Toast, Inc. — Call Transcript 2025

Good afternoon. My name is Danielle, and I will be your conference operator today. At this time, I would like to welcome everyone to Toast Third Quarter 2025 Earnings Conference Call. 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. Thank you. Welcome to Toast 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. 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 fourth 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. Please refer to the cautionary language in today's press release and our SEC filings for a discussion of the risks and uncertainty that could cause actual results to differ materially from our expectations. During this call, we will discuss certain non-GAAP financial measures, including but not limited to non-GAAP subscription services gross profit and non-GAAP financial technology solutions gross profit, which we refer to collectively as our recurring gross profit streams. These are the basis for our top-line guidance. These non-GAAP measures are not intended to be a substitute for our GAAP results. Please refer to the earnings release and SEC filings for detailed reconciliations of these non-GAAP measures to the most comparable GAAP measures. Unless otherwise stated, all references on this call to cost of revenue, gross profit and gross margin, sales and marketing expense, research and development expense, and general and administrative expense are on a non-GAAP basis. Finally, the press release can be found on the Investor Relations website at investors.toasttab.com. After the call, a replay will be available on our website. And with that, let me turn the call over to Aman. Thanks, Michael. 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. We surpassed $2 billion in ARR for the first time. And while I'm proud of this milestone, I'm even more energized about where we're headed. We are an industry leader here in the U.S. in our core business with a clear path to doubling our market share as we scale locations and deliver customer-focused innovation for restaurants. This success enables us to invest in our fast-growing new market segments. We will continue to expand our TAM into new verticals, new geographies, while increasing the capabilities we provide for existing customers. This growth mindset is key to building a durable growth company that can scale to $5 bllion and $10 billion in ARR and beyond. I want to thank the entire Toast team for an exceptional year so far, and I'm confident in our collective ability to keep raising the bar as we grow from here. This quarter, we secured numerous marquee wins, including large-scale operators such as Nordstrom, TGI Fridays, and Everbowl, brands that are turning to Toast to power their next stage of growth. I'm also excited to announce an expanded partnership with Uber, making it easier for restaurants to drive guest demand and better manage off-premise sales. We also plan to support each other in the field with joint go-to-market efforts both here in the U.S. as well as in our international markets. At the start of the year, we laid out four key priorities. Number one, scale locations and market share in our core U.S. SMB business. Two, demonstrate that our new markets can be material drivers of growth. Three, increase customer adoption of our broad platform and drive differentiation through data and AI. And lastly, continue to invest with discipline in our most important priorities while expanding margins over time. Starting with number one, scaling locations in our U.S. SMB and mid-market restaurant business. Today, about 95% of our ARR comes from our core U.S. SMB and mid-market restaurant customers. Led by our best-in-class restaurant platform and strong go-to-market execution, we win the majority of decisions we're in. And our win rates against every major competitor are up year over year. Net adds in our core remain in the same range from a year ago. And this momentum puts us on a clear path to doubling our share of locations and GPV over time. Many of the best restaurants in the country run on Toast, from new concepts to award-winning institutions. For example, 14 of Bon Appétit's 20 best new restaurants for 2025 chose Toast. And more than half of all Michelin-starred restaurants in the U.S. are powered by our platform as well. A great example is Canlis, a Seattle landmark redefining hospitality for over 70 years. After struggling with reliability and uptime, they've turned to Toast for our simplicity, reliability, and hands-on support. They love that they no longer need to think about the technology to deliver one of the best-standing experiences in the country. In their words, "Toast works so well, we don't even have to think about it." We're also seeing strong traction in mid-market with a steady stream of wins each quarter. As I shared earlier, Nordstrom is rolling out Toast at nearly 200 dining locations nationwide, unifying multiple concepts on one platform. TGI Fridays is moving its U.S. footprint to Toast, simplifying operations across its restaurants. And Everbowl, a fast-growing 100+ unit brand, chose Toast for our ability to deliver speed and simplicity at scale. These wins highlight the versatility of our platform to serve restaurants of every type and size. And our platform only grows stronger with the addition of new AI-driven capabilities that I'll touch on in a moment. So moving on to our second priority. Demonstrating that these new market segments can be material drivers of growth. We continue to build momentum in international markets as we expand our platform and establish Toast brand globally. Large, well-respected multi-concept hospitality groups such as Eclective in Ireland, Caravan Group in the U.K., and Happy Valley Group in Canada have chosen Toast because they see us as 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 build towards the best global platform for restaurants. International SaaS ARPU is up 20% year-over-year. And we're confident that these investments will continue to drive both ARPU 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, Delalo Italian Market in Pennsylvania, and Nature's Best in Illinois. They all came to Toast for a modern all-in-one platform that allows them to manage everything from thousands of inventory items to 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 of our restaurant platform, including our kitchen display screens to power fulfillment in grocery stores as well as bottle shops. And lastly, in enterprise, our continued investment in the upstore and multi-location management capability is paying off. We've landed our two largest deals ever this year, and our pipeline has never been stronger. Across all these markets, our momentum is accelerating. We're confident in our path to become a market leader in each of these areas and building them into meaningful growth engines for Toast. Over the long term, we believe these new TAMs have the potential to surpass 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 turning them into products that 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 Sous Chef into Toast IQ, a true AI assistant for restaurant operators. At Amici's, a casual pizza and wing spot in Georgia, the team uses Toast IQ daily to analyze sales, adjust menus, and make faster decisions. As an example, it flagged a drink promo costing them up to $700 a day, and helped them fix it and build a happy hour menu that is even more effective. As they put it, "Toast IQ feels like having a personal assistant," and that's the goal. Toast IQ gives fast answers, proactive insights, and direct actions to operators. Adoptions have been strong, and since rolling it out in early October, more than 25,000 restaurants have used Toast IQ 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 restaurants increase drink sales through data-driven recommendations. It's one 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 personalize outreach. With Toast Advertising, operators can now launch campaigns across Google and Meta in just minutes, with AI-powered recommendations and clear ROI reporting. And it's driving real impact. During the peak season, Pizza by the Sea in Florida estimated $400,000 in sales across its four locations, which was attributed to Toast Advertising campaigns, for more than 20X return on ad spend. Together, Toast 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 ARR and just two years to double it. We are a leader in our core U.S. SMB business, and I have 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, we're on track to increase net adds in 2025 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 ARR 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% EBITDA 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 unit 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, and strong execution across 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 our investors. The progress we're making this year is a direct result of our team's hard work and dedication, our customer 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, Aman, 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 two years after hitting $1 billion. Doubling our ARR underscores the strength and diversity of our business model, with both payments and SaaS ARR each exceeding $1 billion for the first time. We're proud of the milestone and sustaining strong ARR growth at scale, though we're 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 and 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 ARR 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 three 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, ARR grew 30%. Total fintech and subscription gross profit, our recurring gross profit streams, increased 34% year-over-year with a total take rate of 98 basis points across SaaS 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 EBITDA was $176 million for the quarter, with margins expanding 5 percentage points year-over-year to 35%. GAAP operating income was $84 million. We are consistently growing net adds year-over-year every quarter. In Q3, we added approximately 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 adds 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 net adds in 2026. SaaS ARR grew 28% year-over-year, driven by location growth and a mid-single-digit increase in SaaS ARPU on an ARR basis. Subscription revenue increased 29%, and subscription gross profit grew 32%. SaaS gross margin was 79%, up from 77% a year ago due to continued SaaS COGS optimization. Payments ARR 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. GPV per location was up slightly versus last year due to stronger same-store sales trends in the summer. Fintech net take rate was 61 basis points, and payments net 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 surcharging. Non-payments fintech solutions led by Toast Capital contributed $58 million in gross profit and 11 basis points in take rate. We continued to enhance our underwriting process, which unlocked 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 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 TAMs. R&D expenses grew 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 market fit across new customer segments and seeding longer-term Horizon 3 opportunities that have the potential to become new growth factors. Hardware and professional services gross profit was -10% of our recurring gross profit streams. We are leaning into our customer acquisition momentum to establish market share in new TAMs 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 EBITDA was $176 million, a 35% margin. Our Q3 results reflect robust top-line growth, driven in part by better-than-expected GPV, as well as our continued focus on driving efficiencies throughout the P&L. GAAP operating income was $84 million, up from $34 million a year ago. That's both from the strength in adjusted EBITDA and our disciplined approach to managing stock-based compensation. Stock-based comp 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 EBITDA. 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%-25% year-over-year and adjusted EBITDA to be $140 million-$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 midpoint, we now expect 32% growth in fintech and subscription gross profit and $615 million in adjusted EBITDA. I'm extremely proud of the financial profile we've built over the last few years. We've doubled ARR while investing in the next wave of businesses to sustain that growth. Our ability to drive strong growth and expand adjusted EBITDA 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 TAMs started as a small Horizon 3 bets that we gradually scaled as we gained momentum and saw initial product-market fit. We have enough signal across each new TAM 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 Aman said, the strategy we 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. We are still in our 2026 planning cycle and will provide an update in February when we issue guidance. Our commitment to disciplined 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 top-line growth and margin expansion. Our momentum in the core is strong, and with new TAMs 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 one on your telephone keypad. Your first question comes from the line of Josh Baer from Morgan Stanley. Your line is open. Great. Thanks for the question, and congrats on a strong quarter. I wanted to ask about GPV per location, which was up slightly year-over-year, I think better than expected. I'm wondering how much of that was driven by mix, so just lower mix of customers in more pressured parts of the market. 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, what kind of data do you look at? Is it more a selection bias as far as the customers that you land. Or how much is it your actual technology increasing sales? Yeah. Thanks for the question, Josh. We saw it in Q3 in the summer was GPV per location exceeded expectations. And as we looked at October, I think it's normalized a little bit, but overall, it's in line with what we expected. I think certainly our platform, a big part of what we build is to help restaurants run a more profitable and more successful business. And so a lot of the investments we continue to make, handhelds, for example, or Toast Go 3 is an example of that, to help restaurants run a better business. And same-store sales, I think, have been in a balanced place year-over-year, so nothing that has dramatically changed. Okay. Great. Our next question comes from the line of Will Nance from Goldman Sachs. Your line is open. Hey, guys. Thank you for taking the questions. I think 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 as a reaction to how much you yourselves have raised the bar on how to approach this market. 