- Earnings call transcript Q3 2022

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Operator

Good afternoon. My name is Daniel, and I will be your conference operator today. At this time, I would like to welcome everyone to the Toast Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers remarks there will be a question and answer session. you. Thank Instructions] [Operator the Relations to and turn President Senno, of Investor Strategic call now Michael over Vice I'll Finance.

You may begin your conference.

Michael Senno

to September COO, for today's They will Welcome third Aman Gomez; will Comparato, Narang, Daniel. Toast's be prepared call Elena conference Thanks, remarks. with for and quarter CFO, ended session. are joined XX, our call On then Q&A open XXXX. CEO, Chris earnings the by our

today's safe I'd start, your to release. harbor statement like in the we Before attention included draw press to

operational management's During forward-looking of to Act. be line and this statements, expectations and and fourth expenditures, the statements estimated certain business our full future rates for forward-looking those our related Exchange are than including the XXXX. of call, and we'll within make time regarding statements metrics that of may facts financial of All future the growth financial the margin considered and quarter statements, other future year performance meaning expected profit historical profitability, the for outlook guidance and operational Securities

statements the press SEC differ as for forward-looking and from cause Please by a to of materially to as required and revise in language no of we our our update statements. our only undertake Forward-looking except law, these obligation results risks the uncertainties refer today, release to views and expectations. today's actual cautionary reflect or could discussion filings that

and and on cost gross otherwise most of on the to expense SEC These and research reconciliations financial the substitute During general references measures. release, refer profit measures Unless this Presentation our for Please call, selling call detailed results. of measures. and not administrative Investor to non-GAAP are GAAP to all intended a accompanying for non-GAAP basis. we non-GAAP certain margin, expense, expense development comparable non-GAAP be marketing and our this discuss and revenue, measures are stated, these to a will filings gross GAAP earnings

at replay a turn the call of will let on and investor presentation, releases available press the With be over accompanying website including me this both Finally, investors.toasttab.com. call, that, Relations Chris. Investor to the our

Chris Comparato

Michael, Thank good afternoon, you, and everyone.

jump from as apologize cold. I'm nasty sips any for tea recovering I'm of or going in, Before hot a I up-front coughing to outburst

let's past years first want well as even our while IPO. we've our the a to delivering quarter strong This customers excited our jump look delivered dedication So and lot accomplished to of and come. improved we're employees time year, partners, in. Toast the efficient all their anniversary about past And We ongoing marked in to and QX, thank continued focus I opportunity forward investors. for of partnership. more over Toast the a the profitability. growth as

our the These to in are the growth, driving and product testament time. delivering restaurant deepening location our revenue and to execution consistent $XXX topping a In GPV first EBITDA to we addition surpassed segments of innovation. billion for industry serve our all annualized the expectations, of results strategy, ability core

better a we're leveraging orders seamlessly types. to how in-store products to and annual help serve of Spark, front, key wholesale out challenges. restaurants new restaurant innovation grow expand overcome key catering great we Toast new product alongside updates restaurants event, delivery and and different continued where their the month, product the help On announced a and take product hosted our our is and businesses. new product manage business invoicing, to last their we highlight innovation A example

and they remains solid uncertain this closely thrive restaurant we new with customers that remain to the macroeconomic on monitor existing While consumer dynamic continue environment. strong, focused we in industry both are are operating environment the both ensure and Toast and the and in customers to able customers fundamentals We're see to adapt partnering continue our our in. business healthy. demand, to

In quarter, to changes third up XX% macro in grew In in addition, the remains XX% GPV the year-over-year restaurant revenue equally adapt $XXX are million. increasing industry. any was prepared and to ARR XX% we year-over-year healthy, to business to QX. our we $XXX million,

continue We strong growth, drive go-to-market net over platform. our locations grows total X,XXX total XX,XXX with the approximately new quarter indicative ending to powerful as locations, our also location industry-leading scale and strategy adding is sustaining growth in XX% approximately of even and locations

scale. by guidance our is efforts management midpoint and remain XX% healthy committed unit our and year-over-year of the our the to midpoint. after disciplined important at profitability. further result progress the focus The market We range front million with cost opportunity margin areas of a evidence in of on investments in which EBITDA as are to of to growth We're full cost raising we towards guidance year consistent by growth. discipline also improvement this execution, massive our As X% that balancing go $XX our nearly us we efficient the continued and adjusted revenue sustain implies most efficiency QX at increasing economics in

