Toast will reduce workforce by 10% due to slowing growth

A screen displays the corporate logo of Toast Inc. during the company’s IPO on the New York Stock Exchange (NYSE) in New York City, the United States, September 22, 2021.

Brendan McDermid | Reuters

Toasted bread, a maker of restaurant management software, said Thursday that it will let go of 550 employees, about 10% of its workforce. The company also reported fourth-quarter earnings that beat Wall Street expectations.

Shares initially rose as much as 16% after the close, but then gave back much of the gains.

Here’s how the company performed, compared to the consensus among analysts surveyed by LSEG, formerly known as Refinitiv:

  • Earning per share: Loss of 7 cents per share, versus the expected loss of 11 cents per share
  • Income: $1.04 billion versus the expected $1.02 billion

According to a statement, Toast’s revenue increased nearly 35% year-over-year during the quarter. Its net loss of $36 million narrowed from $99 million in the year-ago quarter. The company has set aside $250 million for share buybacks.

The pandemic led many restaurants to adopt Toast’s mobile ordering and payment tools, which helped double the company’s revenue. The shares debuted on the New York Stock Exchange in 2021, in the midst of that rally. Demand has since cooled, falling from 37% in the third quarter and around 45% in the second quarter.

Toast faces growing competition from the likes of Block, Fiserv and Shift4, Bank of America analysts wrote in a December note as they cut their rating on the stock from buy to neutral.

Despite the competition, transactions using Toast products continue to grow. Gross payments volume of $33.70 billion rose 32%, higher than the consensus of $33.53 billion among analysts surveyed by StreetAccount.

Toast’s new job cuts are expected to result in expenses of $45 million to $55 million, mostly in the first quarter, and annualized savings of $100 million.

These cuts come weeks after Aman Narang, co-founder and COO of Toast, replaced Chris Comparato as CEO. Under Comparato’s leadership last summer, Toast began charging a 99-cent fee for every online order that totaled more than $10. Consumers and restaurateurs objected, pushing the company to eliminate the surcharge.

Narang said on a conference call with analysts that management aims to report operating profit in the first half of 2025.

This is breaking news. Please check back for updates.

CLOCK: Lightning Round: I won’t agree with Toast until they make money, says Jim Cramer

Lightning Round: I won't agree with Toast until they make money, says Jim Cramer

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