Dive Brief:

• Restaurant point-of-sale provider Toast is projecting lower revenue growth for the fourth quarter after the company reported slower same-store restaurant sales for the third quarter. 
• Toast’s third-quarter revenue jumped 37% to $1.03 billion, relative to the year-earlier period, according to the company’s earnings press release on Tuesday. Toast estimates fourth-quarter revenue will be between $1 billion and $1.03 billion.
• Boston-based Toast also expects gross payment volume per location to decline for the final quarter of the year, CFO Elena Gomez said during a third-quarter conference call with analysts Tuesday.

Dive Insight:

The company’s expectations for the remainder of the year reflect the current macroeconomic environment, Gomez told analysts during Tuesday’s call. Toast started to notice “a modest slowdown” in same-store transaction volume in September, and it continued into October, she noted.

Trends have remained stable, but Toast is planning for payment volume trends to remain at current levels in the near term, Gomez said. A slight mix shift in the company’s restaurant customers also affected payment volume per location, she mentioned. 

As the economic environment remains uncertain heading into 2024, Toast will employ cost discipline, but the macroeconomic situation “doesn’t change the sentiment of this management team, about the opportunity ahead of us,” Gomez said. Toast provides point-of-sale, software and fintech services for restaurant clients. 

The company’s third-quarter loss narrowed to $31 million, compared to the year-earlier quarter. Adjusted earnings before interest, taxes, depreciation and amortization came was $35 million for the third quarter. Toast is projecting that figure to lower for the fourth quarter, between $5 million and $15 million. 

That sequential decline in adjusted EBITDA reflects the company’s expectation for slower gross payment volume growth year over year, and because Toast is making investments to “strengthen our position heading into 2024,” Gomez said.

Regarding the sequential fourth-quarter revenue decline forecast, Baird Equity Research analysts said “this is industry seasonality...Toast has historically just grown through it,” in a Tuesday note to its investor clients.

Toast added about 6,500 net new locations in the third quarter, putting its total at about 99,000, according to the news release. The company continues to pursue larger clients, but executives said small and medium-sized businesses remain the primary driver of the company’s growth. 

“Toast has been executing well, but growth has started to slow, and investors may fear macro impacts and slower (average revenue per user) growth,” Baird analysts added in a separate Tuesday note.