Toast, Inc. Class A

Good afternoon. My name is Cameron, and I will be your conference operator today. At this time, I would like to welcome everyone to TOAST's first quarter 2024 earnings conference call. Today's call will be 45 minutes. I'll now turn the call over to Michael Seno, Senior Vice President of Finance. You may now begin your conference.

Thank you, Cameron. Welcome to TOAST's earnings conference call for the first quarter, ended March 31st, 2024. On today's call, our CEO and co-founder, Aman Narang, and CFO, Elena Gomez, will open with prepared remarks, which will be followed by our Q&A session. Before we start, I'd like to draw your attention to the Safe Harbor Statement included in today's press release. During this call, we'll make statements related to our business that may be considered forward-looking within the meaning of the Securities Act and the Exchange Act. All statements other than statements of historical facts are forward-looking statements including those regarding management's expectations of future financial and operational performance and operational expenditures, location growth, future profitability timeline and margin outlook, anticipated impact of our structuring plan and share purchase program, expected growth and business outlook, including our financial guidance for the second quarter and full year 2024. Forward-looking statements reflect our views only as of today and accept as required by law We undertake no obligation to update or revise these forward-looking statements. Please refer to the cautionary language in today's press release and our SEC filings for discussion of the risks and uncertainty that could cause actual results to differ materially from our expectations. During this call, we will discuss certain non-GAAP financial measures, including but not limited to non-GAAP subscription services gross profit and non-GAAP financial technology solutions gross profit which we refer to collectively as our recurring gross profit streams. These are the basis for our top line guidance. These non-GAAP measures are not intended to substitute for our GAAP results. Please refer to our earnings release and SEC filings for detailed reconciliations of these non-GAAP measures to the most comparable GAAP measures. Unless otherwise stated, all references on this call to cost of revenue, gross profit and gross margin, sales and marketing expense, Research and development expense and general and administrative expense are on a non-GAAP basis. Finally, the press release can be found on the investor relations website at investors.toasttab.com. After the call, a replay will be available on our website. And with that, let me turn the call over to Aman.

Thank you, Michael. And thank you, everyone, for joining us this afternoon. 2024 is off to a great start. with first quarter results ahead of expectations across the board. We added over 6,000 net locations to our platform. Our current gross profit streams increased 33% year over year, and adjusted EBITDA came in at 57 million, a 74 million improvement versus Q1 last year. I'm really proud of how the whole team performed, and we are well positioned to continue to scale and have a terrific year. Our mission at Toast is to help restaurants delight their guests, do what they love, and thrive. We continue to innovate and drive value for our restaurant community, including with the recent launch of our restaurant management suite, an upgraded digital storefront suite, and a marketing suite, which for the first time is leveraging AI to help our customers stay one step ahead. We're looking forward to sharing more about our longer-term vision and strategy at our Investor Day on May 29th. We've increased our outlook for the full year based on our performance in Q1, and we're all focused on the four strategic priorities I laid out in our February earnings call. One, scaling locations and market share in our core business. Two, driving ARR to platform growth. Three, expanding addressable market into new adjacencies. And four, setting up the company to scale and deliver ongoing operating leverage. First, scaling restaurant locations and gaining share in our core business. We added over 6,000 net locations in the quarter, driven by the combination of our purpose-built restaurant platform and our local go-to-market engine. As we gain momentum in local markets across the country, we continue to see a flywheel effect with higher rep productivity and faster market share gains, which gives us confidence in sustaining healthy location growth. Let me share two recent customer stories that speak to our momentum and the value we create for customers. Pickles Pub is a busy full-service restaurant and bar in downtown Baltimore near Camden Yards and M&T Bank Stadium. They switched to Toast to partner with a technology partner that could handle their volume, streamline operations, and increase speed of service, particularly on those busy game days. On opening day for the Orioles, they blew through their previous sales record and credit the uplift in part to faster speed of service after implementing Toast Go Handles, mobile order and pay, and kitchen display systems. Since switching to Toast, they have reduced order to delivery times for drinks to under a minute. And in addition, the addition of mobile order and pay has opened up a new service model with 20% of food and drink orders coming directly from guests, scanning QR codes at the table and placing the orders themselves. I'm also excited to announce our agreement with Snooze Eatery, a breakfast and lunch concept with over 70 locations nationwide. Snooze needed a technology partner that could support their growth plans and provide a better guest experience with faster and more accurate service. They're rolling out Toast across their footprint, and for the locations they've taken alive, they're already seeing benefits. Toast handhelds have increased server capacity, leading to higher sales, higher tips, and greater earnings. As these two stories highlight, our focus on creating products that drive value for our customers continues to drive our growth. Our second priority is driving ARR and ARPU by building products and experiences our customers love. Earlier this year, we launched a suite-based approach to packaging that simplifies the sales process for customers and our sales reps alike. Our suites are designed with good, better, and best tiers and creates a path for customers to adopt more of our platform over time, as well as provide a framework for us to roll out and monetize new products and features. They cover the breadth and depth of our customers' needs across restaurant operations, guest experience, as well as employee and supplier management. Let's walk through how the suites are adding value for our customers. The Restaurant Management Suite helps multi-location operators access the latest version of our above-store management tools, and for the first time, access powerful benchmarking data across all restaurants on our platform. Our Digital Storefront Suite helps restaurants take control of their online presence, and our Marketing Suite helps them bring their guests back more often. These launches are scratching the surface of how Toast can leverage one of the best data sets in the restaurant industry to create value for customers. To bring this to life with an example, Whisk is a neighborhood restaurant north of Dallas that recently adopted our AI-powered writing assistant included in our marketing suite. The writing assistant not only does a great job of describing Whisk's food and atmosphere, it has cut the time required to send out a guest engagement campaign by more than half. Our recent AI-enhanced marketing campaign drove over $2,500 in sales for WISC in April alone. Moving to our third priority, expanding our addressable market into new adjacencies. We continue to gain momentum across the first three international countries we launched in, the UK, Canada, and Ireland, and remain confident in the potential these markets have to help this drive growth. In Q1, we expanded the platform internationally with the launch of our integrated online ordering capability, which has been received incredibly well by our customers. And as the year progresses, we expect to launch more of our platform across both in-restaurant operations as well as the guest experience. This should help us drive further product differentiation and expand ARPU across these international markets. Within enterprise, we continue to gain momentum across a broad range of customers. The launch of the enterprise tier of our management suite allows our customers to manage their operations at scale and reduce administrative workload on their corporate teams. Our pipeline in this segment remains strong, and we have confidence that we'll continue to increase penetration over time. And beyond international enterprise, we're also investing to open up new opportunities where our vertical platform and our local go-to-market team can be a competitive advantage. Our fourth priority, is setting up the company to scale and deliver ongoing operating leverage to complement our growth. As I mentioned, we delivered over $57 million in adjusted EBITDA in the past quarter, a $74 million improvement versus Q1 last year. We have aligned our resources on our most important priorities and are building a culture where everyone across the organization is taking efficiency seriously. This allowed us to increase our full-year guidance and puts us on track to expand margins by over 13 percentage points at the midpoint versus last year without sacrificing our most important growth in innovation initiatives. To wrap up, I'll leave you with a few thoughts. One, I'm confident in how we're executing and thrilled to be leading this team. And two, we're still in the early innings of what is possible and have the foundation in place to capitalize on this incredible opportunity ahead. I want to thank every toaster. For your continued dedication and passion for our mission, we wouldn't be here without you. Our customers for entrusting us to support you all, and our investors for believing in us and the potential in this business. Thank you, and now I'll turn the call over to Elena to share more about this quarter's results.