That better confidence leads strategy flywheel markets economics scale drives as increasing more penetration in that increase ability discussed inbounds gives proven higher scale. effect in Our our higher profit will productivity. that time. continue and as these and to the unit ARR to we We've productivity contribution to our efficient a That local us results go-to-market improve more referrals over market. and

keep the I'll established continue room XX% X SMB Toast year, When Over penetration, customers transformation of storied to for we runway by even digital dining these a Demand also Quarter our the take the from restaurant their our our and strong, our examples continue than that quarter. to while its have business. positioned products opportunity of we're markets, experience. platform combine flywheel Antoine's increased front-of-house we're in one wanted markets across technology partner, past increasing proof more on Orleans and majority new experience our XX% in grow percentage as its have fine enterprise you effect more gain still significant below who selected more the markets are the capitalize a investing that of more markets. penetration remains untapped industry. restaurants restaurant of more markets. and to types share growth past we we for French to classic nascent A across the share the over SMB and has back operate New Antoine's, efficiently advantage and special international the locations few partner new its in restaurant of in still highlight of replicate segments, Toast total to that full preserving times, known to significant house spectrum in long share a could have the and in to ahead, large with modernize of well its still

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revenue new streams. are In average, employed addition, the drive-thru. catering, evolving to as our such takeout, customers restaurant also their surveyed of On models businesses service develop on-premise, and meet and guests different diversifying curbside needs X delivery, wholesale, to

these to Toast efficiently orders recent and innovations is highlight restaurants Spark, navigate restaurant advantage to uniquely opportunities Our we product new with core help positioned catering challenges of in take and X transform manage how business announced and Toast enables their integrated grow. At wholesale along which invoicing, to restaurants system.

locations customers founders ours. streamline are of went Creative can the separate restaurant which time using focus X and locations billing to at on We of in addition capitalizing our QSR XX Dos customers grow how example owners to table, operations one we is for and on XXXX. and restaurants catering payments invoicing great a while business, on-premise their with paid seamless and multiple business offer solution. to a paperwork for Our their great getting and hybrid BXC. Toros invoicing over both operates Toros into catering managing Taqueria is Chopt operators provide their in catering ability leveraging X XX% systems and service Dos into offering serve X invoicing and already new the and platform showcases a for their seamlessly BXB opportunity models. payment save head is in A of with our as Toast partner areas point live and to of strategic top June more previously solution estimate of Salad after order and deeply faster They

than a we a through months, addition over in our their this Toast. usage And Toast's volume past September the more Tracker. and featured Toros doubled. invoice Spark, with integrated drove monthly X xtraCHEF invoicing uplift alone, In to in of platform the on At payments XX% efficiency managing Dos Price single also

to I mentioned environment. restaurants is earlier, pain a point As this major for the due inflationary

decisions Restaurants top designed XX%. Our Pizza customers engaged costs week-to-week distributors. are price and response insights by food stay food price can from with like price dashboard ingredient fluctuations their monitoring strategic and successfully directly to costs. these changes menus, on customers prices to access reduce to our Pizza in Plaza the Plaza of watching negotiations tracker key nearly newly pricing. fluctuating in xtraCHEF and recipes to about was able have Other make their are

navigate using customers went that locations sales the the help only xtraCHEF their product reach help to manage in how to quickly our we see mid-teens, in rate has our to year, restaurants live significant percentage ability ramped. of motion develop important this customers for is opportunity already Our this QX continue suite QX is a and in issue and the further to suppliers. xtraCHEF to adding it in After attach evident

dispersed That customer to X Among to us XXXX capital. some after an days majority seamless, agreement. is and to experience Finally, businesses help In approval decision second cohort, loan available cases. meet on where more loans. two-thirds taken highlight X cases, low differentiated by received customers loan are customer a business strong a XX% exceeded added customers community we and applicants data financial range use adding restaurants day, the different to all to estimated The signing offering, needs SMB access and in past growth in sizes banking offer give enables performance funds I'd the of Toast value continue on Capital, have businesses a retention. The evident like customer Capital of friction XXX-day larger our just their with SMB to QX, restaurant average, with our drive in each additional year proposition and healthy having year. multiple we've wider customer of Toast an of offerings the loan choice over loan in underserved the over

and customers of execution and drive significant have and economics banking growth add opportunity continued strong value to we momentum and uncertain forward. QX, strong in thrive. with Toast our the to to times, years both ever for empower restaurant and love expanding restaurants product cost tools targeted than a to the our on the will they industry to to mission our trusted and We what deliver durable, guests, technology to In our summary, they as unit focus portfolio disciplined while succeed that committed giving do helping Amid delight going more partner clear restaurant many investments drive believe benefit to customers come. community, We growth leverage serving adapt balancing need products for Toast delivered innovation healthy are management. efficient

over call the Elena. turn I'll Now to

Elena Gomez

everyone, Chris, Thanks, thank joining. and you, for

in the another hard and both guidance to jumping Before since for another QX. the momentum to and our quarter, team I in we've strong the dedication built revenue great our the execution Toast into work the year in contributed sustained That and thanks with great our results, to quarter team. entire adjusted of execution want thank EBITDA above the end coming of high IPO,

balance and profitability as balanced go-to-market a opportunity less growth U.S. that is switching differentiated $XX our top model still those. the partnering evidence XX, of is expanding strong Toast, to the line improvement. new to based We're the than We're new our both QX, is net software together industry's customers location lead that. of existing enable business added us In continuing integrated number approximately on and XXX. The X% market of have X,XXX footprint restaurants we we a will of approach platform broad billion and sustain growth increasing scale invest to efficiently. over live built to healthy growth digital payments huge integrated with approximately in model improved and scale, restaurants and transition. innovation And our restaurant total Our margin a confident early with their with locations, ahead to existing

