Q3 2025 Toast Inc Earnings Call
Speaker #1: Good afternoon. My name is Daniel, and I will be your conference operator today. At this time, I would like to welcome everyone to Toast, Inc.’s third quarter 2025 earnings conference call.
Speaker #1: Today's call will be 45 minutes . I'll now turn the call over to Michael Senno Senior Vice President of finance . You may begin your conference .
Speaker #2: Thank you . Welcome to Toast, Inc. earnings conference call for the third quarter ended September 30th , 2025 . On today's call , our CEO , Aman Narang and CFO Elena Gomez will open with prepared remarks , which will be followed by our Q&A session .
Speaker #2: 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 related to our business that may be considered forward looking within the meaning of the Securities Act and the Exchange Act .
Speaker #2: All statements statements 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 in business outlook , including our financial guidance for the fourth quarter and full year 2025 .
Speaker #2: 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 #2: Please refer to the cautionary language in today's press release and our SEC filings for a discussion of the risks and uncertainties that could cause actual results to differ materially from our expectations .
Speaker #2: 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 .
Speaker #2: Gross profit , which we refer to . Collectively as recurring gross profit streams . These are the basis for our top line guidance .
Speaker #2: These non-GAAP measures are not intended to be a substitute for our GAAP Please refer to the earnings release and SEC filings for detailed reconciliations of these non-GAAP measures to the most comparable GAAP measures .
Speaker #2: results .
Speaker #2: Unless otherwise stated , all references on this call to cost of revenue , gross profit and gross margin . Sales and marketing expense .
Speaker #2: Research and development expense , and general and administrative expense are on a non-GAAP basis . Finally , the press release can be found on the Investor Relations website and investors .
Speaker #2: After the call, a replay will be available on our website. And with that, let me turn the call over to Amin.
Speaker #2: Thanks , Michael .
Speaker #3: And thank you , everybody for joining us . This afternoon . We delivered another great quarter with 34% top line growth , 35% margins and continued year over year growth in net location adds our momentum and execution thus far has us well positioned to deliver a strong 2025 .
Demonstrating that the new market segments can be material drivers of growth.
We continue to build momentum in international markets. As we expand our platform and establish toasts brand globally.
Large well respected. Multaq constant, Hospitality groups.
Such as the collective in Ireland. Caravan group in the UK and Happy Valley group in Canada. Have chosen toast.
Because the Cs is a best-in-class solution that can help them run a better business.
We're rolling out new Integrations, including with Uber, we've improved our online ordering and inventory Management Solutions and continue to regionalize key capabilities.
as we built towards the best, Global platform for restaurants,
International. Sassar Food is up, 20% year-over-year?
And we're confident that these investments will continue to drive, both our poo and win rates over time.
In food and beverage retail.
We continue to gain traction each quarter.
We recently went live with Tri County meat markets in Texas, the Lalo Italian Market in Pennsylvania.
And Nature's Best in Illinois.
They all came to toast for a modern all-in-1 platform, allows them to manage everything from thousands of inventory items.
Efficient checkout Lanes at scale.
We're expanding our sales team.
And deepening our retail offering with features and Integrations to support our vertical strategy.
At the same time, it's exciting to see our customers. Leverage parts, for our restaurant platform, including our kitchen display creams.
The power fulfillment and grocery stores, as well as bottle shops.
And lastly, in Enterprise, our continued investment and above store and multi-location management capabilities is paying off.
We landed our 2 largest deals. Ever this year and our pipeline has never been stronger.
Across all these markets.
We're confident in our path to become a market leader in each of these areas and build them into meaningful growth engines for Toast.
Over the long term.
We believe these new terms, have the potential to serve past our Core Business.
And enable us to scale from 156,000 locations today.
To 500,000 locations and Beyond.
Next, our third priority is expanding our platform adoption and driving differentiation through data and AI.
Toast was built by listening to customers.
Taking real problems from the restaurant floor and turn them into products. At make a difference in their day-to-day.
This customer Centric approach Powers. Our next wave of innovation.
Where our unique scale and data are driving new AI products like toast IQ and toast advertising.
We recently evolved sucia into toast IQ.
A true AI assistant for restaurant operators.
