A Brief Analysis of Toast’s IPO

  • Revenue grew 24% year-over-year from $665 million in the year ended December 31, 2019 to $823 million in the year ended December 31, 2020. It grew 105% period-over-period from $344 million in the six months ended June 30, 2020 to $704 million in the six months ended June 30, 2021.
  • Dec 2020 to Dec 2021 growth is likely to hit 80%+; maybe even 100%. However, this spike is because of how the pandemic affected the business. Growth is likely to drop back to a more reasonable ~35% for 2022.
  • From June 2020 to June 2021, the company generated $1.18B in revenue and will almost certainly close December 2021 well above $1B in revenue.
  • Assuming similar performance to the first half of the year, 2021 annual revenue will likely close ~$1.5B. Given we’re at the end of October, let’s approximate revenue to date is ~$1.2B.
  • On a macro level, wage pressures are rising for the restaurant industry, making restaurants a harder business to operate. Anything that hurts their customer base will inevitably hurt them.
  • Toast does not benefit from the same e-commerce tailwinds that a Shopify has with their integrated payments bus model.
  • Square has certainly taken notice and is the clear leader in innovative POS systems. Though not exclusively focused on restaurants and their acquisition of Afterpay suggests a different strategic direction and slightly different focus, the two will undoubtedly continue to go head to head in the restaurant space. They have formidable competition.

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Technology Practice Lead and Associate for the Americas at Egon Zehnder; I write about economics, capital markets, business strategy, leadership, and technology

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Brandon Scott

Brandon Scott

Technology Practice Lead and Associate for the Americas at Egon Zehnder; I write about economics, capital markets, business strategy, leadership, and technology

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