Toast Inc. (NYSE:TOST) is witnessing an impressive rally, with shares hitting multi-year highs following a strong Q1 performance characterized by robust revenue growth and a significant adjusted EBITDA improvement. The company, a key player in restaurant management software, has recently undertaken major restructuring, including a 10% workforce reduction aimed at achieving GAAP profitability by the first half of 2025.

Since the restructuring, Toast Inc. (NYSE:TOST) has seen a remarkable $74 million year-over-year increase in adjusted EBITDA, reaching a positive $57 million in Q1, surpassing the forecasted $15-25 million. Additionally, the company has raised its FY24 adjusted EBITDA outlook by $50 million, signaling a strong start to the year and anticipates nearing breakeven on GAAP operating income by year-end.

The stock's surge is fueled by unexpected investor delight at Toast's rapid gains post-cost-cutting measures, with share prices soaring to levels not seen since early 2022.

• Despite challenges, Toast Inc. (NYSE:TOST) maintained steady net new location signings, adding 6,000 in Q1, which helps drive higher representative productivity and faster market share increases.

• Toast is expanding internationally, enhancing its platform in the U.K., Canada, and Ireland, which is expected to increase average revenue per user over time.

• Q1 revenue grew by 31.3% year-over-year to $1.07 billion, with annualized recurring revenues up 32%, and a slight 2% dip in Gross Payment Volume per location due to adverse weather in January.

• The company's reshaping of its cost structure in Q1 has set it on a path to achieve higher annualized run-rate savings in 2024.

Toast Inc. (NYSE:TOST) continues to expand its economic moat with strategic enhancements in its software solutions for restaurants. Despite potential short-term economic challenges, the company's focus on profitability and market expansion positions it well for sustained growth post-pandemic.

This article first appeared on GuruFocus.