Q1 2025 Toast Inc Earnings Call
Good afternoon, My name is tamika and I'll be your conference operator today at this time I would like to welcome everyone to the <unk> first quarter 2025 earnings conference call today's call will be 45 minutes.
Tameka: My name is Tameka and I will be your conference operator today. At this time, I would like to welcome everyone to the Toast first quarter 2025 earnings conference call. Today's call will be 45 minutes.
Michael Senno: I will now turn the call over to Michael Senno. Senior Vice President of Finance, you may begin your conference.
Michael: I will now turn the call over to Michael Tonight, you know.
Michael: Senior Vice President of Finance you May begin your conference.
Michael Senno: Thank you, Tameka, and welcome everybody to Toast earnings conference call for the first quarter ended March 31, 2025. On today's call, our CEO and co-founder Aman Narang and CFO Elena Gomez will open with prepared remarks, which will be followed by our Q&A session.
Michael: Thank you Tamika and welcome everybody to <unk> earnings Conference call for the first quarter ended March 31 2025.
Speaker Change: On today's call, our CEO and co founder among the rain and CFO Elena Gomez will open with prepared remarks, which will be followed by a Q&A session.
Michael Senno: 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 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 second quarter and full year 2025. 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.
Speaker Change: Before we start I'd like to draw your attention to the Safe Harbor statement included in today's press release.
Speaker Change: 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 shock.
and the Exchange Act.
Speaker Change: All statements, other than statements of historical facts, are forward-looking statements.
Speaker Change: including those regarding management 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 second quarter in full year 2025.
Speaker Change: Forward-looking statements reflect our views only as of today. And, except it's required by law, we undertake no obligations to update or revise these forward-looking statements.
Michael Senno: 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 current gross profit stream. These are the bases for top one 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-GAAP measures to the most comparable GAAP measures.
Speaker Change: Please refer to the cautionary language in today's press release and or RTC filings for discussion of the risks and uncertainty that could cause actual results to differ materially from our expectations.
Speaker Change: During this call, we will discuss certain non-dap financial measures, including but not limited to, non-dap subscription services goes profit and non-dap financial technology solutions goes profit, which we refer to collectively as our current gross profit screams.
These are the bases for Top 1 Guidance.
Speaker Change: These non-GAAP measures are not intended to be a substitute for a gap result. Please refer to our initial list and SEC filings for detailed reconciliations of these non-GAAP measures to the most comparable GAAP measures .
Michael Senno: 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.
Speaker Change: 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.
Michael Senno: Finally, the press release can be found on the Investor Relations website at investors.surstab.com. After the call, a replay will also be available on our website.
Speaker Change: Finally, the press release can be found on the Investor Relations website at investors.turskab.com. After the call, a replay will also be available on our website.
Aman Narang: And with that, let me turn the call over to Aman. Thank you, Michael. And thank you everybody for joining us this afternoon. We've had a great start to the year with results ahead of expectations. In Q1, we added over 6,000 locations. Our current growth profit streams grew 37% year over year. Adjusted EBITDA grew to $133 million. And our GAAP operating income was $43 million. Our mission at Toast is to help restaurants to let their guests do what they love and thrive. We power approximately 140,000 customers locations globally and we continue to believe we have a much larger opportunity to serve many multiples of that number over the next decade, both by growing share in our core U.S.
Aman: And with that, let me turn the call over to Aman. Come on.
Aman: Thank you Michael, and thank you everybody for joining us this afternoon [inaudible]
Aman: We've had a great start to the year with results ahead of expectations. In Q1, we added over 6,000 locations, our current growth profit streams grew 37% year over year, just that EBITDA grew to 133 million and our gap, gap operating income was 43 million. [inaudible]
Aman: Our mission at Toast is to help the restaurants delight their guests through what they love and thrive . . . .
Aman: We power approximately 140,000 customers locations globally and we continue to believe we have a much larger opportunity to serve many multiples of that number of the next decade both by growing share in our core US SMB market as well as accelerating growth in our new geographies, new verticals and an enterprise. [inaudible]
Aman Narang: S&B market as well as accelerating growth in our new geographies, new verticals, and in enterprise. In Q1, we saw strong momentum in our bookings across all of our market segments, including marquee wins in Applebee's and Topgolf that speak to our ability to serve large, complex operations at scale. While we're paying close attention to what's going on in the macro environment around us, we remain confident in our ability to execute. The momentum we've seen to start this year gives us confidence we should see record net ads in Q2. And as such, we have raised a 2025 full outlook based on our performance.
Aman: In Q1, we saw strong momentum in our bookings across all of our market segments, including Marquis Wins in Apple Bees and Topgolf that speak to our ability to serve large complex operations at scale.
Aman: While we're playing close attention to what's going on in the macro environment around us, we remain confident in our ability to execute. [inaudible]
Speaker Change: The momentum we've seen to start this year gives us confidence we should see record net ads in Q2 and as such we have raised the 2025 full outlook based on our performance. Let me share a brief update on the four priorities I laid out for the business to start the year. I'm going to share a brief update on our performance. Let me share a brief update on the four priorities I laid out for the business to start the year.
Aman Narang: Let me share a brief update on the four priorities I laid out for the business to start the year. The first, scaling locations and market share in our core U.S. restaurant business. Second, demonstrating that our new markets can be material drivers of growth. Third, increasing customer adoption of our broad platform and driving differentiation through data and AI. And lastly, continuing to hold a high bar and investing against our most important priorities while gradually expanding margin. The first scaling locations and market share in our core U.S. restaurant business. We continue to see strong momentum at scale within our core U.S.
Speaker Change: The first scaling locations and market share in our core US restaurant business. Second, demonstrating that our new markets can be material drivers of growth.
Speaker Change: Third, increasing customer adoption of our broad platform and driving differentiation through data in AI, then lastly, continuing to hold a high bar and investing against our most important priorities while gradually expanding margins.
Speaker Change: The first scaling locations and market share in our core U.S. restaurant business. We continue to see strong momentum at scale within our core U.S. S&B segment, which is driving the majority of our growth.
Aman Narang: S&B segment, which is driving the majority of our. Our recipe continues to be at the intersection of a vertical platform approach combined with a differentiated in-market, go-to-market This drives strong win rates, where we win a majority of the time across all of our key competitors. We grew locations in essentially all of our markets across our S&B 10 versus last year and our flywheel markets continue to see above average reproductivity. Sales AE productivity across new bookings was up in Q1 year over year, which is what is giving us confidence into Q2 in the balance of the year.
Speaker Change: Our recipe continues to be at the intersection of a vertical top-form approach combined with a differentiated in-market go-to-market team.
Speaker Change: This drives strong win rates, where we win a majority of the time across all of our key competitors. We grew locations in essentially all of our markets across our S&B 10 versus last year, and our flywheel markets continue to see above average rep productivity.
Speaker Change: Sales AE Productivity Across New Bookings was up in Q1 year-round, which is what is giving us confidence in to Q2 in the bout of the year.
Aman Narang: The product and engineering teams continue to leverage both customer and sales feedback to prioritize the roadmap needed to support durable location growth in our core segment over the long term. This includes investments in the thousand little things that differentiates our platform for restaurants. Including things like language support for non-native English speakers, memberships for businesses like wineries and clubs, as well as more complex entertainment concepts, including one of our newest customers, Topgolf. If you have been to a Topgolf location, you'll know that Topgolf pairs its leading modern golf entertainment experience with a full-serve restaurant and bar.
Speaker Change: The product and engineering teams continue to leverage both customer and sales feedback to prioritize the roadmap needed to support durable location growth in our course segment over the long term. This includes investments in the thousand little things that differentiates our platform for restaurants.
Speaker Change: Including things like language support for non-native English speakers, memberships for businesses like wineries and clubs, as well as more complex and either-canement concepts including one of our newest customers.
Speaker Change: Topgolf. If you've been to Topgolf's location, you'll know that Topgolf pairs his leading modern golf entertainment experience with a full serve restaurant and bar.
Aman Narang: They wanted a POS partner that could deliver seamless hospitality to guests across their entire operation at scale. Guests want to be able to order and act their check quickly without disrupting their golf game, and our handhelds help them take orders and payments at the golf bay. Our KDS streamlines kitchen operations, and our bus, store, multi-location management tools help them track and manage all aspects of their operation centrally. We're really excited to partner with an industry-leading concept like Topgolf, a customer that really speaks to the versatility of the Toast platform.
Speaker Change: They wandered a few as partnered that could deliver seamless hospitality to guests across their entire operation.
Speaker Change: at Scale. Guests want to be able to order and act their check quickly without disrupting their golf game. And our handhelds help them take orders and payments of the golf bay, our KDS streamlines, kitchen operations, and our bus door multi-location management tools help them track and manage all aspects of their operations centrally.
Speaker Change: We're really excited to partner with an industry leading concept like top golf, a customer that really speaks to the versatility of the Toast platform.
