Welcome, everyone. We're so glad to have with us today the team from Toast here in Arizona. Joining us on stage, we have Elena Gomez, who is President and Chief Financial Officer. Also here in Arizona, we have Head of Investor Relations, Emily Woodward. So thank you to both Emily and Elena for joining us here in Arizona. A few years running now here at the conference, Elena, it's a pleasure to have you up here.
Thanks for having me.
All right, great. Let's start it off with 2025 milestones and trends. So 2025 is shaping up to be another strong year for Toast. Your top-line metric, which is recurring gross profit, looks like it's going to be growing at 32%. You're on pace to add more net locations this year than you did last year. Your adjusted EBITDA margins are expanding by more than 600 bp s. That's a lot of accomplishment. Maybe you could recap some of these highlights and to you, really what stood out this year and maybe a little bit of how you're thinking about heading into 2026. We'll clearly hit this in more detail later, but let's just set the table.
Yeah, great. Thanks for the question. At the highest level, 2025 was a strong operational execution year for us and love to see the maniacal focus on execution across the company. And that momentum that you see us exiting 2025, and I'll get into some specifics, is really giving us confidence in 2026. And so in 2025, as you laid out, we crossed a $2 billion milestone, a really big achievement for this company. We're on pace to deliver 32% recurring gross profit and doing so at a healthy 33% margin. So really feel great about the business. And we're hitting our medium-term target that we laid out at Investor Day early. So just a testament to the execution of the team. And really what underpins it when I reflect on the year is our focus on four things, which Aman lays out all the time.
One is penetrating the core TAM and going deeper into those markets. Two is expanding the TAMs that we'll talk about a bit later. And three is this consistent focus on innovation. That's always been the pillar at Toast to consistently innovate for our customers and solve pain points, executing well there. And then obviously all of that, doing it with a very strong capital allocation framework in a very disciplined way. And so that playbook is really what gives us confidence. As long as we continue to execute, we'll also build that foundation for 2026. In terms of the emerging businesses, we've seen a lot of progress this year. We've talked about crossing 100 million in ARR, really just a lot of focus on execution in those businesses as well. A lot to love. We launched Australia in enterprise.
We won some of our biggest deals in the company's history. So anyway, lots of momentum in the business, as you can tell, and I'm excited about 2026.
All right, that's a good intro. Let's segue a little bit into a little more detail on that. You mentioned some of those new markets. So the TAM is clearly expanding and the growth algorithm is evolving. We're adding enterprise, international, and food and beverage retail, and you're having some great early success there. Maybe you talk a little bit more about what's driving that success.
Yeah, you know when you look at these businesses, it's really applying the same playbook that we've applied to become a leader in the U.S. SMB markets and applying that same playbook to these markets. And underpinning that is when you look at the patterns in each of these segments, what we see is legacy players. We see a fragmented market. And we also see an opportunity to modernize the tech stack, in particular in retail. And so when you take our proven playbook and apply it to these TAMs, that's what gives us conviction that we have a right to win. Internationally, we started, of course, in English-speaking countries. We're seeing really great traction. In retail, we're focused on building out the inventory capabilities, but we're serving a lot of legacy.
A lot of those customers have legacy players, so it just brings an opportunity for us to bring our modern platform to that market. And in enterprise, we've been building these above-store capabilities over time. So I feel really good that we have a right to win there as well.
All right, excellent. Well, sticking with these new TAMs, and this is a question we get often from investors, maybe you could talk a little bit about the ARPU profiles of each of those markets, enterprise, international, and food and beverage retail?
Yeah, sure. So the way we think about these emerging businesses or new segments is they represent a significant ARR opportunity for the business, and we believe they will be significant cash flow generators over the long term. And so in that context, we also know that they'll all have very different ARPU profiles. But because we manage this business with healthy unit economics and payback periods, we're going to manage each of these individually with those same guardrails as well. And so that's sort of the big picture. In total, obviously, in our core business, we've been at it longer, so the ARPU of the core business is higher. But we have an opportunity with these new businesses to expand ARPU over time. But in the total ARPU, the impact will be gradual as we get into these new businesses. Total ARPU, primarily driven by the core today.
