Toast, Inc. (TOST): Profitability and Free-Cash-Flow Inflection Amid Rapid Revenue Reacceleration

FY2024: A clear inflection — revenue reaccelerates and cash flow turns materially positive#

Toast, Inc. ([TOST]) closed FY2024 with a surprising inflection: revenue of $4.96B (+28.14% YoY), a small but positive net income of $19M, and free cash flow of $306M, up +229.03% versus FY2023. Those outcomes represent a multi-year swing from loss-making to cash-generative operations while the business preserves high growth. According to Toast’s FY2024 filings on its investor site, revenue and margin improvements were broad-based across software and payments mix shifts, and management’s quarterly reports through 2025 show continued collection of operating leverage in cash flow even as investment in growth continues (see filings at Toast Investor Relations.

The combination of sustained top-line acceleration and a sharp improvement in cash generation is the single most important development for [TOST] because it reframes the valuation conversation: investors now have evidence of both growth durability and free-cash-flow conversion instead of purely forward-looking narratives. The pivot from negative net income and negative EBITDA in prior years to positive FY2024 EBITDA (reported $108M) and reported net income — even if modest — reduces execution risk materially versus the prior multi-year loss profile.

That said, several reported ratio and metric series in the public dataset show internal inconsistencies (for example, net-debt calculations and enterprise-value multiples vary depending on whether short-term investments or cash-and-equivalents are used). Where figures diverge, this note uses line-item balances from the FY2024 balance sheet together with cash-flow statement measures to calculate conservative, replicable metrics and highlights the divergences for readers.

Financial performance: growth, margin improvement and cash conversion#

Toast’s revenue growth regained strong momentum in 2024 after multi-year scaling. Using the company’s reported annual figures, revenue rose from $3.87B in 2023 to $4.96B in 2024, a YoY increase of +28.14% (calculation: (4.96 - 3.87) / 3.87 = +28.14%). Gross profit expanded to $1.19B, producing a gross margin of 23.99% (1.19 / 4.96), up ~560 basis points from 2021’s 18.42% and up ~240 basis points year-over-year from 2023’s 21.58%.

On operating profitability, Toast reported operating income of $16M in FY2024, translating to an operating margin of 0.32% (16 / 4.96). That is a sizable swing versus FY2023 operating loss of $287M (operating margin -7.43%). The company’s FY2024 EBITDA of $108M yields an EBITDA margin of 2.18% — a move from negative EBITDA in earlier years to a modestly positive operating leverage position.

Cash-flow metrics show the cleanest picture of quality. Net cash provided by operations rose to $360M in FY2024 from $135M in FY2023 (+166.67%), and free cash flow was $306M versus $93M in 2023 (+229.03%). The free-cash-flow margin improved to ~6.17% of revenue in 2024 (306 / 4.96), up meaningfully from ~2.40% in 2023 (93 / 3.87). Those changes indicate that the business is converting incremental revenue into real, spendable cash at an accelerating rate.

Accounting notes and data divergences: net debt, current ratio and EV multiples#

The public dataset contains alternate ways of calculating net debt and related multiples. Toast’s FY2024 balance sheet lists cash and cash equivalents of $903M and total cash and short-term investments of $1.42B; total debt is reported at $24M. Two reasonable net-debt definitions produce different outcomes: if net debt uses cash-and-equivalents, net debt = 24 - 903 = -$879M (net cash). If net debt uses cash-and-short-term-investments, net debt = 24 - 1,420 = -$1,396M. The dataset includes the -$879M figure in one place and the larger negative figure in another. For conservatism and to match the company’s cash-lines used in the cash-flow table, this article uses the cash-and-equivalents basis (net cash -$879M) while flagging the discrepancy for readers.

This choice affects enterprise-value (EV) and EV/EBITDA calculations. Using the market capitalization of $24.54B, total debt of $24M, and cash-and-equivalents $903M, implied EV ≈ $23.66B (24.54 + 0.024 - 0.903). Dividing by FY2024 EBITDA ($108M) yields an EV/EBITDA of ~219x on a fiscal-2024 basis. The dataset also contains a published EV/EBITDA metric of 96.25x (TTM), which is inconsistent with the simple FY2024 arithmetic above; this divergence likely reflects a different EBITDA base (rolling TTM EBITDA or adjusted EBITDA) or a different cash definition. Where possible, investors should reconcile company-adjusted EBITDA bridges and confirm the EBITDA base used for multiples rather than relying on single-line metrics.

Key financial table: Income statement and margin trajectory (FY2021–FY2024)#

The table below aggregates the primary income-statement series used throughout this analysis and shows the margin inflection. All figures are company-reported and cited from Toast’s FY filings (see Toast Investor Relations.

(All line items from company filings; margins computed by author.)

Balance-sheet and liquidity: ample runway, modest leverage#

Toast’s FY2024 balance sheet shows total assets of $2.41B and total stockholders’ equity of $1.54B. Total current assets were $1.98B against total current liabilities of $811M, delivering a calculated current ratio of ~2.44x (1,980 / 811). Note that the dataset also lists a TTM current ratio of 2.59x; the small difference likely comes from trailing-period averages or different definitions of current assets. Using the company’s FY2024 line items yields the more conservative 2.44x figure.

Total debt is immaterial at $24M, producing a debt-to-equity ratio (total debt / equity) of roughly 1.56% (24 / 1,540). By several standard measures Toast is essentially a net-cash company at year-end 2024, with net cash of -$879M when measured against cash-and-equivalents. That liquidity profile gives management latitude to invest in international expansion, partnerships, product R&D and selective capital returns (for example, the company repurchased $56M of common stock in FY2024 per the cash-flow statement).