Aman Narang: Next, moving on, our second priority is demonstrating that our new markets can be material drivers of growth. As I had mentioned to start the year, we expect to cross 10,000 locations across international food and beverage retail and enterprise in 2025, and we remain on track to do that. We continue to build out the platform to support the broader TAM across these exciting new segments and have key proof points that speak to our progress.
Speaker Change: Next, moving on, our second priority is demonstrating that our new markets can be material drivers of growth.
Speaker Change: As that mentioned to start the year, we expect across 10,000 locations across international, food and beverage retail and enterprise in 2025, and we remain on track to do that. We continue to build out the platform to support the broader time across these exciting new segments, and as key proof points that speak to our progress.
Aman Narang: In enterprise, we recently announced Applebee's, part of DineBrands, which is our largest win in terms of committed locations. Applebee's wanted a platform that was both easy to use and easy to deploy across their operation. They're leveraging our handhelds to improve guest experience, kitchen display screens to drive kitchen efficiency, as well as our above store enterprise management. In food and beverage retail, we're taking the same vertical approach that works so well in restaurants to build out the retail platform, including recently added inventory linking to support more advanced customers. One of those retailers is Beer on the Wall.
Speaker Change: In Enterprise, we recently announced Apple Bees, part of Dine Brands, which is our largest win in terms of committed locations. Apple Bees wanted a platform that was both easy to use and easy to deploy across their operation. They're leveraging our hand-held to improve guest experience, kitchen-to-place screens to drive kitchen efficiency, as well as our above-store enterprise management suite.
Speaker Change: In putting beverage retail, we're taking the same vertical approach that works so well in restaurants to build out the retail platform including recently added inventory linking to support more advanced customers.
Aman Narang: This is a three location bottle shop and beer cafe in Illinois. They've got a full retail operation and manage nearly 10,000 SKUs with Toast Retail. But that's complemented by a cozy bar that's almost like a coffee shop. Managing inventory at Beer on the Wall used to take over 60 hours a week and required someone to add and manage items separately across the three locations. And since switching to Toast, They've been able to eliminate nearly 40 hours of work weekly since one person can manage it across their entire business by leveraging our advanced inventory capability. The staff loves how efficient and easy-to-use Toast is across both front of house and back of house.
Speaker Change: One of those retailers is Beer on the Wall. This is a three-location bottle shop and beer cafe in Illinois. They've got a full retail operation and manage nearly 10,000 skus with Toast Retail. That's complemented by a cozy bar that's almost like a coffee shop.
Speaker Change: Managing inventory at Bearing the Wall used to take over 60 hours a week, and it required someone to add and manage items separately across the three locations. And since switching to Toast
Speaker Change: They've been able to eliminate nearly 40 hours of work weekly since one person can manage it across their entire business by leveraging our advanced inventory capabilities. The staff loves how efficient and easy to use Toast is across both front of house and back of house tasks.
Aman Narang: And lastly, in international, we continue to see great momentum as well. We've expanded our offering to include loyalty, email marketing and guestbook. Our expanded guest products are resonating with international customers with guests attached doubling over the past year for our most recent locations that went live. We're confident that ARPA will continue to scale internationally as we launch more of the platform and grow adopted.
Speaker Change: And lastly in international, we continue to see great momentum as well. We've expanded our offering to include loyalty, email marketing and guest book. Our expanded guest products are resonating with international customers with guest attach doubling or the past year for our most recent locations that one lives.
Speaker Change: We're confident that our rule will continue to scale internationally as we launch more of the platform and grow adoption.
Aman Narang: It's still early days, and we have a long runway ahead of us, but I'm excited about the progress we've made this quarter across these new segments. Each of them represents a significant growth opportunity for us. And we will continue to invest in our product and our go-to-market capacity to accelerate growth. I'm more bullish than I've ever been that these new market segments will represent a material part of our location growth over the long term.
Speaker Change: It's still early days, and we have a long runway ahead of us, but I'm excited about the progress we've made this border across the new segments.
Speaker Change: Each of them represents a significant growth opportunity for us and we will continue to invest in our product and our go-to-market capacity to accelerate growth.
Speaker Change: I'm more bullish than I've ever been that these new market segments will represent material part of our location growth over the long term.
Aman Narang: Next, our third priority is to increase customer adoption of our broad platform and drive differentiation through data and From day one, our vertical focus in restaurants has helped us build a differentiated platform that not only serves as broad market from small coffee shops to Michelin rated restaurants, but also allows us to build an all in one platform that works better together. We continue to see increasing attach rates across many of our products. and see AI as a unique opportunity to accelerate this. Last spring at our investor day, we announced Sous Chef, our AI agent and assistant that supports restaurant operators.
Speaker Change: Next, our third priority is to increase Kupfer adoption of our Brad platform and drive differentiation to data in AI.
Speaker Change: From day one, our vertical focus and restaurants has helped us build a differentiated platform that not only serves this broad market from small coffee shops to Michelin rated restaurants, but also allows us to build an all-in-one platform that works better together.
Speaker Change: We continue to see increasing attachments across many of our products and see AI as a unique opportunity to accelerate this growth.
Speaker Change: Last spring at our investor day, we announced Sushas, our AI agent and assistant that supports restaurant operators. It's currently being palleted with customers with promising early results and we're continuing to improve it based on Kupfer feedback.
Aman Narang: It's currently being piloted with customers with promising early results, and we're continuing to improve it based on customer feedback. We expect Sous Chef will be an operator's companion driving business insights across the data, troubleshooting common issues, and executing actions to help manage all aspects of the business from menus and ordering, to employee management and scheduling, to managing their digital presence and marketing.
Speaker Change: We expect Fuchsiaff will be an operator's companion driving business insights across the data troubleshooting common issues and executing actions to help manage all aspects of the business from menus and ordering to employee management and scheduling to managing their digital presence and marketing. Thank you very much.
Aman Narang: We're also building. I'm Food Chef with a broader AI powered intelligence engine we're calling Toast IQ with features that combine our restaurant expertise, data and AI to make our products even more powerful for our customers. To bring this to life with an example, one of our early customers, Mission Boathouse in Beverly, Massachusetts, saw approximately 6% higher average order volume in the first weekend after adding our new menu upsell tool, powered by Toast IQ, a boost that's having a real impact with server tips as well. And our digital chip tool, which pulls key guest data directly into the POS and handhelds, is an important step towards creating highly personalized in-store experiences for guests.
We're also building...
Food Chef: On food chef with a broader AI-powered intelligence engine, we're calling Toast IQ with features that combine our restaurant expertise, data, and AI to make our products even more powerful for our customers. [inaudible]
Food Chef: To bring this to life with an example, one of our early customers, Mission Roadhouse in Beverly, Massachusetts, saw approximately 6% higher average order volume in the first weekend after adding our new menu up sale tool, powered by Toast Thank You, a booth that's having a real impact on server tips as well. And our digital trip tool.
Food Chef: which pulls key guest data directly into the TOS and handhelds is an important step, step towards creating highly personalized install experiences for guests.
Aman Narang: A second example is Felipe Taqueria, who is using our AI-powered advertising tool to run Google Ad campaigns for six of their restaurant locations and are seeing over 10x return on ad spend. As you know, restaurant operators are strapped for time. And AI presents a unique opportunity to make our platform both easier to use and more powerful across a range of use cases. We're really early in this journey, and we'll continue to invest here to both differentiate our platform and bring increasing value to our customers.
Food Chef: A second example is Felipe Estakaria, who is using our AI Power Advertising tool to run Google ad campaigns for six of the restaurant locations and are seeing over 10x return on ad spend.
Food Chef: As you know, restaurant operators are staff for time and AI presents a unique opportunity to make our platform both easier to use and more powerful across a range of use cases. We're really early in this journey and we'll continue to invest here to both differentiate our platform and bring increasing value to our customers.
Aman Narang: Shifting gears, our fourth priority here, lastly, is to continue to hold a high bar and invest against what's most important, while gradually expanding more In Q1, we achieved our medium-term margin goals we laid out at Investor Day ahead of our target. and are updated for your guidance now from the Reflects app. It's been a great start to the year. I'm so proud of the team's ability to drive both strong growth and healthy margin expansion. As I said at the start, I'm confident in our and our customers' ability to navigate a dynamic macro environment. We believe we're well positioned to have a strong year while continuing to invest against what's most important.
Food Chef: Shiftingers, our fourth priority here, lastly, is to continue to hold a high bar and invest against what's most important while gradually expanding margins.
Food Chef: In Q1, we achieved our median term margin goals. We laid out that investor day ahead of our target and our updated clear guidance. Now, firmly reflect that.
It's been a great start to the year.
Food Chef: I'm so proud of the team's ability to drive both strong growth and healthy margin expansion. As I said at the start, I'm confident in our and our customers' ability to navigate a dynamic macro environment. We believe we're well positioned to have a strong year while continuing to invest against what's most important.
