Earnings Call Transcript - TOST Q2 2025

Operator, Operator

Good afternoon. My name is Kate, and I will be your conference operator today. At this time, I would like to welcome everyone to Toast's Second 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.

Michael Senno, Senior Vice President of Finance

Thank you. Welcome to Toast earnings conference call for the second quarter ended June 30, 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 third quarter of 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 uncertainties 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 our 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.

Aman Narang, CEO

Thanks, Michael, and thank you to everyone for joining us today. We've had a great first half of the year. Q2 results came in ahead of expectations. We've added a record 8,500 net new locations. We grew recurring gross profit 35%, and we've delivered $161 million of adjusted EBITDA. GAAP operating income reached $80 million. At Toast, our mission is to help restaurants delight their guests, do what they love, and thrive. Our strong results reflect our consistent execution across the company and, more importantly, they reinforce our belief in the significant long-term opportunity ahead of us. We're seeing that opportunity play out as we grow market share in our core and accelerate our momentum across our new customer segments. In Q2, we crossed 10,000 live locations across enterprise, international, and food and beverage retail and now serve approximately 148,000 locations across our customer segments. We're excited to welcome Firehouse Subs, a 1,300 QSR enterprise brand, as well as Zabar's, the iconic New York grocer, to the Toast platform, further signaling our progress in enterprise and retail. Internationally, we launched in Australia. This is our fourth international market, extending our reach beyond the U.K., Ireland, and Canada and another step towards building the leading global platform for restaurants. We're also thrilled to announce an exciting partnership with American Express. This collaboration will bring together reservation listings from Resy, Tock, and Toast Tables into Local by Toast, our mobile app, to make it easier to find and book tables. We also plan to use the reservation data and the power of our platform to enable personalized experiences for diners at the point of sale, including American Express card members. We're excited about the value the two companies can deliver together for both restaurants and diners through this exciting partnership. At the start of the year, we laid out four key priorities. Number one, scale locations and market share in our core U.S. restaurant business; number two, demonstrate that these new market segments can be material drivers of growth; third, increase customer adoption of our broad platform and drive differentiation through data and AI; and lastly, continue to hold ourselves to a high bar and invest against our most important priorities while gradually expanding margins. So let's jump into number one, starting with our core restaurant business. We have strong momentum driven by our purpose-built restaurant platform and our local go-to-market team. As a result of positive customer feedback and the brand investments we've made, we've seen the largest year-over-year increase in brand consideration in our peer set. We grew share in nearly every SMB market we operate in. In our top 10 markets, we continue to see higher rep productivity and higher market share gains relative to our averages. The fact that we're still seeing strong gains in these markets where we have over 30% penetration across large and small metro areas is a clear sign our flywheel strategy is working. We're also expanding the breadth of our platform with new products and features like Toast Go 3 and our new AI-powered intelligence engine, ToastIQ, which reflects a steady drumbeat of innovation that's core to our strategy. Beyond every update is our focus on the thousand little things that make the Toast platform such a great tool for restaurants. An example of this is Supper Club, a neighborhood restaurant in Richmond, Virginia. A deciding factor in their switch to Toast was our Catering & Events product, which replaced a third-party app that was cumbersome for them and their customers. Since switching to Toast, Supper Club has seen a nearly 40% jump in catering sales. Toast Catering is both easy to use and seamlessly integrates into the Toast platform, including our point-of-sale devices and handhelds, which has allowed them to take out significantly more business and even open a second location in March this year. It's a great example of how when our customers grow, we grow right alongside them. Now, second, moving gears. Our second priority is demonstrating that these new market segments can be material drivers of growth. We crossed 10,000 live locations across enterprise, food and beverage retail, and international, and these new customer segments are on track to surpass $100 million in ARR collectively by the end of the year, a milestone that took 6 years in our core business. In enterprise, our vision