Toast, Inc. (TOST) September 2026 Conference Transcript

All right. We are going to get started. My name is Will Nance. Joining us for day two of the conference and kicking us off is the Toast team. We have co-founder and CEO, Iman, and President and CFO, Elena. Thank you for joining us.

Thanks, Adam.

Okay. I want to start a little bit big picture here as it's almost exactly the five-year anniversary of the IPO. So the company had about 50,000 locations. That's more than tripled since then. For 2021, recurring gross profit was roughly $400 million. EBITDA was negative. You've nearly 6x the top line. You're on track for over $800 million of adjusted EBITDA this year. You've been consistently GAAP profitable. So just a major scaling story ever since the IPO. What do you attribute that access to, and then how do you think about measuring success from here?

First of all, good morning, everyone. Thank you for joining us. You know, day-to-day in our business, we're working so hard to execute day after day, month after month, quarter after quarter, and it's easy to lose sight of the progress we've made. And to your point, in five years, we have grown the business over six sacks. You know, we've scaled the business both in the bottom line and the top line. And I think at its core, obviously, it comes back to the execution of the team. You look at, I think, what we've been able to do, one, in our core business, this is the US SMB restaurant business, we have established ourselves in a market leadership position and we continue to scale as Sean Cliff. And then, two, I think when we started the business 15 years ago, it was largely US SMB restaurants. And when we went public five years ago, we had started to talk about, okay, what is the long-term opportunity here? beyond that core TAM. And, you know, two, three years ago, we started to build ourselves, build out our international business, our enterprise business, our retail business. And today, Toast firmly is a business that is in many countries. It is both an SMB and an enterprise. And it's, you know, in many ways, maybe most importantly, also in many verticals. And we're seeing really good traction in those new TAMs that we're going after. And I think that's a big part of the story as well. As I think about really the next five years, you know, I think one, you know, we are taking GPV share in our core business faster than any of the competitors we typically see. We've got the most GPV share in our core, and so continuing to lean in, and we think there's an opportunity to double market share in our core business. That's the top priority. And then in our new TAM, you know, Elena and I have shared this before, but like there's no question that as we take a five and 10-year outlook, these businesses could be very significant. And so across all these three TAMs, you know, we see massive opportunity to continue to grow in scale. We're adding sales capacity across them. And then I think the last thing I'll say is when we went public, that was the beginnings of us really moving from a point-of-sale application to more of a platform. And so we had launched products for guests, employees, suppliers. Those were all, you know, pretty nascent. The ARPU, the IPO, was maybe 8 or 9K. Don't quote me on the exact numbers, but today it's over 13K. And so we're seeing this platform story evolve. And as we think about the next five years, with AI, there's a big opportunity to really expand that and accelerate that growth. And we're seeing that with products like Toast.io growth. So I think those are some of the key focus areas the next five years that we'll continue to lean into.

So I want to come back to some of this product and new vertical opportunities. But maybe we could start off just on the core. I think a lot of the success is still driven by the core, and a lot has changed in the market since the IPO. How do you think about the growth algorithm going forward, and then what has changed in the competitive environment today versus when you went public?