Aman Narang: To wrap up, I want to thank the Toast team for another great quarter. We wouldn't be here without you and your dedication, your passion that goes to that thing. Thank you as well to our customers and investors for continuing to believe in us and our potential.
Food Chef: To wrap up, I want to thank the Toast team for another great reporter. We wouldn't be here without you and your dedication and your passion. That goes without saying. Thank you as well to our customers and our investors for continuing to believe in us and our potential. Thank you.
Aman Narang: We've had a great we've got a great opportunity ahead of us, a strong plan in place, and most importantly, the right team to get us there.
Speaker Change: We've had a great, we've got a great opportunity out of us, a strong plan in place, and most importantly, the right team to get us there. Now I'll turn the call over to Elena to share more details about the quarter.
Elena Gomez: Now I'll turn the call over to Elena to share more details about the quarter. Thank you Aman and to everyone for joining. To start, I would also like to thank our employees whose continued execution across the business led to another strong quarter with top and bottom line results exceeding expectations. In the first quarter, ARR grew 31%, and total fintech and subscription gross profit, our recurring gross profit streams, increased 37% year over year. Adjusted EBITDA was $133 million for the quarter, with margins expanding 13 percentage points year-over-year to 32%, and GAAP operating income was $43 million.
Elena Gomez: Thank you, Aman and to everyone for joining. To start, I would also like to thank our employees whose continued execution across the business led to another strong quarter with top and bottom line results exceeding expectations.
Elena Gomez: In the first quarter, ARR Group 31% and Total Fintech and Subscription Gross Profit are Recurring Gross Profit Streams, Increased 37% Year Over Year.
Elena Gomez: Adjusted Ibiza was $133 million for the quarter, with margins expanding 13 percentage points year over year to 32 percent, and gap operating income was $43 million. We increased our outlook for the full year reflecting our strong first quarter.
Elena Gomez: We increased our outlook for the full year, reflecting our strong first quarter. Consumer trends remain stable through early May. We are closely monitoring the macro environment and are well prepared to manage through any scenario as we execute on our priorities in the year ahead. And we're confident restaurants will remain resilient while navigating this dynamic macro environment as they have in the past. In Q1, we added over 6,000 net locations up relative to net ads in Q1 last year. At the end of the quarter, total locations was approximately 140,000, up 25% year-over-year. We're deepening our penetration in the core.
Elena Gomez: Consumer trends remain stable through early May. We are closely monitoring the macro environment and are well prepared to manage through any scenario as we execute on our priorities in the year ahead. And we're confident restaurants will remain resilient while navigating this dynamic macro environment as they have in the past.
Elena Gomez: In Q1, we added over 6,000 net locations up relative to net ads in Q1 last year. At the end of the quarter, total locations was approximately 140,000, up 25% year over year.
Elena Gomez: And as you heard from Aman, gaining momentum across all our verticals with exciting recent customer additions like Applebee's and Topgolf. Based on the momentum we have to start the year, we're set up to increase location net ads year over year in 2025 versus 2024, and are tracking for a record quarter of net ads in Q2. At only 10% of our 1.4 million location TAM across the customer segments we currently serve and with a significant opportunity to expand our TAM over time, we have a lot of confidence that we will serve multiples of our location count over time.
Elena Gomez: We're deepening our penetration in the core, and as you heard from Aman, gaining momentum across all our verticals with exciting recent customer additions like Applebees and top golf. [inaudible]
Elena Gomez: Based on the momentum we have to start the year, we're set up to increase location net ads year over year in 2025 versus 2024 and are tracking for a record quarter of net ads in Q2.
Elena Gomez: At only 10% of our 1.4 million location tam across the customer segments, we currently serve and with a significant opportunity to expand our tam over time.
Elena Gomez: We have a lot of confidence that we will serve multiples of our location count over time.
Elena Gomez: SAS ARR grew 32% year over year, driven by strong location growth and a 5% increase in SAS ARPU on an ARR based Subscription revenue increased 38% and gross profit grew 45%, benefiting from the improved ARR to revenue conversion we discussed last year. We expect subscription revenue growth to return to more normalized levels in the second half of the year. Payments ARR grew 31% and FinTech gross profit increased 32% in the first quarter. GPV was $42 billion, growing 22% year-over-year, with GPV per location down 3% versus last year. While we expect total GPV will follow the typical strong seasonal pattern in Q2, we anticipate GPV per location will remain down in a similar range on a year-over-year basis.
Elena Gomez: SAF's ARR grew 32% year over year, driven by strong location growth and a 5% increase in SAF's ARR-2 on an ARR basis.
Elena Gomez: Subscription revenue increased 38% and gross profit grew 45%, benefiting from the improved ARR to revenue conversion we discussed last year.
Elena Gomez: We expect September and revenue growth to return to more normalized levels in the second half of the year.
David Kupferberg, David Kupferberg,
Elena Gomez: While we expect total GPD will follow the typical strong seasonal pattern in Q2, we anticipate GPD per location will remain down in a similar range on a year-over-year basis.
Elena Gomez: Net take rate was 59 basis points. Payments net take rate was 48 basis points up three BIPs from a year ago from ongoing cost optimization efforts and targeted pricing moves we made last year. Non-payment fintech solutions led by Toast Capital contributed $47 million in gross profit. Toast Capital continues to perform well. We're seeing solid growth and originations, and defaults remain in line with our expectations. As a reminder, Toast Capital serves an important need for our customers, providing fast, efficient access to capital. Our insight into the health of our customers gives us this unique ability to assess credit quality and make underwriting decisions.
Thank you.
Elena Gomez: Net Take-Rate was 59 basis points, Payments Net Take-Rate was 48 basis points, up three bips from a year ago, from ongoing cost optimization efforts, and targeted pricing moves
Elena Gomez: Non-payment fentex solutions, led by Toast Capital, contributed 47 million in gross profit.
Elena Gomez: Capitol continue to perform well. We're seeing solid growth in originations and defaults remain in line with our expectations.
Elena Gomez: As a reminder, Toast Capital serves an important need for our customers providing fast, efficient access to capital. Our insight into the health of our customers gives us this unique ability to assess credit quality and make underwriting decisions.
Elena Gomez: We are confident in our ability to manage the risk associated with Toast Capital and expect Toast Capital's contribution to net take rate to remain in the 10 basis points range.
Elena Gomez: We are confident in our ability to manage the risk associated with Toast Capital and expect Toast Capital's contribution to that take great to remain in the 10 basis points range.
Elena Gomez: Moving to expenses. In Q1, operating expenses excluding bad debt and credit related expenses increased 12%. This primarily reflects a 25% increase in sales and marketing expenses from investments to grow our sales rep across core, international, and retail plus support our brand marketing campaign.
Thank you.
Speaker Change: Moving to expenses. In Q1, operating expenses, excluding bad debt and credit-related expenses increased 12%.
Speaker Change: This primarily reflects a 25% increase in sales and marketing expenses from investments to grow our sales rep across core, international, and retail plus support our brand marketing campaign.
Elena Gomez: R&D and G&A, excluding $22 million of bad debt and credit-related expenses, were essentially flat. Adjusted EBITDA was $133 million with a margin of 32%, achieving our medium-term margin goal of 30% to 35% well ahead of target. The strong Q1 results reflect a healthy top-line growth and solid execution, along with our commitment to prudently scale the business while investing in our growth areas. Free cash flow was $69 million.
Elena Gomez: R&D and GNA, excluding 22 million of bad debt and credit-related expenses were essentially flat.
Elena Gomez: Adjusted Ibiza was 133 million with the margin of 32%. Achieving our medium-term margin goal of 30 to 35% well ahead of target.
Elena Gomez: The strong Q1 results reflect a healthy top-line growth and solid execution, along with our commitment to prudently scale the business while investing in our growth areas.
Elena Gomez: Free cash flow is seasonally lower in Q1 compared to the rest of the year due to the timing of cash bonus payments and seasonality of GPV. We expect free cash flow to broadly mirror adjusted EBITDA for the full year. We repurchased 17 million in shares in Q1 and remain opportunistic based on market conditions.
Elena Gomez: Three cashflow with 69 million. Three cashflow is seasonally lower in Q1 compared to the rest of the year to the timing of cash bonus payments and seasonality of GPV. The end of the year to the end of the year to the end of the year
Elena Gomez: We expect free cash flow to broadly mirror adjusted Ibiza for the full year.
Thank you.
Elena Gomez: We repurchase 17 million in shares in Q1 and remain opportunistic based on market conditions.
Elena Gomez: Turning to guidance. For the second quarter, we expect total subscription and fintech gross profit to grow in the 26% to 29% range year over year and adjusted EBITDA to be $130 million to $140 million.
Turning to guidance.