As to segments and industry-leading shared, to the we're types evidenced and the across by examples ability the platform the industry. restaurants, gaining different our just entire Chris serve of traction of breadth deeply thanks

in similar range in QX. We net momentum with expect sustain location adds QX our a to as

XX% $XXX our up is XX% Total our million, $XXX financial ended year-over-year to results. revenue at QX core Turning to metric year-over-year. operational million. ARR, which grew

both recurring year-over-year and increases year-over-year million, healthy up we customers. and the SaaS services than Subscription and view in revenue, revenue what revenue our location ARPU third increased both year-over-year, adoption. location XX% sustained product new ARPU solutions. existing increased $XXX gross Total and benefiting as by quarter, driven at shop growth Looking profit driven more XX% from fintech XX% our by subscription across fintech growth and operationally continued totaled grew

cohorts. years contributing The the channels at the surface is ARPU sales to to for of the prior SaaS that's for of leveraging are leverage rates, more of potential As increasing they higher products attach in Chris still and joining rate we've example our our is attaching nascent one customer customers at discussed, the growing scratching expanding of platform our upsell how booking team more as ARPU Existing double-digit products alluded each cohorts pre-XXXX xtraCHEF, more just at ARPU customer new the for recent our than higher annual we're breadth platform. upsell. to are add products. on only customers like

products early we payroll on than cohorts. like penetration are products older much to customers and pipeline benefit from. with New have their Plus, new for exciting have an higher our growth of xtraCHEF new customers and still

our our our to ARPU As team we sales and we develop annual motion, SaaS continue increase customer can we across cohort. refine believe upsell continue to

The Average QX. location in average a of processing ticket customer slightly was billion and remains $XXX which XX% with $XXX revenue solutions rebound XX% continued $XX fintech annualized roughly GPV GPV below remains million, in growth million quarter. profit side, in in growth year-over-year and of location was and to healthy increased the processing result GPV to $X.X up XX% QX. higher levels QX the grew per to million On X% XXXX in per and up year-over-year. flat transactions, the gross is

also Those products addition million a great penetrate we expand marketing the In Toast Capital. Toast volume, the services from $XX healthy lending, and a by of payments benefiting to opportunity offering. of our offers we're have significant proposition, gross in opportunity restaurant and we fintech led growing strong drove value to as products QX. Capital portfolio profit further

our products our PayCard and add other opportunity offerings In addition products the portfolio and for customers products the -- while monetization. combined coupled XX fintech to other capabilities rate offering and fintech a with differentiating strategic with fintech to of highlight our to take combination continued Toast our build optimization points. benefit non-POS driving efforts payments Capital, and in the in platform the of payout additional development The like in of nascent basis our investments, value currently resulted products growth increasing net from that

the As is during year. quarters typically a and second reminder, per in peak GPV third location processing season each higher

We quarter-over-quarter in Total gross delivered gross million, expect point gross QX. improvement seasonally XX% GPV decline quarter-over-quarter each We compared margin to to resulting and leading to basis year-over-year of in of improvement to margin $XXX in per QX and of XXX gross QX processing reporting in XX.X%. location year. profit each lines X% over our margin

costs. QX in-person the for On still customer pattern with benefiting lower existing take momentum year-over-year, usual. sales Hardware Last to lean, hardware a across upsell quarter-over-quarter were approach sustained in customers costs. to position restaurant expenses, due Turning require of in outdoor customers tough more drop products. industry COVID, than continue putting a preparation dining typical as place QX from followed due we of by allocation Hardware lead operating after upsell QX. bundled line to we the improved cost recovering digitization We've in a top accounting revenue revenue while a the to seen flexible for that season Harbor in hardware guidelines shipping to balanced to with existing structure. seasonal year and mainly revert to decreased comp sales acquisition seasonal margins to off stronger

manage closely investment backdrop key in on as monitoring opportunities areas environment. potential, the At to changing focused rigorously and flexibility those is maintaining with ROI we we're macro the the the hiring same the expense tightly our we're prioritizing structure growth. dynamic time, and cost strongest adapt Our to

customer growth of and XX% acquisition Sales to further slowed Moving and other expense recurring as year-over-year marketing costs. percentage QX. revenue decline our a in to

well is engine go-to-market to Our positioned efficiently. scale

grow and gains Spark expect productivity we of penetration increase, effect increasing driving invoicing we Toast's We economics. will our line. to development General our The how are of markets, business emerging their As across continued of new growth growth. improve products, revenue. release an our driving and in were market build drive innovation XX% research and and help improving recent sustained example flywheel location the their -- and believe and of share contribute products rep and products of to balanced deeper unit products, customers investments pipeline investments admirative bottom our and expenses our core recurring latest to number ARPU event continue