At amichi a casual Pizza and Wing Spot in Georgia. The team uses toast. IQ daily to analyze sales, adjust menus, and make better decisions.
As an example, it's flagged, a drink promo. Costing them up to $100 a day.
And help them fix it and build a happy hour menu that is even more effective.
As they put it.
Toe side Q feels like having a personal assistant.
And that's the goal.
Toast IQ gives fast answers, proactive insights, and direct actions to operators.
Adoptions has been strong.
And since rolling it out in early October, more than 25,000 restaurants have used sochic over 235,000 times so far.
our mission is to help our customers Drive Real Results by making toast IQ, the intelligence platform of the future,
The product gets better every day as we expand its data sources, and deepen Integrations across the platform.
As an example, we're also partnering with Brands like Coca-Cola to help restaurant increase drink sales through data driven recommendations,
This more example of the exciting New Opportunities, this product unlocks.
Our marketing and advertising tools are another way. We're helping restaurants grow.
We started with email and SMS.
Then layered in AI to automate and personalized Outreach.
Toast advertising. Operators can Now launch campaigns across Google and meta in just minutes.
With AI powered recommendations and clear are allowed reporting.
And it's driving real impact.
During their peak season.
Pizza By The Sea in Florida, estimated 400,000 in sales across the store locations, which was attributed to toast. Advertising campaigns are more than 20x return on ad spend.
Together TOS, IQ and toast. Advertising are just the start of how we're combining AI data.
And deep restaurant expertise to make our platform smarter.
More powerful and indispensable to restaurants everywhere.
And wrapping it up with our fourth priority.
We're continuing to invest with discipline while expanding margins.
Our goal is to maximize long-term shareholder value by building a durable, growth business that compounds ARR over time.
it took us more than 10 years to reach our first billion in our
and just 2 years to double it.
We are a leader in our Core US, SMB business and that's conviction that we can replicate that success across our new Tams by using the same vertical strategy that has worked so well in our core across new verticals,
New geographies and new segments.
With strong momentum across all areas where, on track to increase. Net adds in 20125, as well as 2026.
Enterprise International and food and beverage, retail are collectively on Pace to reach 100 million in ARR this year.
And we see the potential for each of them to grow to a billion are over time.
As we scale, we're also carefully managing our margins by prioritizing what's most important to build a long-term growth business.
Our Core Business already operates at our Target 40%. Even in margin that we laid out at our investor day.
Giving us the flexibility to invest in New Growth engines.
Given the size of the opportunity.
Our growing conviction and Leadership across new markets.
And our line of sight to achieving strong inner economics at scale.
We're investing to accelerate growth.
We're executing against what we laid out at our investor Day last year.
We have momentum in our core.
Traction across new markets.
Expanding platform, adoption.
The business.
I've never been more confident in our ability to create value for our customers and drive long-term shareholder value.
To wrap up. I want to thank our entire team.
Our customers as well as their investors. The progress we're making this year is a direct result of our team's hard work and dedication.
Our customers, Trust.
And of course, the support of all of our investors. Thank you. And with that, I'll turn the call over to Elena.
Thank you. And to everyone for joining us today to start. I would also like to thank our team for another strong quarter, which came in better than our expectations.
We crossed 2 billion in ARR in the third quarter, just 2 years after hitting 1 billion.
Doubling our our our underscore of strength and diversity of our business model with both payments and SAS are are each exceeding. 1 billion for the first time.
We're proud of the Milestone and sustaining strong our growth at scale. There were far from done our management team wakes up every day with the mindset of getting to 10 billion in ARR over the next decade.
Starting with our core business, getting to this point took years of investment to establish the breadth of our product and go-to-market footprint. The result of these investments, in our relentless focus on execution, is a business with 40% margins that continues to scale.
While our Core Business is already operating at our long-term margin profile. The incremental margins are tracking higher. That's even as we continue to invest with the goal of doubling, our core market, share and sustaining healthy are growth.
In our new growth areas, we're employing the same proven discipline approach to Capital allocation, with growing evidence and conviction that each of these 3 new areas can be material, businesses, long term. We're leaning Into The Upfront investment to build the product capabilities, and go to market, footprint to scale into a market leader in each area.
We're confident we can scale efficiently and drive meaningful contributions to growth over time.
