Toast shares have fallen despite strong earnings and revenue, Aman Narang, Toast CEO, joins 'Money Movers' to discuss Q2 earnings, impact of tariffs, global expansion and AI.

New York

Toast reported earnings and revenue that exceeded estimates, though its shares declined following the announcement. CEO Amang Narang highlighted strong company performance, including 35% growth in recurring gross profit and surpassing $2 billion in annual recurring revenue. The company recently announced a partnership with American Express and continues to focus on helping restaurants improve profitability through its technology platform.

Narang addressed concerns about tariffs and take rate dilution, noting that hardware is a small part of Toast's business and that the company has absorbed tariff costs. Toast is expanding into new market segments, including retail and international markets such as the UK, Canada, and Australia. The CEO emphasized the importance of a vertical strategy and the use of AI to provide data and insights for restaurant customers.

Toast CEO on Q2 earnings, international expansion goals and AI usage

Welcome back. Shares of Toast are down this morning, despite the company beating earnings and revenue estimates. Stock had nearly doubled over the last year, going into the print. Toast also just announcing a new partnership with American Express this week. Joining us this morning in an exclusive interview is Toast CEO, Amang Narang. Amang, welcome back. It's good to have you. Thanks for having me, Carl. Excited to be here. Maybe we just start lining out some broad narratives that you think are important for viewers and investors to understand. Is the Amex deal a big part of that? Yeah. I think, you know, first off, really proud of the performance of the team. We had 35% recurring gross profit growth year over year, 35% margins to support that growth, record customer ads. We're passing $2 billion in ARR. One metric, we're past $200 billion in restaurant sales volume. That's nearly tripled since our IPO. And so really great progress there. Certainly the Amex partnership plays a part. But we're in this early innings at its core of this amazing global opportunity that's really driven by helping restaurants be more successful and be more profitable. That's really what's driving our growth. Are tariffs a material part of this story? And if so, how do you answer questions about them? Yeah, look, I think if you look at our business, our core business is software, hardware, payments and services. And hardware is a small component of it. You know, certainly tariffs play a smaller role, but we've been able to absorb it and not pass it on to our customers. And it has not impacted, certainly, our growth. One of the key concerns in the quarter, at least, is the take rate dilution. What do you tell the street about those issues? Yeah, look, if you look at where we are, let me first start by talking about what Toast does. Like, restaurants are a tough business. At its core, we're in the business of helping restaurants be more profitable. You know, you may have seen, as an example, our Toast handheld device, ordering and paying at the table. And we were the first ones to bring that to the U.S. And what it does is it helps restaurants turn tables faster, increases wages and tips from employees, also helps with more revenue. And we've got a platform, a commission for e-commerce that's built in, end-to-end platform around payroll and scheduling to help restaurants save time, data and insights with our AI platform to help restaurants make smarter decisions. And so a lot of it's really focused on helping restaurants be more profitable and more successful. Look, our take rates will move up and down. Like, I think as we're adding more segments, so we started off the business, the first 10 years really focused on restaurants. And over time, we've added, you know, international with UKI, Canada, Australia. We've added enterprise upmarket. We've added retail with grocery, convenience and gas stations. And so, certainly, that has some impact on our take rates. But at the end of the day, the story is really about focusing on our customers and helping them be more successful. And that's really what's driving our success. You do mention some of your – you say you have four key priorities. One of them is demonstrating that some of these new market segments can drive growth materially. Is that what you mean when you talk about some of these other categories of retail? Yeah, that's exactly right, Carl. We – you know, we – so, we grew up in restaurants. So, the first 10-plus years of the business, we were exclusively focused on the needs of restaurants. And we deeply believe that this vertical strategy, going deep on our customers, is really, really important. And that's what's allowed us to be successful in independent restaurants. And we've, over the past few years, started to expand that. So, as I said, we've expanded to enterprise. We recently launched Marriott, Hilton, Applebee's, Potbelly, Firehouse Subs. In retail now, we're doing grocery stores and convenience stores and gas stations and liquor stores. We've actually just launched Zabar's in New York City, in case you've been there. It's a complex retail operation that's powered by Toast. And then we're also launching internationally in the U.K., Canada, and Australia. And so, those are important growth factors for us. But at its core, the most important thing that we want to focus on is making sure that as we expand the opportunity of the TAM for Toast, that we're focused on the parts of the segment, the parts of the market where the Toast platform can create real value for our customers versus trying to be too broad and too horizontal. We believe the future is really vertical by going deep on the specific subsegments where we think our customers, we can help our customers. Right. How are you thinking about international expansion? And to what degree is any kind of like longer-term dollar wobble or weakness part of your calculus? Yeah. It's not material. Like, at the end of the day, like, you know, when we think about the global opportunity, we think we can more than double the opportunity in the U.S. over the long term by opening up the TAM globally. Restaurants at the end of the day, whether they're in the U.S. or whether they're internationally same, deal with some of the same challenges around labor, around demand generation, around operational efficiency. And so that's what's really what we're focused on. I think certainly, like, in the near term, some of that can have some impact. But if you zoom out and think about why we're going international, it's because we see an opportunity to take what we've done in the U.S., take that globally, both in restaurants but also in retail.

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