Toast IPO: 5 things to know about restaurant-centric payment players

An earlier version of this report incorrectly referred to Toast volume numbers instead of its revenue. This has been fixed.

Toast Inc. as a restaurant-centric payment software maker for the public market may be rolling in the flour.

Financial technology companies see a great opportunity to simplify the ancient and versatile process of managing restaurants, especially those organizations that still rely on paper solutions or use different systems that do not connect to each other. Toast Toast
It could be worth about $ 20 billion, after setting its initial public offering price at $ 40 per share, raising its expected range from $ 34 to $ 36.

Square Inc. SQ, among the toast competitors
+ 0.43%,
Which has automatically seen strong success with its offerings which aim to provide price transparency, a modern interface and an inter-operative solution for small businesses. Square has restaurants and coffee shops as well as other types of retailers on a customer basis, but analysts see Toast in a good position with its attention-grabbing offer.

The company wants to offer 21.74 million shares through its IPO. Toast will raise about 86 868 million, and Ticker plans to list on the New York Stock Exchange under Toast.

Here are five things to know about toast before the offer.

A fragmented market

Toast is betting that it continues to win over customers by offering portfolios of easy-to-use, modern technology solutions that work well with each other.

“Regardless of how big the industry is, restaurants often lag behind other industries in terms of migration to modern, cloud-based platforms,” said Aman Narang, Steve Fredett and Jonathan Grimm in a letter to the company’s prospectus. Their initial conversations with restaurants showed that many owners were frustrated by legacy systems that did not play well together and that the industry “lacked true technology leaders”, with some toasts hoping to stay with its restaurant-centric product.

MKM Partners analyst Rohit Kulkarni wrote in a note to clients, “The independent chain of technology and the ‘mom-and-pop’ concept as well as the ability to work well for scalability for larger regional, national and global branded concepts.”

Toast figures show that there are about 600,000 restaurant locations in the United States, and these businesses spent about ২৫ 25 billion on technology in 2019. The company expects the cost to reach ৫ 55 billion by 202.

According to Toast, restaurants were more motivated to upgrade their technology to better support online ordering, contactless payments and other trends that became more popular during the Covid-1 crisis.

Opportunity ahead

Toast outlines several growth strategies, including geographic expansion.

“We believe there is a significant opportunity to further increase our revenue through expansion internationally,” the company said in its prospectus, although it acknowledged that such expansion would introduce toast to new, local competitors.

“Given the fierce competition in the U.S. integrated POS market, Toast will probably need to expand beyond its core market (e.g., larger enterprise, other vertical, international) to maintain the strong growth trajectory to date,” said Lisa Ellis, an analyst at Moffat Nathanson. Wrote.

Toast also sees room to sell more services to its existing customers. According to the prospectus, customers are receiving a “complete suite of products” of “growing” toast, but the company is listed among its business risks that it is not sure whether customers will continue to sign up for this larger package at current rates. Another goal of the company is to install toast technology everywhere for existing customers, as some clients start with only one subset.

Income is increasing, losses are increasing

The company earned ০ 7,004 million in the first six months of 2021, up from 4. 4.0 million in the first six months of 2020.

The company lost ৫ 255 million in the first six months of 2021, compared to 125 125 million in the first six months of 2020.

To pay

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

The company generates payment revenue through both a percentage of the volume and the equivalent fee, so its revenue here depends on how much a restaurant sends through the Toast platform.

“The amount may vary depending on the success of our customers ‘restaurant locations, the ratio of our customers’ payment volumes processed through our platform, the size of tickets, the level of consumer spending in general and the overall economic situation.” The company said in its prospectus.

Furthermore, when companies earn more debit, people use debit cards or spend online. It was two popular ways to pay during the epidemic because people came to a low-risk payment method and avoided leaving their homes, but Toast hoped that credit and card-current transactions would increase relative to the front.

Another type of takeout

Forget takeout from the restaurant. According to Bernstein analyst Harshita Rawat, Toast herself could be a takeout candidate.

He sees the company as a potential fit for PayPal Holdings Inc. PYPL,
Which wants to set foot in the world of physical trade. He writes, “For many years PayPal had Achilles heel in store and five or more of its efforts have so far yielded no results.

Toast could be an “attractive candidate” for Dutch payment powerhouse Aden NV Aden,
He continued, “Although Adian has followed a biological strategy so far.”

On the other hand, Rawat believes that Toast can play the role of “integration” among restaurant-technology players centered on small and software companies.

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