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. How are you thinking about the sustainability of your recent market share gains and maybe how long it takes to reach that goal of ultimately doubling your share in the core market? Thanks again. Yeah. Thanks for the question, Will. First off, I just want to congratulate the team. We had a fantastic Q3. We've really had a fantastic year so far. Teams performing well. If you look at our net adds, as I mentioned, they're up in Q3. They're tracking to be up every quarter this year. And it's really a direct result of the execution of the team. Our win rates, as I mentioned, are up year-over-year against all major competitors. And that's actually both in QSR and FSR. Our go-to-market team on the ground continues to execute at a high level. And one of the things they have is to maximize location growth. This is across our payments and our SaaS revenue. They've got the tools across upfront fees and hardware and services to make sure that they can go take the location down and win because we've got this upsell engine to complement the new location team. And then lastly, of course, the most important thing underpinning this growth is our core platform, right? We were the first ones to build a restaurant-focused platform as purpose-built for this industry, and we continue to innovate and drive customer-focused innovation for our customers. Toast IQ is a great example of that, helping restaurants run a better business. Our aspiration is really to build the best GPT interface for the restaurant industry. And I think in terms of the timing, you asked the question about timing, double, I think if you look at our net adds this year in our core business, they're in about the same range as last year.So it just shows you the market share gains we're gaining every year as we continue to grow and scale. Got it. Appreciate it. Nice job tonight. Thanks, Will. Our next question comes from Josh Baer from Morgan Stanley. Your line is open. I think I already asked mine. Our next question comes from Timothy Chiodo from UBS. Your line is open. Great. Thank you. I want to shift gears 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. 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 Toast-run restaurants. Another example is. About a year ago, we launched a benchmarking product, which was to help restaurants with 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 in consumer, in fact, this morning, I woke up, and the first thing I did was I went to a restaurant locally in Lexington, Massachusetts, called Revival Cafe. And one of my favorite things about the app is you can order ahead and just pick it up and leave. It's similar to what Starbucks pioneered many years ago. And so we can do that across 100,000+ Toast restaurants here in the U.S. People love that experience. In addition, I think where we have a unique opportunity is to bring diners into stores. So whether it's our partnership with Resy as part of the Amex partnership or with Toast Tables, the ability to get a table, sit down, and then one of the things that we're looking at is imagining 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 diners into the restaurant and then leaving the restaurant as well. And within the app, one feature that a lot of people have heard love is because we've got such great data about the restaurants and when they're busy and when they're not, the ability to generate intelligent offers during their slow periods and the ability to track all of your loyalty in one place is another thing that 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 and digitize that experience for restaurants. Thank you. Your next question comes from Dan Dolev from Mizuho. Your line is open. Hey, guys. Thank you for taking my question. Obviously, great results here. I wanted to ask about just the consumer in general, like the macro, right? There's been a lot of anxiety out there, and obviously, your results are looking great. So maybe you can talk to us what you're seeing kind of maybe in the quarter, but also more recently as we are in Q4 already. That would be fantastic. Thank you. Yeah. Thanks for the question, Dan. Look. The summer was strong. Q3 was strong. Year-over-year. What we saw in October on the consumer has normalized a little bit, but really within a narrow band and in line with kind of what our expectations were. And so in our customers and our restaurants that are performing well, one of the things we always look at is whether it's in boom markets or slower markets. We've gone and studied previous recessions in '01 and '08, and what we've seen is that restaurants tend to be resilient. And what we're seeing so far in our data is our customers are holding up really well. Great. Thank you. Our next question comes from Dominic Ball from Rothschild & Co Redburn. Your line is open. Hello, Aman, Elena, Michael. And Aman, just to start with, I mean, fantastic to hear that you guys are saying that Toast in Dublin's market share in its core TAM. That's amazing. With digital chits within Toast IQ, it looks like one of the best products from our perspective that you launched over the last sort of five years. When we survey private full-service restaurant owners, the dream is really to understand their customer when they walk in. And because waitresses churn so much, 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 and how this has gone so far? Yeah. Thanks, Dominic. We're seeing just to zoom out for a second across Toast IQ, we're seeing lots and lots of use cases like that where customers are seeing the value of having all of their data actually drive value for them, right? So digital chits is a great example of that. 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 at the table. So that's a great example of that. I think more broadly within our Toast IQ platform, we're seeing really high adoption of our backend because customers love the fact that they can use more of a natural language interface. Think of a GPT-like interface where they can go in and say, "Get support, make changes to their backend." Whether it's like 86 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 what's selling well, and how things are going. And so there's a lot of use cases within the Toast IQ umbrella. Digital chits is a good example of that, but really excited to see the progress and the adoption so far and what the product can do for our customers. Great. Thank you. Thank you. Our next question comes from David Hynes from Canaccord Genuity. Your line is open. Hey, thank you, guys. Congrats on the nice quarter. Aman, I wanted to ask how you thought the business performed during the AWS outage. Anecdotally, I talked to restaurants up here in the Boston area. It sounded like everyone kind of cut over to offline mode. It worked well. They were 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, as small as it was being a Monday lunch, it seemed. What did you hear about competitive disruptions? Is this a differentiating point of Toast? How did the business hold up during that period? Yeah. The business held up fine precisely because we've spent the past decade really building this platform for restaurants. And one of the key requirements is if something's down, whether it's the internet or AWS or wherever it may be, you got to be able to operate within the restaurant. And so our customers were able to take orders, send their orders to kitchens, take payments offline. And as the internet came back, as the system came back, they were able to process those off of offline mode. Certainly, we see that the need to leverage these digital channels, whether it's our first-party channels or a partner ecosystem, that that has grown over the years. And so we're looking at ways to continue to make that even more resilient. But I think customers overall were able to work through it, and I don't think there's any meaningful impact in terms of guidance for Q4. Thank you. Thanks. Our next question comes from Ryana Kumar from Oppenheimer. Your line is now open. Hi. Great results, and thanks for taking my question. It was good to see the total take rate up seven basis points from a year ago. I'm just wondering how sustainable and improving take rate is. Thank you. Yeah. Thank you. Yeah. I'm really proud also of the team here on their execution. Take rate was up. The core net take rate was up four basis points, and the total take rate up about five basis points. And that's really the benefits we're seeing from the small targeted pricing moves. It's COGS optimization, which is a priority for that team. It's also new products like surcharging, which is small today and contributing a little bit, but over time that can drive, that can be more meaningful as we get more customers on that product. But when you zoom out, we have a lot of confidence in our ability to drive take rate up over time, really using those same levers, driving cost optimization on a per-transaction basis, driving more digital innovation. And continuing to scale just with our volume. So really view that as an opportunity. Our next question comes from Jason Kupferberg 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 1,000 basis points of upside on that metric in the quarter. It's a lot even by Toast standards. And I think this was against the lapping effect of last year's accounting change. And so I'm curious, as you kind of rank order, what kind of surprised you to the upside? 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 we 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 callouts there. I mean, obviously, you've had a track record of being able to handily outperform, but I wanted to see if there's anything else we might be missing on that front. Thank you. Thanks, Jason. You actually summarized it quite well. So our guidance for Q4 is 25% growth at the high end. And we're always going to aim to do better. We do take a balanced view of GPV just given the macro's dynamic. But as you said, we saw strong GPV trends in the summer. We also had a strong quarter from Toast Capital. And we're seeing that more normalized in Q4. So overall we're really confident with the guidance that 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 it was over 25,000 locations have used 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, including higher AI costs 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. 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 fast pricing increases or better product attach rates as we think about the next year or two? Yeah. Yeah. Great question, Stephen. I mean, right now, the focus on Toast IQ is really on adoption and really driving customer value. As I mentioned, really excited about the early adoption from customers and the value they're getting. If you look at what opportunities this creates for Toast, one, I think because people are using it so much to run their businesses, there's product-led growth opportunities to expand our platform. Another area that we're starting to invest in is if you look at 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 owners, especially SMB restaurant owners, are busy, and they're not marketers and have the time to generate these campaigns. And so you can imagine agentic capabilities within Toast IQ to start to recommend these campaigns when there's slower or different times. And so whether it's on marketing or it's on back-office functions like accounting or bookkeeping or even payroll, we see lots of opportunities to drive key agentic use cases within Toast IQ to drive adoption and value. I think in terms of monetization, it's early. We're looking at different ways. I think one obvious way that we're going to look at is just like GPT, look at usage-based monetization on Toast IQ. But the most important focus here right now is to make sure we're getting adoption and really great value for customers to help drive our growth. Our next question comes from Samad Samana from Jefferies. Your line is now open. Hi. Good evening. Thanks for taking my question. It's great to see the strong results. I guess I'm pretty focused here on pricing. It's going to be a little multi-parted, which first is the pricing on the website, fully realizing the disclosure the company made. But was there some intention that somebody was exploring maybe testing and targeting or A/B testing just to maybe help us understand what happened there? And there's just the comments on the targeted fintech pricing moves that you've made. How much of the backbook have you now maybe pushed price through? So I know that these are focusing on two different pieces, but pricing, I think, is a really big focus right now for everybody. So appreciate you addressing the questions. Thank you. Yeah. Thanks, Samad, for the questions. So I'll start with the website, which was human error. And as soon as we discovered it, we fixed it. You're right. We do tests from time to time. This certainly was not a test. And actually, that part of the website gets 1% of our booking, so not material overall. So we corrected that and moved on. In terms of pricing, our philosophy is unchanged. It's really the way we think about it. It's really just one lever of growth. And we'll still make targeted and surgical price changes. And we'll balance that with market share potential, of course. And in the near term, gaining share is a high priority. And we know we can optimize price over time. In terms of how much of the backbook, we haven't really disclosed that, but we feel confident as long as we're driving value, we'll be able to drive price over time in small targeted ways. And as we bring customers onto our platform, they're coming in at the market rates. Great. Really appreciate it. You guys addressing both. That was really helpful. Thank you, Elena. Sure. We will now take our last question from the line of Darrin Peller from Wolfe Research. Your line is now open. Guys, thanks. Just maybe help us understand what gives you the confidence in your ability to see increased net adds in 2026. Just how much might come from the TAM expansion areas driving the growth versus the core business. Versus the core business you've been adding so well so far. Thanks again, guys. Yeah. Sure, Darrin. If you look at the trend we've seen the past year, our core net adds are in the same range as last year. And so if you look at how we've been able to drive record net adds every quarter this year, it's really from these new TAMs contributing more. And we expect really the same trend to continue next year. We expect in the quarter to continue to perform at a high level based upon the signal we're seeing, and then these new TAMs to play a bigger role. If you look at the longer-term opportunity, if you just zoom out for a second and see what's possible in these TAMs, I think what's exciting to me is. There's so much overlap in the core platform between our core U.S. SMB business and these new TAMs, which is why we've been able to grow these businesses to close to $100 million in ARR just in a couple of years. And that's what's really going to drive the incremental net adds in our business next year. Thank you. Sure. This concludes today's conference call. Thank you all for joining.

