Toast at Morgan Stanley Conference: Strategic Growth and Challenges

On Thursday, 06 March 2025, Toast Inc. (NYSE: TOST) presented at the Morgan Stanley Technology, Media & Telecom Conference, highlighting a year of strategic restructuring and growth, while addressing challenges in consumer spending. Despite a decrease in same-store sales, Toast remains focused on expanding its market share and enhancing its integrated platform with AI.

Key Takeaways

• Toast achieved GAAP profitability in 2024 and added record net new live locations.
• The company aims to expand its U.S. restaurant market share from 15% to 20%.
• Toast plans to enhance its all-in-one platform with AI to improve customer satisfaction.
• The company is exploring international expansion and new verticals like retail.
• Toast Capital is positioned to boost fintech take rates through strategic initiatives.

Financial Results

• GPV reached $160 billion, although GPV per location decreased by 2% in 2024.
• Q4 GPV per location saw a 1% decline, attributed to holiday timing and weather.
• Toast added $400 million in incremental ARR, with $200 million from SaaS ARR.
• EBITDA margin is expected to expand by 300 basis points in 2025.
• Toast Capital aims to contribute roughly 10 basis points to the take rate long-term.

Operational Updates

• U.S. Restaurants: Toast holds a 15% market share, targeting 20% for a flywheel effect.
• Enterprise: Gained traction with brands like Hilton and Potbelly through product differentiation.
• International: Focus on U.K., Ireland, and Canada, with sales reps outperforming U.S. productivity.
• Retail: Strong early signals in hybrid and dedicated retail segments, leading to increased investment.
• AI Initiatives: Introducing tools like Sous Chef for actionable insights and marketing campaign generation.

Future Outlook

• Toast aims to become the market leader in U.S. restaurants over the next decade.
• The company plans to serve multiples of its current customer base through expansion.
• Investments will balance core business growth with new verticals and product differentiation.
• International expansion will explore models like e-commerce and resellers to reach beyond major cities.

Q&A Highlights

• Competition: Toast emphasizes its purpose-built restaurant platform and customer focus.
• Enterprise Market: Investments in capabilities like multi-location management are enhancing market credibility.
• AI Adoption: Restaurants are open to AI that simplifies operations and provides insights.
• Toast Capital: Focus on risk management and leveraging payment data for visibility.

For a deeper dive into Toast’s strategic initiatives and performance, refer to the full transcript below.

Full transcript - Morgan Stanley Technology, Media & Telecom Conference:

Josh Baer, Software Research Analyst, Morgan Stanley: Excellent. My name is Josh Baer, Software Research Analyst at Morgan Stanley. We have the Toast management team. Before introductions, a brief disclosure for important disclosures, please see the Morgan Stanley Research Disclosure website at www.morganstanley.com/researchdisclosures. And if you have any questions, please reach out to your sales representatives.

Thank you so much for joining. We have Aman Narang, Co Founder and CEO of Toast and Elena Gomez, CFO. Thank you for being here. Really excited for the conversation. Thanks for having us, Josh.

Aman, I wanted to start with a little bit of a look back on 2024. You added a record number of net new live locations. You’re GAAP profitable. You’re making progress on new growth markets. What were the biggest accomplishments from your perspective in 2024?

And how are you thinking about 2025?

Aman Narang, Co Founder and CEO, Toast: Yes. Thanks, Josh. And thank you, everybody, for being here. 2024 was a big year for Toast. I stepped in as CEO in January.

And first, we had a restructuring in February of twenty twenty four, so a bunch of change, making sure we meet some change in our leadership team. I wanted to make sure that we, the team, had our resources aligned against what’s most important. So there was a lot of change to start the year. And it was great to see the team be really resilient. We had really a fantastic year.

You look at the growth that we saw in our core business, you mentioned the record net adds. Is exciting to get our retail business off the ground. We launched our retail product and saw a really good early signal in that business. Upmarket and enterprise, we our enterprise business is newer. We got some great success with brands like Perkins or Hilton and Caribou Coffee and many others.

