Toast (NYSE:TOST) Announces Quarterly Earnings Results, Misses Estimates By $0.07 EPS

Key Points

• Toast reported EPS of $0.29, missing the $0.36 consensus estimate by $0.07, while quarterly revenue of $1.98 billion slightly exceeded expectations of $1.97 billion.
• Operating performance was strong: recurring gross profit grew 27% year over year, operating income nearly doubled to $165 million, and Toast added 8,500 net locations. The company raised its full-year outlook for recurring gross profit growth to 26% and adjusted EBITDA to $840 million–$850 million.
• Management expects only modest adjusted EBITDA margin improvement next year as it reinvests for growth; higher hardware inventory pressured free-cash-flow conversion, and an FTC lawsuit remains an unresolved risk.

Toast (NYSE:TOST - Get Free Report) announced its quarterly earnings data on Tuesday. The company reported $0.29 earnings per share for the quarter, missing the consensus estimate of $0.36 by ($0.07), FiscalAI reports. Toast had a net margin of 7.14% and a return on equity of 23.90%. The firm had revenue of $1.98 billion for the quarter, compared to the consensus estimate of $1.97 billion.

Here are the key takeaways from Toast's conference call:

• Strong Q3 execution: recurring gross profit grew 27% year over year, GAAP operating income nearly doubled to $165 million, and Toast added 8,500 net locations, ending the quarter with approximately 189,000 locations.
• Toast raised its full-year outlook to 26% recurring gross profit growth and $840 million-$850 million in adjusted EBITDA; management also expressed confidence in maintaining 20%+ growth into 2027.
• AI products are gaining traction, with Toast IQ Grow on track to exceed $10 million in ARR this year and IQ Team customers reporting a 41% reduction in overtime hours; subscription gross margin expanded 320 basis points year over year.
• Enterprise, international, and retail initiatives are scaling rapidly, collectively reaching approximately $200 million in ARR and expected to double for the second consecutive year, with new customers including Bagel Brands, Outback Steakhouse Australia, and Zingerman’s Deli.
• Management expects only modest adjusted EBITDA margin progression next year as it reinvests in new markets and long-term growth initiatives. Free-cash-flow conversion was pressured by higher hardware inventory, while the FTC lawsuit remains an unresolved legal risk.

Toast Stock Performance

TOST stock traded up $0.19 during midday trading on Tuesday, reaching $33.61. 17,466,247 shares of the company's stock traded hands, compared to its average volume of 10,872,009. Toast has a 52 week low of $22.26 and a 52 week high of $39.67. The company has a 50-day moving average price of $32.00 and a two-hundred day moving average price of $29.39. The firm has a market capitalization of $17.27 billion, a PE ratio of 43.09 and a beta of 1.74.

Insider Activity

In related news, CEO Aman Narang sold 124,542 shares of the business's stock in a transaction on Wednesday, August 5th. The stock was sold at an average price of $35.29, for a total transaction of $4,395,087.18. Following the sale, the chief executive officer directly owned 175,458 shares in the company, valued at approximately $6,191,912.82. The trade was a 41.51% decrease in their position. The transaction was disclosed in a document filed with the SEC, which can be accessed through this hyperlink. The transaction was executed under a pre-arranged Rule 10b5-1 trading plan. Also, CRO Jonathan Vassil sold 85,280 shares of the business's stock in a transaction on Friday, August 21st. The shares were sold at an average price of $36.34, for a total value of $3,099,075.20. Following the sale, the executive owned 69,966 shares in the company, valued at approximately $2,542,564.44. The trade was a 54.93% decrease in their ownership of the stock. Additional details regarding this sale are available in the official SEC disclosure. The transaction was executed under a pre-arranged Rule 10b5-1 trading plan. Over the last three months, insiders sold 520,550 shares of company stock worth $18,096,931. 10.03% of the stock is owned by corporate insiders.

Analyst Upgrades and Downgrades

A number of research analysts have recently commented on TOST shares. BNP Paribas Exane cut Toast from an "outperform" rating to a "neutral" rating and dropped their price target for the company from $38.00 to $35.00 in a research report on Wednesday, September 2nd. Robert W. Baird lifted their price objective on Toast from $30.00 to $33.00 and gave the stock a "neutral" rating in a report on Wednesday, July 8th. Truist Financial decreased their price objective on Toast from $39.00 to $38.00 and set a "buy" rating for the company in a report on Monday, October 19th. BTIG Research restated a "neutral" rating on shares of Toast in a research note on Thursday, August 27th. Finally, Needham & Company LLC upped their price objective on shares of Toast from $35.00 to $45.00 and gave the company a "buy" rating in a report on Wednesday, August 5th. Seventeen research analysts have rated the stock with a Buy rating and eleven have given a Hold rating to the stock. According to data from MarketBeat, the stock has an average rating of "Moderate Buy" and a consensus price target of $39.11.

About Toast

Toast, Inc NYSE: TOST provides a cloud-based technology platform designed for restaurants. Its integrated system combines point-of-sale software and hardware with payment processing, helping restaurants manage sales, orders, menus, guest interactions and day-to-day operations from a unified platform.

The company offers products and services including online ordering, delivery management, digital ordering and payment tools, restaurant websites, gift cards, loyalty programs, marketing, labor management, payroll, inventory management, reporting and analytics.

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