Speaker 13: Good afternoon. My name is Danielle, and I will be your conference operator today. At this time, I would like to welcome everyone to Toast Third Quarter 2025 Earnings Conference Call. 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. Good afternoon. good afternoon My name is Danielle, and I will be your conference operator today. my name is danielle and i will be your conference operator today At this time, I would like to welcome everyone to Toast Third Quarter 2025 Earnings Conference Call. at this time i would like to welcome everyone to toast third quarter 2025 earnings conference call Today's call will be 45 minutes. today's call will be 45 minutes I'll now turn the call over to Michael Senno, Senior Vice President of Finance. i'll now turn the call over to michael senno senior vice president of finance You may begin your conference. you may begin your conference

Speaker 15: Thank you. Welcome to Toast 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. 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 fourth quarter and full year 2025. Thank you. thank you Welcome to Toast Earnings Conference Call for the third quarter ended September 30th, 2025. welcome to toast 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. 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 Before we start, I'd like to draw your attention to the Safe Harbor Statement included in today's press release. 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. 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 fourth quarter and full year 2025. 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 fourth 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. Please refer to the cautionary language in today's press release and our SEC filings for a discussion of the risks and uncertainty that could cause actual results to differ materially from our expectations. During this call, we will discuss certain non-GAAP financial measures, including but not limited to non-GAAP subscription services gross profit and non-GAAP financial technology solutions gross profit, which we refer to collectively as our recurring gross profit streams. These are the basis for our top-line guidance. These non-GAAP measures are not intended to be a substitute for our GAAP results. Please refer to the earnings release and SEC filings for detailed reconciliations of these non-GAAP measures to the most comparable GAAP measures. 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. 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 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. please refer to the cautionary language in today's press release and our sec filings for a discussion of the risks and uncertainty that could cause actual results to differ materially from our expectations During this call, we will discuss certain non-GAAP financial measures, including but not limited to non-GAAP subscription services gross profit and non-GAAP financial technology solutions gross profit, which we refer to collectively as our recurring gross profit streams. during this call we will discuss certain non-gaap financial measures including but not limited to non-gaap subscription services gross profit and non-gaap financial technology solutions gross profit which we refer to collectively as our recurring gross profit streams These are the basis for our top-line guidance. these are the basis for our top-line guidance These non-GAAP measures are not intended to be a substitute for our GAAP results. these non-gaap measures are not intended to be a substitute for our gaap results Please refer to the earnings release and SEC filings for detailed reconciliations of these non-GAAP measures to the most comparable GAAP measures. please refer to the earnings release and sec filings for detailed reconciliations of these non-gaap measures to the most comparable gaap measures Unless otherwise stated, all references on this call to cost of revenue, gross profit and gross margin, sales and marketing expense, research and development expense, and general and administrative expense are on a non-GAAP basis. Finally, the press release can be found on the Investor Relations website at investors.toasttab.com. After the call, a replay will be available on our website. And with that, let me turn the call over to Aman. 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. unless otherwise stated all references on this call to cost of revenue gross profit and gross margin sales and marketing expense research and development expense and general and administrative expense are on a non-gaap basis Finally, the press release can be found on the Investor Relations website at investors.toasttab.com. finally the press release can be found on the investor relations website at investors.toasttab.com After the call, a replay will be available on our website. after the call a replay will be available on our website And with that, let me turn the call over to Aman. and with that let me turn the call over to aman

Speaker 10: Thanks, Michael. 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. We surpassed $2 billion in ARR for the first time. And while I'm proud of this milestone, I'm even more energized about where we're headed. We are an industry leader here in the U.S. in our core business with a clear path to doubling our market share as we scale locations and deliver customer-focused innovation for restaurants. This success enables us to invest in our fast-growing new market segments. We will continue to expand our TAM into new verticals, new geographies, while increasing the capabilities we provide for existing customers. Thanks, Michael. thanks michael And thank you, everybody, for joining us this afternoon. 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. 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. our momentum and execution thus far has us well-positioned to deliver a strong 2025 We surpassed $2 billion in ARR for the first time. we surpassed $2 billion in arr for the first time And while I'm proud of this milestone, I'm even more energized about where we're headed. and while i'm proud of this milestone i'm even more energized about where we're headed We are an industry leader here in the U.S. in our core business with a clear path to doubling our market share as we scale locations and deliver customer-focused innovation for restaurants. we are an industry leader here in the u.s in our core business with a clear path to doubling our market share as we scale locations and deliver customer-focused innovation for restaurants This success enables us to invest in our fast-growing new market segments. this success enables us to invest in our fast-growing new market segments We will continue to expand our TAM into new verticals, new geographies, while increasing the capabilities we provide for existing customers. we will continue to expand our tam into new verticals new geographies while increasing the capabilities we provide for existing customers This growth mindset is key to building a durable growth company that can scale to $5 bllion and $10 billion in ARR and beyond. I want to thank the entire Toast team for an exceptional year so far, and I'm confident in our collective ability to keep raising the bar as we grow from here. This quarter, we secured numerous marquee wins, including large-scale operators such as Nordstrom, TGI Fridays, and Everbowl, brands that are turning to Toast to power their next stage of growth. I'm also excited to announce an expanded partnership with Uber, making it easier for restaurants to drive guest demand and better manage off-premise sales. We also plan to support each other in the field with joint go-to-market efforts both here in the U.S. as well as in our international markets. At the start of the year, we laid out four key priorities. This growth mindset is key to building a durable growth company that can scale to $5 bllion and $10 billion in ARR and beyond. this growth mindset is key to building a durable growth company that can scale to $5 bllion and $10 billion in arr and beyond I want to thank the entire Toast team for an exceptional year so far, and I'm confident in our collective ability to keep raising the bar as we grow from here. i want to thank the entire toast team for an exceptional year so far and i'm confident in our collective ability to keep raising the bar as we grow from here This quarter, we secured numerous marquee wins, including large-scale operators such as Nordstrom, TGI Fridays, and Everbowl, brands that are turning to Toast to power their next stage of growth. this quarter we secured numerous marquee wins including large-scale operators such as nordstrom tgi fridays and everbowl brands that are turning to toast to power their next stage of growth I'm also excited to announce an expanded partnership with Uber, making it easier for restaurants to drive guest demand and better manage off-premise sales. i'm also excited to announce an expanded partnership with uber making it easier for restaurants to drive guest demand and better manage off-premise sales We also plan to support each other in the field with joint go-to-market efforts both here in the U.S. as well as in our international markets. we also plan to support each other in the field with joint go-to-market efforts both here in the u.s as well as in our international markets At the start of the year, we laid out four key priorities. at the start of the year we laid out four key priorities Number one, scale locations and market share in our core U.S. SMB business. Two, demonstrate that our new markets can be material drivers of growth. Three, increase customer adoption of our broad platform and drive differentiation through data and AI. And lastly, continue to invest with discipline in our most important priorities while expanding margins over time. Starting with number one, scaling locations in our U.S. SMB and mid-market restaurant business. Today, about 95% of our ARR comes from our core U.S. SMB and mid-market restaurant customers. Led by our best-in-class restaurant platform and strong go-to-market execution, we win the majority of decisions we're in. And our win rates against every major competitor are up year over year. Net adds in our core remain in the same range from a year ago. Number one, scale locations and market share in our core U.S. number one scale locations and market share in our core u.s SMB business. smb business Two, demonstrate that our new markets can be material drivers of growth. two demonstrate that our new markets can be material drivers of growth Three, increase customer adoption of our broad platform and drive differentiation through data and AI. three increase customer adoption of our broad platform and drive differentiation through data and ai And lastly, continue to invest with discipline in our most important priorities while expanding margins over time. and lastly continue to invest with discipline in our most important priorities while expanding margins over time Starting with number one, scaling locations in our U.S. starting with number one scaling locations in our u.s SMB and mid-market restaurant business. smb and mid-market restaurant business Today, about 95% of our ARR comes from our core U.S. today about 95% of our arr comes from our core u.s SMB and mid-market restaurant customers. smb and mid-market restaurant customers Led by our best-in-class restaurant platform and strong go-to-market execution, we win the majority of decisions we're in. led by our best-in-class restaurant platform and strong go-to-market execution we win the majority of decisions we're in And our win rates against every major competitor are up year over year. and our win rates against every major competitor are up year over year Net adds in our core remain in the same range from a year ago. net adds in our core remain in the same range from a year ago And this momentum puts us on a clear path to doubling our share of locations and GPV over time. Many of the best restaurants in the country run on Toast, from new concepts to award-winning institutions. For example, 14 of Bon Appétit's 20 best new restaurants for 2025 chose Toast. And more than half of all Michelin-starred restaurants in the U.S. are powered by our platform as well. A great example is Canlis, a Seattle landmark redefining hospitality for over 70 years. After struggling with reliability and uptime, they've turned to Toast for our simplicity, reliability, and hands-on support. They love that they no longer need to think about the technology to deliver one of the best-standing experiences in the country. And this momentum puts us on a clear path to doubling our share of locations and GPV over time. and this momentum puts us on a clear path to doubling our share of locations and gpv over time Many of the best restaurants in the country run on Toast, from new concepts to award-winning institutions. many of the best restaurants in the country run on toast from new concepts to award-winning institutions For example, 14 of Bon Appétit's 20 best new restaurants for 2025 chose Toast. for example 14 of bon appétit's 20 best new restaurants for 2025 chose toast And more than half of all Michelin-starred restaurants in the U.S. are powered by our platform as well. and more than half of all michelin-starred restaurants in the u.s are powered by our platform as well A great example is Canlis, a Seattle landmark redefining hospitality for over 70 years. a great example is canlis a seattle landmark redefining hospitality for over 70 years After struggling with reliability and uptime, they've turned to Toast for our simplicity, reliability, and hands-on support. after struggling with reliability and uptime they've turned to toast for our simplicity reliability and hands-on support They love that they no longer need to think about the technology to deliver one of the best-standing experiences in the country. they love that they no longer need to think about the technology to deliver one of the best-standing experiences in the country In their words, "Toast works so well, we don't even have to think about it." We're also seeing strong traction in mid-market with a steady stream of wins each quarter. As I shared earlier, Nordstrom is rolling out Toast at nearly 200 dining locations nationwide, unifying multiple concepts on one platform. TGI Fridays is moving its U.S. footprint to Toast, simplifying operations across its restaurants. And Everbowl, a fast-growing 100+ unit brand, chose Toast for our ability to deliver speed and simplicity at scale. These wins highlight the versatility of our platform to serve restaurants of every type and size. And our platform only grows stronger with the addition of new AI-driven capabilities that I'll touch on in a moment. So moving on to our second priority. Demonstrating that these new market segments can be material drivers of growth. In their words, "Toast works so well, we don't even have to think about it." We're also seeing strong traction in mid-market with a steady stream of wins each quarter. in their words "toast works so well we don't even have to think about it." we're also seeing strong traction in mid-market with a steady stream of wins each quarter As I shared earlier, Nordstrom is rolling out Toast at nearly 200 dining locations nationwide, unifying multiple concepts on one platform. as i shared earlier nordstrom is rolling out toast at nearly 200 dining locations nationwide unifying multiple concepts on one platform TGI Fridays is moving its U.S. footprint to Toast, simplifying operations across its restaurants. tgi fridays is moving its u.s footprint to toast simplifying operations across its restaurants And Everbowl, a fast-growing 100+ unit brand, chose Toast for our ability to deliver speed and simplicity at scale. and everbowl a fast-growing 100+ unit brand chose toast for our ability to deliver speed and simplicity at scale These wins highlight the versatility of our platform to serve restaurants of every type and size. these wins highlight the versatility of our platform to serve restaurants of every type and size And our platform only grows stronger with the addition of new AI-driven capabilities that I'll touch on in a moment. and our platform only grows stronger with the addition of new ai-driven capabilities that i'll touch on in a moment So moving on to our second priority. so moving on to our second priority Demonstrating that these new market segments can be material drivers of growth. demonstrating that these new market segments can be material drivers of growth We continue to build momentum in international markets as we expand our platform and establish Toast brand globally. Large, well-respected multi-concept hospitality groups such as Eclective in Ireland, Caravan Group in the U.K., and Happy Valley Group in Canada have chosen Toast because they see us as 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 build towards the best global platform for restaurants. International SaaS ARPU is up 20% year-over-year. And we're confident that these investments will continue to drive both ARPU 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, Delalo Italian Market in Pennsylvania, and Nature's Best in Illinois. We continue to build momentum in international markets as we expand our platform and establish Toast brand globally. we continue to build momentum in international markets as we expand our platform and establish toast brand globally Large, well-respected multi-concept hospitality groups such as Eclective in Ireland, Caravan Group in the U.K., and Happy Valley Group in Canada have chosen Toast because they see us as a best-in-class solution that can help them run a better business. large well-respected multi-concept hospitality groups such as eclective in ireland caravan group in the u.k and happy valley group in canada have chosen toast because they see us as a best-in-class solution that can help them run a better business We're rolling out new integrations, including with Uber. 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. we've improved our online ordering and inventory management solutions and continue to regionalize key capabilities As we build towards the best global platform for restaurants. as we build towards the best global platform for restaurants International SaaS ARPU is up 20% year-over-year. international saas arpu is up 20% year-over-year And we're confident that these investments will continue to drive both ARPU and win rates over time. and we're confident that these investments will continue to drive both arpu and win rates over time In food and beverage retail, we continue to gain traction each quarter. in food and beverage retail we continue to gain traction each quarter We recently went live with Tri-County Meat Markets in Texas, Delalo Italian Market in Pennsylvania, and Nature's Best in Illinois. we recently went live with tri-county meat markets in texas delalo italian market in pennsylvania and nature's best in illinois They all came to Toast for a modern all-in-one platform that allows them to manage everything from thousands of inventory items to 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 of our restaurant platform, including our kitchen display screens to power fulfillment in grocery stores as well as bottle shops. And lastly, in enterprise, our continued investment in the upstore and multi-location management capability is paying off. We've landed our two largest deals ever this year, and our pipeline has never been stronger. Across all these markets, our momentum is accelerating. We're confident in our path to become a market leader in each of these areas and building them into meaningful growth engines for Toast. They all came to Toast for a modern all-in-one platform that allows them to manage everything from thousands of inventory items to efficient checkout lanes at scale. they all came to toast for a modern all-in-one platform that allows them to manage everything from thousands of inventory items to 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. 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 of our restaurant platform, including our kitchen display screens to power fulfillment in grocery stores as well as bottle shops. at the same time it's exciting to see our customers leverage parts of our restaurant platform including our kitchen display screens to power fulfillment in grocery stores as well as bottle shops And lastly, in enterprise, our continued investment in the upstore and multi-location management capability is paying off. and lastly in enterprise our continued investment in the upstore and multi-location management capability is paying off We've landed our two largest deals ever this year, and our pipeline has never been stronger. we've landed our two largest deals ever this year and our pipeline has never been stronger Across all these markets, our momentum is accelerating. across all these markets our momentum is accelerating We're confident in our path to become a market leader in each of these areas and building them into meaningful growth engines for Toast. we're confident in our path to become a market leader in each of these areas and building them into meaningful growth engines for toast Over the long term, we believe these new TAMs have the potential to surpass 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 turning them into products that 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 Sous Chef into Toast IQ, a true AI assistant for restaurant operators. At Amici's, a casual pizza and wing spot in Georgia, the team uses Toast IQ daily to analyze sales, adjust menus, and make faster decisions. Over the long term, we believe these new TAMs have the potential to surpass our core business. over the long term we believe these new tams have the potential to surpass our core business And enable us to scale from 156,000 locations today to 500,000 locations and beyond. 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. 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 turning them into products that make a difference in their day-to-day. toast was built by listening to customers taking real problems from the restaurant floor and turning them into products that 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. 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 Sous Chef into Toast IQ, a true AI assistant for restaurant operators. we recently evolved sous chef into toast iq a true ai assistant for restaurant operators At Amici's, a casual pizza and wing spot in Georgia, the team uses Toast IQ daily to analyze sales, adjust menus, and make faster decisions. at amici's a casual pizza and wing spot in georgia the team uses toast iq daily to analyze sales adjust menus and make faster decisions As an example, it flagged a drink promo costing them up to $700 a day, and helped them fix it and build a happy hour menu that is even more effective. As they put it, "Toast IQ feels like having a personal assistant," and that's the goal. Toast IQ gives fast answers, proactive insights, and direct actions to operators. Adoptions have been strong, and since rolling it out in early October, more than 25,000 restaurants have used Toast IQ 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 restaurants increase drink sales through data-driven recommendations. As an example, it flagged a drink promo costing them up to $700 a day, and helped them fix it and build a happy hour menu that is even more effective. as an example it flagged a drink promo costing them up to $700 a day and helped them fix it and build a happy hour menu that is even more effective As they put it, "Toast IQ feels like having a personal assistant," and that's the goal. as they put it "toast iq feels like having a personal assistant," and that's the goal Toast IQ gives fast answers, proactive insights, and direct actions to operators. toast iq gives fast answers proactive insights and direct actions to operators Adoptions have been strong, and since rolling it out in early October, more than 25,000 restaurants have used Toast IQ over 235,000 times so far. adoptions have been strong and since rolling it out in early october more than 25,000 restaurants have used toast iq 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. 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. 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 restaurants increase drink sales through data-driven recommendations. as an example we're also partnering with brands like coca-cola to help restaurants increase drink sales through data-driven recommendations It's one 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 personalize outreach. With Toast Advertising, operators can now launch campaigns across Google and Meta in just minutes, with AI-powered recommendations and clear ROI reporting. And it's driving real impact. During the peak season, Pizza by the Sea in Florida estimated $400,000 in sales across its four locations, which was attributed to Toast Advertising campaigns, for more than 20X return on ad spend. Together, Toast 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. It's one example of the exciting new opportunities this product unlocks. it's one example of the exciting new opportunities this product unlocks Our marketing and advertising tools are another way we're helping restaurants grow. 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 personalize outreach. we started with email and sms then layered in ai to automate and personalize outreach With Toast Advertising, operators can now launch campaigns across Google and Meta in just minutes, with AI-powered recommendations and clear ROI reporting. with toast advertising operators can now launch campaigns across google and meta in just minutes with ai-powered recommendations and clear roi reporting And it's driving real impact. and it's driving real impact During the peak season, Pizza by the Sea in Florida estimated $400,000 in sales across its four locations, which was attributed to Toast Advertising campaigns, for more than 20X return on ad spend. during the peak season pizza by the sea in florida estimated $400,000 in sales across its four locations which was attributed to toast advertising campaigns for more than 20x return on ad spend Together, Toast 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. together toast 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. 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 ARR and just two years to double it. We are a leader in our core U.S. SMB business, and I have 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, we're on track to increase net adds in 2025 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 ARR over time. Our goal is to maximize long-term shareholder value by building a durable growth business that compounds ARR over time. 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 ARR and just two years to double it. it took us more than 10 years to reach our first billion in arr and just two years to double it We are a leader in our core U.S. we are a leader in our core u.s SMB business, and I have 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. smb business and i have 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, we're on track to increase net adds in 2025 as well as 2026. with strong momentum across all areas we're on track to increase net adds in 2025 as well as 2026 Enterprise, international, and food and beverage retail are collectively on pace to reach $100 million in ARR this year. 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 ARR over time. and we see the potential for each of them to grow to a billion arr 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% EBITDA 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 unit economics at scale, we're investing to accelerate growth. As we scale, we're also carefully managing our margins by prioritizing what's most important to build a long-term growth business. 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% EBITDA margin that we laid out at our investor day, giving us the flexibility to invest in new growth engines. our core business already operates at our target 40% ebitda 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 unit economics at scale, we're investing to accelerate growth. given the size of the opportunity our growing conviction and leadership across new markets and our line of sight to achieving strong unit 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, and strong execution across 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 our investors. The progress we're making this year is a direct result of our team's hard work and dedication, our customer trust, and of course, the support of all of our investors. Thank you. And with that, I'll turn the call over to Elena. We're executing against what we laid out at our investor day last year. 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, and strong execution across the business. we have momentum in our core traction across new markets expanding platform adoption and strong execution across the business I've never been more confident in our ability to create value for our customers and drive long-term shareholder value. 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 our investors. to wrap up i want to thank our entire team our customers as well as our investors The progress we're making this year is a direct result of our team's hard work and dedication, our customer trust, and of course, the support of all of our investors. the progress we're making this year is a direct result of our team's hard work and dedication our customer trust and of course the support of all of our investors Thank you. thank you And with that, I'll turn the call over to Elena. and with that i'll turn the call over to elena