Elena Gomez: For the second quarter, we expect total subscription and Fintech gross profit to grow in the 26% to 29% range year over year and a [inaudible]
Elena Gomez: As a result of our strong start to the year and continued momentum across the business, we raised our full year outlook. At the midpoints, we now expect 26% growth in FinTech and subscription gross profit and $550 million in adjusted EBITDA, a margin of 31% up 5 percentage points versus 2024. Our guidance factors in stable consumer trends, as well as a slightly higher tariff expenses related to our hardware.
Elena Gomez: As a result of our strong start to the year and continued momentum across the business, we raise our full year outlook.
Elena Gomez: At the midpoint, we now expect 26% growth in Fintech and subscription growth profit and 550 million in adjusted Ibiza, a margin of 31% up 5% is points versus 2024.
Elena Gomez: Our guidance factors in stable consumer trends as well as a slightly higher tariff expenses related to our hardware.
Elena Gomez: Overall, we are on track for another year of strong top-line growth and expanding profitability while continuing to invest in our highest priority long-term growth initiatives. To wrap up, we are executing across the board, and are confident in the large opportunity ahead of us. We remain focused on positioning the company for durable growth by sustaining our momentum in our core and growing the contributions from our new growth curves to drive long-term value.
Elena Gomez: Overall, we are on track for another year of strong top-line growth and expanding profitability while continuing to invest in our highest priority long-term growth initiatives.
Elena Gomez: To wrap up, we are executing across the board, and are confident in the large opportunity ahead of us. We remain focused on positioning the company for durable growth.
Elena Gomez: By sustaining our momentum in our core and growing the contributions from our new growth curves to drive long-term value. Now I'll turn the call back over to the operator to begin Q&A.
Michael Senno: Now, I'll 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, followed by the number one on your telephone keypad.
Elena Gomez: At this time, I would like to remind everyone in order to ask a question, press star, follow by the number one on your telephone keypad.
Timothy Chiodo: Your first question is from the line of Timothy Chiodo for UBS. Great, thank you for taking the question.
Thank you very much.
Elena Gomez: Your first question is from the line of Timothy Chiodo, William B.S. David Kupferberg, David Kupferberg, David Kupferberg,
Timothy Chiodo: I want to see if we can talk a little bit about the payback periods on some of these large enterprise wins. So oftentimes, we look at a lot of metrics on a per location basis. But speaking to something like an Applebee's, for example, big 1500 wins, it's fair to assume that the unit economics on a per location basis at that scale are going to be lower.
Elena Gomez: We look at a lot of metrics on a per location basis, but
Elena Gomez: Speaking to something like an Apple base, for example, Big 1500 wins.
Elena Gomez: It's fair to assume that the unit economics on a per location basis at that scale are going to be lower but maybe you could talk a little bit about the sales and marketing spend and the resources that go into
Aman Narang: But maybe you could talk a little bit about the sales and marketing spend and the resources that go into winning a customer like that, and how when we look at the payback periods, how they might compare to the payback periods that you see overall, which I believe the most recent update was in roughly the mid teens in terms Yeah, great question. Thanks, Tim. So first, I just want to say we're incredibly excited about having Applebee's join the Toast family in the platform, really great execution on the team and really just builds on the momentum we've had serving larger customers.
Elena Gomez: Winning a customer like that, and how, when we look at the payback periods, how they might compare to the payback periods that you see overall, which I believe the most recent update was, in roughly the mid teens in terms of months. [inaudible]
Thank you.
Speaker Change: Yeah, great question. Thanks Tim. So first I just want to say we're incredibly excited about having Apple Please join the Toast family and the platform, really great execution on the team and really just built on the momentum we've had.
Aman Narang: And it's a result of all the investment we made in the product to serve the segment. So we feel really good about that. And to the point you're making, we do manage the business on total payback periods and unit economics are most focused, obviously, on ARR growth. And we manage that mid-teens, as you mentioned. For enterprise deals, we look at deals on a deal-by-deal basis. And because the ARR booked in these deals is so large, the paybacks are very attractive. You know, so that's the big point there is that these deals tend to be much, you know, pretty significant deals.
Speaker Change: Serving larger customers, and it's a result of all the investment we made in the product to serve the segment. So we feel really good about that.
Speaker Change: And to the point you're making, we do manage the business on total payback periods and unit economics. We're most focused, obviously, on ARR growth, and we manage that mid-teens, as you mentioned.
Speaker Change: For enterprise deals, we look at deals on a deal by deal basis, and because the AR are booked in these deals is so large, the paybacks are very attractive, you know, so that's the big point there is that these deals tend to be much, you know, pretty significant deals. So that's the big deal.
Aman Narang: And then we look at LTD to CAC, as we do for all of our segments. And that's often quite healthy because, as you can imagine, the churn for enterprise customers tends to be lower. So all in all, really pleased with how we manage the enterprise business. And in this particular deal, ARR proves very healthy as well. So overall, enterprise, I view, is a very healthy business for us to continue to grow.
Speaker Change: And then we look at LTD-CAC as we do for all of our segments.
Speaker Change: And that's often quite healthy because as you can imagine, the churn for enterprise customers tends to be lower. So all in all, really pleased with how we manage the enterprise business.
Speaker Change: and this particular deal are pretty very healthy as well. So, at overall enterprise I've used a very healthy business for us to continue to grow.
Elena Gomez: Thank you, Elena. And the minor follow-up is, I believe with the vast majority, all but maybe one or two of your enterprise signings thus far have been attaching payments. Is that still generally the trend and the expectation? Yeah, no, that's right. The majority of our customers attach payments and even when payments are not in the deal, the economic Excellent.
Speaker Change: Thank you, Elena. And the minor follow-up is I believe with the vast majority all but maybe one or two of your enterprise signings thus far have been attaching payments, is that still generally the trend and the expectation? Thank you very much.
Speaker Change: Yeah, that's right. The majority of our customers attach payments. And even when payments are not in the deal, the economics are still attractive.
Timothy Chiodo: Thank you for both of those.
Excellent. Thank you for both of those.
Darren Peller: Your next question is from the line of Darren Peller with Wolf Research. Hey, guys. Thanks. A nice job.
Speaker Change: Your next question is from the line of Darren Peller with Wolf Research.
Darren Peller: Maybe you could just start off revisiting again, how you see the macro trending, just a little more on what the company is seeing from the sales to our sales perspective, and just new business formation, and maybe build that into the degree of conservatism, potentially embedded in guidance, just given the rate of growth you just showed us versus the outlook going forward relative to cyclicality. Thanks, guys. Thank you, Darren. So, I think if you look at same-store sales and consumer trends, they remain stable year-to-date. They've been in line, really, for the last few quarters. And one thing that's given us confidence in Q2 and the record net ads we talked about was our sales productivity, our AE productivity is actually up year-over-year.
Speaker Change: Hey guys, thanks, a nice job. Maybe you could just start off revisiting again how you see the macro trending, just a little more on what the company is seeing from the sales perspective and just new business formation. You shouldn't.
Speaker Change: Could he build that into the degree of conservatism, potentially embedded in guidance, just given the rate of growth you just showed us, versus the outlaw going forward relative to sickle-cality? Thanks guys.
Speaker Change: Oh, thank you, Darren. So, I think if you look at same-store sales and consumer trends, they remain stable here to date, and they've been in line really with the last three quarters, and...
Speaker Change: One thing that's given is confidence in Q2 and the record net ad we talked about was the social activity.
Darren Peller: New business formations are also stable. And so, I think that's really what's giving us confidence in our outlook in terms of net ads this year.
Speaker Change: A.E. practically is actually up here over here. New to the formations, they're also stable.
Speaker Change: And so I think that's really what's giving us confidence in our outlook in terms of net ads this year.
Elena Gomez: And in terms of guidance, maybe, Elena, you can talk about that. Yeah. To Aman's point, we've got a lot of momentum exiting Q1 and into Q2, which has given us that confidence to raise our outlook. And at the end of the day, we feel very optimistic that we have the ability to manage on the things we can control. We're mindful, of course, of the macro. And we're planning, as I said in my script, for the continuation of the trends that we've seen, but confident to manage our guidance through, really, a range of macro outcomes. So, feeling really good we can navigate the backdrop we're in.
Speaker Change: Um, and in terms of guidance, maybe I need to confess. Yeah, no, to, you know, to, to mom's point, we've got a lot of momentum exiting Q1 and into Q2, which is giving us that confidence to raise our outlook.
Speaker Change: And at the end of the day, we feel very optimistic that we have the ability to manage on the things we can control. We're mindful, of course, of the macro. And we're planning as you said in my script.
Speaker Change: for the continuation of the trends that we've seen. But confident to manage our guidance through really a range of macro outcomes, so feeling really good, we can navigate the backdrop for it.
Darren Peller: Yeah. That's great.
Darren Peller: And just a quick follow-up would be around pricing. You guys have clearly demonstrated strong attach rates, driving your ability to have pricing where value-add is offered.
