Restaurant software platform Toast (NYSE:TOST) announced better-than-expected results in Q1 CY2024, with revenue up 31.3% year on year to $1.08 billion. It made a GAAP loss of $0.15 per share, improving from its loss of $0.15 per share in the same quarter last year.
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Toast (TOST) Q1 CY2024 Highlights:
- Revenue: $1.08 billion vs analyst estimates of $1.04 billion (3.3% beat)
- EPS: -$0.15 vs analyst expectations of -$0.14 (6% miss)
- Gross Margin (GAAP): 23.2%, up from 21.4% in the same quarter last year
- Free Cash Flow was -$33 million, down from $81 million in the previous quarter
- Market Capitalization: $13.04 billion
Founded by three MIT engineers at a local Cambridge bar, Toast (NYSE:TOST) provides integrated point-of-sale (POS) hardware, software, and payments solutions for restaurants.
Hospitality & Restaurant SoftwareEnterprise resource planning (ERP) and customer relationship management (CRM) are two of the largest software categories dominated by the likes of Microsoft (NASDAQ:MSFT), Oracle (NYSE:ORCL), and Salesforce.com (NYSE:CRM). Today, the secular trend of mass customization is driving vertical software that customizes ERP and CRM functions for specific industry requirements. Restaurants are a prime example where a set of customized software providers have sprung up in recent years to create unique operating systems that blend tax and accounting software, order management and delivery, along with supply chain management. Hotels and other hospitality providers are another example.
Sales GrowthAs you can see below, Toast's revenue growth has been incredible over the last three years, growing from $279 million in Q1 2021 to $1.08 billion this quarter.
Unsurprisingly, this was another great quarter for Toast with revenue up 31.3% year on year. On top of that, its revenue increased $39 million quarter on quarter, a very strong improvement from the $4 million increase in Q4 CY2023. This is a sign of acceleration of growth and great to see.
Looking ahead, analysts covering the company were expecting sales to grow 24% over the next 12 months before the earnings results announcement.
Cash Is KingIf you've followed StockStory for a while, you know that we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills. Toast burned through $33 million of cash in Q1 , increasing its cash burn by 49.2% year on year.
Toast has generated $124 million in free cash flow over the last 12 months, or 3% of revenue. This FCF margin enables it to reinvest in its business without depending on the capital markets.
Key Takeaways from Toast's Q1 Results We were impressed by Toast's strong gross margin improvement this quarter. We were also glad its revenue outperformed Wall Street's estimates. Overall, we think this was a good quarter that should please shareholders. The stock is up 3.7% after reporting and currently trades at $24.63 per share.