In the core, we also have an opportunity to continue to expand that ARPU over time. A lot of that is through product attach, et cetera. Overall, I feel really good about the complexion of the businesses where they are today, but even more excited about the opportunity with these businesses over the long term.
Excellent. All right, well, you mentioned the core. It's a good transition into talking about that, so core SMB and mid-market location adds. It's been a big topic for investors in terms of the net location adds, so you recently talked about on the earnings call that U.S. SMB net adds were in a similar range in 2025 as they were in 2024, and you expect them to also be in a similar range in 2026. When we look at it mathematically and we just think about this year base getting larger and larger, and of course there is some degree of location churn from restaurants failing, that it would seem to us that at some point that the U.S. net add number would have to start to taper off a little bit, and maybe you could just talk about those dynamics.
Yeah, sure. Let me just start with where our conviction comes from, which is sort of bringing together a best-in-class product and then the maniacal focus on execution and operational discipline of our field teams. That combination of those is really what gives us this confidence in delivering core net adds really for many years to come. And that's why core net adds in 2025 are in the same range as 2024, and we believe we'll be in the same range in 2026. And so when you think about that, then you add on the emerging businesses, which of course will drive consistent net adds to Toast over the long term. In terms of the core business, we still have many markets that are not flywheel, so it gives us an opportunity to turn more markets into flywheel.
To the point you made, as we get bigger, naturally the core net adds will taper. That's just the way the math works. But we're just not there yet because we still have plenty of runway to grow in the core. And that will happen gradually, effectively. So that's how we think about it, but we're really excited to think about, and actually I should share, the way we think about it is we want to continue to add net adds to the platform. And the mix between core and emerging businesses will change gradually over time, but the goal we have is to continue to add net adds to our platform every year.
All right, thank you, Elena. Well, very much related to that, you stated a goal that was a really impressive one, which is to roughly double your market share in the core. With that comment, there's lots of questions around the competitive landscape. And maybe you could just talk about if there's anything that you've observed changing and maybe just talk a little bit about related win rates or Salesforce productivity or payback periods.
Yeah, sure. Look, I'm really proud of the team's execution. Aman mentioned this on the earnings call. Our win rates are up. Our productivity is really strong. And we've built a really healthy business as far as it relates to unit economics and payback. And so we give our reps the tools to win in the market. That's really what's driving their win rates. We empower them to make the decision on the ground. And look, they're really going after customers with high GPV. And in cases where they need to lean in, we focus on payback period and make sure they follow these guardrails, but really feel good about their execution. And it all comes back to having a best-in-class product, having this focus on go-to-market execution.
Ultimately, that's what you're seeing play out in our win rate, in our success, consistently adding share gains every quarter, every year.
All right, excellent. So we've covered locations quite well. Let's move into SaaS ARR per location. So as a backdrop, SaaS ARPU or SaaS ARR per location has been solidly in the mid-single digits for some time now, and you've talked about sustaining that into the near term. Maybe just talk a little bit about some of the drivers there and what some of the mixed impacts are having on that ARR per location growth.
Yeah, sure. We feel really confident to be in that mid-single digits, just as we have been over the course of the last several quarters. And the one thing to note is our core ARPU is growing faster than our total ARPU. So that's just a dynamic, obviously, underneath the hood. And that makes sense, right? We've been in the core business much longer. We've been at it for 12 years. We've got these newer businesses, and we have the opportunity over time to add product to each of these segments to drive ARPU over the long term. But mid-single digits is a good range for us to be in the near term.
All right, excellent. Covered that one. Very clear. Let's move on to GPV per location. So maybe you could just talk a little bit about macro-wise what Toast is seeing in terms of any GPV per location trends. Really, we're about two-thirds of the way into the quarter. And then maybe looking beyond that, how should investors be thinking about GPV per location?
Yeah, just like we said, nothing's really changed from our earnings call. We see trends be relatively stable, and of course, we're watching the macro, but for us, the trends have been very stable, like we said on the earnings call. As we zoom out and think about GPV per location over the long term, as we get into these new segments, we're going to see different profiles, of course, similar to ARPU. But because the core business is such a big part of our business today, the impact of adding these new segments will be super gradual, but feel really good about our ability, again, to grow the business. GPV per location tends to stay in a narrow band, and that's exactly what we're seeing.
