One call out - "Toast reports ARR of $1.5B but its annualized total revenue is ~$5B. So only 30% of total revenue is in what they define as ARR. Compare that to CrowdStrike which has 95% of its revenue as subscription."
A gross vs. net issue clouds the walk from annualized revenue to ARR. Toast reports transaction processing revenue on a gross basis (not net of pass-thru cardbrand fees). These pass-thrus fees are removed for their calculation of ARR. So if you take ARR as a % of their annualized NET revenue (as opposed to gross), ARR is much closer to 80% of annualized revenue.
Yes I should have been more clear. I was baking that in because of the lowered gross margins from it but it’s important distinction. It’s why toast has such a low revenue multiple. The revenue is much different than traditional SaaS
Great article!
One call out - "Toast reports ARR of $1.5B but its annualized total revenue is ~$5B. So only 30% of total revenue is in what they define as ARR. Compare that to CrowdStrike which has 95% of its revenue as subscription."
A gross vs. net issue clouds the walk from annualized revenue to ARR. Toast reports transaction processing revenue on a gross basis (not net of pass-thru cardbrand fees). These pass-thrus fees are removed for their calculation of ARR. So if you take ARR as a % of their annualized NET revenue (as opposed to gross), ARR is much closer to 80% of annualized revenue.
Yes I should have been more clear. I was baking that in because of the lowered gross margins from it but it’s important distinction. It’s why toast has such a low revenue multiple. The revenue is much different than traditional SaaS