Speaker 2: Thank you, Aman, 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 two years after hitting $1 billion. Doubling our ARR underscores the strength and diversity of our business model, with both payments and SaaS ARR each exceeding $1 billion for the first time. We're proud of the milestone and sustaining strong ARR growth at scale, though we're far from done. Thank you, Aman, and to everyone for joining us today. thank you aman 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. 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 two years after hitting $1 billion. we crossed $2 billion in arr in the third quarter just two years after hitting $1 billion Doubling our ARR underscores the strength and diversity of our business model, with both payments and SaaS ARR each exceeding $1 billion for the first time. doubling our arr underscores the strength and diversity of our business model with both payments and saas arr each exceeding $1 billion for the first time We're proud of the milestone and sustaining strong ARR growth at scale, though we're far from done. we're proud of the milestone and sustaining strong arr growth at scale though we're 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 and 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 ARR growth. In our new growth areas, we're employing the same proven discipline approach to capital allocation. Our management team wakes up every day with the mindset of getting to $10 billion in ARR over the next decade. 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. 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 and our relentless focus on execution is a business with 40% margins that continues to scale. the result of these investments and 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. 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 ARR growth. that's even as we continue to invest with the goal of doubling our core market share and sustaining healthy arr growth In our new growth areas, we're employing the same proven discipline approach to capital allocation. 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 three 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, ARR grew 30%. Total fintech and subscription gross profit, our recurring gross profit streams, increased 34% year-over-year with a total take rate of 98 basis points across SaaS 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 EBITDA was $176 million for the quarter, with margins expanding 5 percentage points year-over-year to 35%. GAAP operating income was $84 million. We are consistently growing net adds year-over-year every quarter. With growing evidence and conviction that each of these three 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. with growing evidence and conviction that each of these three 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. we're confident we can scale efficiently and drive meaningful contributions to growth over time Turning to our quarterly results, ARR grew 30%. turning to our quarterly results arr grew 30% Total fintech and subscription gross profit, our recurring gross profit streams, increased 34% year-over-year with a total take rate of 98 basis points across SaaS and fintech. total fintech and subscription gross profit our recurring gross profit streams increased 34% year-over-year with a total take rate of 98 basis points across saas 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. 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 EBITDA was $176 million for the quarter, with margins expanding 5 percentage points year-over-year to 35%. adjusted ebitda was $176 million for the quarter with margins expanding 5 percentage points year-over-year to 35% GAAP operating income was $84 million. gaap operating income was $84 million We are consistently growing net adds year-over-year every quarter. we are consistently growing net adds year-over-year every quarter In Q3, we added approximately 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 adds 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 net adds in 2026. SaaS ARR grew 28% year-over-year, driven by location growth and a mid-single-digit increase in SaaS ARPU on an ARR basis. Subscription revenue increased 29%, and subscription gross profit grew 32%. SaaS gross margin was 79%, up from 77% a year ago due to continued SaaS COGS optimization. Payments ARR 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. In Q3, we added approximately 7,500 net locations, and we ended the quarter with 156,000 total locations, up 23% from a year ago. in q3 we added approximately 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 adds in 2025 versus 2024. we remain on track for more net adds 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 net adds in 2026. 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 net adds in 2026 SaaS ARR grew 28% year-over-year, driven by location growth and a mid-single-digit increase in SaaS ARPU on an ARR basis. saas arr grew 28% year-over-year driven by location growth and a mid-single-digit increase in saas arpu on an arr basis Subscription revenue increased 29%, and subscription gross profit grew 32%. subscription revenue increased 29% and subscription gross profit grew 32% SaaS gross margin was 79%, up from 77% a year ago due to continued SaaS COGS optimization. saas gross margin was 79% up from 77% a year ago due to continued saas cogs optimization Payments ARR increased 31%, and fintech gross profit grew 35% in the third quarter versus a year ago. payments arr 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. gpv was $52 billion growing 24% year-over-year GPV per location was up slightly versus last year due to stronger same-store sales trends in the summer. Fintech net take rate was 61 basis points, and payments net 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 surcharging. Non-payments fintech solutions led by Toast Capital contributed $58 million in gross profit and 11 basis points in take rate. We continued to enhance our underwriting process, which unlocked 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. GPV per location was up slightly versus last year due to stronger same-store sales trends in the summer. gpv per location was up slightly versus last year due to stronger same-store sales trends in the summer Fintech net take rate was 61 basis points, and payments net take rate was 49 basis points. fintech net take rate was 61 basis points and payments net 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 surcharging. 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 surcharging Non-payments fintech solutions led by Toast Capital contributed $58 million in gross profit and 11 basis points in take rate. non-payments fintech solutions led by toast capital contributed $58 million in gross profit and 11 basis points in take rate We continued to enhance our underwriting process, which unlocked incremental origination volume in the quarter. we continued to enhance our underwriting process which unlocked incremental origination volume in the quarter Overall, the program remains healthy, and defaults remain in line with our expectations. 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. 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. 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 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 TAMs. R&D expenses grew 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 market fit across new customer segments and seeding longer-term Horizon 3 opportunities that have the potential to become new growth factors. Hardware and professional services gross profit was -10% of our recurring gross profit streams. We are leaning into our customer acquisition momentum to establish market share in new TAMs 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. Sales and marketing expenses grew 23%, reflecting our healthy location growth and scaling our international and retail go-to-market presence. sales and marketing expenses grew 23% reflecting our healthy location growth and scaling 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 TAMs. the added sales capacity positions us to gain market share faster and scale growth in these new tams R&D expenses grew 12%. r&d expenses grew 12% Innovations like Toast IQ and advertising are great examples of further differentiation of our core product. 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 market fit across new customer segments and seeding longer-term Horizon 3 opportunities that have the potential to become new growth factors. we're also adding capabilities to expand our product market fit across new customer segments and seeding longer-term horizon 3 opportunities that have the potential to become new growth factors Hardware and professional services gross profit was -10% of our recurring gross profit streams. hardware and professional services gross profit was -10% of our recurring gross profit streams We are leaning into our customer acquisition momentum to establish market share in new TAMs and continue to drive growth in the core. we are leaning into our customer acquisition momentum to establish market share in new tams and continue to drive growth in the core We're also absorbing higher tariff costs. we're also absorbing higher tariff costs We're doing this while staying within our guardrails to maintain healthy payback periods as we scale. we're doing this while staying within our guardrails to maintain healthy payback periods as we scale Adjusted EBITDA was $176 million, a 35% margin. Our Q3 results reflect robust top-line growth, driven in part by better-than-expected GPV, as well as our continued focus on driving efficiencies throughout the P&L. GAAP operating income was $84 million, up from $34 million a year ago. That's both from the strength in adjusted EBITDA and our disciplined approach to managing stock-based compensation. Stock-based comp 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 EBITDA. 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. Adjusted EBITDA was $176 million, a 35% margin. adjusted ebitda was $176 million a 35% margin Our Q3 results reflect robust top-line growth, driven in part by better-than-expected GPV, as well as our continued focus on driving efficiencies throughout the P&L. our q3 results reflect robust top-line growth driven in part by better-than-expected gpv as well as our continued focus on driving efficiencies throughout the p&l GAAP operating income was $84 million, up from $34 million a year ago. gaap operating income was $84 million up from $34 million a year ago That's both from the strength in adjusted EBITDA and our disciplined approach to managing stock-based compensation. that's both from the strength in adjusted ebitda and our disciplined approach to managing stock-based compensation Stock-based comp as a percentage of recurring gross profit was 14% in Q3, down 3 percentage points versus a year ago. stock-based comp 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 EBITDA. free cash flow grew to $153 million in q3 and $564 million on a trailing 12-month basis nearly 100% conversion from adjusted ebitda Moving to capital allocation, year-to-date through the third quarter, we repurchased 1.5 million shares, or $54 million. 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. 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. now turning to guidance For the fourth quarter, we expect total fintech and subscription gross profit to grow in the range of 22%-25% year-over-year and adjusted EBITDA to be $140 million-$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 midpoint, we now expect 32% growth in fintech and subscription gross profit and $615 million in adjusted EBITDA. I'm extremely proud of the financial profile we've built over the last few years. We've doubled ARR while investing in the next wave of businesses to sustain that growth. Our ability to drive strong growth and expand adjusted EBITDA 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. For the fourth quarter, we expect total fintech and subscription gross profit to grow in the range of 22%-25% year-over-year and adjusted EBITDA to be $140 million-$150 million. for the fourth quarter we expect total fintech and subscription gross profit to grow in the range of 22%-25% year-over-year and adjusted ebitda to be $140 million-$150 million On the back of our strong year-to-date results and momentum heading into Q4, we raised our full-year outlook. on the back of our strong year-to-date results and momentum heading into q4 we raised our full-year outlook At the midpoint, we now expect 32% growth in fintech and subscription gross profit and $615 million in adjusted EBITDA. at the midpoint we now expect 32% growth in fintech and subscription gross profit and $615 million in adjusted ebitda I'm extremely proud of the financial profile we've built over the last few years. i'm extremely proud of the financial profile we've built over the last few years We've doubled ARR while investing in the next wave of businesses to sustain that growth. we've doubled arr while investing in the next wave of businesses to sustain that growth Our ability to drive strong growth and expand adjusted EBITDA 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. our ability to drive strong growth and expand adjusted ebitda 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 TAMs started as a small Horizon 3 bets that we gradually scaled as we gained momentum and saw initial product-market fit. We have enough signal across each new TAM 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 Aman said, the strategy we 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. We take a deliberate, gated approach to investing across our core and 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 TAMs started as a small Horizon 3 bets that we gradually scaled as we gained momentum and saw initial product-market fit. our new tams started as a small horizon 3 bets that we gradually scaled as we gained momentum and saw initial product-market fit We have enough signal across each new TAM that we see a path to market leadership and healthy unit economics at scale. we have enough signal across each new tam 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. 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 Aman said, the strategy we laid out at investor day is working. as aman said the strategy we laid out at investor day is working We remain confident in our medium and long-term targets. 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. 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. 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. We are still in our 2026 planning cycle and will provide an update in February when we issue guidance. Our commitment to disciplined 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. That's underpinned by the strong core margin of 40% and conviction to invest behind our new TAMs. that's underpinned by the strong core margin of 40% and conviction to invest behind our new tams We are still in our 2026 planning cycle and will provide an update in February when we issue guidance. we are still in our 2026 planning cycle and will provide an update in february when we issue guidance Our commitment to disciplined capital allocation is unwavering. our commitment to disciplined capital allocation is unwavering Our long-term margin target is within our control. 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. 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 top-line growth and margin expansion. Our momentum in the core is strong, and with new TAMs 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. 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 top-line growth and margin expansion. 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 top-line growth and margin expansion Our momentum in the core is strong, and with new TAMs 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. our momentum in the core is strong and with new tams 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. now i will turn the call back over to the operator to begin q&a