Turning to our quarterly results are grew, 30% total fintech and subscription growth profit. Our recurring gross profit streams. Increased 34% year-over-year with a total. Take rate of 98 basis, points, across South and fintech.
That's up 7 basis points from a year ago as we steadily increase, adoption reflecting the growing value our platform provides our customers.
Adjusted to be thought was 176 million for the quarter with margins, expanding 5 percentage, points year-over-year to 35%.
Gap, operating income was 84 million.
We are consistently growing net adds year-over-year, every quarter in Q3 we added a proximately, 7,500 net locations, and we ended the quarter with 156,000. Total locations up 23% from a year ago.
We remain on track for more net ads in 2025 versus 2024.
we're focused on executing the same algorithm sustaining consistent market share gains in our core combined with growing Traction in new Tams.
Which sets us up well to continue to grow that adds in 2026.
SAS ARR. Grew 28% year-over-year driven by location growth and a mid single digit increase in staff are on an ARR basis.
Subscription Revenue, increased 29% and subscription gross profit. Grew 32%.
SAS gross margin was 79% up from 77% a year ago due to continued fast. Cogs optimization.
Payments error, increased 31% and fintech gross profit grew 35% in the third quarter versus a year ago.
Gpv was 52 billion growing 24% year-over-year.
Gains last year due to Stronger, same Source sales Trends in the summer.
Fintech. Net take rate was 61 basis points and payments not take rate was 49 basis points.
Payments take rate, increased 4, basis points from a year ago, benefiting from the same drivers. We've seen all year, ongoing cost optimization efforts, small targeted pricing moves and new products, including search charging.
Non-payments fintech solutions led by Toast Capital contributed $58 million in gross profit and 11 basis points in take rate.
Incremental origination volume in the quarter. Overall, the program remains healthy and defaults remain in line with our expectations.
Excluding 31 million of bad debt and credit related expenses. Operating expenses increased 17% in Q3. We are investing in our highest priority areas to drive durable growth while driving efficiencies throughout the p&l.
Sales and marketing expenses grew 23%, reflecting our healthy location growth and scaling, as well as our international and retail go-to-market presence.
The added sales capacity, positions us to gain market, share faster and scale growth in these new towns.
R&D expensive group, 12%.
Innovations like toast IQ and advertising are great examples of further, differentiation of our core product.
We're also adding capabilities to expand our product markets across new customer segments and seating longer-term Horizon, with three opportunities that have the potential to become new growth factors.
Hardware and Professional Services. Gross profit was negative. 10% of our recurring gross profit streams. We are leaning into our customer acquisition momentum to establish market share in New Towns, and continue to drive growth in the core.
We're also absorbing higher tariff costs. We're doing this while staying within our guardrails to maintain healthy, payback periods as we scale.
Adjusted Eva was 176 million, a 35% margin, our Q3 results. Reflect robust, Topline growth driven in part by better than expected gpv, as well as our continued focus on driving efficiencies throughout the p&l.
Gap. Operating income was 84 million up from 34 million, a year ago, that's both from the strength and adjusted Ava, and our disciplined approach to managing stock based compensation.
Stock-based compensation as a percentage of recurring gross profit was 14% in Q3, down 3 percentage points versus a year ago.
Free cash flow grew to 153 million in Q3 and 564 million on a trailing 12-month basis. Nearly 100% conversion from adjusted ibitha.
Moving to Capital allocation year to date through the third quarter. We repurchased 1.5 million shares or 54 million. We will continue to be opportunistic based on market conditions and act judiciously in support of building long-term shareholder value.
Now turning to guidance for the fourth quarter, we expect total fintech and subscription gross profit to grow in the range of 22% to 25% year-over-year and adjusted Etha to be 140 million to 150 million.
On the back of our strong, year-to-date results. And momentum heading into Q4.
We raised our full year outlook at the midpoints we. Now expect 32% growth in fintech and subscription growth profit, and 615 million in adjusted with a
I'm extremely proud of the financial profile. We've built over the last few years, we've doubled our while investing in the next wave of businesses to sustain that growth.
Our ability to drive strong growth, and expand a justatee with the margins at a healthy rate, demonstrates. The power and leverage of our business model, which is also enabling us to invest in Horizon 2 and 3 growth areas.