is to have the most iconic restaurant brands in Toast and drive innovation for the entire industry. Our investments are paying off, and we'll keep enhancing the platform to meet the needs of large-scale operators. We're also seeing strong interest from customers to use more of our platform, which will contribute to scaling enterprise ARPUs over time. In food and beverage retail, we're off to a strong start, and the early signals are really promising. We're building deeper inventory management tools, expanding integrations, and scaling our dedicated sales team. Total ARPU for retail customers is already above $10,000, a clear indication our value proposition is resonating. Food retailers like Zabar's New York City are using Toast Retail to handle their large SaaS-based operations, manage over 30,000 SKUs across the 20,000 square foot store, and process more than 2,500 transactions daily. Zabar's shows how Toast supports complex high-volume retail environments. Across the U.K., Ireland, and Canada, rolling out more of our products is driving a steady increase in booked ARPU. We're also seeing greater traction among full-service restaurants, which now make up the majority of our new wins in these regions, showing that product improvement investments in our go-to-market teams are paying off. We're launching in Australia with the same products we have in our other international markets today. Our fast comprehensive launch down under is thanks to the learnings and infrastructure from our first three markets and the localization investments we've made over the past few years. We took our first customer, Graze Craze, live in Australia this summer. Graze Craze is an existing Toast customer in the U.S. and we were top of mind when they decided to expand to Australia. They initially opted for a local provider at launch but couldn't find another POS provider that matched Toast's capabilities. So they were excited to transition to Toast when we could support their Australian operations. They're now using our guest-facing displays, kitchen display screens, and online ordering products to solve for the operational friction and reporting gaps they experienced with the local system at launch. And they planned to add more products like email marketing and loyalty to help drive demand, and above-store tools, including multi-location management and reporting to power their continued expansion across Australia. Shifting gears, our third priority is increasing customer adoption of our platform and driving differentiation through data and AI. We were a pioneer in bringing purpose-built handhelds to market 7 years ago, redefining in-store operations and service to restaurants. And since then, billions of orders have run through Toast Go handhelds, giving us a deep understanding of what works on the restaurant floor. Our new Toast Go 3 handheld builds on that foundation and continues to push the industry forward. It's the only device that combines ToastIQ, Toast's intelligence engine, with built-in cellular connectivity, so staff can take orders, process payments, and print receipts seamlessly across Wi-Fi and cellular networks. It does all this while being lighter, faster, and more durable than before with a 24-hour battery life. With ToastIQ, staff now get real-time context about their guests to help increase check sizes. Personalized notes and guest details from Toast Tables show up directly into our Toast Go 3 handhelds and terminals. And our Amex partnership aims to build on this technology to deliver these personalized experiences for Amex card members as well. Haywire Restaurants in Texas calls the Toast Go 3 a game changer. They used to lose Wi-Fi in certain areas of their 3-story concrete building, but now with Toast Go 3's cellular functionality, they can seamlessly transition between cellular and Wi-Fi to stay connected and take payments without getting interrupted. The new handheld meets the demand of their restaurants, including drops on their concrete floors or servers working double shifts, who now carry a handheld all day long, without needing to charge it. Haywire also says that Toast Go 3 is a tool for growth, giving them a reliable way to generate sales at community events and festivals and open the door to sales they wouldn't access otherwise. Now lastly, our fourth priority is to continue to invest with discipline while expanding our margins. Our updated full-year outlook reflects the strength of our execution and the scalability of our business. We have reached the medium-term margin guidance we laid out at our Investor Day ahead of plan, and we're confident in our ability to continue investing behind what's most important to fuel long-term growth while balancing margins over time. As I close out, I want to thank every Toaster, our customers, and our investors. The progress we're making is a direct result of the team's incredible execution and the confidence our customers and investors have in what we're building. Our platform helps local businesses thrive, and I've never been more excited about the opportunity that's in front of us. Thank you. And with that, I'll turn the call over to Elena.