Speaker 13: This time, I would like to remind everyone that in order to ask a question, press star, then the number one on your telephone keypad. Your first question comes from the line of Josh Baer from Morgan Stanley. Your line is open. This time, I would like to remind everyone that in order to ask a question, press star, then the number one on your telephone keypad. this time i would like to remind everyone that in order to ask a question press star then the number one on your telephone keypad Your first question comes from the line of Josh Baer from Morgan Stanley. your first question comes from the line of josh baer from morgan stanley Your line is open. your line is open

Speaker 5: Great. Thanks for the question, and congrats on a strong quarter. I wanted to ask about GPV per location, which was up slightly year-over-year, I think better than expected. I'm wondering how much of that was driven by mix, so just lower mix of customers in more pressured parts of the market. 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, what kind of data do you look at? Is it more a selection bias as far as the customers that you land. Or how much is it your actual technology increasing sales? Great. great Thanks for the question, and congrats on a strong quarter. thanks for the question and congrats on a strong quarter I wanted to ask about GPV per location, which was up slightly year-over-year, I think better than expected. i wanted to ask about gpv per location which was up slightly year-over-year i think better than expected I'm wondering how much of that was driven by mix, so just lower mix of customers in more pressured parts of the market. i'm wondering how much of that was driven by mix so just lower mix of customers in more pressured parts of the market Or maybe and/or how much is coming from Toast customers just outperforming peers? 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, what kind of data do you look at? and if that is part of the case just wondering if you what kind of data do you look at Is it more a selection bias as far as the customers that you land. is it more a selection bias as far as the customers that you land Or how much is it your actual technology increasing sales? or how much is it your actual technology increasing sales

Speaker 10: Yeah. Thanks for the question, Josh. We saw it in Q3 in the summer was GPV per location exceeded expectations. And as we looked at October, I think it's normalized a little bit, but overall, it's in line with what we expected. I think certainly our platform, a big part of what we build is to help restaurants run a more profitable and more successful business. And so a lot of the investments we continue to make, handhelds, for example, or Toast Go 3 is an example of that, to help restaurants run a better business. And same-store sales, I think, have been in a balanced place year-over-year, so nothing that has dramatically changed. Yeah. yeah Thanks for the question, Josh. thanks for the question josh We saw it in Q3 in the summer was GPV per location exceeded expectations. we saw it in q3 in the summer was gpv per location exceeded expectations And as we looked at October, I think it's normalized a little bit, but overall, it's in line with what we expected. and as we looked at october i think it's normalized a little bit but overall it's in line with what we expected I think certainly our platform, a big part of what we build is to help restaurants run a more profitable and more successful business. i think certainly our platform a big part of what we build is to help restaurants run a more profitable and more successful business And so a lot of the investments we continue to make, handhelds, for example, or Toast Go 3 is an example of that, to help restaurants run a better business. and so a lot of the investments we continue to make handhelds for example or toast go 3 is an example of that to help restaurants run a better business And same-store sales, I think, have been in a balanced place year-over-year, so nothing that has dramatically changed. and same-store sales i think have been in a balanced place year-over-year so nothing that has dramatically changed

Speaker 5: Okay. Great. Okay. okay Great. great

Speaker 13: Our next question comes from the line of Will Nance from Goldman Sachs. Your line is open. Our next question comes from the line of Will Nance from Goldman Sachs. our next question comes from the line of will nance from goldman sachs Your line is open. your line is open

Speaker 6: Hey, guys. Thank you for taking the questions. I think 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 as a reaction to how much you yourselves have raised the bar on how to approach this market. 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. How are you thinking about the sustainability of your recent market share gains and maybe how long it takes to reach that goal of ultimately doubling your share in the core market? Thanks again. Hey, guys. hey guys Thank you for taking the questions. thank you for taking the questions I think obviously, really nice results tonight. i think 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 as a reaction to how much you yourselves have raised the bar on how to approach this market. 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 as a reaction to how much you yourselves have raised the bar on how to approach this market Pretty much every competitor has doubled down trying to catch up. pretty much every competitor has doubled down trying to catch up So can you just speak to some of those competitive concerns? so can you just speak to some of those competitive concerns You mentioned win rates being up against peers. you mentioned win rates being up against peers How are you thinking about the sustainability of your recent market share gains and maybe how long it takes to reach that goal of ultimately doubling your share in the core market? how are you thinking about the sustainability of your recent market share gains and maybe how long it takes to reach that goal of ultimately doubling your share in the core market Thanks again. thanks again

