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Toast, Inc.

TOST

Wall street consensus:

Ticker:

​Recent Conference Call

Toast, Inc. Earnings Call Summary:

1. Insightful Quote:
Elena Gomez, Chief Financial Officer, captured the essence of Toast, Inc.'s strategic orientation by stating, "In 2023, we showed our ability to balance durable growth and profitability. For the year, Toast processed over $125 billion in payment volume, up 38%. ARR grew 35%. And total fintech and subscription gross profit, our recurring gross profit streams, increased 49% for the year. We are efficiently scaling the business and driving cost discipline, delivering adjusted EBITDA of $61 million, a 6% margin on our recurring gross profit stream, 22 percentage points better than 2022."

2. Key Quarterly Business Trends:
- Toast's Q4 location growth was strong, with over 6,500 new locations added, reaching approximately 106,000 locations, a 34% increase versus 2022. This indicates Toast's continued ability to penetrate and expand in its market segment, reflecting its competitive edge and appeal to diverse restaurant businesses.
- Pricing strategies emerged as an evolving aspect of Toast's business model. The company hinted at a gradual approach to adjusting prices across SaaS and fintech products, asserting its strategic leverage to sustain ARPU growth alongside location expansion.
- The company's international expansion efforts are showing encouraging early signs, with Toast reaching over 1,000 locations in international markets. This underscores Toast's ambition to replicate its successful U.S.-based business model in global markets and expand its addressable market beyond its current footprint.

3. Critical Questions from Analysts:
- **William Alfred Nance, Goldman Sachs:** Inquired about the company's pricing strategy and its impact on future growth, especially given the emphasis on gradual price adjustments.
- **Response:** Management underscored the importance of pricing as part of a broader strategic approach, focusing on gradual implementation to ensure it complements both locational growth and ARPU expansion.

- **Harshita Rawat, Bernstein:** Asked about the dynamics of fintech gross profit and net take rates.
- **Response:** CFO Elena Gomez explained there are no structural concerns affecting net take rates and anticipates improvements driven by cost optimization efforts alongside surgical pricing initiatives later in the year.

- **Unique Question - Tien-Tsin Huang, JPMorgan:** Explored how new location additions might differ from those in previous years, questioning whether they present lower GPV potentials.
- **Response:** CEO Aman Narang clarified that SMBs continue to be the primary growth driver without any significant change in the GPV profile of new locations, indicating a consistent approach to targeting high-value locations.

4. Outlook or Guidance:
Toast, Inc. expressed confidence in sustaining double-digit ARR growth and a healthy EBITDA margin through a balanced focus on location expansion, ARPU growth, and strategic investments in products and international markets. The company is on track for GAAP operating income profitability by the first half

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