Elena Gomez, CFO

Thank you, Aman, and to everyone for joining. To start, I would also like to thank our incredible team for another strong quarter, which came in above our expectations. In the second quarter, ARR grew 31% and total fintech and subscription gross profit, our recurring gross profit streams, increased 35% year-over-year. Total take rate across SaaS and fintech gross profit was 93 basis points in the quarter, an increase of 8 basis points from a year ago, reflecting our growing share of wallet and the increasing value we are providing our customers. Adjusted EBITDA was $161 million for the quarter, with margins expanding 8 percentage points year-over-year to 35%, and GAAP operating income was $80 million. We also increased our full-year guidance to reflect our strong quarter and the operating momentum we have heading into the second half of the year. We posted a record quarter with approximately 8,500 net location additions, and we ended Q2 with 148,000 locations, up 24% from a year ago. Our results reflect deeper penetration in our core customer sector complemented by growing momentum across our new customer segments. As Aman mentioned, across international, enterprise, and food and beverage retail, we crossed 10,000 locations in Q2. We are excited about the new bellwether brands like Firehouse Subs and Zabar's showing the versatility of our platform to serve a wide range of customers across all segments. The traction we're seeing is a testament to our investments to serve these new customer segments across both product and go-to-market, and our confidence in the trajectory of these new customer segments continues to grow. We expect these new total addressable markets to become increasingly meaningful parts of our business over time and contribute to sustained long-term growth. As a result, we are investing behind our success. We're building out the product to serve deeper parts of these new TAMs and scaling go-to-market to accelerate our progress. That includes expanding into new geographies over time, and we're excited to have our first customer live in Australia. Looking out to the remainder of the year, we remain on track for more location net adds in 2025 versus 2024, driven by our consistent go-to-market execution and comprehensive product offering in our core, complemented by the growing scale from new customer segments. SaaS ARR grew 30% year-over-year, driven by location growth and a 5% increase in SaaS ARPU on an ARR basis. Subscription revenue increased 37% and gross profit grew 43%, benefiting from the improved ARR to revenue conversion we discussed last year. As a reminder, beginning next quarter, we will lap the step-up and the associated one-time benefits we saw in Q3 and Q4 of last year, and therefore, expect subscription revenue to more closely mirror SaaS ARR growth beginning in Q3. Payments ARR increased 32% and fintech gross profit grew 30% in the second quarter. GPV was $50 billion, growing 23% year-over-year, with GPV per location down 1% versus last year. Fintech net take rate was 57 basis points, and payments net take rate was 49 basis points. Both increased 3 basis points from a year ago from a combination of ongoing optimization efforts, small targeted pricing moves, and new products, including surcharging. Non-payment fintech solutions led by Toast Capital contributed $40 million in gross profit and 8 basis points in take rate. Capital take rate contribution was in line with Q2 last year. And as a reminder, it is seasonally lower in Q2 due to higher GPV. Toast Capital remains healthy with solid demand from customers, and defaults remain in line with our expectations. Looking ahead, we continue to expect Toast Capital's contribution and net take rate to remain in the 10 basis point range. Excluding $19 million of bad debt and credit-related expenses, operating expenses increased 18% in Q2. That's primarily from a 28% increase in sales and marketing expenses as we grow our go-to-market footprint across international and retail. In the core, we're making targeted rep additions and supporting our brand campaign to deliver ongoing share gains. R&D grew 9%, reflecting investments in our highest priority areas. In the core, Toast Go 3 and newly launched ToastIQ features highlight our continued focus on extending our product differentiation and driving tangible customer outcomes. Across our new customer segments, we are taking the same vertical approach that has driven our success in the core. We're serving the needs of our customers more deeply in each segment, such as enhancing our inventory solutions for retail, bringing Toast Go 3 internationally, and expanding our functionality and integrations in enterprise. Adjusted EBITDA was $161 million with a margin of 35%. Our strong Q2 results reflect healthy top line growth, including better-than-expected GPV, as well as our focused execution and disciplined capital allocation. In addition, the seasonality of GPV contributed to the seasonally high margin in the quarter. Free cash flow was $208 million, driven by strong adjusted EBITDA and a benefit from working capital due to the seasonality of our payments business. GAAP operating income was $80 million, up from $14 million a year ago. That's both the strength in adjusted EBITDA and our prudent approach to managing stock-based compensation. The stock-based comp as a percentage of recurring gross profit was 14% in Q2, down 6 percentage points versus a year ago. We continue to be on a path for stock-based comp to be in low double digits as a percentage of recurring gross profit. Turning to guidance. For the third quarter, we expect total subscription and fintech gross profit to grow in the range of 23% to 26% year-over-year, and adjusted EBITDA to be $140 million to $150 million. We raised our full-year outlook due to our strong results and continued momentum across the business. At the midpoint, we now expect 29% growth in fintech and subscription gross profit and $575 million in adjusted EBITDA, a margin of 32%, up 5 percentage points versus 2024. Let me provide some context on our margin profile in the second half of the year. As a reminder, Q4 margin is typically lower relative to the rest of the year due to the seasonality of payments. In addition, we will have higher tariff expenses in the second half of the year. We take a disciplined approach to scaling the business, and based on positive signals in our growth initiatives, we are unlocking incremental investments across both core and our new customer segments to move faster in these areas and position ourselves for sustained long-term growth. Overall, we are on track for another year of both strong top line growth and expanding profitability and are confident we can continue to deliver durable growth while driving towards our long-term margin target. To wrap up, we had a great first half, reflecting our consistent execution. Our momentum in the core is strong, and we are really excited by our progress in new customer segments. Looking ahead, we're excited and confident about the opportunity in front of us and believe we are just getting started. Now I'll turn the call back over to the operator to begin Q&A.

