Toast, the popular restaurant management software company, has announced that it will be reducing its workforce by 10%, resulting in the layoff of approximately 550 employees. Despite this news, the company has reported strong fourth-quarter earnings that have exceeded Wall Street’s expectations.
Toast’s revenue during the quarter increased by almost 35% compared to the previous year, reaching $1.04 billion. Additionally, the company’s net loss narrowed to $36 million from $99 million in the same quarter of the previous year. In a statement, Toast revealed that it has allocated $250 million for share buybacks.
The COVID-19 pandemic played a significant role in driving the adoption of Toast’s tools for mobile ordering and payments by many restaurants. This surge in demand helped double the company’s revenue and led to its successful debut on the New York Stock Exchange in 2021. However, as the pandemic situation has improved and restrictions have eased, the demand for Toast’s services has cooled down.
Toast is now facing increasing competition from companies such as Block, Fiserv, and Shift4. Bank of America analysts have even downgraded their rating on Toast’s stock from buy to neutral, citing this growing competition. Despite this, transactions using Toast products continue to grow, with gross payment volume reaching $33.70 billion, a 32% increase compared to the consensus among analysts.
In an effort to streamline operations and cut costs, Toast has implemented job cuts that are expected to result in $45 million to $55 million in charges, primarily in the first quarter. These cuts are projected to save the company approximately $100 million annually.
These recent developments come shortly after Aman Narang, Toast’s co-founder and COO, took over as CEO, replacing Chris Comparato. Under Comparato’s leadership, Toast faced backlash from consumers and restaurant owners when they introduced a surcharge of 99 cents for online orders exceeding $10. However, the company quickly responded to the objections and eliminated the surcharge.
Narang expressed management’s goal of achieving operating profit in the first half of 2025 during a conference call with analysts. Toast is determined to overcome the challenges posed by increasing competition and continue its growth trajectory.
In conclusion, while Toast has made the difficult decision to reduce its workforce, the company’s strong fourth-quarter earnings demonstrate its resilience and ability to adapt to changing market conditions. With its commitment to innovation and providing valuable solutions to the restaurant industry, Toast remains poised for future success.