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Toast Inc. Lowers Full-Year Revenue Forecast, Shares Plummet


Shares of Toast Inc., a leading software and payments tools provider for the restaurant industry, took a hit in Tuesday’s extended session. The company slightly lowered the upper range of its full-year revenue forecast, resulting in disappointment among analysts.

Q3 Performance and Outlook

Toast reported a net loss of $31 million, or 9 cents per share, in the third quarter. This compares to a loss of $98 million, or 19 cents per share, in the same period last year. Although the company’s loss was 1 cent lower than the FactSet consensus, investors were not impressed.

To compound matters, Toast recorded adjusted Ebitda of $35 million, surpassing analysts’ expectations of $20 million. Despite exceeding projections on this front, Toast shares still experienced a near 20% plunge in after-hours trading.

CEO Optimistic Amidst Revenue Growth

CEO Chris Comparato acknowledged Toast’s focus on achieving a balance between sustainable top-line growth and efficiency. He expressed satisfaction with the company’s adjusted Ebitda margin expansion for the seventh consecutive quarter.

Toast experienced significant revenue growth, with Q3 revenue increasing from $752 million to $1.032 billion. This figure aligned with the FactSet consensus. However, it was not enough to offset concerns surrounding the company’s revised forecast.

Revised Projections: Q4 and Full-Year

For the fourth quarter, Toast now anticipates revenue between $1.00 billion and $1.03 billion, with adjusted Ebitda ranging from $5 million to $15 million. Analysts had initially predicted revenue of $1.03 billion and adjusted Ebitda of $12 million.

Moreover, the company narrowed its full-year forecast. Toast now expects revenue in the range of $3.83 billion to $3.86 billion, compared to its previous projection of $3.81 billion to $3.87 billion. Although this adjustment reflects an overall increase, Mizuho analyst Dan Dolev noted that it effectively reduces the upper end of the guidance.

Analyst Commentary

Dolev labeled Toast’s revised top-line guidance as “disappointing” in a note to clients. However, he did commend the company for raising its full-year forecast for adjusted Ebitda. The new projections estimate adjusted Ebitda ranging from $38 million to $48 million, an improvement from the previous range of $15 million to $35 million.

Overall, Toast’s adjusted earnings and steady growth in revenue paint a mixed picture for investors. Time will tell how the market reacts to these changes in the coming weeks.

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