Toast stock plunges again as tech firm’s profitability declines

Toast CEO Chris Comparato sigeds the guest book before ringing the New York Stock Exchange opening bell in September.Richard Drew/Associated Press

Restaurant technology company Toast disappointed Wall Street with its fourth-quarter financial report, despite sales more than doubling, and its stock plunged 18 percent on Wednesday.

The Boston-based company said its revenue totaled $568 million in the fourth quarter, an increase of 111 percent from the same period in 2020, as the restaurant industry recovered somewhat amid the pandemic. Toast reported net income of $2 million, better than the $61 million loss of a year earlier.

But the improvement was due to a $118 million accounting adjustment related to warrants Toast has issued. Excluding the warrants, Toast would have posted a substantial loss. And the company’s gross profit margin declined to 14 percent of revenue from 19 percent a year ago.

Toast’s stock price, which had previously declined 30 percent from its initial public offering price in September, lost another 18 percent on Wednesday.

The company said about 57,000 restaurant locations used its services at the end of the fourth quarter, 41 percent more than a year earlier.

For the first quarter of 2022, Toast said it expected revenue of $469 million to $499 million, reflecting growth of 70 percent or more. For the entire year, revenue was projected to grow about 40 percent to between $2.35 billion and $2.4 billion.

Toast rival NCR this month said it would consider selling or spinning off some of its businesses, which could include its Aloha restaurant payments unit. An analyst asked Toast chief executive Chris Comparato whether the company would be interested in buying such a rival to boost its growth.

“Will we assess strategic opportunities when we see them on the landscape, whether it’s within a line of business or more broadly? Perhaps,” Comparato responded.

The company’s growth from its own internal efforts has been strong as it “continues to execute extremely well, and we’re going to continue to prioritize that,” he added.

The quarterly report was the second since Toast went public, and both have led to sharp stock drops. In November, the stock fell as much as 19 percent after Toast reported third-quarter results.