A Quick Take On Toast
Toast is a main competitor to PAR Technology, focusing primarily on the US Small and Midsize Business (SMB) market, which is estimated to contain about 600K restaurants. The company added a record 8.5K net new locations in Q2, bringing the total to approximately 148K locations across customer segments, reflecting 24% growth y/y.
The company employs a “flywheel strategy” and invests in sales capacity to drive market share gains, even in highly penetrated areas. Toast is expanding its platform with new products like Toast Go 3, a handheld device featuring cellular connectivity, and the AI-powered intelligence engine, ToastIQ.
Increasing contributions are coming from new segments, including enterprise (where they gained Firehouse Subs), international (where they launched in Australia as their fourth market), and food and beverage retail. These three segments have collectively crossed 10K live locations and are expected to surpass $100M in Annual Recurring Revenue (ARR) by year-end.
Toast is utilizing multiple AI initiatives, such as tools that leverage data across 150K locations to help customers make data-driven decisions on menu pricing and location strategy. They are also piloting Sous Chef, an AI-Powered Assistant intended to build a GPT-like interface for restaurants.
The food and beverage retail segment presents a huge Total Addressable Market (TAM) of roughly 220K US locations. The ARPU for retail customers is already above $10K, which is attractive because retail Gross Payment Volumes (GPVs) are higher than those of traditional restaurants.
Toast demonstrates strong financial health, with Adjusted EBITDA reaching $161M in Q2, and margins expanding to 35% year-over-year. The company also generates significant cash flow, reporting $208M in Free Cash Flow and holding $1.72B in cash and equivalents with no debt.
For an introduction to the business model and moving parts, see our Primer