Operator, Operator

Your first question comes from the line of Will Nance with Goldman Sachs.

William Alfred Nance, Analyst

Great results today. I wanted to ask a question on the new disclosure on retail ARPUs being, I think, north of $10,000. Obviously, great to see and you've talked about this being a very large average merchant size. I was wondering if you could talk through that number and maybe give some context on the breakdown between payments and software. And then you mentioned further enhancements to the product. Where are you kind of now versus where you want to be on the software suite for that vertical? And what types of things do you think to be on the roadmap? I appreciate it.

Aman Narang, CEO

Yes. Well, thanks for the question. If you go back and look at our core business and you look at how we've been able to expand both SaaS ARPU and fintech ARPU over time. It's taken a while to get us to where we are today, where our core ARPU is. And so if you look at how quickly we've been able to get retail ARPU up over $10,000, I think it just really shows that it's a really good opportunity for us. That's why we're investing in sales capacity. We're going to continue to invest in the balance of the year. And I think the data we're seeing from some of the early reps that we've scaled up, this dedicated team for retail is really, really positive. I think a lot of the products that we have, you think about payments, capital, payroll, scheduling, a lot of that applies, but there are also some very specific products around inventory that are very specific to retail that we continue to build out. And by the way, they're specific to subcategories within retail. So what's needed in grocery versus liquor stores versus convenience stores and such, there are some differences as well. But netnet, I think if you look at where we are, I think we're ahead of expectations, and my confidence in the potential of the business is the highest it's ever been.

William Alfred Nance, Analyst

That's great. I used the loyalty module at a grocery store in my neighborhood this weekend and it saved me $1. Regarding the macro dynamics in GMV, could you provide the latest breakdown of GPV per location trends across the base? As you mentioned, there seems to be an upward trend from retail and possibly a downward trend from some international location ads. We've been experiencing negative same-store sales for a while in restaurants. I'd like to know if you could rank those drivers and discuss any significant changes.

Aman Narang, CEO

Yes. Since you asked about retail right now, well, even though at the Analyst Day, we talked about how retail GPVs are higher than restaurants because we're newer. We're still growing into that. And so I just want to clarify that. But overall, if you look at GPV trends, it's been largely flat for us, and GPV per location was down 1%. It's been on this narrow band. And mix is a very small component of it. Like if you look at our customer base overall, GPV has largely been flat. I think it's up like a very small amount. And then if you look at the rest of the segments, retail is a little bit higher. International is a little bit lower. But I think over time, in each of these businesses, what Elena and the team are doing a great job of is really looking at unit economics. They're looking at payback periods and margins. And we have confidence that all of these businesses are great opportunities over time.

Operator, Operator

Your next question comes from the line of Tien-Tsin Huang with JPMorgan.

Tien-Tsin Huang, Analyst

Lots of fun momentum here. Just wanted to clarify on the third quarter EBITDA expected to be sequentially down, it looks like. Is that the unlocking of certain investments that you called out there, Elena, can you just elaborate on that maybe and how discretionary that is? I also heard tariff expenses. I just want to get all that straight.

Elena Gomez, CFO

Yes, thank you for the question. We are experiencing strong momentum in our customer segments. In the second half, our margin reflects increased investment in these areas to boost our progress. You heard Aman mention 10,000 live locations and we are on track to reach $100 million in annual recurring revenue. We plan to continue investing in this growth. Additionally, tariffs are influencing our situation and they have a more significant impact in the second half of the year compared to the first half. However, we are committed to investing for sustained growth over the long term, which is evident in our investments during the second half.

Tien-Tsin Huang, Analyst

Okay, great. Then my quick follow-up just on Toast Go 3. I heard a lot of good things about this. Do you expect an upgrade cycle from existing customers using prior versions of Toast Go, or is this more about attaching to new sales? Just trying to understand how that layers in?