So great success there. And if you just look at on the metrics side, we had it was like $400,000,000 or so in incremental ARR that we added. And we grew GPV to $160,000,000,000 and we also increased margins by 20 points. And so I think it really followed the team’s progress in terms of being able to grow at that level and also continue to also expand margins. And looking into ’25, to some extent, there’s a little bit of like more of the same.

There’s a lot to do in terms of continuing to make progress against the things that have started. And this year, while it’s great to have 28,000 net adds, if you look at our U. S. Restaurant business, we’ve got 28,000 locations that we added across the whole business, but we’re still at 15% share in The U. S.

And so continuing to scale that. And then within these new terms, whether it’s retail or international or enterprise, we shared earnings that we’ll get to 10,000 locations across these. Now for context, if you look at our U. S. Restaurant business, it took us a lot longer to get to 10,000 locations and that’s a big opportunity for us over the long term.

So there’s a lot of focus there to make sure that as we invest more that we see the right signals as we continue to scale there. And then and I think on the expansion side, if you talk to our customers, you continue to hear that many of them want more of an all in one integrated platform. And so there’s a lot of investment and focus on continuing to make sure that as we expand the platform, we’re seeing the right signals from customers. So like as an example, as customers use more of our platform, are they happier, right? Is NPS going up?

Are they stickier? We talk a lot about employee products, for example. Every restaurant today is going to run payroll, every restaurant is going to run scheduling. And so there’s a lot of focus to say, especially with AI, right? Like how do we make it even more differentiated and just a no brainer for restaurants to use more of the platform.

That’s a big focus for the team this year. And then continue to hold a really high bar on talent. We have to make sure that culturally, especially the leadership level, as we’re investing, that there’s no waste in the organization and the investments are best aligned with what’s most important. There’s a lot to do. I know I shared a lot there, a lot to do.

What I’m excited about, you asked about what I’m excited about, we hold about 5% to 10% of our investments in R and D and we hold it against these what we call these Horizon three bets. So these are best and they’re not driving revenue today. But there’s some really interesting things we’re doing there, whether it’s in the consumer experience, on the customer, we have this app called Toast Local. And then we’re also looking to and really think hard about like what are ways in which we can help restaurants, whether it’s improving yield, how do we drive more button seats in the restaurants, how do we make the experience even more personalized. There’s a lot of interesting bets the team has going that I think I’m personally involved with that I’m excited about.

Josh Baer, Software Research Analyst, Morgan Stanley: Thanks, Aman. Great overview and we’ll dig into most of that for the conversation. I do want to pull Elena into the conversation. And you have a unique insight into the health of consumer spending. We can see GPV per location.

In 2024, that was down a few points. Wanted to ask how much of that was due to same store sort of like to like sales pressure year over year versus just your evolving mix of your restaurants given your ramp in all these new growth markets?

Elena Gomez, CFO, Toast: Yes. It’s a fair question. Overall, our GPV per location was down 2% for the full year for 2024. Most of that is really driven by same store sales. To a lesser extent, mix does play a role.

And as we begin to get into these and expand into these new TAMs, what we’re seeing is not all locations are created equal. So on a GPV per location basis, for example, international, the GPV per location is slightly lower than what we see in The U. S. Market. The flip side on the retail side, what you see is when you compare the industry average, and it’s early for us on retail, so I just want to remind everyone about that.

But when you look at the industry average, that GPV publication tends to be a bit higher than what we see in restaurants. And then with enterprise, it really just depends on a deal by deal and the complexion of what they’re looking for and the set of products they ask of us and so on and how many restaurants, etcetera. So it really depends. But overall, I think it’s important that the core business continues to be the primary. A lot of these businesses are new.

It’s important for us to understand the dynamics of those and manage obviously paybacks and all that. But at the core of it, most of it is driven by same store sales just because these businesses are just so new. Over time, you’ll see a gradual impact to GPB publication for sure.

Josh Baer, Software Research Analyst, Morgan Stanley: Great. And how should we think about some of the puts and takes in Q1 from a seasonality perspective? And then also, what have you said about 2025?

