TOST

Good afternoon. My name is Krista, and I'll be your conference operator today. At this time, I would like to welcome everyone to Toast First Quarter 2026 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 First Quarter 2026 Earnings Call. Toast CEO, Aman Narang, and CFO, Elena Gomez, will open with prepared remarks, followed by Q&A. Before we start, I'd like to remind everyone that today's call may include forward-looking statements, which are subject to risks and uncertainties and reflect our views and assumptions only as of today.

These forward-looking statements include expectations around financial and operational metrics, business and investment strategy, and guidance. Actual results may vary significantly, and we expressly disclaim any obligation to update the forward-looking statements made today.

For a detailed discussion of risks, please refer to the cautionary language in today's press release and/or SEC filings. 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. With that, let me turn the call over to Aman.

Thanks, Michael, and thank you everybody for joining us today. 2026 is off to a strong start. In Q1, we grew recurring gross profit streams 27% and expanded GAAP operating income margins to 21%. We added 7,000 net locations and are broadening who we serve from local restaurants across the U.S. to enterprise chains, international markets, and retail. By bringing our same playbook of depth and operational expertise that built our core business to each new market.

I'm really proud of the Toast team. We are both delivering world-class results and reinventing ourselves at the same time. From how we build for, sell to, and support our customers with AI, as well as a series of AI investments across our platform to help our customers with the intelligence and the efficiency necessary to run a more successful and profitable business.

Toast IQ is the foundation for our evolution from a software platform to an agent platform that can drive outcomes for our customers. With the recent launch of Toast IQ Grow, which includes our first AI agent, we are already seeing this vision start to come to life. I'm excited to share more in a couple of minutes as we break down our priorities, but what's incredibly exciting is we are just scratching the surface of what's possible here.

Our progress in each of these areas is shaping our revised set of priorities in 2026. Number 1, expand what Toast does for customers. Grow from a software to an agentic platform that can do work and deliver outcomes for our customers. Number 2, expand the markets we serve. Number 3, reinvent the organization with AI and dramatically accelerate productivity.

We are incredibly well-positioned as a vertically integrated platform across software, hardware, and Fintech. We are a foundational technology partner for our customers, they are looking to us to help them take advantage of the opportunities AI creates. We will lean into this opportunity while continuing to execute our strategy of expanding to new markets to scale this business to $5 billion and $10 billion and beyond.

All right, let's dig in to our priorities. Number 1, grow from a software to an agentic platform that can do work and deliver outcomes for our customers. For 14 years, we've evolved from a point-of-sale solution into a comprehensive system of record, helping customers manage operations, employees, guests, and suppliers. As we've delivered more value and built out our platform, we've seen broader price attach and higher ARPUs.

What I consistently hear from customers is that while they love our ambition and our innovation, they're stretched thin and don't have enough time to leverage everything we've built. As a result, small business owners outsource functions critical to running a profitable business.

Things like marketing, bookkeeping, payroll and tax, and more. We've always provided the software, and now with AI, we will provide the service that can actually do the work for them. They can leverage our growing agent layer to outsource capabilities that are not their core competency and give them time back to do what they do best: great food, great service, and great hospitality.

Our advantage here is structural. The data that powers these functions, what guests order, how often and when they visit, how much our customers spend on labor and inventory, how the business is performing, already lives in Toast.

That data has been built up over 14 years, every new location and transaction makes it more valuable. Every agent we deploy deepens the value we can deliver for our customers. This advantage is already showing up in the product. Toast IQ has 40,000 weekly active locations and growing.

Operators tell us Toast IQ is already helping them find revenue opportunities, save time, and identify trends they hadn't picked up on. For instance, Toast IQ helped a customer in California identify that they weren't covering their food and labor costs when opening an hour early for sporting events last fall.

The customer adjusted their hours based on this insight and saved thousands of dollars. The first Toast IQ agent we've launched is a marketing agent within Toast IQ Grow, which brings together everything a restaurant needs to build their brand online, develop direct customer relationships, and drive demand.

