Summary
Toast's fiscal 2023 third quarter, ended September 30, 2023, showed steady top-line growth and better profitability than a year earlier. Revenue was $1,032 million, up 37.2% from $752 million in the prior-year quarter. Gross profit was $226 million, up 49.7% from $151 million, and gross margin rose to 21.9% from 20.1%. Operating loss was $59 million, narrower than the $85 million loss a year earlier, while operating margin improved to -5.7% from -11.3%. Net loss narrowed to $31 million from $98 million. Diluted EPS was -$0.09, compared with -$0.19. The company also added over 6,500 net new locations in the quarter, bringing total locations to approximately 99,000, up 34% year-over-year. ARR was $1,218 million as of September 30, 2023, up 40%, and GPV increased 34% to $33.7 billion.
On a year-to-date basis, revenue was $2,829 million, up 44.1% from $1,963 million. Gross profit was $608 million, up 72.2% from $353 million, and gross margin was 21.5% versus 18.0%. Operating loss was $231 million, compared with a $285 million loss, but net loss was $210 million, compared with $175 million, so the nine-month net loss widened. Diluted EPS was -$0.40, compared with -$0.54. Operating cash flow was $43 million, compared with negative $137 million. Capital expenditures were $4 million, compared with $13 million. Deferred revenue was $52 million, up from $48 million a year earlier, and RPO was $617 million, up from $455 million.
Cash generation improved in the quarter. Operating cash flow was $48 million, compared with negative $69 million in the prior-year quarter. Free cash flow was $37 million, compared with negative $80 million. Adjusted EBITDA was $35 million, compared with negative $19 million. Non-GAAP gross profit was $244 million, up 49%. The CEO noted a seventh consecutive quarter of Adjusted EBITDA margin expansion. Capital expenditures were $0 million in the quarter, compared with $6 million a year earlier.
Guidance points to continued revenue growth. For the fourth quarter ending December 31, 2023, Toast expects revenue of $1.00 billion to $1.03 billion and Adjusted EBITDA of $5 million to $15 million. For the full year ending December 31, 2023, Toast expects revenue of $3.83 billion to $3.86 billion, up from $3.81 billion to $3.87 billion, and Adjusted EBITDA of $38 million to $48 million, up from $15 million to $35 million. The company is betting on recent product launches, including Toast Now, a new point-of-sale experience, Toast for Cafes Bakeries, Catering Online Ordering, Restaurant Retail, and Food Waste Reduction, to support growth. Leadership is also changing: Aman Narang becomes CEO on January 1, 2024, with Chris Comparato moving to the Board and Mark Hawkins becoming Chair.
Risks remain familiar and material. Toast cites macroeconomic conditions such as inflation and its potential impact on consumer spending, rising interest rates, global supply chain issues, and the COVID-19 pandemic. The company also carries credit exposure through Toast Capital, where it is responsible for purchasing defaulted loans up to 15% of the total originated amount for each quarterly loan cohort. Execution risks include demand for new products, competitive positioning, customer retention, and the leadership transition. The quarterly net loss narrowed, but the full-year net loss widened. Toast still reported a net loss and an operating loss for the quarter, and the fourth-quarter Adjusted EBITDA guide is $5 million to $15 million.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2023 | Q2 FY2023 | QoQ | Q3 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $1.03B | $978.0M | +5.5% | $752.0M | +37.2% |
| Gross profit | $226.0M | $208.0M | +8.7% | $151.0M | +49.7% |
| Gross margin | 21.9% | 21.3% | +0.6 pp | 20.1% | +1.8 pp |
| Research & development | $87.0M | $92.0M | -5.4% | $74.0M | +17.6% |
| Sales & marketing | $100.0M | $100.0M | ±0.0% | $84.0M | +19.0% |
| General & administrative | $98.0M | $96.0M | +2.1% | $78.0M | +25.6% |
| Total operating expenses | $285.0M | $288.0M | -1.0% | $236.0M | +20.8% |
| Operating income (loss) | -$59.0M | -$80.0M | +26.3% | -$85.0M | +30.6% |
| Operating margin | -5.7% | -8.2% | +2.5 pp | -11.3% | +5.6 pp |
| Net income (loss) | -$31.0M | -$98.0M | +68.4% | -$98.0M | +68.4% |
| Net margin | -3.0% | -10.0% | +7.0 pp | -13.0% | +10.0 pp |
| Diluted EPS | -$0.09 | -$0.19 | +$0.10 | -$0.19 | +$0.10 |
Risks
Toast disclosed a material weakness in internal controls over financial reporting as of December 31, 2022, tied to ineffective IT general controls over user access for systems supporting revenue reporting. Management is implementing remediation but cannot assure the measures will be sufficient or that additional material weaknesses will not be identified, which could lead to restatements or missed reporting obligations.
Toast Capital's bank partner originates working capital loans and Toast Capital is obligated to purchase certain defaulted or non-performing loans up to 15% of each quarterly cohort, exposing it to customer credit and fraud risk. MD&A notes general and administrative expenses rose 26% in FY2023 Q3 and 36% year to date, primarily due to increases in bad debt and credit related expenses of $6 million and $28 million, respectively, driven by growth in Toast Capital.
Toast's financial technology services, including Toast Capital loans with a Utah-chartered bank partner, subject it to regulatory requirements and reliance on a single bank partner. If the bank partner terminates the relationship or regulations change, Toast may be unable to offer working capital loans or could face sanctions, liability, and increased compliance costs.
Risk factors and MD&A highlight inflation, rising interest rates, supply chain issues, and uncertainty affecting consumer spending and restaurant industry demand. A majority of Toast customers are SMBs, which are more susceptible to economic fluctuations and restaurant closures, potentially reducing locations, GPV, and payment processing revenue.
A large majority of revenue comes from financial technology solutions tied to payment volume, and results can vary with ticket size, card-present vs card-not-present mix, debit vs credit mix, and consumer spending. For FY2023 Q3, financial technology solutions revenue was $856 million of total revenue of $1,032 million, up 36% from prior-year quarter, making Toast particularly sensitive to GPV fluctuations.
A majority of Toast customers are SMBs with between one and ten restaurant locations, and risk factors state SMBs often have higher rates of business failure, more limited resources, and greater susceptibility to economic fluctuations. Adverse changes in the economic environment or business failures of SMB customers may have a greater impact on Toast than on competitors less focused on SMBs.
Toast may incorporate artificial intelligence into platform and product offerings, and risk factors say deficient or inaccurate AI output could cause competitive harm, legal liability, or reputational damage. Competitors that adopt AI more quickly or successfully could impair Toast's ability to compete.
MD&A states financial technology solutions revenue per location has historically been stronger in the second and third quarters due to warmer-month sales and GPV trends. This seasonality can cause fluctuations in financial results and affect period-to-period comparisons.
SaaS KPIs
All quarters →Adjusted EBITDA
Free Cash Flow
Gross Payment Volume (GPV)
Total Locations
Net New Locations
Annualized Recurring Run-Rate (ARR)
Summary, forecast, risks and KPIs are extracted from Toast, Inc.'s SEC filings for Q3 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.