Elena Gomez, CFO, Toast: Yes. Fair question. So just to give a little texture, overall, the consumer spend and sort of the health of the consumer, what we see is relatively stable. That’s where I would start. I think in Q4, what you saw is a little bit of an improvement of GPV per location.

It was down like 1%. And that was really driven a little bit by holiday timing, some weather that was favorable that sort of played a role in Q4. Q1, you will not see that same decline. It will decline a little bit more than Q4. And when you just step back and think about it, the weather in January, some of the fires in L.

A, there’s a bunch of dynamics that play a role. Leap year played a role, believe it or not. And so when you think about all of that, you’ll see that the complexion of Q1 will be a little bit different than Q4. But when you zoom out, in general, GPV per location has been somewhat in a relatively narrow range, and we continue to believe that as we get into 2025.

Aman Narang, Co Founder and CEO, Toast: Thank you.

Josh Baer, Software Research Analyst, Morgan Stanley: I want to talk about locations. I always say that’s the most important metric to track because it’s not only the base of growth for the whole business, but it also gets at all the debates around competition and TAM, go to market, execution. So I wanted to start with competition. It’s always been a competitive space. We have noticed some payment vendors maybe focusing more on restaurants, some delivery services occasionally, some announcements about incremental functionality into restaurants.

If you can unpack sort of the current state of the competitive landscape, are you seeing any changes?

Aman Narang, Co Founder and CEO, Toast: I think you hit it, Josh. This market has always been competitive. I remember like ten years ago, one of the things that really stood out to me was just how fragmented this market was. And I think if you look at our net adds, it’s a testament to the progress we’ve been able to make despite that. We’ve been at this for twelve years.

We’ve invested over $1,000,000,000 in R and D into this restaurant platform. And I think what customers really appreciate is that it’s purpose built for restaurants and it show comes through in all aspects of the platform. And if you look at even not just the core point of sale, but even the expansion products that we’ve built out. And And so we’ve got a lot of confidence as long as we continue to be obsessed with customers and continue to improve both the product and the service and there’s lots of feedback as you can imagine we get all the time on ways we can continue to improve the platform across all these different sub segments of the TAM that we serve. I think we’ll be okay.

And I think in terms of like your question about the competitive landscape, our team on the go to market side does a great job of tracking a lot of that data. And we track the funnel end to end and we continue to believe that there’s nothing material there that’s changed and we continue to believe at the end of the day, the most important thing that we can do is going to focus on our execution.

Josh Baer, Software Research Analyst, Morgan Stanley: Makes sense. Before we get into enterprise, retail, international, I want to ask you about the core. Sure. U. S, SMB, mid market.

Yes. In my perspective, last quarter, there was a lot of attention on these growth markets for good reason and maybe a little less focus on the core and the flywheel market. So I wanted to ask the current state of the core business and how much more runway is left there.

Aman Narang, Co Founder and CEO, Toast: Yes. Look, the most important thing that we can do at Toast over the next decade is to make sure that we’re a market leader in U. S. Restaurants. Of course, there’s lots of other opportunities, but that is still the most important thing we have to do.

In fact, investments we have in these new businesses comes from the core. If you look at where we are, you’ve got 15% of U. S. Restaurants, maybe a little bit higher in terms of SMB restaurants. But if you look at the patterns we’re seeing, we’ve talked about this whole concept of getting to 20% sure and that drives Flywheel, that drives accelerated growth.

We still see that we’ve had more markets enter Flywheel. When markets are in flywheel, you see actually everything improves top of funnel conversion, win rate productivity. And if you just zoom out and think about why, it’s actually pretty intuitive because if you’re a restauranteur and you’ve got more proof points and data points of other restauranteur is using Toast, that social proof is really valuable, not just at like a city level, but even at a neighborhood level sometimes or a city block, you’ll see sometimes when you get more density, it really accelerates. And so, in our most penetrated markets, we’re still seeing stronger growth in the average market. And so there’s a lot of investment, a lot of focus across the business.

