Title

Presentation

Toast, Inc. beats earnings expectations. Reported EPS is $0.29, expectations were $0.28.

Operator: 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.

Michael Senno: Thank you. Welcome to Toast First Quarter 2026 Earnings Call. Toast’s 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 strategies 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 our 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.

Aman Narang: 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’s 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.

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Toast IQ is the foundation for our evolution from a software platform to an agent platform that can drive outcomes for our customers. And 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 one, expand what Toast has for customers, grow from a software to an agentic platform that can do work and deliver outcomes for our customers. Number two, expand the markets we serve. And number three, 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, and 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. So let’s dig in to our priorities. Number one, growth 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 parts attached at higher ARPUs. But 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 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 lived in Toast. That data has been built up over 14 years, and every new location and transaction makes it more valuable. And 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 haven’t picked up on. For instance, Toast IQ helped the 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 save thousands of dollars. The first Toast IQ agent we’ve launched is a marketing agent within to Toast IQ Grow, which brings together everything a restaurant needs to build a 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 restaurant right alongside them. The marketing agent builds and optimizes the campaign from our customers’ past performance data, their sales forecast, and soon upcoming events and weather, a full month of campaign across SMS, e-mail and social media in minutes.

Campaigns designed by the marketing agents 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 to 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 e-mail, SMS, Facebook and Instagram weeks in advance. Nearly 1/3 of sales in March were directly attributable to Toast marketing tools and sales were up more than 30% compared to the prior 4 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 0 commissions and no middleman. Restaurants use Toast Local to attract new guests and reengage 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 and experienced significantly. Toast Local now enables guests to discover and book a table at over 20,000 restaurants through Resy and Toast Tables, making it 1 of the largest reservation marketplaces.

The early traction is strong. We have more than doubled weekly app downloads in the last quarter and Toast Local is now 1 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 costs and bookkeeping and accounting to complement Toast IQ Grow. By working in concert, we will be able to look at a restaurant 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 capabilities to do this effectively today.

And moving on to priority 2, which is to expand who we serve. The vertical playbook that built our restaurant business, product depth, operational expertise and local go-to-market is not 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 our both product and brand. In product, customers are citing Toast IQ as their reason they’re choosing Toast. Our brand campaign Built for Busy extends the differentiation into the market. Built for Busy reflects the 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. And it captures our product philosophy to shift solutions and products to help customers get and stay busy.

From handheld increasing throughput to KDS, keeping the kitchen in sync and starting with the marketing agent, Toast IQ agents taking work off their plate. 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 teams, 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 that our core did at a similar time period, demonstrating our proven vertical playbook is working. In enterprise, we launched Toast for Drive-Thru, opening up 140,000 locations and we’re going deeper in hotels, bringing Preferred Hotels out of the platform. We also continue to invest in specific product features to deeply serve important sub-verticals 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. And 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 of busy restaurants. And 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 of the most demanding retail environments require. The capabilities we 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 are on a path to significantly scale the locations we serve across our existing TAM and further expand the opportunity to core adjacencies like membership and golf, more international markets and new retail verticals.

We will 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. Now 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 helps 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 percent long-term margin.

We see a clear path in materially scaling this business by going deeper in our core markets, 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 and 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 with their dedication and commitment to Toast. I want to thank our customers and investors for your continued support as well.

Thank you. And with that, I’ll turn the call over to Elena.

Elena Gomez: 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% and 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-payment 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 gross 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 moving out 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 workflows 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. And we’re further differentiating our core products, 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 and due to the timing of cash bonus payments and payment 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 and 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 we’ll 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% to 24% year-over-year and adjusted EBITDA to be $185 million to $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% to 23% and adjusted EBITDA to be $790 million to $810 million. We are positioning Toast to sustain high growth for the next 5 to 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, and 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 and 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.

Operator: [Operator Instructions]

Michael Senno: Thanks, Krista. We’ll kick off for Q&A. First question we will take from Stephen Sheldon at William Blair.

Stephen Sheldon: Maybe first here, I just wanted to — 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? And does owning those touch points with employees and servers having them 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 employee guest interaction. So I guess, how much does that — this hardware serve as a differentiated? Or are there other things like that as you think about your platform that could serve as a big way up on the AI front?

Aman Narang: Stephen, I think that’s a great question. There’s obviously lots of ways in which AI is helping us build across the platform. But I think specifically on hardware, 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. And so if you think about — like to your point about how are we leveraging AI at the table or when a server interacting with guests, there’s a few examples of things we’ve shared over the past few quarters. One example is menu upsells where the servers have visibility into what are the types of items that are most likely to increase check size. More recently, we announced digital chits, which is basically if you book a table using Toast Tables in tune with Resy, you’ll be able to get that data right on the handheld when a server is interacting with guests.

