Toast (TOST) Q3 2024 earnings summary

Executive summary

• Added 7,000 net new locations in Q3 2024, reaching nearly 127,000 total, a 28% year-over-year increase, with strong momentum in core US, retail, international, and enterprise segments.

• Recurring gross profit streams rose 35% year over year, with Adjusted EBITDA of $113 million and GAAP operating income of $34 million.

• Revenue for Q3 2024 rose 26% year-over-year to $1.31B, driven by subscription and fintech solutions.

• Net income for Q3 2024 was $56 million, a turnaround from a net loss of $31 million in Q3 2023.

• Strategic focus remains on scaling locations, expanding product offerings, entering new adjacencies, and driving operating leverage.

Financial highlights

• ARR increased 28% year over year to $1.6 billion; SaaS ARR grew 33%, with a 4% increase in SaaS RPU on an ARR basis.

• Subscription revenue rose 44% year over year to $189 million, with part of the increase due to a one-time benefit.

• Payments ARR grew 23%, fintech gross profit up 27%, and GPV reached $41.7 billion, up 24% year over year.

• Free cash flow for Q3 2024 was $97 million, up from $37 million in Q3 2023; nine-month free cash flow was $172 million.

• Cash and marketable securities totaled $1.27 billion as of September 30, 2024.

Outlook and guidance

• Q4 2024 non-GAAP subscription and fintech gross profit expected between $370 million and $380 million (32-35% growth year-over-year); Adjusted EBITDA projected at $90-$100 million.

• Full-year 2024 non-GAAP subscription and fintech gross profit expected between $1,395 million and $1,405 million (32-33% growth); Adjusted EBITDA guidance raised to $352-$362 million, with a 26% margin at midpoint.

• Sequential decline in Q4 Adjusted EBITDA and margin expected due to seasonality and planned reinvestments.

• Management expects seasonality to continue impacting fintech solutions revenue, with stronger results in Q2 and Q3.

• Existing cash, equivalents, and credit facility expected to meet working capital needs for at least the next 12 months.