Summary
Toast reported first quarter fiscal 2023 revenue of $819.0 million, up 53.1% from $535.0 million in the prior-year quarter. Gross profit of $174.0 million rose 95.5% from $89.0 million, and gross margin rose to 21.2% from 16.6%. Non-GAAP gross profit reached $189 million, up 87%. Location growth did the heavy lifting. Toast added more than 5,500 net new locations in the quarter, taking the total to roughly 85,000, up nearly 40% year over year. Annualized recurring run-rate was $987 million as of March 31, 2023, up 55% year over year, and gross payment volume rose 50% to $26.7 billion.
Product and market news moved in parallel. Toast launched Toast Tables, a reservation and waitlist tool tied into its point of sale and into Google search, and opened for business in Canada, Ireland and the United Kingdom. Toast.org handed out more than $1 million in grants to nonprofit organizations.
Profitability tells a two-sided story. Operating loss was $92.0 million, narrower than the $101.0 million loss in the prior-year quarter, and operating margin improved to negative 11.2% from negative 18.9%. Net loss went the other way, widening to $81.0 million from $23.0 million. The prior-year quarter carried a large mark-to-market gain from the change in fair value of the warrant liability, and that item was far smaller this year, so net loss ended wider even as the operating loss narrowed. Diluted loss per share was $0.16, narrower than $0.20 a year earlier. Adjusted EBITDA, a non-GAAP measure, improved to negative $17 million from negative $45 million in the prior-year quarter.
Cost increases came largely from employee-related spending and from higher bad debt and credit related expenses tied to Toast Capital. Hardware and related professional services are priced competitively to lower the barrier for new restaurant locations.
Cash generation trailed the income statement. Net cash used in operating activities was $55.0 million, compared with $47.0 million in the prior-year quarter. Free cash flow, a non-GAAP measure, was negative $65 million against negative $50 million a year earlier. Capital expenditures were $2 million, flat versus the prior-year quarter. Deferred revenue of $49.0 million edged down from $50.0 million, while remaining performance obligations of $517.0 million rose 30.2% from $397 million. The balance sheet held $950 million in cash, cash equivalents and marketable securities at March 31, 2023, plus $330 million available under the 2021 facility.
Management's outlook covers the second quarter and the full fiscal year. For the quarter ending June 30, 2023, Toast expects revenue of $920 million to $950 million and Adjusted EBITDA of negative $10 million to $0. For the full year ending December 31, 2023, the company raised its revenue outlook to $3,710 million to $3,800 million from $3,570 million to $3,660 million, and its Adjusted EBITDA outlook to negative $10 million to $10 million from negative $30 million to negative $10 million.
Risks remain. Macroeconomic conditions, including inflation and its potential effect on consumer spending, rising interest rates, global supply chain issues and the COVID-19 pandemic, could pressure results. Seasonality matters because financial technology solutions revenue has historically been stronger in the second and third quarters. Credit exposure tied to Toast Capital loan guarantees adds another layer, and the warrant liability is remeasured at fair value each reporting date, which can swing other income. Toast also notes that outside financing may be needed and that it cannot be sure such financing would be available on acceptable terms.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2023 | Q4 FY2022 | QoQ | Q1 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $819.0M | $768.0M | +6.6% | $535.0M | +53.1% |
| Gross profit | $174.0M | $158.0M | +10.1% | $89.0M | +95.5% |
| Gross margin | 21.3% | 20.6% | +0.7 pp | 16.6% | +4.6 pp |
| Research & development | $85.0M | $79.0M | +7.6% | $62.0M | +37.1% |
| Sales & marketing | $99.0M | $87.0M | +13.8% | $71.0M | +39.4% |
| General & administrative | $82.0M | $91.0M | -9.9% | $57.0M | +43.9% |
| Total operating expenses | $266.0M | $257.0M | +3.5% | $190.0M | +40.0% |
| Operating income (loss) | -$92.0M | -$99.0M | +7.1% | -$101.0M | +8.9% |
| Operating margin | -11.2% | -12.9% | +1.7 pp | -18.9% | +7.6 pp |
| Net income (loss) | -$81.0M | -$100.0M | +19.0% | -$23.0M | -252.2% |
| Net margin | -9.9% | -13.0% | +3.1 pp | -4.3% | -5.6 pp |
| Diluted EPS | -$0.16 | -$0.20 | +$0.04 | -$0.20 | +$0.04 |
Risks
Toast identified a material weakness in internal controls over financial reporting as of December 31, 2022, tied to ineffective IT general controls in user access over certain systems supporting revenue reporting. Remediation is ongoing and may not be sufficient, which could lead to restatements or failure to meet periodic reporting obligations.
Toast Capital relies solely on one bank partner to offer working capital loans, and Toast must purchase defaulted or non-performing loans up to 15% of each quarterly loan cohort. MD&A attributes a $12 million increase in bad debt and credit related expenses in FY2023 Q1 mainly to growth in Toast Capital.
Operating results depend significantly on payment processing; revenue and gross profit vary with payment volume, ticket size, consumer spending, and mix of card-not-present versus card-present and debit versus credit transactions. Financial technology solutions revenue rose 54% to $673 million in FY2023 Q1 from $438 million in FY2022 Q1, increasing exposure to these fluctuations.
A majority of Toast customers are SMBs, which have higher business failure rates, more limited resources, and greater susceptibility to economic fluctuations. This concentration may make retention more difficult and costly and amplify macroeconomic hits relative to competitors less focused on SMBs.
Unfavorable restaurant industry or global economic conditions, including inflation, rising interest rates, supply chain issues, and reduced consumer spending, could reduce restaurant locations or gross payment volume. Toast notes these factors are particularly acute for its SMB-heavy customer base.
Rapid growth strains management, systems, and personnel; Toast must attract, train, and retain sales, support, engineering, and management staff. Volatile equity value may reduce retention and require significant additional expenses.
Subscription revenue is recognized ratably over 12 to 36 month terms, so declines in new or renewal contracts are not fully reflected in current quarter revenue but can negatively affect future quarters. This lag makes results less responsive to current sales changes.
Expansion of financial technology services requires additional partnerships, licenses, regulatory approvals, and compliance processes. Failure to meet these requirements could increase costs, subject Toast to sanctions, or force discontinuation of some financial solutions.
SaaS KPIs
All quarters →Adjusted EBITDA
Free Cash Flow
Gross Payment Volume (GPV)
Total Locations
Net New Locations
Annualized Recurring Run-Rate (ARR)
Non-GAAP Gross Profit
Summary, forecast, risks and KPIs are extracted from Toast, Inc.'s SEC filings for Q1 FY2023 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 6, 2026.