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*Stock Advisor returns as of February 7, 2025

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. Finally, the press release can be found on the investor relations website at investors.toasttab.com. After the call, a replay will be available on our website. And with that, let me turn the call over to Aman.

Aman Narang -- Co-Founder and Chief Executive Officer

Thanks, Michael, and thank you, everybody, for joining us this afternoon. 2024 was a great year for Toast. We added a record 28,000 net locations. Our recurring gross profit streams grew 34% year over year.

Adjusted EBITDA grew to $373 million, and we were GAAP profitable for the first time in the history of the business. I'm really proud of our team, and I'm confident that we're well-positioned for a great 2025. Our mission at Toast is to help restaurants delight their guests, do what they love and thrive. From Day 1, our vertical strategy has served us well by focusing on solving the needs of restaurants better than anybody else in the world.

This has allowed us to deepen our market share and establish a leadership position across SMB and mid-market restaurants here in the U.S. More recently, we've also started to expand our addressable market into new customer segments, new geographies and new verticals. In 2024, our enterprise team had their best year yet with marquee wins, including Potbelly, Perkins, and Hilton Hotels. We continue to drive strong growth across our international markets.

And our team in food and beverage retail demonstrated in 2024 that we should invest more to grow even faster in 2025. Over the next decade, we have the opportunity to serve many multiples of our 134,000 customer locations today. Not only can we grow market share and scale locations in our four U.S. restaurant segments, we can continue to expand our TAM by building out the platform to support new geographies and new verticals across complex higher GPV merchants where we have a right to win.

Our strategy remains consistent with what we shared recently at our investor day, but we have refreshed our priorities to reflect what is most critical in 2025: first, scaling locations and market share in our core U.S. restaurant business; second, demonstrating that our new markets can be material drivers of growth; third, increasing customer adoption of our broad platform and driving differentiation through data and AI; and lastly, continue to hold a high bar and invest against our most important priorities while gradually expanding margins. All right. So let's begin.

First, scaling locations and market share in our core U.S. restaurant business. Despite our strong growth at just 15% market share in the U.S. restaurant market, we have tremendous headroom to scale.

In 2024, we increased market share and location count in all of our Top 100 markets in the SMB segment. Our most penetrated markets continue to see strong growth, which gives us confidence that our flywheel strategy is working, and we have the opportunity to scale market share in the years ahead. In 2025, we plan to surgically increase sales and marketing investments in our core business, including brand investments to increase awareness and consideration. As an example, we recently launched our It's the Little Things campaign that highlights how much the small details matter in hospitality and can be the difference between an incredible guest experience versus just an average one.

This campaign showcases the breadth and depth of our vertically integrated restaurant platform, a reason why more than a third of all James Beard award winners and over half of all Michelin Star-rated U.S. restaurants run their businesses on Toast. One of these Michelin stars belongs to Revere, a fine dining restaurant in Washington, D.C. that have seen significant time and cost savings with Toast.

Toast Payroll has cut the time it takes with their small team to do payroll from three hours down to one. And because it's integrated directly into Toast, it's also more accurate. They also use xtraCHEF to save time and inventory and identify when they're overpaying for ingredients, like when they decided to pull lobster from their menu recently after seeing the prices of lobster skyrocket. Without this data on their fingertips, their menu costs would have been overbudget.

Toast frees up the Revere team and gets them out of the back office so that they can focus on what they do best, delivering an award-winning testing menu and a great guest experience. Moving on, our second priority is demonstrating that these new markets can be material drivers of growth. In 2024, we made great progress across enterprise, international and retail, and expect to surpass 10,000 customer locations across these new segments later this year. We're investing in these businesses because customer reception and feedback had been strong, and we see the potential for them to drive significant location expansion for many years to come.

In 2025, we will invest in our R&D platform and our go-to-market capacity to drive customer satisfaction, win rates and market share across these new markets, positioning us for strong growth in 2026 and beyond. In our enterprise business, as I shared, I'm excited to announce that Hilton Hotels & Resorts has chosen to partner with Toast as an approved food and beverage kiosk provider. This builds on our growing presence in hotels, including large chains such as Marriott and Choice Hotels, as well as many independent operators who see the benefit of the Toast platform. In addition, we've also signed our largest full-service restaurant deal with Ascend Brands, starting with 500 Perkins and Huddle House restaurants.

