster, and more durable than before. With a 24-hour battery life. With Toast IQ, staff now get real-time context about their guests to help increase check sizes. Personalized notes and guest details from Toast tables show up directly into our Toastco 3 handhelds and terminals. And our Amex partnership aims to build in this technology to deliver these personalized experiences for Amex card members as well. Haywire Restaurant in Texas calls the Toastco 3 a game changer. They used to lose Wi-Fi in certain areas of the three-story concrete building, but now with Toastco 3 cellular functionality, they can seamlessly transition between cellular and Wi-Fi to stay connected and take payments without getting interrupted. The new handhelds meet the demands of the restaurants, including drops on their concrete floors or servers working double shifts who can now carry a handheld all day long without needing to charge it. Haywire also sees the Toastco 3 as a tool for growth, giving them a reliable way to generate sales at community events and festivals and opening the door to sales that wouldn't access otherwise. Lastly, our fourth priority is to continue to invest with discipline while expanding our margins. Our updated full-year outlook reflects the strength of our execution and the scalability of our business. We've reached the medium-term margin guidance we laid out at our investor day ahead of plan, and we're confident in our ability to continue investing behind what's most important to fuel long-term growth while balancing margins over time. As I close out, I wanna thank every toaster, our customers and our investors. The progress we're making is a direct result of the team's incredible execution and the confidence our customers and investors have in what we're building. Our platform helps local businesses thrive and I've never been more excited about the opportunity that's in front of us. Thank you, and with that, I'll turn the call over to Lana.