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Toast, Inc. (TOST) is a cloud-based, all-in-one digital technology platform designed specifically for the restaurant industry. The company offers a comprehensive suite of software-as-a-service (SaaS) products and financial technology solutions, including integrated payment processing and restaurant-grade hardware. Toast serves as the restaurant operating system, connecting front-of-house and back-of-house operations across various service models such as dine-in, takeout, delivery, catering, and retail.
- Financial Technology Solutions - Facilitates payment transactions through transaction-based fees and includes marketing and servicing working capital loans through Toast Capital.
- Subscription Services - Provides access to Toast's software applications over a term of 12 to 36 months, with fees based on location, software products purchased, hardware configuration, and employee count.
- Hardware and Professional Services - Sells hardware such as terminals, tablets, and handhelds, and offers professional services like installation, configuration, and training.
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Your GPV per location has declined approximately 3% year-over-year for consecutive quarters, and you expect this trend to continue into Q4. What are the underlying factors driving this decline, and how do you plan to address them?
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Operating expenses increased 11% year-over-year in Q3, with sales and marketing expenses up 25% and R&D expenses up 5%. How do you justify these increased investments amidst declining GPV per location, and what return on investment do you expect?
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Churn remains slightly above 10% on an annualized basis, primarily impacting smaller restaurants. What strategies are you implementing to reduce churn among these smaller clients and improve overall retention?
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You added approximately 7,000 net locations this quarter. Can you provide a breakdown between new restaurant openings and competitive takeaways, and how sustainable is this level of net adds in the current market environment?
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You are investing more in TAM expansion areas like retail and international markets next year. Given the early stages of these ventures and increased operating expenses, how confident are you that these investments will yield profitable returns, and what are the main risks you foresee?