I know there’s energy and enthusiasm when we talk about these new TAMs because they’re exciting. But internally within the business, there’s a huge focus to make sure we continue to scale and grow in our core business. And core business teaches a lot about these new TAMs as well, right? And so we’ve got to continue to make sure that we drive towards. As I said, the most important thing that we can do over the next decade is continue to strive towards market leadership in restaurants and here in The U.

S.

Josh Baer, Software Research Analyst, Morgan Stanley: Thank you. Moving to enterprise, you mentioned Hilton and Perkins, you also want Potbelly. Yes. And so you’re seeing some traction upmarket. First, I was hoping you could unpack what product innovation and go to market changes have led you to this initial success and what’s on the roadmap around product and go to market to sort of continue unlocking that market?

Elena Gomez, CFO, Toast: Yes. I think I’ll start and feel free to chime in, of course. At the highest level, when you look at our product differentiation in the core business, it’s very relevant also in the regional and mid market and enterprise business. So if you think about what happens in the four walls of a restaurant, it’s very consistent. In terms of innovation, and actually, I’ll give you a little texture too.

When you think about our investment in enterprise, In 2019, we had invested in enterprise and COVID hit and we stopped investing, if you will, in enterprise really to get focused in the business, in the core business. And then we’ve reinvested, we brought back that investment a couple of years after COVID around 2022. Let’s say that’s when we really in earnest began to invest. And over the course of the last couple of years, we’ve invested in above store capabilities that you would expect. Things like P2PE, just given the security requirements that a lot of our enterprise customers expect of us, multi location management, menu publishing, all these things that you would imagine an enterprise operator needs when they’re running hundreds of locations.

So that’s where the investment has focused. And as we’ve grown our investment, our pipeline has also grown. So it started with winning and we had enterprise customers all along, but we started winning the likes of Marriott and Potbelly and some of these others. And so we’re starting to see an increased credibility in the market around our enterprise investment. And if I think about what do we need to invest to continue to grow, drive thru is definitely an opportunity that we see, especially if you want to get the larger QSR enterprise formats that presents an opportunity.

And there’s a kind of innovation happening around voice AI. So there’s certainly with the data we have an opportunity to continue to be successful in enterprise. The team is executing really well. And a lot of times, we’re getting pulled into deals, which is a really good sign in terms of having been in the market only a couple of years and seeing already such great traction.

Josh Baer, Software Research Analyst, Morgan Stanley: You mentioned drive through. Just wondering, are there any other roadblocks in addressing the top chains when you think about enterprise restaurant chains.

Aman Narang, Co Founder and CEO, Toast: And just maybe just to add to maybe extensibility of the platform, we continue to make sure that the infrastructure that we have, we don’t want any one customer to take over our roadmap. And so an important part of going upmarket is the extensibility that the platform offers. And what I see is if as tech is becoming more and more sophisticated, when you talk to these larger restaurant chains, they see the importance and the value of moving off of legacy on a cloud. And they don’t want to be in the business of trying to build all of this themselves. And so, I think the most important thing that we can do is to continue to invest in ways where the platform is extensible, so you can benefit from all the innovation that’s coming in from the SMB business, but it also can be customized for these upmarket larger chains.

Josh Baer, Software Research Analyst, Morgan Stanley: Perfect. I want to shift over to the international opportunity where I believe you mentioned that sales reps internationally are from a productivity standpoint are tracking ahead of location productivity versus The U. S. At a similar scale. Very impressive.

What is key to that? Are you just replicating The U. S. Playbook in these international markets? Are there nuances from country to country?

How have you adapted your go to market strategy?

Aman Narang, Co Founder and CEO, Toast: Tim’s done a phenomenal job. It’s a team that is working on our international opportunity is really passionate about going into these new markets and we’ve got a lot of R and D out of Dublin. We’ve got people out of The U. S. That have moved into these new markets to help launch these countries for us.

I think a lot of it is just we’ve been at this again for twelve years and so there’s a lot of experience, right? We’ve learned a lot along the way in terms of what does it take to scale a go to market in the customer success team. We’ve learned a lot about the platform, of course, is a lot better than it was ten years ago. So I think some of it is like, actually, you’ve talked about how not all of the platform is available yet. But if you look at the core platform of like taking orders, taking payments, getting reports and data, getting operational perspective on how employees are performing, all of like the guts of running a restaurant and the operations of a restaurant.