Toast IQ Grow includes websites, online ordering, advertising, and marketing capabilities, plus this new marketing agent and a marketing success manager to develop the marketing strategy for restaurants right alongside them. The marketing agent builds and optimizes a campaign from a customer's past performance data, their sales forecast, and soon, upcoming events and weather.

A full month of campaign across SMS, email, and social media in minutes. Campaigns designed by the marketing agent are already outperforming what restaurants can do on their own, with pilot customers using Toast IQ Grow seeing an average 8% increase in sales compared to similar Toast restaurants.

Sahara Bistro Shawarma, a fast casual Middle Eastern concept, came to Toast with a fragmented marketing stack. By adopting Toast IQ Grow's marketing agent, they can now plan and schedule campaigns across email, SMS, Facebook, and Instagram weeks in advance.

Nearly a third of sales in March were directly attributable to Toast marketing tools, and sales were up more than 30% compared to the prior four weeks. In addition to helping restaurants drive demand through Toast IQ Grow, we are investing in our consumer network, Toast Local.

Toast Local connects restaurants and guests directly with zero commissions and no middlemen. Restaurants use Toast Local to attract new guests and re-engage their regulars through loyalty programs and targeted offers.

For guests, they love the convenience of an app that saves them money at tens of thousands of restaurants through no-fee ordering, personalized loyalty rewards, and exclusive offers, whether they're ordering pickup, delivery, or dining in. That last part is important. Unlike aggregator marketplaces built around delivery, Toast Local extends into the on-premise experience where the majority of restaurant revenue is generated. We recently expanded that experience significantly.

Toast Local now enables guests to discover and book a table at over 20,000 restaurants through Resy and Toast Tables, making it one of the largest reservation marketplaces. The early traction is strong. We've more than doubled weekly app downloads in the last quarter, and Toast Local is now one of the top apps in the App Store's food and drink category.

We plan to roll out a series of agentic products to tackle other work as well. Over time, we expect agents across restaurant operations, scheduling and payroll, inventory and food cost, and bookkeeping and accounting to complement Toast IQ Grow. By working in concert, they will be able to look at a restaurant's projected demand, food cost and availability, labor schedules, and projected guest volume to drive suggestions to improve profitability.

That's an incredibly exciting future because many of our customers don't have the time or the capability to do this effectively today. Moving on to priority 2, which is to expand who we serve. The vertical playbook that builds our restaurant business, product depth, operational expertise, and local go-to-market is now working in enterprise, international, and retail.

In our core, we're well-positioned to grow market share in 26 and beyond, and we're differentiating on both product and brand. On product, customers are citing Toast IQ as the reason they're choosing Toast.

Our brand campaign, Built For Busy, extends the differentiation into the market. Built For Busy reflects a fundamental truth about our customers. Busy is the ultimate sign of success, whether they're running a family restaurant, an enterprise chain, or a multi-location retailer.

It captures our product philosophy to ship solutions and products to help customers get and stay busy. From handhelds increasing throughput to KDS keeping the kitchen in sync, and starting with the marketing agent, Toast IQ agents taking work off their plates. These differentiators are why we continue to win the majority of the time.

We are increasing share across all market types, from the largest cities to smaller metro areas and among high GPV restaurants. In our most penetrated markets, we are still growing, giving us confidence in continued healthy share gains for many years to come. We're proud to announce that The Alinea Group, the world-renowned Chicago-based restaurant group that includes iconic Alinea, Next, The Aviary, and The Office, went live on Toast.

They chose Toast as a key technology partner that shares the same DNA for relentless innovation, commitment to precision, and a passion for delivering a stellar guest experience. Across all of our TAMs, we're building more conviction in the long-term potential with every quarter.