Aman Narang, CEO

Yes, I think it's both, Tien-Tsin. If you look at, certainly new customers will likely start with the Toast Go 3 device, but for a lot of existing customers, as their hardware refresh cycles come up. I think a lot of them are really excited about being able to use this device because it's got the cellular backup, especially if you've got big spaces; they like the ability to be able to use both Wi-Fi and cellular at the same time.

Operator, Operator

Your next question comes from the line of DJ Hynes with Canaccord.

David E. Hynes, Analyst

So Aman, we've had several quarters now with really nice enterprise momentum. I'm curious what you're seeing incumbent vendors at that end of the market doing to thwart the threat that Toast creates, right? Are they trying to innovate? Are they getting more aggressive on price? How price sensitive are the enterprise buyers? Just any color on kind of competitive dynamics in the enterprise segment would be helpful.

Aman Narang, CEO

Sure, DJ. If you zoom out and look at what's happened in the core independent restaurant business, the adoption of cloud was actually faster upmarket in enterprise. And so a lot of what we continue to see is a lot of legacy on-premise solutions that Toast is facing. And so I don't think it's really about price. I think it's about leveraging modern tech, where you can use the cloud. And that's really what's driving some of our growth. We're investing in a big way now with Firehouse Subs, not just in the non-drive-thru, but we're also starting to invest now in the drive-thru segment. And certainly, if you look at the competitive environment, we've said this before, it's always been a very competitive environment in this space. And I think our focus is just on customers. The more customer-obsessed we can be about solving the problems these enterprise brands have, I think that's what's really driving our growth and our success.

Elena Gomez, CFO

Yes. And I would just build on, DJ. We've begun investing in enterprise really a few years ago, and that's what you're starting to see show up is our capabilities have matured in a way where you're starting to see the likes of Applebee's, and we closed Marriott a couple of years ago. And if you take Firehouse, as an example, one of the reasons they chose Toast is really about the capabilities in the store. They really wanted to focus on performance in-store. They wanted to increase staff efficiency. They wanted to improve guest experience, reliability. And so to me, that's very much a capability. We were able to meet that demand. And that's why you're seeing our pipeline really improve as a result of this investment, which has taken a couple of years to mature.

David E. Hynes, Analyst

Yes, yes. And then, Elena, can you just remind me like a 1,500 location win, a 1,300 location win? Like how long does it take to stand those up? When do they start hitting into net adds?

Elena Gomez, CFO

Yes, it varies. We will work with the new customer to determine their timeline for implementation. For instance, with Firehouse, we already have some locations operational. So it really depends on how quickly they wish to proceed. Typically, it's not too long after we secure the deal, and it can take one to two years based on their pace. Some clients may want to move more quickly. On average, a project of that scale could take four to six quarters, or possibly up to two years.

Operator, Operator

Your next question comes from the line of Timothy Chiodo with UBS.

Timothy Edward Chiodo, Analyst

I want to talk a little bit about what you mentioned in terms of the investment behind go-to-market, but I want to keep it specific to core U.S. restaurants and not looking really at the growth market sales teams. So I was hoping you could comment a little bit around your coverage in the major, major cities. I'm assuming you have salespeople in most of those, but is there more room to add in the major cities? Or is that you've kind of got the coverage? And then second, as you move into beyond those major markets, so 50 miles outside of ABC Major City. Is there any kind of a plan to add coverage there? Or would you consider more going with third-party distribution partners, ISOs, banks, et cetera, and to the extent you could comment on the effectiveness of those channels in selling such a vertical-specific product.

Aman Narang, CEO

Thanks, Tim. It's a great question. It's actually one we debate internally all the time. If you look at the past 5 years, we've invested a lot to significantly increase our sales capacity. And that's really what's driving the core of our growth. The great thing is you look at the flywheel effect we've talked about, that continues. So like in these markets where we've got SMB coverage, you actually see productivity up year-over-year this year as an example. So it just shows that that strategy continues to work. Now in terms of like what we're doing on coverage. I'd say, in most markets, to your point, we've got coverage. That being said, there are some markets where we feel like we're under-penetrated. So we're being surgical about saying in certain markets, we want to add coverage. And that's true whether they're metro areas or they're suburbs. And so I think it just really depends on kind of what our penetration is, what our productivity is. And so we use that to refine, I'd say on the edges, but it's not like a material step function change in terms of how much rep capacity we're adding. I think in terms of other channels, we've always had a really robust partner ecosystem, like 20% of our new customers come from referrals, that's food distribution partners, tech providers. And so that's certainly a key part of our funnel. But we do think that it's important for us, to your point about this vertical product that's restaurant-specific, that we own the end-to-end experience. And so whether it's the go-to-market, the onboarding, the support, we own it all in-house, and we think that's a differentiator in addition to our platform. And so there aren't any plans right now to open that up beyond our core direct strategy, but we're certainly always exploring; it's a topic actually we talk about all the time.