And 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 the guests order history to learn what’s most relevant for that guest, like allergy, for example. We’re also testing out things like walking in — just walk out and pay. So if you’ve got a card on file when you book a table, you don’t even have to go through the checkout experience. And so that’s another example where the server validating that the bill was paid is really important on the handheld. And so I think there’s lots of examples where the hardware and software working together, we think can create a great experience. Another example is where there’s a lot of discussion on voice AI and video AI. And with voice, of course, there’s examples like the phone, picking up the phone to automate that experience, drive through but also things like kiosks and handhelds.

Imagine walking into a restaurant and the server — and the handheld listening to the order and they were getting to the kitchen even faster. And so I think there’s lots of ideas, lots of opportunities. Another one is AI listening to the interaction to help coach SaaS better. And 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.

Michael Senno: We’re going to — we’ll move to our next question, Samad Samana from Jefferies.

Samad Samana: I wanted to ask on Toast IQ. And obviously, there’s a lot of focus on AI. And as you think more about monetization and 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 aligned 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 kind of as well aligned for maybe the restaurants out there. So 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?

Aman Narang: Hey, Samad. Good question. We’re actively exploring not just the capabilities from an AI standpoint in Toast IQ, but also the pricing model. So I think it’s topical for us and timely. I’d say, first and foremost, like what’s exciting to see with Toast IQ is we have gotten now 40,000 customers that are weekly active customers using the platform. That was the first step. It was obviously critical to get usage up. And what we’ve heard from customers is it’s actually useful. Like looking at 1 of the common use cases that I hear is being able to generate custom views on data versus just getting pre-canned reports. But another area that was a bit of surprise was analyzing fraud and theft and getting visibility into what’s going on there.

And then, of course, making changes to the back end of the Toast, getting support more broadly with the chatbot. So I think there’s been lots of ways in which Toast IQ is adding value for our customers. I shared the example on 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 — and there are some examples of us also like some products like growth for software and hardware as well as part of the platform. But the biggest opportunity that I see right now is if you talk to our customers, one 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.” And so especially for these busy operators, often they’re going to go outsource things like marketing, things like running their back office, payroll and tax or accounting and bookkeeping.

And for a lot of these functions, the data that is necessary to do marketing is actually coming from Toast. And so that’s actually the key reason why Toast IQ Grow has seen such really good early signal where we’re optimizing the 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. And I think from a pricing and monetization standpoint, that’s what’s most important. Because as we take on some of this work, — 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. And as we can take on the work I think that’s really the opportunity for monetization long term.

But we’re looking at usage-based to your question as a pricing model as well.

Michael Senno: Thanks, Samad. We’ll take our next question from Josh Baer at Morgan Stanley.

Josh Baer: Great. Nice quarter. You highlighted 40% of the support interactions resolved by AI. And then on the engineering side, the velocity up by more than 60%. So seeing a lot of efficiency there. I guess the messaging is you’re reinvesting into growth areas while still trending upward towards those long-term margin targets. How — can you talk a little bit about how you make that decision, the growth versus margin decision? And 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.

Elena Gomez: Thanks, Josh, for the question. I’ll take that. Yes. Look, I think, first of all, I do believe — we believe that AI is absolutely going to change the way we work. And we’re already seeing, as Aman said, efficiencies in our support organization, efficiencies really across the company, but it’s — we’re still continuing to roll out. So we want to be balanced with how we think about those benefits. But just zooming out and 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 we 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. And the decisions we make to invest typically are customer signal, rep productivity. We talk to our customers all the time. And so we’re looking at signals across all of the businesses to make sure that we’re excellent stewards of capital always. And so that’s how we think about it. And then opportunistically, we’ll continue to look at like, for example, we’ve repurchased shares, et cetera. So 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. And you’ve seen us make a lot of progress in the GAAP profitability as well.

Michael Senno: We’ll turn to our next question from DJ Hynes at Canaccord.

David Hynes: Elena, I was hoping you could touch on enterprise across 2 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? And then 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?

Elena Gomez: Yes. Look, I’ll start and Aman, you can jump in as well. As — first of all, we’ve been on this journey with enterprise. It’s a multiyear journey. Let me just start there. And 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 — like I said, you’ve seen us add more customers. And now with Drive-Thru, that opens up the opportunity even further. And so really excited about that offering. And the team is executing quite well across the enterprise TAM.