Speaker Change: Yeah, that's great. Just a quick follow would be around the pricing. You guys have, you know, clearly demonstrated...
Darren Peller: Maybe just talk about what you're seeing now, and more importantly, in a different kind of macro. Do you still see that as an opportunity, or do you have to be more careful on that front?
Speaker Change: strong attach rates, driving your ability to have pricing where value-add is offered. Maybe just talk about what you're seeing now and more importantly in a different kind of macro. Do you still see that as an opportunity or do you have to be more careful on that front?
Elena Gomez: Thanks, guys. And so, we've got to balance sort of doing the right thing for our customers, but also making sure we hit our plans, and I'm confident we can do both very well.
Speaker Change: Thanks, guys. Yeah, it's a very fair question. Look, at the highest level, as you know, ARR is our North Star, and it's really, you know, our growth algorithm is really focused on growing locations and product attach.
Speaker Change: Pricing is a small, small lever, and I think we have to take a very balanced approach in this macro, obviously. I'm saying, and...
Speaker Change: You know, the conscious of what it feels like to be a customer during this macro. So we've got to balance sort of doing, you know, doing the right thing for our customers, but also making sure we hit our plans and I'm confident we can do both very well.
Stephen Sheldon: Your next question is from a line of Stephen Sheldon with William Blair. Hey, thanks for taking my questions. First, just an update. You're to get an update on the potential timing of a broader rollout of AI solutions like Sous Chef and Toast IQ. I continue to think those solutions could be really impactful to clients. It sounds like they're performing well in some pilots. So how are you thinking about the potential monetization as you roll them out? Would it be more of an upsell with a separate or additional module or more about being included with core solutions and supporting, adding those capabilities, supporting pricing up with those?
Speaker Change: The next question is from a line of Stephen Sheldon, with William Blair?
Stevens Sheldon: Hey, thanks for taking my questions. First, just an update, I'm going to get an update on the potential timing of a broader role out of AI Solutions like Sue Chef and Toast. Thank you.
Speaker Change: I continue to think those solutions could be really impactful to clients. It sounds like they're performing well in some pilots. So how are you thinking about potential monetization as you roll them out? Would it be more of an upsell with a separate or additional module or more about being included with core solutions and supporting?
adding those capabilities, supporting and pricing up with overtime.
Aman Narang: Yeah, thanks, Stephen. Look, I'll start by saying it's really early with a lot of this, but it's like very clear that AI is going to have a big impact on our business and our industry. And, you know, we're working hard to lay the groundwork to really enable the whole organization, first and foremost. And this is even before you get to customers, like things like how we work and how we build software, how we support customers, G&A, so the marketing, there's a lot there. It's very clear that we have to get ahead of to be, you know, an AI-first company.
Speaker Change: Yeah, thanks, Stephen. Look, I'll start by saying it's really early with a lot of this, but it's like very clear that AI is going to have a big impact on our business and our industry.
Speaker Change: And, you know, we're working hard to lay this groundwork to fairly enable the whole organization for some problems. And this is, even before you get to customers, like, things like how we work and how we both software, how we support customers, G&A, so the marketing, there's a lot there. It's very clear that we have to get ahead of to be, you know, and. And, you know, we're working hard to help customers. We're working hard to help customers. We're working hard to help customers.
Aman Narang: On the customer front, I think The thing we have to keep on going back to is our restaurants' customers are not tech-savvy, they're strapped for time, and so we have to help them understand how these tools can actually create value, and so the team is really focused on that. So you look at this Toast IQ release, it's all about, like, this is the intelligence engine that every Toast product will leverage over time, and so some of the examples I shared earlier, like one was we started seeing some of these customers' check size increasing with our AI-enabled upsell module, or with our AI-enabled marketing campaign, you know, we're starting to see not only restaurants generating demand via email and text, and the AI generation is probably, Gen AI was generating these campaigns for you, we're starting to see productive ad campaigns on Google and social, so really good to see some early signals of customer impact, but it's still early.
D.I. for his company. On the customer front, I think.
Speaker Change: The thing that to keep on going back to is our restaurant's customer is not tech savvy, it's a chef for time, and so...
Speaker Change: We have to help them understand how these tools can actually create value, and so the team is really focused on that, so you look at this Toast IQ release.
Speaker Change: It's all about like this is the intelligence engine that every toast product will leverage over time And so here's some examples I shared earlier like one was you start to see at some of these customers
Speaker Change: Check size increasing with AI-Nable, the Upsell Module, or with our AI-Nable Marketing Campaign.
Speaker Change: You know, we're starting to see not only restaurants generating demands, the email texts and the AI generation is about the Genai with generating these campaigns for you.
Speaker Change: We're starting to see productive ad campaigns in Google and social, so really good to see some early signals of customer impact.
Aman Narang: And then on Sous Chef, the way to think about it is this is like a restaurant co-pilot, it's like, you know, it's like a data feed and a chat-based tool that our customers and our support team can use, and so it helps you with things like insights about your business, you know, what does an example be like, it might tell you, like, Monday and Tuesday, and your sales forecast is off, and you're not profitable, or it might say, here's some items that keep going out of stock, or like, you know, and then on the other thing that we're doing is we're building out the language interface where You know, Sous Chef can be the thing you can use to talk to the Toast back end.
Brassil Early, and then on Sue Chefs.
Speaker Change: The way to think about it is this is like a restaurant co-pilot. It's like you know it's like a data series and a chat-based tool that our customers and our support team can use.
Speaker Change: And so it helps you with things like insights about your business, you know, that was just an example, it would be like...
Speaker Change: You know, sous-chef can be the thing you can use to talk to the toast back end.
Stephen Sheldon: So, you know, think about like, I want to 86 an item or turn off delivery or reset my printer. It's really powerful to have an interface like Sous Chef we can talk to and actually manage the back end config. And so really focus at the highest level and just driving customer impact with AI and building an AI first culture. And if we can have customer impact, like I think, you know, we're really confident monetization will fall over time. But right now that gets early and the focus is on really driving Got it. Makes sense. Thanks.
Speaker Change: So, you know, think about like I want an 86 item or turn off delivery or reset my printer. It's really powerful to have an interface like Sushab, we can talk to.
and I actually managed the back-end config and so...
Speaker Change: really focus at the highest level on just driving customer impact with AI and building an AI-first culture. And if we can have customer impact, like I think, you know, we're really confident monetization will fall over time. But right now that gets early and the focus is on really driving customer impact.
Stephen Sheldon: And then just a quick follow up would be great to just get an update on the international traction.
Speaker Change: God, it makes sense, thanks. And then just a quick follow-up would be great to just get an update on the international traction. And specifically are there commonalities on the types of locations you're winning in Canada, UK and Ireland? And are there any early signs you're seeing a positive referral or a word of mouth activity picking up?
Stephen Sheldon: And specifically, are there commonalities on the types of locations you're winning in Canada, UK and Ireland? And are there any early signs you're seeing a positive referral or word of mouth activity picking up? Yeah, Stephen, I think if you look at the traction we've seen internationally, it's in some ways, it's very similar to the early days of Toast here in the US, where, you know, if you look at our average GDP per location in the US, it's higher than industry averages, and we see something similar internationally as well. And the progress has been really strong.
Speaker Change: Yeah, Stephen, I think if you look at the traction we're seeing internationally, in some ways it's very similar to the early days of Toast here in the US where...
Speaker Change: You know, if you look at our average GP for P for a location in the US, it's highly industry averages, and we see something similar internationally as well. And the progress has been really strong, we're, as I mentioned, we're ahead of plan to grasp all of our segments.
Aman Narang: We're, as I mentioned, we're ahead of plan across all of our segments. Customer sentiment continues to be strong, we're building out, really internationalizing the full platform. And in terms of network effects, at the highest level, Toronto or London, they're not fundamentally different than Boston or New York. And so what we have to do is there's so many markets that, you know, whether it's in North America, Western Europe, Australia, New Zealand, a few others, where GPB per location is healthy. And so our focus is really on replicating the playbook we've got in the US. And I think in terms of like your question about are we seeing a referral channel, the truth is like it's still early.
Speaker Change: Kupfer sentiment, continuously strong, we're building out, they are nationalizing the full platform, and in terms of network effects.
Speaker Change: Look at the highest level Toronto London, they're not fundamentally different than Boston, New York, and so...
Speaker Change: What we have to do is there's so many markets that...
Speaker Change: You know, whether it's in North America, Western Europe , Australia, New Zealand, a few others weren't it?
Speaker Change: GPB per location is healthy and so our focus is really on replicating the playbook we've got in the US.
Speaker Change: And I think in terms of your question about are we seeing your referral channel? The truth is, it's still early. Go to these markets, and while we create early fraction, it's still not the same thing as what you're seeing in the US. So I think we'll see that over time.