I think the biggest thing that's changed is we have gone from maybe 4% or 5% of market share to over 20% share on locations, more than that on GPV because bigger restaurants typically choose toast. And, you know, I think as you look at the growth in our core, it's a couple things. One is, right from day one, right, you know, we have focused on building out the platform and going deep on the needs of the restaurant vertical. I think one of the misunderstandings about the restaurant business is people think of it as like one product with one set of needs. But actually, within restaurants, there's so many sub-verticals. And so one of the expressions we've used to talk about our business is to build out the thousand little things that our customers need. You know, starting off at QSR restaurants and FSRs and bars and nightclubs, hotel restaurants, non-English speaking restaurants, cafeterias, really the list goes on. And each of these teams has different needs. Just recently I was talking to a prospect and they were talking about using our QR codes, scanning a QR code in a hotel environment to then add service charges and charge it to a room. Or if you look at sports entertainment, you know, there are specific requirements around all these different locations, you know, managed across a shared kitchen, both for pickup and in-store orders. And so there's lots of different features and capabilities, and we're comfortable with that complexity, that vertical depth that's needed to support restaurants. And I think that is at the core of what's allowed us to continue to drive really strong wind rates and the growth that we continue to see in our core business. And I have tons of conviction that as long as we continue to lean into that, you know, we can continue to establish, continue to see some really strong growth in our core. And the second piece of it is our, you know, the sales and service motion that we've built out over the past decade, you know, starting in the U.S. and then now internationally as well. I think that's a huge advantage in terms of serving these bigger customers that, you know, Toast typically serves customers that have higher GPV, these more complex businesses. And our sales team, you know, you look at the productivity of the team, we continue to see flywheel markets perform really well. More markets enter flywheel, but we're seeing greater, stronger productivity. And so I think that continues to be an area where we're performing really well as well. And as I think about the next decade, I think one of the biggest opportunities back to vertical focus that I think we have is we think about Toast when we first started, it was a software platform, right? Customers would use our platform to use all the capabilities and workflows to manage employees or suppliers or their guest experience in the operations of the restaurant. And now for the first time with AI, you start to see we can actually take on some of that work, really. Like with Toast Like You Grow, for example, we can share that in a little bit. And so it's two things. One is the intelligence layer, and then also taking off some of the manual work restauranteurs typically have had to outsource. And that I think allows us, and the north star there is, Can we help these SMB restauranteurs run a more profitable business? And I think if we can do that, I think we'll be both positioned in the market.

So, Elena, Aman mentioned some of the ARPU stats over the last couple of years. Payments take rate, SaaS ARPUs, kind of up and to the right really consistently for the last couple of years. Most of that, I think, has been module adoption on the SaaS side and a lot of optimizations on the take rate side. But as you look ahead, how are you thinking about pricing as a lever for growth?

Yeah, that's a great question. Look, at the highest level, the priority is market share gains, right? That's what Aman just talked about, our growth algorithm, and you said it in your question. It's really about driving location growth and then product attached. That's really the primary growth vector that we're leaning on today. Over the long term, certainly pricing will be available to us, and our pricing philosophy really hasn't changed, right? We really are focused on very targeted, small price moves where it makes sense, where we might see, you know, customers that are outliers relative to the current market rate. But those are small, surgical, very targeted. Our primary growth algorithm, again, is really driving locations and ARPU. And when you think about our total monetization, you know, RGP over GPB, that's about 100 basis points. It grew five basis points year over year. And that's, again, on the back of strong product adoption and then, of course, the COGS optimization that we've been working on for a very long time. So at the end of the day, we're very much focused on if we drive customer outcomes and do some of this work that Amon talked about, we're very confident in our ability to monetize through pricing.

And Elena, I guess you guys see such a broad aperture for consumer spending on restaurants. Any call-outs in the current quarter that you would make on just the environment and overall spending level?

Yeah, no, we're steady as she goes, you know, in line with expectations. Like, we look at data in many different ways, but nothing new to reports and cernies. We could do it. Daily, yeah.

No news is good news. So I wanted to shift to Toast IQ Grow. I think this has been one of the bigger stories of the past year. You just mentioned it, Amon, in your last answer. This is really how the company is thinking about attacking the opportunity for AI-enabled products. products. You mentioned this is on pace to be the fastest product to ever reach $10 million in ARR in the company's history. Maybe you can talk about just what you're hearing from restaurant customers and what they're demanding from Toast from an AI perspective.