Our credit-related approximately include which expenses, million and $XX bad G&A in were expenses QX. debt

absorb and and well to bad other moderate credit-related in Capital forward. and continue expect related we receivables year-over-year Excluding grew management, core to to G&A expenses expenses as in fintech we leverage debt Toast expenses, on anticipate debt debt Bad as G&A on disciplined XX% offerings. outstanding on emphasis the costs. credit-related operating liabilities bad With as our cost include QX company G&A public growth and going

allows our expect monitor closely ability adjusted to advantage bad expenses is overall grow its maintain and expand data while Total QX credit restaurant default the was debt the accretive we to healthy risk. $XX million. low Our health and the Capital negative as to and margin the EBITDA related to to And of us manage and repayment the rates program, Toast we operating business.

basis in to on example that invest our order sustain margin is was while and trajectory prioritize a healthy to sustain quarter-over-quarter. forward. areas improvement QX base optimizing of a key improve to rigorously growth, efficiently continue in operating help great drive focused ability will our investments Our going line remain growth cost to We negative points this X.X% XXX top profitability.

guidance. to turning Now

$XXX expect EBITDA negative at For to to which with be to in expected $XXX revenue of midpoint, range XX% million range to the of quarter, represents million adjusted the the in we $XX negative million, million. the year-over-year $XX fourth growth be

We similar see guidance, in strong on seasonal typical to decline a per QX and our our performance GPV QX trends healthy historical QX GPV our guidance XXXX full expectations at X% the We at revenue expect year are $X.XX revenue billion, increase XX% billion now midpoint. higher in midpoint. of a and range Based continue be to to into reflects $X.XX year-over-year the location to trend. year the full

Our EBITDA updated from last guidance the $XX is negative midpoint. nearly $XXX negative X.X% a improvement full the range adjusted million, million adjusted margin to year guidance. at an the negative for our year implies $XXX at million EBITDA midpoint of This

the on that We're along profit environment opportunity by of continued we've while adjusted quarterly relatively we our on year, a our industry, us impacts end key new to change a on quarter, front current approach market and forward, the want great that proven to we product last strong were face consistent. closing, innovation dynamic big drive in restaurant structure results the in their Our In a cost efficient environment indicators. restaurants models. have margins a the in of this EBITDA navigate we ever and meaningful us operating will the this contribute would in structure, to areas few to to for we're efficiency, of partner this both focus maintain prepared had improve that financial there and market after us focused help investing invest growth. third my quarters to to changes. leverage. with macro to progress we ability to building we need management as them than trajectory efficiency team guest assumes enabled timing, experiences differentiated the adopt any business changing trusted adapt made deliver a momentum. going conditions a durable service the cost growth balanced quickly We And This remains of focus I but puts believe improvements this our if macro our year cost the technology execution. operating more has The meaningfully areas monitoring offer on to XXXX. thanks key In intend our driving go and disciplined enable posting environment, closely on reiterate to our efficient the to with reassess operating

to points lead business. Our that pain our for restaurant growth their restaurant platform, our Toast investments driving the position is digital biggest the industry-leading the and And solving relentless focus a put partner industry industry. to in to with transition on strong the in being strengthen further great

start to the over I'll Now back Q&A. the call turn to operator our

Operator

Instructions] from of [Operator comes Your first question JPMorgan. Please the proceed. line Tien-Tisn Huang

Tien-Tsin Huang

the narrow results to some cohort Great there like gap see. with? products you great. Slide like ask, the that to to do it like. XX, to What between do are I I tasked to And product think need be of it mind, will the that. upsell the team how don't to detail wanted sounds 'XX looks I pre-'XX going class, and ARPU big Any here. helpful would be it hard I'm it big this curious you was if or how a is focus

Aman Narang

Thanks of I proud is Aman. the things a This just Look, by one think question. for is we're in of our really great the QX. go-to-market performance team

You're these got, hardware and upsell board, seeing of are the you're Slide products. core team, We've their and getting to growth and booking also high the ARPU more shop, on employee that talked products higher of newer terms customers products, time, xtraCHEF our like seeing and products familiar just as over software XX, time. as of through on rates capital, really mentioned, expanding we've about core new in ARPU products saw at And lower like more even Elena And of across you that kiosks are cloud some subscriptions got our it's then also over products, our as attach customers right? guest are booking, they're ARPU. with a the is not adding only as Chris on and And such. with these

really seeing good both as on momentum, as board an the across so business it's upsell well well. as new bookings And really and

Tien-Tsin Huang

you quick just don't And my Great. mind. if follow-up,

Just question appetite. risk bigger picture around

less a appetite with down? do into capital risk dial underwriting up to watching Going new in about certain you What it talked business, xtraCHEF. locations, the there macro, general just or signals what are you you,

