Toast - $TOST - Earnings Analysis: Record revenue growth of 29% year over year in Q4 2024.

Business Model

Toast generates revenue by providing cloud-based, all-in-one digital technology solutions to the restaurant industry, including subscription services for its software platform, financial technology solutions primarily through payment processing services, and hardware and professional services.

Revenue Sources

• Subscription services - recurring revenue from SaaS products providing point of sale, operations management, digital ordering, marketing, and team management solutions to restaurants.
• Financial technology solutions - revenue from payment processing fees associated with transactions processed through the Toast platform.
• Hardware and professional services - revenue from sales of hardware terminals and devices, and professional services including installation and onboarding support.

Income Statement Analysis

• Revenue increased by 29.1% year over year in Q4 2024 compared to Q4 2023.
• Operating income improved from a loss of $56 million to a profit of $32 million.
• Net income improved from a net loss of $36 million to a net profit of $33 million.
• Basic earnings per share improved from $(0.07) to $0.06.

Balance Sheet Analysis

• Total assets increased by 23% year over year, primarily due to increases in cash and cash equivalents.
• Total stockholders' equity increased by 29% due to accumulated profits and additional paid-in capital.
• Total liabilities increased by 13%, reflecting growth in accrued expenses and other current liabilities.

Cash Flow Analysis

• Net cash provided by operating activities increased by 60%, indicating improved operational efficiency.
• Net cash used in investing activities increased due to higher capital expenditures.
• Net cash provided by financing activities more than doubled, reflecting proceeds from issuance of common stock.

Capital Allocation

Management is focusing investments on R&D, expanding into new markets such as international locations, enterprise customers, and food and beverage retail sector. The company is committed to disciplined investment while gradually expanding margins. In 2024, the company repurchased $56 million of Class A common stock.

Management Commentary

2024 was a great year for Toast. We added a record 28,000 net locations.

Our recurring gross profit streams grew 34% year over year.

Adjusted EBITDA grew to $373 million and we were GAAP profitable for the first time in the history of the business.

In 2025, we'll accelerate our efforts across these new addressable markets and continue to further differentiate our platform.

We will lap the improved ARR to revenue conversion and comp against related one-time benefits we saw in 2024.

In December, when we made those comments, we hadn't completed our planning process.

Overall Sentiment: Positive, with strong growth and profitability, tempered by cautious outlook on certain one-time benefits.

Disclaimer: This report is for informational purposes only and not investment advice. The analysis is based on limited information and subject to change. Investing in securities involves risks, including potential loss of principal. Past performance doesn't guarantee future results. Always conduct your own research, understand the risks, and consult a financial professional before making investment decisions.