For us, when AI really started to take off, the obvious place that we first went to was, okay, we've got all this great data. Let's get it into an LLM so that it's accessible and searchable. And that was the beginnings of, like, okay, you can start to analyze and get insight on what's going on in your business. And so one of the things that's been powerful already is people are using Coach IQ to load all of their data and get insight about, you know, what are the drivers of profitability in their business, which for an SMB operator is a big deal because historically a lot of the data is not as accessible and hard to use. Even if you've got custom reports, to really understand how do you generate the right view of your data is a lot of work. Whereas with the language interface, you can ask it a question about why were my sales down last week, why was cost of food different ways versus a couple weeks ago. And so that was step one. And what we have seen more recently is when we talked to a lot of our customers, what they told us was, look, for a lot of the work that they're focused on, like, you know, running great restaurants, great service, great food, and most successful restaurants in the SMB space are outsourcing things like demand and marketing. They're outsourcing things like bookkeeping. They're outsourcing, you know, the bookkeeper might help them with labor and their schedules, forecasting what demand might be. And what we have been able to do is actually build a better version, truly a better version of what was out there before by leveraging our software, leveraging our data, and then building the AI capability with humans in the loop to help them take on some of that work. And TosteCQ Grow is the first example of this. So what TosteCQ Grow is, is all of our guest-facing products, So things like online ordering, websites, loyalty, CRM, marketing, advertising. And what we're doing is leveraging the data and leveraging AI to actually do the work of figuring out how to make sure your website is optimized for SEO, to make sure that your online ordering is set up such that it maximizes conversion. Your marketing and advertising campaigns are set up to, again, to drive engagement with your guests. And what we've seen is customers that switch to it. This was a data point, frankly, that I noticed early. We shared it's approaching 10 million ARR. But the customers that have switched to it have seen sales growth. When you think about an S&B business, you know, 48% sales growth when incremental demand is so expensive is a huge deal. And so that product actually right now is constrained on bringing customers live because of the impact that we're seeing on customers' top line. And what the opportunity is long term is you think about a restaurant, there's no concept of looking at when they're busy and when they're not. And there's no concept of actually understanding your guests to say what might get them to engage with your marketing to actually come in. If you're making this up here, if you love margaritas and guacamole, the messaging that might engage you is different than the average user. And so we've got all the data to look at when the restaurants are busy, when they're not busy, and to look at all their guests and to better understand what sort of marketing we can generate. So part two of this can be incredibly personalized in a way that I think historically has really not been available for restaurants, which allows us to create even more effect. And that's across, of course, demand, but then also across suppliers and the cost of food and all the supplies restaurants have, the demand forecast, the labor schedule. And the North Star is across all of these variables, that's what the team's working towards, can you improve profitability because it's such a low-margin business. And I think that's what ultimately is going to drive our wind rate. That's something that's going to drive our ability to continue to take share. And the team on the core SMB side, that's their primary point.

So, Alana, maybe you can talk about this more from a financial perspective. How are you thinking about the potential for Toast IQ grow and other AI products in the IQ suite to contribute to SaaS ARPU growth over time?

Yeah, it's a great question. So, first of all, really strong performance from Toast IQ grow already out of the gate, which is really encouraging. The impact to ARPU meaningfully will take some time, just because we're in the early days. But as Amon said, you know, if we can take some of this work that our customers are doing, and often they're actually paying a third party to do for them, we have this opportunity not only to do it better, but also leverage the data, leverage the software, and all the complexity that he just talked about puts us in a unique position to monetize. And so that's what we're really excited about. I would even zoom out and say AI has really presented a much bigger opportunity for us to drive ARPU growth over the long term. And IQ Grow is the first product that we're seeing really great traction, but you can imagine all the complexity that lives in a restaurant and all the services that we can do for them. For us, that presents an opportunity to take that data, which is an asset, take our software, and then provide services to our customers. So I'm very confident over time we can impact ARPU meaningfully. Yeah, makes sense.

You know, one thing I'll just add, Elena, is, and you may have hit this, is if you look at the services TAM that exists in the restaurant business, it's meaningfully bigger than the software TAM. If you look at what restaurants are spending on all the software that's, you know, from Toast or other partners that sit on top of our platform, relative to what they spend on bookkeeping or marketing or even, you know, to pick up the phone in the restaurant, One of the things that I think maybe I didn't hit earlier is there's all this work that we think with AI we can do more efficiently and better. And so that opportunity in terms of, again, we've got to prove it, right? But that opportunity to re-accelerate our food growth because we're going after this TAM where the spend is greater than what it is for software, I think is a massive opportunity for us. And Toast IQ Grow is the beginnings of it, and we'll keep you all updated as we launch more products. And it's everything from answering the phone with voice AI in a restaurant or a drive-thru, to managing the books, to scheduling labor, to helping on the cost of supplies. And I think a lot of that may not work. We've shown with Toast IQ Grow, which is our marketing AI product, we can take on for the first time.

