Toast (TOST) has been one of the most searched-for stocks on Zacks.com lately. So, you might want to look at some of the facts that could shape the stock's performance in the near term. Shares of this restaurant software provider have returned +6.2% over the past month versus the Zacks S&P 500 composite's +3.4% change. The Zacks Internet - Software industry, to which Toast belongs, has gained 7.1% over this period. Now the key question is: Where could the stock be headed in the near term? While media releas ...

standret/iStock via Getty Images Right now, despite the euphoric mood in the stock markets, most investors are bracing for a potential U.S. recession in the back half of the year. Companies like Yelp (YELP) have already warned that the retail and restaurant space is slowing down, which is a clear leading indicator of the U.S. consumer pinching budgets. Yet against this backdrop, point-of-sale technology company Toast (NYSE:TOST) has never looked healthier. On top of achieving stellar revenue and ARR growth ...

Toast (TOST) has recently been on Zacks.com's list of the most searched stocks. Therefore, you might want to consider some of the key factors that could influence the stock's performance in the near future. Over the past month, shares of this restaurant software provider have returned -2.4%, compared to the Zacks S&P 500 composite's +2.2% change. During this period, the Zacks Internet - Software industry, which Toast falls in, has gained 7.2%. The key question now is: What could be the stock's future direct ...

Here's why the stock has a lot of potential upside. Toast (TOST 0.98%) unexpectedly turned a profit in the second quarter, but its shares were still unable to gain any traction following its strong results and increased guidance. Shares of the cloud-based restaurant management software company are up over 25% year to date, but well off its recent highs. Let's look at the company's most recent quarterly results, future prospects, and valuation to see if this is a good time to buy the beaten-down stock. Incre ...

Toast Inc (TOST) closed 6.1% lower at $22.71 last session, even after the fintech company's second-quarter earnings and revenue exceeded estimates. Anytime there's a top-line beat but the stock moves lower, its worth a closer look under the hood to see if there's a 'buy the dip' opportunity. The stock is down 13.1% already in August, but could soon stage a bounce after encountering a historically bullish trendline. The stock is within one standard deviation of its 126-day moving average, after trading above ...

Financial Data and Key Metrics Changes - The company reported a 29% year-over-year increase in recurring gross profit streams, totaling $344 million [16][17] - Adjusted EBITDA reached $92 million, representing a 27% margin on recurring gross profit streams, with GAAP profitability achieved earlier than expected [16][17] - Total locations increased to approximately 120,000, up 29% year-over-year, with a record addition of 8,000 net locations in Q2 [16][17] Business Line Data and Key Metrics Changes - SaaS ARR grew 35% year-over-year, driven by strong location growth and a mid-single-digit increase in SaaS ARPU [17] - Payments ARR grew 24%, while fintech gross profit increased by 23% in Q2 [17] - The net take rate was 54 basis points, with the core net take rate remaining flat year-over-year at 45 basis points [18] Market Data and Key Metrics Changes - The company added approximately 8,000 net locations primarily in the U.S. SMB and mid-market segments, with contributions from international, enterprise, and food and beverage retail [17] - Internationally, the company has 2,000 live locations, with strong adoption of new products like online ordering and kiosks [12][17] Company Strategy and Development Direction - The company aims to scale locations and market share in its core business, expand offerings for restaurants, and enter new market segments [7][8] - Strategic priorities include delivering ongoing operating leverage and investing in growth areas while maintaining disciplined capital allocation [14][19] - The company is focused on leveraging AI and data to enhance customer offerings and drive demand [50] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to manage through various economic cycles, noting resilience in restaurant performance [25] - The guidance for Q3 includes expectations for total subscription and fintech gross profit growth of 23% to 27% year-over-year [23] - Management remains optimistic about sustaining high growth and margin expansion over the long term [24] Other Important Information - The company has repurchased $49 million in shares year-to-date and plans to continue opportunistic buybacks [22] - Free cash flow totaled $108 million in Q2, driven by strong adjusted EBITDA and favorable working capital [21] Q&A Session Summary Question: Changes in restaurant health and macro observations - Management noted that GPV per location was down 3% and remains consistent, with confidence in managing through economic cycles [25] Question: Subscription ARR and product resonance - Management highlighted strong performance across various product offerings, including data and AI tools, which are resonating well with customers [27] Question: Incremental investments and market opportunities - Management confirmed that the mix of new restaurant openings and competitive takeaways remains stable, with continued healthy unit economics [30] Question: Legacy replacement opportunities in various markets - Management identified enterprise and retail segments as having significant legacy replacement opportunities, similar to the restaurant business a decade ago [32] Question: Upsell team progress and guidance clarification - Management acknowledged the upsell team's progress and emphasized the importance of driving ARPU growth alongside location growth [34] Question: Contribution from new areas like food and beverage retail - Management reported strong growth in international and retail segments, with ongoing investments to expand the platform [40] Question: GPV per location trends and impacts - Management indicated that the primary driver for the decline in GPV per location is same-store sales, with no notable patterns across segments [44] Question: Investments needed in food and beverage retail and international - Management described the early stages of development in these new verticals, with positive customer reception and ongoing investments [48] Question: Customer interest in AI initiatives - Management noted early positive feedback on AI initiatives, particularly in guest marketing and data utilization for restaurant operations [50] Question: Gross retention expectations and churn metrics - Management reported churn slightly above 10% annually, primarily due to business closures, with no material changes in retention assumptions [53]

