Toast shares closed up 8% Friday after the restaurant software vendor beat revenue estimates and said the number of locations it serves surged 40% in the second quarter.
Toast provides technology that can serve as a restaurant’s operating system across dine-in, takeout, and delivery channels. Its products gained rapid adoption during the pandemic as restaurants moved to contactless payments and rushed to go digital.
Revenue in the second quarter increased 58% from a year ago to $675 million, soaring past the $651 million expected by analysts, according to Refinitiv. Toast also offered an upbeat third-quarter forecast, and raised revenue and adjusted earnings guidance for the full year.
The rally in Toast’s shares on Friday is the latest sign of a possible rebound in the tech stocks that were hit the hardest in this year’s market swoon. Toast is still down 42% in 2022, but is up 68% from its low reached in May.
CEO Chris Comparato said on the earnings call with analysts that Toast is excelling by helping restaurants become more efficient with their sales while also managing their expenses. That’s particularly important because the industry is facing soaring costs due to a 40-year high in inflation. Comparato said the restaurant workforce is still about 6% below where it was prior to the pandemic.
“Labor and food are two are the two biggest expenses for restaurants, and the current environment has amplified the pressure on both,” Comparato said. “We provide restaurants with an array of products to automate processes and increase efficiency across their workflows so they can focus on what matters the most: the food, their guests and their employees.”
Toast said the total number of locations it serves rose by a record and reached 68,000 in the quarter.
Analysts at Piper Sandler said Toast has shown it can execute in a challenging macroeconomic environment.
“The expanding product portfolio appears to be resonating in an environment marked by rising food costs, labor shortages, and supply chain challenges, thus helping restaurants digitize and automate operations,” the analysts wrote in a note late Thursday.
Needham analysts said Toast’s guidance shows that demand remains strong.
“We believe TOST is the leading provider of restaurant software and payments solutions and has openended growth potential,” they wrote in a note on Friday.