We take a deliberate gated approach to investing across our core and Horizon 2 and 3 growth areas. Our new Tam started as a small Horizon 3 peps that we gradually scaled, as we gain momentum and saw initial product Market fit.
We have enough signal across each new town, that we see a path to Market leadership and healthy unit economics at scale.
We are investing into that potential to position ourselves for success and to drive long-term growth and shareholder value, while gradually expanding margins over time.
As a man said, the strategy will laid out at investor day is working.
We remain confident in our medium and long-term targets.
Specifically for 2026 at our multi-billion dollar scale. We will sustain growth over 20% and our ambition is to exceed that
Our current expectation. Is that margins will be flat to slightly up year-over-year.
That's underpinned by the strong core margin of 40% and conviction to invest behind our new Tams.
In February, when we issue guidance.
Our commitment to discipline Capital. Allocation is unwavering. Our long-term margin Target is within our control. We are choosing to reinvest in areas. We have conviction can be meaningful, long-term cash flow, generators and add significant shareholder value.
To close out. We had an excellent quarter and I'm proud of our team for consistently delivering results that outperform our expectations.
2025 is on track to be another year of impressive. Topline growth and margin expansion. Our momentum in the core is strong and with new Tam scaling quickly. We're confident toast is in a position to compound our Top Line at a healthy rate for the next decade and drive long-term shareholder value. Now, I will turn the call back over to the operator to begin Q&A.
This time I would like to remind everyone that in order to ask a question press star, then the number 1 on your telephone keypad. Your first question comes from the line of Josh Bayer from Morgan, Stanley. Your line is open
Great. Thanks for the question, and congrats on a strong quarter. Um, wanted to ask about gpv per location which was up slightly year-over-year, I think better than, uh, expected um, wondering how much of that was driven by mix. So just lower mix of customers in more pressured parts of the market, um, or or maybe and or how much is coming from toast? Customers just outperforming peers. And if that is part of the case, just wondering if you, you know what, what kind of data do you look at is it more a selection bias as far as the customers that you land um or uh how much is it? Your actual technology increasing sales?
Yeah, thanks for the question, Josh. Um, you know, we saw it in Q3 in the summer was gpv per location, xed expectations. Um, and, uh, as we looked at October, I think it's normalized a little bit, but overall, it's in line with what we expected. Um, I think, certainly our platform a big part of what we build is the health restaurants, uh, run a more profitable and more successful business. And so a lot of the Investments we continue to make, you know, handholds for example, or to go 3 is an example of that top restaurants are not better business. And, um, same store sales I think have been in, in, in a balanced Place, uh, year-over-year. So nothing that has dramatically changed.
Okay, great. Um,
my next question comes from the line of Will nonce from Goodman Sac field line is open.
Hey guys, thank you for taking the questions. Um, you know, I think yeah, obviously really nice results tonight. You talked about a clear path to doubling your market share in core SMB. And I think there's been really heightened focus on competition recently. And honestly, probably, uh, as a reaction to how much you yourself have raised the bar on how to approach this Market. You know, pretty much every competitor has doubled down trying to catch up. So can you just speak to some of those competitive concerns? You mentioned win rates being up against peers, you know, how are you thinking about the sustainability of your recent market, share gains and maybe how long it takes uh you know to reach that goal of ultimately doubling your share in the core Market. Thanks again.
Yeah, thank thanks for the question. Well, you know, first off, I just want to congratulate the team we had a fantastic kids, we really had a fantastic year so far, teams performing well. Um if you look at our net heads, as I mentioned they're up in. Q3 they're tracking to be up every quarter this year and um it's really you know a direct result of
Uh, the execution of the team, our win rate as I mentioned are up year-over-year against all major competitors. Um and that's actually both in qsr and FSR. Um,
In our Core Business. There are uh, in about the same range of last year and so it just shows you the market share gains were gaining every year as we continue to grow and scale.
Appreciate it that shot tonight.
Thanks. Well.
Our next question comes from Josh. Bayer from Morgan Stanley. Your line is open.
Uh, I think I already asked mine.
The next question comes from Timothy chiodo from UDS. Your line is open.