Speaker 10: Yeah. Thanks for the question, Will. First off, I just want to congratulate the team. We had a fantastic Q3. We've really had a fantastic year so far. Teams performing well. If you look at our net adds, as I mentioned, they're up in Q3. They're tracking to be up every quarter this year. And it's really a direct result of the execution of the team. Our win rates, as I mentioned, are up year-over-year against all major competitors. And that's actually both in QSR and FSR. Our go-to-market team on the ground continues to execute at a high level. And one of the things they have is to maximize location growth. This is across our payments and our SaaS revenue. Yeah. yeah Thanks for the question, Will. thanks for the question will First off, I just want to congratulate the team. first off i just want to congratulate the team We had a fantastic Q3. we had a fantastic q3 We've really had a fantastic year so far. we've really had a fantastic year so far Teams performing well. teams performing well If you look at our net adds, as I mentioned, they're up in Q3. if you look at our net adds as i mentioned they're up in q3 They're tracking to be up every quarter this year. they're tracking to be up every quarter this year And it's really a direct result of the execution of the team. and it's really a direct result of the execution of the team Our win rates, as I mentioned, are up year-over-year against all major competitors. our win rates as i mentioned are up year-over-year against all major competitors And that's actually both in QSR and FSR. and that's actually both in qsr and fsr Our go-to-market team on the ground continues to execute at a high level. our go-to-market team on the ground continues to execute at a high level And one of the things they have is to maximize location growth. and one of the things they have is to maximize location growth This is across our payments and our SaaS revenue. this is across our payments and our saas revenue They've got the tools across upfront fees and hardware and services to make sure that they can go take the location down and win because we've got this upsell engine to complement the new location team. And then lastly, of course, the most important thing underpinning this growth is our core platform, right? We were the first ones to build a restaurant-focused platform as purpose-built for this industry, and we continue to innovate and drive customer-focused innovation for our customers. They've got the tools across upfront fees and hardware and services to make sure that they can go take the location down and win because we've got this upsell engine to complement the new location team. they've got the tools across upfront fees and hardware and services to make sure that they can go take the location down and win because we've got this upsell engine to complement the new location team And then lastly, of course, the most important thing underpinning this growth is our core platform, right? and then lastly of course the most important thing underpinning this growth is our core platform right We were the first ones to build a restaurant-focused platform as purpose-built for this industry, and we continue to innovate and drive customer-focused innovation for our customers. we were the first ones to build a restaurant-focused platform as purpose-built for this industry and we continue to innovate and drive customer-focused innovation for our customers Toast IQ is a great example of that, helping restaurants run a better business. Our aspiration is really to build the best GPT interface for the restaurant industry. And I think in terms of the timing, you asked the question about timing, double, I think if you look at our net adds this year in our core business, they're in about the same range as last year.So it just shows you the market share gains we're gaining every year as we continue to grow and scale. Toast IQ is a great example of that, helping restaurants run a better business. toast iq is a great example of that helping restaurants run a better business Our aspiration is really to build the best GPT interface for the restaurant industry. our aspiration is really to build the best gpt interface for the restaurant industry And I think in terms of the timing, you asked the question about timing, double, I think if you look at our net adds this year in our core business, they're in about the same range as last year. and i think in terms of the timing you asked the question about timing double i think if you look at our net adds this year in our core business they're in about the same range as last year So it just shows you the market share gains we're gaining every year as we continue to grow and scale. so it just shows you the market share gains we're gaining every year as we continue to grow and scale

Speaker 6: Got it. Appreciate it. Nice job tonight. Got it. got it Appreciate it. appreciate it Nice job tonight. nice job tonight

Speaker 10: Thanks, Will. Thanks, Will. thanks will

Speaker 13: Our next question comes from Josh Baer from Morgan Stanley. Your line is open. Our next question comes from Josh Baer from Morgan Stanley. our next question comes from josh baer from morgan stanley Your line is open. your line is open

Speaker 5: I think I already asked mine. I think I already asked mine. i think i already asked mine

Speaker 13: Our next question comes from Timothy Chiodo from UBS. Your line is open. Our next question comes from Timothy Chiodo from UBS. our next question comes from timothy chiodo from ubs Your line is open. your line is open

Speaker 9: Great. Thank you. I want to shift gears 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? Great. great Thank you. thank you I want to shift gears a little bit to talk a little bit more about the opportunity that Toast has with consumers. i want to shift gears 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. 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? 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. You've got some pieces, right? you've got some pieces right Toast Tables, Toast takeout, the Uber partnership, and much more. toast tables toast takeout the uber partnership and much more There could be gift cards. 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. 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

Speaker 10: Yeah. That's a great question, Tim. 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 Toast-run restaurants. Another example is. About a year ago, we launched a benchmarking product, which was to help restaurants with menus and pricing insights run better businesses just off the menu data. Yeah. yeah That's a great question, Tim. that's a great question tim If you look at our scale and the impact that's already having, you already see examples of that even beyond consumer. 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 Toast-run restaurants. 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 toast-run restaurants Another example is. another example is About a year ago, we launched a benchmarking product, which was to help restaurants with menus and pricing insights run better businesses just off the menu data. about a year ago we launched a benchmarking product which was to help restaurants with 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 in consumer, in fact, this morning, I woke up, and the first thing I did was I went to a restaurant locally in Lexington, Massachusetts, called Revival Cafe. And one of my favorite things about the app is you can order ahead and just pick it up and leave. It's similar to what Starbucks pioneered many years ago. And so we can do that across 100,000+ Toast restaurants here in the U.S. People love that experience. In addition, I think where we have a unique opportunity is to bring diners into stores. So there are many examples where our scale and our network effects are playing a role. so there are many examples where our scale and our network effects are playing a role And in consumer, in fact, this morning, I woke up, and the first thing I did was I went to a restaurant locally in Lexington, Massachusetts, called Revival Cafe. and in consumer in fact this morning i woke up and the first thing i did was i went to a restaurant locally in lexington massachusetts called revival cafe And one of my favorite things about the app is you can order ahead and just pick it up and leave. and one of my favorite things about the app is you can order ahead and just pick it up and leave It's similar to what Starbucks pioneered many years ago. it's similar to what starbucks pioneered many years ago And so we can do that across 100,000+ Toast restaurants here in the U.S. and so we can do that across 100,000+ toast restaurants here in the u.s People love that experience. people love that experience In addition, I think where we have a unique opportunity is to bring diners into stores. in addition i think where we have a unique opportunity is to bring diners into stores So whether it's our partnership with Resy as part of the Amex partnership or with Toast Tables, the ability to get a table, sit down, and then one of the things that we're looking at is imagining 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 diners into the restaurant and then leaving the restaurant as well. So whether it's our partnership with Resy as part of the Amex partnership or with Toast Tables, the ability to get a table, sit down, and then one of the things that we're looking at is imagining the ability to just walk out and leave at the end of the transaction because you've got a card on file. so whether it's our partnership with resy as part of the amex partnership or with toast tables the ability to get a table sit down and then one of the things that we're looking at is imagining 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 diners into the restaurant and then leaving the restaurant as well. and so there's a huge opportunity there in terms of providing a better guest experience both in terms of bringing diners into the restaurant and then leaving the restaurant as well And within the app, one feature that a lot of people have heard love is because we've got such great data about the restaurants and when they're busy and when they're not, the ability to generate intelligent offers during their slow periods and the ability to track all of your loyalty in one place is another thing that 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 and digitize that experience for restaurants. And within the app, one feature that a lot of people have heard love is because we've got such great data about the restaurants and when they're busy and when they're not, the ability to generate intelligent offers during their slow periods and the ability to track all of your loyalty in one place is another thing that we're getting some really good feedback on. and within the app one feature that a lot of people have heard love is because we've got such great data about the restaurants and when they're busy and when they're not the ability to generate intelligent offers during their slow periods and the ability to track all of your loyalty in one place is another thing that we're getting some really good feedback on So I agree with you. so i agree with you There's a lot of potential here given the density of restaurants that we now have. 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 and digitize that experience for restaurants. and i think really the focus is on figuring out how we can build the best in-store experience and digitize that experience for restaurants

Speaker 9: Thank you. Thank you. thank you

Speaker 13: Your next question comes from Dan Dolev from Mizuho. Your line is open. Your next question comes from Dan Dolev from Mizuho. your next question comes from dan dolev from mizuho Your line is open. your line is open

Speaker 4: Hey, guys. Thank you for taking my question. Obviously, great results here. I wanted to ask about just the consumer in general, like the macro, right? There's been a lot of anxiety out there, and obviously, your results are looking great. So maybe you can talk to us what you're seeing kind of maybe in the quarter, but also more recently as we are in Q4 already. That would be fantastic. Thank you. Hey, guys. hey guys Thank you for taking my question. thank you for taking my question Obviously, great results here. obviously great results here I wanted to ask about just the consumer in general, like the macro, right? i wanted to ask about just the consumer in general like the macro right There's been a lot of anxiety out there, and obviously, your results are looking great. there's been a lot of anxiety out there and obviously your results are looking great So maybe you can talk to us what you're seeing kind of maybe in the quarter, but also more recently as we are in Q4 already. so maybe you can talk to us what you're seeing kind of maybe in the quarter but also more recently as we are in q4 already That would be fantastic. that would be fantastic Thank you. thank you

Speaker 10: Yeah. Thanks for the question, Dan. Look. The summer was strong. Q3 was strong. Year-over-year. What we saw in October on the consumer has normalized a little bit, but really within a narrow band and in line with kind of what our expectations were. And so in our customers and our restaurants that are performing well, one of the things we always look at is whether it's in boom markets or slower markets. We've gone and studied previous recessions in '01 and '08, and what we've seen is that restaurants tend to be resilient. Yeah. yeah Thanks for the question, Dan. thanks for the question dan Look. look The summer was strong. the summer was strong Q3 was strong. q3 was strong Year-over-year. year-over-year What we saw in October on the consumer has normalized a little bit, but really within a narrow band and in line with kind of what our expectations were. what we saw in october on the consumer has normalized a little bit but really within a narrow band and in line with kind of what our expectations were And so in our customers and our restaurants that are performing well, one of the things we always look at is whether it's in boom markets or slower markets. and so in our customers and our restaurants that are performing well one of the things we always look at is whether it's in boom markets or slower markets We've gone and studied previous recessions in '01 and '08, and what we've seen is that restaurants tend to be resilient. we've gone and studied previous recessions in '01 and '08 and what we've seen is that restaurants tend to be resilient And what we're seeing so far in our data is our customers are holding up really well. And what we're seeing so far in our data is our customers are holding up really well. and what we're seeing so far in our data is our customers are holding up really well

Speaker 4: Great. Thank you. Great. great Thank you. thank you

Speaker 13: Our next question comes from Dominic Ball from Rothschild & Co Redburn. Your line is open. Our next question comes from Dominic Ball from Rothschild & Co Redburn . our next question comes from dominic ball from rothschild & co redburn Your line is open. your line is open