Elena Gomez

Yes.

just our customers, to their their first a our to on. of see pay, so -- so So their lot we business, with we're ability all, of payment positioned understand data volume capital the sort really well of and we

careful so our seeing in pay So the managed. rates believe line. us is out to far loan risk not attention signals, portfolio that that anything We largely of to default leads are but we're

our In with much very fact, in expectations, Tien. they're line

we're seeing backdrop keep light that it risk. in going of that course, So in. not we're monitoring the we're But to of

Operator

question line of of the Hynes The next proceed. Please DJ from Canaccord. comes

DJ Hynes

mix results set volume. on some should we and with Elena, traffic. of think of and prices a there's wanted point, I right? that kind you. works that at impacts against thing per pros to how inflationary maybe I'll about ask about cons, it one for good of the payment are presume a On start I Nice here. hand, GPV high going forward location

the model? be that points data we thinking our into should how factor we So as about

Elena Gomez

question. Yes. that's great No, a

from our up, in a transaction is that our that. definitely fact XXXX. back are location, higher that I know from levels commented also to also we're And our of being close is transaction but the inflation per factor, sort way we So benefiting ticket we're but all and not know the we that GPV on volumes. And and benefiting

At the cost respect to point to cost levels. and So at bit home, home. a seeing food away food food. cost from that faster than the benefit look we're food and we we're the Then of that growing pre-COVID cost is interesting the going other with at home the home from data of is as away of of

diners as more from and So that of demand food to comfortable, consumer away home. become shifting have seeing trend we're

expect that from We continue well. to benefit to as

DJ Hynes

Interesting. Yes.

follow-up. Okay. a And then more maybe strategic

would But channels to of business. long-term your just attrition just like on kind the motion you you cost going to that and customer the natural and I'm profile is building around lower how refilling do thoughts importance love the b, scale get obviously self-serve important is. acquisition the the of like margin a, with product-led see important. as progress lower there; to be of out Just And thinking of

Chris Comparato

Yes. DJ, Chris. is this

customer. that yourself customer bundling as in new of win motion a existing customers think flexibility I up-front our self-service, But its Aman motion efficient to all time, of demands the given platform the either want it's upsell to the position really growth platform product-led to to mentioned, support put accessibility then to a in net or clear modules. over whether have upfront, the and through you more restaurants

those of products, capitalize identify spend that seeing to we for at the those that we're all more And looking right for we can what productive types get and they a channel time restaurant segments to over then of journey is more becoming teams customer So right are efforts. exposed lot the which on time. and

continue we address restaurant's So points, pain to that's that what we that we sure points. that making complement products pain the the with the build to right But the has and and address those then look platform all select needs at.

Operator

next Nance question Sachs. comes proceed. The Goldman of Will Please from

Will Nance

and there question maybe you book the change think into I I in well. back line follow in specific look you thought great result subscription the function some today. on dig follow-on strength see step the on ARPUs. higher in ARPUs the kind sales mean does the Slide xtraCHEF? and these I And on as that of subscription the products a ARPU to to point Nice great is, motion I top then in motion was bit And the maybe results us Wondering of XX step up, particularly I kind the of little what XXXX guess to Tien-Tsing's something revenues. the cohort. the of if that is It's wanted a primarily would is of upsell get like, the for to drove penetrated that payroll Or function? base? could

Elena Gomez

and that chime take free I'll to as Sure, Aman, in feel well.

role, with selling solution obviously xtraCHEF at that they're the resonate broad of guest the That's actually, whether really important we as ordering, And bundles all things that, that really used payroll elements understanding started positioning So that customers. early testing of as breadth that hardware, our have impact. as continued our step-function have too We breadth like is They're selling. it's team opportunity getting to in with products, based started part. a is we online products, payroll. And the getting so sales different good but customers a really are the platform. that played payroll more it's the to platform, the still well an of on of xtraCHEF, is really big

nascent. really was XXXX in fact, In

don't so it XXXX. in would I shows know -- So I early even

the broad a So the any and payroll really X of it's platform versus product. breadth

DJ Hynes

of a have ahead some from like rate for, Toast came we were bit looking take sounds it there. there Capital may in in The where contribution been

could through quarters. you last trajectory of sounded than bigger was the it it It maybe couple Just a Capital bit running. we of wondering little thought if Toast like the over talk was

you has of the on would been cadence of could what provide capital any quarters over several So the adoption be last color those great.

Elena Gomez

we and we really commented we're guys Capital, by more QX rate transparency. that. take to encouraged the XXX-day No, give benefited But and product we wanted Yes. because Toast launched on from in a you it

though, Our focus on operations of the payment the factors. and rate, improving It's infrastructure. Toast just two is improving but Capital, take our have a also not we combination

focus. that be to going always there's So

team We have drivers primary a those the the time. in both for things, all Capital. the -- that Toast primary But whole on of QX, just two focused not

Operator

proceed. The of Mayank Please Tandon next from question comes Needham.

