Toast will lay off 10% of its workforce, about 550 employees, as growth slows
- Toast said it would lay off 550 employees, resulting in $45 million to $55 million charges, mostly in the first quarter.
- The maker of restaurant software reported better-than-expected results, but growth continued to slow after an acceleration in 2021.
- Toast is beginning share buybacks.
Toast, maker of restaurant management software, said on Thursday it will let go of 550 employees, about 10% of its workforce. The company also reported fourth-quarter earnings that surpassed Wall Street's expectations.
Several technology companies have instituted layoffs in 2024. On Wednesday Cisco said it would eliminate 4,000 jobs as sales declined and clients became even more cautious about spending.
Toast's shares were initially up as much as 16% after hours but then gave back much of the gains.
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's revenue increased almost 35% year over year during the quarter, according to a statement. Its net loss of $36 million narrowed from $99 million in the year-ago quarter. The company has committed $250 million for share buybacks.
The pandemic lead many restaurants to adopt Toast's tools for mobile ordering and payments, which helped double the company's revenue. Shares debuted on the New York Stock Exchange in 2021, in the midst of that uptick. Demand has cooled since then, down from 37% in the third quarter and about 45% in the second quarter.
Toast faces increasing competition from the likes of Block, Fiserv and Shift4, Bank of America analysts wrote in a December note as they reduced their rating on the stock from buy to neutral.
Despite the competition, transactions using Toast products continue to grow. Gross payment volume, at $33.70 billion, was up 32%, higher than the $33.53 billion consensus among analysts surveyed by StreetAccount.
Toast's new layoffs should result in $45 million to $55 million in charges, mostly in the first quarter, and $100 million in annualized savings.
Those cuts come weeks after Aman Narang, Toast's co-founder and COO, replaced Chris Comparato as CEO. Under Comparato's leadership last summer, Toast started charging a fee of 99 cents for each online order that totaled more than $10. Consumers and restaurant owners objected, prompting 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.
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