Speaker 11: Hello, Aman, Elena, Michael. And Aman, just to start with, I mean, fantastic to hear that you guys are saying that Toast in Dublin's market share in its core TAM. That's amazing. With digital chits within Toast IQ, it looks like one of the best products from our perspective that you launched over the last sort of five years. When we survey private full-service restaurant owners, the dream is really to understand their customer when they walk in. And because waitresses churn so much, 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 and how this has gone so far? Hello, Aman, Elena, Michael. hello aman elena michael And Aman, just to start with, I mean, fantastic to hear that you guys are saying that Toast in Dublin's market share in its core TAM. and aman just to start with i mean fantastic to hear that you guys are saying that toast in dublin's market share in its core tam That's amazing. that's amazing With digital chits within Toast IQ, it looks like one of the best products from our perspective that you launched over the last sort of five years. with digital chits within toast iq it looks like one of the best products from our perspective that you launched over the last sort of five years When we survey private full-service restaurant owners, the dream is really to understand their customer when they walk in. when we survey private full-service restaurant owners the dream is really to understand their customer when they walk in And because waitresses churn so much, it's really hard to do that. and because waitresses churn so much it's really hard to do that But this sort of product seems to be offering that. but this sort of product seems to be offering that So is there any case studies on any early data points and how this has gone so far? so is there any case studies on any early data points and how this has gone so far

Speaker 10: Yeah. Thanks, Dominic. We're seeing just to zoom out for a second across Toast IQ, we're seeing lots and lots of use cases like that where customers are seeing the value of having all of their data actually drive value for them, right? So digital chits is a great example of that. 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 at the table. So that's a great example of that. Yeah. yeah Thanks, Dominic. thanks dominic We're seeing just to zoom out for a second across Toast IQ, we're seeing lots and lots of use cases like that where customers are seeing the value of having all of their data actually drive value for them, right? we're seeing just to zoom out for a second across toast iq we're seeing lots and lots of use cases like that where customers are seeing the value of having all of their data actually drive value for them right So digital chits is a great example of that. so digital chits is a great example of that 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 at the table. 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 at the table So that's a great example of that. so that's a great example of that I think more broadly within our Toast IQ platform, we're seeing really high adoption of our backend because customers love the fact that they can use more of a natural language interface. Think of a GPT-like interface where they can go in and say, "Get support, make changes to their backend." Whether it's like 86 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 what's selling well, and how things are going. And so there's a lot of use cases within the Toast IQ umbrella. Digital chits is a good example of that, but really excited to see the progress and the adoption so far and what the product can do for our customers. I think more broadly within our Toast IQ platform, we're seeing really high adoption of our backend because customers love the fact that they can use more of a natural language interface. i think more broadly within our toast iq platform we're seeing really high adoption of our backend because customers love the fact that they can use more of a natural language interface Think of a GPT-like interface where they can go in and say, "Get support, make changes to their backend." Whether it's like 86 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 what's selling well, and how things are going. think of a gpt-like interface where they can go in and say "get support make changes to their backend." whether it's like 86 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 what's selling well and how things are going And so there's a lot of use cases within the Toast IQ umbrella. and so there's a lot of use cases within the toast iq umbrella Digital chits is a good example of that, but really excited to see the progress and the adoption so far and what the product can do for our customers. digital chits is a good example of that but really excited to see the progress and the adoption so far and what the product can do for our customers

Speaker 11: Great. Thank you. Great. great Thank you. thank you

Speaker 10: Thank you. Thank you. thank you

Speaker 13: Our next question comes from David Hynes from Canaccord Genuity. Your line is open. Our next question comes from David Hynes from Canaccord Genuity . our next question comes from david hynes from canaccord genuity Your line is open. your line is open

Speaker 3: Hey, thank you, guys. Congrats on the nice quarter. Aman, I wanted to ask how you thought the business performed during the AWS outage. Anecdotally, I talked to restaurants up here in the Boston area. It sounded like everyone kind of cut over to offline mode. It worked well. They were 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, as small as it was being a Monday lunch, it seemed. What did you hear about competitive disruptions? Is this a differentiating point of Toast? How did the business hold up during that period? Hey, thank you, guys. hey thank you guys Congrats on the nice quarter. congrats on the nice quarter Aman, I wanted to ask how you thought the business performed during the AWS outage. aman i wanted to ask how you thought the business performed during the aws outage Anecdotally, I talked to restaurants up here in the Boston area. anecdotally i talked to restaurants up here in the boston area It sounded like everyone kind of cut over to offline mode. it sounded like everyone kind of cut over to offline mode It worked well. it worked well They were able to collect payment information. they were able to collect payment information I assume run those later. 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, as small as it was being a Monday lunch, it seemed. i think they did have to shut down online ordering which i'm sure is factored into elena's guidance for q4 as small as it was being a monday lunch it seemed What did you hear about competitive disruptions? what did you hear about competitive disruptions Is this a differentiating point of Toast? is this a differentiating point of toast How did the business hold up during that period? how did the business hold up during that period

Speaker 10: Yeah. The business held up fine precisely because we've spent the past decade really building this platform for restaurants. And one of the key requirements is if something's down, whether it's the internet or AWS or wherever it may be, you got to be able to operate within the restaurant. And so our customers were able to take orders, send their orders to kitchens, take payments offline. Yeah. yeah The business held up fine precisely because we've spent the past decade really building this platform for restaurants. the business held up fine precisely because we've spent the past decade really building this platform for restaurants And one of the key requirements is if something's down, whether it's the internet or AWS or wherever it may be, you got to be able to operate within the restaurant. and one of the key requirements is if something's down whether it's the internet or aws or wherever it may be you got to be able to operate within the restaurant And so our customers were able to take orders, send their orders to kitchens, take payments offline. and so our customers were able to take orders send their orders to kitchens take payments offline And as the internet came back, as the system came back, they were able to process those off of offline mode. Certainly, we see that the need to leverage these digital channels, whether it's our first-party channels or a partner ecosystem, that that has grown over the years. And so we're looking at ways to continue to make that even more resilient. But I think customers overall were able to work through it, and I don't think there's any meaningful impact in terms of guidance for Q4. And as the internet came back, as the system came back, they were able to process those off of offline mode. and as the internet came back as the system came back they were able to process those off of offline mode Certainly, we see that the need to leverage these digital channels, whether it's our first-party channels or a partner ecosystem, that that has grown over the years. certainly we see that the need to leverage these digital channels whether it's our first-party channels or a partner ecosystem that that has grown over the years And so we're looking at ways to continue to make that even more resilient. and so we're looking at ways to continue to make that even more resilient But I think customers overall were able to work through it, and I don't think there's any meaningful impact in terms of guidance for Q4. but i think customers overall were able to work through it and i don't think there's any meaningful impact in terms of guidance for q4

Speaker 3: Thank you. Thank you. thank you

Speaker 10: Thanks. Thanks. thanks

Speaker 13: Our next question comes from Ryana Kumar from Oppenheimer. Our next question comes from Ryana Kumar from Oppenheimer. our next question comes from ryana kumar from oppenheimer

Speaker 12: Your line is now open. Hi. Great results, and thanks for taking my question. It was good to see the total take rate up seven basis points from a year ago. I'm just wondering how sustainable and improving take rate is. Thank you. Your line is now open. your line is now open Hi. hi Great results, and thanks for taking my question. great results and thanks for taking my question It was good to see the total take rate up seven basis points from a year ago. it was good to see the total take rate up seven basis points from a year ago I'm just wondering how sustainable and improving take rate is. i'm just wondering how sustainable and improving take rate is Thank you. thank you

Speaker 2: Yeah. Thank you. Yeah. I'm really proud also of the team here on their execution. Take rate was up. The core net take rate was up four basis points, and the total take rate up about five basis points. And that's really the benefits we're seeing from the small targeted pricing moves. It's COGS optimization, which is a priority for that team. It's also new products like surcharging, which is small today and contributing a little bit, but over time that can drive, that can be more meaningful as we get more customers on that product. Yeah. yeah Thank you. thank you Yeah. yeah I'm really proud also of the team here on their execution. i'm really proud also of the team here on their execution Take rate was up. take rate was up The core net take rate was up four basis points, and the total take rate up about five basis points. the core net take rate was up four basis points and the total take rate up about five basis points And that's really the benefits we're seeing from the small targeted pricing moves. and that's really the benefits we're seeing from the small targeted pricing moves It's COGS optimization, which is a priority for that team. it's cogs optimization which is a priority for that team It's also new products like surcharging, which is small today and contributing a little bit, but over time that can drive, that can be more meaningful as we get more customers on that product. it's also new products like surcharging which is small today and contributing a little bit but over time that can drive that can be more meaningful as we get more customers on that product But when you zoom out, we have a lot of confidence in our ability to drive take rate up over time, really using those same levers, driving cost optimization on a per-transaction basis, driving more digital innovation. And continuing to scale just with our volume. So really view that as an opportunity. But when you zoom out, we have a lot of confidence in our ability to drive take rate up over time, really using those same levers, driving cost optimization on a per-transaction basis, driving more digital innovation. but when you zoom out we have a lot of confidence in our ability to drive take rate up over time really using those same levers driving cost optimization on a per-transaction basis driving more digital innovation And continuing to scale just with our volume. and continuing to scale just with our volume So really view that as an opportunity. so really view that as an opportunity

Speaker 13: Our next question comes from Jason Kupferberg from Wells Fargo. Your line is now open. Our next question comes from Jason Kupferberg from Wells Fargo. our next question comes from jason kupferberg from wells fargo Your line is now open. your line is now open

Speaker 8: Thank you, guys. I wanted to ask about recurring gross profit. I mean, you delivered, I think, about 1,000 basis points of upside on that metric in the quarter. It's a lot even by Toast standards. And I think this was against the lapping effect of last year's accounting change. And so I'm curious, as you kind of rank order, what kind of surprised you to the upside? GPV, Toast Capital, other factors. Thank you, guys. thank you guys I wanted to ask about recurring gross profit. i wanted to ask about recurring gross profit I mean, you delivered, I think, about 1,000 basis points of upside on that metric in the quarter. i mean you delivered i think about 1,000 basis points of upside on that metric in the quarter It's a lot even by Toast standards. it's a lot even by toast standards And I think this was against the lapping effect of last year's accounting change. and i think this was against the lapping effect of last year's accounting change And so I'm curious, as you kind of rank order, what kind of surprised you to the upside? and so i'm curious as you kind of rank order what kind of surprised you to the upside GPV, Toast Capital, other factors. 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 we 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 callouts there. I mean, obviously, you've had a track record of being able to handily outperform, but I wanted to see if there's anything else we might be missing on that front. Thank you. 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. 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 we look at the top end of the Q4 guidance, I think you'd be down a little bit. but if we 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 callouts there. so i'm just curious if there's any callouts there I mean, obviously, you've had a track record of being able to handily outperform, but I wanted to see if there's anything else we might be missing on that front. i mean obviously you've had a track record of being able to handily outperform but i wanted to see if there's anything else we might be missing on that front Thank you. thank you

Speaker 2: Thanks, Jason. You actually summarized it quite well. So our guidance for Q4 is 25% growth at the high end. And we're always going to aim to do better. We do take a balanced view of GPV just given the macro's dynamic. But as you said, we saw strong GPV trends in the summer. We also had a strong quarter from Toast Capital. And we're seeing that more normalized in Q4. So overall we're really confident with the guidance that we've given. Thanks, Jason. thanks jason You actually summarized it quite well. you actually summarized it quite well So our guidance for Q4 is 25% growth at the high end. so our guidance for q4 is 25% growth at the high end And we're always going to aim to do better. and we're always going to aim to do better We do take a balanced view of GPV just given the macro's dynamic. we do take a balanced view of gpv just given the macro's dynamic But as you said, we saw strong GPV trends in the summer. but as you said we saw strong gpv trends in the summer We also had a strong quarter from Toast Capital. we also had a strong quarter from toast capital And we're seeing that more normalized in Q4. and we're seeing that more normalized in q4 So overall we're really confident with the guidance that we've given. so overall we're really confident with the guidance that we've given

