Toast, Inc. Q1 FY2025 earnings call

• Aman noted strong Q1 results with over 6,000 net locations added, recurring gross profit up 37% year-over-year, adjusted EBITDA $133M, and GAAP operating income $43M.
• Priorities include scaling locations and market share in the core U.S. restaurant business, demonstrating new markets as material growth drivers, increasing customer adoption via data and AI, and expanding margins.
• Highlighted wins like Applebee's and Topgolf, with progress in international, food and beverage retail, and enterprise segments. For example, Applebee's is using Toast's platform for improved guest experience and kitchen efficiency, and Topgolf benefits from Toast's handhelds, KDS, and multi-location management tools.
• AI initiatives such as Sous Chef and ToastIQ are in pilot phases, showing early customer impact, with ToastIQ being an intelligence engine leveraged by Toast products, and Sous Chef acting as a restaurant copilot.

In the first quarter, recurring gross profit streams grew 37% year-over-year. ARR grew 31%, and total fintech and subscription gross profit increased 37% year-over-year. Over 6,000 net locations were added, with total locations reaching approximately 140,000, up 25% year-over-year. SaaS ARR grew 32% year-over-year, payments ARR grew 31%, and non-payment fintech solutions led by Toast Capital contributed $47 million in gross profit. Subscription revenue increased 38% and gross profit grew 45%, with payments net take rate up 3 bps from the prior year.

• For the second quarter, total subscription and fintech gross profit is expected to grow in the 26% to 29% range year-over-year, and adjusted EBITDA is forecasted to be $130 million to $140 million.
• The full-year 2025 outlook was raised, expecting 26% growth in fintech and subscription gross profit, $550 million in adjusted EBITDA, and a margin of 31%, up 5 percentage points versus 2024. The guidance factors in stable consumer trends and slightly higher tariff expenses related to hardware.

• Macro environment uncertainty could cause actual results to differ materially from expectations.
• Tariff uncertainties may impact hardware expenses.
• Risks associated with Toast Capital's credit quality, though defaults remain in line with expectations.

Q: Talk about the payback periods on large enterprise wins like Applebee's, including sales and marketing spend and payback comparison to mid-teens months.

A: Elena Gomez stated they manage the business on total payback periods and unit economics, focusing on ARR growth. Enterprise deals are evaluated deal-by-deal, with large ARR booked making paybacks attractive, and LTV to CAC is healthy due to lower churn.

Q: Update on the potential timing of broader rollout of AI solutions like Sous Chef and ToastIQ and monetization.

A: Aman Narang said it's early, but AI will have a big impact. Toast is working on AI-enabling the organization and customers, with early signals of customer impact from initiatives like ToastIQ and Sous Chef, and monetization to follow as impact is proven.

Q: How to manage cost base in a steeper recession.

A: Elena Gomez mentioned they've navigated dynamic times before, and would be decisive in pulling back spending on non-revenue generating areas while being balanced for long-term business.

Q: Details on the Topgolf win, competition in nontraditional formats, and impact on TAM.

A: Aman Narang said the team did well on the Topgolf win, competing against some legacy on-premise solutions. The win expands the TAM, and it's part of the strategy to build out the TAM in specialized areas like wineries and non-English native speaking restaurants.