Aman Narang: You go to these markets and while we've got early traction, it's still not, you know, the same thing as what you're seeing in the US.
Aman Narang: And so I think we'll see that over time.
Stephen Sheldon: Great, thanks and really nice results. Thank you.
Great, thanks, and really nice result.
Dominic Ball: Your next question is from the line of Dominic Ball with Reborn Atlantic. Hey, everyone. Hey, Aman, Elena, Michael. Great set of results. You clearly demonstrated Toast's ability to fend off competition from cloud-native POS systems, shall we say. But DoorDash, which is a partner and now maybe an emerging competitor, has sort of relaunched its POS system. They're also acquiring seven rooms to deepen their hospitality software suite. How do you find this progression as, you know, some partners become more like direct competitors? And does this push Toast to invest a little bit more into local bikes?
Thank you.
Speaker Change: Your next question is from the line of Dominic Ball with reborn Atlantic. [inaudible]
David Kupferberg, David Kupferberg,
Speaker Change: Everyone, hey Aman, Elena, Michael, great set of results. You clearly demonstrated Toast's ability to, you know, fend off competition form.
cloud-native POS system, shall we say.
Speaker Change: But Dawdash, which is a partner and now maybe an emerging competitor, has sort of re-launched POS system. They're also acquiring seven rooms to deepen their host palathy software suite.
Speaker Change: How do you find this progression as some partners become more direct competitive and does this push Toast to invest a little bit more into local bike Toast?
Dominic Ball: Yeah, I think great question, Dominic.
Aman Narang: Look, our strategy has literally been this vertical strategy from day one is to build the world's best platform for restaurants. And we continue to believe there's a ton to do, right, to continue to not just rest on our laurels, but continue to build out the platform. And look, it's been working so far, you've seen our consistency in our execution. And what the R&D and the platform team and product team focus on is, just as we've got, you know, led the way over the past decade with our platform, whether it's the all in one cloud, handheld guest products, increasingly with data and AI with the same mentality, or we're not gonna, you know, We're going to continue to invest to differentiate and build up a platform.
Yeah, I think great question, Dominic. Look at our strategy.
Speaker Change: And they really been this vertical strategy from day one is to build the world's best platform for restaurants and we continue to believe there's a ton to do [inaudible]
Speaker Change: Right, to continue to not just wrap our laurels but continue to build out the platform and look it's been working so far you've seen our consistency in our execution. Thank you very much.
Speaker Change: We're going to continue to invest to differentiate and build up a platform.
Aman Narang: And then in your question on local, I think our local strategy is really independent of what others are doing. We're leaning into what we think we can uniquely do well, which is to bring guests in store. And so that's where we think about all the ways in which we can do that. You know, that is specific and distinct to our platform and the things we can do there. And so we continue to do that. But that's independent of what the market. Sounds great. Thank you.
Speaker Change: And then any question on local? I think our local strategy is really independent of what others are doing. We're leaning into what we think we can uniquely do well.
Speaker Change: which is to bring guests in store. And so that's where as we think about all the ways in which we can do that.
Speaker Change: You know, that is a significant distinct to our platform and the things we can do there and so we can continue to do that but that's independent of what the market's doing.
Sounds great. Thank you. Thank you.
Raina Kumar: Your next your next question is from line of Raina Kumar Oppenheimer. Hi, great results here. And thanks for taking my question.
Speaker Change: Your next question is from the line of Reina Kuma, Robin Himer. Bye.
Raina Kumar: So if we were to enter a steeper recession, can you talk about how you would expect to manage your cost base versus continuing to invest in the business? Yeah, thanks, Raina. Great question. So, you know, we've navigated through very dynamic times in the past, including COVID. And as we said, we haven't seen a change in consumer trends so far. And we know restaurants have proven to be resilient to really a range of macro scenarios. And so when you think about that, you know, that's the context that we operate in. But of course, if we did see pressure in the business, you know, we've been decisive in the past, when we're faced with a downturn, and we'd pull back spending in areas that are non-revenue generating, and we'd really be balanced in that, right?
Raina Kumar: Hi, great results Aaron, thanks for taking my question. So if we were to enter a steeper recession, we'd talk about how you would expect to manage your cost-based versus continuing to invest in the business.
Raina Kumar: Yeah, thanks, Rayna, great question. So, you know, we've navigated through very dynamic times in the past, including COVID. And as we said, we haven't seen a change in consumer trends.
Raina Kumar: We know restaurants have proven to be resilient through really a range of macro scenarios And so when you think about that, you know, that's the context that we operate in But of course if we did see pressure in the business
Raina Kumar: You know, we've been decisive in the past when we're faced with a downturn and we pull back spending in areas that are non-rebney generating and we really be balanced in that, right? We want to make sure we think about this process over the long term as well. Let's go.
Aman Narang: We want to make sure we think about this business over the long term as well. So we'd be balanced. But overall, I think this team is ready to navigate under any scenario and will be decisive in doing so, confident we can navigate. appreciate it.
Raina Kumar: So, we'd be balanced, but overall I think this team is ready to navigate under any scenario and we'll be decisive in doing so confident we can navigate.
Aman Narang: And as a follow up, are there any opportunity for toast to service other diamond brands like IHOP? We are absolutely exploring. Look, our enterprise team, one of the things that's exciting is that the pipeline that we see across enterprise has never been stronger. This is we're getting more proof points. I think it's getting the word out and it's also helping us continue to get more interest. And so certainly, you know, I think, you know, we continue to see great opportunities.
Speaker Change: Appropriated and as a follow-up, are there any opportunities for Toast to serve as other diamond brands like I have?
Speaker Change: We are absolutely exploring an enterprise team. The one thing that's exciting is that the pipelines that we see across enterprise has never been stronger. This is getting more proof points. I think it's getting the word out in the talk. It's getting out there.
Speaker Change: helping us continue to get more interest. And so, certainly, I think we continue to see great opportunity.
Raina Kumar: and I have specifically your question that's that's that's the current deal is for Applebee's. Understood.
Speaker Change: and I have specifically your question that's that's that's the current deal is for Applebee's but just to be clear
Raina Kumar: Thanks for the call.
Thank you.
Andrew Bauch: Yeah, thank you. Your next question is from the line of Andrew Bauch with Wells Fargo. Hey, thank you for taking my question. A nice set of results here. I want to revisit the enterprise win with Applebee's and across a couple of vectors, I guess, number one, can you help us understand the pitch? Is that I mean, I'm sure it's a combination of driving further growth for them, but also being more efficient, I guess, any kind of like KPIs you can provide there. And then my follow up would be, you know, this is a segment of the market that, you know, many investors who are skeptical thought that, you know, you guys can actually win.
Understood. Thanks for the color.
Yes, thank you.
Speaker Change: Hey, thank you for taking my question and I said a result here. I want to revisit the Enterprise win with Apple Bees and across a couple of actors. I guess number one, can you help us understand the pitch?
I'm sure it's a combination of...
Speaker Change: Driving further growth for them, but also being more efficient. Any kind of like KPI would you provide there?
Speaker Change: And then my follow-up would be, you know, this is the segment of the market that, you know, many investors who are skeptical thought that, you know, you guys can actually win.
Andrew Bauch: So how do you kind of see this being an anchor tenant for these large chains and enterprises? And are you having additional conversations with with more Applebee's like restaurants today? Yeah, absolutely.
Speaker Change: So, how do you plan to see this being an anchor tenant for these large chains and enterprises? And are you having additional conversations with more Apple D's like restaurants today? Bye.
Aman Narang: We are, you know, I think, as I just mentioned, our enterprise pipeline has never been stronger. And so we're absolutely having conversations with, you know, many, many brands. And, you know, as we get more and more proof runs, right, it's not just about Applebee's, you look at Marriott, and Hilton, and Choice Hotels, and then you've got Perkins, and Potbelly, and Visa. I don't have all of them on the tip of my finger. But if you look at the list, Applebee's is just one among many as we've been growing our platform upmarket. And I have a lot conviction, as you think, zoom out and think about the next decade, with the way we're investing in the platform, and that this is a part of the market that will be available to us for sure.
Speaker Change: Yeah, absolutely. We are, you know, I think as I mentioned, our enterprise pipelines have never been stronger, and so we are aptly having conversations with
You know, many, many brands and...
Speaker Change: As we get more and more proof front, Trace, not just about half a BC look at it. [inaudible]
Speaker Change: Mary Outen, Hilton, and Choice Hotels, and then you've got Perkins, and Pop Valley, and this, I don't have all of them onto my finger, but if you look at the list...
Speaker Change: Applebee is just one among many as we've been growing our platform of market and I have a lot of conviction as you think, do not think about the next decade with the waiver investing in the platform and that this is part of the market that will be available to us for sure.