Ascend recognized that they needed a modern cloud-based technology partner to improve operational efficiency, to help the staff drive consistently great service, and support their ambitious expansion plan. Beyond these wins, our pipeline and presence of market has never been stronger, and I look forward to welcoming more large brands to Toast later this year. Internationally, you've heard us talk about our growth and positive customer feedback in our international markets despite missing key parts of our platform that needed to be internationalized. We made progress against this throughout 2024 and most recently launched our loyalty and restaurant retail products.

SaaS ARPU for international locations that went live in Q4 2024 was up 50% year over year. And in 2025, we believe we have the necessary surface area across our platform to grow market share, expand sales capacity to have a great year. And lastly, in retail, 2024 was really a year of test and learn. We knew that the same vertically focused approach that has worked so well in restaurants would work for us in food and beverage retail.

As we brought on initial customers, we've had tremendous learnings that has helped shape our product road map and our customer-facing strategy across sales, marketing and customer success. One decision we have made is to scale a dedicated sales team to support our retail efforts to keep our restaurant team focused on increasing market share in our core market and let a specialist team go after this new opportunity. Food and beverage retail market, especially in grocery and convenience has historically been served by legacy solutions with relatively low market share across horizontal cloud-based entrants. Our vertical approach has resonated with customers because we're going deep on the challenges these customers face, including the need for a mobile inventory tool, as well as new service models to make it easier and faster to drive speed of service, manage inventory and efficiency at checkout, as well as improve the guest experience.

To bring this to life, let me share an example. Kelly's Market in Decatur, Georgia. Kelly's is a grocery meets deli meets coffee meets wine bar. And before Toast, they actually used two separate point-of-sale systems because they didn't have something that could work seamlessly across their operation.

Toast makes it possible for Kelly's to really deliver on hospitality. For example, a customer sandwich order follows them as they move from the deli counter over to grocery and then to checkout, something other POS systems struggle to do. Kelly's is also able to customize each terminal to the store so that a POS prompts to tip at the coffee bar but not at grocery checkout. And most importantly, with Toast, they're able to streamline their purchasing, receiving, and inventory workflows into a single system to save the team more than 10 hours a week.

While it is exciting to track our progress and outlook this year, I have even more conviction about what's possible over the next decade as we scale market share and expand our TAM beyond these markets we're in today. Brick-and-mortar businesses continue to be underserved by modern, easy-to-use technology, and our platform is architected to be able to expand across multiple growth vectors in parallel. Next, our third priority is to increase customer adoption of our broad platform and drive differentiation by leveraging data and AI. At Toast, we deeply understand restaurants, the people that work in them and the little things that add up to improving the lives of everyone in this business.

This is reflected in how we build our products and has fueled our location growth while also increasing attach rates and ARPU. Our aim is to help solve the hardest challenges our customers face and to do so through a tightly integrated platform that remains easy to use. That's a delicate balance that we work hard to maintain. I'll share some examples from the past year.

For front-of-house staff, we've launched dozens of enhancements to our core POS software to kiosks, as well as kitchen display systems. To help drive guest engagement and demand with large websites, branded apps, SMS marketing, powered by AI capability, and to help restaurants manage cost and complexity, we've improved reporting and multi-location management, enhanced our payroll and supplier accounting products and launched a benchmarking tool that leverages our extensive restaurant data to provide actionable insights for our customers. The benchmarking tool has been a game-changer for many of our customers, including our team at Ada, a full-service restaurant in Louisville, who have used our insights to enhance their menu, add new specials and even change their hours of operation to grow their business. For example, they noticed that chicken sales were underrepresented in restaurants near them by using this data and used that to add and market a fried chicken special on a slower night that boosted Tuesday night revenues by 40%.

That's the power of our data. The scale of our data set and our product platform, the opportunity that AI creates and our deep restaurant expertise are a strong foundation to build from as we look to the future. We also know how important guest demand and retention are and we will deepen our focus here. Our strategy is anchored in helping restaurants improve their top and bottom line, and we're confident this will translate into strong ARPU growth and win rates for Toast over the long term.

And finally, to wrap up, our fourth priority is to continue to hold high margin, high bar and invest against what's most important while gradually expanding margins. In 2024, you saw us make some tough choices and restructure our investments against what's most important. You also saw us dramatically expand margins while continuing to drive strong top-line growth. In 2025, we will continue to use the same disciplined approach and make investments very deliberately in areas we see long-term opportunity for growth and differentiation.

The Toast team does a great job of leveraging data to invest across different market horizons, which will help us continue to balance margins while doubling down in the areas where we see strong growth potential. As I wrap up, I want to thank and congratulate the Toast team for a record 2024. I also want to thank our customers and our investors for having confidence in all of us. I think, we have a strong plan for this coming year and, more importantly, have clarity on what is most important to achieve our goals over the long term.