Toast (TOST) came out with quarterly earnings of $0.02 per share, beating the Zacks Consensus Estimate of a loss of $0.02 per share. This compares to loss of $0.19 per share a year ago. These figures are adjusted for nonrecurring items. This quarterly report represents an earnings surprise of 200%. A quarter ago, it was expected that this restaurant software provider would post a loss of $0.16 per share when it actually produced a loss of $0.15, delivering a surprise of 6.25%. Over the last four quarters, t ...

Financial Performance - Total revenue for the three months ended June 30, 2024, was $1,242 million, a 27% increase from $978 million in the same period of 2023[76] - Subscription services revenue increased by 37% to $166 million for the three months ended June 30, 2024, compared to $121 million in the prior year[76] - Financial technology solutions revenue grew by 27% to $1,023 million for the three months ended June 30, 2024, up from $808 million in the same period of 2023[76] - Annualized Recurring Run-Rate (ARR) reached $1,473 million, reflecting a 29% increase from $1,140 million in the previous year[71] - For the three months ended June 30, 2024, the company reported a net income of $14 million, compared to a net loss of $98 million for the same period in 2023[91] - Adjusted EBITDA for the six months ended June 30, 2024, was $148 million, a significant increase from a loss of $3 million in the same period in 2023[91] - Financial technology solutions revenue for the six months ended June 30, 2024, reached $1,896 million, compared to $1,482 million for the same period in 2023, marking a 28% increase[93] - The company achieved a gross profit of $330 million from Subscription Services and Financial Technology Solutions for the three months ended June 30, 2024, compared to $259 million in the same period in 2023, reflecting a 27% increase[95] Costs and Expenses - Total costs of revenue for the three months ended June 30, 2024, were $956 million, a 24% increase from $770 million in the same period of 2023[78] - Sales and marketing expenses increased by 15% to $115 million for the three months ended June 30, 2024, compared to $100 million in the prior year[81] - Research and development expenses decreased by 5% to $87 million for the three months ended June 30, 2024, down from $92 million in the same period of 2023[82] - General and administrative expenses decreased by 22% to $75 million for the three months ended June 30, 2024, compared to $96 million in the same period of 2023[83] Cash Flow and Liquidity - Free cash flow for the six months ended June 30, 2024, was $75 million, a turnaround from a negative cash flow of $(26) million in the same period in 2023[97] - As of June 30, 2024, the company had cash and cash equivalents of $691 million, an increase from $605 million as of December 31, 2023[98] - The company has a share repurchase program authorized for up to $250 million, with $36 million spent to repurchase 1 million shares during the six months ended June 30, 2024[105] - The total available funds under the senior secured credit facility remained at $330 million as of June 30, 2024, with no amounts drawn or outstanding[104] - The company believes that existing cash and cash equivalents, along with available borrowing capacity, will be sufficient to meet working capital needs for at least the next 12 months[107] Market and Risk Factors - The company is exposed to financial market risks, including changes in interest rates and foreign currency exchange rates, with no material changes in market and credit risk since the last annual report[108] Shareholder Information - As of June 30, 2024, the total fully diluted share count was 635 million, including 560 million Class A and B common stock, 36 million options, 28 million unvested restricted stock units, 7 million warrants, and 4 million shares reserved for charitable donations[106] Other Financial Metrics - Interest income increased by 11% to $10 million for the three months ended June 30, 2024, compared to the previous year[85] - The change in fair value of warrant liability for the three months ended June 30, 2024, was a gain of $1 million, compared to a loss of $26 million in the same period in 2023[91] - As of June 30, 2024, Toast has approximately 120,000 Locations, a 29% year-over-year increase, processing approximately $143 billion in gross payment volume (GPV) over the trailing 12 months[67]