In each of our new TAMs, ARR is growing faster and has higher SaaS ARPU than our core did at a similar time period, demonstrating our proven vertical playbook is working. In enterprise, we launched Toast Drive-Thru, opening up 140,000 locations, and we're going deeper in hotels, bringing Preferred Hotels & Resorts onto the platform. We also continue to invest in specific product features to deeply serve important subverticals, like pizza, demonstrated by winning Hungry Howie's, a 500-unit national pizza chain, as well as Papa Murphy's.

We continue to see strong growth. With the pipeline in front of us, I'm confident Enterprise will be a meaningful growth driver for years to come. Internationally, we're scaling location count and growing ARPU. We recently launched our Toast Go 3 handheld to further differentiate our platform.

We see the best opportunity in tier 1 cities in the countries we're in, where higher GPV restaurants align with our value proposition and drive stronger ARPU and unit economics. As we expand to new markets beyond Canada, U.K., Ireland, and Australia, we plan to launch more tier 1 cities with high density and busy restaurants.

In Retail, we're scaling quickly and focused on deepening product market fit with high-value operators. Grocery, for example, is a near-term focus and represents a meaningful opportunity. There are over 20,000 independent grocers in the U.S. generating over $250 billion in sales.

We're seeing strong traction with these larger, more complex operators and now serve over 100 grocery locations with more than $5 million in sales. Demonstrating our platform is capable of handling the volume and complexity the most demanding retail environments require.

The capabilities we've built for restaurants, supplier connectivity, invoice workflows, SKU level complexity translate directly, letting us move fast to meet the needs of these customers. Our scale across restaurants and growing presence in retail give us a unique vantage point, and over time, we see it as the foundation to becoming the platform powering local commerce.

We're on a path to significantly scale the locations we serve across our existing TAMs and further expand the opportunity to core adjacencies like membership and golf, more international markets, and new retail verticals.

We'll remain disciplined about where we expand, but our vertical playbook has proven, and with the TAM runway in front of us, I'm confident we can replicate our success that we've had in our core business. Moving on to priority 3, which is to drive productivity through AI. AI is reshaping how we work.

Engineering coding velocity is up over 60% year-over-year and accelerating in recent months. This helped us launch our marketing agent 3 months earlier than planned. In support, we've expanded AI coverage from chat to phone and now have about 40% of our support interactions resolved by AI. We're seeing efficiencies as we do this, which is enabling us to invest more in account management and upsell for our highest value customers.

As we drive productivity and efficiency, it frees up capital to invest in our top growth initiatives and support our path to 40-plus% long-term margins. We see a clear path to materially scaling this business by going deeper in our core market, expanding what we do for existing customers, scaling the new markets we're already seeing great success in, and over time, opening up new ones.

We are operating from a position of financial strength and leaning in to drive sustained long-term growth. We will remain disciplined about where we lean in, guided by customer feedback, and where we have conviction in building differentiated, profitable businesses that deliver significant shareholder value. I'm excited about 2026. We are really well positioned for another record year.

I want to thank each and every Toaster for their dedication and commitment to Toast, and I want to thank our customers and investors for your continued support as well. Thank you. With that, I'll turn the call over to Elena.

Thank you, Aman and everyone for joining us today. I would also like to thank our team for an excellent start to the year. Q1 results exceeded our expectations, reflecting the consistent high level of execution across the company.

In the first quarter, ARR was up 26%. Our recurring gross profit streams increased 27%. Total monetization across SaaS and Fintech exceeded 1% of GPV for the first time. Adjusted EBITDA was $179 million.

On a GAAP basis, operating income margin crossed 20% for the first time to 21% or $110 million, and EPS more than doubled to $0.20. Building on last year's momentum, we added 7,000 net locations in Q1 and ended the quarter with 171,000 live locations, up 22% from a year ago.

Our best-in-class vertical SaaS platform and local go-to-market execution continues to drive consistent share gains in our core, complemented by increasing contributions across each of our new TAMs. SaaS ARR grew 27% versus a year ago, driven by the combination of our strong location growth and consistent mid-single-digit SaaS ARPU growth on an ARR basis.