Thank you, everybody, and next, I'll turn the call over to Elena to share more on this quarter's results and our outlook for 2025.

Elena Gomez -- Chief Financial Officer

Thank you, Aman, and to everyone for joining the call today. I also want to thank our employees for another successful quarter and to the terrific execution that delivered our record performance throughout the year. Our full year results showcased the strength of our business model in what was a transformational year for Toast. We added a record 28,000 net locations, processed approximately $160 billion in payment volume, and grew both ARR and our recurring gross profit streams 34%.

We're delivering that growth at scale. In 2024, we added over $400 million in ARR and processed over 0.5 percentage point of total U.S. GDP. On top of the strong top-line momentum, we also significantly changed the financial profile of the company, highlighting our efficient approach to scaling the business.

For the full year 2024, adjusted EBITDA was $373 million with margins expanding 20 percentage points year over year, and we posted our first full year of GAAP profitability. We entered 2025 operating with momentum and from a position of financial strength. As you heard from Aman, we see a large and growing opportunity ahead of us to serve many multiples of our customer base. Our investments in 2025 are primarily directed at accelerating progress in new markets and fortifying our strength in our core as we position the company for durable growth over the long term.

At the same time, we will take the same disciplined approach to balancing growth and profitability that you've seen from us. That balance is reflected in the midpoint of our 2025 guidance of 24% growth in our recurring gross profit stream and $520 million in adjusted EBITDA, a 30% margin. Turning to our results. In the fourth quarter, our recurring gross profit streams increased 39%, capping off a strong year of top-line growth.

Total monetization measured by our recurring gross profit streams as a percentage of GPV was 93 basis points in the fourth quarter. That is 10-basis-point -- that's a 10-basis-point improvement from prior year and reflects our growing share of wallet and the increasing value we're providing our customers. We added approximately 7,000 net locations in the quarter, growing our total locations approximately 134,000, up 26% year over year. Looking out, we are well-positioned to add a comparable number of net locations to our platform in 2025 as in 2024.

In Q4, SaaS ARR grew 32% year over year due to our strong location growth and a 5% increase in SaaS ARPU on an ARR basis. Subscription revenue increased 41% and gross profit 47%, benefiting from the improved ARR to revenue conversion we discussed last quarter, which partially includes a onetime benefit that will not recur in 2025. Our SaaS net retention rate remained in a healthy range of 110% in 2024, led by solid contributions from upsell and location expansion from existing customers. Payments ARR and fintech gross profit both increased 35% in Q4.

GPV was $42 billion, up 25% year over year with Q4 GPV per location down 1% versus the prior year. Q4 net take rate was 56 basis points with a core net take rate of 46 basis points. We typically see a quarter-over-quarter decline in payments take rate in Q4 from seasonally higher credit mix. However, Q4 payments take rate increased 1 basis point versus Q3 due to continued cloud optimization and the targeted price changes we made in September.

We're confident in the team's execution, and we'll continue to take a balanced approach to pricing, making thoughtful, targeted adjustments to complement our primary growth drivers of location additions and product attach. Nonpayment fintech solutions led by Toast Capital contributed $43 million in gross profit in Q4. For the year, Toast Capital originations exceeded $1 billion, reflecting steady healthy demand from our customers. Toast Capital bad debt was down for a full year versus 2023, even as gross profit grew over 20%.

That improvement reflects adding the forward flow model and lower default rates through optimizing our customer underwriting process. Looking ahead, we expect bad debt to grow off base as the program scales and for Toast Capital's contribution to take rate to remain in a similar range as in 2024. Moving to expenses. In Q4, operating expenses excluding bad debt and credit-related expenses increased 12%, reflecting targeted investments in our highest priority growth initiatives.

That includes expanding our retail-specific sales team and seeding new brand investments, which contributed to a 32% year-over-year increase in sales and marketing expenses. R&D grew 2% while G&A declined 12%, excluding $19 million of bad debt credit-related expenses. In 2025, our investments will directly align with the priorities Aman laid out, accelerating our progress in our new markets, continuing to drive market share gains in our core, and innovation that leverages our scale and data to further differentiate our vertical offerings. Our dollar-based payback period remain in the mid-teen months in 2024.

We manage payback on a portfolio basis and our ability to maintain a consistent level even as we increase investment in our TAM expansion areas demonstrates the strength and efficiency of our core customer group. We will continue to manage payback to mid-teens on a portfolio basis as we make long-term growth investments. Adjusted EBITDA was $111 million in the fourth quarter, and margins expanded 18 percentage points year over year to 28%. GAAP operating income was $32 million in Q4, reflecting strong operating performance and lower stock comp expense.

