Release Date: November 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Toast Inc (TOST, Financial) added approximately 7,000 net locations in the third quarter, demonstrating strong growth in market presence.
- Recurring gross profit streams grew by 35% year over year, indicating robust financial performance.
- The company increased its full-year outlook based on strong third-quarter performance, showing confidence in future growth.
- Toast Inc (TOST) launched new products like a branded app and SMS marketing, enhancing its offerings and customer engagement.
- The enterprise segment saw significant wins, including a partnership with Potbelly Sandwich Works, expanding Toast Inc (TOST)'s reach in larger markets.
Negative Points
- GPV per location was down approximately 3% year over year, indicating potential challenges in transaction volume growth.
- The company faces ongoing challenges in converting ARR to revenue, with some improvements being one-time benefits.
- Toast Inc (TOST) is making targeted pricing adjustments, which may impact customer satisfaction and retention.
- The international and retail segments, while showing promise, are still in early stages and require careful monitoring of economics and contribution margins.
- Churn remains a concern, particularly among smaller restaurant clients, which could affect overall customer retention metrics.
Q & A Highlights
Q: Can you discuss the trajectory of location growth for 2025 compared to 2024?
A: Aman Narang, Co-President and CEO, stated that Toast had a strong quarter with 7,000 net location additions. The company is confident in its ability to continue driving location growth into next year, supported by strong productivity in flywheel markets and early momentum in new verticals like CBG retail and international markets.
Q: How are you approaching the upsell and cross-sell of new products like the branded app and SMS marketing?
A: Aman Narang explained that these products are additions to Toast's guest suite, aimed at driving customer loyalty and demand. The early feedback has been positive, especially among mid-market and multi-unit SMB customers. Elena Gomez, CFO, added that while it's too early to report on gross profit specifics, the company maintains a disciplined focus on unit economics and payback periods.
Q: Can you provide more details on the targeted price increases and their impact?
A: Elena Gomez noted that the price adjustments were very targeted, affecting a small cohort of customers with minimal impact in Q3 and a small benefit expected in Q4. Pricing is seen as a long-term strategy to complement growth drivers like location and ARPU.
Q: How is the enterprise pipeline developing, and what factors are helping you win in this segment?
A: Aman Narang highlighted the strong enterprise pipeline, with wins like Potbelly Sandwich Works. The company's success is attributed to go-to-market execution and investments in product capabilities that support enterprise needs, such as config management and above-store capabilities.
Q: What are the expectations for Toast Capital's growth, and how does it compare to competitors?
A: Elena Gomez stated that Toast Capital is performing well, with strong demand for its low-friction access to capital. While the program is still nascent compared to competitors like Square Capital, there's potential for growth through increased attach rates, provided it's done in a balanced, risk-adjusted manner.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
