Toast, Inc.

Toast, Inc. (NYSE: TOST) supplies software, payment services, hardware and related financial products to restaurants and retail businesses. Subscriptions and payment-related services generate recurring gross profit, while hardware and professional services currently run at a gross loss.

September-quarter results

Three months ended September 30. USD millions, except diluted earnings per share.

Adjusted EBITDA removes interest, taxes, depreciation, amortization, stock compensation and selected warrant, restructuring, lease and other items. Free cash flow is operating cash flow less capital spending.

The profit mix

GAAP subscription and financial-technology gross profit was $630 million, up from $490 million. Hardware and professional services had a gross loss of $85 million, versus $57 million. Ticker Byline's comparison finds that the additional $28 million loss absorbed 20% of the $140 million increase in recurring-stream gross profit.

Toast's highlighted 26% operating margin divides operating income by subscription and financial-technology gross profit. Dividing the same $165 million by all revenue produces an 8.3% margin, up from 5.1%. The two figures use different denominators.

Commercial growth and forecast delivery

Reported locations reached approximately 189,000, including 8,500 net additions during Q3. Gross payment volume rose 20% to $61.8 billion. Annualized recurring run-rate reached $2.503 billion, up 24%; this combines annualized subscription billings and adjusted payment fees after estimated transaction costs, rather than only contracted software subscriptions.

Adjusted EBITDA of $240 million exceeded August's $210 million to $220 million Q3 forecast. The annual range rose to $840 million to $850 million from $805 million to $825 million. Q4 guidance is $200 million to $210 million.

Annual adjusted subscription and financial-technology gross profit is expected to reach $2.375 billion to $2.385 billion, versus $2.325 billion to $2.355 billion previously. The Q4 forecast is $610 million to $620 million. These are gross-profit forecasts, rather than revenue guidance.

Cash and capital allocation

At September 30, company cash of $1.203 billion and marketable securities of $682 million totaled $1.885 billion, up from $1.713 billion in June. Restricted cash of $76 million and customer funds of $154 million are separate.

Nine-month operating cash flow was $474 million, versus $467 million. After $48 million of capital spending, free cash flow was $426 million, versus $430 million. Inventory used $131 million, and deferred contract-acquisition costs used $148 million. Other noncash and working-capital changes also affect the comparison with net income.

Nine-month share repurchases used $486 million, with none in Q3. Net purchases of loans held for investment used another $78 million, classified as investing cash and excluded from the company's free cash flow. Those loan investments are separate from business acquisitions.

The September condensed balance sheet lists no separate interest-bearing borrowing line. The last detailed facility disclosure, at June 30, showed a $350 million revolver due May 2030, with no borrowings and $347 million available after letters of credit.

Leadership and next operating milestones

President and Chief Financial Officer Elena Gomez plans to leave that role December 31. Finance executive Michael Senno becomes CFO January 1, 2027. Gomez is expected to remain an adviser and nonexecutive employee through July 2.

The next results can show whether recurring gross profit continues to outgrow hardware losses, whether cash conversion improves and how the company delivers its higher annual forecast.