Through disciplined equity management, stock-based comp was 16% of recurring gross profit streams exiting 2024, and we remain on track to reach our target of low double-digit percent of recurring gross profit over the medium term. Free cash flow totaled $134 million in Q4 and $306 million for the full year. In 2025, we anticipate free cash flow to broadly mirror adjusted EBITDA for the full year and expect typical seasonality throughout the year with lower free cash flow quarter due to seasonality of our payments business and the timing of annual cash bonus payments. Moving to guidance.

In Q1, we expect total subscription and fintech gross profit growth in the 27% to 30% range and adjusted EBITDA to be $100 million to $110 million. On a full-year basis, we expect 23% to 25% growth in our recurring gross profit streams. We anticipate higher growth in the first half of the year. In the second half of the year, we will lap the improved ARR to revenue conversion and comp against related onetime benefits we saw in 2024.

On a full year adjusted EBITDA guidance of $510 million to $530 million reflects a 30% margin at the midpoint and reaches our 30% to 35% future margin target ahead of expectations. Our ability to increase investments in our new markets while expanding margins is a testament to the durability of our business model and the strength of our position in U.S. SMB and mid-market restaurants. With good signals across international, food and beverage retail and enterprise, we have confidence accelerating our investment will drive meaningful penetration over the next few years.

On top of that, we will continue to seed investments in longer-term opportunities to build our next generation of growth vectors. In all, we are positioning ourselves to deliver healthy growth in 2025, 2026, and beyond. To wrap up, we are executing across the board, growing our core, expanding our TAM and delivering leverage as we scale. Heading into 2025, we're laser-focused on sustaining our momentum and continuing to execute at a high level across those same three areas.

We're incredibly excited about what lies ahead for Toast and are well-positioned to capture the massive opportunities ahead. Now I'll turn back the call over to the operator to begin Q&A.

Questions & Answers:

Operator

Thank you. [Operator instructions] Your first question comes from Will Nance of Goldman Sachs. Your line is open.

William Nance -- Analyst

Hey, guys, I appreciate you taking the question. Congrats on a strong finish through the year. Aman, I wanted to follow up on some of the comments you made around, and I think Elena just echoed around the strong signals you're seeing in both international and retail and some of the newer initiatives. It sounded like you rejiggered a few of the strategic priorities for investment this year based on some of the feedback that you're getting.

You mentioned the retail. Wondering if you could just talk about how things are progressing versus your expectations. And there was a little bit more emphasis in the upfront commentary around servicing multiples of the current location base, and I think you also mentioned new verticals as well. And so, just wondering how kind of the thought process has changed or evolved over time around kind of the surface area that you want Toast to address over time.

Thanks.

Aman Narang -- Co-Founder and Chief Executive Officer

Yeah, I can start. Thanks, Will. First off, I just want to just reinforce that the bulk of the focus of the company is to continue to scale and be -- drive toward leadership in our core U.S. restaurant segment.

That's where we're seeing the bulk of the growth. That's where we see the bulk of investment. And I don't want to underplay that in any way. It's also, I think, at the same time, it's great to see the signals we are seeing in these new segments.

And I mentioned that we're approaching 10,000 locations this year across the segment. That's a nice milestone for the team. And it's really across all these growth segments. You look at in retail, as I mentioned in my prepared remarks, is like this was a year of test and learn.

And we're seeing the right signals in terms of unit economics and ARPU to give us confidence to say, let's go invest and build a dedicated team here against retail. On enterprise, I think, compared two or three years ago, we are seeing a much stronger pipeline. The product has come a long way, and we're starting to see more consistent wins, and I expect that really to continue this year. And then, in international, and the big focus was really expanding SaaS ARPU and we've done that.

I think, it's up 50% for go-live year over year. And so, all of that is giving us confidence to say we should invest. But again, like if you look at where we are as a company, we're still at 15% market share in the U.S. restaurant segment -- in U.S.

restaurants. And so, that still is a big focus area for us as well.

William Nance -- Analyst

Awesome. Appreciate that. And maybe Elena, just a more numerical question. I think, in the fourth quarter, I think the SaaS ARR per location came in a touch higher than what we were expecting, and I would say similar on the same-store sales number.

And so, just wondering if you have any color on sort of what you're seeing, if you can -- maybe if we're seeing some of that improvement in the international ARPU come through in the fourth quarter? And maybe what kind of the trends at a high level you're expecting in the near term, particularly around same-store sales? I know there's been some chatter around wildfires and weather and stuff in the first quarter. Any color on in terms of what you're seeing will be helpful. Thanks.