Great, thank you. I want to shift yours a little bit to talk a little bit more about the opportunity that toast has with consumers. So back when you had, maybe 100,000 restaurants or so, maybe some of the stuff was less applicable because maybe the network wasn't quite as dense but it's getting there and you're on your way to being north of 200,000. And I was wondering if you could just talk about. What does that mean in terms of an opportunity? You've got some pieces, right? Toast tables toast, takeout the Uber partnership and much more. There could be gift cards. Just talk a little bit about what that dense Network gives you, as an advantage versus some of your competitors. And what kind of products could come out of that
Yeah, that's a great question. Tim um, you know if you if you look at our scale
and the impact that's already having you already see examples of that even Beyond consumer just to zoom out for a second, you've got millions of restaurant employees using toast. And when you walk into toast restaurants,
A consistent theme that I hear is that they love toast and they want to work at at toast run restaurants. Now, another example is uh, we launched about a year ago, we launched a benchmarking product which was to help restaurants and menus and pricing, insights, run better businesses just off the menu data. So there are many examples where our scale and our Network effects are playing a role. And, uh, in consumer, you know, in fact this morning, I woke up and the first thing I did was I went to a restaurant located in Lexington, Massachusetts called a Revival Cafe and 1 of my favorite, things about the app is, you can order ahead and just pick it up, uh, and leave and similar to what Starbucks pioneered many years ago. And so we can do that across 100 thousand plus toast restaurants here in the US. People loved that experience. In addition, I think where we have a unique opportunity is to bring diners in the stores. So whether it's our partnership with resi and talk as part of the AmEx partnership or with toast tables, the ability to get a table, sit down and then 1 of the things that we're looking at is imagine the ability to just walk out and leave at the end of the transaction because you've got a card on file. And so there's a huge opportunity there in terms of providing a
Better guest experience, both in terms of bringing Dinars into the restaurant and then leaving the restaurant as well. And, and within the app, once we hear that, a lot of people have heard love is, um, because we've got such great data about the restaurants and when they're busy and when they're not the Builder Jenner intelligent offers during their slow periods and the ability to track all of your loyalty in 1 place is another thing that uh, we're getting some really good feedback on. So I agree with you. There's a lot of potential here given the density of restaurants that we now have, and I think really, the focus is on figuring out how we can build the best in-store experience, uh, uh, and digitized in that experience for restaurants,
thank you.
Your next question comes from Dan Del live from mu Health. Your line is open.
Hey guys, thank you for taking my question, obviously great results here. Um, wanted to ask about just the consumer in general, like, the macro, right. There's been a lot of like, anxiety out there and obviously, your results are looking great. So maybe you can talk to us. What you're seeing, kind of maybe the quarter but also more recently, uh, as we are in, you know, Q4 already that would be fantastic. Thank you.
Yeah, thanks for the question. Then, look at the summer was strong, Q3 was strong. Um,
Year-over-year, we saw in October on the consumer, was normalized, a little bit, but really within a narrow band and in line with kind of what our expectations were. And um,
And so, in our customers and our restaurants are performing well. You know, one of the things we always look at is, um, whether it's in boom markets or slower markets. You know, we've studied previous recessions in '01 and '08, and what we'll be seeing is that restaurants tend to be resilient. What we're seeing so far in our data is our customers are holding up really well.
Great. Thank you.
The next question comes from Dominic, Paul from Rob's child and Co record. Your line is open.
It's within toss IQ. It looks like 1 of the best products from our perspective that you launched over the last sort of 5 years. You know, when we surveyed, private 4 restaurant owners. The dream is really to understand their customer when they walk in, and because wages and wages churn so much. Um, it's really hard to do that, but this sort of product seems to be offering that so, is there any case studies on any early data points? Um, and how this has gone so far.
Yeah, thanks Dominic. We're saying you know just to zoom out for a second across to a queue. We're seeing lots and lots of use cases like that, where customers are seeing the value?