Speaker 13: Our next question comes from Stephen Sheldon from William Blair. Your line is now open. Our next question comes from Stephen Sheldon from William Blair. our next question comes from stephen sheldon from william blair Your line is now open. your line is now open

Speaker 7: Thanks. And great results. I wanted to follow up on a prior question on Toast IQ. Great to hear that I think it was over 25,000 locations have used 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, including higher AI costs 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. 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 fast pricing increases or better product attach rates as we think about the next year or two? Yeah. Thanks. thanks And great results. and great results I wanted to follow up on a prior question on Toast IQ. i wanted to follow up on a prior question on toast iq Great to hear that I think it was over 25,000 locations have used it, which is a lot more than I would have expected this early. great to hear that i think it was over 25,000 locations have used 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, including higher AI costs associated with hosting. so just wanted an update there of how we should think about the financial impact of that including higher ai costs 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. with that kind of adoption i think in a month i'd assume that you're not selling it as a separate sku Am I right on that assumption? am i right on that assumption Do you plan to eventually sell it as a separate SKU? do you plan to eventually sell it as a separate sku Or could that be used as part of the basis for fast pricing increases or better product attach rates as we think about the next year or two? or could that be used as part of the basis for fast pricing increases or better product attach rates as we think about the next year or two Yeah. yeah

Speaker 10: Yeah. Great question, Stephen. I mean, right now, the focus on Toast IQ is really on adoption and really driving customer value. As I mentioned, really excited about the early adoption from customers and the value they're getting. If you look at what opportunities this creates for Toast, one, I think because people are using it so much to run their businesses, there's product-led growth opportunities to expand our platform. Yeah. yeah Great question, Stephen. great question stephen I mean, right now, the focus on Toast IQ is really on adoption and really driving customer value. i mean right now the focus on toast iq is really on adoption and really driving customer value As I mentioned, really excited about the early adoption from customers and the value they're getting. as i mentioned really excited about the early adoption from customers and the value they're getting If you look at what opportunities this creates for Toast, one, I think because people are using it so much to run their businesses, there's product-led growth opportunities to expand our platform. if you look at what opportunities this creates for toast one i think because people are using it so much to run their businesses there's product-led growth opportunities to expand our platform Another area that we're starting to invest in is if you look at 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 owners, especially SMB restaurant owners, are busy, and they're not marketers and have the time to generate these campaigns. And so you can imagine agentic capabilities within Toast IQ to start to recommend these campaigns when there's slower or different times. Another area that we're starting to invest in is if you look at 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 owners, especially SMB restaurant owners, are busy, and they're not marketers and have the time to generate these campaigns. another area that we're starting to invest in is if you look at 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 owners especially smb restaurant owners are busy and they're not marketers and have the time to generate these campaigns And so you can imagine agentic capabilities within Toast IQ to start to recommend these campaigns when there's slower or different times. and so you can imagine agentic capabilities within toast iq to start to recommend these campaigns when there's slower or different times And so whether it's on marketing or it's on back-office functions like accounting or bookkeeping or even payroll, we see lots of opportunities to drive key agentic use cases within Toast IQ to drive adoption and value. I think in terms of monetization, it's early. We're looking at different ways. I think one obvious way that we're going to look at is just like GPT, look at usage-based monetization on Toast IQ. But the most important focus here right now is to make sure we're getting adoption and really great value for customers to help drive our growth. And so whether it's on marketing or it's on back-office functions like accounting or bookkeeping or even payroll, we see lots of opportunities to drive key agentic use cases within Toast IQ to drive adoption and value. and so whether it's on marketing or it's on back-office functions like accounting or bookkeeping or even payroll we see lots of opportunities to drive key agentic use cases within toast iq to drive adoption and value I think in terms of monetization, it's early. i think in terms of monetization it's early We're looking at different ways. we're looking at different ways I think one obvious way that we're going to look at is just like GPT, look at usage-based monetization on Toast IQ. i think one obvious way that we're going to look at is just like gpt look at usage-based monetization on toast iq But the most important focus here right now is to make sure we're getting adoption and really great value for customers to help drive our growth. but the most important focus here right now is to make sure we're getting adoption and really great value for customers to help drive our growth

Speaker 13: Our next question comes from Samad Samana from Jefferies. Your line is now open. Our next question comes from Samad Samana from Jefferies. our next question comes from samad samana from jefferies Your line is now open. your line is now open

Speaker 14: Hi. Good evening. Thanks for taking my question. It's great to see the strong results. I guess I'm pretty focused here on pricing. It's going to be a little multi-parted, which first is the pricing on the website, fully realizing the disclosure the company made. But was there some intention that somebody was exploring maybe testing and targeting or A/B testing just to maybe help us understand what happened there? And there's just the comments on the targeted fintech pricing moves that you've made. Hi. hi Good evening. good evening Thanks for taking my question. thanks for taking my question It's great to see the strong results. it's great to see the strong results I guess I'm pretty focused here on pricing. i guess i'm pretty focused here on pricing It's going to be a little multi-parted, which first is the pricing on the website, fully realizing the disclosure the company made. it's going to be a little multi-parted which first is the pricing on the website fully realizing the disclosure the company made But was there some intention that somebody was exploring maybe testing and targeting or A/B testing just to maybe help us understand what happened there? but was there some intention that somebody was exploring maybe testing and targeting or a/b testing just to maybe help us understand what happened there And there's just the comments on the targeted fintech pricing moves that you've made. and there's just the comments on the targeted fintech pricing moves that you've made How much of the backbook have you now maybe pushed price through? So I know that these are focusing on two different pieces, but pricing, I think, is a really big focus right now for everybody. So appreciate you addressing the questions. Thank you. How much of the backbook have you now maybe pushed price through? how much of the backbook have you now maybe pushed price through So I know that these are focusing on two different pieces, but pricing, I think, is a really big focus right now for everybody. so i know that these are focusing on two different pieces but pricing i think is a really big focus right now for everybody So appreciate you addressing the questions. so appreciate you addressing the questions Thank you. thank you

Speaker 2: Yeah. Thanks, Samad, for the questions. So I'll start with the website, which was human error. And as soon as we discovered it, we fixed it. You're right. We do tests from time to time. This certainly was not a test. And actually, that part of the website gets 1% of our booking, so not material overall. So we corrected that and moved on. In terms of pricing, our philosophy is unchanged. It's really the way we think about it. It's really just one lever of growth. And we'll still make targeted and surgical price changes. And we'll balance that with market share potential, of course. Yeah. yeah Thanks, Samad, for the questions. thanks samad for the questions So I'll start with the website, which was human error. so i'll start with the website which was human error And as soon as we discovered it, we fixed it. and as soon as we discovered it we fixed it You're right. you're right We do tests from time to time. we do tests from time to time This certainly was not a test. this certainly was not a test And actually, that part of the website gets 1% of our booking, so not material overall. and actually that part of the website gets 1% of our booking so not material overall So we corrected that and moved on. so we corrected that and moved on In terms of pricing, our philosophy is unchanged. in terms of pricing our philosophy is unchanged It's really the way we think about it. it's really the way we think about it It's really just one lever of growth. it's really just one lever of growth And we'll still make targeted and surgical price changes. and we'll still make targeted and surgical price changes And we'll balance that with market share potential, of course. and we'll balance that with market share potential of course And in the near term, gaining share is a high priority. And we know we can optimize price over time. In terms of how much of the backbook, we haven't really disclosed that, but we feel confident as long as we're driving value, we'll be able to drive price over time in small targeted ways. And as we bring customers onto our platform, they're coming in at the market rates. And in the near term, gaining share is a high priority. and in the near term gaining share is a high priority And we know we can optimize price over time. and we know we can optimize price over time In terms of how much of the backbook, we haven't really disclosed that, but we feel confident as long as we're driving value, we'll be able to drive price over time in small targeted ways. in terms of how much of the backbook we haven't really disclosed that but we feel confident as long as we're driving value we'll be able to drive price over time in small targeted ways And as we bring customers onto our platform, they're coming in at the market rates. and as we bring customers onto our platform they're coming in at the market rates

Speaker 14: Great. Really appreciate it. You guys addressing both. That was really helpful. Thank you, Elena. Great. great Really appreciate it. really appreciate it you You guys addressing both. you guys addressing both That was really helpful. that was really helpful Thank you, Elena. thank you elena

Speaker 2: Sure. Sure. sure

Speaker 13: We will now take our last question from the line of Darrin Peller from Wolfe Research. Your line is now open. We will now take our last question from the line of Darrin Peller from Wolfe Research. we will now take our last question from the line of darrin peller from wolfe research Your line is now open. your line is now open

Speaker 1: Guys, thanks. Just maybe help us understand what gives you the confidence in your ability to see increased net adds in 2026. Just how much might come from the TAM expansion areas driving the growth versus the core business. Versus the core business you've been adding so well so far. Thanks again, guys. Guys, thanks. guys thanks Just maybe help us understand what gives you the confidence in your ability to see increased net adds in 2026. just maybe help us understand what gives you the confidence in your ability to see increased net adds in 2026 Just how much might come from the TAM expansion areas driving the growth versus the core business. just how much might come from the tam expansion areas driving the growth versus the core business Versus the core business you've been adding so well so far. versus the core business you've been adding so well so far Thanks again, guys. thanks again guys

Speaker 10: Yeah. Sure, Darrin. If you look at the trend we've seen the past year, our core net adds are in the same range as last year. And so if you look at how we've been able to drive record net adds every quarter this year, it's really from these new TAMs contributing more. And we expect really the same trend to continue next year. We expect in the quarter to continue to perform at a high level based upon the signal we're seeing, and then these new TAMs to play a bigger role. Yeah. yeah Sure, Darrin. sure darrin If you look at the trend we've seen the past year, our core net adds are in the same range as last year. if you look at the trend we've seen the past year our core net adds are in the same range as last year And so if you look at how we've been able to drive record net adds every quarter this year, it's really from these new TAMs contributing more. and so if you look at how we've been able to drive record net adds every quarter this year it's really from these new tams contributing more And we expect really the same trend to continue next year. and we expect really the same trend to continue next year We expect in the quarter to continue to perform at a high level based upon the signal we're seeing, and then these new TAMs to play a bigger role. we expect in the quarter to continue to perform at a high level based upon the signal we're seeing and then these new tams to play a bigger role If you look at the longer-term opportunity, if you just zoom out for a second and see what's possible in these TAMs, I think what's exciting to me is. There's so much overlap in the core platform between our core U.S. SMB business and these new TAMs, which is why we've been able to grow these businesses to close to $100 million in ARR just in a couple of years. And that's what's really going to drive the incremental net adds in our business next year. If you look at the longer-term opportunity, if you just zoom out for a second and see what's possible in these TAMs, I think what's exciting to me is. if you look at the longer-term opportunity if you just zoom out for a second and see what's possible in these tams i think what's exciting to me is There's so much overlap in the core platform between our core U.S. there's so much overlap in the core platform between our core u.s SMB business and these new TAMs, which is why we've been able to grow these businesses to close to $100 million in ARR just in a couple of years. smb business and these new tams which is why we've been able to grow these businesses to close to $100 million in arr just in a couple of years And that's what's really going to drive the incremental net adds in our business next year. and that's what's really going to drive the incremental net adds in our business next year

Speaker 1: Thank you. Thank you. thank you

Speaker 10: Sure. Sure. sure

Speaker 13: This concludes today's conference call. Thank you all for joining. This concludes today's conference call. this concludes today's conference call Thank you all for joining. thank you all for joining