Toast sales rise 26.5% to $1.3 billion

toast (TOST 1.65%)a leading provider of cloud-based restaurant management software, reported its third quarter results on November 7, 2024. The company reported significant growth in key financial metrics, demonstrating strong execution of its strategy. Revenue rose to $1.305 billion, up 26.5% from $1.032 billion in the third quarter of 2023, although no revenue estimates were provided for comparison. The company posted a net profit of $56 million, a notable recovery from a net loss of $31 million a year earlier. Earnings per share (EPS) were $0.10 basic and $0.07 diluted. The results came in below analysts' earnings estimate of $0.138315 per share. Overall, the quarter saw significant progress and significant improvements in profitability.

Source: Quarterly analyst estimates provided by FactSet.

Understand Toast's business model

Toast is a comprehensive technology platform for the restaurant industry that includes point-of-sale (POS), payment processing and restaurant operations management. It offers a range of tools for digital ordering, delivery, marketing and financial solutions.

In recent years, Toast has focused on expanding its integrated platform to meet the diverse needs of restaurants. This strategic focus is central to its value proposition and provides coherent management across multiple operational aspects. Key success factors include increasing the number of restaurants using the platform and improving recurring revenue streams.

Q3 performance highlights and strategy

In the third quarter of 2024, Toast launched several innovative products, including a branded mobile app and SMS marketing tools that addressed key restaurant needs. These launches have helped Toast expand its market presence, as evidenced by its growth to nearly 127,000 locations, up 28% year over year.

The company's gross payment volume (GPV) reached $41.7 billion, up 24% and demonstrating strong user engagement with its payment solutions. These metrics highlight the importance of integrated solutions for Toast's customers that help improve customer retention and increase revenue.

Net income turned positive from a previous net loss of $56 million, driven by revenue growth and operational efficiency. Adjusted EBITDA also increased to $113 million, demonstrating effective cost management and scalable growth.

Despite strong domestic performance, Toast's international operations remain limited. The future presents both a challenge and an opportunity for global expansion. The company will require significant investment to repeat its success in international markets.

Looking to the Future: Financial and Strategic Outlook

For the fourth quarter of 2024, Toast forecasts non-GAAP gross profit from subscriptions and financial technology solutions between $370 million and $380 million. Adjusted EBITDA is forecast between $90 million and $100 million. These expectations underline the confidence that we will continue on the current growth path.

The full year outlook is for non-GAAP gross profit growth of 32-33%, reflecting continued expansion in market penetration and product offerings. Investors should pay attention to Toast's efforts to reduce churn rates and strategies to drive international growth in the coming quarters.