Subscription gross profit continues to outpace top line growth at 32%. SaaS gross margin exceeded 80% for the first time, expanding nearly 300 basis points from a year ago to 81%. In addition to ongoing efficiencies as we scale, we're seeing early gains from leveraging AI to transform our customer support experience. Payments ARR and Fintech gross profit increased 24% in the first quarter. GPV was $51 billion, up 22% year-over-year, with GPV per location down 1% versus last year.

Fintech net take rate was 61 basis points, and payments take rate was 51 basis points. Payments take rate increased 2 basis points year-over-year as we continue to execute on cost optimization efforts, new products, and targeted pricing adjustments. Non-payments Fintech solutions led by Toast Capital contributed $51 million in gross profit and 10 basis points in take rate.

Overall, the program continues to grow at a steady clip, and defaults remain consistent and well within our risk guardrails. Our total monetization take rate, measured by recurring gross profit as a percentage of GPV, crossed 1% for the first time to 103 basis points. The 5 basis point increases versus a year ago demonstrates our growing share of wallet and value we provide our customers.

We expect our total take rate to continue to grow as we evolve our platform with AI and deliver more outcomes for our customers. Moving down the P&L, hardware and professional services ggross profit was negative 13% of our recurring gross profit streams. We are leaning into our customer acquisition momentum across all of our TAMs and absorbing higher tariff costs.

Our strong overall unit economics and scale enable us to absorb these costs while maintaining healthy payback periods. Excluding $28 million of bad debt and credit-related expenses, operating expenses increased 17% in the first quarter. We're investing in our highest priority areas across product and go-to-market, and investing in AI tooling to evolve the ways we work and increase productivity. Over time, AI efficiency gains will give us the flexibility to invest more in key growth initiatives and support our long-term margin profile.

Sales and marketing expenses increased 20%, reflecting our strong location growth. We're investing to support our ongoing market share gains in our core and opening up sub-segments like non-native English-speaking customers. We're also expanding our go-to-market presence in our new TAMs, which is accelerating our progress.

R&D expenses grew 20% year-over-year. We're investing in our product strategy to expand our TAM and drive location growth and differentiate our product with agentic workloads and providing our internal teams with AI capabilities to increase productivity.

In Enterprise, we just launched our drive-thru offering. We're expanding Toast Go 3 internationally and deepening our grocery product for retail customers. We're further differentiating our core product, most recently with the release of Toast IQ Grow and relaunch of Toast Local. Adjusted EBITDA grew 35% to $179 million, a 34% margin.

Our Q1 results reflect healthy top-line growth, as well as our continued focus on driving efficiencies throughout the P&L. Free cash flow was $115 million. As a reminder, free cash flow is typically lower in Q1 due to the timing of cash bonus payments and payments seasonality.

For the full year, we expect our conversion of Adjusted EBITDA into free cash flow to be slightly lower than in 2025. We are strategically purchasing memory chips and plan to hold more inventory in the near term. We expect the majority of this cash impact in Q2 and for the free cash impact to normalize over time as inventory moves to customers. GAAP operating income was up over 150% from last year to $110 million.

In addition to our strong Adjusted EBITDA growth, we're benefiting from ongoing leverage in stock-based compensation. SBC as a percent of recurring gross profit was 11%. That's nearly half what it was just 2 years ago through our disciplined approach to managing stock compensation.

Year to date, we've repurchased 14 million shares for nearly $400 million. We've been opportunistic given the market pullback and our confidence in the business, and we expect this to be an accretive use of capital.

We have approximately $200 million remaining on our share repurchase authorization and will maintain an opportunistic approach to repurchases based on market conditions to support long-term shareholder value. The combination of our strong financial results and decline in our diluted share count resulted in GAAP EPS more than doubling to $0.20.

