Toast(TOST) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In 2024, Toast added a record 28,000 net locations and processed approximately $160 billion in payment volume, with recurring gross profit streams growing 34% year-over-year [9][57] - Adjusted EBITDA for the full year reached$ 373 million, with margins expanding 20 percentage points year-over-year, marking the first full year of GAAP profitability [9][58] - In Q4, recurring gross profit streams increased 39%, with total monetization measured by recurring gross profit streams as a percentage of GPV at 93 basis points, a 10-basis-point improvement from the prior year [60] Business Line Data and Key Metrics Changes - SaaS ARR grew 32% year-over-year in Q4, with a 5% increase in SaaS ARPU on an ARR basis [62] - Payments ARR and fintech gross profit both increased 35% in Q4, with GPV at $42 billion, up 25% year-over-year [63] - Non-payments fintech solutions, led by Toast Capital, contributed$ 43 million in gross profit in Q4, with Toast Capital originations exceeding $1 billion for the year [64][65] Market Data and Key Metrics Changes - SaaS ARPU for international locations that went live in Q4 2024 was up 50% year-over-year, indicating strong growth potential in international markets [21][44] - The company processed over 0.5% of total US GDP in 2024, showcasing its significant market presence [57] - The company expects to surpass 10,000 customer locations across new segments later this year, indicating strong growth in enterprise, international, and retail markets [39] Company Strategy and Development Direction - Toast's mission is to help restaurants thrive, focusing on deepening market share in the US restaurant segment while expanding into new customer segments and geographies [10][11] - The company plans to increase sales and marketing investments in its core business and has launched campaigns to enhance brand awareness [13][14] - Investments in 2025 will focus on accelerating progress in new markets and fortifying core strengths, with a disciplined approach to balancing growth and profitability [59][67] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's position for 2025, highlighting strong growth signals in both international and retail segments [9][11] - The company aims to maintain a high margin while gradually expanding margins, reflecting a disciplined investment strategy [31][59] - Management anticipates a balanced approach to pricing and continued growth in customer adoption of its platform, leveraging data and AI for differentiation [30][49] Other Important Information - The company achieved a dollar-based payback period in the mid-teens months, demonstrating strong efficiency in customer acquisition [68] - Free cash flow totaled$ 134 million in Q4 and $306 million for the full year, with expectations for free cash flow to mirror adjusted EBITDA in 2025 [70] Q&A Session Summary Question: Progress on international and retail segments - Management emphasized that the core focus remains on scaling the US restaurant segment, while also seeing positive signals in new segments, with nearly 10,000 locations expected across these areas [78][79] Question: SaaS ARR and same-store sales trends - Management noted that SaaS ARR per location was higher than expected, with same-store sales showing slight improvement despite external factors affecting Q1 [86][89] Question: Unit economics across different growth areas - Management indicated that customer acquisition costs and unit economics vary by segment, with retail showing healthy payback periods and strong GPV per unit [94][96] Question: AI product developments and customer reception - Management highlighted ongoing investments in AI capabilities, with positive customer feedback on tools that leverage data for operational improvements [100][102] Question: Enterprise pipeline and product positioning - Management reported a strong pipeline in the enterprise segment, with significant improvements in product capabilities to support upmarket growth [108][111] Question: Retail segment economics compared to restaurants - Management indicated that early retail customers show higher ARPU and margin contributions compared to traditional restaurant customers, suggesting strong potential for growth [112][114]