All right, excellent. Let's move to the next topic, which is net payments take rate. So you've recently had some strength, and I'd say this has been another one of the highlights of 2025. And you called out three distinct factors that have helped to drive this net take rate a little bit higher. So one is the cost optimization efforts. Two are some surgical pricing that you've made along the way, and that's in addition to the more notable one last September. And then also the surcharging product, which is still relatively nascent within your business. Maybe you could expand upon those?
Yeah, and I'm really pleased with the progress we've made. Take rate has been up year over year every single quarter in Q3 and is on pace for that in Q4. And that's really not any single item. It's what you laid out. It's pricing, it's COGS optimization, and then advancing our digital products. So on pricing, just to unpack that a little bit more, what we've said is we will implement surgical, very targeted price changes. You'll never see sort of a step change in our pricing algorithm, but more steady, targeted price change. So we executed against that, as you said, last year and continue to do that in pockets. And then in terms of COGS optimization, we have a team that is really focused on looking at cost per transaction. And as we scale, we're processing over $200 billion in GPV.
We have an opportunity to drive cost per transaction down, and so the team is really focused on that. And then in terms of surcharging, I would say that's just an example of our innovation. We can innovate for our customers, solve some of their problems, that's what surcharging did, and drive more digital products. As we do that, that presents an opportunity for us to also drive take rate. So zooming out, I think we have this opportunity to continue to drive an increase in our take rate over the long term, leveraging some combination of these levers over time.
All right, excellent. Well, let's move on to some of the comments around 2026 and some of the investments that Toast is making. So at the most recent earnings call, you gave sort of an early outlook into 2026. And you talked about net location adds growing in 2026 versus 2025. You talked about recurring gross profit growth being above 20%. And then you talked about the margins being flat to slightly up. And when we look at what the OpEx that implies, it implies a little bit of a step up in investment. We believe that's because you're seeing lots of opportunity and you want to go after it. Maybe you could talk a little bit about what you're going after in those new TAMs and why you had such confidence to lean into the investment.
Yeah, sure. So at our last earnings call, we laid out a financial framework for 2026, very much in line, by the way, with our Investor Day framework a couple of years ago. But let me unpack what we said at earnings. So we said really two things. One is our recurring gross profit will minimum grow 20%, consistent, like I said, with what we said at earnings. And we always aim to do better, and we've proven that we've done that over the course of the last couple of years. In terms of margin, what we said is margins will be flat to slightly up. And the reason for that is we're operating from a position of strength. Our core business is generating 40% margins, and it's the lion's share of our business. The incremental margins are higher, which is fueling our ability to invest in these new verticals.
So we feel really confident in our ability to, and now is the time to make these upfront investments in these new verticals. And the reason for that is because each of them individually represents significant ARR opportunities. I talked about them becoming significant cash flow generators for us over the long term. In order to do that, we have to make some upfront investment, and that's what you're seeing us lean into in 2026.
Okay, thank you, Elena. A little follow-up on that. So in terms of those investments, when we think about breaking them down, maybe you could give some more directional color around how much of that is for the core versus the new TAMs, and then in terms of the more functional investments. So some of that you mentioned is going to go-to-market, and then some of that is going into product innovation or adding new modules, which is supportive of ARPU.
Yeah, sure. So a couple of things. One, as I said, our core business is the lion's share of our business, and we continue to believe we have a ton of runway in our core business. We've talked about doubling market share. In order to do that, we're going to continue to invest in both go-to-market capacity and targeted areas, continuing to turn flywheel markets. And then we're going to continue to invest in product innovation. We've always really focused on being a differentiator and investing in innovation, things like Toast IQ, which we'll talk about, I'm sure, and some other product ideas. So definitely a lot of investment going into the core business. And then in terms of the emerging businesses, it's really a combination of rep capacity. You've seen us lean into rep capacity across all of them. Enterprise is a little bit different.
Enterprise is really more of a product play, but for international and retail, it's really about investing in rep capacity and then building out the platform. In international, as you remember, we started with just some elements of the platform. We didn't build out the entire platform, so as we've added capabilities, we're seeing really good success there, so that's ultimately where the investment is going, and zooming out, what I think about is we're seeing really positive customer signal. We're seeing really positive rep productivity, and we're approaching these businesses in a very data-driven approach, so in 2026, as we invest, there may be times where we see something that's not working, and because we're so data-driven, we may pull back. The flip side is we may see areas where we have a lot of success, and we want to lean into that investment.