Turning to guidance, for the second quarter, we expect total subscription and Fintech gross profit to grow 22%-24% year-over-year and Adjusted EBITDA to be $185 million-$195 million. We increased our full year 2026 guidance reflecting our strong start to the year. We now expect recurring gross profit to grow 21%-23% and Adjusted EBITDA to be $790 million-$810 million.

We are positioning Toast to sustain high growth for the next 5-10 years. We're seeing positive results from the investments we've made to begin delivering agentic solutions for our customers, extend our lead in the core, and accelerate progress in new TAMs across enterprise, international, and retail.

Our new TAMs are scaling rapidly. We're confident each is on the path to be materially larger with healthy unit economics. Our bias remains to reinvest top-line outperformance across our growth initiatives and into internal AI tools to transform how we operate. Our bar for investing remains high. It is grounded in customer feedback, improving unit economics, and where we have conviction we can generate meaningful long-term cash flow.

To wrap up, we are executing our goals and are on track to deliver strong top and bottom line results in 2026, while positioning the company for sustained high growth over the next decade as we lead the AI transformation for restaurants and across local commerce. We are more excited than ever about the massive opportunity that lies ahead of us. Now, I will turn the call back over to the operator to begin Q&A.

Thank you. At this time, I would like to remind everyone in order to ask a question, press star then the 1 on your telephone keypad.

Thanks, Krista. We'll kick off our Q&A. First question we'll take from Stephen Sheldon at William Blair.

Hey, thanks for taking my questions. Maybe first here, I guess as we think about the hardware, how much of a differentiator do you think your hardware solutions like Toast Go 3 could be? Does owning those touch points, you know, with employees and servers having them, you know, kind of in their hands, does that give you a big leg up in terms of, In your view, helping restaurants take AI-supported insights from Toast IQ and making them actionable in an employee-guest interaction? I guess, yeah, how much does that, does hardware serve as a differentiator? Are there other things like that as you think about your platform that could serve as a big leg up on the AI front?

Yes, Stephen, I think that's a great question. There's obviously lots of ways in which AI is helping us build across the platform. I think specifically on hardware, you know, I think we've learned over the years that being vertically integrated across software and hardware as a platform gives us an advantage where we can build capabilities for our customers faster.

If you think about, like, to your point about how are we leveraging AI at the table or when a server's interacting with guests, there are a few examples of things we've shared over the past few quarters. One example is Menu Upsells, where servers have visibility into what are the types of items that are most likely to increase check size.

More recently, we announced digital checks, which is basically if you book a table using Toast Tables and soon with Resy, you'll be able to get that data right on the handheld of when a server's interacting with guests.

Over time, the vision there, by the way, is not only to get the data that's stored in the CRM, but to actually look at a guest's order history to learn what's most relevant for that guest, like an allergy, for example. We're also testing out things like walk out, just walk out and pay. If you've got a card on file when you book a table, you don't even have to go through the checkout experience.

That's another example where the server validating that the bill was paid is really important on the handheld. I think there's lots of examples where the hardware and software working together, we think can create a great experience. You know, another example is where there's a lot of discussion on voice AI and video AI. With voice, of course, there's, you know, examples like the phone, picking up the phone to automate that experience, drive-thru, but also, you know, things like kiosks and handhelds.

Imagine walking into a restaurant and the server and the handheld listening to the order, and then we're getting to the kitchen even faster. I think there's lots of, lots of ideas, lots of opportunities. Another one is AI listening to the interaction to help coach staff better. I think we certainly see the fact that we've got the hardware and the software together being a big advantage in terms of building products faster.

Got it. That's helpful.

Thanks, Stephen.

Maybe, yeah,

Go ahead. All right. Thanks, Stephen. We'll move to our next question. Samad Samana from Jefferies.

Hi, good evening, and thanks for taking my question. I wanted to ask on Toast IQ, you know, obviously there's a lot of focus on AI. As you think more about monetization of agents and as you think about your own pricing model, would you ever at some point revisit how you're thinking about pricing, making it align more on maybe like a usage-based nature?