Elena Gomez -- Chief Financial Officer

Yeah, let me take the first question on SaaS ARPU. And if you zoom out and think about the scale of our ARR, a little bit of movement on revenue can have an impact on ARPU. So I would say, we are kind of in the same zone, so I feel a healthy zone, and so there's nothing specific about the quarter and just keep that scale in mind. And then, in terms of same-store sales, Q4, we saw a little bit of improvement, and so you can see GPV per location was down 1%.

And so, that was what really drove Q4. And heading into the year in Q1, obviously, the fires, the storms that hit the country and leap year, believe it or not, played a role last year that won't play a role this year. So all that combined, you'll see a bigger decline in Q1 than you saw in Q4. But generally speaking, GPV per location stays in a narrow band, and we feel no reason to believe that will be different in 2025.

William Nance -- Analyst

Awesome. Appreciate you taking the questions.

Aman Narang -- Co-Founder and Chief Executive Officer

Sure. Thanks, Will.

Operator

The next question comes from Joshua Baer of Morgan Stanley. Your line is open.

Josh Baer -- Analyst

Great. Congrats on the quarter and the strong guide. I wanted to talk a little bit more about unit economics. And it seems like by saying that your managed payback on a portfolio basis, it implies some differences in the payback periods for the different growth areas in the portfolio.

Just hoping you could unpack a little bit. Any insight into some of those differences, into customer acquisition costs or SaaS ARPU, GPV per location across enterprise, international and the retail adjacencies?

Aman Narang -- Co-Founder and Chief Executive Officer

Sure, Joshua. If you look at the retail business, I'll start there. The CAC payback is healthy today. If you look at the TAM and the GPV per unit, it -- on average, tends to be stronger than the average restaurant.

And so, that gives us confidence in where to invest, and that's really where we're investing. Internationally, it was important that we got SaaS ARPU up. That's why we focus on that because restaurants internationally tend to be a little bit smaller than in the U.S. And then, enterprise, I think it's really very deal-specific.

It just really depends on the deal. But overall, if you look at the portfolio of customers we brought on, because you're signing up hundreds of customers at a time, typically, the CAC and the unit economics there are strong. I think, one thing that Elena and the finance team do a great job of is really making sure we are managing to overall payback and overall unit economics. That's why we've been able to expand margins for the past couple of years.

But we're also looking at it on a segment basis. And I think in each of these segments, part of the reason we have confidence to invest more, whether it's in retail or international is because we're seeing the right signals in our data. We are seeing them improve and that gives us confidence to invest more. And in fact, if you look at international, our productivity of our reps internationally is actually better than what it was in the U.S.

two or three years into the business. And so, that's also giving us some confidence to lean in and invest more. Overall, long term, as we think about these growth vectors, we see these as like big -- like we see all of them as massive ARR opportunities, right, all these new TAMs over the next decade.

Josh Baer -- Analyst

That's very helpful. And just wanted to give you, Aman, the opportunity to talk a little bit about AI. We've seen some previews for some capabilities around optimizing restaurants and back office and menus and ingredients. Just wanted to see like where you are as far as products in the market and customer reception to that.

Thank you.

Aman Narang -- Co-Founder and Chief Executive Officer

Sure, Josh. We are investing. The great thing with Toast is we've got this amazing opportunity because we've got this amazing data set, right, that we're sitting on top of. And so, so far, there are a few wins we've talked about.

I mentioned benchmarking as an example. We are starting to see restaurants really use that now, whether it's on leveraging it to look at recommended menu items or inflation trends or how to price the menu or even fraud. And so, that's been, I think, a nice win where customers that are leveraging the data and making -- and our tools are making it easily accessible. Similarly in Sous Chef, it's early but we are starting to see -- it's really about helping the restaurant GMs, right, be smarter about how to leverage the data around sales and staffing and food costs again to make good decisions and, again, make that data actionable.

And then, lastly, on generative AI specifically, we've done some nice things on marketing front because, as you can imagine, restaurateurs aren't marketers, and so our platform just really makes it easy to create these compelling campaigns on email and text. And so, that's helped make those products even more valuable. And as I think about like the medium term, like this year and next year, the focus for us on AI is really, from a restaurant perspective, is really on how do we improve service. Like what are the ways in which we can make servers at the point-of-sale smarter, think of like data-driven upsells, for example? How do you make the experience more personalized at the point of transaction? If those of you that remember the show Cheers like the personalized experience, that's something we think we can create with our data.