Operator, Operator

Your next question comes from the line of Matt Coad with Truist.

Matthew Robert Coad, Analyst

Wanted to touch on SaaS ARPU again. You guys are rolling out a lot of different products that you talked about, whether it be on the AI front or some of the new hardware. So just curious if you could provide an update on kind of your strategy to price for value here.

Elena Gomez, CFO

Yes, of course. Our SaaS ARPU in Q2 was approximately 5%. We focus on our growth drivers, which include ARR and the number of locations, as well as ARPU. Pricing is just a minor aspect of our ARPU growth strategy. We aim to ensure we deliver value to our customers so that pricing doesn't become a concern. When considering how to enhance ARPU over time, we have numerous opportunities. Many of our products are not tied to specific terminals, and we plan to keep innovating. Data and AI will definitely contribute to this progress. We are also refining our upselling strategies while balancing our land and expand approach. I'm confident that our diverse platform will contribute to ARPU growth in the long run.

Matthew Robert Coad, Analyst

Yes, just for my quick follow-up, the nonpayment portion of gross profit, so mainly Toast Capital, it was down, I think you said to $40 million this quarter compared to $47 million last quarter. Could you unpack that a little bit for us? Is that kind of just timing related to that decline? Or are you guys pulling back on certain loan growth right now?

Elena Gomez, CFO

Yes. Overall, I would say the program is really healthy. There's seasonally some dynamic there in Q2. And then there was a little softer demand at the start of the quarter. But overall, we feel really good about where Toast Capital's growth is; the defaults are in line with expectations. So feel really it's a good healthy program for us and continues to be.

Operator, Operator

Your next question comes from the line of Josh Baer with Morgan Stanley.

Joshua Phillip Baer, Analyst

I have a quick question about Firehouse. You mentioned some reasons for their adoption of Toast. How does this relate to the actual products? Can you specify any of the suites they plan to use and whether payments are included? Additionally, regarding international expansion, especially in Australia, how should we view this? Is it part of a larger wave of international growth and will we hear about other countries, or is this just the second wave for now?

Elena Gomez, CFO

Yes. On Firehouse Subs, they're definitely taking payments. And in terms of the suite of products, obviously, they're using our handhelds, our KDS, and restaurant management suite. So it's the breadth of our platform that they're using. And I'll let Aman talk about international.

Aman Narang, CEO

Yes, Josh. Regarding Australia, I understand your question was about whether it fits into a larger strategy for wave 2. One of the positives of our launch in Australia is that we were able to introduce the same products there that we have in our H1 markets, which include the U.K., Ireland, and Canada. This success is largely due to the excellent work our R&D team has done in localizing our platform. It took considerable time to roll out these products and increase ARPU in the U.K., Ireland, and Canada. Thus, being able to launch in new countries with a complete platform is a significant advantage for us. As for expanding into more countries, we're not ready to share any announcements right now. It's about finding the right balance; we need to ensure we are successful in our current markets. However, looking ahead, we absolutely aspire to expand more internationally and globally.

Operator, Operator

Your next question comes from the line of Darrin Peller with Wolfe Research.

Darrin David Peller, Analyst

For the record, net additions of 8,500. Can you clarify how much of that was influenced by the core business versus the expansion of the total addressable market? Additionally, regarding your goal of 10,000 locations, it's impressive that you've surpassed that figure in enterprise, international, and food and beverage retail. Can you provide more detailed information about the composition of these 10,000 locations and their distribution across those three categories?