We've seen a lot of rapid change in other parts of software. I don't know if that would be as well aligned for maybe the restaurants out there. Just help us think through that, and do you see that as maybe a potential upside driver over time if they're driving a lot of utilization and value out of it? Thank you so much.

Yeah. Thanks, Samad. Good question. We're actively exploring not just the capabilities from an AI standpoint in Toast IQ, but also the pricing model. I think it's topical for us and timely. I'd say first and foremost, what's exciting to see with Toast IQ is we've gotten now 40,000 customers that are weekly active customers using the platform. That was the first step. It was absolutely critical to get usage up. What we've heard from customers is it's actually useful.

Looking at one of the common use cases I hear is being able to generate custom views on data versus just getting pre-canned reports. Another area that was a bit of a surprise was analyzing fraud and theft and getting visibility into what's going on there.

Of course, making changes to the back end of Toast, getting support more broadly with the chatbot. I think there's been lots of ways in which Toast IQ is adding value for our customers. I shared the example earlier in the call about a customer that adjusted their hours by chatting with Toast IQ and recognizing that there were hours they were open when they weren't generating enough profit.

I think there are some examples of us also like, you know, some product-led growth for software and hardware as well as part of the platform. The biggest opportunity that I see right now is if you talk to our customers, 1 of the things you consistently hear is like, "Look, we're trying to keep our doors open.

We're trying to make sure there's great food and great hospitality," and that takes a lot. Especially for these busy operators, often they're going to go outsource things like marketing, things like running their back office, so payroll and tax, or accounting and bookkeeping. For a lot of these functions, the data that is necessary to do marketing is actually coming from Toast.

That's actually a key reason why Toast IQ Grow has seen such good, really good early signal, where we're optimizing their digital presence and generating marketing campaigns for them because all that data is already in Toast, and we've seen 8% lift in GPV, which is a really good early signal there. I think from a pricing and monetization standpoint, that's what's most important.

Because as we take on some of this work and by the way, Toast IQ Grow, it's an agent, but it's actually also backed by a human that can help support these marketing campaigns. As we can take on the work, I think that's really the opportunity for monetization long term. We're looking at usage-based, to your question, as a pricing model as well.

Thanks, Aman. We'll take our next question from Josh Baer at Morgan Stanley.

Great. nice quarter. Thanks for the question. You highlighted 40% of the support interactions resolved by AI, and then on the engineering side, the velocity up by more than 60%, seeing a lot of efficiency there. I guess the messaging is you're reinvesting into growth areas, while still trending upward toward those long-term margin targets.

How Can you talk a little bit about how you make that decision, the growth versus margin decision, if, you know, if we'd expect to see I guess, like, how we should interpret that or measure that, higher growth for longer, or if growth does dip, like, we would flip higher on the margin side, just a little help thinking about the growth versus margin philosophy? Thanks.

Thanks, Josh, for the question. I'll take that. Yeah, look, I think, first of all, I do believe, we believe that AI is absolutely gonna change the way we work. We're already seeing, as Aman said, efficiencies in our support organization, efficiencies really across the company. It's, you know, we're still continuing to roll out.

We want to be balanced with how we think about those benefits. Just zooming out in how we think about balancing growth and profitability, a couple of principles we think about. One is we're really positioning the growth of the company and thinking about our growth profile over the next 5 to 10 years, right? We're trying to position ourselves to invest behind growth initiatives we believe will deliver durable growth for a very long time. With that, we're also holding the bar high.

You've seen us employ really strong discipline around capital allocation. That's not going to change. The decisions we make to invest typically are customer signal, rep productivity. We talk to our customers all the time, we're looking at signals across all of the businesses to make sure that we're excellent stewards of capital always.

That's how we think about it. Opportunistically, you know, we'll continue to look at Like, for example, we've repurchased shares, et cetera. We have a capital allocation framework that we look at. What you should take is we have high conviction about our long-term 40% EBITDA plus margin profile. That has not changed. You've seen us make a lot of progress in the GAAP profitability as well.

