Toast Inc. Highlights Strong Growth and Raises Full-Year Outlook

Toast Inc. Reports Strong Q2 2024 Results

Toast Inc. (TOST), a leading provider of restaurant management software, has delivered impressive second-quarter results for 2024, exceeding analyst expectations and showcasing significant growth across key financial indicators. The company recorded a remarkable addition of 8,000 net new locations, resulting in a 29% year-over-year uptick in recurring gross profit.

The adjusted EBITDA reached $92 million, reflecting a robust 27% margin. Notably, the company achieved GAAP profitability ahead of its schedule. Following this strong performance in the first half of the year, Toast has updated its full-year financial projections.

Key Highlights:

• Record Growth: Toast Inc. added 8,000 net new locations in Q2, reaching a total of around 120,000.
• Increased Revenue: Recurring gross profit grew by 29% year-over-year to $344 million, with adjusted EBITDA at $92 million.
• SaaS Growth: The company reported a 35% year-over-year increase in SaaS Annual Recurring Revenue (ARR) and a 24% increase in payments ARR.
• FinTech Performance: Fintech gross profit surged by 23% in Q2, with Gross Payment Volume increasing to $40.5 billion, marking a 26% year-over-year growth.
• Updated Outlook: The full-year outlook reflects anticipated growth in fintech and subscription gross profit of 27% to 29%, and adjusted EBITDA projections of $285 million to $305 million.
• Share Buybacks: To date, the company has repurchased $49 million in shares while also executing a warrant repurchase for 5.2 million shares worth $60 million.
• Future Investments: Toast expects a slower pace of share buybacks in the second half of the year.

Company Outlook:

• Toast intends to boost investments in critical areas during the latter half of the year.
• For Q3, adjusted EBITDA is estimated to be between $70 million and $80 million.
• The company anticipates maintaining GAAP breakeven for the remainder of the year.

Challenges Faced:

• Sales Decline: GPV per location decreased by 3% in Q2, primarily due to a drop in same-store sales, though this trend was not significant across different segments.
• Churn Rate: There’s been a slight uptick in churn rate, now slightly above 10%, but the impact on ARR is expected to remain minimal.

Opportunities for Growth:

• Toast’s core U.S. small and mid-market business played a crucial role in the net additions.
• The top ten cyber markets are seeing 50% more wins compared to non-flywheel markets.
• Significant opportunities exist within the enterprise segment and retail sector for transitioning from legacy systems.
• International markets represent growth potential, with plans to enhance sales capabilities in the retail sector overseas.

Conclusion:

Toast Inc. continues to show robust performance and substantial growth potential, as demonstrated by its record numbers of new locations and an enhanced full-year outlook. The company’s strategic investments and commitment to leveraging AI for customer value, combined with its resilient platform, position it favorably for ongoing success in the dynamic restaurant management sector.