Financial Data and Key Metrics Changes - In Q1 2025, the company added over 6,000 net locations, with total locations reaching approximately 40,000, a 25% year-over-year increase [6][22] - Recurring gross profit streams grew 37% year-over-year, with adjusted EBITDA increasing to $133 million and GAAP operating income at $43 million [6][22] - Annual Recurring Revenue (ARR) grew 31%, with SaaS ARR increasing by 32% year-over-year [22][24] - Total gross payment volume (GPV) was $42 billion, growing 22% year-over-year, although GPV per location decreased by 3% [26] Business Line Data and Key Metrics Changes - Subscription revenue increased by 38%, and gross profit grew by 45%, benefiting from improved ARR to revenue conversion [24][25] - Payments ARR grew 31%, while fintech gross profit increased by 32% in Q1 [26] - Non-payment fintech solutions, particularly Toast Capital, contributed $47 million in gross profit, with solid growth in originations [27] Market Data and Key Metrics Changes - The company is deepening its penetration in the core U.S. market while also expanding into new geographies and verticals [7][22] - International markets are expected to cross 10,000 locations in 2025, with strong momentum in customer adoption [13][16] - Customer sentiment remains strong, with the average gross profit per location in international markets being higher than industry averages [59] Company Strategy and Development Direction - The company aims to scale locations and market share in the U.S. restaurant business while demonstrating that new markets can drive material growth [8][12] - Focus on increasing customer adoption of the platform and driving differentiation through data and AI [16][18] - The company plans to continue investing in high-priority areas while gradually expanding margins [19][30] Management's Comments on Operating Environment and Future Outlook - Management remains confident in navigating the macro environment, with stable consumer trends observed [22][43] - The company has raised its full-year outlook based on strong Q1 performance and anticipates record net adds in Q2 [8][30] - Management is prepared to manage costs effectively in the event of a recession while continuing to invest in growth [72][73] Other Important Information - The company repurchased $17 million in shares in Q1 and expects free cash flow to broadly mirror adjusted EBITDA for the full year [29][30] - The company is focused on building an AI-first culture to enhance customer impact and drive future monetization [57][92] Q&A Session Summary Question: Can you discuss the payback periods on large enterprise wins like Applebee's? - Management expressed excitement about the Applebee's deal, noting that payback periods for enterprise deals are attractive due to large ARR booked [33][36] Question: How is the macro environment affecting same-store sales and new business formation? - Management indicated that same-store sales remain stable and new business formations are also stable, contributing to confidence in future net adds [42][43] Question: What is the strategy regarding pricing in the current macro environment? - Management emphasized a balanced approach to pricing, focusing on ARR growth while being mindful of customer needs during economic fluctuations [47][48] Question: Can you provide an update on the rollout of AI solutions like Sous Chef and Toast IQ? - Management stated that it is early in the rollout process, but they are focused on driving customer impact and expect monetization to follow over time [51][57] Question: How is the company managing costs in light of potential tariff impacts? - Management noted that incremental costs from tariffs are manageable and that they have diversified their supply chain to mitigate risks [110][112] Question: What is the outlook for location growth and market share? - Management indicated that the core business continues to drive the majority of growth, with new segments expected to contribute more over time [115][102]

Toast Announces First Quarter 2025 Financial Results Booked Applebee's, Toast's largest deal in company history Added over 6,000 net new Locations in first quarter 2025 Annualized recurring run-rate (ARR) as of March 31, 2025 grew 31% to $1.7 billion Net income was $56 million and Adjusted EBITDA was $133 million in first quarter For the full year ending December 31, 2025, Toast expects to report: Toast considers Non-GAAP subscription services and financial technology solutions gross profit to be its recurr ...

Core Viewpoint - Toast Inc. is expected to report a significant revenue increase of 24.7% year-over-year, with a consensus estimate of $1.34 billion for Q1 2025 earnings, alongside a projected non-GAAP earnings per share of 19 cents, recovering from a loss of 5 cents per share in the same quarter last year [1][2]. Group 1: Financial Performance - The Zacks Consensus Estimate for revenues is pegged at $1.34 billion, indicating an increase of 24.7% from a year ago [1]. - TOST's earnings have beaten the Zacks Consensus Estimate in three of the last four quarters, with an average surprise of 197.4% [2]. - The company expects adjusted EBITDA between $100 million and $110 million, with gross profit projected to grow between 27% to 30% for the quarter [2]. Group 2: Strategic Initiatives - Toast's strategy focuses on enhancing restaurant revenues and profits, aiming for long-term growth in average revenue per user (ARPU) and higher win rates [3]. - The company is prioritizing market share growth in the U.S. restaurant industry, expanding into new regions, and leveraging data and AI to boost platform usage while maintaining disciplined investments [4]. - Toast has launched ToastIQ, an AI-powered engine designed to improve restaurant operations through smart prompts and automated workflows, utilizing data from over 130,000 locations [9]. Group 3: Partnerships and Market Presence - Toast has secured significant partnerships, including being chosen as an approved POS provider by Hilton Hotels & Resorts and a major deal with Ascent Brands for 500 locations [5]. - The partnership with Dine Brands Global, Inc. aims to modernize Applebee's locations across the U.S., showcasing Toast's growing presence in the enterprise space [10]. Group 4: Operational Enhancements - The company has rolled out updates for front-of-house staff, including improvements to POS systems, kiosks, and kitchen displays, as well as new tools for guest engagement and cost management [6]. - Toast is focused on addressing customer challenges with a user-friendly platform, enhancing reporting, payroll, and accounting tools [6]. Group 5: Challenges and Market Conditions - Weather and macroeconomic factors may have impacted gross payment volume (GPV) per location in Q1, alongside increased competition internationally and risks in executing enterprise rollouts [7]. - Increased spending on growth priorities, such as expanding the retail sales team and launching new marketing efforts, may have negatively affected profit margins [7].

