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April 11, 2025
The Lithography Inflection Point - How Two Different Approaches to EUV Could Reshape the Semiconductor Industry
By
Kristal Investment Desk
Inside transformation that turned Toast into a profitable powerhouse and what it teaches us about vertical SaaS business models
In February 2020, before the pandemic upended the restaurant industry, Toast was riding high. The Boston-based restaurant technology platform had just raised $400 million at a $4.9 billion valuation and was adding locations at a blistering pace.
The formula seemed straightforward: build an end-to-end operating system for restaurants, focus on growth above all else, and eventually translate market leadership into profitability.
Then COVID hit. Within weeks, the company laid off half its staff as restaurants across the country shuttered. Toast's future — like that of the industry it served — suddenly looked precarious.
Fast forward to February 2025, and Toast's Q4 2024 earnings tell the remarkable story of not just recovery, but transformation. The company reported its first full year of GAAP profitability while adding a record 28,000 locations. Revenue reached $1.34 billion, up 29% year-over-year. Adjusted EBITDA totaled $111 million, with margins expanding to 28% — an 18 percentage point improvement from the previous year.
This wasn't just a good quarter; it represented the culmination of a fundamental evolution in Toast's business model and strategic approach. The journey from growth-obsessed startup to balanced, profitable platform offers important lessons about vertical integration, product development, and the maturing of technology business models.
The vertical software component — point-of-sale, inventory management, payroll, marketing tools — addresses restaurant-specific workflows with specialized functionality. A restaurant kitchen operates differently than a retail store or doctor's office, requiring purpose-built tools rather than generic solutions.
The payments component provides a consistent, high-margin revenue stream that scales with transaction volume. When a diner pays their check, Toast processes that payment and takes a small cut — generating revenue that grows alongside the restaurant's business.
What makes this model particularly powerful is data integration. When payments flow through the same system that manages orders, inventory, and labor, Toast gains visibility across the entire restaurant operation. This enables unique insights: correlating menu items with profit margins, optimizing staffing based on busy periods, identifying high-value customers through spending patterns.
This integrated approach explains why Toast has succeeded where horizontal solutions have struggled to gain traction in restaurants. The company's benchmarking tool exemplifies this advantage — allowing restaurateurs to compare their performance against similar establishments and make data-driven decisions about pricing, menu offerings, and staffing.
Toast's earliest strategic priority was clear: maximize location growth. In a fragmented market with numerous legacy providers, scale was essential to establish credibility and create network effects. This focus drove impressive expansion, with the company reaching 134,000 locations by the end of 2024.
This balanced approach has produced impressive results. While Toast maintained strong top-line growth (recurring gross profit streams up 39% year-over-year), the company significantly improved financial performance. The dollar-based payback period remained in the mid-teen months, indicating sustainable unit economics even as Toast invested in new opportunities.
What makes Toast particularly interesting is its multi-dimensional growth strategy. Rather than pursuing a single vector, the company is simultaneously:
Each expansion direction leverages Toast's core technology while opening new addressable markets. The retail expansion is particularly noteworthy, as Narang explained:
This multi-pronged approach provides multiple growth levers while mitigating risk — if one market segment slows, others can compensate.
Perhaps the most intriguing aspect of Toast's strategy is its approach to artificial intelligence. While many tech companies make vague pronouncements about AI potential, Toast is deploying practical applications that address specific restaurant pain points:
These capabilities aren't flashy, but they deliver tangible value — like helping Ada restaurant in Louisville boost Tuesday night revenues by 40% through data-informed menu adjustments.
Looking forward, Toast is focusing on enhancing the point-of-sale experience through data-driven recommendations and personalization.
As Narang noted:
The restaurant industry generates massive amounts of data, much of which has historically gone unused. Toast's position at the intersection of operations and payments creates unique opportunities to surface insights that improve both guest experience and business performance.
Toast's guidance for 2025 reflects confidence in continued balanced growth: 23-25% increase in recurring gross profit streams and adjusted EBITDA of $510-530 million (30% margin). This represents substantial improvement over 2024 while maintaining strong growth — no small feat for a company of Toast's scale.
The most significant long-term question is whether Toast can maintain its vertically-optimized advantage as horizontal platforms enhance their restaurant-specific capabilities. So far, the evidence suggests that Toast's deep industry expertise and purpose-built platform continue resonating with customers across segments.
Toast's evolution offers broader lessons about technology business models. The company demonstrates that vertical integration — deeply understanding a specific industry's workflows and building purpose-built solutions — can create sustainable competitive advantages that horizontal platforms struggle to match.
This approach contrasts with horizontal platforms that serve multiple industries with generic capabilities. While horizontal solutions offer breadth, they often lack the depth that specialized businesses require.
What makes Toast particularly powerful is combining this vertical focus with the network effects and economies of scale typically associated with horizontal platforms. By focusing exclusively on food service (now expanding to adjacent food retail), Toast achieves sufficient scale to invest in R&D, data capabilities, and infrastructure improvements that benefit its entire customer base.
The result is a company that has achieved what once seemed contradictory: maintaining robust growth while dramatically improving profitability. Toast's Q4 2024 results don't represent a departure from its original mission; rather, they demonstrate the maturation of a business model that has proven its fundamental soundness.
Disclaimer: The views in the post are for for informational purposes only and should not be considered as investment advice. Please contact your RM or Kristal.AI for investment advise.
By
Kristal Investment Desk
March 23, 2025
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April 11, 2025
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We are licensed in Singapore, Hong Kong and India. Kristal Advisors (SG) Pte. Ltd. presently operates under the CMS license by the Monetary Authority of Singapore (MAS). Kristal Advisors (HK) Ltd is licensed and regulated by the Securities and Futures Commission (SFC) to carry out Type 4 and Type 9 regulated activities and is not involved in the discretionary management of any collective investment scheme. Kristal Advisors Private Ltd. presently operates as a Registered Investment Advisor under the jurisdiction of the Securities and Exchange Board of India (SEBI).
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