That's great. Well, we could probably spend a lot more time talking about IQ, but I wanted to maybe pivot over and talk about some of the new TAMs and new verticals you mentioned up front. I think one of the highlights of this quarter was the record net ads and the disclosure that you expect the expansion TAMs, the ARR from these new verticals to roughly double this year to around $200 million. So with that, I was hoping you could do sort of a state of the union, three main verticals, retail, international, and enterprise. Where do each of them stand, and how do you think about milestones for each of them as you look ahead?

Yeah, so the retail international enterprise businesses, all of these businesses really two, three years ago were very nascent, you know, sub-10 million ARR, and it's exciting to see them grow in scale, just like our core businesses did. You know, we talked about how those doubled this year from 100 to 200 million, And one of the things that we do in company is we comp these businesses to our core business, you know, a couple years in because we've got that data. And what we see is these businesses, really all three of them, are growing faster and have higher ARPUs than the core did, right, two, three years in. And I think that's really encouraging. And I think it really speaks to really the product market fit that Toast has beyond U.S. SMB restaurants. Now, each of these businesses, obviously, the constraints to growth and the customer reception and the feedback and the product roadmap is different. But fundamentally, the anchor product is a point of sale platform that's consistent. The hardware, the networking, the software, the base is consistent. And that's why all of our customers, whether it's a hotel or an enterprise chain or a grocery store or a restaurant, it's all using a shared multi-tenant platform. It's not like we've split up the code base across all these different customers. In our international business, the opportunity that we've seen as we launched in the UK and Canada and Australia and Ireland is we've got to focus on the tier one cities where you've got really the restaurant GPB and the GDP per capita. And so as we think about the roadmap, we think we have a massive opportunity to open up the TAM by going into these tier one cities globally. And you'll see us open up more cities over time. And that's not just for SMB restaurants. Initially it will be focused on SMB restaurants, but already in the U.K., for example, we've got groceries. We see an enterprise opportunity internationally, and then, of course, longer term, we see an opportunity in retail as well, more broadly. In our enterprise business, we continue to see in the non-drive-through terms, so for context, we launched our drive-through product about a year ago, maybe just a couple months ago. We continue to take share at a strong clip. We've got probably the strongest pipeline we've had on the issue of the company, and And people see the value of our platform in terms of table turns, all the things we've seen in SMB, the digital platform. And then in drive-thrus early, but we're seeing, again, we're starting to see, because that's such a big part of the time, as the product continues to get built out, we're seeing ourselves in more opportunities because of the toast brand that we've got. And so enterprise is really, I'd say the blockers long-term are the product investments to support the enterprise business. This is everything from, you know, building above stores, security compliance, to guest products, upmarket, some of the AI products, to support some of the use cases that are a little bit different in enterprise.

So it's really get in a product more than go to market.

And then in retail, and it's interesting, when we first launched in retail, there's a lot of skeptics who said, you know, you're a restaurant company, what right do you have to win in retail? And it turns out that business, in many ways, is the best business we've launched is the new business. The ARPUs are closest to our core business. You know, we're investing heavily in the go-to-market capacity in that business right now. And it's because we're seeing really good signal on the ground for customers. You know, we started off in restaurant retail, these hybrid concepts, and then launched in grocery, in convenience stores, in liquor stores, and have expanded from there as well. And we're focused on, like, the vertical depth that allowed us to succeed in restaurants. And that's been really, really positive. In fact, you know, one of the things that's, I think, a little bit misunderstood about Toast is just how varied our core U.S. SMB-TAM is. Like, what allowed us to succeed in restaurants was not that we built this generic horizontal platform. we were comfortable supporting all of the different sub-verticals that I talked about earlier and went deep on the thousand little things and the features. And we'd like that complexity to support all the features this TAM needed, whether it's right from QuickServe, full-serve bars, iClub, not English-speaking pizza. I was amazed at how many features, by the way. This business needed coming from e-commerce before at a company called Indeka. And it turns out, like, in all these new TAMs, it's the same flavor. As we go into, you know, whether it's sports entertainment or we go into, you know, convenience stores, it's the gas stations, it's the vertical depth of the platform that's necessary. And that has, that really plays to our strengths. And so we've been able to lean in there, and that's a big part of what's allowing us to succeed in these new work.