I think what you hear from customers internationally is that it’s a step function change versus what they were using previously. And that’s because we’ve been at this again building the core of the platform for ten plus years. In terms of go to market, I think in the markets we’re in today, we have a lot of conviction that there’s not there’s a lot of overlap between our strategy in The U. S. And internationally, like these teams that are local in market that can get to know restaurateurs, a service experience that’s again local.

But we’re also looking at, as we think beyond the cities we’re in internationally, because as you can imagine, like the number of like these bigger cities internationally, the ratio is a little bit different than in The U. S. And so we’re thinking about like what are different models that we could consider. It’s not well known, but with Toast in The U. S.

Early on, because we only had so much capital, we actually tested reseller models to get beyond the larger cities. And so we have some experience with that. And so we are exploring what are things we can do longer term, right, because we can’t be everywhere. And so are there strategies, whether it’s with e commerce or through reseller models to accelerate our growth? But again, the balance is always like we’ve got to also make sure in the markets we’re in, our execution is top notch.

And so those are the things we’re always balancing.

Josh Baer, Software Research Analyst, Morgan Stanley: And when you talk about additional cities outside those largest ones, are you still sticking to UK, Ireland and Canada? And just wondering like how you balance getting to a flywheel status in some of those markets versus expanding to some other countries?

Aman Narang, Co Founder and CEO, Toast: Yes. I think we it’s a balance because we also want to invest in some of the markets we’re not in internationally within these two countries by the way to get them going because you need to get going. But we also efficiency we had as you get to flywheel and the social proof that comes with that. So balancing those two. But the focus is first and foremost on making sure in the cities we’re in, right, the execution is top notch that we can get as quickly as possible to the level of scale where you start to see some of those flywheel elements.

And in terms of other countries, we’re always exploring and we’ve got a team again that’s looking at further out. And so there’s a team led really by R and D that’s and it’s a cross functional team that’s exploring what is the right strategy, which countries and how do we also just test and learn before we go full throttle in some of these countries. And so yes, there’s learnings happening, but the core focus is again on these in the markets that we’re in today.

Josh Baer, Software Research Analyst, Morgan Stanley: Perfect. I want to shift over to retail adjacencies. Sure. Grocery, convenience store, bottle shops. And you talked about what you saw in your initial investments making you more confident to invest more in 2025.

So things are starting out really strong in those markets. There are so many different sub segments when you think about some of those retail adjacencies. Where are you best positioned to win? Where is the Toast product a really good fit?

Aman Narang, Co Founder and CEO, Toast: Yes. First off, retail 2023 was largely about hybrid concepts. 2023, there were restaurants that had some retail component. 2024 was the first year we said we’re going to actually go after the retail opportunity across convenience stores and bottle shops and grocery stores. And we’ve seen thematically the highest level really good traction.

And that’s why we’re investing in a dedicated sales team this year going after the retail opportunity. So thematically across the TAM like we’ve seen really good early signal. And one example of that is just the productivity of the reps that are going after the retail opportunity. I think Elena mentioned earlier that the GPV per location in retail was higher than restaurants across these TAMs. And it made me go back to Toast seven, eight years ago, where it took us a while to get into the larger GPV locations in restaurants, because you can imagine if you’re in these larger restaurants, you need more social proof before you’re going to switch over.

And so we’ve seen some of the same trends in retail where we’re seeing really good success across the subcategories we’re in. But as an example, if you’re a small market or bodega or a smaller grocery operation versus your $50,000,000 grocery operation, the complexity is a little bit different, right? Like for example, you need more self checkout capability, you need the inventory needs are more sophisticated, there is the e commerce needs are more sophisticated. And so the R and D team that focuses on grocery is again looking at the TAM and saying, what is the right strategy to serve this whole TAM? And often I think GPV is a proxy for complexity.