Aman Narang, CEO

If you examine our core business, it continues to account for the majority of our growth. We've been engaged in this for over ten years now, and the number of go-lives in our core business is at an all-time high. Our rep productivity is strong, and we are seeing solid gains in our most penetrated markets, even exceeding averages in other markets. Overall, the core business remains very robust. The new businesses are also making a significant contribution as they scale. For example, in retail, international, and enterprise, the proportion of net go-lives is at its highest because we are expanding in these areas too. This scaling is leading to record net additions for the business, and we are on track for record net adds not just this quarter but for the entire year. Regarding the breakdown among the three segments, I can say that we are witnessing positive momentum across all of them. In retail, we are increasing our sales capacity as the average revenue per user exceeds $10,000, with healthy rep productivity, indicating we should invest further. In international, we've seen an increase in ARPU, and rep productivity is comparable to our U.S. SMB operations, despite lacking the same level of brand recognition and market penetration. This is a good indicator. For enterprise, we anticipate a gradual growth as these wins, while impressive, come with longer sales cycles. Thus, we expect a slow but steady increase over time. All three segments are contributing, and we are making investments in all of them to unlock long-term opportunities ahead.

Darrin David Peller, Analyst

That's great to hear. Just a quick follow-up would be on SaaS ARPU. It is still growing very well. And so when we think about how much is driven by customers coming on with higher SaaS ARPU versus just the upsell team continuing to do well. How do we distinguish that if you could help us out?

Elena Gomez, CFO

Yes, we're experiencing growth in average revenue per user from both new and existing customers. One of the key focuses is on refining our approach to gaining and expanding customers. The upsell team is effectively contributing to this, and their performance is strong. Over time, we aim to further enhance our product-market fit across our entire range of products. Overall, we are seeing significant progress with both new and existing customers.

Operator, Operator

Your next question comes from the line of David Koning with Baird.

David John Koning, Analyst

Great job. To start, between our Q3 guidance and full-year guidance, we have some insight into Q4. It appears to be around 21% to 22% at the midpoint for recurring GP growth. If that's considered the exit point, does that provide a good indication of how next year might begin? Additionally, what are the factors that could influence this growth in either direction over time?

Elena Gomez, CFO

Yes. Thanks for the question. So a couple of things. One is, as we always aim to do better, and that's really important in how we balance our guidance. Just keep in mind, the first half of the year benefited from that ARR conversion. So that's a dynamic at play in the second half of the year. And then GPV was better than our expectations in Q2. And so just in terms of how we guide, we really focus on being prudent and balanced as we enter into any guidance cycle. The other thing I'll tell you is our investments that we have, we've talked about on this call, is really in service of sustaining our growth over the long term. So we're always going to aim to do better, and these investments really will position us for growth not only in '26 but beyond.

David John Koning, Analyst

Great. And just a quick follow-up. July trends. Obviously, Q2 got better with volume, which is great. July trends, like per location, did that start out pretty well?

Aman Narang, CEO

Yes, it's in line with expectations. Yes, I think we're in good shape in July.

Operator, Operator

Your next question comes from the line of Dan Dolev with Mizuho Securities.

Dan Dolev, Analyst

Great results here, as always. Can you please help us understand how the Amex partnership enhances the flywheel here because it seems very cool, that deal that you're doing. Appreciate that.

Aman Narang, CEO

Sure, Dan. In our partnership with Amex, we are integrating inventory from Resy, Tock, and Toast Tables into our app, which we call Toast Local. This allows users to find and book from a wide variety of restaurants in one place. When you book through any of these platforms and check in at the restaurant, the Toast platform can offer a personalized experience. This includes taking into account allergies, special notes, birthdays, and even recommending favorite menu items, whether it’s a preferred drink or dishes you love. Many people have specific preferences and tastes, so equipping the staff, hosts, servers, and kitchen with this information is crucial for creating tailored experiences. Thus, our focus is on expanding local inventory and enhancing the overall experience for guests, including Amex cardholders.

Operator, Operator

We will now take our last question from the line of Harshita Rawat with Bernstein.

Harshita Rawat, Analyst

So I want to ask about Sous Chef, which we announced last year. I know you're currently doing pilots. What are you hearing from your customers in terms of the problem they're solving with this AI-powered assistant and the value you're driving? And how differentiated is that product in the market?

Aman Narang, CEO

Thank you for your question, Harshita. We are making excellent progress with Sous Chef, and the feedback from customers has been very encouraging. Restaurateurs, who are not typically tech experts, appreciate having a human interface that provides insights, recommendations, and the ability to make changes. This capability to take action within Sous Chef has received positive responses and input. Our ultimate aim is to create the best GPT-like interface for restaurants, leveraging our extensive data. We are incorporating customer feedback and plan to launch the platform to the public later this year.

Operator, Operator

This concludes today's conference call. Thank you for joining.