So, I mean, maybe you just addressed it, but I'd love to hear just how you think about the philosophy around evaluating new TAMs. So I think this quarter you talked about fuel and gas stations as kind of a sub-vertical within retail, sports and entertainment, and on the enterprise side. So how do you think about entering these new sub-tams and verticals? And then how do you ensure that the vertical focus that's always been the differentiator for Toast is preserved as the company looks wider?

So we've got a top-down view. Every year we refresh our strategy in a three-year plan, and we've got a top-down view of where we want to go, which countries, which cities, which verticals. enterprise with sub verticals, with target accounts. Of course, we want to, number one is market leadership in our core business. So we evaluate all of this. And then we also, bottoms up, get a lot of signal from customers. And so, for example, the fuel work was simply, it turns out 80% of the convenience stores, and I was surprised by the stat, are attached to gas stations. And half of that market is actually SMB. When I thought of gas stations initially, I was like, it's all Shell and Chevron. It's not. Actually, half the market is actually SMB. And that really speaks to our strength. And so we did the work to integrate in to the fuel controller. And I think our board was pretty concerned when we brought in the fuel controller and have a gas pump into the boardroom one time. But anyway, it's not that capability. And we're seeing a really good early pipeline there because that market's all entirely legacy. They're using systems from the 80s and 90s often throughout their businesses. And in sports entertainment, similarly, you know, the push there was actually there's a lot of overlap from some of the SMB teams. The product gaps existed for us in sports entertainment very similar to actually what food halls needed in terms of multiple locations being often shared by a shared kitchen and the complexity of handling not just in-store but also pickup and delivery as part of that operation and managing throughput. It was things like managing the reporting that was needed in that concept in terms of aggregating all that data across one concept where some config is shared and some isn't. And again, this goes back to the thousand little things in our comfort in building out the platform to support all these different sub-verticals. And again, as I said earlier, this is very much in our DNA because this is how we got here. If you look at the 15-year journey we've been on in our core SMB business, the reason we have gotten to where we are is not because we've got the best sales team. Yes, we've got a great sales team, but it's also because we've got a great service promotion and a great product that actually meets the needs of these customers And so it's very natural for us to go after these new subverticals. Now, one guiding principle that we use internally, if we think about where we go, is we look for parts of the TAM where there is typically higher GPB per location because that's correlated with a complex business, a complex product need, a higher sales and service motion, which we've built out over the past decade. And that's really where we see the biggest opportunity. We're not as interested in going after the parts of TAMs, which are low GPV down market.

Makes sense. Maybe on that note, Elena, one of the kind of ongoing debates around the new TAMs is always the impact on unit economics and maybe even more so the impact on some of the headline KPIs that investors focus on. So as these new verticals drive a larger share of the incremental location growth, how do you expect that to impact some of these KPIs?

Yeah, it's a fair question. So as we've talked about, our priority in this moment is really to prioritize market share gains because we believe that's a key determinant of our long-term shareholder value. And so we're investing behind these TAMs that Aman just talked about. But you're right, as they scale, we're going to see a different complexion to our customer profile. But keep in mind, the core business is still a pretty big part of our business. But the important thing is – actually, let me give you a little texture. when we think about the core business around the same time as these new TAMs, each of our new TAMs already are at that same profile or even higher in terms of ARPU. And so that gives us a lot of confidence. If you think about where the core started, and a couple years in, let's call it 6K in ARPU, and today we're almost double that, actually more than double that. And so we have this opportunity to really follow that same playbook with these new TAMs as we build out more capabilities and drive more innovation. So that's a piece of texture I think is really helpful for us to study and understand. And then when you think about the payback, that's really the most important thing we're focused on in each of these new towns. And we know the playbook, right? We've done it with the core business. We're going to do it with each of these new towns. And for each of them, it's a little bit different, right? Iman just talked about in international, we're really focused on tier one cities, and we're honing our go-to-market motion. In retail, we're adding rep capacity, so we know we have extended payback periods right now, but we also know what steady state looks like in terms of rep capacity. So all said, we feel really confident in our ability to drive that payback to what we think is healthy in a few years, sub-20 months. And the other thing Amon said earlier is we're really drafting off the core platform in both R&D and then also in the company drafting off the G&A investment, So we're not spinning up another platform. We're not adding more investment. We're really drafting off the core business. So I feel really confident in our ability to manage those paybacks, which is, to us, what gives us confidence that these will be very profitable businesses over the long term.