Similarly, if you look at fuel and look at convenience stores, one of the areas we need to invest in is the fuel integrations. And so we do a great job supporting massive big set of SKUs in convenience stores, but we have to build out the fuel capability to support convenience stores. In fact, people like a product, so my system sometimes use Toast within the convenience store, even if fuel integration is not there and they manually double key in what the fuel total was. And then on the bottle shop side, there’s some regulation and rules and laws that are state specific in terms of what’s required and sort of reporting back to the states. And so we’re working through those.

And I think at the highest level, the thing that has been really positive to see is the early data because we track our pipeline. We look at like legacy and how much of the pipeline is coming from legacy operators. And you see like a lot of legacy. And I think it’s or you see some of these horizontal solutions that are not purpose built that are that actually in fact we compete against in restaurants. And so what we’re seeing is that the early customers, the biggest thing they found to be valuable is this like vertical focus, where we’re going in and not just saying here’s your restaurant product, we’re going in and saying how do we make this product work for you and that signal and as a result, the customer signal and the receptivity has been really positive.

Josh Baer, Software Research Analyst, Morgan Stanley: Excellent. So sort of rolling up U. S. Core, international, enterprise, retail, you’ve talked about a goal to serve multiples of your current customer base, which is a really big number. So can you get there through those markets that we’ve just talked about or are there other verticals or other ways to think about that TAM expansion to get there?

Aman Narang, Co Founder and CEO, Toast: Yes. If you look at the opportunity in U. S, in The U. S, First of all, yes, absolutely. I’ll start by saying absolutely, we can get there in just the markets we’re in.

And my leadership team and the Toast team knows I love numbers. I can share a little bit about how we think about it. You look at U. S. SMB in the mid market in the enterprise space and you kind of have a sense of what that TAM is.

And then you go look at the retail TAM across convenience stores and bottle stores, shops and grocery. And then you say, okay, we’re in these two or three international markets. You just add that up and you get a perspective on like what kind of market share you’d need to go to have meaningful growth for many, many years, right. This is the many multiples. Then you stack up and then you say, well, wait a minute, like in addition to SMB and mid market restaurants in international markets, you’ve got retail.

In fact, we’ve got if you go to London, you’ll see some retail locations, grocery stores using Toast already, right? Then you say, well, the enterprise changed internationally. And so if you look at the cross section of all of these, there’s actually a lot of opportunity just by looking at the intersection of some of these other segments that we’re in The U. S, taking them international, looking at more international markets over time. And then over in the long term, I do think we will explore other verticals as well.

Like I think thematically like one long term vision that we think a lot about internally, we had an internal kickoff event a couple of days ago and we talked about this, is like could Toast be the platform that powers in person commerce? And of course, there’s a lot there. And so you got to figure out how do you surgically think about the sub tens gradually over time. But that is part of the long term vision.

Josh Baer, Software Research Analyst, Morgan Stanley: Great. So put differently, it would be shortsighted to look at the $1,400,000 TAM that you’ve laid out as the endpoint, that just like we’ve seen that grow so much since IPO, you could expect to see that continue to grow significantly over time.

Aman Narang, Co Founder and CEO, Toast: Yes. Over the long term, the balance always is we’ve got to make sure we’re not as I said, we’ve got the most important thing is we’ve got to win in U. S. Restaurants. And so how we think about TAM expansion is like it’s more of a longer term vision.

Perfect.

Josh Baer, Software Research Analyst, Morgan Stanley: I want to shift and talk a little bit about payments and pricing, starting with fintech take rates. There’s the potential for, I think, fintech take rates to move higher, pricing increases, cost optimization. Ultimately, where can take rate go?

Elena Gomez, CFO, Toast: Yes. No, great question. We are very confident that over the long term, we can move take rate up. And the reason we have this confidence is if you think about the levers that we can deploy to really drive that, and this is really over the long term. Number one is cost optimization, as you said.

And if you just think about the scale that we’re at now processing over 160,000,000,000 in GPV, that’s just going to continue to grow, especially as we go after this multiple hundreds of locations. But as our scale grows, that’s just going to create natural opportunity for us to work with our partners and our ecosystem and really drive some of that cost per transaction down. And then of course, pricing, we’ve talked about being very targeted, very gradual sort of steady execution against that over time as a natural part of our playbook. And then just thinking about our innovation and how we can take our innovation and drive more digital products. Surcharging is a more recent example of that.

