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Sept. 21, 2021, 11:29 p.m. EDT · CORRECTED

Toast IPO: 5 things to know about the restaurant-focused payments player

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By Emily Bary

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Growing revenues, widening losses

The company generated $704 million in revenue during the first six months of 2021, up from $344 million in the first six months of 2020. Toast brings in revenue through several sources, including subscription offerings, fintech offerings like payments, hardware, and professional services.

The company lost $235 million in the first six months of 2021, whereas it lost $125 million in the first six months of 2020.

Get paid

Toast acknowledges the unpredictability of payments revenue in discussing the potential risks to its business.

The company generates payments revenue both as a percentage of volume and through a flat fee, so its revenue here depends on how much volume a restaurant sends through Toast’s platform.

“This amount may vary, depending on, among other things, the success of our customers’ restaurant locations, the proportion of our customers’ payment volumes processed through our platform, ticket size, consumer spending levels in general, and overall economic conditions,” the company said in its prospectus.

Further, the company tends to generate more revenue when people use debit cards or engage in online spending. These were two popular ways to pay during the pandemic as people flocked to less risky payment methods and avoided leaving their homes as much, but Toast anticipates that credit and card-present transactions will increase on a relative basis going forward.

The other kind of takeout

Forget restaurant takeout. Toast itself might be a takeout candidate, according to Bernstein analyst Harshita Rawat.

She sees the company as a possible fit for PayPal Holdings Inc. /zigman2/quotes/208054269/composite PYPL -0.49% , which has been looking to gain a foothold in the world of physical commerce. “In-store spend has been the Achilles Heel for PayPal for many years, and its five or so attempts so far have not yield material results,” she wrote.

Toast also might be an “attractive candidate” for Dutch payments powerhouse Adyen NV /zigman2/quotes/205351021/delayed NL:ADYEN -1.46% , she continued, “although Adyen has pursued an organic strategy so far.”

On the other hand, Rawat thinks that Toast could assume the role of the “consolidator” among restaurant-technology players by scooping up smaller and focuses software companies.

/zigman2/quotes/208054269/composite
US : U.S.: Nasdaq
$ 187.79
-0.92 -0.49%
Volume: 11.08M
Nov. 26, 2021 1:00p
P/E Ratio
45.23
Dividend Yield
N/A
Market Cap
$220.64 billion
Rev. per Employee
$808,830
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/zigman2/quotes/205351021/delayed
NL : Netherlands: Euronext Amsterdam
2,422.50
-36.00 -1.46%
Volume: 101,501
Nov. 26, 2021 5:35p
P/E Ratio
201.80
Dividend Yield
N/A
Market Cap
€73.92 billion
Rev. per Employee
€2.08M
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