IPO News: What to look for when Toast makes its stock market debut

For many IPO-bound tech startups, going public is a strategy to both survive the pandemic and expand their businesses. The successful listings in the early part of the year seem to have lured more companies to the stock market, sending the IPO market into overdrive. Currently, restaurant software firm Toast, Inc. is preparing for its closely-watched initial public offering.

To List Under TOST

The Boston-based company, which develops cloud-based systems for restaurants to manage orders and payroll, last week revealed plans to become a listed company. According to its SEC filing, the company is looking to list on the New York Stock Exchange under the ticker symbol TOST. But the management is yet to disclose the number of shares being offered, the price, and the offer date. Goldman Sachs, Morgan Stanley, and JP Morgan are the lead underwriters.

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What makes Toast’s stock market debut significant is the fact that it comes at a time when restaurants are re-opening for dining in, after a prolonged lull. The company’s products can probably make things easier for restaurant operators as they put things back on track, and provide customers an improved dining experience. The company’s innovative offerings and support system give it an edge over rivals, in a huge market that remains largely untapped.

Huge Market

Moreover, the company is part of one of the fastest-growing industries, in which the restaurant-POS-sales segment is estimated to grow at a combined annual rate of about 10% through 2028. Toast’s market share has been growing faster than the industry average. As of June 2021, there were over 47,942 customer locations on its platform. The rapid shift to omnichannel dining options during the pandemic has had a positive effect on the business.

Toast’s revenues more than doubled to $703.7 million in the first half of fiscal 2021, aided by the steady rise in the number of customers. There was a corresponding increase in operating expenses to $211.6 million, which had a negative impact on the bottom-line performance. Net loss widened to $5.67 per share from $3.14 per share in the first half of 2020. Interestingly, Toast became cash-flow positive during the period, with a $168-million year-over-year increase in free cash flow.

Risks

Meanwhile, the company has not been immune to the virus-driven disruption that forced the management to slow down on its growth programs, reduce the workforce and cut costs. Going ahead, competition is likely to intensify, which would require the compnay to keep innovating.

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The software system offered by Toast helps hotels across the globe to streamline operations, while boosting sales and enhancing customer experience. Founded by Aman Narang, Steve Fredette, and Jonathan Grimm in 2011, the tech firm is currently led by CEO Chris Comparato.