Summary
Toast closed fiscal 2023 with a fourth quarter that paired rapid top-line growth with better margins. Revenue was $1.04 billion, up 34.9% from the prior-year quarter. Gross profit rose 43.0% to $226 million. Gross margin reached 21.8%, up 1.2 percentage points. The operating loss narrowed to $56 million. The net loss narrowed to $36 million. Operating cash flow was $92 million. Remaining performance obligations ended the quarter at $678 million, up 41.2%. Deferred revenue was $41 million, down 10.9%. On the operating side, Gross Payment Volume increased 32% to $33.7 billion, Locations grew 34% to approximately 106,000, and Toast added over 6,500 net new Locations in the quarter. Annualized recurring run-rate was over $1.2 billion, up 35%.
For the full year, revenue was $3.86 billion, up 41.5%. Gross profit rose 63.2% to $834 million. The operating loss narrowed to $287 million. The net loss narrowed to $246 million. Diluted EPS improved to negative $0.47. Gross margin for the full year was 21.6%, up 2.9 percentage points, and operating margin was negative 7.4%, up 6.6 percentage points. Operating cash flow was $135 million. Capital expenditures were $42 million, up 27.3%.
Non-GAAP results told a similar story. Fourth quarter Adjusted EBITDA was $29 million, compared with negative $18 million a year earlier. Free cash flow was $81 million, compared with negative $29 million. Non-GAAP gross profit reached $245 million, up 42%. Non-GAAP subscription services and financial technology solutions gross profit was $281 million, up 36%. For the full year, Adjusted EBITDA was $61 million, compared with negative $115 million a year earlier. Free cash flow was $93 million, compared with negative $189 million. Non-GAAP subscription services and financial technology solutions gross profit was $1,057 million, up 49%.
Guidance for the first quarter of 2024 calls for non-GAAP subscription services and financial technology solutions gross profit of $275 million to $285 million (20-24% growth compared to the first quarter of 2023) and Adjusted EBITDA of $15 million to $25 million. For the full year 2024, Toast guided to non-GAAP subscription services and financial technology solutions gross profit of $1,300 million to $1,320 million (23-25% growth compared to 2023) and Adjusted EBITDA of $200 million to $220 million. Management said it anticipates GAAP operating income profitability by the first half of 2025. After the quarter, Toast announced a restructuring plan that will affect approximately 550 employees and is expected to cost $45 million to $55 million, with substantially all charges in the first quarter of 2024. The board also authorized a share repurchase program of up to $250 million of Class A common stock. Aman Narang became chief executive officer on January 1, 2024. The company signed Caribou Coffee, covering 500 initial coffeehouse locations, and Choice Hotels International, which made Toast for Hotel Restaurants a brand standard for Cambria Hotels and Radisson.
The quarter had blemishes. Net retention rate was 111%, compared with 118% a year earlier. Toast's MD&A points to seasonality in financial technology solutions revenue, with stronger second and third quarters. The company still expects total operating expenses to increase, even as the restructuring aims to improve operating expense efficiency. Forward-looking statements list risks around demand for Toast products, growth of the business, implementation at customer locations, competition, and execution of the restructuring and share repurchase. Toast uses hardware and professional services as customer acquisition tools and prices them competitively to reduce barriers to entry for new Locations.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q4 FY2023 | Q3 FY2023 | QoQ | Q4 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $1.04B | $1.03B | +0.4% | $768.0M | +34.9% |
| Gross profit | $226.0M | $226.0M | ±0.0% | $158.0M | +43.0% |
| Gross margin | 21.8% | 21.9% | -0.1 pp | 20.6% | +1.2 pp |
| Research & development | $94.0M | $87.0M | +8.0% | $79.0M | +19.0% |
| Sales & marketing | $102.0M | $100.0M | +2.0% | $87.0M | +17.2% |
| General & administrative | $86.0M | $98.0M | -12.2% | $91.0M | -5.5% |
| Total operating expenses | $282.0M | $285.0M | -1.1% | $257.0M | +9.7% |
| Operating income (loss) | -$56.0M | -$59.0M | +5.1% | -$99.0M | +43.4% |
| Operating margin | -5.4% | -5.7% | +0.3 pp | -12.9% | +7.5 pp |
| Net income (loss) | -$36.0M | -$31.0M | -16.1% | -$100.0M | +64.0% |
| Net margin | -3.5% | -3.0% | -0.5 pp | -13.0% | +9.5 pp |
| Diluted EPS | -$0.07 | -$0.09 | +$0.02 | -$0.20 | +$0.13 |
Risks
Unfavorable conditions in the restaurant industry or global economy, including inflation, rising interest rates, supply chain issues, and reduced consumer spending, can reduce restaurant locations, GPV, and IT spending; the impact may be particularly acute among SMBs, which comprise the majority of Toast customers.
A majority of Toast customers are SMBs, defined as one to ten restaurant locations, which are more difficult and costly to retain and more susceptible to inflation and interest rate changes; adverse economic conditions or business failures among these customers could disproportionately reduce Locations, GPV, and revenue.
Net Retention Rate was 111% at December 31, 2023 compared to 118% at December 31, 2022, a percentage change of negative 7%, which may indicate weaker expansion or higher churn; Toast depends on renewals and additional product sales because those costs are substantially lower than acquiring new customers.
Payment processing is a core revenue driver; GPV was $126.1 billion for the year ended December 31, 2023, up 38%, and any decline in GPV or shift in payment mix toward lower-margin transactions could reduce revenue and gross profit.
Toast Capital relies on a single bank partner and Toast must purchase charged-off, non-performing, or non-compliant loans up to 15% of the original principal amount per quarter; bad debt and credit related expenses increased $30 million in the year ended December 31, 2023 due to growth in Toast Capital.
The restaurant management software market is intensely competitive, and competitors may adopt AI more quickly or successfully than Toast; competitive pressures may force Toast to maintain or lower processing rates and fees or increase incentives, negatively affecting financial performance.
Financial products including Toast Capital require compliance with bank partner requirements and numerous regulatory regimes; changes in laws or interpretations, or failures to comply, could lead to sanctions, litigation, increased costs, or discontinuation of offerings.
Toast processes large amounts of sensitive payment, payroll, and personal information and has experienced security incidents in the past; a breach or denial-of-service attack could lead to service loss, regulatory action, litigation, and reputational harm.
In February 2024 Toast announced a restructuring plan with a reduction in force of approximately 550 employees and expected charges of $45 to $55 million, mostly in Q1 2024; execution risks include loss of institutional knowledge, employee attrition, operational disruption, and failure to realize anticipated savings.
Toast previously identified a material weakness in IT general controls for fiscal year 2022 related to user access over certain IT systems supporting revenue reporting; it was remediated as of December 31, 2023, but future control deficiencies could lead to restatements or reporting failures.
Financial technology solutions revenue is seasonal and has historically been stronger in the second and third quarters because customers have greater sales during warmer months; seasonality may cause fluctuations in financial results.
SaaS KPIs
All quarters →Adjusted EBITDA
Free Cash Flow
Gross Payment Volume (GPV)
Total Locations
Net New Locations
Payments Annualized Recurring Run-Rate
Subscription Annualized Recurring Run-Rate
Non-GAAP Subscription Services and Financial Technology Solutions Gross Profit
Total Annualized Recurring Run-Rate (ARR)
Non-GAAP Gross Profit
Summary, forecast, risks and KPIs are extracted from Toast, Inc.'s SEC filings for Q4 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.