Financial Performance - GAAP operating income was $5 million in Q2 2024, compared to a GAAP operating loss of $(80) million in Q2 2023[1][2] - Net income was $14 million in Q2 2024, compared to a net loss of $(98) million in Q2 2023[1][2] - Adjusted EBITDA was $92 million in Q2 2024, compared to $15 million in Q2 2023[1][2] - Adjusted EBITDA for Q2 2024 was $92 million, a significant improvement from $15 million in Q2 2023[27] - Net cash provided by operating activities was $124 million and Free Cash Flow was $108 million in Q2 2024, compared to $50 million and $39 million, respectively, in Q2 2023[2] - Net cash provided by operating activities for the three months ended June 30, 2024, was $124 million, compared to $50 million for the same period in 2023[13] - Net cash used in investing activities for the six months ended June 30, 2024, was $33 million, compared to $54 million for the same period in 2023[13] - Net cash provided by financing activities for the six months ended June 30, 2024, was $47 million, compared to $46 million for the same period in 2023[13] - Total cash, cash equivalents, cash held on behalf of customers, and restricted cash at the end of June 30, 2024, was $864 million, compared to $622 million at the end of June 30, 2023[13] - Free cash flow for Q2 2024 was $108 million, a substantial increase from $39 million in Q2 2023[35] - Net cash provided by operating activities in Q2 2024 was $124 million, compared to $50 million in Q2 2023[35] Revenue and Profit Metrics - Annualized recurring run-rate (ARR) grew 29% year-over-year to $1.5 billion as of June 30, 2024[1][2] - Gross Payment Volume (GPV) increased 26% year-over-year to $40.5 billion in Q2 2024[2] - Gross Payment Volume (GPV) for Q2 2024 reached $40.5 billion, a 26% increase compared to $32.1 billion in Q2 2023[26] - Total Annualized Recurring Run-Rate (ARR) grew to $1.473 billion in 2024, up 29% from $1.140 billion in 2023[26] - Non-GAAP Subscription Services Gross Profit increased to $127 million in Q2 2024, up from $90 million in Q2 2023[31] - Non-GAAP Financial Technology Solutions Gross Profit remained steady at $217 million in Q2 2024, compared to $177 million in Q2 2023[32] - For Q3 2024, Toast expects Non-GAAP subscription services and financial technology solutions gross profit to be in the range of $345 million to $355 million, representing 23-27% growth compared to Q3 2023[4] - For full year 2024, Toast expects Non-GAAP subscription services and financial technology solutions gross profit to be in the range of $1,340 million to $1,360 million, representing 27-29% growth compared to 2023[4] Operational Metrics - Added approximately 8,000 net new locations in Q2 2024, bringing total locations to approximately 120,000, a 29% year-over-year increase[1][2] - A live location (Location) is defined as a unique site using Toast Point of Sale with transaction volumes above a minimum threshold[25] Expense Management - Non-GAAP Sales and Marketing Expenses decreased to $97 million in Q2 2024 from $84 million in Q2 2023[33] - Non-GAAP Research and Development Expenses were $63 million in Q2 2024, down from $66 million in Q2 2023[34] - Non-GAAP General and Administrative Expenses reduced to $55 million in Q2 2024 from $61 million in Q2 2023[34] AI and Innovation - Toast launched an AI innovation hub in June 2024, with 57% of surveyed restaurants reporting already using or wanting to use AI-powered experiences[6] Definitions and Key Metrics - Adjusted EBITDA is defined as net income (loss) adjusted for stock-based compensation, depreciation, amortization, and other non-operating items[15] - Non-GAAP Subscription Services and Financial Technology Solutions Gross Profit excludes stock-based compensation and depreciation/amortization expenses[16] - Gross Payment Volume (GPV) is a key metric representing the total dollars processed through the Toast payments platform[22] - Annualized Recurring Run-Rate (ARR) is calculated using subscription and payment processing services, excluding Toast Capital and SaaS credits[23]

Lauri Patterson Introduction & Investment Thesis I had last written about Toast (NYSE:NYSE:TOST) in May, where I held my "buy" rating on the stock after it reported its Q1 FY24 earnings, where revenue and Adjusted EBITDA grew 31% and 435% YoY, respectively. My bullish thesis was predicated on my belief that the company is continuing to scale into new locations while building a strong sales organization to drive a higher number of product modules per customer, enabling it to unlock operating leverage. Since ...