Aman Narang: And then to your question about, like, you know, why did they buy? Specifically, I think, part of it is, you know, you think of Applebee's as a concept, it's got a fixed footprint. And one of the things they loved about it is our industry-leading handheld, the Telco device, because you can take orders and payments to the table, it helps them with check size, tips, turning tables faster, so that's one of the motivators. You know, our kitchen management and KDS tools, another area where they wanted to modernize. And then our above-store management. And so, in fact, in the Applebee's case, we're actually replacing an in-house solution that they were managing.
Speaker Change: Part of it is, you know, you think of it, Apple V's the concept, it's got a big footprint, and one of the things they loved about it is our industry-leading handheld, the Telco device.
Speaker Change: because you can take orders and table, it helps them with checksides, tips, turning tables faster, so that's what the motivators, you know, all of our kitchen management and KDS tools, another area where they want to modernize, and then up our bus for management, right? And so in fact, in the Applebee case, we're actually replacing an in-house solution that they were managing.
Aman Narang: And so, the value prop is really, as you go upmarket, it often starts with in-store. Like, within the four walls of a restaurant, like, you know, some of the benefits we provide in SMB apply into enterprise. And then as we're building out the above-store capabilities that we've talked about in the past, like, more of the market becomes available to us. But to your point earlier, absolutely, we believe long-term this is a big opportunity, this is a meaningful opportunity for us to grow.
Speaker Change: And so the value prop is really, as you go up market, it often starts with in-store, like within the full wall of the restaurant, like toast, you know, some of the benefits we provide in the SMB, apply into enterprise, and then as we're building out the above store capabilities that we've talked about in the past.
Speaker Change: Like, more of the market becomes available to us, but to your point earlier, absolutely, we believe, long term, this is a meaningful opportunity for us for growth.
Elena Gomez: Great. And then just a quick follow up for me, the software RPU strength was particularly strong in the quarter.
Speaker Change: Great, just a quick follow up for me, the software R-Poo Strength was particularly strong in the quarter. I know that the conversion dynamic is a part of it, but anything else around a patch or other that's driving that strength there into the double digits. Thank you very much.
Elena Gomez: I know that the conversion dynamic is a part of it, but anything else around attach or other that's driving that strength there into the double digit? Yeah, that's a great question. Look, I think, at the highest level, the team is executing well. And as you know, we really focus on ARR as sort of the long term, you know, metric that we're looking at in the business. So really pleased with the results and also really, really thinking about long term market growth and the many levers that we have to grow that over time, but really good execution on the Great, great results.
Speaker Change: Yeah, that's a great question. Look, I think at the highest level the team is executing well. And as you know, we really focus on ARR as sort of the long term, you know, metric that we're looking at in the business. So really pleased with the results and also really. Thank you very much.
Speaker Change: Really thinking about long-term arctic growth and the many levers that we have to grow that at work time, but really good execution on the team.
Andrew Bauch: Thank you.
Great, great result.
Josh Baer: Your next question is from Josh Baer with Morgan Stanley. Thanks for the question. Congrats on a great quarter. I did want to come back to Toast IQ as a follow-up to the earlier question. I mean, I definitely heard the answer. I understand it's very early.
Thank you.
Your next question is from Josh Baer with Morgan Stanley.
Speaker Change: Thanks for the question. Congrats on a great quarter. I did want to come back to Toast IQ as a follow-up to the earlier question. I mean, I definitely heard the answer. I understand it's very early. Are you able to talk a little bit about
Josh Baer: But are you able to talk a little bit about the go-to-market or philosophy around pricing? I mean, there's a lot of anecdotally in the press release, like the value is overwhelming. There's a lot of different products even embedded in Toast IQ. So any more context there would be helpful.
Speaker Change: The go-to-market or philosophy around pricing, and there's a lot of anecdotally, in the press release, like the value is overwhelming, there's a lot of different products even embedded in Toast IQ, so any more context there would be helpful. All right.
Aman Narang: Yeah, Josh, I mean, I think not really on pricing, if I'm honest, like the focus, you know, and we'll certainly keep you up to date as things develop. But if you look at these products, first of all, you look at AI to begin with, and it's moving so quickly, I feel like every, you know, quarter, things are changing. And then the tools are getting better and better. And so our team is very focused on making sure that we are helping our customers first and foremost, like stay up to date with the trends in AI and trying to find ways to create impact for them.
Speaker Change: Josh, I think it's not really unpracing if I'm honest.
Speaker Change: Like the focus, you know, and we'll certainly keep you up to date as things develop.
Speaker Change: But if you look at these products, first of all, you look at AI to begin with and it's moving so quickly, I feel like every quarter of things are changing and the tools are getting better and better and so our team is very focused.
Speaker Change: on making sure that we are helping our customers, first and foremost, like stay up to date with the trends in AI and trying to find ways to create impact for them. And so I think it's great to see the early impact of some of these case studies we're sharing, but we've got to, you know, these are not products at scale that are,
Aman Narang: And so I think it's great to see the early impact of some of these case studies we're sharing. But we've got, you know, these are not products at scale that are still early. And so we have to prove this out at the next level of scale. And I think certainly, like, there's no question that if we continue to see these patterns, like modernization will be an opportunity for us. If we're helping restaurants, look, at the end of the day, if we're helping them with things like check size, if we're helping them with the guest experience, if we're helping them with sales forecasting, if we're helping them driving demand in restaurants, you think of like, you know, how many restaurants have all these open seats, and there's no tools to help them actually bring guests in when they're slower.
Speaker Change: It is still early and so we have to prove this out of the next level of scale.
Speaker Change: And I think certainly there's no question that if we continue to see these.
Peace.
Speaker Change: The modernization will be an opportunity for us if we're helping restaurants, like at the end of the day if we're helping them with things like checksides if we're helping them with the guest experience if we're helping them with Salesforce casting if we're helping them.
Speaker Change: Driving demanded restaurants. You think of like, you know, how many restaurants have all these open seats and there's no tools to help them actually bring guests in when they're slower. And so there's a lot of things we're looking at. And as we start to see impact, you know, we'll certainly look at monetization as well. Thank you very much.
Aman Narang: And so there's a lot of things we're looking at. And, and, and as we start to see impact, you know, we'll certainly look at modernization as well.
Josh Baer: It's not a perfect answer for you on pricing, but it's where we are. No, I appreciate it, Aman.
Speaker Change: It's not a perfect answer for you in pricing, but we'll be out.
Aman Narang: And just wondering, as you start stacking up these enterprise logos, with all the momentum there, if you're seeing any reaction or anything different from legacy vendors? Thanks. Not really, not really. I mean, I think we're focused on executing and we know, like, there's no shortage of things that our R&D team has to do to build out the platform of market. And I think that's what that's what that's what's driving our focus, because a lot of what we're doing across the platform to support whether it's S&B, or retail, or national actually applies up market enterprise as well.
Speaker Change: No, I appreciate it, Aman. And just wondering, as you start stacking up these enterprise logos with all the momentum there, if you're seeing any reaction or anything different from legacy vendors. Thanks.
Speaker Change: Not really, not really. I mean, I think we're focused on executing if we know, like, there's no shortage of things that our ND team has to do to build out the platform of market.
Speaker Change: And I think that's what that's what that's what's driving our focus because a lot of what we're doing across the platform to support whether that's in the retailer and actually applies up market enterprise as well. Think of the broad platform and as we build out some of the capabilities of market, you know, we believe we can have a differentiated differentiated offering. [inaudible]
Aman Narang: Think of the broad platform.
Dan Dolev: And as we build out some of the capabilities of market, you know, we believe we can have a differentiated, differentiated Your next question is from the line of Dan Dolev with Muzuho. Hey, Dan. So I'll start with our core business, and our core business, as I mentioned, the AE productivity was up year over year in Q1 and really through April as well. And so that's what's driving the confidence in our core business. And in these new segments, you know, it's very aggressive goals because these are symptoms of growth, and we're seeing results ahead of expectations.
Speaker Change: Okay, thanks guys, nice results here. I'd be curious on the confidence you have on the second quarter location number.
Speaker Change: And how we should think about it in the face of the macro, so any sensitivity to that would be great and maybe just anything kind of is it like enterprise mix rolling on or you know other things just just more color on that location would be amazing. Thank you so much.
Hey, Dan.
Speaker Change: So, I'll start with our core business. And our core business, as I mentioned, the A productivity was up year over year in Q1 and really through through
Speaker Change: April as well. And so that's what's driving the conference in our core business. And in these new segments, you know, it's very aggressive goals because in terms of growth and we're seeing results ahead of expectations. There's nothing in the enterprise
Dan Dolev: There's nothing in the enterprise, you know, rollout. You can imagine there's such scale in our core business that certainly these winds are great, but at the end of the day, it's still driving, you know, the majority of the growth. And so the mix, even if there's any changes in terms of across them, it's very, very aggressive. Got it. Great.
