Toast (TOST 4.29%) has been a publicly traded company for only a few months, but investors are increasingly taking notice of this software-as-a-service stock that's helping to revolutionize the restaurant industry. Is this an initial public offering (IPO) that long-term investors should consider right now? In this segment of Backstage Pass, recorded on Dec. 13, Fool contributors Danny Vena, Asit Sharma, Jason Hall, and Rachel Warren share their thoughts on this potential breakout stock.
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Danny Vena: Now they're guiding for revenue for the full year of $1.67 billion, which is up a 103% year over year. So that shows that the third-quarter revenue that was up triple digits was not a fluke. This is something that is continuing for now, which intrigues me a little bit.
Finally, the company's net revenue retention rate of 110% shows that existing customers are -- not only is it attracting more customers, but their existing customers are spending 10% more than they did this time last year. I found that to be very intriguing and really wanted to pay attention to this company. It's one that is on my radar now and certainly one that I'm considering investing in. Any thoughts?
Asit Sharma: Danny, I know Fool [analyst] T.J. Piggott is interested in this company, and I was listening to him, trying to remember if I had used this because it sounded so familiar. I talked to him about this local restaurant. I live in Raleigh, North Carolina. It's basically a beer garden and how this is such a nice post-COVID experience because it made everything touchless.
But I couldn't remember if it was Toast or not. My wife and I actually were back there after several months this Friday. This is the Standard restaurant for any of you who live in Raleigh, and I looked this time when I scanned the bar code and it was powered by Toast.
It's such a nice experience because it makes everything very streamlined. For those out here who've never used this technology, I do miss the interaction with people who are serving in a restaurant, but it makes sense in this era and I can see how we'll have a hybrid experience going forward. But it's so convenient.
You pull up your phone, the menu is there. You're sitting there, everything is being done on your phone while you're chatting with your friends.
The food is being brought to you. When you check out, you can walk away with your phone. You don't have to even check out. It'll check you out, but of course you should check out when you leave or you might forget to add a tip in.
But it is so amazingly convenient, and I think the technology feels pretty seamless. I always discourage myself like anecdotal experience, but this one was one where I say this is intriguing. I think you've brought an interesting company today.
Jason Hall: I think if this kind business can get to scale. That's the key thing because that network effect that's pretty powerful in the restaurant business. You become a known supplier. The thing I like the most is it removes that customer service experience. My experiences is, the servers are always great to walk over like two minutes before you're done eating.
They're like "You need anything?" No I'm good. Two minutes later, you're done and you can't find them anywhere.
It removes that thing, and it turns really a great experience into just a frustrating ending and that's what you always remember. I think that customer experience benefit alone makes it worth it. Do I just keep talking Danny?
Danny Vena: Actually, let's see if Rachel had any thoughts on this, and then we'll turn the mic over to you, Jason.
Rachel Warren: I just had a quick thought. I was looking at this company real quick to just read a little bit more about it as we were talking about it. You know how U.S. News and World Report, they'll release different rankings and analysis of different companies?
Well, apparently, just a few days ago, ranked Toast No. 2 in their rating of the best point-of-sale systems of 2021, and Toast also snagged the No. 2 spot in their best point-of-sale systems for restaurants rating. It seems like it's gaining a lot of steam.
It's interesting because its services are targeted toward a very specific niche whereas a lot of these other point-of-sale systems can serve a lot of different types of businesses. I find that interesting, like it has a very specific market to expand within.