Great. Thank you.

Great. Thanks, Josh. We'll turn to our next question from DJ Hynes at Canaccord.

Hey. Thanks, Michael. Elena, I was hoping you could touch on enterprise across two axes. First, the pipeline you see in that cohort and maybe how that compares to this time a year ago. I mean, does it feel like there's any inflection happening there? Second would be the backlog of deals that you've won that have yet to go live and what visibility that gives you into location growth over the next several quarters. Thank you.

Yeah, look, I'll start. Aman, you can jump in as well. You know, first of all, we've been on this journey with enterprise. It's a multi-year journey. Let me just start there. As you've seen through our wins that we've announced over the course of the last several years, we're definitely getting pulled into enterprise deals, which is healthy.

The pipeline continues to be really healthy across, you know, like I said, you've seen us add more customers. Now with Drive-Thru, that opens up the opportunity even further. Really excited about that offering. The team is executing quite well across the enterprise TAM.

Yeah, I think, Elena, you hit it. I mean, if there's one stat I'll share is in Q1 2026 alone, we booked more locations than we had total customers in 2023. I think that momentum has not slowed down across both hotels, full-service restaurants, and Drive-Thru, obviously, we just launched, but there's good customer signal there as well. You know, we're confident in our ability to hit the plans we set out to start the year.

Thank you.

Thanks, DJ. We'll take our next question from Dominic Ball at Rothschild.

Hey, Aman, Elena, Michael, Emily, thanks for the question. Aman, interesting comments on Toast Local, following the commentary yesterday from DoorDash. Alongside seeing DoorDash POS active in San Francisco, Phoenix, New York, it seems like a formal launch is somewhat imminent.

They have a bundled offering, strong distribution channel. As this, like, delivery platform transitions from a partner to a peer, Toast is the best POS system there is. How do you really get Toast Local to be a real peer to DoorDash? Is there any other competitive responses available to Toast? Thank you.

Yeah. Hey, Dominic, I think first off, like, you know, whether it's DoorDash, Uber, or hundreds of other partners we have, they're critical partners for us because to deliver a great experience, right? Our platform and their platforms have to work really well. That doesn't change. I think, you know, we were the first ones in the space to build a deep vertical platform for restaurants.

That's really what allowed us to grow and succeed and get to 25% plus share in the market. You know, we continue to see the same signals in terms of the growth and the potential that we have. I think the way we're gonna do that is by doing the same thing we did to start the business, which is to focus exclusively and focus on the needs of our customers.

A lot of the focus we've got now on Toast IQ and the agent layer is very much about, again, creating value for customers based upon customer feedback. I think as long as we continue to do that, as long as we continue to stay customer obsessed, I think we'll be just fine. I think in terms of local, again, I'd say the biggest reason we're leaning into local is based upon, again, on customer feedback.

Like, what we hear consistently from customers is they'd love to have a low commission, no commission channel where they can generate demand. The reason we brought in Resy inventory to combine with Toast Tables is now we've got one of the best inventory of restaurants to book tables on.

We think we can do some really unique things with that experience where, one, when you book a table and have a card on file, you can make the experience of checkout much better. You can personalize the experience at the table, based on the guest order history, in Toast.

Then we're also looking at data about both the guests and the restaurant in terms of when the restaurant is busy and when they're not, to try to create the right set of offers that are personalized to the guests, again, drive demand incrementally. So it's our focus on local has really been about helping restaurants get more people in the door.

You know, one of the stats that I think is exciting, I'll share is app downloads, I think I shared this in the call as well, is, are up 2x. Weekly app downloads are up 2x just the last quarter. You know, you can see the rankings go up in the App Store, food and drink category. I think really good early momentum, very much focused on bringing restaurants, demand in store at a great value.

Great to hear. Thanks.

Thanks, Dom.

We'll take our next question from Tim Chiodo at UBS.