Mayank Tandon

kind expect maybe terms specifically that commented what just on to to are quarter. levers, the to that? you the revenue? of level? would would through need then margins of gross through that around some to exiting that Aman, the you EBITDA I to think And Could in what get have come XXXX. on walk the Any different Congrats then you on OpEx levers be profitable framework the on deliver line of you recurring

Elena Gomez

by our our in -- in and the start middle early, I'll we're but the Yes. middle we're or very planning. XXXX saying of not we're in early

at to highest continue several going we're we've to guys more you next the level, But our and shown quarters. have -- that earnings we've specifics call. the for at I'll So last focus on discipline cost

So We're we want leverage to you, that's ahead. to a I places gain in obvious have opportunity to remind number G&A. continue going But like one. massive the

balanced think invest continue very sustainable of So to And about in going are light that's areas that to long-term how approach it the to as growth. in we're a XXXX going macro. to I would drive

Mayank Tandon

guess Right. a I would just release, had It's in macro we still the think encouraging to are the where hear you hospitality investors. also into the is I of question typically, I company ago, the had incumbent. definitely opportunity, a as systems, think there press terminals as believe, be, should a market. Chris, locations management XX,XXX-plus by think months target follow-up, my few when integrated be usually viewed those hospitality, property like identified a I you But positively

So been so how just any hospitality someone color displacing that do long? the I love on hear progress to around How incumbent playing progress would that? out? go about see and you do you around any has side for the an your opportunity

Chris Comparato

Sure.

So the we're hotel very excited opportunity. about

that now span hotel continues that are We capable out confident few build our the well We're speak. it's got PMS build we a with about still pipeline within course us muscle team building you execute quarters, that the hotels. can days. and again, that beyond it. of And support those are very We're early number we're opportunities of There's over But and we integrations excited continue the PMS hotels. properties, the within that We've in that restaurants to our exciting. they're integrations we're out a that at PMS. of But but interfacing to of segment, foundation. next continue winning to Oracle's I'll see we you'll caution as

Operator

of comes from Baer question proceed. Morgan next Please The Stanley. Josh

Josh Baer

the wanted in lower we X,XXX, were QX. given ask think I to I than the seasonality about locations, expected, better looking for

linearity Was even into to September any from October month-to-month going deterioration adds. the about of or wondering location there November? Just

Elena Gomez

Yes.

So you're testament switching converting Toast location They restaurants than better adds I'll net in team. and a were really and right, we faster. QX. that's that onboarding talk existing expected, the came And about QX were to to them converting

a saw QX, range still QX prepared the in That great I year. QX. to a that Based we some performance net growth track in we So on similar location my pulled locations and team. to be full current commented we're remarks, expect for the in into on from strong pipeline,

Josh Baer

Great. And on guidance. one then

Just wanted to sure heard make I right.

saying reflects location historical similar were that per was GPV in guidance that to decline trends? a You

Elena Gomez

and mentioned Yes. Typically, and that and seasonally remarks, dips QX per in prepared location higher into down it's my QX GPV I QX. in

that. guidance revenue of unusual. not historical reflects that's So It's typical and patterns our

Josh Baer

that's is of spending. guidance? like any macro is the and Okay. prudence I shift incorporated macro in level spending and in around that there potential consumer question guess guess on consumer I

Chris Comparato

to service us mentioned, restaurants, maintaining you even fundamentally new are for more driving that seeing valuable their think not healthy continue like Restaurants our Restaurants Well, then across Josh, models, We're market. believe We any past turning our tough environment. things teams I'll is that demand resilient of dining a we're recessions. jump spending to we what mindful historical seasonality board. thing And during business, demand costs and invoicing with in platform across changes believe are consumer driving in. of And consumer last the proven on line we we spend as growing business. see trends. in and leave operational in I'll becomes for with signs their the said, then or macro efficiency, the has

So we and spot a macro when good think have in situations been it the looking that comes we're to looming. at the

Elena Gomez

And seen to comment we're seasonal on we've seeing October, In just your the same comments. guidance pattern historically.

Operator

question next Please of The you. Thank Chiodo Timothy proceed. Credit from comes Suisse.

Timothy Chiodo

of And one pricing, that were there some of drivers some First was of into quarter-over-quarter. losses its is, were sharing that way P&L? the lawsuits the bit cost the Maybe take working the terms versus on follow-up, you with thresholds your capital, the leverage? the what what mechanics a around in just simple the one margins gross a around subscription is when that again into up of in are little helped The terms just maybe then terms what there that? just nicely partner, you And just credit dig of the could services. your in recap

Elena Gomez

sure. Yes,

and about. subscription that's course, in So both line dress ARPU scaling we've side, really our our healthy cetera, platform on you in the positioning And top a that beat it's the being and on margin, the SaaS et talked really strong, the gross saw business. of

really question that Is your on On So margin. other debt gross related. bad what's that's SaaS the story right? was

Timothy Chiodo

Yes, the mechanics.