Of having all of their data actually create Drive value for them, right? So digital chips is a great example of that uh, in the past, if you're using a separate reservation system and a Legacy Point of Sale, you're maybe printing that out on paper, but the ability to have that digitally on your handheld, just makes that experience even more powerful because you can connect the guest experience to what's in the menu to drive upsell as well as to create a more personalized experience, right? Right at the table. So we're that's a great example of that. I think more broadly, um, within our toast IQ platform. We're seeing really high adoption, um, of our back end because customers love the fact that they can use, uh, more of a natural language interface, think of a GPT like interface, where they can go in and say, you know, get support make changes to their back end of the um, you know, whether it's like 8060 and adding for example, or adding specials as well as just get insight about what's going on in their business in terms of profitability, in terms of which what's selling well and
And how things are going. And so, there's a lot of use cases within the Tokyo, umbrella. Digital chips are a good example of that, but really excited to see the the progress and the adoption so far. And, uh, and what the product can do for our customers.
Great. Thank you.
Thank you.
My next question comes from David Hines from peddicord jennetty. Your line is open.
Hey, thank you guys. Uh, congrats to my quarter. Amin, I want to ask how you thought the business performed before and during the AWS outage? I, you know, anecdotally, talked to...
Gross ones up here in the Boston area. It sounded like everyone kind of cut over to offline mode. It worked. Well, they're able to collect payment information. I assume run those later. I think they did have to shut down online ordering which I'm sure is factored into Elena's. Guidance for Q4, you know, it's a small as it was being a Monday lunch. It seemed, um,
You know what what did you hear about the competitive disruption is this a differentiating point of post like how did the business hold up during that period?
Yeah. Uh, DJ the, you know, the business of the fun? Because, besides the, because we've spent, you know, the past decade really building the platform for restaurants and 1 of the key requirements, is if something's down was the internet or AWS or whatever it may be, you got to be able to operate within the restaurant. And so, um, you know, our customers are able to take orders, send their orders to kitchens take payments offline. And as dinner, it came back as as as the system came back, they were able to process those off of offline mode.
um, certainly we see that, you know, the the the, uh,
The need to Leverage.
These digital channels, whether it's our first party channels or our partner ecosystem, that that has grown right over the years. And so we're looking at ways to continue to make that even more resilient and um and uh but I think customers overall were able to work through it and uh I don't think there's any meaningful impact in terms of guidance for Q4.
Thank you.
Thanks.
Our next question comes from Rhina Kumar from Oppenheim. Your line is now open.
Hi a great results and thanks for taking my question. Um, it was good to see uh the total take right um up uh 7 basis points um from a year ago. Um I'm just wondering um how sustainable um and improving take rate is thank you.
Yeah, thank you. Um yeah, I'm really proud also of the team here on their execution. Take rate was uh you know, the core. Net take rate was up 4 basis points and the total take rate up about 5 basis points. And that's really the benefits you're seeing from the small targeted pricing moves its cogs optimization, which is a priority for that team. It's also a new product like search charging which, you know, small today and and contributing a little bit, but over time, that can that can drive, that can be more meaningful as we get more customers on that, um, on that product. But when you zoom out, we have a lot of confidence in our ability to drive
Right up over time really using those same levers driving cost optimization on a per transaction basis, driving more digital Innovation. Um and continuing to scale just with our our volume so really um, view that as an opportunity.
The next question comes from Jason Cooper from Wells Fargo. Your line is now open.
Thank you guys. I wanted to ask about recurring gross profit. I mean, you delivered. I think about a thousand basis points of upside on that metric in the quarter. It's a lot even by toast standards. Uh, and I think this is, this was against the lapping effect of last year's accounting change. And so, I'm curious as you kind of rank order, what, what kind of surprised you to, to the upside, you know, gpv toast, Capital, other factors, and then just looking at typical Q4, seasonality on the recurring, gross profit, I think it tends to be up kind of modestly quarter over quarter versus Q3. But if you look at the top end of the Q4 guidance, I think you'd be down a little bit. So I'm just curious if there's any call outs there. I mean, obviously you've had a, a track record of, of, of being able to handle the outperform but um, wanted to see if there's anything else we might be uh, Missing on that front. Thank you. Yep, thanks Jason. Um, you actually summarized it quite well. So our guidance for Q4 is 25% growth at the high end and, you know, we're always going to aim to do better. We do take a balance for you of G.
Peavey just given the macros Dynamic, but as you said, you know, we saw a strong gpv Trends in the summer. We also had a strong quarter from toast Capital, um, and we and we're seeing that more normalized in Q4. Um, so overall, you know, I I we're really confident with the guidance that we've we've given
Our next question comes from Stephen Sheldon from William Blair, your line is now open.