So that's a big focus area for us. And then, over the long term, we're tracking some of the trends in voice AI and video just because there's a lot happening there in the AI space. And there's a lot of manual restaurant workflows where we think we can help.

Operator

The next question comes from David Hynes of Canaccord Genuity. Your line is open.

David Hynes -- Analyst

Hey, guys, congrats on a nice quarter and excellent 2024. Aman, another nice enterprise data point in the quarter. Maybe you could just talk a little bit about what the pipeline looks like there? And how are you thinking about positioning the product, whether it's more open, more composable? What differentiates you guys as you push up market and pursue those opportunities?

Aman Narang -- Co-Founder and Chief Executive Officer

Yeah, sure, DJ. I think, it's nice to see the momentum. I think this year, just the past couple of quarters, we saw Potbelly and Hilton and Perkins and Huddle House recently. And that's really a testament to the team and the work they've done over the past couple of years to really build out the platform.

You think of like two, three years ago, we just didn't have all the capabilities needed to go upmarket at that level of scale. And so, it's been everything from building out enterprise config management. It's like how do you manage and publish menus and all the config that exists at a corporate level down to the stores. It's about security and compliance needs.

It's things like APIs and, to your point, the composability of the product. There's a lot that's happening there. And I think that the great news is we're seeing our customers see it and see the value of it. And so, our pipeline is really, I think, never been stronger overall.

And we're committed to continue to invest in this TAM. We see the market opportunity here in the U.S. And I think every year, we should continue to make steady progress here upmarket.

David Hynes -- Analyst

Great. And then, Elena, just a follow-up for you quickly on the retail segment. I know it's very early days there, but the proof points from the early customers, like what do they look like from an ARPU contribution, a margin contribution standpoint compared to maybe your normal SMB restaurant type of customer? Just kind of help me think about the size of those customers and how they could impact the financial model.

Elena Gomez -- Chief Financial Officer

Yeah, it's a good question, DJ. It's early and so I think we're away from kind of where we ultimately settle out. But so far, what we've seen is the economics overall are really healthy. And the industry average for customers is higher than what the restaurant average is.

So that's like an early indicator that we have some potential to drive greater ARPU and GPV per location over time. But because it's so early and because there's within retail, various almost many subsegments, it's really too early for us to say where will the dust settle. But so far with the customers we see, we feel really good. And as Aman said earlier, it's one massive opportunity for us to drive ARR over the long term.

David Hynes -- Analyst

Yeah, yeah. OK. Sounds good. Thank you, guys.

Aman Narang -- Co-Founder and Chief Executive Officer

Thank you, DJ.

Operator

Your next question comes from Timothy Chiodo with UBS. Your line is open.

Timothy Chiodo -- Analyst

Great. Thank you for taking the question. I want to dig into the more medium-term outlook or growth algorithm for ARR per location. So more recently, it's been in the, call it, 4% to 5% range, mid-single digits.

And I believe the algorithm has been the new customers coming in, maybe slightly lower than total company average, partially due to land and expand, a little bit of a shift down market, maybe the international coming on at initially lower SaaS ARPU. But definitely, you mentioned the existing customers adding new modules. You just gave the new disclosure on international ARPU up 50% as you've expanded the modules there. And then, of course, there's the pricing element, which you mentioned would be something beyond 2024.

So with all those moving parts, is mid-single digit the right number that investors should consider for, call it, the medium-term or longer-term SaaS ARPU growth? Or are there other factors that you would add or subtract from that list?

Aman Narang -- Co-Founder and Chief Executive Officer

Sure, Tim. I think, in the near term, I'd say, mid-single digits is the right number. I hear you, by the way. There's lots of puts and takes as our business is getting more complex.

And if you just zoom out, like our goal is to maximize ARR, right? You think about locations, product attach and upsell and pricing and so all those variables go into it, and we very much recognize that ultimately, like the way we are going to do that is by driving toward market leadership. I think, as we think about like medium and longer term, we've talked a lot on this call about like TAM expansion. I want to just reinforce that the team is also incredibly focused on the land and expand motion. We are looking at the attach rates across the existing product portfolio.

We are looking to make those products better and better to serve the TAM, continue to improve the way that we can serve that TAM. A lot of the work we're doing on data and AI. If you think about like all the data we have across guests and employees and suppliers, we see an opportunity there. And so, over the long term, there's a huge focus there to continue to find ways to create more value for customers, which I think ultimately will translate to stronger ARPU.

But in terms of your question, I'd say, like I think the way to think about that is that in the near term, I think the mid-single digits is a reasonable way to think about it. And in the longer term, we'll come back to you.