Elena Gomez

Okay. Yes.

to Tim. program is business, not loan we out we Toast's expand to business And program, continue rates our have actually But and been to of grow. Toast accretive a to default expecting, should we related accrue as overall, with for have default Capital what add and the basically, So we're future that the potential line and healthy expect our rates.

Operator

Please The comes question next from Stephen of the proceed. Blair. Sheldon line William of

Stephen Sheldon

just really strong location growth. one First here, quarter another

where wins seeing legacy the types still And situations and wins where if getting. that's see also to replacing greenfield this Or at these you're in you've changes vendors? starting any of so wins Just if mostly what year SaaS quarter to Are you curious relative changed historically. seen you're or previously locations that you're on just I'm all or curious this solutions? are competitive

Aman Narang

across sales results board. is the We as Chris the legacy saw in about mentioned, with and in balance The Elena -- when and as mentioned, And into an of the shared we've launch about, Sure, win. the across improve. win saw question. it's Stephen. and as calls, tend focus our mid-market Look, the make really things impact we, and Great previous a we to healthy more QX. growth. momentum past. On's think start we like QSR QSR good efficient starting proud I than QSR really we to really Walk consistency really Chris of is the our driving We've some with seen and team in to that talked time in in saw XX% We -- talked really providers. We've cloud the decision, buying QX of win of on go is rates we story terms in

new well. of existing, from some we good our terms seeing out tailwind new opening expansion COVID, existing Jamba a enterprise Nothing like restaurants restaurants as opening, just Cakes -- had balance in also and are up seen in and Bundt small of and new of even we've Juice. and trends We coming healthy on And customers,

Stephen Sheldon

it's I follow-up, Great. then as just That's really a helpful. know very And small.

thinking this seeing progress on And You're international when how really seed update on could still the we any side Or a thoughts international talking, on are of I contributor? kind the investments you're international a think, that? love about away year? about investing there, revenue But an next year. ways you're behind placing from be

Elena Gomez

we out the motion, early. put understand talked product Canada, investment we're I'll international. U.K. seeing, No, there what would year that year saying international obviously, building in -- we We're still view has super but start is Yes. we already that the investment our million encouraged by talked opportunities it's of we're range making early And the We've frankly. you, Dublin team by go-to-market We a been XXXX, the But the evaluating end It out. but I want got has to about about. as $XX in I on and the customers the XXXX we to tell few level. earlier very really early we're the into the of and of gone would year hasn't We're in $XX would low in on, things changed. million kind expect the that increasing, all you as view a sure building

So customers. we're early learning from our

has the encouraging. And far, feedback so been really

we're that investment So going make to continue into to XXXX.

Operator

comes next Please from proceed. Rawat The Bernstein. question of Harshita

Harshita Rawat

question on have churn. So a I

fully location as the change in that big so? you net importantly, level churn appreciate can past Elena, do industry And in a average And I kind I your Toast how kind better an seen lower So restaurant much more that Is if churn or in restaurant. would you of, restaurant think can history? versus guess, kind let about the how versus of downturn? becomes of the you've year

Elena Gomez

relatively low change our even restaurants, Yes. was our haven't we during And and churn seen for No, COVID, difficult time pretty a any which in churn. was consistent.

see I change expect wouldn't we that would pattern. in So a

another digits. of historically low single to that digits most But of it, that course, And has restaurants restaurants to been the churn leading change in seen platform. to I our when we a on single We haven't -- versus have watching us mean, churn, pattern. business also, the and double-click for are we'll we go the but in out be it continues of keep

by So encouraged we're that.

Chris Comparato

add I'll that X% a of want audience you Chris. locations addressable potential. when alone, still -- The as to than oriented I this market ARR U.S. short towards add look at at The addressable questions we're related of for are term. thing some of churn thing our our only less one total total to market is remind we're X% and one the the I'll is just And these

restaurant early of and transformation. back in want and going a is that to across we the transformation happening the it's believe through industry of we So of leading be digital, this house front house, we're to days the to the still mindful

short-term a we So on excited the considerations, because recession long talk warnings, are ahead. opportunity the these reminder, increasingly are just about term, we but about as we believe

Harshita Rawat

And just downturn. very follow-up. roll-up a a good capital like scale software guidance also so sheet is On but smaller in balance the done good of allocation, a this of kind restaurant time, into sense providers has valuation environment, at going same

these do kind -- balance two? are you you how how between of about So like the thinking

Elena Gomez

sheet Sorry, Are strong asking can between balance you clarify a you balance and the your investing? question?