Investment Thesis Toast is, in my opinion, straightforward: The company enjoys strong moats that protect it from the existing competition, the Switching Costs moat, and the Network Effect moat. While enjoying the protection of its moat, Toast is still in its growth phase, with few main catalysts, namely the international expansion segments and vertical expansion launching new products. When pricing Toast to its median multiple within its comparable segments (Software and FinTech), Toast appears to be underv ...

Toast Inc. (TOST) recently partnered with Dine Brands Global, Inc. (DIN) , the parent company of iconic American restaurant chains like Applebee’s Neighborhood Grill + Bar, IHOP, and Fuzzy’s Taco Shop, for a nationwide technology rollout of Toast at Applebee’s locations across the United States. The initiative aims to modernize one of America’s most recognizable casual dining restaurants.The comprehensive rollout includes several industry-leading components from the Toast platform, such as Toast point-of-sa ...

Core Insights - Toast, Inc. (TOST) went public in 2021 at a high valuation, but despite significant growth, its stock remains below all-time highs, indicating a disconnect between stock performance and business fundamentals [1]. Company Overview - Toast, Inc. is a payments processing company that has shown impressive growth in recent years, yet its stock price has not reflected this growth trajectory [1]. Investment Strategy - The investment strategy focuses on identifying companies with high potential for revenue and earnings growth that are not fully recognized in current market prices. The preference is for companies that are less cyclical and exhibit higher growth [1]. Market Position - The company is positioned in the U.S. market, which is favored for investment due to its growth potential [1].

Group 1 - Toast (NYSE: TOST) appears overvalued both absolutely and relatively [1] - Companies with strong free cash flow generation, shareholder-friendly policies, independence from third-party product innovation, and significant growth opportunities are rarely overvalued [1] - The analysis emphasizes a long-term buy-and-hold strategy, particularly focused on technology stocks [1]

Core Viewpoint - The investment sentiment towards U.S. companies has been cautious due to extremely high valuations and a resurgence of appetite for risky investments following market downturns [1]. Group 1 - The earnings multiples for U.S. companies have significantly increased, indicating a potential overvaluation in the market [1]. - There is a noted shift in investor behavior, with a renewed interest in high-risk investments after a period of market decline [1].

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Core Viewpoint - Toast Inc. (TOST) has experienced a significant decline in stock price, dropping 16.8% over the past month, which is worse than the broader market and its industry peers [1][2]. Group 1: Market Context and Challenges - The decline in TOST's stock is attributed to broader market weaknesses and negative investor sentiment due to escalating trade war concerns, particularly the increase in tariffs to 25% on imports from China, Canada, and Mexico [3]. - The National Restaurant Association has indicated that the 25% tariff hike could lead to a 30% profit loss for average independent restaurant operators, potentially costing the restaurant industry up to $12.1 billion [4]. - TOST is facing customer churn among smaller restaurant clients, which poses a risk to its business [4][5]. Group 2: Business Strategy and Growth - In response to macroeconomic pressures, TOST is shifting its focus towards enterprise restaurants and expanding into new markets, including the convenience store sector [6][7]. - The company has added 7,000 locations in Q4 2024, reaching a total of 134,000 locations, reflecting a 26% year-over-year growth [7]. - TOST's annual recurring revenues are increasing due to a larger share of repeat customers, driven by its suite-based packaging model that encourages broader platform adoption [8]. Group 3: Innovation and Future Prospects - TOST is enhancing its offerings with AI-powered marketing suites and restaurant management systems, which are expected to improve guest experience and operational efficiency [9]. - The Zacks Consensus Estimate for TOST's 2025 revenues is $6.07 billion, indicating a growth of 22.3% year-over-year, while earnings are expected to reach 92 cents per share, reflecting a staggering growth of 2,966.7% year-over-year [10]. - TOST has consistently beaten earnings estimates in three of the last four quarters, with an average surprise of 197.4% [10]. Group 4: Valuation and Investment Recommendation - The recent decline in TOST's stock price has resulted in attractive valuations, with a forward 12-month price-to-sales (P/S) ratio of 2.62, significantly lower than the industry average of 5.70 [11]. - Despite facing near-term challenges, TOST's long-term prospects remain positive due to its growth in location additions and ongoing innovations [13]. - The recommendation is to hold TOST stock for now, given its attractive valuation and potential for future growth [14].