Summary
Toast reported second quarter fiscal 2022 revenue of $675.0 million, up 58.5% from $426.0 million in the prior-year quarter. Six-month revenue reached $1.21 billion, up 71.1% from $707.0 million in the first half of 2021. Subscription services revenue doubled year over year. Financial technology solutions revenue rose on more live locations and higher spend per location. The location base reached roughly 68,000 restaurants at June 30, 2022, up over 40% year over year, and the company added more than 6,000 net new locations in the quarter, a first for Toast.
Profitability did not keep pace. Gross profit rose 27.0% to $113.0 million, but gross margin fell to 16.7% from 20.9%. The operating loss widened to $99.0 million from $51.0 million a year earlier, and operating margin slipped to -14.7% from -12.0%. Sales, product development and administrative spending all climbed sharply with headcount. Hardware costs rose with shipment volume and higher freight and product costs. Toast prices hardware and professional services competitively to lower the barrier for new restaurants.
The bottom line still improved. Net loss narrowed to $54.0 million from $135.0 million in the prior-year quarter, and diluted loss per share improved to -$0.11 from -$0.64. For the six months, net loss narrowed to $77.0 million from $234.0 million, and diluted EPS improved to -$0.39 from -$1.13. Non-operating items account for most of the gap between the widening operating loss and the narrower net loss. A favorable swing in the fair value of warrant liabilities helped, and last year's debt extinguishment and derivative charges did not repeat. Adjusted EBITDA, a non-GAAP measure, was $(33) million for the quarter, down from $11 million a year earlier.
Cash flow turned negative. Operating cash flow was a use of $21.0 million in the quarter, down from $56.0 million provided in the prior-year quarter, and the six-month figure swung to a use of $68.0 million from $51.0 million provided. Capital expenditures were $5.0 million in the quarter, up from $2.0 million. Free cash flow, a non-GAAP measure, was a use of $80.0 million for the six months, compared with $39.0 million generated in the same stretch of 2021. The $330 million revolving credit facility was undrawn at June 30, 2022, and the credit agreement requires minimum liquidity of $250 million.
Operating metrics kept expanding. Gross payment volume was $23.3 billion for the quarter, up 62%, and annualized recurring run-rate was $787 million at June 30, 2022, up 59%. Remaining performance obligations were $449.0 million. Deferred revenue of $52.0 million was down 16.1% from $62.0 million a year earlier, so unrecognized billings are not tracking the revenue line. Toast also folded Sling, an employee scheduling and communications tool, into its team management suite.
Guidance covers the third quarter and the full year. For the quarter ending September 30, 2022, Toast expects revenue of $700 million to $730 million and Adjusted EBITDA of $(40) million to $(30) million. For the full year 2022, the company raised its revenue outlook to $2,620 million to $2,660 million from $2,500 million to $2,550 million, and improved its Adjusted EBITDA outlook to $(160) million to $(140) million from $(195) million to $(175) million. Both full-year Adjusted EBITDA bounds stay negative.
Risks sit on both sides of the model. Management flagged inflation, its possible effect on consumer spending, and global supply chain issues. Seasonality favors the second and third quarters, when restaurant sales are strongest, so demand usually cools later in the year. Toast carries $250 million of purchase commitments, most due in 2022, plus $123 million of operating lease commitments, and letters of credit of $11 million were outstanding at June 30, 2022. Competition and labor costs in restaurant technology remain the long-run tests for a company still spending well ahead of its gross profit.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2022 | Q1 FY2022 | QoQ | Q2 FY2021 | YoY |
|---|---|---|---|---|---|
| Revenue | $675.0M | $535.0M | +26.2% | — | — |
| Gross profit | $113.0M | $89.0M | +27.0% | — | — |
| Gross margin | 16.7% | 16.6% | +0.1 pp | — | — |
| Research & development | $67.0M | $62.0M | +8.1% | — | — |
| Sales & marketing | $77.0M | $71.0M | +8.5% | — | — |
| General & administrative | $68.0M | $57.0M | +19.3% | — | — |
| Total operating expenses | $212.0M | $190.0M | +11.6% | — | — |
| Operating income (loss) | -$99.0M | -$101.0M | +2.0% | — | — |
| Operating margin | -14.7% | -18.9% | +4.2 pp | — | — |
| Net income (loss) | -$54.0M | -$23.0M | -134.8% | — | — |
| Net margin | -8.0% | -4.3% | -3.7 pp | — | — |
| Diluted EPS | -$0.11 | -$0.20 | +$0.09 | — | — |
Risks
Toast's revenue depends on the restaurant industry and consumer spending. MD&A cites inflation, rising interest rates, and global supply chain issues as factors that have impacted and may continue to impact results, while a majority of customers are SMBs that are more susceptible to economic fluctuations and restaurant closures.
Toast depends on third parties to manufacture hardware and supply components, particularly semiconductor chips subject to a severe global shortage. MD&A attributes higher hardware costs in FY2022 Q2 partly to higher freight and product costs, which could further pressure hardware margins or availability.
A significant portion of revenue and gross profit comes from payment processing, and margins vary by transaction type. Toast expects the relative percentage of credit card and card-present transactions to increase, which historically carry lower gross profit, after gross margin declined 4.2 pp to 16.7% in FY2022 Q2.
A majority of Toast customers are SMBs with one to ten restaurant locations, which have higher business failure rates, more limited resources, and greater susceptibility to economic fluctuations. This concentration could increase churn and reduce revenue if restaurant closures rise.
Operating cash flow for the six months ended June 30, 2022 was negative $68 million, down 233.3% from positive $51 million in the prior-year period, and deferred revenue at June 30, 2022 was down 16.1% from June 30, 2021. MD&A cites higher deferred costs, higher inventory purchases, and lower deferred revenue as working capital uses of cash.
Toast Capital relies solely on one bank partner to originate working capital loans and is obligated to purchase charged-off or non-performing loans up to 15% of each quarterly cohort's original principal. A partner termination, rising defaults, or fraud could reduce loan availability and cause financial losses.
Toast previously identified material weaknesses in controls over the financial statement close process and unusual and infrequent transactions. As a large accelerated filer for FY2022, it will require an auditor attestation report, and failure to remediate could result in misstatements or missed reporting deadlines.
Toast transmits large amounts of sensitive payment and personal information and states it has experienced security incidents in the past and may face additional incidents. A breach or denial-of-service attack could damage brand, trigger litigation, and require significant remediation costs.
Toast closed the acquisition of Sling Inc. in July 2022 and previously acquired StratEx and xtraCHEF. Integrating personnel, operations, technologies, and regulatory compliance controls may divert management attention, increase costs, or fail to realize anticipated benefits.
Toast's revenue grew 58.5% in FY2022 Q2, but risk factors state recent growth rates should not be considered indicative of future performance and may decline due to slowing demand, competition, changing customer and guest behaviors, or SMB demand. Subscription revenue is recognized ratably over 12 to 36 months, so new sales declines may not be fully reflected immediately.
Toast has experienced system outages in 2022 and prior years, including from disruptions at third-party vendors, and some customer agreements include service-level commitments. Future outages could trigger credits or claims and lead to revenue losses and brand harm.
Toast depends on senior management, key technical employees, and a direct sales force. Competition for qualified personnel and volatility in the value of equity awards could impair hiring and retention, delaying product and growth objectives.
SaaS KPIs
All quarters →Adjusted EBITDA
Free Cash Flow
Gross Payment Volume (GPV)
Total Locations
Net New Locations
Non-GAAP Gross Profit
Summary, forecast, risks and KPIs are extracted from Toast, Inc.'s SEC filings for Q2 FY2022 (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.