Thanks and great results. I wanted to follow up on a prior question on toast IQ. Great to hear that. I think that it was it over 25,000 locations of use it, which is a lot more than I would have expected this early. So just wanted an update there of how we should think about the financial impact of that, you know, including a higher AI cost associated with hosting with that kind of adoption. I think in a month I'd assume that you're not selling it as a separate SKU. So am I right on that assumption? Do you plan to eventually sell it as a separate SKU?
Or could that be used as part of the basis for, you know, fast pricing increases or better, uh, product attach rates as we think about, you know, the next year or two?
Yeah yeah, great question. Stephen let me right now the focus onto IQ is really on adoption and really driving customer value. Is it as I mentioned really excited about the early adoption from customers and the value they're getting um
you know, if you if you look at like what opportunities, this creates for toast, um 1 I think because people are using it so much to run their businesses, there's uh, product like growth opportunities to expand our platform
Uh, another area that we're starting to invest in is if you look at like our marketing platform, for example, we started off with email, text and ads, but now we've got AI driven automation, to create personalized, marketing campaigns. Because as you can imagine restaurant tours, especially SMB, restaurant, tours are busy and they're not marketers are at the time to generate these campaigns. And so, you can imagine a genetic capabilities within TOS. Just start to recommend these campaigns when there's slower or a different times. And so, whether it's on on, um, on um, marketing, or it's on back office functions, like accounting or bookkeeping, or even payroll. We see lots of opportunities to drive. Ketogenic use cases within TOS, to drive adoption and value. I think in terms of modernization it's it's uh, early, we're looking at different ways. I think 1 obvious way that we're going to look at is just like GPT. Look at uh usage based modernization on toast AQ. Um but you know the most important Focus here right now is to make sure we're getting adoption and really, really great value for customers, uh, to help Drive our growth.
My next question comes from Samar Samana from Jeff. Your line is now open.
Good evening. Thanks for taking my question. It's great to see the strong results. Uh, I guess I'm pretty focused here on pricing. Um, it's going to be a little multi-party, which first is the pricing on the website, fully realizing the disclosure that the company made. But was there some intention that somebody was...
Exploring maybe testing and targeting, or A/B testing, just maybe help us understand what happened there. This is just the comments on the targeted fintech pricing moves that you've made, like how much of the backup of, you know, maybe push price through. But I know these are focusing on two different pieces, but pricing I think is a really big focus right now for everybody. So, I appreciate you listening to the questions. Thank you.
Um, and actually that part of the website gets 1% of our um, booking so not Material overall. So we we corrected that and moved on in terms of pricing? Um, you know our philosophy, um, is unchanged. It's really the way we think about it. It's really just 1 lever of growth and and we'll still make targeted and surgical price changes, um, and we'll balance that with market share potential of course. And in the near term, um, gaining share is a high priority and we know we can optimize price over time in terms of how much of the back book. Um, we haven't really disclosed that but we feel confident as long as you're driving value, um, you know, we'll be able to, to drive price over time in a, in small targeted ways. And as we bring customers onto our platform, they're coming in at, you know, the um, Market rates.
Great, really appreciate it, you guys addressing, but that was really helpful. Thank you, Elena.
Sure.
We will now take our last question from the line of Darren Peller from Wolfe research. Your line is now open.
26 just how much might come from The Tam expansion areas driving the growth versus The Core Business versus, uh, The Core Business. You've been adding so well, so far. Thanks again, guys. Yeah, sure. Darren
Um, if you look at the trend we've seen in the past year, our core net ads.
Are in the same range as last year. And so, if you look at how we've been able to drive record, net ads every quarter this year, it's really from these new 10s contributing more. Um, and we expect really the same time to continue next year. We expect in the quarter to continue to perform at high level based on the signal we're seeing. And then these these new Tams to play a bigger role. If you look at like the longer term opportunity, if you just zoom out for a second and see what's possible in these Tams, I think what exciting to me is, um,
There's so much overlap in the core platform between our Core US, SMB business. And these new towns, which is why I've been able to grow these business to, to close to 100 million naira or just in a couple years. And uh and that's what's really going to drive the incremental. Net adds in our business next year.
Sure, this concludes today's conference call. Thank you all for joining.