Toast Shares Jump 11% After Solid Earnings Report

Ticker Symbol: TOST

Toast Inc, the restaurant technology company that provides point of sale terminals and management software, reported second quarter financial results that broadly beat consensus estimates. The company’s shares were last trading at $20.20, roughly 50% below the September 2021 IPO price of $40. The company’s shares have declined by 41% this year but are up roughly 59% from the bottom in May. Toast trades at a forward price to sales multiple of 3.2 times, which is generally considered cheap in the software industry.

The company reported second quarter revenue of $675 million, up 59% from the same period last year and well ahead of Wall Street’s estimates for $651 million. The company reported adjusted earnings before interest, depreciation, and amortization (EBITDA), loss of $33 million for the three-month period, once again beating estimates for a loss of $54 million. Gross profit totaled $113 million, against an estimated profit of $105 million. Net loss for the period was $54 million, sharply lower than the average expected loss of $115 million.

Toast also provided strong third quarter guidance that came in ahead of investor expectations. It sees revenue for the period ending on September 30^th to be between $700 million and $730 million. At the midpoint of that range, the firm’s revenue would climb a very strong 47% from the third quarter of 2021. The consensus forecast by analysts was for revenue of $674 million. The company also sees adjusted earnings before interest, depreciation, and amortization loss to be between $30 million and $40 million, slightly better than the expected $44 million loss.

For the full year, the software company projected revenue to total between $2.62 billion and $2.66 billion, which is higher than investors’ expectations of $2.55 billion. Management also predicted that the EBITDA loss for fiscal 2022 would be between $140 million and $160 million. It previously saw an EBITDA loss of $175 million to $195 million. Wall Street was estimated a loss of $185 million. At the midpoint of its revenue guidance, Toast’s top-line would climb a strong 55% year-over-year.

Crucially, management also remained upbeat in its commentary and analysis of the company’s trajectory. Chief Executive Officer Christopher Comparato said that the company saw no sign of a slowdown in consumer demand or spending in restaurants. The company added a record 6 thousand net new locations in the second quarter, which hints towards robust growth ahead. The firm also sees over 900 thousand restaurants using its software throughout the Unites States, by the end of the third quarter. Management also said that the number of locations using 4 or more of the company’s products increased to 61% from 44% two years ago.

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