Harshita Rawat

pertinent. some in continuing of smaller of the the especially to acquire providers, acquiring smaller, And the some

Elena Gomez

I the strategy understand our Yes, really changed. fair. Yes, look, Yes. question. M&A hasn't

obviously, changed. think, I the backdrop has

with us adjacency do. get customer? to to is changing. not really platform the they've to pain point always consistent be would market assets around principles we continue So is our a going for something an to that's it market solves guiding the that our the faster, that to going is to going And is, be which we're canvass platform it to like So always acquiring done,

the attention are Of now, that. different paying course, valuations to so we're and

if opportunistic fit. be we'll So there's a

Operator

UBS. from proceed. Kumar Please The of comes next question Rayna

Rayna Kumar

very had points. in strong the a basis You take rate quarter, net XX

anything the wondering items? as onetime key And drivers are if there? unusual in to what out call there's Just

Elena Gomez

Yes.

from we I'll said XXX-day encouraging. focused One is factors rate what Capital we which was that. Toast loan, launching which a on our and driving had take just really demand optimization two our focus product, we benefited and healthy So of then, continued earlier, I on have the repeat the whole there's benefit. is payment And team from course,

have our opportunity think the and long of really, term, of when platform do continue about would about platform. you think to to monetization just more broader zoom you the as beyond and going an more drive And take But platform want fact our payment out drive over zoom the SaaS we side. on it's to to the And more that, So we'll that rate. then and digitization really and of to a I we that the and and digital continue And drive monetize to combination take more rate volume monetization. the power in-quarter opportunity, those. and rate will think volume take than to platform it product innovation of more think our have -- drive out we're through the opportunity

Rayna Kumar

follow-up. And helpful. just one That's very

If you larger on enterprise your can just moving restaurants, upmarket to more comment progress please?

Aman Narang

Sure.

bigger -- expansion groups. And bigger good I right? in mid-market this SMB just we've wins is the a we So gradually think and and We and look, business in I -- saw have enterprise, that this started as some in year. mentioned, gone into spectrum, we

enterprise about out, in Toast with a like Bundt XXX And things Texas. for just for I think of Nothing Jamba us So Louisiana. well. been has lot Juice our while, customer units out a offering. Chris of Cakes expanded expanded a as On's called Walk which interest of there's out

many I the to similar. right? where handhelds or we're on in work seeing management, the is inbound of tools proposition lot of automation, we config those some efficiency, X restaurant, walls right amount over self-service. about to operational value to a like improve through. a digital capabilities, that walls, time an like we chain as that like time grow context, continue It's continues think security SMB and And and well. to the compliance, going of we're certainly for outside grow gradually. to The management, things And improve just offer confident So a ways X when larger Things menu into we're

Operator

Josh Beck take final line will the from of of KeyBanc. We now our question

Josh Beck

had big the flywheel still good XX. fan in was Certainly the than really less also of but of total. markets, XX% I progress has a Slide they're

investing this the likely So years, the is of markets is, there trajectory limit future emerging that continue? could is that the my flywheel markets. slope I Or in just question to guess of you're some in maybe element

over Just curious time? progress about how this trend

Aman Narang

penetration, for a QX. the what for market. to where Look, we that see team for while or you nothing overall to continue question. XX% really of and where And trend context our see to rep we and of trend accomplished seen as we pointed tenure tend that's our Yes. just have continue now we as [indiscernible] telling see us proud same Look, the to in XX% because performance And And than audience, we correctly less productivity the end we've there's we that, about of should continue. market more improve. not tend great that's are sales out, markets improve,

Josh Beck

product look seem that maybe curious Excellent. help base like follow-up, on customers, exciting the When is. you products, I'm market event. new segments? existing certainly Just product I'm also at get strongest the Spark across may to applicable an close how invoicing lie And launch of where then fit curious, curious into for just a the does you it the your product.

Chris Comparato

whether script, for models. base need. our different industry of roughly us. has service and restaurants extremely the days Yes, it's It's different believe invoice of it's we events, this believe whether those my to whether majority deploying restaurants off the the models of the of one We of demand. the Catering and it's is that to of In I attract meals, it's have types and applicable. opportunities service certain that kitchen, types early about a catering, in key customer XX% deliver talked Josh, drive need are

broader So platform makes but drive more the evolve processes to could operator. on restaurant on solutions to And lot catering top this those it platform. then see manual a it for invoicing. Restaurants tend either you'll they doing or invoicing, deliver point all-in-one a an to today integrated engagements, easier of use

the the of we'll next X tripled usage over think over unique Toros It's As that still so stories the of the opportunity. past a to for tell their Dos and, how amount and quarters. I it's invoicing on days, mentioned, continue increased restaurants the payments early we evolves but XX% months the course few volume

Operator

I back you. like the turn to the would over presenters. call Thank to

Chris Comparato

you your evening, for time. Have you a and Okay. great Thank all. thank

Operator

concludes today's call. conference This

You may now disconnect.

Toast (TOST) 11 Nov 222022 Q3 Earnings call transcript