Speaker Change: Roland, you can imagine there's such a scale in our core business that certainly these wins are great but at the end of the day the core is still driving, you know, the majority of the growth and so the mix, even if there's any changes in terms of across them, it's very, very gradual.
Dan Dolev: And then maybe a quick follow up. I noticed that the take rate X capital moved up a little bit. Maybe is this just mix or, you know, is there something special that you guys are doing to help get that take rate up, which is very nice to see? Thank you. Yeah, thanks, Dan, for the question. Yeah, take rate is up four basis points year over year in Q1. So really, really pleased with the progress that we've made. And it's really a combination of things, Dan. It's not any single one thing. So think about the pricing initiative that we had in the tail end of 2024.
Speaker Change: Got it. Great. And then maybe a quick follow-up. I noticed that the take rate X capital moved up a little bit. Maybe it's just makes or you know, is there something special that you guys are doing to help get that take rate up, which is very nice to see. Thank you.
Speaker Change: Yeah, thanks, Dan, for the question. Yeah, Ops, cake rate is up for 4 basis points year, year, and Q1. So really, really pleased with the progress that we've made. And it's really a combination of things. Dan, it's on any single one thing. Thank you so much.
Think about the pricings. [inaudible]
Speaker Change: Initiative that we had in the tail end of 2024.
Dan Dolev: A little bit more of cost optimization, which is just an ongoing focus area, looking at cost per transaction that our team does. And then some product, you know, surcharging is starting to see some traction as well. So it's really a combination of all those. It's not any one single one single lever, but really pleased with what we're tracking. Great. Well, nice results again. Thanks.
Speaker Change: A little bit more of cost optimization which is just an ongoing focus area looking at cost per transaction that our team does and then some product, you know, surcharging is starting to see some direction as well so it's really a combination of all those. Let's go.
Speaker Change: It's not any one single lover, but really pleased with what we're tracking. [inaudible]
Great, well nice results again, thanks.
Dan Dolev: Thank you.
Harshita Rawat: Your next question is from the line of Harshita Rawat with Bernstein. Hi, good afternoon. Elena, I want to ask about hardware and the impact from tariffs, acknowledging the uncertainty in the dynamic environment. I know you talked about slightly higher hardware expenses for the year. Maybe just talk about, I guess, the sensitivity around the tariff scenarios and also your ability to pass on some of the costs to your customers. Do we expect maybe if hardware costs are elevated, maybe slightly higher, longer payback period?
Thank you.
Speaker Change: Your next question is from the line of her <expletive> , Rawat, with Bernstein.
Good afternoon. Elena, I want to ask about hardware. Thank you very much.
Speaker Change: and the impact on tarage, acknowledging the uncertainty in the dynamic environment. I know you talked about slightly higher hardware expenses for the year. Maybe to talk about, I guess, the sensitivity around the tariff scenarios. And also...
Speaker Change: Your ability to pass on some of the cost to your customers, or do we expect maybe if hardware costs are elevated, maybe slightly higher, longer payback payments? Thank you.
Elena Gomez: Yeah, thanks, Harshita. It's a very relevant question, something we've been paying a lot of attention to. So look, based on the current rules, the incremental costs associated with tariffs are manageable and reflected in the guidance and the outlook I shared today. And at the highest level, we're confident we can navigate this very, I would call, very dynamic landscape. And part of that is because over the course of the last couple of years, we've taken steps to diversify our supply and really rely less on China. And so as we've done that, that's put us in a position this year where it is a very manageable expense for us.
Speaker Change: Yeah, thanks, Harshita. It's a very relevant question, something we would paint a lot of attention to, to look based on the current roles, the incremental costs associated with terrorists are manageable and reflected in the guidance and the outlook I shared today. And at the highest level, we're confident we can navigate this.
Very, I would call it very dynamic.
Elena Gomez: And at the moment, we have to be balanced as whether or not we consider passing that along to customers. We have to be incredibly balanced in this environment. So we're going to think about pricing holistically.
Speaker Change: And at the moment, we have to be balanced, whether or not we consider passing that along to customers, we have to be incredibly balanced in this environment. So, we're going to think about pricing holistically, so nothing specific on tariffs that I would comment on.
Elena Gomez: So nothing specific on tariffs that I would comment.
Elena Gomez: Thanks. And as a follow up, I mean, I just remind us of the, you know, location growth algorithm in terms of, you know, share from new location ads, existing restaurants, adding new locations, market share, so on. And now you have the, you know, growing new vectors in terms of enterprise, international food and beverage.
Speaker Change: Thanks, and as the follow-up, I mean, I just remind us of the, you know, location growth algorithm in terms of...
Speaker Change: You know, share from new location ads, existing restaurants, adding new locations, market share, to go on and now you have the, you know, growing new vectors in terms of enterprise, international food and beverage retail. Thanks.
Speaker Change: Yeah, I'll start and feel free to. So at the highest level, the share between new and existing continues to be relatively balanced.
Speaker Change: And then as you think about our net ads adding on to our platform, core continues to be the primary growth engine, of course, but as we continue to invest in these new TAMs, you'll see that, they'll begin to contribute more over time, and certainly as we get into the backup of the year.
Samad Samana: We will now take our last question from the line of Samad Samana with Jeffrey.
Thanks.
Speaker Change: We will now take our last questions from the line of Samad Samana with Jeffries.
Jeremy Seller: Hey guys, this is Jeremy Seller on Persona Mod. Thanks for squeezing me in. The PopGolf win is really interesting. I think it shows your continued ability to expand the TAM and adapt the platform in new formats. Can you talk about what went into that deal? I guess, who do you compete against in non-traditional formats like this? How do you think about maybe the metrics per location? And then lastly, I guess, does it change the way you think about the total TAM, you know, the aggregate of all the formats that you're currently going after? Yeah, thanks, Jeremy.
Speaker Change: Hey, guys, this is Jeremy Seller on Person Mod. Thanks for squeezing me in. The pop-goal plan is really interesting. I think it shows your continued ability to expand the term and adapt the platform in new formats.
Speaker Change: I guess, can you talk about what went into that deal? I guess, who do you compete against in non-traditional formats like this? How do you think about maybe the metrics for location? And then lastly, I guess, does it change the way you think about the total time, you know, the aggregate of all the formats that you're currently going after? [inaudible]
Aman Narang: Definitely, the team did a phenomenal job. Excited about this win in Topgolf. In terms of the competition, actually, as you get into these specialized parts of the time, we see a little bit more legacy in terms of what we're competing against, these on-premise solutions that we compete against. And I think in terms of the value proposition at Topgolf, it's really, you know, we're actually powering the food and beverage. We're also powering the retail and the tea times, the whole thing. And so this is, I guess, we're building out the platform, and it opens up more and more opportunity.
Speaker Change: Yeah, thanks for me. Definitely, it seems a phenomenal job. I'm excited about this when the top golf in in terms of. [inaudible]
Speaker Change: The competition, actually, as you get into these specialized parts of the time, what we see a little bit more legacy in terms of what we're competing against, these on-premise solutions, and yeah.
Speaker Change: And the two times, the whole thing. And so this is like, as we're building out the platform, it opens up one more opportunity. And I think to your point, like that is the strategy on our SMD team is to think hard about what are ways in which we can continue to build out the team. I talked in the call about in the script about, you know, wineries and membership club, the non-English native speaking restaurants. And so this just fits in there. And in terms of GPV and metrics, these are bigger. If you go to top call, you can see these are big locations. And.
Aman Narang: And I think, to your point, like, that is the strategy on our SMB team is to think hard about what are ways in which we can continue to build out the TAM. I talked in the call about, in the script about, you know, wineries and membership clubs and non-English native speaking restaurants. And so this just fits in there. And in terms of GPV and metrics, these are bigger. If you go to Topgolf, you can see these are big locations. I don't know exactly what the GPV averages are, but it's a significant footprint, and we're excited to power it.
Speaker Change: I don't know exactly what GTV is, the averages are, but it's with the Mexican footprint and with
Speaker Change: Great, that's great color, and then it excludes on a quick follow-up. With the understanding, I guess, that you have the data to manage risk related to Toast Capital, to Toast itself. I guess, have you seen any change in the creditworthiness of the average restaurant? I think some metrics out there have shown, look, increased the credit stress at that restaurant separate from same store sales. Are you seeing anything like that?
Aman Narang: No, we're not seeing to our toast capital program is super, you know, the team's executing quite well. It's very healthy originations are healthy. And most importantly, our defaults are in line with our expectations. So we're not seeing that pattern.
Speaker Change: Now, we're not seeing to our Toast Capital program, super, you know, the teams executing quite well, very healthy, originations are healthy, and most importantly, our defaults are in line with our expectations, so we're not seeing that pattern.
Michael Senno: This concludes today's conference call. Thank you for joining. You may now disconnect.
Speaker Change: This concludes today's conference call. Thank you for joining. You may not disconnect.
Thank you. Bye.