Timothy Chiodo -- Analyst

Great. Thank you. And the super-quick follow-up is just when you say near term, just roughly, that's about what's implied in the fiscal year 2025 guide, keeping in that roughly mid-single-digit range. Is that fair?

Aman Narang -- Co-Founder and Chief Executive Officer

Yeah, that's right.

Timothy Chiodo -- Analyst

Perfect. Thank you so much.

Aman Narang -- Co-Founder and Chief Executive Officer

Thank you, Tim.

Operator

The next question comes from Dan Dolev with Mizuho. Your line is open.

Dan Dolev -- Analyst

Hey, guys, thanks for taking my question. Great results. Hopefully, I didn't miss it but it looks like the payments ARR accelerated significantly to 35%. Can you maybe unpack the change? So hopefully, you didn't address it already.

I appreciate it.

Elena Gomez -- Chief Financial Officer

Can you -- sorry, can you repeat the question, Dan?

Dan Dolev -- Analyst

Sorry about that. Yeah. It looks like the payments ARR accelerated meaningfully in Q4. I wonder if you can unpack that for us.

Elena Gomez -- Chief Financial Officer

Yeah. Thank you, Dan. So typically, what we see in Q4 because of the seasonality, right, we typically see our take rate come down in Q4, right? And as the team has done a lot of work on cost optimization, we implemented a price change in September. And so, what you're seeing in our take rate is really an increase related to that price change.

And so, that's how you should think about it. So those are the sort of the puts and takes. Obviously, there's a lot going on underneath the hood, but those are the primary things I would call out.

Dan Dolev -- Analyst

Great. Well, thanks for taking my question and a great quarter. Appreciate it.

Aman Narang -- Co-Founder and Chief Executive Officer

Thanks, Dan.

Operator

The next question comes from Samad Samana with Jefferies. Your line is open.

Samad Samana -- Analyst

Hi. Good evening. Thanks for taking my questions. Maybe first one for you, Aman.

If you think about Marriott and if you think about Potbelly, some of your larger wins, and maybe with the rollout cadence and/or the hunting cadence was for Marriott, how should we think about how that would apply to maybe the wins you called out today with Hilton and Ascend? And just what did you learn with those other big wins? And how should we apply that to what you just announced in terms of the big deals today?

Aman Narang -- Co-Founder and Chief Executive Officer

Yeah. Thanks, Samad. Look, I think not all of these enterprise wins are the same. Within the Hotel business, what's nice is a lot of the franchisees that own Marriott or Hilton or Choice Hotels is actually overlapped, and so we've got pulled into some of these deals.

And I think it gives us more upside in terms of these franchisees taking Toast across all of their brands. Across the hotel space, though, the wins have been -- you got to get the corporate location and then you've got to work with all the franchisees. Whereas in some of the other brands that we work with, there -- it's a commitment across, right, a certain number of locations with a certain rollout plan. And so, it just really depends on the deal.

And more and more, I think, especially as we go into the core restaurant segment, what we have seen more often than that is a rollout plan that's aligned on upfront as part of the win or the booking of the deal.

Samad Samana -- Analyst

Understood. And then, Elena, maybe just a follow-up for you. You called out the tougher comp created by the ARR conversion dynamic in the back half of '24. Is it fair to think about the first half growth that you're implying is the right way to think about what growth for the full year would have been, if not for that headwind in the back half? Or maybe just help us understand how much you're baking into that and what kind of the pro forma growth would have looked like?

Elena Gomez -- Chief Financial Officer

Yeah. We haven't quantified specifically, Samad, the ARR conversion. So I would -- I don't want to quantify it here. But the way to think about it is the benefit that we received in 2024 in the second half, had a bit more -- had onetime benefits we've talked about.

That will not be the case in 2025. And so, what we have today, exiting the year is kind of the visibility we have today. Obviously, we aim to do better. But that's a good proxy to look at the second half of the year.

And just knowing that where we are today, obviously, we aim to do better as we exit the year unless we get more visibility.

Samad Samana -- Analyst

Great. Congrats on the whole Toast team on a great quarter.

Aman Narang -- Co-Founder and Chief Executive Officer

Thanks so much.

Operator

Your next question is from Harshita Rawat with Bernstein. Your line is open.

Harshita Rawat -- Analyst

Hi. Good afternoon. Aman, I want to follow up on your market share gains comments in your core U.S. restaurant segment.

