Toast, the maker of restaurant management software, has announced plans to lay off 550 employees, representing 10% of its workforce. This decision comes amid several technology companies making similar downsizing moves in 2024, the most recent being Cisco with its decision to cut 4,000 jobs due to declining sales and cautious spending by clients.
Despite the job cuts, Toast reported fourth-quarter earnings that exceeded Wall Street’s expectations. Following the announcement, Toast’s shares surged up to 16% in after-hours trading, although these gains were somewhat offset later.
Here’s how the company did, compared with the consensus among analysts polled by LSEG, formerly known as Refinitiv:
- Earnings per share: Loss of 7 cents per share, vs. loss of 11 cents per share expected
- Revenue: $1.04 billion vs. $1.02 billion expected
Toast, a creator of restaurant management software, reported a nearly 35% annual rise in its revenue for the recent quarter, as per an official statement. Despite a net loss of $36 million, this was a significant reduction from the $99 million loss reported in the same quarter the previous year. The company also revealed plans to invest $250 million in share buybacks.
The Covid-19 pandemic triggered widespread adoption of Toast’s mobile ordering and payment tools among restaurants, leading to a doubling of the company’s revenue. Responding to this surge in demand, shares of Toast debuted on the NYSE in 2021. However, demand has cooled down since then, falling from 37% in Q3 and around 45% in Q2.
Bank of America analysts highlighted growing competition for Toast from rival companies such as Block, Fiserv, and Shift4, leading to a downgrade of Toast’s rating from ‘buy’ to ‘neutral’.
Nevertheless, transactions via Toast’s products continue to grow, as shown by the 32% increase in gross payment volume to $33.70 billion, slightly higher than the anticipated $33.53 billion predicted by StreetAccount analysts.
The recently announced layoffs at Toast are expected to result in charges between $45 million to $55 million – mostly in Q1 – but should yield annualized savings of about $100 million.
These developments follow the recent appointment of Aman Narang, Toast’s co-founder and COO, as CEO, succeeding Chris Comparato. During Comparato’s tenure last summer, Toast faced a backlash from consumers and restaurant owners for introducing a 99-cent fee for all online orders exceeding $10. As a result, the company had to retract the surcharge.
Going forward, Narang, in a conference call with analysts, stated that the company aims to report operating profit by the first half of 2025.