And then just think about embedded finance until capital is our first step into that direction that we’ve had a great program already. But you can imagine with the data we have, the visibility we have with payments that, that presents other opportunities for us over the long term. And so when I look at all of those levers over time, we feel very confident we can drive the take rate up.

Josh Baer, Software Research Analyst, Morgan Stanley: A follow-up on Toast Capital. How should we think about that opportunity? How do you size that opportunity? And for those investors who have some concerns around the capital business, considering and assessing the risk side of things, what’s the takeaway?

Elena Gomez, CFO, Toast: Yes. Great question. First of all, managing risk is front and center for that program. We have a great team that’s very focused on managing that risk. We have great visibility into the payment data, which gives us a lot of insight into the creditworthiness of our customers.

So overall, very pleased with how the team is managing the program. But also just from a customer lens, we’re presenting an opportunity and integrated part of our platform where customers can get access to capital very easy, quick, low friction. And what we’re finding is not only is it driving value, but a lot of our customers are coming back and renewing those loans. And so it’s one of our highest MPS products. So certainly very proud of the team.

And as we thought about growing the program over time, natural course of business was let’s add a let’s diversify our funding sources. And so as many of you know, we have a CRT program where we retain some of the risk. And then we also have added in 2024 forward flow losing track of time here ’25. ’20 ’5 now, yes. Forward flow was an opportunity for us to, again, diversify our funding resources.

It has different economics, very positive in both scenarios. And then within our CRT program, really pleased with the team’s ability to manage the risk, but also optimize how our underwriting process overall. So that’s what you saw drive down that debt in 2024. But over the long term, as I think about the program, it’ll be roughly contributing the same amount of basis points, 10 basis points to our take rate. And I think it’ll just grow as our business grows.

Really pleased overall with the program and the risk is managed quite well.

Josh Baer, Software Research Analyst, Morgan Stanley: Great. I want to ask about software and software ARPU. Software ARPU has been growing mid single digits and it sounds like that’s the right way to think about the range in the near term. So the question is, you’re taking some actions around packaging and pricing. You have continual innovation rolling out new products, selling more products, attaching more products, investing in this upsell team.

Like if all of that

Aman Narang, Co Founder and CEO, Toast: goes well and you execute to those initiatives, is that what’s

Josh Baer, Software Research Analyst, Morgan Stanley: needed to get to mid single execute to those initiatives, is that what’s needed to get to mid single digit growth? Or is there potential to see that reaccelerate?

Elena Gomez, CFO, Toast: Yes. It’s a great question. So first, I would start by saying our North Star is ARR, even though I know everyone focuses on locations. I view locations and ARPU both equally important as we think about the trajectory of the business over the next three, four, five years. And in 2024, we added $200,000,000 of SaaS ARR alone across those two vectors.

So that’s number one. As it relates to ARPU and growing it over time, in the near term, certainly the mid single digits is a right zone. But over the long term, we have an opportunity to continue to grow that ARPU. And so just breaking that down, some of it is this idea that we the fact that we’re not in we don’t have our attach is not at terminal attach today. So for most of our products, there’s still plenty of runway with our upsell team, with our team to grow that attach.

Second, you can imagine we’re going to continue to innovate, right? And so that will continue to drive more opportunity, more surface area for our teams to sell. And then some of the products, whether it’s team management or some of the newer products in catering, etcetera, those are opportunities really new where we still have an opportunity for our upsell team to grow and drive more penetration into our customer base.

Aman Narang, Co Founder and CEO, Toast: And

Elena Gomez, CFO, Toast: our upsell team is still relatively new, doing quite well, but there’s still more room to optimize their efficacy over time as well as we get more data. So on product attached is absolutely a way to grow. Pricing is another lever, of course, that will take slow, steady surgical movements on pricing are very targeted over time. So when you put that all together, we feel really confident over the long term we can drive our ARPU growth.