Regardless, we'll always manage back to these payback periods and take a very disciplined capital approach to investing in these new verticals. And zooming out even further, I would say the most important thing we're doing is investing in 2026 for the long term. It's not just about 2026, right? We're talking about building and sustaining growth over the long term, and these growth factors present that opportunity.
Excellent. And just a minor follow-up. You mentioned it just now in terms of rep capacity, and you talked about the growth markets, but also I know we've talked about this offstage, but there's also some additional investment behind rep capacity, even in the core.
Yeah, even in the core.
And the productivity of those reps is up. So the combination of more reps, higher productivity equals higher gross adds for the core.
Yeah, no, that's exactly right. And in fact, in our core business, it still represents a big opportunity for us. If we're trying to double market share, clearly we're going to have to make some investment there, both in obviously product innovation, but also targeted rep capacity as well.
All right, excellent. Well, you also alluded to this, Elena. You talked about how the sales teams are managing to payback periods. And one component that goes into the payback calculation is hardware. So in the current environment, you've mentioned a few comments around the tariffs. And again, this is a tool that the sales teams have to them. And all this adds into the hardware cost that goes into the CAC calculation. Maybe talk a little bit more about hardware and how the investment community should be thinking about that.
Yeah, sure. Hardware has always been a lever that our reps use on the ground, always been actually a differentiator for us, and a couple of things I would say, we really empower the reps. We have a very sort of strict payback period and guardrails that our reps follow and very clear escalation paths if needed, but when a rep is dealing with a customer, at the end of the day, they're really managing a bunch of levers. They're managing what's the hardware that this customer, like what do they want to pay upfront? They're thinking about the SaaS and subscription. They're thinking about payment rates as well, and so the rep has the tools to look at the total cost of ownership of a customer, and we empower them because we have this payback framework that they're very familiar with, and we train them a ton on it.
They're empowered to leverage that, and in cases where they need to lean in on hardware, they will, and then the other thing I would say is we're on our third generation of our Toast Go 3 device, which is best in class, and in fact, I was with a customer watching an onboarding last month, and we got to talking, and this was the head of restaurants for this 200-footprint restaurant location, and she said, "Look, one of the reasons ultimately we chose you is because we wanted your Toast Go 3 devices. We wanted them in our cafes. We wanted them in our restaurants because we believe it's going to drive a better operation and a better customer experience," so that was music to my ears, but hardware is absolutely a differentiator and definitely something that the reps use in their toolkit.
Right, excellent. With the time remaining, we're going to try and cover two more topics. One is Toast IQ, and the other is partnerships. So Toast IQ, a recent product, really, it's a great example of some of the unique things that Toast can do with your scale and your data. Can you talk a little bit about this offering and then maybe more broadly, just some of the other innovations and things that are in your product roadmap ahead?
Yeah, sure. I'm really excited about Toast IQ. I'll talk about that, but I just want to frame how we think about our roadmap. First of all, we've always said driving differentiation for our customers and helping them solve problems day-to-day in their workflows is really important, and so we're continuing to invest behind that, and we're also leveraging all the data that sits within our platform and leveraging AI now in Toast IQ with this data, and so Toast IQ specifically is really think about it almost as a co-pilot for the restaurant operator. They can ask it questions. It can drive insight. I was actually with a customer in Chicago, and she mentioned that she's using Toast IQ has changed how she runs her business, and I said, "Well, tell me a little bit more," and she said, "Look, it tells me when times are slow.
It tells me what are the best-selling items on my menu. It tells me which employee has the highest sales. Also tells her which employees have voids." So she's doing some performance management. But that's just the beginning. You can imagine that she's taking action as a result of some of these insights that she's getting from Toast IQ. And this is in the early stage. I can see the team already thinking about how to iterate on this product and make it even more powerful for our customers. So really excited about Toast IQ. And then in general, it goes back to leveraging this data. Advertising is another example where we're helping our customers with some of their marketing campaigns. And a lot of these customers, they don't have a CMO on-site. They don't have someone who can really think about their advertising strategy.
