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Toast (NYSE:TOST) has reverberated across Wall Street with the announcement of laying off about 550 workers, equating to roughly 10% of its workforce, simultaneous with its fourth-quarter earnings disclosure.
The company anticipates these layoffs to incur charges ranging between $45 million and $55 million, primarily in its fiscal first quarter, with an estimated annual savings of around $100 million.
Amidst a trend of tech companies downsizing workforces due to decreasing sales and escalating costs, Toast’s financial report presents a rather paradoxical picture. Although observing an earnings-per-share (EPS) loss of 7 cents for Q4, it outperformed expectations of an 11-cent loss. Furthermore, the company exceeded revenue projections, amassing sales of $1.04 billion versus the estimated $1.02 billion, marking a nearly 35% year-over-year (YOY) surge in sales.
Comparing Q4 results to the same quarter in the previous year, Toast managed to reduce its net loss from $99 million to $36 million. Concurrently, it announced intentions of executing $250 million in share buybacks and celebrated the addition of 6,500 new locations in Q4, culminating in roughly 106,000 total locations by year-end, somewhat alleviating the somber tone of Thursday’s earnings report.
Chief Financial Officer Elena Gomez summarized the report, stating, “To wrap-up, we are executing across the board, growing our location count, driving value for our customers, seeding new longer-term growth initiatives, and positioning the company to operate fast and nimble going forward.”
A Surprising Response: How TOST Stock Soared Despite Layoffs
The response of investors has proved unexpected, with emphasis leaning toward the company’s earnings beat rather than the disconcerting layoffs. TOST stock surged by 17% post-announcement, resulting in a 24% increase year-to-date (YTD).
Best recognized for its all-in-one, cloud-based restaurant platform, Toast gained substantial traction during the Covid-19 pandemic, offering restaurants tools for mobile ordering and payment processing.
On the date of publication, Shrey Dua did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
