Toast (TOST) Q3 2024 earnings summary

Executive summary

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

• Recurring gross profit streams grew 35% year-over-year; Adjusted EBITDA reached $113 million with a 30% margin; GAAP operating income was $34 million; net income was $56 million, a turnaround from a net loss of $31 million in Q3 2023.

• Revenue for Q3 2024 rose 26% year-over-year to $1.31 billion, driven by growth in subscription and financial technology solutions.

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

• Launched new products including Branded Mobile App and SMS Marketing, and implemented over a dozen feature updates.

Financial highlights

• ARR increased 28% year-over-year to $1.6 billion; SaaS ARR grew 33%; subscription revenue rose 44% year-over-year, with part of the increase due to a one-time benefit.

• Payments ARR up 23%; fintech gross profit increased 27%; GPV was $41.7 billion, up 24% year-over-year; net take rate was 56 bps.

• GAAP subscription services and financial technology solutions gross profit rose 35% year-over-year to $365 million; Non-GAAP equivalent reached $378 million.

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

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

Outlook and guidance

• Q4 2024 guidance: 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 guidance: 32%-33% growth in fintech and subscription gross profit, Adjusted EBITDA of $352-$362 million, and a 26% margin at midpoint.

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

• Focus on balancing growth with modest margin expansion, targeting 30%-35% medium-term margin.

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