David Hynes: Yes, I think, Elena, you hit it. I mean there’s one stat I’ll share is in Q1 ’26 alone, we booked more locations than we had total customers in ’23. And so I think that momentum has not slowed down across both hotels, full-serve restaurants and Drive-Thru obviously, we just launched, but there’s good customer signal there as well. And we’re confident in our ability to hit the plans we set out to start the year.

Michael Senno: We’ll take our next question from Dominic Ball at Rothschild.

Dominic Ball: 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. So they have a bundled offering, strong distribution channel. As this like delivery platform transition from a partner to a peer. Toast is the best POS system there is. So how do you really get Toast Local to be a real peer to DoorDash? And is there any other competitive responses available to Toast?

Aman Narang: Yes. Dominic, I think first off, like we — whether it’s DoorDash or 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 hasn’t changed. I think we were the first ones in the space to build a deep vertical platform for restaurants. That’s really what has allowed us to grow and succeed and get to 20%-plus share in the market. We continue to see the same signals in terms of the growth and the potential that we have. And I think the way we’re going to do that is by doing the same thing we did to start the business, which is to focus exclusively on — focus on the needs of our customers.

And so 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. And so 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 launching — we’re leaning into Local is based on, 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. And so the reason we brought in Resy inventory to combine with Toast Tables is now we’ve got 1 of the best inventory of restaurants to book tables on. And we think we can do some really unique things with that experience where, one, when you book a table and a card on file, you can make the experience to check out much better.

You can personalize the experience at the table based upon the guests order history in Toast. And 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 to again drive demand incrementally. And so it’s our focus on Local has really been about helping restaurants get more people in the door. And it’s been — One of the stats that I think is exciting, I’ll share it apps download, I think I shared this on the call as well, are up 2x. Weekly app downloads are up 2x just the last quarter. And you can see the rankings go up in the app stores, food and drink category. And so I think really good early momentum, very much focused on bringing restaurants demand in store at a great value.

Michael Senno: We’ll take our next question from Tim Chiodo at UBS.

Timothy Chiodo: Great. Thank you. So a topic that I know a lot of investors would like to get a little bit more comfort with particularly into 2027, it’s the hardware topic, right? So you previously said for 2026, it’s about 150 basis points impact to EBITDA margins. I know earlier today, you mentioned some impact on free cash flow conversion as you build inventory. But I know this is a challenging topic and it’s challenging to forecast. But 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?

Elena Gomez: Yes, Tim, it’s a very relevant question. Thanks. So definitely, like you said, it’s a very fluid environment. I think a couple of things that I’ll just comment on. One is, it’s really important to us to not have any customer disruption, and that’s a principle that we’re operating in. So to that end, we’ve increased inventory levels to secure the supply into ’27. And of course, we’ll remain opportunistic to add supply if it makes sense. But at the highest level, I have no concern about our ability to meet our growth. So that’s number one. Number two, the impact to the ’27 P&L will be larger than the impact to ’26. But as I say that, there’s something you really should understand is, one, we’re going to manage the margins in ’26 and ’27 as you’ve seen us manage it today.

So we’re going to have healthy margins in both ’26 and ’27 So 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. And as I said earlier, we’re committed to that long-term margin profile that we’ve talked about. So 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.

Michael Senno: We’ll take our next question from Andrew Bauch at BMO.

Andrew Bauch: I wanted to touch upon the international progress. 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 we’re now a couple of years into this push?

Aman Narang: Andrew, overall, really proud of the team’s progress. We are — continue to grow. The international business grew healthy clip last year, both in terms of locations as well as on ARPU. We recently launched our Toast Go 3 handheld internationally, which is 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 already. But where we’ve seen the most success is these Tier 1 cities. Think anout like in the Canada, Vancouver or Toronto or in the U.K. London or in Australia, we are sensing really good early signal in Sydney and Melbourne. And the reason is these cities have the most 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.

And so I think one of the things we’ve done is just leaning further into more of a Tier 1 city strategy, I’d say. And so certainly, we’ll continue to grow outside of these cities and in these countries we’re in. But as we open up more countries, it may look more like a Tier 1 city strategy versus going fully deep in every country. And so that’s something that we’re contemplating and looking at as we head into the back half of this year.

Andrew Bauch: Yes, it would be great to see London as a flywheel market.

Aman Narang: Couldn’t agree more. Absolutely. That’s what we’re working on.

Michael Senno: Thanks, Andrew. Okay. We’re going to take our last question from Rayna Kumar at Oppenheimer.

Rayna Kumar: 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.

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

Michael Senno: That concludes our conference call today. I want to thank everyone for joining and have a good rest of the night.

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