Key financial table: Balance sheet and cash-flow summary (FY2021–FY2024)#

¹Net cash (debt) = Total debt - Cash & equivalents (author calculation). All figures from company filings.

What drove the improvement: product mix, payments momentum and operating leverage#

Three drivers explain the FY2024 turnaround and improved cash conversion. First, the core software subscription base expanded both by new merchant additions and by higher attach rates for add-on modules (labor, inventory, loyalty), increasing recurring revenue per location and raising gross margin. Second, the payments mix improved: higher volumes and a greater share of value-added payments services increased payments-related ARR and improved contribution margins. Third, cost structure discipline and fixed-cost leverage in R&D and G&A began to show; although R&D remained a sizable investment (FY2024 R&D $351M), sales and marketing efficiency improved enough that operating losses compressed to a positive operating income.

These drivers are consistent with Toast’s strategic priorities described in company materials: deepen vertical product set, monetize payments more effectively, and expand internationally where economics are attractive. Public disclosures and management commentary point to the American Express partnership and international pilots (notably Australia) as strategic levers to accelerate payments TPV and merchant acquisition. Those initiatives should feed into payments volume growth and cross-sell opportunities if they scale as described in investor presentations (Toast Investor Relations.

Competitive dynamics and product moat: vertical depth vs broad-market challengers#

Toast’s competitive advantage rests on vertical specialization in restaurants: specialized POS workflows, integrated back-of-house tools, labor and inventory modules, and guest-facing loyalty and analytics. That vertical depth creates stickiness and higher ARPU opportunities versus generalized SMB platforms. However, Toast faces meaningful competition from large, capitalized platforms — notably Block/Square and Lightspeed — which can leverage broader merchant footprints and cross-product ecosystems to pressure pricing and distribution.

Competing effectively requires continued product differentiation (restaurant-specific workflows and analytics), robust partner distribution (acquirers, reservation platforms), and payments economics that benefit both merchants and Toast. The company’s partnership with American Express and integrations with reservation/guest platforms are strategic responses to those competitive forces, designed to make the platform harder to displace by delivering measurable merchant ROI and richer guest data.

Strategic priorities, capital allocation and trade-offs#

Management’s choices in FY2024 balanced expansion with margin recovery: R&D remained elevated at $351M while the company repurchased $56M of stock and maintained a net-cash position. That mix suggests management is prioritizing long-term platform strength while using modest buybacks to offset dilution. With cash-and-equivalents of $903M and essentially no significant debt, Toast has flexibility to accelerate international deployment or pursue selective inorganic plays, provided unit economics remain attractive in new geographies.

The critical trade-off for investors is whether incremental growth investments (international rollouts, local payments integrations, expanded sales coverage) will sustain the new margin profile or reintroduce pressure on free-cash-flow conversion. FY2024’s data show the company can grow and generate cash simultaneously, but future cadence will depend on execution details and the pace of payments monetization.

Risks and headwinds grounded in the numbers#

Several quantifiable risks emerge from the filings. First, valuation multiples (as reported and as calculated) point to market expectations of continued margin expansion and growth: the trailing P/E (using price $42.09 and EPS $0.39) is ~107.92x, reflecting a high bar for earnings durability. Second, EV/EBITDA reconciliation differences in the public dataset signal that investors must reconcile adjusted EBITDA definitions and TTM bases; relying on headline multiples without understanding adjustments risks misleading conclusions. Third, payments economics are partially subject to competitive pricing and interchange dynamics; any sustained deterioration in payments margins would reduce contribution margins and slow cash conversion.

Operationally, execution risk in international markets (local payments integrations, channel partnerships, localized product adjustments) is real and capital-consuming; success in an Australia rollout depends on achieving both regulatory/integration milestones and localized merchant economics.

What this means for investors (neutral, data-driven implications)#

Toast’s FY2024 performance marks a structural improvement: the company converted growth into cash while moving to a positive net income. For investors this means the narrative has shifted from “growth at all costs” to “growth with demonstrable cash conversion,” and that shift lowers certain execution risks. However, valuation metrics priced into the equity imply that the market expects continued margin improvement and persistent revenue growth: the current P/E ~107.92x and the wide spread between FY-based EV/EBITDA (~219x using FY2024 arithmetic) and reported TTM multiples mean multiples compress only if EBITDA and FCF scale meaningfully.

Near-term catalysts that will move investor sentiment include: repeated quarter-to-quarter free-cash-flow outperformance, clear evidence that payments partnerships (e.g., American Express) materially lift TPV and yield, and proof points from international launches demonstrating similar ARPU and retention as U.S. merchants. Conversely, any meaningful deceleration in ARR growth, deterioration in payments margins, or large incremental investments that push cash conversion backwards would reintroduce valuation risk.

Conclusion: from inflection to execution — focus on cash conversion and payments economics#

Toast’s FY2024 results show an important inflection: revenue +28.14% to $4.96B, net income $19M, and free cash flow $306M. Those figures convert the company’s narrative from a pure growth story toward a growth-plus-cash-generation profile. The balance sheet is a strength — low debt and substantial cash — giving management options to accelerate strategic initiatives. That said, valuation still embeds material future execution, and investors must watch the consistency of adjusted-EBITDA reconciliation, payments-margin trends, and international unit economics to judge whether the current inflection matures into a durable operating model.

Appendix: All primary line items used in this article come from Toast’s FY2024 filings and the company’s investor pages; where calculations were performed (margins, growth rates, ratios) the arithmetic is shown in-text and tables. For the company’s filings and quarterly disclosures see Toast Investor Relations.