Josh Baer, Software Research Analyst, Morgan Stanley: Thank you. Aman, I want to ask you about AI, a topic that I think you have started talking more about on recent calls. You have a benchmarking tool, Sous Chef, a lot of potential around optimization. I guess the question is, one, what is your AI strategy? Two, how does the data and your positioning put you in a good position to deliver AI capabilities to customers?

And three, are restaurants ready to adopt AI?

Aman Narang, Co Founder and CEO, Toast: Yes. Before I get there, just one comment on the ARPU. And I think if you look at the Toast platform fundamentally, the reason people switch to Toast is they see it as an example, the handhelds turning tables faster or they see integrated e commerce drive digital demand. And so these new products, one of the most important things we’re getting the team focused on is what are the customer outcomes, right? Because we want to see the same flywheel with these incremental products as well.

And I think the more we focus on that, the more than the ARPU and the expansion will follow. That’s the mindset that the team is really focused on. And to your question, AI, it’s maybe I’ll share a story that one of our customers has recently signed up as a place called China Life, almost like a it’s based in San Francisco, kind of similar concept to Italy in many ways. They’ve got like a restaurant, but they’ve got food court like concepts and retail. And I was chatting with the GM and the owner and they were saying, we get so much data every day and like our team just like they gloss over it.

It’s like we don’t know what to do with it because there’s just so much data that hits them. And so the task that we have is to recognize like our restaurateurs are really busy. They’re not technologists and CIOs on like BI experts. And so how do we leverage AI to make their jobs easier by making like as an example, insights more actionable. And you look at benchmarking, for example, the reason it’s done well is because you log into the backend of Toast and it tells you some things you should consider like, hey, you’ve been kept up with inflation, here’s a menu item for your cuisine type that you could add that’s really popular, how to think about a pricing of your menu.

And so even fraud by the way. And so making it actionable and making it accessible is what’s going to unlock the usage of the platform and our customers leveraging AI, even generative AI for marketing. The reason more than half of our customers now use it is because it’s so much faster to generate these marketing campaigns in Toast using Gen AI as opposed to doing it themselves. And so the more we can stay focused on recognizing their customers are not technologists, they’re not data experts and the more we can make the platform accessible, I think that’s what’s really going to unlock, like the power of AI. And I think that the potential is so enormous because so much of how restaurants operate is so manual, even today.

Like you think of like how they’ve scheduled staff or how they go purchase inventory or food. Like there’s so many workflows that are so manual. And so, our challenge is to leverage AI, but do it in a way that is accessible and easy for our customers.

Josh Baer, Software Research Analyst, Morgan Stanley: Thank you. I want to sneak last question in on margins and investments. The EBITDA margin expansion for 2025, roughly 300 basis points is greater than sort of how you were framing it a little bit earlier before the end of the planning process. So the question is really on investments. And how do you manage all these different growth initiatives, priorities from an investment standpoint, deliver this type of margin expansion?

Elena Gomez, CFO, Toast: Yes. No, absolutely. So that’s Alman and I spent a lot of time talking about that. At the highest level, I would say our investments, as Man said earlier, we still have to invest significantly in the core business, of Aman’s priorities, deepen our penetration in the core, expand in our new verticals, of course, product differentiation and doing that in a balanced very balanced way, right, thinking about durable growth over the long term while still expanding margins along the way. That’s the principles of just how we manage.

And then just to give a little more texture on the core business, it’s everything from reps in targeted territories. It’s product differentiation. For the new TAMs, it’s rep capacity, it’s adding product expanding the product and the platform to serve those customers. And again, zooming out, when I think about the investment, a lot of that’s going to drive revenue in 2025, but a lot of it is also going to drive this growth over the long term. And so we’re constantly looking at that balance, knowing that there will always be expansion every year.

And so we’re sort of balancing the growth over the long term. But really encouraged by what we’re seeing in the market today and we’re leaning into that investment.

Josh Baer, Software Research Analyst, Morgan Stanley: Excellent. We are over time. Aman, Elena, thank you very much for all your insights.

Aman Narang, Co Founder and CEO, Toast: Thanks, Josh. Take care

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