Makes sense. Alana, coming into the quarter, memory costs and hardware were really top of mind for investors. I was wondering if you could provide an update in terms of what you're seeing today, the work that you've done over the last couple of quarters to mitigate some of those impacts. And, you know, I think in particular some of the commentary you had this past quarter about emerging on the other side of the cycle in a structurally better position from a margin perspective.

Yeah, now really proud of we have a hardware ops team, and this is what they've been living and breathing every day. And our priority once the memory shortage emerged was let's just make sure that we are never in a position where hardware constraints limit our growth. And so we've been able to secure inventory for this year and next year. We feel really good about that. But then also, we took this opportunity to really go deep on everything, on the entire end-to-end supply chain, whether it was the bill of materials, the product costs, et cetera. And in doing so, we identified certain areas where we could have even longer-term structural change to our P&L. And certainly, from where we started to where we are, we thought the expenses were going to be much higher. They're lower than we anticipated for 2026, but also for 2027. And to your point, structurally, we believe we have an opportunity to optimize the supply chain based on segments, et cetera, that will give us this opportunity to drive down costs and just have improved margins. Some of the specific things we've done, we've, you know, in certain cases, we can use hardware with lower memory chip costs. We can use older generations of hardware in certain cases for a certain set of customers. And then opportunistically, we're in the spot market buying at favorable prices, and we're always looking at that and really being surgical about those buys. But all in all, I feel really good not only about our ability to manage it, but also our hardware margin structurally. When we get out of this memory crisis, I'm very confident they'll be better than where they were before we started this.

Makes sense. Some of the other commentary you provided this quarter was the decision to invest against some of these longer-term initiatives. You had the tariff refund that I think was reinvested. Can you talk about the philosophy around growth-related investments? What are the signals that you're seeing that you're responding to, and how it all kind of bakes into the near-term operating leverage profile?

Yeah, absolutely. So, you know, the way we often think about it, Aman just talked about every year we go through a strategy session, we look out several years, and when we think about that, we're thinking about positioning the company to drive durable growth for many years to count and compounding our top line growth. And so in that context, we look at all the opportunities in front of us. And we're not opportunity constraint, like you heard Aman talk a lot about our ideas. And as we go deeper into the core, as we go deeper into these new TAMs, we uncover even more opportunities. So we're excited about that. And so to that end, what we think about is we want to drive durable growth but at the same time expand margins gradually and that's what we're executing to in 26 and you'll see us follow that same cadence in the coming years and what gives us confidence to you know we're to invest right we're actively choosing to invest right now is the progress we're seeing already in these new towns and we talked about you know getting over 200 million in ARR and each of them and also the payback that I just talked about. We feel really good about our ability to drive that payback. So when you put that all together, we're investing behind driving this durable growth over the long term. And then, you know, overall feeling really good about as we get into these new towns, we're seeing even more opportunities.

So when you think about more of the long-term margin profile, you had some optimistic commentary on both the margin profile, the core, and what you think you can do in some of these new verticals. How is just the view of the margin potential of the business evolves over time?

Yeah, at the highest level, we're operating in a really strong position of financial strength. That's like the core. If you think about our core business, operating that rule of 60, essentially, growing over 20% margins in our core business, 40% and growing, and we continue to drive efficiency up and down the P&L. That is really important to us. And that strength in that core business is enabling and fueling the growth in these new TAMs that we've talked about as well. So I feel really good about that. And then when you consider the AI opportunity and just how we're thinking about it across the company, reimagining how we work, that presents even more operating leverage for us over the long term. So zooming out when I think about the margin profile of this business, 40% plus is no question. I think that there's a real opportunity to get there and maybe even expand that margin over the long term. Got it.

Well, I think that basically takes us the time, but thank you both for being here. I really enjoyed the conversation.

Thank you, everybody.