What are you seeing with respect to market share gains in your flywheel markets versus non-flywheel? And what percentage of your markets are now in flywheel? And just a follow-up also on international, as you're kind of getting the right signals from the international market, are you also kind of rethinking your distribution strategy abroad? Thank you.

Aman Narang -- Co-Founder and Chief Executive Officer

Yeah. Thanks, Harshita. If you look at the 28,000 net adds we had in 2024, which was a record for Toast, the bulk of the growth came from our core SMB business. And so, the way we've done that is the flywheel markets continue to perform really well.

These markets perform better than the Toast average, more markets. I don't know the exact stat in terms of how many markets in flywheel, but more markets entered flywheel again this year. And so, I think that -- the core -- the health of the core SMB business is strong. On international, was the question about, you said what's the distribution strategy?

Harshita Rawat -- Analyst

Yeah, no, I was just thinking about if you're rethinking distribution in terms of just also following a little bit more of a partnership approach internationally.

Aman Narang -- Co-Founder and Chief Executive Officer

Yeah, it's a good question, Harshita. We are exploring a few different options. I think, for us right now, the focus is in these initial markets we are in, we want to make sure we execute really well, and we have a path to the kind of success we've had in the U.S. here over the past decade.

And we're replicating largely the U.S. model because it's worked really well and we believe it's replicable. As we look beyond these markets, I think one of the factors we're looking closely at is what is the GPV per location and the ARPU potential in some of these markets? And that's really what's going to drive our distribution strategy. That's one of the variables.

Of course, the other variable we're looking at is just, what is the competitive landscape? What's the penetration of cloud? And some of the other complexities that are different by market. And so, we are using that to think through like would we ever consider a reseller strategy or would we consider a different distribution strategy through e-commerce? But we're not there yet. Really, the focus right now is to continue to scale in these existing international markets we have launched in.

Harshita Rawat -- Analyst

Thank you.

Operator

We will now take our last question from the line of Bryan Keane with Deutsche Bank. Your line is open.

Bryan Keane -- Analyst

Hi, guys, congrats on the solid results. I guess, just two questions, if I may. I guess, first question, I know you guys made some public comments in the fourth quarter at a conference. You guys were expecting more the 100 to 200 basis point of EBITDA margin expansion.

Obviously, with the guide today, suggests something quite a bit greater than that. I think, it's 260 to almost 400 or something about that. Can you just talk a little bit about kind of what's changed, I guess, from an EBITDA margin expansion from the fourth quarter to the guide?

Elena Gomez -- Chief Financial Officer

Yeah, thanks for the question. So we believe the midpoint of our guidance really reflects healthy growth and ongoing gains in profitability, I'll start there. In December, when we made those comments, we hadn't completed our planning process so we continue to refine that as we got into the year. But really, the key point we wanted to convey when we were at the conference was our margin expansion in 2025 would be significantly less than 2024, and that's because of what Aman just laid out, right? We are investing for growth, and we've seen a lot of really positive signals from these opportunities to drive margin expansion.

And so, that's really what ultimately changed is we completed our process but also we had more visibility. And so, the key point was to make sure we've set that expectation around our margin expansion.

Bryan Keane -- Analyst

No, that's helpful. And then, just as a quick follow-up on the pricing changes that started in September, how do we think about that going through 2025 and to the following years, '26 and beyond? Just how much of an impact that will have? Will it have a similar impact each year? Or is it kind of just a onetime benefit that lapse in September of this year?

Elena Gomez -- Chief Financial Officer

Yeah, it's a fair question. So the pricing you're talking about is the fintech price change we made in September. I'd zoom out and tell you to think about our primary growth algorithm for the business is driving locations and product attach, and pricing is complementary to that. And what you'll see in terms of our strategy is us make small ongoing, very gradual pricing changes across both SaaS and fintech.

That's factored into our guidance. And that's really the strategy you'll see us execute against over the next several years. So at any point in time, there will not be an outsized impact for pricing, and our guidance, obviously, reflects the strategy I just laid out.

Operator

[Operator signoff]

Duration: 0 minutes

Call participants:

Michael Senno -- Senior Vice President of Finance

Aman Narang -- Co-Founder and Chief Executive Officer

Elena Gomez -- Chief Financial Officer

William Nance -- Analyst

Will Nance -- Analyst

Josh Baer -- Analyst

Joshua Baer -- Analyst

David Hynes -- Analyst

Timothy Chiodo -- Analyst

Dan Dolev -- Analyst

Samad Samana -- Analyst

Harshita Rawat -- Analyst

Bryan Keane -- Analyst

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Toast (TOST) Q4 2024 Earnings Call Transcript was originally published by The Motley Fool