And so leveraging advertising is a great tool for them. And we've made it super simple. A lot of the customers that have been using it are seeing very specific ROI. And again, we're early in our journey on advertising. We can see that evolving more as we leverage the data in our platform.
Excellent. Thank you, Elena. Let's move on to partnerships. So there were two big announcements this year, one with American Express and one with Uber. Maybe you could talk a little bit about these and the broader approach to partnerships that you take at Toast.
Yeah, sure. Partners for us are really an important strategic asset, right? Not only the partner ecosystem that we have, we have hundreds of partners that build on top of our platform. And then we have strategic partners like an American Express and an Uber, all with the focus on helping our customers be successful and making sure we give them the capabilities they need. In terms of American Express, it presents an opportunity for us to improve the guest experience that we're uniquely positioned to offer and bringing all of the inventory with Resy and tables all into one place. And it's early on the American Express partnership. There's a lot more we can do together to mutually benefit both American Express and Toast. And then Uber presents another opportunity for us to together drive benefit to our mutual customers, have a better integration for customers with the Uber platform.
Over time, we can see this relationship also continue to expand as we do more with them and continue to build on the partnership. It's early, and so we'll have more to update over time. Really excited about both these partnerships and look forward to sharing more over time.
Excellent. Thank you, Elena. We have some time left here. I think we're going to try and get in another one or two here. Let's talk about a topic. We get this question all the time from investors around enterprise payments attach. So you've announced some big and notable enterprise wins over the past few years: Applebee's, Potbelly, Perkins, Huddle House, just to name a few. And some of those came with payments opportunities, and some of them are potentially up for grabs for Toast to go get. So maybe you could talk a little bit about some of those focus areas and how you're driving better payments attach within some of these enterprise wins. And if you don't mind, maybe just longer term, what's the level of enterprise payments attach that investors should be thinking about?
Sure. So most of our customers today, most of our enterprise customers do take payments. There's only a handful that have not taken payments. I'll start there. And typically, that's because they already have existing relationships. But just zooming out in terms of the enterprise opportunity, we've been building the capabilities for enterprise over the course of the last several years. And what we're seeing now is we're getting pulled into deals. And often when we get pulled into these deals, it's because we've got a modern platform. It's all in one place. We've built all this above-store capability. Payments just naturally becomes part of that conversation. So more often than not, we're actually seeing our customers take the payments as part of the overall better together platform, if you will.
All right, excellent. A minor follow-up there. I gather there might be some nuance with some of the hotel chains. Maybe you could just elaborate on that a little bit.
Yeah, so you're probably talking about Marriott. When we launched Marriott, I want to say it was two or three years ago, they already had an existing relationship with a payment provider, but the journey with Marriott has been wonderful. They have great partners, continuing to add locations kind of at a steady rhythm in our profile, so really feel good about that partnership, and hotels in general has been a really great outcome for us. As we built on Marriott, what's happened is we've gotten inbound from other brands, which makes that a really healthy business for us. We launched Choice Hotels, as you recall. I think that was last year, so we've built that capability, and now what we're seeing is more pipeline from hotels, which is great.
All right, excellent. Well, we can probably squeeze in just one more here. And we put some analysis out on this, and I don't think it's a super major topic for you guys, but the Visa Mastercard recent settlement, right? We appreciate it's not even approved yet, and this is going to take some time to be implemented. But the stated average reduction in interchange on a blended basis, not specific to Toast merchants, is about a 10 bp s reduction. Maybe just talk a little bit about what this could mean to Toast down the road.
Yeah, this is more of a long-term. I think they're still, as you know, they're still trying to sort through the final conclusions there. But I think what's important to remember for our business is it won't impact the entirety of our business. Not everyone is going to be impacted by this change. And so that's why for us, to the point you made, it's not going to be a material factor. And we're thinking if there's any impact, it would be beyond 2027 and beyond, but likely not material for us.
Excellent. Well, on behalf of our team, we just want to say it's really a pleasure having you guys here, both Emily Woodward from Investor Relations and Elena, CFO. You guys joined our conference here many years in a row, and you're a big part of it. We appreciate you being here.
Thank you for having me.