Great. Thank you. A topic that I know a lot of investors would like to get a little bit more comfort with, particularly into 2027. It's a hardware topic, right? You previously said for 2026, it's about 150 basis points impact EBITDA margins.

I know earlier today you mentioned some impact on free cash flow conversion as you build inventory. I know this is a challenging topic, and it's challenging to forecast. To the extent that there's anything you could provide around how you're thinking about it for 2027, the supply that you think you'll have entering 2027, and how the kind of the process or conversations go with your suppliers. Thanks.

Yeah, Tim, it's a very relevant question. Thanks. Definitely, like you said, it's a very fluid environment. I think a couple things that I'll just comment on. 1 is it's really important to us to not have any customer disruption. That's a principle that we're operating in.

To that end, we've increased inventory level to secure the supply into 2027. Of course, we'll remain opportunistic to add supply if it makes sense. The highest level, I have no concern about our ability to meet our growth.

That's number 1. Number 2, the impact to the 2027 P&L will be larger than the impact to 2026. As I say that, there's something you really should understand is, 1, we're gonna manage the margins in 2026 and 2027 as you've seen us manage it today.

We're gonna have healthy margins in both 2026 and 2027. We're actively planning for that. And also the last thing I'll say is, yes, there'll be near-term cost pressure, but we don't anticipate this will have any structural impact to our P&L over the long term.

As I said earlier, we're committed to that long-term margin profile that we've talked about. All in all, I think the team is managing it well. We're actively managing it and feel very confident in our ability to manage margins, but more importantly, also the ability to get supply to our customers' hands.

Excellent. Thank you, Elena.

Thanks, Tim.

We'll take our next question from Andrew Bauch at BMO.

Hey, guys. Thanks for for getting me on. I wanted to touch upon the international progress. You know, it seems like over the last several months, we saw a lot of new headlines and new press releases from you. Anything you've seen so far that's working or anything that's materially different than the U.S. market, given that, you know, we're now a couple of years into this push?

Yeah. Hey, Andrew Bauch. Overall, really proud of the team's progress. You know, we continue to grow. The international business grew at a healthy clip last year, both in terms of locations as well as in ARPU. We recently launched our Toast Go 3 handheld internationally, which was a big missing piece, really, because it's such an important part of our platform.

I think one of the learnings internationally has been that, and I'd say most of our investment is set up this way as already. Where we've seen the most success is these tier 1 cities. Think about like in Canada, you know, Vancouver or Toronto, or in the U.K., London, or in Australia, we're seeing some really good early signal in Sydney and Melbourne.

The reason is these cities have the most, you know, high GPV busy restaurants, where the Toast value proposition is most pronounced in terms of things like the handhelds or the operational capabilities we offer in our platform. I think one of the things we've done is just lean in further into more of a tier 1 city strategy, I'd say.

Certainly we'll continue to grow, you know, outside of these cities and these countries we're in. As we open up more countries, you know, it may look more like a tier 1 city strategy versus going fully deep in every country. That's something that we're contemplating and looking at as we head into the back half of this year.

Yeah, it'd be great to see London as a flywheel market for drivers.

Yeah. Couldn't agree more. Absolutely. That's what we're working on.

Thanks, Andrew. Okay, we're gonna take our last question from Rayna Kumar at Oppenheimer.

Hi. Thanks for taking my question. I'm just wondering, like what you're seeing for same-store sales, into April, and if you saw any changes in the quarter as well. Thank you.

Yeah, I'll just take that. Overall, our consumer trends have been stable, is what I would tell you. You know, GPV per location, in Q1 was down 1%, but very much within a reasonable zone, and Q2 similar. Overall, customers are quite resilient. They've proven that over many cycles. That's what we're seeing. We looked at our own data as well, and it's stable.

Appreciate the color.

Thank you.

Thanks, Rayna. That concludes our conference call tonight. We want to thank everyone for joining, and have a good rest of the night.