Toast(TOST) - 2023 Q3 - Quarterly Report

Revenue Growth and Performance - Gross Payment Volume (GPV) for Q3 2023 reached $33.7 billion, a 34$25.2 billion in Q3 2022[92] - Annualized Recurring Run-Rate (ARR) as of September 30, 2023, was $1.218 billion, up 40$868 million in the same period last year[92] - Total GPV for the nine months ended September 30, 2023, was $92.5 billion, a 40$66.3 billion in the same period in 2022[92] - Total revenue for the three months ended September 30, 2023, increased by 37% to $1,032 million compared to$752 million in the same period last year[115] - Subscription services revenue grew by 46% to $131 million for the three months ended September 30, 2023, driven by growth in restaurant locations on the Toast platform[115] - Financial technology solutions revenue increased by 36$856 million for the three months ended September 30, 2023, primarily due to growth in restaurant locations on the Toast platform[116] - Hardware revenue rose by 26% to $34 million for the three months ended September 30, 2023, driven by new restaurant locations and higher sales to existing locations[116] Revenue Breakdown by Segment - Subscription services revenue is primarily based on a rate per location, varying by software products, hardware configuration, and employee count[100] - Financial technology solutions revenue includes transaction-based fees and fees from working capital loans through Toast Capital[101] - Hardware revenue is generated from the sale of terminals, tablets, handhelds, and related devices, net of estimated returns[102] - Professional services revenue comes from installation services, including business process mapping, configuration, and training[102] - Financial technology solutions revenue is seasonal, typically stronger in Q2 and Q3 due to higher customer sales during warmer months[97] Expenses and Investments - Research and development expenses focus on platform improvements and new product offerings, driven by employee-related costs and third-party software[108] - Sales and marketing expenses increased by 19$100 million for the three months ended September 30, 2023, primarily due to higher employee-related costs[121] - Research and development expenses grew by 18% to $87 million for the three months ended September 30, 2023, mainly due to increased employee-related costs[122] - General and administrative expenses increased by 26$98 million for the three months ended September 30, 2023, driven by higher bad debt and credit-related expenses[123] Profitability and Cash Flow - Adjusted EBITDA improved to $35 million for the three months ended September 30, 2023, compared to a loss of$19 million in the same period last year[133] - Free cash flow for the nine months ended September 30, 2023 was $12 million, compared to$(160) million in the same period of 2022[136] - Net cash provided by operating activities for the nine months ended September 30, 2023 was $43 million, compared to$(137) million in the same period of 2022[141] - Net cash used in investing activities for the nine months ended September 30, 2023 was $85 million, compared to$25 million in the same period of 2022[141] - Net cash provided by financing activities for the nine months ended September 30, 2023 was $58 million, compared to$36 million in the same period of 2022[141] - Net increase in cash, cash equivalents and restricted cash for the nine months ended September 30, 2023 was $16 million, compared to$(126) million in the same period of 2022[141] Financial Position and Liquidity - As of September 30, 2023, the company had cash and cash equivalents and marketable securities of $1,030 million, excluding$87 million held on behalf of customers and $49 million in restricted cash[138] - The company has$330 million available under its 2021 Facility as of September 30, 2023[138] - The company believes its 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[139] - Cash used in investing activities for the nine months ended September 30, 2023 included purchases of marketable securities, capitalized software, and an acquisition[144] - The company entered into an amendment to its revolving credit facility agreement on March 2, 2023 to replace LIBOR with SOFR[147] Other Financial Metrics - Interest income, net, increased to $10 million for the three months ended September 30, 2023, up from$3 million in the same period last year, due to higher income from marketable securities[125] - The change in fair value of warrant liability resulted in a gain of $18 million for the three months ended September 30, 2023, compared to a loss of$21 million in the same period last year[126] Customer and Market Reach - Toast serves approximately 99,000 restaurant locations as of September 30, 2023, processing $118 billion in GPV over the trailing 12 months[86]